Tapping Growth
123
Tapping Growth ANNUAL REPORT 2012
Transcript of Tapping Growth
Tapping Growthannual report 2012
4
vision
A leading integrated & innovative agro commodity group, built by our dedicated people, enhancing value for customers & stakeholders
gmg global ltdannual report 2012
contents
01 Corporate Profile
02 The Group At A Glance
06 Corporate Structure
08 Message From The Chairman
10 CEO’s Letter To Shareholders
12 Board Of Directors
14 Key Management Team
18 Industry Review
20 Operations & Financial Review
21 Risk Management
22 Corporate Social Responsibility
24 Corporate Data
25 Financial Contents
1GMG Global Ltd
Annual Report 2012
GMG GLOBAL LTD (“GMG”) is a singapore-based integrated natural rubber producer with capabilities spread across every stage of the natural rubber value chain, from planting, cultivating, tapping, processing, to the marketing and exporting of natural rubber.
listed on the SGX Mainboard, GMG focuses primarily on the production and supply of premium natural rubber products to the european, american and asian markets.
Some of GMG’s products include tyre-grade rubber used in the manufacture of vehicle tyres and centrifuged latex and block rubbers of latex used in the manufacture of medical-grade gloves and contraceptives. our clientele includes some of the world’s top tyre manufacturers as well as medical equipment companies.
GMG has been actively growing its rubber plantation assets and enhancing its rubber processing technologies organically as well as through the acquisition of synergistic entities.
the Company, its subsidiaries and associates (“the Group”) now manages more than 100,000 hectares of rubber plantations located across africa and asia; and operates a total of 10 processing plants located in thailand, Indonesia, Cameroon and Cote d’Ivoire with a total annual capacity of approximately 370,000 tons.
corporateprofile
as one of the world’s few listed pure rubber companies, the Group seeks long-term investments in upstream and downstream assets and facilities, and strong integration of its business units established on its own or through acquisitions and joint ventures.
With firm beliefs in sustainable practices and corporate citizenship, the Group is constantly in touch with the local communities in the areas it operates in. Various initiatives have been launched to create mutually-beneficial relationships with its stakeholders.
GMG is a subsidiary of China’s Sinochem International Corporation (“Sinochem International”) which is listed on the Shanghai Stock exchange. Sinochem International is a diversified international conglomerate which specialises in the trading, manufacturing and transportation of chemicals (including agricultural and horticultural), plastics, and rubber and metallurgy products. Sinochem International is one of the largest seller of natural rubber in the people’s republic of China (“prC”).
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the group at a glance
COre Businesses
GMG is an integrated natural rubber company engaged in upstream and downstream aspects of the entire rubber production value chain.
prOCesses
Plantation – the Group directly manages a combined plantation area of more than 100,000 hectares using agronomy best practices.
Processing – the Group directly manages a combined processing capacity of approximately 370,000 tons annually.
plantations Headquartered in Singapore, the Company’s plantations are located in diverse locations which include Cameroon and Cote d’Ivoire on the african continent and closer to home in Southeast asia – Indonesia. our associate also owns stakes in Gabon, Ghana, nigeria, Cote d’lvoire and Cambodia.
processing the Company also operates processing facilities in Cameroon, Cote d’Ivoire, thailand and Indonesia.
8. the raw material of rubber is received and inspected.9. the raw material of rubber is then put into a pre-clean line to be cleaned with water.10. the cleaned rubber is then blended in the mixing line.11. after which, the rubber will be placed into a high temperature dryer to vapourise the water within.12. the rubber is then cut to a certain weigh bale and pressed.13. after quality inspection and packaging, the finished product is ready for shipment.
PlantinG inSPECtinGtaPPinG MiXinG aCid
1St ROllinGnatURal RUBBER 2nd ROllinGdRYinG
ClEaninG BlEndinG
PROdUCt PRESSinG
inSPECtinG
1. rubber trees are planted and maintained until maturity at 7 years.2. tapping, which is the process of stripping away a small section, starts at year 7 or when the girth of the tree reaches a
minimum radius of 25cm. the tapping on the bark is done at a slight angle so the latex can be drained out of the tree. the latex collected will be inspected for its quality.
3. once the latex has been collected, it will be mixed with a diluted acid.4. the rubber/acid mixture undergoes the first rolling to remove excess water.5. then it undergoes the second rolling to texturise the rubber.6. after rolling it twice the product is dried.7. as a result natural rubber is made.
dRYinG
ShiPMEnt
3GMG Global Ltd
Annual Report 2012
3GMG Global Ltd
Annual Report 2012
FinAnCiAL HiGHLiGHTs
TOnnAGe sOLD AGAinsT GrOss prOFiT MArGin
fy2012fy2011fy2010
300,000
250,000
200,000
150,000
100,000
50,000
0
VoluMe (tonnaGe) GroSS proFIt MarGIn (%)
30
25
20
15
10
5
0
VOlU
ME
(tO
nn
aG
E)
GR
OS
S P
RO
fit
Ma
RG
in (%
)
fy2010
fy2011
fy2012
418.65
1,194.27
1,104.27
Turnover
(s$mil)
45.04
74.58
40.48
fy2010
fy2011
fy2012
10.32
10.55
10.59
fy2010
fy2011
fy2012
fy2010
fy2011
fy2012
396.22
808.89
810.86
ROE(%)
EPS(sgd cents)
1.17
1.33
0.53
fy2010
fy2011
fy2012
11.37
9.22
4.99
fy2010
fy2011
fy2012
Shareholders’ Equity
(s$mil)
97,548
25
14.312.4
206,948
272,942
Net Profit(s$mil)
NAV (sgd cents)
4
Cote d’ivoire
dr Congo
Cameroon
nigeria
gHana
gaBon
the group at a glance
legend
processing facility
plantation
Headquarter
5GMG Global Ltd
Annual Report 2012
indonesiasingapore
tHailand
CamBodia
united States of america europe China South america South Korea Japan thailand Middle east India others
united States of america europe China South america South Korea Japan thailand Middle east India others
our source of revenue in terms of geographical locations
In FY2012, China continued to be our main source of revenue, accounting for 44% of Group revenue for the year under review.
europe remains as our second largest market in terms of sales revenue, with a quarter of Group revenue derived from this region. Similar to FY2011, South Korea and united States of america are our third and fourth most significant markets, making up 10% and 6% of Group revenue respectively.
our products are mainly sold to tyre manufacturers. all of our shipments made to europe and united States of america in FY2012 are sold to the world’s top 10 tyre manufacturers with whom we have entered into long-term contracts.
the Group’s geographical sales markets are categorised according to shipment destinations.
revenue breakdown by geographical location (%)
fy2012 s$1,104.3 million
fy2011 s$1,194.3
million
62544
310
13152
61954
113
12112
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corporate structureAs At 15 MArch 2013
100%
GMG Holdings Ltd
(Singapore)
100%
GMG Investment
Congo SPRL
(DR Congo)
60%
Ivoirienne de
Traitement du
Caoutchouc (ITCA)
(Cote d’Ivoire)
40%
GP Sentosa
Enterprises Co., Ltd
(Thailand)
51%
100%
6%
sinochem
international
(overseas)
pte ltd
sinochem
international
corporation
gmg global ltd
(singapore)
100%
GMG Investment (S)
Pte Ltd (Singapore)
100%
GMG Services
Pte Ltd (Malaysia)
75%
PT. GMG Sentosa
(Indonesia)
95%
PT. Bumi Jaya
(Indonesia)
49%
Teck Bee Hang
Co., Ltd (Thailand)
95.45%
Inobonto Holdings
Pte Ltd (Singapore)
100%
GMG Cote d’Ivoire
S.A. (Cote d’Ivoire)
80%
PT. Inobonto
Indah Perkasa
(Indonesia)
98.4%
Techem Industries
Co., Ltd (Thailand)
86%
Teck-Fu Joint
Venture Co., Ltd
(Thailand)
100%
Green Ventures
Cameroon S.A.
(Cameroon)
51.2%
Tropical Rubber
Cote d’Ivoire
(Cote d’Ivoire)
100%
GMG International
S.A. (Cameroon)
90%
Hevecam S.A.
(Cameroon)
80%
Sud-Cameroun
Hevea S.A.
(Cameroon)
35%
SIAT SA
(Belgium)
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Our products are mainly sold to tyre manufacturers. All
of our shipments made to europe and
united states of America in FY2012
are sold to the world’s top 10 tyre
manufacturers with whom we have entered into long-
term contracts.
aUtOMOtiVE
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message from the chairman
Despite the challenges in FY2012, GMG achieved a creditable set of results even as natural rubber prices fell significantly by about 30%, from an average selling price of S$5,771 per ton in FY2011 to S$4,046 per ton in FY2012.
9GMG Global Ltd
Annual Report 2012
Dear Shareholders,
2012 was another year of economic uncertainty, but thankfully, the world averted a global economic meltdown due to coordinated efforts of many nations.
During the year in review, softer demand across the globe coupled with surplus production in major rubber producing countries led to a significant decline in natural rubber prices. However, in recent months, several countries, in particular, Indonesia, thailand and Malaysia implemented a slew of measures to bolster prices by reducing rubber shipments.
We are optimistic about the promising prospects of rubber even though the demand from the united States and europe, in the short-term, will remain soft due to the continued economic uncertainties.
the automobile sector in the united States and China are on the upturn, and we expect demand for rubber tyres to pick up eventually. the International rubber Study Group (IrSG) reckons that the annual growth rate of global natural rubber consumption is projected to be 4.4% over the 10-year period from 2010 to 2020. this suggests a sustained demand and a buoyant global market for natural rubber at least in the medium term.
More specifically, the annual growth rate of natural rubber consumption in asia for the 2010 to 2020 period is likely to outpace that of the united States and europe. the annual growth rate in asia is expected to be 5.5% (this being higher than that of europe and united States, which is expected to be 1.6% and -0.2% respectively).
as one of the world’s largest economies, China’s demand for luxury items and automobiles is set to grow in tandem with urbanisation and higher disposable income of the population, spurring stronger demand for rubber products such as motor vehicle tyres and footwear. according to the China association of automobile Manufacturers, sales of automobiles in China may gain 5% in 2013
to 20 million units. IrSG also expects China’s demand for natural rubber to increase, with a projected natural consumption of up to 5.2 million tons in 2015 and up to 7.3 million tons in 2020.
FY2012 GrOup perFOrMAnCe reviewDespite the challenges in FY2012, GMG achieved a creditable set of results even as natural rubber prices fell significantly by about 30%, from an average selling price of S$5,771 per ton in FY2011 to S$4,046 per ton in FY2012. the Group achieved net profit attributable to shareholders of S$40.5 million, on the back of Group revenue of S$1,104.3 million.
For the year in review, the Group recorded higher sales tonnage, which rose 31.9% to 272,942 tons, largely contributed by an increase in volume sold by teck Bee Hang, and first time volume addition from ItCa and SIat Sa.
the positive contributions from these recently acquired entities to the Group’s top-line and bottom-line, are a testament that our strategy to grow the Group’s business through mergers and acquisitions, is paying off.
our financial position remains sound, with cash and cash equivalents standing at S$132 million as at 31 December 2012 with a low debt to equity ratio of 0.16.
OuTLOOkMoving into 2013, the Group will continue to focus on further integration across all our subsidiaries and look out for further merger and acquisitions opportunities to enable the Group to continue growing organically and inorganically.
the global economic cycle is getting shorter, and the outlook is increasingly harder to forecast. therefore, we not only have to act and react swiftly to events and circumstances, we would also have to remain constantly resilient and brace ourselves against negative macroeconomic events, while preparing ourselves for the upturn.
DiviDenDIn appreciation of our shareholders, the Directors have proposed a final cash dividend of 0.135 cents per share, subject to shareholders’ approval at the forthcoming annual General Meeting on 29 april 2013.
in AppreCiATiOn
I would like to express my sincere thanks to our Board of Directors, management team and employees for your contribution and dedication. and to our business partners and customers, “thank You” for your unwavering support and we look forward to a closer collaboration and partnership with you in the years ahead. to our shareholders, we are grateful for your continued optimism and confidence in us.
Zhang ZenggenChairman
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ceo’s letter to shareholders
We will continue to adopt a responsible and balanced approach in the management of our businesses as we scale new heights, so as to ensure that the Group’s growth is not at the expense of the well-being of any individual, our employees and all stakeholders, as well as the environment.
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Annual Report 2012
Dear Shareholders,
the global economic environment has stabilised in recent months, with improved market conditions. However, the sentiments continue to be subdued and cautious. on the back of such, GMG continues prudently to grow its plantation footprint and processing capabilities, while increasing its internal integration of core activities across asia and africa.
In February 2012, we announced the establishment of a wholly-owned subsidiary, GMG Investment Congo Sprl, with the objective of seeking out opportunities in rubber plantation operations and processing facilities in the Democratic republic of Congo.
on the acquisitions’ front, following the completion of our rights issue exercise in the preceding financial year (2011), we went on to acquire a 35% stake in SIat Sa in July 2012, using part of the proceeds raised from the rights issue exercise. SIat Sa, which comes with an extensive experience and an established network, owns and invests in natural rubber and palm oil businesses spread across Cote d’Ivoire, Ghana, nigeria and Gabon. this strategic and synergistic investment allows us further inroads into the rich and fertile soils of africa, and complements us in our ambition to become a dominant player in the global natural rubber industry.
In november 2012, we shared that the Group had entered into a share sale and purchase agreement with lavender equities Sdn. Bhd. to further acquire a 44% stake in our subsidiary pt. Bumi Jaya, thereby increasing our stake to 95%. this transaction, which was also funded from the proceeds raised in the previous rights issue, is part of our strategy to synergise our processing capacities to a common processing platform in Indonesia. on 13 December 2012, the Group established yet another wholly-owned subsidiary – GMG Cote d’Ivoire S.a., in Cote d’Ivoire, with the aim of identifying business opportunities in the region’s natural rubber and palm oil plantations as well as business commercialisation opportunities in agro-industrial complexes to meet international and local market demand.
FY2012 review GMG has grown across asia and africa. It became increasingly important for us to ensure that our values and multi-national cultures are in sync, one with the other, in order that we may maximise our collective synergy and strength across all business units. We have been and will continue to ensure operational efficiency, productivity and the Group’s long-term sustainability. together, we embarked on our roadmap for transformation which we called HuGGS - an acronym for “Human resource, Growth, and Global System”. HuGGS represents our desire to embrace one common vision, a unified mission, a singular goal and one common platform across the Group.
through this exercise, we came together to relook at our enterprise in its entirety – our people, processes, metrics, organisation design, technology, sourcing and alliances strategy, assets and location, and very importantly, customer experience, in a bid to redefine and recharge the organisation for further growth. the initiative, which will be fully implemented towards the end of the first half of FY2013, will allow us to strengthen our core competencies and infrastructure both for the Group’s short-term and long-term sustainability.
pLAns FOr FY2013Moving ahead, our focus will be on achieving greater efficiency in processing quality and quantity, increasing customer focus, building a professional team and enhancing our brand value. to nurture future management talents, in 2013, we plan to establish our own training academy in Hevecam, Cameroon, and another training academy which we will jointly develop with SIat Sa.
While we work towards rejuvenating the organisation for sustained growth, we have also laid out concrete plans for the year ahead.
We will engage in new planting and replanting projects as part of our trees renewal process to ensure that the average age profile of our rubber trees remains attractive. We will continue our integration work across all new entities, plants and plantations which we have added to our portfolio.
Besides taking care of our assets, we will also focus on enhancing our “software”, which is just as vital to the day-to-day operations and the progression of the Group. We will do so by stepping up on human resource training and recruitment, improvement of technology in our plantations and processing facilities to increase productivity and efficiency, as well as refinement of our organisational processes and procedures.
at the same time, we will also work on expanding the global reach of our business and strengthening ties with our existing customers, many of whom count amongst the world’s top tyre manufacturers. We have already achieved great strides in getting our processing plants in asia and africa to be certified by the top 10 global tyre manufacturers.
OuTLOOk as the global economic outlook becomes increasingly less predictable, we remain cautiously optimistic as we move into 2013.
We will continue to adopt a responsible and balanced approach in the management of our businesses as we scale new heights, so as to ensure that the Group’s growth is not at the expense of the well-being of any individual, our employees and all stakeholders, as well as the environment.
in AppreCiATiOnI would like to express my appreciation to the many dedicated people who have contributed to the growth of GMG. Without the dedication, commitment and enthusiasm of our management team and staff, we would not have made such a remarkable achievement. With their continued support, I am confident we will be able to progress and transform GMG to where we would like it to be – delivering more value to our shareholders.
Yao XingliangChief executive officer
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FroM LeFt to right:Zhang Zenggen Yao Xingliang Qin hengde JeffreY gondobintoro taY Puan Siongong Kian Min
Mr Zhang holds an executive Master’s Degree in Business administration (eMBa) from China-europe International Business School (CeIBS), obtained in 2005. He also holds a Master’s Degree in Mechanical engineering from tsinghua university, China, which he received in 1993.
Yao Xingliang, 42Chief eXeCutive offiCer, eXeCutive direCtorMr Yao was appointed as executive Director and Chief executive officer with effect from 1 august 2011. He was last re-elected as Director on 20 april 2012. Mr Yao’s last appointment, before GMG, was Vice president and Head of the rubber unit of Sinochem International.
Mr Yao has more than 19 years of experience in the rubber, Chemicals and plastics units of Sinochem International and as the Head of these business units at various stages of his career.
board of directors
Mr Yao holds a Master’s Degree in Business administration (MBa) from the Business Institute of norway, a joint program between Fudan university and norway Business School and a Bachelor of Investment Degree from China Banking and Financing Institution of China.
Qin Hengde, 42non-eXeCutive direCtorMr Qin was appointed as non-executive Director and a member of the audit Committee on 5 September 2008. He was last re-elected as Director on 20 april 2012.
Mr Qin is an executive Director and executive Vice president of Sinochem International. Mr Qin was previously appointed as Vice president and Chief Financial officer of Sinochem International, Director of the Finance Department and the Chief accountant of Hubei Hongqi electrician Group, and the Chief accountant of national Investment resource Development Co ltd, a public company in China. In 2002, he joined D’long International Strategic Investment Co ltd and served as the Deputy General
Zhang Zenggen, 47ChairMan, non-eXeCutive direCtorMr Zhang was appointed as non-executive Director and Chairman on 29 July 2010. He is also the Chairman of the Strategic and Investment Committee and a member of both the nominating and remuneration Committees. He was last re-elected as Director on 21 april 2011. Mr Zhang has more than 25 years of corporate management experience in the petroleum and chemical industries. Since 2007, Mr Zhang holds the position of Director and Chief executive officer of Sinochem International Corporation (“Sinochem International”), a company listed on the Shanghai Stock exchange. prior to his current appointment, he held various general management and executive positions as the Vice General Manager of the Human resource Department of Sinochem Group, the General Manager of Sinochem Xingzhong oil Staging (Zhoushan) Co ltd, Vice General Manager of Sinochem International oil Co ltd and General Manager of the risk Management Department of Sinochem Corporation.
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Annual Report 2012
Manager of the Investment Management Department.
Mr Qin holds a Bachelor of accounting from nanjing university of Science & technology and Master of Science in Management engineering from Huazhong university of Science & technology in 2002. Mr Qin received the executive Master’s Degree in Business administration (eMBa) at the China-europe International Business School (CeIBS) in 2011.
Jeffrey Gondobintoro, 42non-eXeCutive direCtorprior to being a non-executive Director, Mr Gondobintoro was executive Director and Chief operating officer of GMG. He held these positions until 15 January 2010 and 2 January 2012 respectively. He was last re-elected as a Director on 21 april 2011.
Mr Gondobintoro holds a Bachelor of Business administration from the university of Denver, uSa, obtained in 1994.
Tay Puan Siong, 64indePendent non-eXeCutive direCtorMr tay has been an Independent non-executive Director since 19 november 1999 and was last re-elected as Director on 23 april 2010. Mr tay is the Chairman of the audit Committee and a member of both the nominating and the remuneration Committees.
Mr tay is currently an Independent non-executive Director of two other public companies. at Stamford tyres Co ltd, he is the Chairman of the audit Committee and a member of the nominating Committee. at times publishing ltd, he is the Chairman of the audit Committee and a member of the executive Committee. From 1997 to 2012, Mr tay was an Independent non-executive Director, Chairman of audit and the executive resource and Compensation Committees of Superior Multi-packaging ltd.
Mr tay holds a Bachelor of Business administration (1971) from the former university of Singapore. He attended the Harvard Business School program for Management Development in 1984 and is a member of the Chartered Institute of logistics and transport.
Mr tay is a Justice of peace, appointed in 1994.
Ong Kian Min, 52indePendent non-eXeCutive direCtorMr ong has been an Independent non-executive Director since 19 november 1999 and was last re-elected as Director on 21 april 2011. He is the Chairman of both the nominating and the remuneration Committees and a member of the audit Committee.
Mr ong was called to the Bar of england and Wales in 1988 and to the Singapore bar in the following year. In his 23 years’ of legal practice, he focused on corporate and commercial law, in the areas such as mergers and acquisitions, joint ventures, restructuring and corporate finance. In addition to practising as a consultant with Drew & napier llC, a leading Singapore law firm, he is also a Senior adviser of alpha advisory pte ltd, a financial and corporate advisory firm, and Chief executive officer of Kanesaka Sushi pte ltd. Mr ong also serves as the non-executive Chairman of HupSteel ltd and as non-executive Director on the boards of several other Singapore-listed companies.
Mr ong was a Member of parliament of Singapore from January 1997 to april 2011. He was awarded the president’s Scholarship and police Force Scholarship in 1979. He holds a Bachelor of law (Hons) external degree from the university of london and a Bachelor of Science (Hons) degree from the Imperial College of Science and technology in england.
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Danny Lo Kan Yu, 65Chief finanCial offiCer,gMg global ltdMr lo was an executive Director and has been the Chief Financial officer since 13 July 1999. He was last re-elected as Director on 26 april 2006. He stepped down from his executive Directorship of the Group on 5 September 2008 and continues to hold the position of Chief Financial officer. He is also appointed as Director of the Group’s various subsidiaries.
Mr lo is a member of the Institute of Certified public accountants in Singapore, as well as the Institute of Chartered accountants in england and Wales. He was trained at Deloittes Haskins & Sells in england. Mr lo was the Chief Financial officer of the Cathay organisation Group of companies in Singapore from 1984 to 1995. He had provided consultancy services to the GMG Group from 1995 to 1999 through rMl Management Consultants.
Ma Deyou, 44viCe PreSident, buSineSS develoPMent, gMg global ltd Mr Ma joined the Group on 5 September 2008 as Vice president in charge of business development, and was appointed as Director of the Group’s various subsidiaries.
Mr Ma worked as a Senior Manager of Dalian Junan real estate Development Co. ltd., prior to 1998, after which he moved to Sichuan province as the assistant of Chief executive officer of Sichuan Hushan electrical Co. ltd., a listed company in the Shenzhen Stock exchange. From 2002 to 2004, Mr Ma worked for D’long International Strategic Investment Co. ltd., based in Shanghai and was mainly involved in investment and mergers and acquisitions work. Mr Ma served Sinochem International Shanghai from June 2004 to September 2008 as the key person for the implementation and action for industrial investment in
natural rubber processing and plantation. He has completed various acquisitions which have enhanced the competitive advantage of Sinochem‘s rubber business.
Mr Ma holds a Master’s Degree in Structure of engineering from Dalian university of technology, liaoning province (1996).
Gu Linmin, 50viCe PreSident, gMg global ltdMr Gu was appointed as Vice president of the Company on 1 June 2012.
He has more than 18 years of experience in managing companies and large enterprises in the chemical sector. In 2009, Mr Gu was appointed to Sinochem International Corporation.
prior to his appointment, Mr Gu had served the Sinochem Group of companies in various management and executive capacities. these companies include Sinochem Jiangsu Corporation, Sinochem american Holdings, Inc, Sinochem (uSa) Inc., Sinochem ningbo Import and export Co., ltd.
Mr Gu holds an eMBa from China-europe International Business School (China) and a Master’s Degree from the Department of Chemistry, Hangzhou university, prC.
Alain T.S. Young, 60viCe PreSident, gMg global ltd, direCtor general, heveCaM S.a., CaMeroonMr Young joined the Group in July 2007, as Director and Chief executive officer (Director General) of Hevecam S.a., Cameroon and Director General of GMG International S.a., Cameroon. He was appointed as Director of tropical rubber Cote d’Ivoire and Green Ventures Cameroon S.a. in 2008.
Elson Ng Keng Kwang, 63PreSident (StrategiC ProJeCtS),Chief adviSor to the Ceo,gMg global ltdMr ng served as executive Director, president & Chief operating officer from 23 July 1999 through 6 September 2003, and as executive Director, president and Chief executive officer from 7 September 2003 through 29 July 2010. Since 30 July 2010, in line with corporate initiatives and succession planning, he assumes the role of president (Strategic projects) and Chief advisor to the Ceo. He continues to hold Directorship & Commissioner positions in the Group’s various subsidiaries.
Mr ng is a Fellow of the united Kingdom based Chartered Institute of Bankers (FCIB), Institute of Chartered Secretaries & administrators (FCIS) and the Chartered Management Institute (FCMI) as well as a graduate of the pacific rim Bankers program (university of Washington), Stanford/nuS executive program, university of Hawaii-advanced Management program and the university of Michigan-Southeast asia Business program and various overseas executive management training programmes.
Mr ng has over 30 years of international banking experience having worked with various local and foreign banks, of which he spent 17 years with Wells Fargo Bank, na and Bank of Hawaii. He last served as regional Ceo/Country Manager in asia of Bank of Hawaii for more than 10 years.
Mr ng served on the Board of trustees of aFraSIa Business Council (a tICaD’s initiative), and spoke on unDp/tICaD/InWent/WorlD BanK’s forums on africa developments. He also sits on the Board of trustees of pK Fokam Institution of excellency, Cameroon and a Vice Chairman of africa Business Group (afBG), a public-private initiative under the auspicious of Singapore Business Federation (SBF).
keymanagement team
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Annual Report 2012
Mr Young acquired extensive leadership and general management capabilities and held various management positions with multinationals in uSa, Canada, Middle east, and africa (Cote d’Ivoire, Cameroon and uganda). His business experiences of 28 years cover a wide spectrum of business activities, in the fields of petroleum product distribution, oil field equipment maintenance, corrugated box manufacturing, truck assembly, steel mills, electronic high-tech and banking.
Mr Young also has experience in the african markets having worked in Cote d’Ivoire from 1999 to 2001, Cameroon from 2001 to 2004 and uganda from 2004 to 2007, where he served respectively as Chief Financial officer, Managing Director and Country Chairman of Chevron Inc., a large uS multinational operating in the petroleum and energy Industry.
Mr Young holds a Bachelor of Finance and accounting from Concordia university, Montreal, Canada. He is also a professional member of the Certified Management accountant (CMa) association of Canada, as well as a member of the Investment Dealers association (IDa) of Canada.
Tjahaja Gondosetiawan, 43CountrY Manager, indoneSiaMr Gondosetiawan has been a Director of pt. Bumi Jaya and pt. GMG Sentosa since 2005 and 2010 respectively. He remains as a Director following the Group’s successful acquisition of a 51% stake in pt. Bumi Jaya in april 2007.
From 1991 to 2005, Mr Gondosetiawan served as Director and Managing Director in various Indonesian companies covering various industries including sugar machinery supplier, freight forwarding business, cement plant, hotel and
property development, railway container transportation and logistics management services. He is currently managing the daily operations of both pt. Bumi Jaya and pt. GMG Sentosa.
Mr Gondosetiawan holds a Bachelor in Business administration from the university of Southern California, los angeles, uSa.
Lee Keng Seng, 66Chief eXeCutive offiCer, teCK bee hang Co. ltd., thailandMr lee was appointed executive Director in 2003 and is currently the executive Director as well as Ceo of teck Bee Hang Co. ltd., thailand.
a veteran in rubber industry having extensive hands-on experience as a trader, manufacturer and processor, Mr lee has accumulated over 40 years of experience in various international rubber organisations. early in his sterling career, Mr lee began as a trainee Supervisor from 1968 to 1969 in International Footwear Manufacturing ltd., Hong Kong. In 1970 to 1973 he was appointed as the Managing Director of International Footwear pte. ltd., Singapore, dealing with the manufacturing and export of rubber footwear.
over the course of Mr lee’s illustrious career, he was appointed the Managing Director of companies such as International Footwear (Kedah) Co. ltd., Malaysia from 1974 to 1976, and lam Seng rubber (Malaysia) Sdn. Bhd., Malaysia from 1979 to 1986. From 1977 to 1978, Mr lee was also the Deputy Managing Director of Southern Co. ltd., Singapore, the third largest rubber packing house, trader and exporter in Singapore. He has also held key positions such as the Chairman of len tong Holdings and Investment Co. ltd., Hong Kong from 1987 to 1995. He was entrusted to be the General Manager and later the executive Director of lam Wah Co. ltd., thailand and teck Bee Hong Co., ltd.,thailand. From 1998 to
2002, he was appointed as the Director of Heritage assets Sdn. Bhd. Malaysia, a long established company involved in ornamental processing and fabricating plants.
Jean-Marc Seyman, 65direCtor general, Sud-CaMeroun hevea S.a., CaMeroonMr Seyman assumed the role of Director and Chief executive officer (Director General) of Sud-Cameroun Hevea S.a. in october 2010. previously he was the Ceo of Hevecam S.a. and GMG International S.a., Cameroon from 2000 to July 2007. Mr Seyman continues as a Director of Hevecam S.a. to date.
Mr Seyman has over 30 years of experience and an established reputation in the natural rubber industry. He has spent 20 years with paris-based Safic-alcan holding various executive management positions in paris and Kuala lumpur and also served an 8-year term in Singapore as its Group’s Managing Director for Far east. He last served Safic-alcan in paris as its Vice president & Group Director of rubber/latex operations. Mr Seyman has also held other positions including Chief executive officer of Fine Shine Group in uSa and Contech nigeria ltd. in lagos managing plastic packaging operations, chemical trading, plastic resins distribution and marketing of natural rubber. He has an in-depth international natural rubber experience both in terms of management and marketing.
Mr Seyman is a graduate in economic Studies from CnaM, France.
16
Joseph Desire Biley, 62PreSident direCtor general, troPiCal rubber Cote d’ivoire, Cote d’ivoirea graduate from eSSeC (ecole Superieure des Sciences economiques et Commerciales) in paris from IMD (International Management Development Institute) in lausanne and from IeSe in Spain, Mr Biley has been a Director of tropical rubber Cote d’Ivoire since its incorporation in 1995.
Mr Biley joined the Group as president Director General of tropical rubber Cote d’Ivoire in 1997. prior to that, he was the Director of public affairs in nestle, in charge of regional Development. over the past 24 years, he has held positions such as assistant to Managing Director, Division leader, Finance and administration Deputy Manager, Finance and Control Manager, operations Director within the nestle Group in Cote d’Ivoire. Mr Biley is also the president of the Board of Directors of the Ivorian association for Standardization, Chairman of the national Federation of Industries and Services of Cote d’Ivoire. Vice Chairman of the national Board of employers in Cote d’Ivoire, rapporteur of the Worldbank’s task Force on Internal and external competitiveness listed in the who’s who 100 in Cote d’Ivoire. He was recently appointed by the profession (aproMaC) to chair the Ivorian rubber Development Fund with the initiative to spearheading the development of additional 300,000 Ha of new plantations and plantations access roads in Cote d’Ivoire.
Nome Karine Lohoues, 41direCtor general, ivoirienne de traiteMent de CaoutChouC (itCa), Cote d’ivoire Ms lohoues is currently the Director General of ItCa, having previously held the position of Chief operating officer from august 2012 to January 2013.
a graduate with Bachelor Degrees from eSCG (ecole Superieure de Commerce et de Gestion) in paris, and laSalle university in philadelphia (uSa) as well as a Master Degree in Business administration (MBa) from philadelphia university, she has been a Director of ItCa since 16 august 2012.
Ms lohoues has a strong background in banking and finance, with expertise in areas such as financial analysis, financial lending processes, market research, debt restructuring, securitisation, strategy and management. prior to her current appointment, she held positions with access Bank Cote d’Ivoire as Head of Multinationals & telecoms in Corporate Banking Group from January 2009 to august 2012, and with phoenix Capital Management as a Senior Financial analyst in Corporate Finance Department from March 2007 to December 2008. She also held various positions with pnC Mellon Bank Group in Delaware (uSa) as Senior Hedge Fund analyst in the alternative Investment Group from January 2005 to December 2006, and with other companies such as exchange Data International (uK), and Bloomberg lp (uSa).
keymanagement team
17GMG Global Ltd
Annual Report 2012
mediCal
Besides tyre-grade rubber used in
the manufacture of vehicle tyres,
our products also include
centrifuged latex and block rubbers
of latex used in the manufacture
of medical-grade gloves and
contraceptives.
18
The VerSATiliTY oF rubber
Given its elasticity, impermeability, corrosive-resistance, tough and waterproof properties, rubber has been the material of choice for many of the products that we see and use in our daily lives. Its uses span a wide range of sectors including but not limited to the transportation, industrial, consumer as well as hygiene and medical fields.
of these major end-users of rubber, the transportation sector forms the largest part of the world’s demand for rubber, representing 60-70% of all rubber used. the other 30-40% comes from other sectors, mainly from the consumer sector, which covers products such as shoes, condoms, gloves and erasers (refer to Figure a).
Given the special physical characteristics of rubber, save for a major technological breakthrough, there is hardly any substitute material in the market currently that is commercially viable. The GeneSiS oF nATurAl rubber
as one of the fundamental building blocks that keep our everyday lives possible and sustainable, rubber has come a long way from its early prehistoric days when it was first discovered in 1600 BC. Many years later in 1839, Charles Goodyear pioneered the vulcanisation process that makes rubber more durable and less sticky, which makes it a good material for car tyres, shoe soles and hoses.
nATurAl VS SYnTheTic
there are two main types of rubber commonly found in modern industrial society – natural and synthetic rubber. as the name suggests, the former is made from latex extracted naturally from rubber trees, which entails a process that includes tapping, the addition of a diluted acid, and multiple rounds of rolling to remove the excess water and to texturise the rubber sheets.
on the other hand, synthetic rubber is created through chemical processes that involve petroleum derivatives.
With advantages and superior properties over each other, both types of rubber are deployed in different industries and exist in different forms for a wide range of functions. For example, natural rubber has better tear strength and excellent heat resistance, making it a better material over synthetic rubber for high-performance tyres used on racing cars, aircrafts, trucks and buses. on the other hand, synthetic rubber shows resilience over a wider range of temperature and better resistance to oils, solvents and other chemicals, thus making it the preferred choice for industrial uses.
nATurAl rubber ProDucTion
natural rubber is produced in various parts of the world, with the top three producing countries being thailand, Indonesia and Vietnam. taking into account other producer countries such as Malaysia, India, China, Sri lanka and philippines, asia as a whole represents 93% of the world’s natural rubber production share as of 20121 (refer to Figure B).
outside of asia, africa and latin america are the next largest natural rubber producing regions, representing 4% and 3% of the world’s natural rubber production share respectively, as of 20121 (refer to Figure B).
the supply of natural rubber is constrained by availability of arable land, high labour costs and the long gestation period for new rubber plantings.
natural rubber trees are living plants. Hence, the output of each harvesting season is dependent on a number of factors, which includes weather conditions, skills of farmers taking care of these trees and the technology used in the processing of tapped latex, amongst other things.
as the harvesting period of a rubber tree is considerable, taking as long as seven years for a rubber tree sapling to mature to the harvest-ready age, and an additional three years for it to reach its peak production age, rubber price cycles tend to be very lengthy. therefore, rubber tree growers need to have excellent foresight as far as new investments are concerned.
industryreview
Figure a: uses of natural rubber Figure B: World natural rubber production by Geographical regions as of 2012
General rubber Goods latin america
africa
tyres asia70% 93%
30% 3%
4%
19GMG Global Ltd
Annual Report 2012
nATurAl rubber conSuMPTion
In terms of demand, China is the world’s top consumer of rubber, making up about one-third of the world’s rubber consumption. China consumed 3.8 million tons of natural rubber in 2012, which accounted for 35.3% of the global natural rubber consumption1.
as for asia/oceania as a whole, in 2012, the region’s total natural rubber consumption was 7.9 million tons, representing 72% of global natural rubber consumption, while the americas and europe accounted for 15.4% and 11.3% of global natural rubber consumption respectively in the same year1 (refer to Figure C).
nATurAl rubber Price TrenD
as of 2012, natural rubber prices have fallen significantly due to softening demand across the globe as well as surplus production in major rubber producing countries. In particular, the price of benchmark thai export-grade rubber sheet fell from a record high of uS$6.40 per kg in February 20112, to uS$3.28 per kg (as of 13 February 2013)3 as a result of weaker demand brought about by the sluggish economic outlook in the united States and the european debt crisis.
However, a slew of supply-cutting and consumption-boosting measures were undertaken by major exporters to provide price support. In particular, Indonesia, thailand and Malaysia agreed to cut their rubber shipments by 150,000 tons in august 2012 . also, thailand has stepped up its rubber purchase programme to absorb surplus in the physical market. Since May 2012, it had bought 170,000 tons, and a further purchase of 250,000 tons is expected by March 20134.
It is also interesting to note that rubber price cycles are closely linked to economic cycles, which are in turn dependent on swings in industrial growth. this is due to the fact that the demand for automobile tyres overlaps with the global industrial cycle.
MArkeT ouTlook
looking ahead, while natural rubber demand from the united States and europe is likely to remain weak in the short run, the long-term prospects of the global natural rubber industry remain promising with prices expected to trend upwards, due to the export-cutting measures as well as increased optimism that growth in China and the united States will be sustained, thus improving demand for natural rubber4.
according to a report published by the International rubber Study Group (IrSG), the annual growth rate of global natural rubber consumption is projected to be 4.4% over the 10-year period from 2010 to 20201. this suggests sustained demand and a buoyant global market for natural rubber at least in the medium term.
More specifically, the annual growth rate of natural rubber consumption in asia for the 2010 to 2020 period is likely to outpace that of the united States and europe. the annual growth rate in asia is expected to be 5.5%, this being higher than that of europe and united States, which is expected to be 1.6% and -0.2% respectively1.
as one of the world’s largest economies, China’s demand for luxury items and automobiles is set to grow in tandem with urbanisation and higher disposable income of the population, which will in turn spur stronger demand for rubber products such as motor vehicle tyres, medical gloves and footwear.
Going forward, China’s demand for natural rubber is likely to increase, with a projected natural consumption of up to 5.2 million tons in 2015 and up to 7.3 million tons in 20201.
Globally, with the rising healthcare awareness, the demand for rubber gloves is also expected to rise as glove usage is closely correlated with healthcare spending, in turn spurring demand for natural rubber.
Figure C: World natural rubber Consumption by Geographical regions in 2012
asia/oceania
americas
europe
others
72%15.4%11.3%1.3%
notes:
1 International rubber Study Group
2 the Business times, “thailand, Indonesia, M’sia to meet again on rubber”, 16 november 2012
3 Bloomberg, “rubber poised for Worst Week Since november as Yen rebounds”, 14 February 2013
4 Bloomberg, “thailand to Step up rubber-purchase program as prices Gain”, 22 november 2012
20
operations& financial review
FY2012S$’000
FY2011S$’000 change %
Group income Statement highlightsrevenue 1,104,272 1,194,273 (7.54)Gross profit 137,307 170,684 (19.55)Share of profit of associate 4,129 (89) nMprofit attributable to Shareholders of the company
40,480 74,582 (45.72)
earnings per shares (cents) 0.53 1.33 (60.15)financial Position highlightsplantation assets 242,301 233,918 3.58Cash and cash equivalent 131,905 452,237 (70.83)total debts 130,829 109,781 19.17Shareholders’ equity 810,859 808,891 0.24Debt: equity ratio 0.16 0.136 17.65
FY2012 FY2011S$’m % S$’m %
Capital Structuretotal equity 866.8 86.9 863.7 88.7Short-term Debt 118.6 11.9 78.7 8.1long-term Debt 12.2 1.2 31.1 3.2
FY2012 oPerATionS reVieW
FY2012 has been a challenging year for the Group as we experienced natural rubber prices swings ranging from uS$2,300 to uS$3,300 per ton. average selling price for the 272,942 tons sold in FY2012 was S$4,046 per ton compared with FY2011 which sold 206,948 ton at average price of S$5,771 per ton. Increase in tonnage in FY2012 was in the processing operations; teck Bee Hang contributing 31,000 tons of the increase, our new subsidiary ItCa in Cote d’Ivoire 10,000 tons and our new associate SIat Sa 27,000 tons. our own plantation yield fell 3,800 tons in FY2012 due to our continuing replanting program and also an industrial dispute in January 2012 amongst a small section of plantation workers at our Hevecam plantation.
S ales revenue for F Y2 012 w as S$1,104.3 million, down 7.5% from FY2011 and gross profit was S$137 million, down 19.6% from FY2011.
Gross profit margins fell from 14.3% in FY2011 to 12.4% in FY2012 primarily due to increase in our processing tonnages which have lower Gp margins.
FY2012 also saw the first time contribution of S$4.2 million from our 35% investment in SIat Sa effective from 18 July 2012.
net profit attributable to shareholders of the Company for FY2012 was S$40.5 million compared with S$74.6 million in FY2011. In FY2012, the Group continued with its growth strategy in developing our greenfield land concessions in Sud-Cameroun Hevea S.a., (45,000 hectares) and the land parcels surrounding our existing Hevecam plantation (18,500 hectares). nearer home through pt. Inobonto Indah perkasa, the Group continues to seek opportunities in acquiring land concessions in Indonesia for rubber and palm oil plantation development.
cASh FloW STATeMenT hiGhliGhTS
For FY2012, operating cash generated before movement in working capital was an inflow of S$61.7 million compared with S$125.0 million inflow in the corresponding FY2011.
Capital expenditure totalled S$45.3 million for FY2012, as compared with S$17.9 million in FY2011. the main capital expenditures were for new plantings by our Cameroon and Indonesia subsidiaries and upgrading of factory facilities by our thailand subsidiary. the acquisition of SIat Sa, accounted for S$313.6 million cash outflow in FY2012.
Financing activities generated a cash outflow of S$3.0 million in FY2012. there was a cash inflow of S$361.5 million in FY2011 which included proceeds from the rights issue amounting to S$344.2 million.
as at 31 December 2012, the Group’s cash balance totalled S$131.9 million.
21GMG Global Ltd
Annual Report 2012risk
management
riSk MAnAGeMenT STrATeGY
the Board assessed and evaluated the Group’s risk tolerance and appetite and had set out an overall strategy to safeguard shareholders’ investments and the Group’s assets. even as the Group pursues its strategic objectives, it does so by managing risks through teams, plans, systems, controls, processes and procedures. the design and implementation of the foregoing are overseen by the Board and it continues to monitor improvements and enhancements.
the Group has documented r isk management policies. these policies framework the internal controls which detail the Group’s risk management philosophy – to minimise to the lowest extent the adverse or potential adverse effects to its shareholders, businesses and people. risk managers are involved in the integral part of the strategic and operational decision-making process at all levels. Such managers engage in proactive risk management and regularly report to the audit Committee and the Board.
During the last financial year, the financial, operational and compliance risks faced by the Group are:
coMMoDiTY riSk
Commodity risk arises from the volatility of global rubber prices. From time to time, the Group enters into (natural rubber) futures contracts to manage this risk. nevertheless, we limit all such contracts at any point in time to not more than 10% of our annual sales tonnage.
ForeiGn exchAnGe riSk
the Group transacts business in various foreign currencies, including the united States Dollar, Indonesian rupiah, thai Baht, euro, Congolese Francs and CFa Francs and is therefore exposed to foreign exchange risk. the Group uses forward contracts and options to manage its exposure to foreign currency risk in the local reporting currency.
the Company has a number of investments in foreign subsidiaries, whose net assets are exposed to currency translation risk.
inTereST rATe riSk
the primary sources of the interest rate risk of the Group and Company relate to interest-bearing bank deposits, bank borrowings, long-term loans and finance leases. Interest-bearing bank deposits are short-term in nature and with the current interest rate level, any variation in the interest rates would unlikely have a material impact on the net income of the Group and Company. the interest rates on short-term loans, long-term loans and finance leases are disclosed in the financial statements.
creDiT riSk
the Group’s principal financial assets are cash, bank balances and trade and other receivables. the credit risk on liquid funds and derivative financial instruments is limited because the counterparties have high credit ratings.
the Group’s credit risk is primarily attributable to its trade receivables. the amounts presented in the balance sheet are net of allowances for doubtful receivables. an allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows.
the Group has significant trade receivables from two outside party customers amounting to S$14,302,000 (F Y2011: S $18,305,0 0 0) or 22% (F Y2011: 28%) of the total trade receivables balance as at the year end.
liquiDiTY riSk
the Group maintains sufficient cash and cash equivalents, and internally generated funds to finance its activities.
the Group has internal control procedures established to supervise and monitor key transactions and activities of the Group’s operations. these procedures are independently reviewed and regularly tested to ensure compliance.
bioloGicAl ASSeTS in PlAnTATionS
the Group’s mature rubber tree plantations, mostly located in africa, are replanted after 25-35 years when latex yields decrease to an uneconomic level.
replanting and new planting initiatives are dependent on factors such as soil conditions, plant diseases, pests, weeds and weather conditions. the Group engages the services of qualified professionals to provide advice on matters pertaining to the renewal of biological assets and/or the conduct of new planting initiatives.
the Group also conducts assessments such as due diligence, cost-benefit analyses, project milestones and CapeX expenditure reviews to ensure that risks are kept within acceptable levels.
coMPliAnce AnD leGAl riSk
the Group operates in many different geographic locations with very diverse cultures and local customs. Its businesses are subject to local regulations and standards, which may impact or limit flexibility in responding to market conditions or changes to cost structures. the respective operating business heads are tasked with the responsibility of compliance with applicable laws and regulations and the Board oversees the discharge of their responsibilities.
the legal risks that arise include but are not limited to inadequate documentation and uncertainty about the practical enforceability of contracts and rights (whether accorded or negotiated). Claims or disputes that may or may not lead to litigation could also result as a consequence of doing business. the Group identifies and manages legal risks through the use of internal and external legal advisers. In addition, the Group also engages proactively in discussions and consultations with regulators, governments, industry leaders and chambers to provide feedback on reforms and developments and to understand local requirements to the largest extent possible.
22
corporatesocialresponsibility
we pLACe susTAinABiLiTY OF Our GrOwTH AnD THe weLL-BeinG OF Our OperATinG envirOnMenT riGHT AT THe HeArT OF everYTHinG we DO AT GMG.
reSPonSibiliTY To our STAkeholDerS
We listen to our stakeholders and understand what their expectations are of us. We regularly engage them at all levels, from employees, customers and business partners to the communities that work, live and play around our plantations and facilities across the globe.
We encourage feedback from our stakeholders and strive to make our Group more accountable to the society and the environment. as a socially and morally responsible corporate citizen of the world, GMG champions the mutual growth of our stakeholders. We develop our employees to achieve their fullest potential, share our knowledge and expertise with the local community, and constantly consider the potential impact that our business decisions will have on the world. at the end of the day, it is not just about bottom lines and sales; it is about doing business with integrity.
reSPonSibiliTY To our enVironMenT
We hold the firm belief of protecting the natural environment, conserving earth’s finite resources and limiting the adverse environmental impact arising from our operations.
at GMG, there is an explicit policy against the uncontrolled and/or illegal use of fire in our forestry or plantation operations. In Cameroon, GMG partners the World Wildlife Fund (WWF) and the national park of o’Campo-Maan to preserve wild life and prevent poaching and use of illegal arms.
Cameroon, being a member of the rainforest alliance, has rules on forest, fauna and flora conservation which we strictly adhere to. GMG does not source for any raw materials located in primary forests, or forests of conservation value. We also actively seek to minimise our business impact on the natural landscape through water and energy conservation.
aspects of plantation and factor y management, including replanting, that have environmental impacts are identified, and plans to mitigate the negative impacts and promote the positive ones are formulated, implemented and monitored, demonstrating the continuous improvement of our Group.
GMG is equipped with an environment Monitoring Department which fully documents and monitors aspects of environmental preservation. We have established policies and procedures aimed at minimising and monitoring the proper use and disposal of chemicals, biological control agents and liquid, air and solid non-organic wastes. GMG has instituted necessary actions on the preservation of the environment and its biodiversity, soil and water management and conservation plans are also well in place.
to ensure that our business expansion is not at the expense of the well-being of the environment, a comprehensive and participatory independent environmental and Social Impact assessment (eSIa) will be undertaken prior to the establishment of new planting projects or operations. GMG’s plantation operations in Cote d’lvoire, Cameroon and Indonesia have obtained the Certificate of environmental protection issued by the respective governments.
an environmental and Safety Management plan has also been developed, and will be constantly reviewed to minimise and mitigate the negative environmental and Safety impacts identified in the eSIa.
the status of rare, threatened or endangered species and habitats of high conservation value that exist in our plantations or could be affected by the running of our plantations and factories are being identified, and their conservation taken into account in our management plans and operations.
BeLow
Donation to school children ceremony
23GMG Global Ltd
Annual Report 2012
reSPonSibiliTY To our eMPloYeeS
We realise that engaging and developing our staff to reach their fullest ability can only spur our Group to greater heights. We are committed to providing the right training to our employees for them to be confident and safe while executing their work. We also constantly strive to maintain the highest occupational safety standards for our employees at all our plantations and facilities.
GMG follows international environmental standards and social agreements, and our suppliers are requested to abide by our Health, environment and Safety (HeS) policy, which serves as a criterion in GMG’s selection process for ethical suppliers. our supplies are also required to adhere to our Work permit procedures on accident prevention prior to their engagement as subcontractors on our sites.
to ensure that our employees work with a peace of mind, we provide them and their families with basic social amenities such as education and healthcare services.
GMG is an equal opportunity employer and offers opportunities to all regardless of gender, creed, and background, without discrimination. We employ more than 9,000 employees worldwide, and they represent a diverse range of personal and cultural backgrounds, values and aspirations. We believe that empowering them and seeking different opinions in how we conduct our business together—including how we address our social responsibilities—will make us stronger, more successful and lead to a higher performance as well as greater cohesion and inclusion within the Group.
reSPonSibiliTY To our coMMuniTY
GMG recognises and respects the legal and customary rights of the indigenous local community who resides within or adjacent to our plantations. We provide them with opportunities for employment with fair compensation, and at the same time safeguard their health and safety.
We will continue to play an active role as a socially responsible entity and a strong advocate of sustainable plantation practices who cares for local communities.
Just recently, we participated in a bus donation drive for school children and donated basic necessities to the indigenous pygmy population in Cameroon. We also held a ceremony for the distribution of necessities including mattresses, blankets, sheets, cloth, rice, oil, salt and soap to the pygmies of Bissiang and Bidou, Cameroon. this exercise was done with WWF representatives present as we explained the Group’s working ideals and behaviour to the population at Bissiang and Bidou. We also shared our ideals of conservationism and that we are not taking away the homelands. Contrary to that, we want to help the local population in any way we can.
LeFt AnD BeLowDonated basic necessities to the indigenous pygmies population.
24
corporatedata
exeCuTive
Yao XingliangDirector & Chief executive officer
nOn-exeCuTive
Zhang Zenggen, ChairmanQin HengdeJeffrey Gondobintorotay puan Siong, Independentong Kian Min, Independent
AuDiT COMMiTTee
tay puan Siong, Chairmanong Kian MinQin Hengde
nOMinATinG COMMiTTee
ong Kian Min, Chairmantay puan SiongZhang Zenggen
reMunerATiOn COMMiTTee
ong Kian Min, Chairmantay puan SiongZhang Zenggen
COMpAnY seCreTAries
Hazel Chia luang Chewlu ling ling
reGisTereD OFFiCe:
8 Marina View #34-05 asia Square tower 1Singapore 018960tel no: +65 6220 8638Fax no: +65 6323 0737
sHAre reGisTrAr:
Boardroom Corporate & advisory Services pte ltd50 raffles place#32-01 Singapore land towerSingapore 048623tel no: +65 6536 5355Fax no: +65 6536 1360
AuDiTOrs
Deloitte & touche llpCertified public accountants6 Shenton Way#32-00 DBS Building tower twoSingapore 068809
pArTner-in-CHArGe
patrick tan Hak pheng(appointed on 1 June 2008)
BOArD OF DireCTOrs
25GMG Global Ltd
Annual Report 2012
financial contents
Corporate Governance 26
Report of the Directors 36
Statement of Directors 40
Independent Auditors’ Report 41
Statements of Financial Position 43
Consolidated Income Statement 45
Consolidated Statement of Comprehensive Income 46
Statements of Changes in Equity 47
Consolidated Statement of Cash Flows 49
Notes to Financial Statements 51
GmG Global Ltd & its Subsidiaries major Properties 117
Statistics of Shareholdings 119
26
corporate governance
The Board of Directors (the “Board”) is committed to maintaining a high standard of corporate governance within the Company and its subsidiaries (the “Group”) and confirms that the Company has adhered to the principles and guidelines as set out in the Code of Corporate Governance 2005 (the “Code”) unless otherwise specified.
1. Board Matters
(a) Board Composition
As at the date of this report, the Board comprises the following Directors:
executive director:Yao Xingliang
Non-executive directors:Zhang Zenggen, ChairmanQin HengdeJeffrey Gondobintoro
Non-executive Independent directors:Tay Puan SiongOng Kian min
The Board is of the view that its current size is appropriate, and will review, from time to time, the Board’s composition and size as deemed necessary.
As a group, the Directors bring with them a broad range of expertise and experience in areas such as accounting, finance, legal, business and management experience, industry knowledge, strategic planning and customer-based experience and knowledge. The diversity of the Directors’ experience allows for the useful exchange of ideas and views. The profile of the Board members is set out in the section entitled ‘Board of Directors’ of the Annual Report.
The Non-Executive Directors constructively challenge management and assist in the development of proposals on strategy. The Non-Executive Directors also review the performance of management.
(b) Chairman and Chief executive officer (Ceo)/ executive director
The roles of the Chairman and CEO are separated in line with good corporate governance practices. They each perform separate functions to ensure that there is an appropriate balance of power and authority, and that accountability and independent decision-making are not compromised.
The Chairman, who is Non-Executive, manages the business of the Board and, in consultation with the CEO/Executive Director and Company Secretaries, schedules Board meetings at appropriate intervals during the year. The Chairman is responsible for the workings of the Board and ensures the integrity and effectiveness of the governance process of the Board. The Chairman is also responsible for the exercise of control of the quality, quantity and timeliness of information flow between management and the Board.
The CEO/Executive Director manages the Group’s day-to-day operations with the assistance of the senior management.
All major decisions made by the CEO/Executive Director are endorsed and, where necessary, approved by the Board.
27GMG Global Ltd
Annual Report 2012
corporate governance
(c) role of the Board
The Board oversees the business affairs of the Company, sets broad and overall business objectives of the Group, provides guidance to management, approves major transactions and monitors the performance of management.
Board’s approval is required for matters likely to have a material impact on the Group’s operations as well as investments, disposals and matters other than in the ordinary course of business.
The Board conducts regular scheduled meetings at least 5 times a year and meets as and when warranted by particular circumstances between these scheduled meetings. management meets regularly to attend to the Group’s operational matters.
The Company’s Articles of Association provide for meetings to be held via telephone or other means of communication (such as video conferencing).
The Board is supported by the following Board Committees:
(i) Audit Committee
(ii) Nominating Committee
(iii) Remuneration Committee (iv) Strategy and Investment Committee
Details of Directors’ attendance at Board and Board Committee meetings held in the financial year ended 31 December 2012 (“FY2012”) are summarized in the table below:
meeting of boardaudit
committeenominating committee
remuneration committee
no. of meetings
held @
no. of meetings attended
no. of meetings
held
no. of meetings attended
no. of meetings
held
no. of meetings attended
no. of meetings
held
no. of meetings attended
Zhang Zenggen 5 5 – – 1 1 2 2Yao Xingliang 5 5 – – – – – –Han Jianguo (i) 2 2 – – – – – –Jeffrey Gondobintoro 5 3 – – – – – –Qin Hengde 5 5 4 4 – – – –Ong Kian min 5 5 4 4 1 1 2 2Tay Puan Siong 5 5 4 4 1 1 2 2
Notes:@ Number of meetings held during the period the Director was a member of the Board.(i) mr Han Jianguo resigned as Executive Director on 20 June 2012.
All Directors have independent access to the Group’s senior management and the Company Secretaries. Directors are provided with complete and adequate information prior to Board meetings and on an on-going basis.
The Company Secretaries provide advice, secretarial support and assistance to the Board and ensure adherence to Board procedures and relevant rules and regulations applicable to the Company. The Company Secretaries attend all Board meetings and Board Committee meetings, as appropriate.
The Directors may seek independent professional advice to fulfil their duties and such cost will be borne by the Company.
28
corporate governance
Newly-appointed Directors are provided with background information on the Group’s history, business operations and policies to ensure that they are familiar with the Group’s structure, business and operations.
The Company has also set aside a training budget for the Directors to attend relevant courses and seminars. The Directors are provided with updates on changes in the relevant laws and regulations, where appropriate, to enable them to make well-informed decisions and to discharge their duties responsibly.
The Board provides shareholders with a detailed and balanced explanation and analysis of the Company’s performance, position and prospects on a quarterly basis in the Group’s quarterly and full-year financial results announcements.
management provides the Board with financial statements of the Group’s performance, position and prospects on a regular basis.
(d) Board Committees
(i) audit Committee (“aC”)
The AC comprises three Non-Executive Directors, a majority of whom are Independent Non-Executive Directors, as follows:
Tay Puan Siong, ChairmanOng Kian minQin Hengde
The Board is of the view that the AC members have adequate financial management expertise and experience to discharge the AC’s functions.
The AC met 4 times in FY2012, and as and when deemed appropriate to carry out its functions.
The AC is regulated by a set of written terms of reference. The terms of reference of the AC had been amended to be in line with the recommendations of the Code as revised by the monetary Authority of Singapore on 2 may 2012 (the “2012 Code”).
The AC performs the following key functions:
• reviews the annual and quarterly financial statements of the Company and the Group before submission to the Board for adoption;
• reviews with the external and internal auditors, their audit plans and audit reports;
• reviews the co-operation given by Management to the external and internal auditors;
• reviews and nominates the appointment or re-appointment of external auditors;
• reviews the scope and findings of the internal audit including the effectiveness of the Company’s internal audit function;
• reviews interested person transactions; and
• reviews the independence of the external auditors annually.
The AC has full access to and co-operation of management. The AC also has full discretion to invite any Director or Executive Officer to attend its meetings and has been given adequate resources to enable it to discharge its functions.
29GMG Global Ltd
Annual Report 2012
The AC has reviewed the audit and non-audit services provided by the external auditors, Deloitte & Touche LLP, and is of the opinion that the provision of non-audit services does not affect their independence. A breakdown of the audit fees for audit and non-audit services provided by Deloitte & Touche LLP is disclosed in page 109 of the Annual Report.
Annually, the AC meets with the external auditors and internal auditor without the presence of management. The AC has recommended the re-appointment of Deloitte & Touche LLP as the Company’s auditors at the forthcoming Annual General meeting.
The external auditors of the Company, its Singapore-incorporated subsidiaries and significant foreign-incorporated subsidiaries and associated companies are Deloitte & Touche LLP and overseas practices of Deloitte & Touche Tohmatsu. Accordingly, the Company has complied with Rules 712 and 715 of the Listing manual.
The Company has in place a whistle-blowing programme where employees may, in confidence, report possible improprieties which may cause financial or non-financial loss to the Company. The objective is to ensure that arrangements are in place, for the independent investigation of matters raised and to allow appropriate follow-up action to be taken.
(ii) Nominating Committee (“NC”)
The NC, regulated by a set of written terms of reference, comprises three members, a majority of whom are Independent Non-Executive Directors.
The members of the NC as at the date of this report are:
Ong Kian min, ChairmanTay Puan SiongZhang Zenggen
The NC is chaired by mr Ong Kian min, an Independent Non-Executive Director not associated with any substantial shareholder. The principal functions of the NC are summarized below:
• reviews and makes recommendations to the Board on all nominations for appointments and re-appointments to the Board;
• decides whether a Director is able to and has been adequately carrying out his duties as a Director of the Company, particularly when the Director has multiple Board representations;
• makes recommendations to the Board for the continuation of services of any Director who has reached the age of seventy (70) years, where appropriate;
• assesses the performance of the Board as a whole;
• reviews the Board structure, size and composition, and makes recommendations to the Board with regards to any adjustment that are deemed necessary; and
• determines the independence of each Director.
The NC has in place a process for selection and appointment of new Directors. This process provides procedures for the identification of potential candidates, review of the candidates’ skills, knowledge and experience, assessment of candidates’ suitability and finally recommending their appointments for the Board’s consideration.
corporate governance
30
The NC has adopted a formal process of evaluating the performance of the Board as a whole. This process involves the completion of a questionnaire by Board members. A summary of finding is prepared based on the completed questionnaires and is reviewed and deliberated by the NC. The Chairman of the NC confers with the Chairman of the Board on the findings and appropriate follow-up actions are taken as necessary. A Board performance evaluation was carried out to assess and evaluate the Board’s composition, size and expertise, timeliness of Board information, accountability and processes.
The NC has reviewed the independence of each Director for FY2012 in accordance with the 2012 Code’s definition of independence and is satisfied that at least one-third of the Board comprises Non-Executive Independent Directors. In respect of the Independent Directors, messrs Tay Puan Siong and Ong Kian min who have served on the Board of the Company more than nine (9) years from the date of their appointments on 19 November 1999, the NC had reviewed and confirmed that both Tay Puan Siong and Ong Kian min are considered Independent Directors of the Company, one of the reasons being that there had been changes in the major controlling shareholder and senior management of the Company since August 2008. The NC further views that there are adequate representations of Non-Executive Directors and Independent Non-Executive Directors on the current Board.
The NC will continue to review from time to time the Board’s composition, size and structure and make recommendations to the Board on any adjustment that are deemed necessary.
In accordance with the Company’s Articles of Association, each Director retires at least once every three years by rotation and all newly appointed Directors retire at the next Annual General meeting following their appointments. The retiring Directors are eligible to offer themselves for re-election.
The NC has recommended the re-election of the following Directors who will be retiring pursuant to Article 87 of the Company’s Articles of Association at the forthcoming Annual General meeting, following a review of their performance and contributions:
(i) Tay Puay Siong(ii) Ong Kian min
The Board has accepted the NC’s recommendation and accordingly, the above-named Directors will be offering themselves for re-election.
(iii) remuneration Committee (“rC”)
The RC, regulated by a set of written terms of reference, comprises three members, a majority of whom are Independent Non-Executive Directors.
The members of the RC as at the date of this report are:
Ong Kian min, ChairmanTay Puan SiongZhang Zenggen
The RC reviews and recommends to the Board:
• the remuneration packages of each Director and senior executives of the Group;
• Directors’ fees for Independent Non-Executive Directors and Non-Executive Directors subject to shareholders’ approval at the Annual General meeting; and
• service contracts and terms of employment of the Executive Director(s) and senior executives of the Group.
corporate governance
31GMG Global Ltd
Annual Report 2012
The RC also has access to external professional advice on remuneration matters, if required.
The RC has recommended to the Board an amount of S$455,000 as Directors’ fees for the year ending 31 December 2013 to be paid in arrears. The Board will table this recommendation at the forthcoming Annual General meeting for shareholders’ approval.
Directors’ fees payable to the Independent Non-Executive Directors and Non-Executive Directors are set in accordance within a remuneration framework and in consideration of the contribution, effort, time incurred and responsibilities of the Independent Non-Executive Directors and Non- Executive Directors.
The remuneration for the Executive Director and senior executives comprises a basic salary plus any other fixed allowances and an annual performance bonus which is tied to the Group’s performance and individual performance. The Executive Director does not receive Director’s fee.
directors’ remuneration
Breakdown (in percentage terms) of the remuneration paid for FY2012 is set out below:
fees (%)
salary (%)
bonus (%)
benefits (%)
others (%)
total (%)
NaMes$750,000 to s$1,000,000 Yao Xingliang – 77.93 16.91 1.95 3.21 100.00
Below s$250,000Han Jianguo (i) – 89.93 6.97 3.10 – 100.00Zhang Zenggen 100.00 – – – – 100.00Qin Hengde 100.00 – – – – 100.00Jeffrey Gondobintoro 100.00 – – – – 100.00Tay Puan Siong 100.00 – – – – 100.00Ong Kian min 100.00 – – – – 100.00
Note: (i) mr Han Jianguo was an Executive Director for the period 1 January 2012 to 20 June 2012.
The existing service agreement for the Executive Director is for a period of 3 years. The service agreement provides for termination by the Executive Director or the Company upon giving not less than 3 months’ notice in writing.
corporate governance
32
employees’ remuneration
Breakdown (in percentage terms) of the annual remuneration paid to each of the top five executives (who are not Directors of the Company) for FY2012 is set out below:
salary (%)
bonus (%)
benefits (%)
others (%)
total(%)
Names$500,000 to below s$750,000Elson Ng Keng Kwang 83.07 13.84 3.09 – 100.00
s$250,000 to below s$500,000Alain T.S. Young 92.31 7.69 – – 100.00Dino ma Deyou 76.01 12.67 2.20 9.12 100.00Danny Lo Kan Yu 81.38 13.56 5.06 – 100.00Lu Ling Ling 79.28 16.52 4.20 – 100.00
There were no employees in the Company or the Group who are related to a Director or the CEO and whose remuneration exceeded S$150,000 during the financial year under review.
The Company has in place a Performance Share Plan (“Share Plan”) administered by the RC.
No grants of awards have been made under the Share Plan during the financial year under review.
All the Executive Director, Non-Executive Directors (including Independent Directors) and employees of the Group are eligible to participate in the Share Plan. Selected Directors and employees of the Company’s intermediate holding company, Sinochem International (Overseas) Pte Ltd., and its ultimate parent company, Sinochem International Corporation and its subsidiaries are also eligible to participate in the Share Plan.
(iv) strategy and Investment Committee (“sIC”)
The SIC’s key functions are to review and evaluate proposed investments and divestments as well as mergers and acquisitions of the Group.
The SIC, regulated by a set of written terms of reference, comprises the following members as at the date of this report:
Zhang Zenggen, ChairmanYao Xingliang Qin HengdeElson Ng Keng Kwang
2. INterNal audIt (“Ia”), rIsk MaNageMeNt aNd INterNal CoNtrols
The Group has in place a robust and effective system of internal controls addressing financial, operational and compliance risks, inter alia, to safeguard shareholders’ interests and the Group’s assets and businesses and also to manage risks.
The Group has in place an IA function which reports primarily to the Chairman of the AC. The internal auditor has adopted the Standards for the Professional of Internal Auditing set by The Institute of Internal Auditors.
The AC, on an annual basis, assesses the effectiveness of the IA function by examining the scope of the IA work, the independence of areas reviewed and the internal auditor’s report on the state of the Group’s internal controls.
corporate governance
33GMG Global Ltd
Annual Report 2012
The internal auditor performs detailed work to assist the AC in the evaluation of the Group’s financial, operational, compliance and information technology controls based on internal audit plan approved by the AC. Any material non-compliance or weakness in internal controls, including recommendations for improvements are reported to the AC. The AC also reviews the effectiveness of actions taken by management on the recommendations made by the internal auditor in this respect.
The AC is satisfied that the IA function is adequately resourced and has the appropriate standing within the Company to undertake its activities independently and objectively.
The Group also has an internal control structure which consists of policies and procedures which were established and implemented to provide reasonable assurance that the Group’s related business objectives would be achieved. These measures extend beyond the accounting and finance function and address all activities of the Group, whether such related to plantations or processing, sales or marketing etc. management strived to provide clear and consistent policy guidelines concerning all areas of risk and ensure that these are disseminated down to line managers to ensure an understanding of best risk practices.
The Company has an independent Risk management function to oversee the Company’s risk management framework and policies. Our risk management philosophy and system is outlined briefly on page 21, together with the main risks arising from the Group‘s operations which are financial risk, commodity risk, foreign exchange risk, interest rate risk, credit risk and liquidity risk. The Notes to the Financial Statements also provide some details thereon. These risks are constantly monitored by management and the Board as a whole. The Board recognizes that no cost effective internal control system will preclude all errors and irregularities, as systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable but not absolute assurance against the occurrence of material errors, poor judgement in decision-making, human errors, losses, fraud or other irregularities.
Based on the work performed by the internal and external auditors, the internal controls and risk management systems established and reviewed by management as well as the regular reviews undertaken by various Board Committees, the Board, with the concurrence of the AC, is of the opinion that the internal controls, addressing the financial, operational and compliance risks of the Company, are adequate to meet the needs of the Group in its current business environment.
3. CoMMuNICatIoN wIth shareholders
In line with continuous disclosure obligations, the Company is committed to regular and proactive communication with its shareholders. It is the Board’s policy that shareholders be informed of all major developments within the Group.
Information is communicated to the shareholders on a timely basis through:
(a) announcements and press releases made via SGXNET on major developments of the Group;
(b) financial statements containing a summary of the financial information and affairs of the Group for the respective quarters and full-year which are released via SGXNET;
(c) annual reports that are sent to all shareholders; and
(d) notices of and explanatory notes for Annual General meetings and Extraordinary General meetings.
At the General meetings, shareholders are given opportunities to communicate their views on matters pertaining to the Group and to participate in the meeting. Issues seeking approval of shareholders, if any, are usually tabled as separate resolutions.
The Chairpersons of the AC, RC and NC as well as the external auditors will be present and available at the forthcoming Annual General meeting to address any queries raised by shareholders.
corporate governance
34
4. seCurItIes traNsaCtIoNs
The Company has adopted an internal code governing dealings in securities by Directors and key officers of the Company and its subsidiaries. Directors and key officers of the Company and its subsidiaries are required to comply with the code.
Directors and key officers of the Company and its subsidiaries have been informed not to deal in the Company’s securities at all times whilst in possession of unpublished price sensitive information and during the periods commencing at least two weeks and one month before the announcement of the Company’s results for the three quarters and full-year respectively and ending on the day of the announcement of the relevant results.
Directors and key officers are also encouraged not to deal in the Company’s securities on short-term considerations.
5. INterested PersoN traNsaCtIoNs
The Company has adopted an internal policy governing procedures for the identification, approval and monitoring of interested person transactions.
All interested person transactions are subject to review by the AC.
Details of interested person transactions for FY2012 including transactions undertaken pursuant to the shareholders’ general mandate under Rule 920 of the Listing manual of the SGX-ST were as follows:
name of interested person
aggregate value of all interested person transactions during
the financial year under review (excluding transactions less than $100,000 and transactions conducted
under shareholders’ mandate pursuant to rule 920)
aggregate value of all interested person transactions conducted under shareholders’ mandate
pursuant to rule 920 (excluding transactions
less than $100,000)12 months to
31/12/201212 months to
31/12/2012S$ S$
Sinochem International (Overseas) Pte LtdSale of Goods – 563,425,954marketing income – –Purchase of goods – –Credit purchase payments – –Purchase of chemicals – 1,262,093
GmG Exim USA marketing fee expense 640,311 –Consultancy fee 131,964 –
PT Asuransi Rama Satria WibawaInsurance expense 354,214 –
corporate governance
35GMG Global Ltd
Annual Report 2012
6. MaterIal CoNtraCts
Except for the service agreement entered into with the Executive Director and the interested person transactions conducted under the general mandate given by shareholders, there were no material contracts during the financial year under review as required to be reported under Rule 1207(8).
7. uPdate oN use of ProCeeds froM reNouNCeaBle rIghts Issue
utilisation of proceeds from renounceable rights issue in december 2011
amount (S$’000)
Net proceeds from December 2011’s Rights Issue 344,245Less: Refundable deposit paid to Fimave SA for the acquisition of 3,809 ordinary shares in the share capital of SIAT SA, announced via SGXNET, on 21 February 2012. (33,294)Completion of acquisition and subscription of 35% shareholding in the capital of SIAT SA, announced via SGXNET, on 18 July 2012. (280,321) Acquisition of additional shares in PT Bumi Jaya, announced via SGXNET, on 14 January 2013. (6,141) Shareholder loan given to PT Bumi Jaya, announced via SGXNET, on 14 January 2013. (2,911)
Balance of net proceeds remaining from december 2011’s rights Issue 21,578
corporate governance
36
report ofthe directors
The directors present their report together with the audited consolidated financial statements of the group and statement of financial position and statement of changes in equity of the company for the financial year ended December 31, 2012.
1 dIreCtors
The directors of the company in office at the date of this report are:
Zhang Zenggen Yao Xingliang Jeffrey Gondobintoro Ong Kian min Tay Puan Siong Qin Hengde
2 CorPorate goVerNaNCe
The company is committed to maintaining a high standard of corporate governance within the group. Good corporate governance establishes and maintains a legal and ethical environment in the group which strives to preserve the interests of all stakeholders.
3 Board of dIreCtors
The Board oversees the business affairs of the group, approves the financial objectives and the strategies to be implemented by management and monitors standards of performance and issues of policy, both directly and through its committees.
The Board comprises 6 directors, 1 of whom holds an executive position:
Executive Director: Yao Xingliang (Chief Executive Officer)
Non-Executive Directors: Zhang Zenggen (Non-Executive Chairman) Qin Hengde Ong Kian min Tay Puan Siong Jeffrey Gondobintoro
The Board meets at least four times annually and as and when deemed appropriate. The Board approves the group’s strategic plans, key business initiatives, major investments and funding decisions; it reviews the group’s financial performance and evaluates the performance and determines the compensation of senior management. These functions are carried out by the Board directly or through committees of the Board which have been set up to support its work.
4 seCurItIes traNsaCtIoNs
The group has issued a Policy on Share Dealings to all employees of the group, setting out the implications of insider trading and the recommendations by the Singapore Exchange Securities Trading Limited. The group has adopted a code of conduct to provide guidance to its officers with regard to dealing in the company’s shares.
37GMG Global Ltd
Annual Report 2012
report ofthe directors
5 arraNgeMeNts to eNaBle dIreCtors to aCQuIre BeNefIts BY MeaNs of the aCQuIsItIoN of shares aNd deBeNtures
Neither at the end of the financial year nor at any time during the financial year did there subsist any arrangement whose object is to enable the directors of the company to acquire benefits by means of the acquisition of shares or debentures in the company or any other body corporate. The company has in place a Share Performance Plan where the directors are eligible to participate. The Share Performance Plan has not been put into effect and no grants of awards have been made during the year.
6 dIreCtors’ INterests IN shares aNd deBeNtures
The directors of the company holding office at the end of the financial year had no interests in the share capital and debentures of the company and related corporations as recorded in the register of directors’ shareholdings kept by the company under Section 164 of the Singapore Companies Act except as follows:
shareholdingsregistered in the
names of directors
shareholdingsin which directors
are deemed tohave an interest
names of directors and company in which interests are held
atbeginning
of year at end
of year
atbeginning
of year at end
of year
gMg global ltd(ordinary shares)
Jeffrey Gondobintoro 6,853,550 6,853,550 905,641,902 905,641,902Ong Kian min 4,000,000 4,000,000 4,000,000 4,000,000Tay Puan Siong 4,000,000 4,000,000 4,000,000 4,000,000
By virtue of Section 7 of the Singapore Companies Act, mr Jeffrey Gondobintoro, mr Ong Kian min and mr Tay Puan Siong are deemed to have interest in the ordinary shares of all the subsidiaries held by the company.
The directors’ interests in the shares of the company as at January 21, 2013 were the same as at December 31, 2012.
7 dIreCtors’ reCeIPt aNd eNtItleMeNt to CoNtraCtual BeNefIts
Since the beginning of the financial year, no director has received or become entitled to receive a benefit which is required to be disclosed under Section 201(8) of the Singapore Companies Act, by reason of a contract made by the company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except for salaries, bonuses and other benefits as disclosed in the financial statements. Certain directors received remuneration from related corporations in their capacity as a director and/or executives of those related corporations.
There were also certain other transactions (shown in the financial statements) with corporations in which certain directors have an interest.
38
report ofthe directors
8 share oPtIoNs
(a) options to take up unissued shares
During the financial year, no option to take up unissued shares of the company or any corporation in the group was granted.
(b) options exercised
During the financial year, there were no shares of the company or any corporation in the group issued by virtue of the exercise of an option to take up unissued shares.
(c) unissued shares under option
At the end of the financial year, there were no unissued shares of the company or any corporation in the group under option.
9 audIt CoMMIttee
The Audit Committee of the company is chaired by mr Tay Puan Siong, an independent non-executive director, and includes mr Ong Kian min, also an independent non-executive director, and mr Qin Hengde, a non-executive director. The Audit Committee has met four times since the last Annual General meeting (“AGm”) and has reviewed the following, where relevant, with the executive director and external and internal auditors of the company:
a) the audit plans of the internal and external auditors and results of the internal auditors’ examination and evaluation of the group’s systems of internal accounting controls;
b) the group’s financial and operating results and accounting policies;
c) the statement of financial position and statement of changes in equity of the company and the consolidated financial statements of the group before their submission to the directors of the company and external auditors’ report on those financial statements;
d) the quarterly and annual announcements as well as the related press releases on the results and financial position of the company and the group;
e) the co-operation and assistance given by the management to the group’s external auditors; and
f) the re-appointment of the external auditors of the group.
The Audit Committee has full access to and has the co-operation of the management and has been given the resources required for it to discharge its function properly. It also has full discretion to invite any director and executive officer to attend its meetings. The external and internal auditors have unrestricted access to the Audit Committee.
The Audit Committee has recommended to the directors the nomination of Deloitte & Touche LLP for re-appointment as external auditors of the group at the forthcoming AGm of the company.
39GMG Global Ltd
Annual Report 2012
10 audItors
The auditors, Deloitte & Touche LLP, have expressed their willingness to accept re-appointment.
ON BEHALF OF THE DIRECTORS
...........................................…Zhang Zenggen
...........................................…Yao Xingliang
march 28, 2013
report ofthe directors
40
In the opinion of the directors, the consolidated financial statements of the group and the statement of financial position and statement of changes in equity of the company as set out on pages 43 to 116 are drawn up so as to give a true and fair view of the state of affairs of the group and of the company as at December 31, 2012, and of the results, changes in equity and cash flows of the group and changes in equity of the company for the financial year then ended and at the date of this statement there are reasonable grounds to believe that the company will be able to pay its debts when they fall due.
ON BEHALF OF THE DIRECTORS
...........................................…Zhang Zenggen
...........................................…Yao Xingliang
march 28, 2013
statement ofdirectors
41GMG Global Ltd
Annual Report 2012
report on the financial statements
We have audited the accompanying financial statements of GmG Global Ltd (the “company”) and its subsidiaries (the “group”) which comprise the statements of financial position of the group and the company as at December 31, 2012, and the income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows of the group and the statement of changes in equity of the company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 43 to 116.
Management’s responsibility for the financial statements
management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act (the “Act”) and Singapore Financial Reporting Standards and for devising and maintaining a system of internal accounting controls sufficient to provide reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets.
auditors’ responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
opinion
In our opinion, the consolidated financial statements of the group and the statement of financial position and statement of changes in equity of the company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the group and of the company as at December 31, 2012 and of the results, changes in equity and cash flows of the group and changes in equity of the company for the year ended on that date.
independentauditors’ reportTO THE MEMBERS OF GMG GLOBAL LTD
42
report on other legal and regulatory requirements
In our opinion, the accounting and other records required by the Act to be kept by the company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.
deloitte & touche llPPublic Accountants andCertified Public AccountantsSingapore
Patrick tan hak PhengPartnerAppointed on June 1, 2008
march 28, 2013
independentauditors’ report (cont’d)TO THE MEMBERS OF GMG GLOBAL LTD
43GMG Global Ltd
Annual Report 2012
group company
note 2012 2011 2012 2011
$’000 $’000 $’000 $’000
assets
Current assetsCash and cash equivalents 7 131,905 452,237 38,657 357,265Pledged fixed deposits 7 3,131 3,266 – – Trade receivables 8 64,412 65,713 – – Other receivables 9 53,047 43,955 162,215 160,943Current portion of loan receivables 21 765 – – – Held-to-maturity investment 10 31 21 – – Derivative financial instruments 11 2,026 591 662 – Inventories 12 132,255 136,132 – – Total current assets 387,572 701,915 201,534 518,208
Non-current assetsInvestment in subsidiaries 13 – – 191,505 188,517Investment in associates 14 317,580 3,908 317,480 – Available-for-sale investments 15 255 252 – – Held-to-maturity investment 10 – 43 – – Plantation assets 16 242,301 233,918 – – Property, plant and equipment 17 88,359 83,310 1,491 1,021Investment properties 18 17,838 – – – Club membership 19 640 640 640 640Goodwill 20 11,942 8,211 – – Loan receivables 21 2,461 6,140 12,307 12,831Deferred tax assets 27 6,699 7,220 – – Total non-current assets 688,075 343,642 523,423 203,009
total assets 1,075,647 1,045,557 724,957 721,217
statements of financial positionDEcEMBER 31, 2012
44
group company
note 2012 2011 2012 2011
$’000 $’000 $’000 $’000
lIaBIlItIes aNd eQuItY
Current liabilitiesShort-term loans 22 110,865 71,250 47,650 41,970Trade payables 23 27,967 11,174 – – Other payables 24 34,130 32,159 47,001 39,776Current portion of long-term loans 25 7,552 7,156 – – Current portion of finance leases 26 225 309 142 142Derivative financial instruments 11 835 6,176 40 2,790Income tax payable 7,770 15,620 6 6Total current liabilities 189,344 143,844 94,839 84,684
Non-current liabilitiesLong-term loans 25 11,690 30,377 – – Finance leases 26 497 688 446 587Deferred tax liabilities 27 7,342 6,975 914 164Total non-current liabilities 19,529 38,040 1,360 751
Capital, reserves and non-controlling interestsShare capital 28 611,330 611,330 611,330 611,330Treasury shares 29 (1,995) (1,995) (1,995) (1,995)Capital reserves 30 10,462 9,795 – – Currency translation reserves (55,116) (35,902) – – Investment revaluation reserve 31 – (10) – – Retained earnings 246,178 225,673 19,423 26,447Equity attributable to owners of the company 810,859 808,891 628,758 635,782Non-controlling interests 55,915 54,782 – – Total equity 866,774 863,673 628,758 635,782
total liabilities and equity 1,075,647 1,045,557 724,957 721,217
statements of financial position (cont’d)DEcEMBER 31, 2012
See accompanying notes to financial statements.
45GMG Global Ltd
Annual Report 2012
note 2012 2011
$’000 $’000
revenue 32 1,104,272 1,194,273
Cost of sales (966,965) (1,023,589)
gross profit 137,307 170,684
Other income 33 7,969 19,168Distribution costs (37,996) (35,499)Administrative expenses (61,348) (40,774)Share of profit (loss) of associates 14 4,129 (89)Finance costs 34 (6,630) (5,056)Foreign currency exchange gain 5,001 4,093Fair value gain (loss) on financial derivatives 3,298 (5,066)
Profit before tax 51,730 107,461
Income tax expense 35 (8,821) (16,387)
Profit for the year 36 42,909 91,074
Attributable to:
Owners of the company 40,480 74,582Non-controlling interests 2,429 16,492
42,909 91,074
earnings per ordinary share (cents)– Basic and fully diluted 37 0.53 1.33
consolidatedincome statementYEAR EnDED DEcEMBER 31, 2012
See accompanying notes to financial statements.
46
note 2012 2011
$’000 $’000
Profit for the year 36 42,909 91,074
other comprehensive incomeCash flow hedges:
Losses arising during the year – (3,292)Reclassification to profit or loss from equity – 18,044
Exchange differences on translation of foreign operations (16,220) (7,902)Share of associates’ other comprehensive income (3,843) – Available-for-sale investment:
Gain (Loss) arising during the year 10 (10)other comprehensive income for the year, net of tax (20,053) 6,840
total comprehensive income for the year 22,856 97,914
total comprehensive income attributable to:Owners of the company 21,276 81,935Non-controlling interests 1,580 15,979
22,856 97,914
consolidatedstatement of comprehensive incomeYEAR EnDED DEcEMBER 31, 2012
See accompanying notes to financial statements.
47GMG Global Ltd
Annual Report 2012
shar
eca
pita
l$’
000
trea
sury
shar
es
$’00
0
capi
tal
rese
rves
$’00
0
curr
ency
tran
slat
ion
res
erve
s $’
000
inve
stm
ent
reva
luat
ion
res
erve
$’
000
hed
gin
gre
serv
es$’
000
reta
ined
earn
ings
$’00
0
attr
ibu
tabl
eto
ow
ner
s of
th
e co
mpa
ny
$’00
0
non
-co
ntr
olli
ng
inte
rest
s $’
000
tota
l$’
000
grou
p
Bal
ance
at J
anua
ry 1
, 201
126
7,08
4 –
9,
795
(28,
513)
–
(14,
752)
162,
609
396,
223
40,5
9643
6,81
9
Tota
l com
preh
ensi
ve in
com
e
for t
he y
ear
– –
–
(7
,389
)(1
0)14
,752
74,5
8281
,935
15,9
7997
,914
Issu
e of
sha
re c
apita
l (N
ote
28)
344,
246
–
–
–
–
–
–
344,
246
–
344,
246
Repu
rcha
se o
f sha
res
(Not
e 29
) –
(1
,995
) –
–
–
–
–
(1
,995
) –
(1
,995
)D
ivid
ends
pai
d to
no
n-co
ntro
lling
inte
rest
s –
–
–
–
–
–
–
–
(1
,793
)(1
,793
)D
ivid
end
paid
(Not
e 41
) –
–
–
–
–
–
(1
1,51
8) (1
1,51
8) –
(1
1,51
8)
Bal
ance
at D
ecem
ber 3
1, 2
011
611,
330
(1,9
95)
9,79
5(3
5,90
2)(1
0) –
22
5,67
380
8,89
154
,782
863,
673
Tota
l com
preh
ensi
ve in
com
e
for t
he y
ear
–
–
–
(19,
214)
10 –
40
,480
21,2
761,
580
22,8
56N
on-c
ontr
ollin
g in
tere
st
aris
ing
from
acq
uisi
tion
of
subs
idia
ries
(Not
e 42
) –
–
–
–
–
–
–
–
1,
239
1,23
9Ef
fect
of d
ispo
sal a
nd
acqu
isiti
on o
f non
-con
trol
ling
inte
rest
in a
sub
sidi
ary
(Not
e 30
) –
–
6
67
–
–
–
(3,12
3)(2
,456
)–
(2,4
56)
Div
iden
ds p
aid
to
non-
cont
rolli
ng in
tere
sts
–
–
–
–
–
–
–
–
(1,6
86)
(1,6
86)
Div
iden
d pa
id (N
ote
41)
–
–
–
–
–
–
(16,
852)
(16,
852)
–
(16,
852)
Bal
ance
at D
ecem
ber 3
1, 2
012
611,
330
(1,9
95)
10,4
62(5
5,11
6) –
–
24
6,17
881
0,85
955
,915
866,
774
statementsof changes in equityYEAR EnDED DEcEMBER 31, 2012
48
sharecapital
treasury shares
retainedearnings total
$’000 $’000 $’000 $’000
Company
Balance at January 1, 2011 267,084 – 17,060 284,144
Total comprehensive income for the year – – 20,905 20,905
Issue of share capital (Note 28) 344,246 – – 344,246
Repurchase of shares (Note 29) – (1,995) – (1,995)
Dividend paid (Note 41) – – (11,518) (11,518)
Balance at December 31, 2011 611,330 (1,995) 26,447 635,782
Total comprehensive income for the year – – 9,828 9,828
Dividend paid (Note 41) – – (16,852) (16,852)
Balance at December 31, 2012 611,330 (1,995) 19,423 628,758
statementsof changes in equity (cont’d)YEAR EnDED DEcEMBER 31, 2012
See accompanying notes to financial statements.
49GMG Global Ltd
Annual Report 2012
2012 2011$’000 $’000
operating activitiesProfit before tax 51,730 107,461Adjustments for:
Depreciation of property, plant and equipment 11,296 10,093Depreciation of plantation assets 2,964 3,373(Gain) Loss on disposal of property, plant and equipment (96) 103Loss on disposal of investment in associates 125 – Interest expense 6,630 5,056Allowance for inventories 123 1,366Inventories written off (1,266) – Interest income (4,292) (2,365)Write-off of doubtful trade and other receivables (580) –Allowance for doubtful other receivables 220 267Accrual for post-employment benefits 71 199Fair value gain on financial derivatives (1,111) (606)Share of (profit) loss of associates (4,129) 89
Operating cash flows before movements in working capital 61,685 125,036
Trade receivables (1,759) (692)Other receivables (9,219) (8,542)Loan receivables 2,663 340Inventories 12,999 (72,727)Trade payables 15,254 (10,892)Other payables (8,023) 8,902
Cash generated from operations 73,600 41,425
Interest paid (6,999) (4,559)Interest received 4,292 2,365Income tax paid (15,272) (17,865)
Net cash from operating activities 55,621 21,366
Investing activitiesProceeds on disposal of property, plant and equipment 334 31Purchase of plantation assets (14,880) (6,801)Purchase of property, plant and equipment (Note B) (30,392) (10,321)Proceed from sales of other investment 2 – Proceeds on held-to-maturity investment 31 34Acquisition of subsidiaries (Note 42) (15) – Acquisition of associates (313,615) – Payment on disposal and acquisition of non-controlling interest in a subsidiary (Note 30) (2,456) – Purchase of club membership – (640)
Net cash used in investing activities (360,991) (17,697)
consolidatedstatement of cash flowsYEAR EnDED DEcEMBER 31, 2012
50
2012 2011
$’000 $’000
financing activitiesDividends paid (16,852) (11,518)Dividends paid to non-controlling interest of subsidiary (1,686) (1,793)Proceeds from long-term loans from related parties – 380Repayment of long-term bank loans (23,891) (20,362)Purchase of treasury shares – (1,995)Proceeds from short-term loans 39,615 51,703Net proceeds from issue of shares on rights issue – 344,246(Repayment of) Proceeds from finance leases (296) 593movements in pledged fixed deposits 1,161 150
Net cash (used in) from financing activities (1,949) 361,404
Net (decrease) increase in cash and cash equivalents (307,319) 365,073Cash and cash equivalents at the beginning of the year 452,237 90,724Effect of exchange rate changes on the balance of cash and
cash equivalents held in foreign currencies (13,013) (3,560)Cash and cash equivalents at the end of the year (Note a) 131,905 452,237
Notes to Consolidated statement of Cash flows
a. Cash and cash equivalents consist of
2012 2011 $’000 $’000
Cash and bank balances 78,425 89,975Fixed deposits * 61,927 371,147Less: Bank overdrafts (8,447) (8,885)
131,905 452,237
* Excluding fixed deposits pledged of $3,131,000 (2011: $3,266,000).
B. Purchase of property, plant and equipment During the year, additions were made to plant and equipment with an aggregate cost of $30,437,000 (2011: $11,105,000)
of which $45,000 (2011: $784,000) was acquired by means of finance leases. Cash payments of $30,392,000 (2011: $10,321,000) were made in respect of the remaining additions to plant and equipment.
consolidatedstatement of cash flows (cont’d)YEAR EnDED DEcEMBER 31, 2012
See accompanying notes to financial statements.
51GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
1 geNeral
The company (Registration No. 199904244E) is incorporated in Singapore with its principal place of business and registered office at 8 marina View, #34-05, Asia Square Tower 1, Singapore 018960 (2011: 55 market Street, #03-01, Singapore 048941). The company is listed on the mainboard of the Singapore Exchange Securities Trading Limited. The financial statements are expressed in Singapore dollars.
The principal activity of the company is that of an investment holding company.
The principal activities of the subsidiaries are disclosed in Note 13 to the financial statements.
The consolidated financial statements of the group and statement of financial position and statement of changes in equity of the company for the year ended December 31, 2012 were authorised for issue by the Board of Directors on march 28, 2013.
2 suMMarY of sIgNIfICaNt aCCouNtINg PolICIes
BASIS OF ACCOUNTING – The financial statements have been prepared in accordance with the historical cost basis, except as disclosed in the accounting policies below, and are drawn up in accordance with the provisions of the Singapore Companies Act and Singapore Financial Reporting Standards (“FRS”).
ADOPTION OF NEW AND REVISED STANDARDS – On January 1, 2012, the group has adopted all the new and revised FRSs and Interpretations of FRS (“INT FRS”) that are effective for annual periods from that date and are relevant to its operations. The adoption of these new/revised FRSs and INT FRSs does not result in changes to the group’s and company’s accounting policies and has no material effect on the amounts reported for the current or prior years.
At the date of authorisation of these financial statements, the following amendments to FRS that are relevant to the group and the company were issued but not effective:
• Amendments to FRS 1 Presentation of Financial statements – Amendments relating to Presentation of Items of Other Comprehensive Income
• Amendments to FRS 19 Employee Benefits • FRS 110 Consolidated Financial Statements • FRS 112 Disclosure of Interests in Other Entities • FRS 113 Fair Value measurement • Amendments to FRS 32 Financial Instruments: Presentation and FRS 107 Financial Instruments: Disclosure
– Offsetting Financial Assets and Financial Liabilities
amendments to frs 1 Presentation of financial statements – amendments relating to Presentation of Items of other Comprehensive Income (“oCI”)
The amendment on Other Comprehensive Income (“OCI”) presentation will require the group to present in separate groupings, OCI items that might be recycled ie., reclassified to profit or loss (eg., those arising from cash flow hedging, foreign currency translation) and those items that would not be recycled (eg. revaluation gains on property, plant and equipment under the revaluation model). The tax effects recognised for the OCI items would also be captured in the respective grouping, although there is a choice to present OCI items before tax or net of tax.
Changes arising from these amendments to FRS 1 will take effect from financial years beginning on or after July 1, 2012, with full retrospective application.
52
notes tofinancial statementsDecember 31, 2012
2 suMMarY of sIgNIfICaNt aCCouNtINg PolICIes (CoNt’d)
amendments to frs 19 employee Benefits
The amendments to FRS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur and hence eliminate the ‘corridor approach’ permitted under the previous version of FRS 19 and accelerate the recognition of past service costs. The amendments require all actuarial gains and losses to be recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus.
The amendments to FRS 19 are effective for annual periods beginning on or after January 1, 2013 and require retrospective application with certain exceptions. The group anticipates that the application of the amendments to FRS 19 may have impact on amounts reported in respect of the groups’ defined benefit plans. However, the group has not yet performed a detailed analysis of the impact of the application of the amendments, and hence have not yet quantified the extent of the impact.
frs 110 Consolidated financial statements and frs 27 separate financial statements
FRS 110 replaces the control assessment criteria and consolidation requirements currently in FRS 27 and INT FRS 12 Consolidation -Special Purpose Entities.
FRS 110 defines the principle of control and establishes control as the basis for determining which entities are consolidated in the consolidated financial statements. It also provides more extensive application guidance on assessing control based on voting rights or other contractual rights. Under FRS 110, control assessment will be based on whether an investor has (i) power over the investee; (ii) exposure, or rights, to variable returns from its involvement with the investee; and (iii) the ability to use its power over the investee to affect the amount of the returns. FRS 27 remains as a standard applicable only to separate financial statements.
FRS 110 will take effect from financial years beginning on or after January 1, 2014, with retrospective application subject to transitional provisions.
frs 112 disclosure of Interests in other entities
FRS 112 requires an entity to provide more extensive disclosures regarding the nature of and risks associated with its interest in subsidiaries, associates, joint arrangements and unconsolidated structured entities.
FRS 112 will take effect from financial years beginning on or after January 1, 2014, and the group is currently estimating extent of additional disclosures needed.
frs 113 fair Value Measurement
FRS 113 is a single new Standard that applies to both financial and non-financial items. It replaces the guidance on fair value measurement and related disclosures in other Standards, with the exception of measurement dealt with under FRS 102 Share-based Payment, FRS 17 Leases, net realisable value in FRS 2 Inventories and value-in-use in FRS 36 Impairment of Assets.
FRS 113 provides a common fair value definition and hierarchy applicable to the fair value measurement of assets, liabilities, and an entity’s own equity instruments within its scope, but does not change the requirements in other Standards regarding which items should be measured or disclosed at fair value.
53GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
2 suMMarY of sIgNIfICaNt aCCouNtINg PolICIes (CoNt’d)
The disclosure requirements in FRS 113 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under FRS 107 Financial Instruments: Disclosures will be extended by FRS 113 to cover all assets and liabilities within its scope.
FRS 113 will be effective prospectively from annual periods beginning on or after January 1, 2013. Comparative information is not required for periods before initial application.
The management anticipates that the application of FRS 113 may affect certain amounts reported in the financial statements and result in more extensive disclosures in the financial statements.
amendments to frs 32 financial Instruments: Presentation and frs 107 financial Instruments: disclosure – offsetting financial assets and financial liabilities
The amendments to FRS 32 clarify existing application issues relating to the offsetting requirements. Specifically, the amendments clarify the meaning of ‘currently has a legal enforceable right of set-off’ and ‘simultaneous realisation and settlement’.
The amendments to FRS 107 require entities to disclose information about rights of set-off and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement.
The amendments to FRS 107 are required for annual periods beginning on or after January 1, 2013 and interim periods within those annual periods. The disclosures should be provided retrospectively for all comparative periods. However, the amendments to FRS 32 are effective for annual periods beginning on or after January 1, 2014, with retrospective application required.
The management anticipates that the application of amendments to FRS 107 will result in more extensive disclosures on offsetting financial assets and financial liabilities. However, the management is still evaluating the impact of the amendments to FRS 32 on the financial assets and liabilities that have been set-off on the statement of financial position.
Other than as disclosed above, management anticipates that the adoption of the FRSs, INT FRSs and amendments to FRSs that were issued but effective only in future periods will not have a material impact on the financial statements of the group and the company in the period of their initial adoption.
BASIS OF CONSOLIDATION – The consolidated financial statements incorporate the financial statements of the company and entities controlled by the company (its subsidiaries). Control is achieved where the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies in line with those used by other members of the group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
54
notes tofinancial statementsDecember 31, 2012
2 suMMarY of sIgNIfICaNt aCCouNtINg PolICIes (CoNt’d)
Non-controlling interests in subsidiaries are identified separately from the group’s equity therein. The interest of non-controlling shareholders that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured (at date of original business combination) either at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another FRS. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Changes in the group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the company.
When the group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under FRS 39 Financial Instruments: Recognition and measurement or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity.
In the company’s financial statements, investments in subsidiaries and associates are carried at cost less any impairment in net recoverable value that has been recognised in profit or loss.
BUSINESS COmBINATIONS – Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the acquisition date fair values of assets given, liabilities incurred by the group to the former owners of the acquiree, and equity interests issued by the group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with FRS 39 Financial Instruments: Recognition and measurement, or FRS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profit or loss.
Where a business combination is achieved in stages, the group’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.
55GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
2 suMMarY of sIgNIfICaNt aCCouNtINg PolICIes (CoNt’d)
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under the FRS are recognised at their fair value at the acquisition date, except that:
• deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with FRS 12 Income Taxes and FRS 19 Employee Benefits respectively;
• liabilities or equity instruments related to share-based payment transactions of the acquire or the replacement of an acquiree’s share-based payment awards transactions with share-based payment awards transactions of the acquirer in accordance with the method in FRS 102 Share-based Payment at the acquisition date; and
• assets (or disposal groups) that are classified as held for sale in accordance with FRS 105 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.
The measurement period is the period from the date of acquisition to the date the group obtains complete information about facts and circumstances that existed as of the acquisition date – and is subject to a maximum of one year from acquisition date.
The accounting policy for initial measurement of non-controlling interests is described above.
The policy described above is applied to all business combinations that take place on or after January 1, 2010.
FINANCIAL INSTRUmENTS – Financial assets and financial liabilities are recognised on the group’s statement of financial position when the group becomes a party to the contractual provisions of the instrument.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or where appropriate, a shorter period. Income and expense is recognised on an effective interest rate basis for debt instruments other than those financial instruments “at fair value through profit or loss”.
financial assets
Investments are recognised and de-recognised on a trade date where the purchase or sale of an investment is under a contract where terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as fair value through profit or loss which are initially measured at fair value.
Other financial assets are classified into the following specified categories: financial assets “at fair value through profit or loss”, “held-to-maturity investments”, “available-for-sale” financial assets and “loans and receivables”. The classification depends on the nature and purpose of financial assets and is determined at the time of initial recognition.
56
notes tofinancial statementsDecember 31, 2012
2 suMMarY of sIgNIfICaNt aCCouNtINg PolICIes (CoNt’d)
Financial assets at fair value through profit or loss (FVTPL)
Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is designated as at FVTPL.
A financial asset is classified as held for trading if:
• it has been acquired principally for the purpose of selling in the near future; or
• it is a part of an identified portfolio of financial instruments that the group manages together and has a recent actual pattern of short-term profit-taking; or
• it is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:
• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
• the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
• it forms part of a contract containing one or more embedded derivatives, and FRS 39 Financial Instruments: Recognition and measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.
Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in Note 4 to the financial statements.
Held-to-maturity investments
Bonds with fixed or determinable payments and fixed maturity dates where the group has a positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortised cost using the effective interest method less impairment, with revenue recognised on an effective yield basis.
Loans and receivables
Trade receivables, other receivables and loan receivables that have fixed or determinable payments that are not quoted in an active market are classified as “loans and receivables”. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate method, except for short-term receivables when the recognition of interest would be immaterial.
57GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
2 suMMarY of sIgNIfICaNt aCCouNtINg PolICIes (CoNt’d)
Available-for-sale financial assets
Certain shares held by the group are classified as being available for sale and are stated at fair value. Fair value is determined in the manner described in Note 4. Where reliable fair value estimates are not available, these investments are stated at cost less any impairment losses. Gains and losses arising from changes in fair value are recognised in other comprehensive income with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in other comprehensive income and accumulated in revaluation reserve is reclassified to profit or loss. Dividends on available-for-sale equity instruments are recognised in profit or loss when the group’s right to receive payments is established.
Impairment of financial assets
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.
For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of receivables where the carrying amount is reduced through the use of an allowance account. When a receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
With the exception of available-for-sale financial assets, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
In respect of available-for-sale financial assets, any subsequent increase in fair value after an impairment loss, is recognised in other comprehensive income.
Derecognition of financial assets
The group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the group neither transfers nor retains substantially all the risk and rewards of ownership and continues to control the transferred asset, the group recognises its retained interest in the assets and an associated liability for amounts it may have to pay. If the group retains substantially all the risks and rewards of ownership of a transferred financial asset, the group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
financial liabilities and equity instruments
Classification as debt or equity
Financial liabilities and equity instruments issued by the group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
58
notes tofinancial statementsDecember 31, 2012
2 suMMarY of sIgNIfICaNt aCCouNtINg PolICIes (CoNt’d)
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities are classified as either financial liabilities “at fair value through profit or loss” or other financial liabilities.
Financial liabilities at fair value through profit or loss (FVTPL)
Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
• it has been incurred principally for the purpose of repurchasing in the near future; or
• it is a part of an identified portfolio of financial instruments that the group manages together and has a recent actual pattern of short-term profit-taking; or
• it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
• the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
• it forms part of a contract containing one or more embedded derivatives, and FRS 39 Financial Instruments: Recognition and measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.
Financial liabilities at fair value through profit or loss are initially measured at fair value and subsequently stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. Fair value is determined in the manner described in Note 4 to the financial statements.
Other financial liabilities
Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, using the effective interest method, with interest expense recognised on an effective yield basis.
Interest-bearing bank loans, overdraft and other loans are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the group’s accounting policy for borrowing costs (see below).
59GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
2 suMMarY of sIgNIfICaNt aCCouNtINg PolICIes (CoNt’d)
The group’s interest-free state loan is initially measured at fair value and subsequently measured at amortised cost, using the effective interest method.
Derecognition of financial liabilities
The group derecognises financial liabilities when, and only when, the group’s obligations are discharged, cancelled or they expire.
Derivative financial instruments and hedge accounting
The group enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risk and commodity price risk, including forward foreign exchange contracts and forward commodity (natural rubber) contracts. Details of derivative financial instruments are disclosed in Note 11 to the financial statements.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. The group designates certain derivatives as hedges of highly probable forecast transactions (cash flow hedges).
A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.
Hedge accounting
The group designates certain hedging instruments, which include derivatives, as cash flow hedges.
At the inception of the hedge relationship the entity documents the relationship between the hedging instrument and hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in fair values or cash flows of the hedged item.
Note 11 contain details of the fair values of the derivative instruments used for hedging purposes. movements in the hedging reserve in other comprehensive income are also detailed in the consolidated statement of comprehensive income.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.
Amounts recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item is recognised in profit or loss in the same line of the statement of comprehensive income as the recognised hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously accumulated in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.
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notes tofinancial statementsDecember 31, 2012
2 suMMarY of sIgNIfICaNt aCCouNtINg PolICIes (CoNt’d)
Hedge accounting is discontinued when the group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any gain or loss accumulated in equity at that time remains in equity and when the forecast transaction is ultimately recognised in profit or loss, such gains and losses are recognised in profit or loss, or transferred from equity and included in the initial measurement of the cost of the asset or liability as described above. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was accumulated in equity is recognised immediately in profit or loss.
STATUTORY RESERVES – Certain subsidiaries are required by laws established in their respective countries of incorporation to set aside certain percentage of its annual profit after tax as legal reserve until the accumulated reserve has reached a certain percentage of the subsidiary’s paid-up capital.
LEASES – Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
The group as lessee
Assets held under finance leases are recognised as assets of the group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the group’s general policy on borrowing costs (see below). Contingent rentals are recognised as expenses in the periods in which they are incurred.
Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
INVENTORIES – Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
PLANTATION ASSETS – Plantation assets comprise land use rights, mature rubber tree plantations and plantation establishment costs. mature rubber tree plantations and plantation establishment costs, (collectively “biological assets”) are measured at cost less any accumulated depreciation and any impairment losses since market-determined prices or values are not available and alternative estimates of fair value are determined to be unreliable. Depreciation of rubber tree plantations that are in production is provided at the rate of 4.0% per annum over the expected period of rubber tapping activities of 25 years. Plantation leasehold land is depreciated at 1.5% per annum over the lease period.
Plantation establishment costs, consisting of costs directly incurred during the period of plantation development, are not depreciated. The establishment costs will be transferred to plantation assets and will subject to depreciation upon commencement of rubber tapping activities. No depreciation is provided on the land use rights as management is of the opinion that the land use rights effectively have a perpetual life (Note 16).
61GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
2 suMMarY of sIgNIfICaNt aCCouNtINg PolICIes (CoNt’d)
PROPERTY, PLANT AND EQUIPmENT – Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.
Depreciation is charged so as to write off the cost of assets other than freehold land and construction-in-progress, over their estimated useful lives, using the straight-line method, on the following bases:
Leasehold buildings – 3% to 20% Leasehold improvements – 10% Office equipment, furniture and fittings – 10% to 100% Plant, machinery and equipment – 5% to 331/3% motor vehicles – 20% to 331/3% Computers – 20%
The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, if there is no certainty that the lessee will obtain ownership by the end of the lease term, the asset shall be fully depreciated over the shorter of the lease term and its useful life.
The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amounts of the asset and is recognised in profit or loss.
Construction in progress, which represents property, plant and equipment in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing cost capitalised in accordance with the group’s accounting policy. Depreciation of these assets, on the same basis as other items of property, plant and equipment, commences when the assets are ready for their intended use.
INVESTmENT PROPERTIES – Investment properties, which are properties held to earn rentals and/or for capital appreciation, are measured initially at its cost, including transaction costs. Freehold land is not depreciated. Building is depreciated on a straight line basis to write off the cost over its estimated useful life at annual rate of 3% to 20%.
The gain or loss arising on disposal or retirement of an item of investment properties is determined as the difference between the sales proceeds and the carrying amounts of the asset and is recognised in profit or loss.
CLUB mEmBERSHIP – Club memberships with indefinite useful lives (“life membership”) are not amortised. They are stated at cost less any impairment in net recoverable amount.
GOODWILL – Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any) in the entity over net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.
If, after reassessment, the group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
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notes tofinancial statementsDecember 31, 2012
2 suMMarY of sIgNIfICaNt aCCouNtINg PolICIes (CoNt’d)
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary or the relevant cash generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
ImPAIRmENT OF NON-FINANCIAL ASSETS EXCLUDING GOODWILL – At the end of each reporting period, the group reviews the carrying amounts of its non-financial assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
ASSOCIATES – An associate is an entity over which the group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for under FRS 105 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the group’s share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the group’s interest in that associate (which includes any long-term interests that, in substance, form part of the group’s net investment in the associate) are not recognised, unless the group has incurred legal or constructive obligations or made payments on behalf of the associate.
Any excess of the cost of acquisition over the group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.
63GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
2 suMMarY of sIgNIfICaNt aCCouNtINg PolICIes (CoNt’d)
Where a group entity transacts with an associate of the group, profits and losses are eliminated to the extent of the group’s interest in the relevant associate.
PROVISIONS – Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that the group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
REVENUE RECOGNITION – Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.
Sale of goods
Revenue from the sale of goods is recognised when all the following conditions are satisfied:
• the group has transferred to the buyer the significant risks and rewards of ownership of the goods;
• the group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
• the amount of revenue can be measured reliably;
• it is probable that the economic benefits associated with the transaction will flow to the entity; and
• the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.
Dividend income
Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.
Service income
Service income such as training fees and marketing fees is recognised when services have been rendered.
BORROWING COSTS – Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
64
notes tofinancial statementsDecember 31, 2012
2 suMMarY of sIgNIfICaNt aCCouNtINg PolICIes (CoNt’d)
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
RETIREmENT BENEFIT COSTS – Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes, such as Singapore Central Provident Fund and state schemes where the group’s operations are located, are dealt with as payments to defined contribution plans where the group’s obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.
For defined benefit retirement benefit plans, the cost of providing benefits is determined based on the present value of the potential obligation from independent actuarial valuation. The retirement benefit obligation recognised in the statement of financial position represents the net present value of the defined benefit obligation.
EmPLOYEE LEAVE ENTITLEmENT – Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period.
INCOmE TAX – Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The group’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where the company and subsidiaries operate by the end of the reporting period.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit, and are accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interest are only recognised to the extent that it is probable that there will be sufficient taxable profit against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis.
65GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
2 suMMarY of sIgNIfICaNt aCCouNtINg PolICIes (CoNt’d)
Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited outside profit or loss (either in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss (either in other comprehensive income or directly in equity), or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost.
FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION – The individual financial statements of each group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financial statements of the group and the statement of financial position and statement of changes in equity of the company are presented in Singapore dollars, which is the functional currency of the company, and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rate of exchange prevailing on the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the end of the reporting period. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised in other comprehensive income. For such non-monetary items, any exchange component of that gain or loss is also recognised in other comprehensive income.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the group’s foreign operations (including comparatives) and subsidiaries whose financial statements are denominated in a functional currency other than that used by the company, are expressed in Singapore dollars using exchange rates prevailing at the end of the reporting period. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in a separate component of equity under the header of foreign currency translation reserve.
On the disposal of a foreign operation (i.e. a disposal of the group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation, or loss of significant influence over an associate that includes a foreign operation), all of the accumulated exchange differences in respect of that operation attributable to the group are reclassified to profit or loss. Any exchange differences that have previously been attributed to non-controlling interests are derecognised, but they are not reclassified to profit or loss.
In the case of a partial disposal (i.e. no loss of control) of a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. of associates or jointly controlled entities that do not result in the group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.
66
notes tofinancial statementsDecember 31, 2012
2 suMMarY of sIgNIfICaNt aCCouNtINg PolICIes (CoNt’d)
On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are recognised in other comprehensive income and accumulated in a separate component of equity under the header of foreign currency translation reserve.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.
CASH AND CASH EQUIVALENTS – Cash and cash equivalents comprise cash on hand, demand deposits and bank overdrafts that are subject to an insignificant risk of changes in value.
3 CrItICal aCCouNtINg JudgeMeNts aNd keY sourCes of estIMatIoN uNCertaINtY
In the application of the group’s accounting policies, which are described in Note 2, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Critical judgements in applying the group’s accounting policies
management did not make judgements that will have significant effect on the amounts recognised in the financial statements apart from those involving estimation which are dealt with below and in the other notes to the financial statements.
key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
Impairment of plantation assets
The group assesses annually whether its plantation assets have any indication of impairment in accordance with its accounting policy. Such assessment is based on estimates of future rubber prices, exchange rates, operating expenses and sales orders. No provision for impairment is considered necessary at the end of the reporting period (2011: $Nil) as no indication of impairment has been identified. The carrying amount of plantation assets for the group at the end of the reporting period is disclosed in Note 16 to the financial statements.
Useful lives of land use rights
An amount of $147 million was attributed to the land use rights on the 40,000 hectares plantation land granted by State of Cameron in December 1996 for a period of 50 years plus 50 years on a renewable basis. management is of the view that the right to use the plantation land is on a perpetual basis and accordingly, there is no need for depreciation of the land use rights. The land use rights is included in the carrying amount of plantation assets for the group at the end of the reporting period and is disclosed in Note 16 to the financial statements.
67GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
3 CrItICal aCCouNtINg JudgeMeNts aNd keY sourCes of estIMatIoN uNCertaINtY (CoNt’d)
Allowance for inventories
At the end of each reporting period, the group reviews the carrying values of its inventories to ensure that they are stated at lower of cost or net realisable value. In assessing the net realisable value and making appropriate allowance, management identifies inventories that are slow-moving, considers their physical condition, the market condition and price for similar items. The carrying amount of inventories at the end of the reporting period is disclosed in Note 12 to the financial statements.
Impairment of associates
The group assesses annually whether there is any indication of impairment for its investments in associates. If an indication of impairment is identified, value in use calculation requires the entity to estimate the future cash flows expected to rise from the cash-generating unit and a suitable discount rate in order to calculate present value. management is of the view that there is no indication of impairment in the carrying amounts of investments in associates. The carrying amount of investment in associates is disclosed in Note 14 to the financial statements.
Accrual for post-employment benefits
The accrual for post-employment benefits represents management’s best estimate of the future outflow of economic benefits to the group. A subsidiary is required to pay its employees a sum of money upon retirement as stipulated in the collective agreement described in Note 39 to the financial statements. As at December 31, 2012, an accrual of $1,290,000 (2011: $1,219,000) has been made by the group and included as part of other payables in the statement of financial position.
The accrual for the post-employment benefits recognised in the statement of financial position represents the present value of the potential obligation based on an independent actuarial valuation. The bases used in the actuarial valuation were as follows:
(a) All employees of the subsidiary and the details of their retirement and/or probable departure dates spanning the years from 2013 to 2014 (2011: 2012 to 2014); and
(b) Expected payments to retiring/terminated employees based on their existing salaries as at the end of the reporting period, adjusted for expected changes up to the probable dates of retirement/termination.
Impairment of property, plant and equipment
The group assesses annually whether its property, plant and equipment have any indication of impairment in accordance with its accounting policy. Such assessment is based on the value in use calculation to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. management has assessed the carrying amount of property, plant and equipment and is of the view that no impairment is required to be recognised. The carrying amount of property, plant and equipment at the end of the reporting period is disclosed in Note 17 to the financial statements.
Fair value of assets and liabilities acquired in business combination
The group relies on independent valuers for the fair value of property, plant and equipment acquired in business combination. management has also determined that the fair value of all other assets and liabilities acquired in business combination approximates their carrying amounts. The fair value of assets and liabilities acquired in business combination is disclosed in Note 42.
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notes tofinancial statementsDecember 31, 2012
3 CrItICal aCCouNtINg JudgeMeNts aNd keY sourCes of estIMatIoN uNCertaINtY (CoNt’d)
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. management has assessed the carrying value of goodwill and is of the view that no impairment is required to be recognised. The carrying amount of goodwill at the end of the reporting period was $11,942,000 (2011: $8,211,000) (Note 20).
4 fINaNCIal INstruMeNts, fINaNCIal rIsks aNd CaPItal rIsks MaNageMeNt
(a) Categories of financial instruments
The following table sets out the financial instruments as at the end of the reporting period:
group company
2012 2011 2012 2011
$’000 $’000 $’000 $’000
financial assets
Fair value through profit or loss (FVTPL):Designated as FVTPL 2,026 591 662 –
Held-to-maturity investment 31 64 – – Loans and receivables (including cash
and cash equivalents) 228,989 540,560 213,017 530,253Available-for-sale financial assets 255 252 – –
financial liabilities
Fair value through profit or loss (FVTPL):Designated as FVTPL 835 6,176 40 2,790
Liabilities at amortised cost 192,926 153,113 95,239 82,475
(b) Financial risk management policies and objectives
The group has documented risk management policies. These policies set out the group’s overall business strategies and its risk management philosophy. The group’s overall financial risk management programme seeks to minimise potential adverse effects of financial performance of the group. Risk management is carried out by the relevant risk officers under the policies approved by the Board of Directors.
The group’s activities expose it to a variety of financial risks, including the effects of changes in world rubber prices, foreign currency exchange and interest rates. The group uses derivative financial instruments, such as forward foreign exchange contracts and forward commodity (natural rubber) contracts to reduce certain exposures. The group does not hold derivative financial instruments for speculative purposes.
69GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
4 fINaNCIal INstruMeNts, fINaNCIal rIsks aNd CaPItal rIsks MaNageMeNt (CoNt’d)
(b) Financial risk management policies and objectives (cont’d)
The group maintains considerable financial resources and management has a reasonable expectation that the group is well placed to manage its business risks successfully despite the current uncertain economic outlook and believes that the group has adequate resources to continue operational existence for the foreseeable future.
Other than highlighted above, there has been no change to the group’s exposure to these financial risks or the manner in which it manages and measures the risk. market risk exposures are measured using sensitivity analysis indicated below.
(i) Foreign exchange risk management
The group is exposed to foreign currency risk as a result of its transactions where the denominations differ from the functional currencies of the respective group entities.
The group transacts its business in various foreign currencies, including the United States dollar, Euro and Thai baht and is therefore exposed to foreign exchange risk.
At the end of the reporting period, the carrying amounts of monetary assets and monetary liabilities denominated in currencies other than the respective group entities’ functional currencies are as follows:
group company
liabilities assets liabilities assets
2012 2011 2012 2011 2012 2011 2012 2011
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
United States dollars 48,599 45,239 48,306 359,516 53,689 41,970 86,258 437,651Euro 9,700 227 1,898 22,926 2,834 – 13,694 13,634Singapore dollars 5,154 2,400 2,389 4,365 – – – – Thai baht – – – – – – 40,673 40,174
The group uses forward foreign exchange contracts to manage its exposure to foreign currency risk in the local reporting currency.
The company has a number of investments in foreign subsidiaries, whose net assets are exposed to currency translation risk.
Foreign currency sensitivity
The following table details the sensitivity to a 10% increase and decrease in the relevant foreign currencies against the functional currency of each group entity. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the group where the denomination of the loan is in a currency other than the currency of the lender or the borrower.
70
notes tofinancial statementsDecember 31, 2012
4 fINaNCIal INstruMeNts, fINaNCIal rIsks aNd CaPItal rIsks MaNageMeNt (CoNt’d)
(b) Financial risk management policies and objectives (cont’d)
(i) Foreign exchange risk management (cont’d)
Foreign currency sensitivity (cont’d)
If the relevant foreign currency weakens by 10% against the functional currency of each group entity, profit or loss will (decrease) increase by:
us dollarimpact
euroimpact
singaporedollar impact
thai bahtimpact
2012 2011 2012 2011 2012 2011 2012 2011$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
group
Profit or loss 29 (31,428) (i) 780 (2,270) (i) 277 (197) – –Other equity – – – – – – – –
Company
Profit or loss (3,257) (39,568) (ii) (1,086) (1,363) – – (4,067) (iii) (4,017) (iii)
Other equity – – – – – – –
If the relevant foreign currency strengthens by 10% against the functional currency of each group entity, profit or loss will increase (decrease) by the same amount.
Notes:
(i) This is mainly attributable to the exposure outstanding on cash and bank balances and fixed deposits at the end of the reporting period in the group.
(ii) This is mainly attributable to the exposure to United States dollar fixed deposits and other receivables at the end of the reporting period in the company.
(iii) This is mainly attributable to the exposure on other receivables at the end of the reporting period in the company.
In management’s opinion, the sensitivity analysis is representative of the year end foreign exchange risk exposure. However, it may not reflect the exposure during the year.
(ii) Interest rate risk management
The primary source of the interest rate risk of the group relates to interest-bearing bank deposits, short-term loans, long-term loans and finance leases. Interest-bearing bank deposits are short-term in nature and with the current interest rate level, any variation in the interest rates will not have a material impact on the net income of the group. The interest rates on short-term loans, long-term loans and finance leases are disclosed in Notes 22, 25 and 26 to the financial statements respectively.
The group’s and the company’s profit and loss and equity are not affected by changes in market interest rates as the interest-bearing instruments mainly carry fixed interest and are measured at amortised cost.
71GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
4 fINaNCIal INstruMeNts, fINaNCIal rIsks aNd CaPItal rIsks MaNageMeNt (CoNt’d)
(b) Financial risk management policies and objectives (cont’d)
(iii) Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the group. The group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by the counterparty limits that are reviewed and approved by management.
Concentration of credit risk exists when economic, industry or geographical factors similarly affect group counterparties whose aggregate credit exposure is significant in relation to the group’s total credit exposure.
The group has significant concentration of credit risk from two outside party customers amounting to $14,302,000 (2011: $18,305,000) or 22% (2011: 28%) of total trade receivables balance as at the end of the reporting period. The group also has significant concentration of credit risk from its immediate holding company amounting to $27,680,000 (2011: $29,646,000) or 43% (2011: 45%) of total trade receivables as at the end of the reporting period.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties have high credit ratings.
The carrying amount of financial assets recorded in the financial statements, grossed up for any allowance for losses, represents the group’s maximum exposure to credit risk, without taking account of the value of any collateral obtained.
(iv) Liquidity risk management
The group maintains sufficient cash and cash equivalents, available credit lines and internally generated funds to finance its activities.
liquidity and interest risk analyses
Non-derivative financial liabilities
The following tables detail the remaining contractual maturity for non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the group and company can be required to pay. The table includes both interest and principal cash flows. The adjustment column represents the possible future cash flows attributable to the instrument included in the maturity analysis which is not included in the carrying amount of the financial liability on the statement of financial position.
72
notes tofinancial statementsDecember 31, 2012
4 fINaNCIal INstruMeNts, fINaNCIal rIsks aNd CaPItal rIsks MaNageMeNt (CoNt’d)
(b) Financial risk management policies and objectives (cont’d)
(iv) Liquidity risk management (cont’d)
weightedaverage
effectiveinterest
rate
ondemand
or within 1 year
within2 to
5 yearsafter
5 years adjustment total% $’000 $’000 $’000 $’000 $’000
group
2012Non-interest bearing – 62,097 – – – 62,097Finance lease liability
(fixed rate) 5.7 252 508 61 (99) 722Fixed interest rate
instruments 4.0 122,147 10,736 1,321 (4,097) 130,107184,496 11,244 1,382 (4,196) 192,926
2011 Non-interest bearing – 43,333 – – – 43,333Finance lease liability
(fixed rate) 5.0 345 633 152 (133) 997Fixed interest rate
instruments 4.6 86,205 22,007 8,332 (7,761) 108,783129,883 22,640 8,484 (7,894) 153,113
Company
2012Non-interest bearing – 47,001 – – – 47,001Finance lease liability
(fixed rate) 3.4 163 449 62 (86) 588Fixed interest rate
instruments 1.8 47,784 – – (134) 47,650 94,948 449 62 (220) 95,239
2011Non-interest bearing – 39,776 – – – 39,776Finance lease liability
(fixed rate) 4.3 163 522 152 (108) 729Fixed interest rate
instruments 1.9 42,134 – – (164) 41,970 82,073 522 152 (272) 82,475
73GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
4 fINaNCIal INstruMeNts, fINaNCIal rIsks aNd CaPItal rIsks MaNageMeNt (CoNt’d)
(b) Financial risk management policies and objectives (cont’d)
(iv) Liquidity risk management (cont’d)
Non-derivative financial assets
The following tables detail the expected maturity for non-derivative financial assets. The tables below have been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets except where the group and the company anticipates that the cash flow will occur in a different period. The adjustment column represents the possible future cash flows attributable to the instrument included in the maturity analysis which are not included in the carrying amount of the financial asset on the statement of financial position.
weightedaverage
effectiveinterest
rate
ondemand
or within 1 year
within2 to
5 yearsafter
5 years adjustment total% $’000 $’000 $’000 $’000 $’000
group
2012Non-interest bearing – 163,931 – – – 163,931Fixed interest rate instruments 2.7 64,549 817 – (308) 65,058
228,480 817 – (308) 228,989
2011Non-interest bearing – 159,914 252 – – 160,166Fixed interest rate instruments 2.6 376,445 513 6,239 (2,803) 380,394
536,359 765 6,239 (2,803) 540,560
Company
2012Non-interest bearing – 23,944 – – – 23,944Fixed interest rate instruments 3.9 163,449 24,178 15,095 (13,649) 189,073
187,393 24,178 15,095 (13,649) 213,017
2011Non-interest bearing – 67,613 – – – 67,613Fixed interest rate instruments 3.5 435,734 17,596 22,518 (13,208) 462,640
503,347 17,596 22,518 (13,208) 530,253
74
notes tofinancial statementsDecember 31, 2012
4 fINaNCIal INstruMeNts, fINaNCIal rIsks aNd CaPItal rIsks MaNageMeNt (CoNt’d)
(b) Financial risk management policies and objectives (cont’d)
(iv) Liquidity risk management (cont’d)
Derivative financial instruments
The following table details the liquidity analysis for derivative financial instruments. The table has been drawn up based on the undiscounted net cash inflows (outflows) on the derivative instrument that settle on a net basis and the undiscounted gross inflows and (outflows) on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves existing at the end of the reporting period.
on demandor within
1 year
$’000
group
2012Net settled:
Forward foreign exchange contracts 1,867Forward commodity (natural rubber) contracts (676)
2011Net settled:
Forward foreign exchange contracts (6,107)Forward commodity (natural rubber) contracts 522
Company
2012Net settled:
Forward foreign exchange contracts 622
2011Net settled:
Forward foreign exchange contracts (2,790)
75GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
4 fINaNCIal INstruMeNts, fINaNCIal rIsks aNd CaPItal rIsks MaNageMeNt (CoNt’d)
(b) Financial risk management policies and objectives (cont’d)
(v) Fair value of financial assets and financial liabilities
The carrying amounts of cash and cash equivalents, trade and other current receivables and payables approximate their respective fair values due to the relatively short-term maturity of these financial instruments. The fair values of other classes of financial assets and liabilities are disclosed in the respective notes to the financial statements.
The fair values of financial assets and financial liabilities are determined as follows:
(i) the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices;
(ii) the fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis; and
(iii) the fair value of derivative instruments are calculated using quoted prices of equivalent instruments. Where such prices are not available, discounted cash flow analysis is used, based on the applicable yield curve of the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives.
management considers that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values.
The group classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
a. quoted prices (unadjusted) in active markets for identical assets and liabilities (Level 1);
b. inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and
c. inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
Held for trading and other derivative financial instruments are measured at fair value based on Level 2 of the fair value hierarchy. Quoted equity shares classified as available-for-sale investment is measured at fair value based on Level 1 of the fair value hierarchy.
There were no transfers between Level 1 and Level 2 of the fair value hierarchy in 2011 and 2012.
76
notes tofinancial statementsDecember 31, 2012
4 fINaNCIal INstruMeNts, fINaNCIal rIsks aNd CaPItal rIsks MaNageMeNt (CoNt’d)
(c) Capital risk management policies and objectives
The group manages its capital to ensure that entities in the group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. management has ensured that all externally imposed capital requirements are complied with.
The capital structure of the group consists of debt, which includes the borrowings, cash and cash equivalents, equity attributable to owners of the parent, comprising share capital, reserves and retained earnings. management has ensured that all externally imposed restrictions are complied with.
The group’s risk management committee reviews the capital structure on a semi-annual basis. As a part of this review, the committee considers the cost of capital and the risks associated with each class of capital. Based on the recommendations of the committee, the group will balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the redemption of existing debt.
The group’s overall strategy remains unchanged from 2011.
5 holdINg CoMPaNY aNd related CoMPaNY traNsaCtIoNs
The company is a subsidiary of Sinochem International (Overseas) Pte Ltd, incorporated in Singapore. The company’s ultimate holding company is Sinochem International Corporation, incorporated in the People’s Republic of China. Related companies refer to members of the ultimate holding company’s group of companies.
Some of the group’s transactions and arrangements are between members of the ultimate holding company’s group of companies and the effect of these on the basis determined between the parties is reflected in these financial statements. The intercompany balances are unsecured, interest free, repayable on demand and expected to be settled in cash unless otherwise stated.
Trading transactions
During the year, group entities entered into the following trading transactions with related companies that are not members of the group:
sales ofgoods
purchases of goods
credit riskpayments (note)
marketing income
2012 2011 2012 2011 2012 2011 2012 2011
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Sinochem International (Overseas) Pte Ltd (563,426) (376,949) 1,262 3,806 – 25 – (38)
No guarantees have been given or received on outstanding amounts. No expense has been recognised in the period for bad or doubtful debts in respect of the amounts owed by related companies.
Note: Credit risk payments refer to fees charged by the immediate holding company, Sinochem International (Overseas) Pte Ltd, on rubber tonnage sold under a long-term contract.
77GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
6 other related PartY traNsaCtIoNs
Some of the company’s transactions and arrangements are with related parties and the effect of these on the basis determined between the parties is reflected in these financial statements.
During the year, the group entities indicated below entered into the following trading transactions and had balances with related parties (related by way of common directors) that are not members of the group:
transportexpense
marketingfee expense
insuranceexpense
consultancyfee
2012 2011 2012 2011 2012 2011 2012 2011
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Related parties 2,768 2,614 640 577 354 338 132 –
purchases of goods marketing income
2012 2011 2012 2011
$’000 $’000 $’000 $’000
Associate 103,157 – (1,427) – The balances are unsecured, interest-free, repayable on demand and expected to be settled in cash unless
otherwise stated. No guarantees have been given or received.
No expense has been recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties.
Compensation of directors and key management personnel
The remuneration of directors and other members of key management during the year was as follows:
group
2012 2011
$’000 $’000
Short-term benefits 3,457 4,147Post-employment benefits 33 28
The remuneration of directors and key management is determined by the remuneration committee having regard to the performance of individuals.
78
notes tofinancial statementsDecember 31, 2012
7 Cash aNd Cash eQuIValeNts aNd Pledged fIXed dePosIts
group company2012 2011 2012 2011
$’000 $’000 $’000 $’000
Cash at bank 76,917 89,165 18,608 39,757Cash on hand 1,508 810 1 1Fixed deposits 65,057 374,413 20,048 317,507Less: Bank overdrafts (8,446) (8,885) – – Less: Pledged fixed deposits (3,131) (3,266) – – Cash and cash equivalents 131,905 452,237 38,657 357,265
Cash and cash equivalents comprise cash held by the group and short-term bank deposits (excluding fixed deposits) with an original maturity of three months or less. The carrying amounts of these assets approximate their fair values.
The group’s fixed deposits amounting to $61,926,000 (2011: $371,147,000) bear an average effective interest rate of 1.00% to 5.50% (2011: 0.50% to 4.49%) per annum and for a tenure of seven days to one year (2011: seven days to one year). The company’s fixed deposits amounting to $20,048,000 (2011: $317,507,000) bear an effective interest rate of 0.18% (2011: average effective interest rates of 0.55% to 1.35%). management is of the view that the fixed deposits qualify as cash and cash equivalents as these can be withdrawn at any time without penalty.
The group’s fixed deposit amounting to $3,131,000 (2011: $3,266,000) have been pledged to the financial institution in respect of banking facilities provided to the subsidiaries. The fixed deposits bears an average effective interest rate of 2.40% to 4.25% (2011: 2.63%) per annum and have a tenure of approximately three months to a year (2011: three months to a year).
The group’s and company’s cash and bank balances and fixed deposits that are not denominated in the functional currencies of the respective entities are as follows:
group company2012 2011 2012 2011
$’000 $’000 $’000 $’000
United States dollars 41,392 355,011 9,838 347,898Singapore dollars 1,157 2,925 – – Euro 1,273 13,184 3 –
79GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
8 trade reCeIVaBles
group
2012 2011
$’000 $’000
Immediate holding company (Note 5) 27,680 29,646Outside parties 36,775 36,113
64,455 65,759Less: Allowance for doubtful debts – outside parties (43) (46)
64,412 65,713
movements in the allowance for doubtful trade receivables:
Balance at beginning of the year 46 48Amount written off (2) – Exchange adjustment (1) (2)Balance at end of the year 43 46
The average credit period on sale of goods is 21 days (2011: 36 days). No interest is charged on the trade receivables.
Included in the group’s trade receivables balance are debts with a carrying amount of $43,000 (2011: $122,000) which are past due at the reporting date for which the group has made an allowance for doubtful debt of $43,000 (2011: $46,000). No allowance has been made for the remaining past due receivables of $12,160,000 (2011: $14,042,000) as there has not been a significant change in credit quality and the amounts are still considered recoverable. The group does not hold any collateral over these balances.
In determining the recoverability of a trade receivable, the group considers any change in the credit quality of the trade receivable from the date credit was granted up to the end of the reporting period. Accordingly, management believes that there is no further credit provision required in excess of the allowance for doubtful debts.
The table below is an analysis of trade receivables as at the end of reporting period:
group
2012 2011
$’000 $’000
Not past due and not impaired 52,252 51,595Past due and not impaired (i) 12,160 14,042Past due and impaired – individually assessed (ii) 43 122
64,455 65,759
80
notes tofinancial statementsDecember 31, 2012
8 trade reCeIVaBles (CoNt’d)
(i) Aging of receivables that are past due but not impaired:
group
2012 2011
$’000 $’000
< 3 months 11,096 14,0423 months to 6 months 640 – > 12 months 424 –
12,160 14,042
(ii) These amounts are stated before any deduction for impairment losses.
The group’s trade receivables that are not denominated in the functional currencies of the respective entities are as follows:
group
2012 2011
$’000 $’000
United States dollars 4,715 4,456Euro 403 956
9 other reCeIVaBles
group company2012 2011 2012 2011
$’000 $’000 $’000 $’000
Value added tax receivables 17,316 13,618 10 310Sundry debtors 21,502 8,295 2,681 2,565Staff advances 1,319 1,133 – – Prepayments 4,952 4,958 152 476Deposits 4,443 5,139 124 105Advance to suppliers 4,464 12,175 – – Subsidiaries (Note 13) – – 159,248 157,487
53,996 45,318 162,215 160,943Less: Allowance for doubtful sundry debtors (949) (1,363) – –
53,047 43,955 162,215 160,943
81GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
9 other reCeIVaBles (CoNt’d)
movements in the allowance for doubtful sundry debtors:
group
2012 2011
$’000 $’000
Balance at beginning of the year 1,363 1,126Amount written off (578) – Charge to profit or loss 220 267Exchange adjustment (56) (30)Balance at end of the year 949 1,363
Value added tax receivables in the respective tax jurisdiction of the subsidiaries are past due for 90 days (2011: 90 days) but not impaired at the reporting date.
The allowance for doubtful sundry debtors is determined by reference to past default experiences.
Included in the group’s other receivables balance are debts with a carrying amount of $1,148,000 (2011: $1,457,000) which are past due at the reporting date for which the group has made an allowance for doubtful debt of $949,000 (2011: $1,363,000). The group does not hold any collateral over these balances. On the average, these other receivables are past due for 30 days (2011: 30 days).
The table below is an analysis of sundry debtors as at the end of reporting period:
group company2012 2011 2012 2011
$’000 $’000 $’000 $’000
Not past due and not impaired 20,354 6,838 2,681 2,565Past due and not impaired (i) 199 94 – – Past due and impaired – individually assessed (ii) 949 1,363 – –
21,502 8,295 2,681 2,565
(i) Aging of receivables that are past due but not impaired:
group
2012 2011
$’000 $’000
< 3 months 199 94 (ii) These amounts are stated before any deduction for impairment losses.
82
notes tofinancial statementsDecember 31, 2012
9 other reCeIVaBles (CoNt’d)
The group’s other receivables that are not denominated in the functional currencies of the respective entities are as follows:
group company2012 2011 2012 2011
$’000 $’000 $’000 $’000
United States dollars 2,199 49 76,420 89,753Singapore dollars 1,232 1,440 – – Euro 222 8,786 1,384 803Thai baht – – 40,673 40,174
10 held-to-MaturItY INVestMeNt
group
2012 2011
$’000 $’000
Unquoted government bonds, at amortised cost 31 64
Analysed as:Current 31 21Non-current – 43
31 64
The average effective interest rate of the unquoted government bonds held by a subsidiary is 11.25% (2011: 11.25%) per annum.
As at December 31, 2012, the unquoted government bonds have nominal values amounting to $33,000 (2011: $64,000) with coupon rate of 4.5% (2011: 4.5%) per annum, with partial repayment on an annual basis and matures in February 2013.
There were no disposals or allowance for impairment for the held-to-maturity investment.
The group’s held-to-maturity investment is denominated in the functional currency of the respective entities.
83GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
11 derIVatIVe fINaNCIal INstruMeNts
2012 2011
assets liabilities assets liabilities
$’000 $’000 $’000 $’000
group
Fair value of: Forward foreign exchange contracts 1,975 108 69 6,176 Forward commodity (natural
rubber) contracts 51 727 522 – 2,026 835 591 6,176
Company
Fair value of: Forward foreign exchange contracts 662 40 – 2,790
Forward foreign exchange contracts
The group and company utilises forward foreign exchange contracts to manage its exposure to significant foreign exchange transactions on its future transactions and cash flows. The group and company are parties to a variety of forward foreign exchange contracts in the management of its exchange rate exposures. The instruments purchased are primarily denominated in the currencies of the group’s principal markets.
At the end of the reporting period, the total notional amounts of derivative financial instruments to which the group and company are committed to are as follows:
group company2012 2011 2012 2011
$’000 $’000 $’000 $’000
Forward foreign exchange contracts
– Buy Euro and Sell United States dollars 117,051 442,622 37,133 344,857– Buy United States dollars and Sell Euro 11,301 – – – – Buy United States dollars and Sell Japanese Yen 12,218 – 12,218 – – Buy United States dollars and Sell Indonesian Rupiah 9,463 – – –
150,033 442,622 49,351 344,857 The average maturity period for forward foreign exchange contracts ranges from one week to seven weeks
(2011: one week to five months).
At December 31, 2012, the fair value of the group and company’s outstanding forward foreign exchange contracts is estimated to be a net gain of $1,867,000 (2011: $6,107,000 net loss) and net gain of $622,000 (2011: $2,790,000 net loss) respectively.
84
notes tofinancial statementsDecember 31, 2012
11 derIVatIVe fINaNCIal INstruMeNts (CoNt’d)
Forward commodity (natural rubber) contracts
The group utilises forward commodity (natural rubber) contracts to manage the fluctuations in world rubber prices.
At the end of the reporting period, the total notional amounts of derivative financial instruments to which the group is committed to are as follows:
group
2012 2011
$’000 $’000
Forward commodity (natural rubber) contracts 12,623 13,773
The average maturity period for forward commodity (natural rubber) contracts ranges from one to five months (2011: one to eight months).
As at December 31, 2012, the fair value of the group’s outstanding forward commodity (natural rubber) contracts are measured at fair value through profit or loss of which the fair value is estimated to be a net loss of $676,000 (2011: $522,000 net gain)
12 INVeNtorIes
group
2012 2011
$’000 $’000
Raw materials 77,424 78,884Consumables and spare parts 17,367 16,594Rubber plant nursery 1,721 572Finished goods and goods for resale 35,743 40,082
132,255 136,132
The cost of sales includes $123,000 (2011: $1,346,000) in respect of allowance for slow-moving consumables and spare parts.
85GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
13 INVestMeNt IN suBsIdIarIes
company
2012 2011
$’000 $’000
Unquoted equity shares, at cost 195,163 188,517Less: Impairment loss (3,658) –
191,505 188,517
movement in impairment loss:
Charge to profit or loss during the year and balance at end of the year 3,658 –
The balances with subsidiaries are unsecured, interest-free, repayable on demand and expected to be settled in cash unless otherwise stated.
During the year, the company carried out a review of the recoverable amounts of its investment in subsidiaries where there was an indication that the investments had suffered an impairment loss. Accordingly, management determined that the carrying amount of unquoted equity shares in a subsidiary was fully impaired as the subsidiary has been loss-making and in negative equity position.
Details of the company’s subsidiaries at December 31, 2012 are as follows:
name of subsidiary
principal activities/country ofincorporationand operations
proportion of effective ownershipinterest and voting
power held 2012 2011
% %
GmG Holdings Ltd (1) Investment holding/ 100 100Singapore
P.T. Bumi Jaya (2) Rubber procurement, 51 51processing andexporters/Indonesia
P.T. GmG Sentosa (2) Rubber procurement, 75 75processing andexporters/Indonesia
Ivoirienne de Rubber procurement, 60 –Traitement de processing and exporters/Caoutchouc (2) (8) Cote d’Ivoire
86
notes tofinancial statementsDecember 31, 2012
13 INVestMeNt IN suBsIdIarIes (CoNt’d)
name of subsidiary
principal activities/country ofincorporationand operations
proportion of effective ownershipinterest and voting
power held 2012 2011
% %
GmG Investment Congo SPRL (3) (9) Rubber procurement and 100 –Processing/DemocraticRepublic of Congo
GmG Cote d’Ivoire (3) (9) Rubber procurement and 100 –processing/Cote d’Ivoire
G.P. Sentosa Enterprises Investment holding/ 100 100Co. Ltd (2) (6) Thailand
Teck Bee Hang Rubber procurement, 55 55Co. Ltd (2) (7) processing and
exporters/Thailand
Inobonto Holdings Investment holding/ 95.5 –Pte. Ltd. (3) (8) Singapore
subsidiaries of teck Beehang Co. ltd:
Techem Industries Co. Ltd (4) manufacture and 98.4 98.4distribution of plasticproducts/Thailand
Teck-Fu Joint Venture Rubber procurement,Co. Ltd (5) processing and 86 86
exporters/Thailand
subsidiary of gMgholdings ltd:
GmG Investment (S) Investment holding, 100 100Pte Ltd (1) general importers and
exporters/Singapore
87GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
13 INVestMeNt IN suBsIdIarIes (CoNt’d)
name of subsidiary
principal activities/country ofincorporationand operations
proportion of effective ownershipinterest and voting
power held 2012 2011
% %
subsidiaries of gMgInvestment (s) Pte ltd:
GmG International Investment holding/ 100 100S.A. (2) Cameroon
Tropical Rubber Cote Rubber plantation and 51.2 51.2D’Ivoire (2) processing/Cote d’Ivoire
Green Ventures Inactive/Cameroon 100 100Cameroon S.A. (3)
GmG Services Inactive/malaysia 100 100Pte Ltd (3)
subsidiary of Inobonto holdingsPte. ltd.:
PT Inobonto Indah Rubber and oil palmPerkasa (3) (8) plantation/Indonesia 80 –
subsidiaries of gMg International s.a:
Hevecam Cameroon Rubber plantation and 90 90S.A. (2) processing/Cameroon
Sud-Cameroun Rubber plantation and 80 80Hevea S.A. (2) processing/Cameroon
(1) Audited by Deloitte & Touche LLP, Singapore.
(2) Audited by overseas practices of Deloitte Touche Tohmatsu Limited.
(3) These subsidiaries are inactive as at year end.
(4) Audited by Suthat Accountancy Office, Thailand. The direct interest held by Teck Bee Hang Co. Ltd is 98.4%. This subsidiary is not considered a material subsidiary.
(5) Audited by PND Audit and Law, Thailand. The direct interest held by Teck Bee Hang Co. Ltd is 86%. This subsidiary is not considered a material subsidiary.
(6) The direct interest held by the company is 40%. This subsidiary is not considered a material subsidiary.
(7) The direct interest held by the company is 49%.
(8) Subsidiaries acquired during the year (Note 42).
(9) Subsidiary incorporated during the year.
88
notes tofinancial statementsDecember 31, 2012
14 INVestMeNt IN assoCIates
group company2012 2011 2012 2011
$’000 $’000 $’000 $’000
Unquoted equity shares, at cost 317,643 4,169 317,480 – Exchange adjustment (260) (172) – – Share of post-acquisition profit (loss) 4,040 (89) – – Share of post-acquisition other comprehensive income (3,843) – – –
317,580 3,908 317,480 –
Details of the group’s associates at December 31, 2012 are as follows:
name of associate
principal activities/country ofincorporationand operations
proportion of effective ownership interest and voting
power held
2012 2011
% %
Siat SA (2) (4) Investment holding/ 35 –Belgium
subsidiaries of siat sa:
Compagnie Heveicole Rubber plantation, de Cavally (2) (4) processing and
exporters/Cote d’Ivoire 35 –
Ghana Oil Palm Oil palm plantation, Development Co Ltd (2) (4) processing and
trading/Ghana 35 –
Presco Plc (3) (4) Oil palm plantation, processing andtrading/Nigeria 21 –
Siat Gabon (2) (4) Rubber and oil palm plantation, processingtrading, exporters and cattle ranch/Gabon 35 –
89GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
14 INVestMeNt IN assoCIates (CoNt’d)
name of associate
principal activities/country ofincorporationand operations
proportion of effective ownership interest and voting
power held
2012 2011
% %
subsidiaries ofsiat sa (cont’d):
Siat Nigeria Ltd (3) (4) Oil palm plantation,processing and trading/Nigeria 35 –
Siat Cambodge (4) (5) Inactive/Cambodia 35 –
associates of teck Beehang Co. ltd (Note 13):
medline Products Producing and selling – 25.1Co., Ltd (1) rubber glove product/
Thailand
Feltex Co., Ltd (1) Producing and selling 24.8 24.8concentrate latex andblock rubber/Thailand
(1) Audited by Intadit C.P.A Office Company Limited, Thailand. These associates are not considered material associates.
(2) Audited by overseas practices of Deloitte Touche Tohmatsu Limited. Reviewed for consolidation purposes.
(3) Audited by Spiropoulos, Adiele, Okpara & Co, Nigeria. These associates are not considered material associates.
(4) Associates acquired during the year.
(5) This associate is inactive as at year end.
90
notes tofinancial statementsDecember 31, 2012
14 INVestMeNt IN assoCIates (CoNt’d)
Summarised financial information in respect of the group’s associates is set out below:
group
2012 2011
$’000 $’000
Total assets 699,441 22,316Total liabilities (189,776) (13,887)Net assets 509,665 8,429
Group’s share of associates’ net assets 179,180 3,908
Revenue 249,704 91,350Profit (Loss) for the year 28,740 (197)
Group’s share of associates’ profit (loss) for the year 4,129 (89)
The group tests the carrying amount of investment in its directly-held associate annually for impairment or more frequently if there are indications that the carrying amount of the investment in the associate might be impaired. The carrying amount of the investment in the associate includes the goodwill on consolidation net of liabilities assumed.
The recoverable amount of the carrying amount of investment in the associate is determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the investment in the associate. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on expectations of future changes in the market.
The group prepares cash flow forecasts derived from the most recent financial budgets prepared by the associate and approved by management for the next five years and extrapolates cash flows for the following five years based on an estimated zero growth rate per annum.
The rate used to discount the forecast cash flows from the associate is 8% (2011: N/A).
As at December 31, 2012, any reasonably possible changes to the key assumptions applied are not likely to cause the recoverable amounts to be below the carrying amount of investment in the associate. management has determined that the recoverable amount of the investment in the associate exceeds its carrying amount and accordingly, no impairment loss is required to be recognised.
91GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
15 aVaIlaBle-for-sale INVestMeNts
group
2012 2011
$’000 $’000
Quoted equity shares, at fair value 55 47Unquoted equity shares, at cost 200 250
255 297Less: Impairment loss on unquoted equity shares – (45)
255 252
movement in impairment loss:
Balance at beginning of the year 45 47Amount written off during the year (45) – Exchange adjustment – (2)Balance at end of the year – 45
The investment in quoted equity shares offers the group the opportunity for return through dividend income and fair value gains. It has no fixed maturity or coupon rate. The fair value of the security is based on the quoted closing market prices on the last market day of the financial year.
The investment in unquoted shares is stated at cost less impairment in recoverable value as management is of the view that there are no reliable measures of the fair values of such investments.
The group’s available-for-sale investments are denominated in the functional currency of the respective entities.
92
notes tofinancial statementsDecember 31, 2012
16 PlaNtatIoN assets
plantations
plantationsestablishment
costs total
$’000 $’000 $’000
Group
Cost: At January 1, 2011 270,588 24,144 294,732 Additions 223 6,578 6,801 Transfers 2,476 (2,476) – Reclass to property, plant and equipment – (155) (155) Exchange adjustment (2,070) (407) (2,477) At December 31, 2011 271,217 27,684 298,901 Additions 271 14,609 14,880 Transfers 4,268 (4,268) – Exchange adjustment (5,050) (1,133) (6,183) At December 31, 2012 270,706 36,892 307,598
Accumulated depreciation: At January 1, 2011 62,805 – 62,805 Depreciation for the year 3,373 – 3,373 Exchange adjustment (1,195) – (1,195) At December 31, 2011 64,983 – 64,983 Depreciation for the year 2,964 – 2,964 Exchange adjustment (2,650) – (2,650) At December 31, 2012 65,297 – 65,297
Carrying amount: At December 31, 2012 205,409 36,892 242,301
At December 31, 2011 206,234 27,684 233,918
The group’s plantation assets comprise mainly 2 plantations located in Niete, Cameroon and Anguededou, Cote d’Ivoire with a total planted area of around 20,763 hectares. Plantations normally reach full harvest potential during a period of between 11 and 20 years after planting. Currently, there are no insurance policies in Africa against losses due to uncontrollable and extraordinary weather conditions.
The accumulated interest expense capitalised amounted to $1,995,000 (2011: $2,079,000) as at the end of the reporting period after adjustment for exchange rate differences. No interest expense was capitalised in 2011 and 2012.
Included in plantation assets is an amount of $147 million which relates to the land use rights on the 40,000 hectares plantation land granted by the State of Cameroon in December 1996 for a period of 50 years plus 50 years, renewable at a nominal value to the group. With the group’s continuing investment in replanting and extension on the plantation land, the management is of the view that it is not likely that the land use rights will not be renewed at the expiry of its current term and accordingly, the land use rights have a perpetual life and no depreciation has been provided.
93GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
17 ProPertY, PlaNt aNd eQuIPMeNt
freehold land
leasehold buildings
leaseholdimprovements
officeequipment,furniture
and fittings
plant,machinery
andequipment
motorvehicles computers
construction- in-progress total
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
GroupCost:
At January 1, 2011 26,246 78,864 5,950 12,161 43,012 17,841 321 832 185,227Additions – 1,921 181 260 3,221 2,360 239 2,923 11,105Disposals – – (6) (54) (330) (75) – – (465)Transfer – 1,459 100 10 42 362 – (1,973) – Reclass from plantation
assets – – – 35 – – – 120 155Exchange adjustment (1,082) (1,441) (222) (188) (709) (289) (5) (17) (3,953)At December 31, 2011 25,164 80,803 6,003 12,224 45,236 20,199 555 1,885 192,069Additions – 1,968 1,005 1,120 7,282 3,787 211 15,064 30,437Disposals (48) (2) (487) (29) (225) (540) – – (1,331)Transfer – 2,262 308 57 1,652 446 – (4,725) – Transfer to investment
properties (Note 18) (14,572) (17,680) – – – – – – (32,252)Acquired on acquisition of
subsidiaries (Note 42) – 5,964 – 205 1,561 242 – 83 8,055Exchange adjustment (657) (4,086) (155) (540) (2,486) (824) (19) (94) (8,861)At December 31, 2012 9,887 69,229 6,674 13,037 53,020 23,310 747 12,213 188,117
Accumulated depreciation:At January 1, 2011 – 46,459 262 9,830 29,429 14,634 159 – 100,773Depreciation for the year – 2,706 760 403 4,194 1,864 166 – 10,093Disposals – – (4) (50) (225) (52) – – (331)Exchange adjustment – (825) 2 (160) (490) (296) (7) – (1,776)At December 31, 2011 – 48,340 1,020 10,023 32,908 16,150 318 – 108,759Depreciation for the year – 2,982 1,041 628 4,075 2,428 142 – 11,296Disposals – (2) (487) (28) (153) (423) – – (1,093)Transfer to investment
properties (Note 18) – (14,414) – – – – – – (14,414)Exchange adjustment – (2,075) (35) (428) (1,587) (654) (11) – (4,790)At December 31, 2012 – 34,831 1,539 10,195 35,243 17,501 449 – 99,758
Carrying amount: At December 31, 2012 9,887 34,398 5,135 2,842 17,777 5,809 298 12,213 88,359
At December 31, 2011 25,164 32,463 4,983 2,201 12,328 4,049 237 1,885 83,310
Certain of the group’s motor vehicles with net book values of $886,000 (2011: $1,333,000) are under finance lease obligations (Note 26).
94
notes tofinancial statementsDecember 31, 2012
17 ProPertY, PlaNt aNd eQuIPMeNt (CoNt’d)
leaseholdimprovements
officeequipment,furniture
andfittings
motorvehicles computers
constructionin
progress total
$’000 $’000 $’000 $’000 $’000 $’000
Company
Cost:At January 1, 2011 323 509 614 – – 1,446Reclass – (56) – 56 – – Additions – 10 696 68 – 774At December 31, 2011 323 463 1,310 124 – 2,220Additions – – – 101 826 927Disposals (323) (6) – – – (329)At December 31, 2012 – 457 1,310 225 826 2,818
Accumulated depreciation:At January 1, 2011 115 470 338 – – 923Reclass – (28) – 28 – – Depreciation for the
year 74 9 169 24 – 276At December 31, 2011 189 451 507 52 – 1,199Depreciation for the
year 134 7 262 55 – 458Disposals (323) (7) – – – (330)At December 31, 2012 – 451 769 107 – 1,327
Carrying amount:At December 31, 2012 – 6 541 118 826 1,491
At December 31, 2011 134 12 803 72 – 1,021
The company’s motor vehicles are under finance lease obligations (Note 26).
95GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
18 INVestMeNt ProPertIes
freehold leasehold
land buildings total
$’000 $’000 $’000
GroupCost:
At January 1, 2011 and December 31, 2011 – – – Transfer from property, plant and equipment (Note 17) 14,572 17,680 32,252At December 31, 2012 14,572 17,680 32,252
Accumulated depreciation:At January 1, 2011 and December 31, 2011 – – – Transfer from property, plant and equipment (Note 17) – 14,414 14,414At December 31, 2012 – 14,414 14,414
Carrying amount:At December 31, 2012 14,572 3,266 17,838
At December 31, 2011 – – –
Fair value:At December 31, 2012 16,197 3,514 19,711
At December 31, 2011 – – –
As at December 31, 2012, the group changed the classification of certain freehold land and leasehold buildings from property, plant and equipment to investment property as management had identified these assets to be held to earn rentals and/or for capital appreciation.
The fair value of the group’s investment properties at December 31, 2012 have been determined on the basis of valuations carried out at the respective year end dates by independent valuers having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued. The valuations were arrived at by reference to market evidence of transactions prices for similar properties, and were performed in accordance with International Valuation Standards.
The property rental income from the group’s investment properties all of which are leased out under operating leases, amounted to $29,000 (2011: $Nil). Direct operating expenses (including repairs and maintenance) arising from the rental-generating investment properties amounted to $65,000 (2011: $Nil).
19 CluB MeMBershIP
group and company
2012 2011
$’000 $’000
Cost:At beginning of the year 640 – Additions – 640At end of the year 640 640
96
notes tofinancial statementsDecember 31, 2012
20 goodwIll
group
2012 2011
$’000 $’000
Balance at beginning of year 8,211 8,211Arising on acquisition of subsidiaries (Note 42) 3,731 – Balance at end of year 11,942 8,211
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. The carrying amount of goodwill has been allocated as follows:
group
2012 2011
$’000 $’000
Teck Bee Hang Co. Ltd and its subsidiaries (“TBH Group”) (single CGU) 8,211 8,211
Inobonto Holdings Pte Ltd and its subsidiary (“Inobonto Group”) (single CGU) 2,021 –
Ivoirrienne de Traitment de Caoutchouc (“ITCA”) (single CGU) 1,710 –
11,942 8,211
The group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The carrying amount of the CGU includes the goodwill on consolidation net of liabilities assumed.
The recoverable amount of the CGU is determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.
The group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next five years and extrapolates cash flows for the following five years based on an estimated zero growth rate per annum. This rate does not exceed the average long-term growth rate for the relevant markets.
The rates used to discount the forecasted cash flows from each CGU are as follows.
group
2012 2011
% %
TBH Group 15.0 15.0Inobonto Group 7.5 N.A.ITCA 12.0 N.A.
As at December 31, 2012, any reasonably possible changes to the key assumptions applied are not likely to cause the recoverable amounts to be below the carrying amounts of each CGU. management has determined that the recoverable amount of each CGU exceeds its carrying amount and accordingly, no impairment loss is required to be recognised.
97GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
21 loaN reCeIVaBles
group company2012 2011 2012 2011
$’000 $’000 $’000 $’000
Loan to rubber farmers 765 3,574 – – Loan to non-controlling interests of a subsidiary 2,461 2,566 – – Subsidiary (Note 13) – – 12,307 12,831
3,226 6,140 12,307 12,831
Analysed as:Current 765 – – – Non-current 2,461 6,140 12,307 12,831
3,226 6,140 12,307 12,831
The loan to rubber farmers is part of a “social arrangement” whereby Hevecam is required to provide financing to rubber farmers in the NGOK village, one of the villages in Hevecam’s plantation. This was part of the privatisation arrangement with the State of Cameroon, where the rubber farmers will be given access to the allocated land area to carry out rubber-tapping activities. The loan to rubber farmers is unsecured, interest-free and repayable by 2018. management is of the view that the loan to rubber farmers is expected to be collected within 12 months based on historical experience. Accordingly, the amount has been reclassified from non-current to current in the current financial year.
The loan to non-controlling interests of a subsidiary is unsecured, repayable after 2018 and earns interest at 5% (2011: 5%) per annum.
The company’s loan receivables from a subsidiary is unsecured, repayable after 10 years and earns interest at 5% (2011: 5%) per annum.
The loan receivables that are not denominated in the functional currency of the respective entities are as follows:
group company2012 2011 2012 2011
$’000 $’000 $’000 $’000
Euro – – 12,307 12,831
22 short-terM loaNs
group company2012 2011 2012 2011
$’000 $’000 $’000 $’000
Bank loans 110,865 71,250 47,650 41,970
The short-term loans of the group and the company bear interest at an average effective rate of 2.97% (2011: 2.88%) per annum and 1.82% (2011: 1.5%) per annum respectively.
98
notes tofinancial statementsDecember 31, 2012
22 short-terM loaNs (CoNt’d)
The group and company’s short-term loans that are not denominated in the functional currencies of the respective entities are as follows:
group company2012 2011 2012 2011
$’000 $’000 $’000 $’000
United States dollars 47,650 41,970 47,650 41,970
23 trade PaYaBles
group
2012 2011
$’000 $’000
Outside parties 18,356 11,174Associates (Note 14) 9,611 –
27,967 11,174
The average credit period on purchases of goods is 11 days (2011: 4 days). No interest is charged on the trade payables.
Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs.
The group’s trade payables that are not denominated in the functional currencies of the respective entities are as follows:
group
2012 2011
$’000 $’000
Euro 9,658 202
99GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
24 other PaYaBlesgroup company
2012 2011 2012 2011$’000 $’000 $’000 $’000
Sundry creditors 11,024 12,945 – 86Accrued expenses 10,671 12,520 3,318 3,756Interest payable 1,043 1,412 107 171Immediate holding company (Note 5) 9,080 5,135 – – Due to directors of subsidiaries 2,293 147 – 147Subsidiaries (Note 13) – – 43,557 35,616Associates (Note 14) 19 – 19 –
34,130 32,159 47,001 39,776
The average credit period given is 49 days (2011: 55 days). No interest is charged on the sundry creditors.
The amounts due to directors arose mainly from payments made on behalf of a subsidiary and are unsecured, interest-free and repayable on demand.
The group’s other payables that are not denominated in the functional currencies of the respective entities are as follows:
group company2012 2011 2012 2011
$’000 $’000 $’000 $’000
United States dollars 949 171 6,039 – Singapore dollars 3,753 2,340 – – Euro 42 25 2,834 –
25 loNg-terM loaNs
group
2012 2011
$’000 $’000
Bank loans:Secured 14,245 28,737Unsecured 499 4,103
Loan due to related parties (Note 6) – unsecured 4,498 4,693Total 19,242 37,533
Less: Amount due for settlement within 12 months (shown under current liabilities) Bank loans – unsecured 499 3,336 Bank loans – secured 4,144 3,820 Loan due to related parties (Note 6) – unsecured 2,909 – Total 7,552 7,156
Amount due for settlement after 12 months 11,690 30,377
100
notes tofinancial statementsDecember 31, 2012
25 loNg-terM loaNs (CoNt’d)
Details of the group’s loans are as follows:
Secured bank loans
group
2012 2011
$’000 $’000
Loan A 1,678 – Loan B – 1,141Loan C 6,415 8,250Loan D 6,152 6,415Loan E – 8,840Loan F – 2,934Loan G – 1,157
14,245 28,737
The group has the following bank loans:
a) Loan A is repayable in may 2013 and bears an average effective interest rate of 11.75% (2011: Nil%) per annum. The bank loan is secured by the plant and equipment of a subsidiary amounting to $2,824,000 (2011: $Nil).
b) Loan B which bore interest at 7.7% per annum was fully repaid in the current year.
c) Loan C is repayable in semi-annual instalments till August 2016 and bears an average effective interest rate of 9.00% (2011: 9.00%) per annum. Loan D is repayable in semi-annual instalments till August 2018 and bears an average effective interest rate of 8.25% (2011: 8.25%) per annum. The two bank loans are secured by all the assets of a subsidiary amounting to $211,774,000 (2011: $233,273,000) which include inventories, plantation assets and property, plant and equipment amounting to $18,992,000 (2011: $18,582,000), $76,042,000 (2011: $74,285,000) and $15,373,000 (2011 : $12,615,000) respectively.
d) Loans E, F and G which bore interest at 7.38%, 7.38% and 7.25% per annum were fully repaid in the current year.
group
2012 2011
$’000 $’000
Unsecured bank loans
Loan A 368 816Loan B – 2,751Loan C 131 290Loan D – 246
499 4,103
101GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
25 loNg-terM loaNs (CoNt’d)
The group has the following bank loans:
a) Loan A is repayable in monthly instalments up to October 2013 and bears an average effective interest rate of 6.00% (2011: 6.00%) per annum.
b) Loans B and D which bore interest at 6.00% and 6.13% per annum was fully repaid in the current year.
c) Loan C is repayable in monthly instalments up to November 2013 and bears an average effective interest rate of 6.50% (2011: 6.50%) per annum.
The loans due to related parties are not repayable within 12 months. The loans are due to the minority shareholders of subsidiaries in Indonesia. The loan bears an average interest rate of 5.00% (2011: 4.80%) per annum.
management is of the opinion that the fair values of the group’s long-term borrowings, by discounting their future cash flows at market rates, approximate their carrying values as shown in the financial statements.
The group’s long term loans that are not denominated in the functional currencies of the respective entities are as follows:
group
2012 2011
$’000 $’000
United States dollars – 3,098Singapore dollars 1,401 –
26 fINaNCe leases
group company
minimum lease payments
present value of minimum lease
paymentsminimum lease
payments
present value of minimum lease
payments
2012 2011 2012 2011 2012 2011 2012 2011
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Amounts payable under finance leases:
Within one year 252 345 225 309 163 163 142 142In the second to fifth years
inclusive 508 633 444 554 449 522 392 453After five years 61 152 53 134 62 152 54 134
821 1,130 722 997 674 837 588 729Less: Future finance charges (99) (133) – – (86) (108) – – Present value of lease obligations 722 997 722 997 588 729 588 729
Less: Amount due for settlement within 12 months (shown under current liabilities) (225) (309) (142) (142)Amount due for settlement after
12 months 497 688 446 587
102
notes tofinancial statementsDecember 31, 2012
26 fINaNCe leases (CoNt’d)
It is the group and company’s policy to lease certain of its plant and equipment under finance leases. The average lease term is seven years (2011: seven years). For the year ended December 31, 2012, the average effective borrowing rate ranges from 3.40% to 8% (2011: 4.34% to 5.71%) per annum and 3.40% (2011: 4.34%) per annum for the group and company respectively. Interest rates are fixed at the contract date, and thus expose the group to fair value interest rate risk. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The fair value of the group and company’s lease obligations approximates their carrying amount.
The group and company’s obligations under finance leases are secured by the lessors’ title to the leased assets.
The group and company’s finance leases that are not denominated in the functional currencies of the respective entities are as follows:
group
2012 2011
$’000 $’000
Singapore dollars – 60
27 deferred taX
The following are the major deferred tax (assets) liabilities recognised by the group and company, and the movements thereon, during the current and prior reporting periods:
group
unremitted interest
taxlosses restatements others total
$’000 $’000 $’000 $’000 $’000
At January 1, 2011 392 (1,010) 9,621 19 9,022Credit to profit or loss (Note 35) (194) (6,205) – (2,466) (8,865)Exchange adjustment 1 (5) – (398) (402)At December 31, 2011 199 (7,220) 9,621 (2,845) (245)Charge (Credit) to profit or loss (Note 35) 1,987 (859) – (321) 807Change in tax rate – – – (45) (45)Exchange adjustment (3) 284 – (155) 126At December 31, 2012 2,183 (7,795) 9,621 (3,366) 643
Company
At January 1, 2011 and December 31, 2011 145 – – 19 164Charge (Credit) to profit or loss 1,845 (1,095) – – 750At December 31, 2012 1,990 (1,095) – 19 914
103GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
27 deferred taX (CoNt’d)
Certain deferred tax assets and liabilities have been offset in accordance with the group and company’s accounting policy. The following is the analysis of the deferred tax balances (after offset) for statement of financial position purposes.
group company2012 2011 2012 2011
$’000 $’000 $’000 $’000
Deferred tax liabilities 7,342 6,975 914 164Deferred tax assets (6,699) (7,220) – –
643 (245) 914 164
At the end of the reporting period, deferred tax liabilities have not been recognised on the aggregate amount of temporary differences associated with undistributed earnings of subsidiaries which amount to $215.4 million (2011: $189.3 million). No liability has been recognised in respect of these differences because the group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future.
Temporary differences arising in connection with interests in associates are insignificant.
28 share CaPItal
group and company
2012 2011 2012 2011number of
ordinary shares $’000 $’000
Issued and fully paid: At beginning of year 7,675,848,772 3,839,149,386 611,330 267,084 Issue of shares on rights issue, net of expenses – 3,836,699,386 – 344,246 At end of year 7,675,848,772 7,675,848,772 611,330 611,330
On December 22, 2011, the company issued 3,836,699,386 ordinary shares at $0.091 each in connection with a rights issue exercise. Share issue expenses incurred for the rights issue amounting to $4,894,000 were charged against share capital.
The company has one class of ordinary shares which carry one vote per share, has no par value and carries a right to dividend as and when declared by the company.
104
notes tofinancial statementsDecember 31, 2012
29 treasurY shares
group and company
2012 2011 2012 2011number of
ordinary shares $’000 $’000
At beginning of the year 15,650,000 – 1,995 – Repurchased during the year – 15,650,000 – 1,995At end of the year 15,650,000 15,650,000 1,995 1,995
In 2011, the company repurchased 15,650,000 shares in connection with a share buy-back exercise. The total amount paid to acquire the shares was $1,995,000 and has been deducted from shareholders’ equity. The shares are held as treasury shares. The company intends to reissue these shares to executives who exercise their share options under the employee share option plan.
30 CaPItal reserVes
group
note 2012 2011
$’000 $’000
Statutory reserve (a) 9,795 9,795Other reserve (b) 667 –Total 10,462 9,795
(a) Statutory reserve represents the amounts appropriated in accordance with the statutory requirements in Cameroon and Ivory Coast, Africa, where certain subsidiaries are required to appropriate 10% of the net profit for the year to constitute a legal reserve with a ceiling of 20% of the respective subsidiary’s share capital. This reserve is not distributable. No appropriation has been made to statutory reserve since 2008 as the reserve had reached the ceiling of 20% of the respective subsidiaries’ share capital.
(b) In the Privatisation Agreement signed in December 1996, GmG International SA (“GmG International”) bought 90% of the share capital of Hevecam SA (“Hevecam”), representing 1,417,315 shares at CFA14,816 per share, for a sum of CFA21 billion. The remaining 10% share capital, representing 1,574,795 shares, is held by the State of Cameroon. In the same Privatisation Agreement there was an obligation imposed on GmG International to sell 3% of the 90% shareholding in Hevecam to employees of Hevecam at a 50% discount within a period of two years (the “3% entitlement”), i.e., GmG International SA is obliged to sell 42,519 shares at price of CFA7,408 per share to its employees. However, this obligation lapsed as the employees were unable to raise the funds to purchase their 3% entitlement.
In December 2010, Hevecam’s Establishment Agreement was renewed. The Establishment Agreement is essentially a tax incentive package given to Hevecam for a period of 12 years whereby Hevecam enjoys a 50% exemption on all Cameroonian taxes. In the renewal of the Establishment Agreement signed in December 2010, the above obligation, i.e., GmG International SA to sell 3% (42,519 shares) to its employees was a condition for the renewal. The obligation for the price for the share being at 50% discount to the fair market value of each share.
105GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
30 CaPItal reserVes (CoNt’d)
(b) In 2012, GmG International SA agreed to sell 42,519 shares to its employees at CFA 23,471 per share. The net asset value (“NAV”) of each Hevecam share as at December 31, 2011 was used as the fair market value.
In this sale, GmG International SA realised a gain of $906,000 (CFA 365.8 million) at company level. At GmG consolidated level, the group realised a loss of $2.217 million (CFA 900.9 million). As the disposal of 3% entittlement in Hevecam did not result in the loss of control of Hevecam, the $2.217 million (CFA 900.9 million) is accounted for within equity. Subsequent to and separate from the disposal transaction, the management of GmG International SA had decided that it would be in the best interest of the company to buy back these shares issued to its employees and resultantly offered to buy back the 42,519 shares at CFA 46,942 per share, using the NAV of each Hevecam share as at December 31, 2011 as the fair market value. 89% of employees voted and consented to sell the shares back to GmG International SA.
On acquisition of the 3% entitlement, GmG International SA realised a loss of $239,000 (CFA 97 million) at company level. At the GmG consolidated level, the group realised a loss of $239,000 (CFA 97 million) within equity.
The gain and loss from the transactions had been calculated based on the following:
2012
$’000
Sale of shares to employees:Net assets disposed 4,673Loss on disposal of non-controlling interest in a subsidiary (2,217)Total consideration received 2,456
Purchase of shares from employees:Net assets acquired (4,673)Loss on acquisition of non-controlling interest in a subsidiary (239)Total consideration paid (4,912)
31 INVestMeNt reValuatIoN reserVe
The investment revaluation reserve arises on the revaluation of available-for-sale financial assets. Where a revalued financial asset is sold, the portion of the reserve that relates to that financial asset, and is effectively realised, is recognised in profit or loss. Where a revalued financial asset is impaired, the portion of the reserve that relates to that financial asset is recognised in profit or loss.
32 reVeNue
group
2012 2011
$’000 $’000
Sale of goods 1,104,272 1,194,273
106
notes tofinancial statementsDecember 31, 2012
33 other INCoMe
group
note 2012 2011
$’000 $’000
Interest income on cash and bank balances and fixed deposits 4,292 2,365Training fees from rubber farmers 501 618marketing income from immediate holding company (Note 5) – 38marketing income from associates (Note 14) 1,427 – Proceeds from insurance settlement (a) 339 – Compensation from suppliers (b) 289 – Gain from settlement arrangement with bank (c) 666 – Gain from settlement arrangement with State of Cameroon (d) – 16,012Others 455 135
7,969 19,168
(a) The group recorded proceeds from settlement of an insurance claim arising from a subsidiary.
(b) The group received compensation from a supplier arising from claims against supplies provided in prior year.
(c) The group recorded a gain arising from early settlement of a long term bank loan during the year.
(d) In 2011, the group entered into an agreement with the State of Cameroon to set-off the outstanding loan amount against certain amounts recoverable from the State. Accordingly, the net excess of the amount recovered from the State of $16,012,000 was recorded as a gain.
34 fINaNCe Costs
group
2012 2011
$’000 $’000
Interest on bank borrowings and loans 6,591 5,028Interest on obligations under finance leases 39 28
6,630 5,056
107GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
35 INCoMe taX eXPeNse
group
2012 2011
$’000 $’000
Current tax – Singapore 2,878 1,450 – Foreign 4,291 22,147Deferred tax (Note 27) 807 (8,865)Overprovision of current tax in prior years (91) (125)Withholding tax 936 1,780Income tax expense 8,821 16,387
Domestic income tax is calculated at 17% (2011: 17%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.
group
2012 2011
$’000 $’000
Profit before tax 51,730 107,461
Tax at the domestic income tax rate of 17% (2011: 17%) 8,794 18,268Non-(taxable) allowable items (721) 705Overprovision of current tax in prior years (91) (125)Effect of different tax rates of subsidiaries operating in other jurisdictions 976 5,033Effect of reversal of temporary differences 807 (8,865)Effect of income tax at concessionary tax rate (1,880) (409)Withholding tax 936 1,780Tax expense for the year 8,821 16,387
A subsidiary in Singapore is accorded a concessionary tax rate of 10% on certain income given that it qualifies for the Global Trader Programme Incentive Scheme with effect from January 1, 2007 for 5 years. With effect from January 1, 2010, the Global Trader Programme has been extended for another 5 years.
Subject to agreement with the Comptroller of Income Tax and the tax authorities in the relevant foreign tax jurisdictions in which the group operates and conditions imposed by law, the group has tax loss carryforwards available for offsetting against future taxable income as detailed below.
108
notes tofinancial statementsDecember 31, 2012
35 INCoMe taX eXPeNse (CoNt’d)
group
2012 2011
$’000 $’000
Tax loss carryforwards
– Foreign 10,613 2,156
Deferred tax benefit on above not recorded 2,653 539
Future tax benefits from the foreign tax loss carryforwards from a subsidiary in Indonesia have a limited life up to 2017 to offset against future profits after which any unutilised amount will be foregone.
group
2012 2011
$’000 $’000
Reinvestment allowance
– Foreign 8,211 –
Deferred tax benefit on above not recorded 1,581 –
Future tax benefits from the foreign reinvestment allowance carryforwards from a subsidiary in Cameroon have a limited life up to 2016 to offset against future profits after which any unutilised amount will be foregone.
36 ProfIt for the Year
Profit for the year has been arrived at after charging (crediting):
group
2012 2011
$’000 $’000
Depreciation:
Depreciation of property, plant and equipment 11,296 10,093Depreciation of plantation assets 2,964 3,373Total depreciation 14,260 13,466
Directors’ remuneration: – of the company 919 1,386 – of the subsidiaries 1,057 1,406Total directors’ remuneration 1,976 2,792
109GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
36 ProfIt for the Year (CoNt’d)
group
2012 2011
$’000 $’000
Employee benefits expense (including directors’ remuneration):
Defined contribution plans 2,785 2,376Others 47,836 36,066Total employee benefits expense 50,621 38,442
Allowance for doubtful other receivables 220 267
Cost of inventories recognised as expense 966,965 1,023,589
Audit fees: – paid to auditors of the company 240 211 – paid to other auditors 335 336
Non-audit fees: – paid to auditors of the company 20 148 – paid to other auditors 9 96
(Gain) Loss on disposal of property, plant and equipment (96) 103
37 earNINgs Per share
Basic and fully diluted earnings per ordinary share for the group are based on the consolidated profits attributable to owners of the company of $40,480,000 (2011: $74,582,000) divided by the weighted average number of shares of 7,660,198,772 (2011: 5,628,167,739).
38 segMeNt INforMatIoN
An operating segment is a component of the group that engages in business activities from which it may earn revenue and incur expenses, including revenue and expenses that relate to transactions with any of the group’s other components. The results of the operating segments are reviewed regularly by the group’s chief operating decision makers to make decisions about the resources to be allocated to the segments and assess its performance, and for which discrete financial information is available.
Segment information is specifically focused on the geographical location of the subsidiaries. The group’s reportable segments under FRS 108 are therefore as follows:
– Cameroon – Cote d’Ivoire – Democratic Republic of Congo (DR Congo) – Indonesia – Thailand – Singapore
Cameroon, Cote d’Ivoire, DR Congo, Indonesia and Thailand are mainly engaged in growing, tapping and processing of natural rubber. Singapore is engaged in marketing of natural rubber.
110
notes tofinancial statementsDecember 31, 2012
38
seg
MeN
t IN
for
Mat
IoN
(Co
Nt’
d)
In
form
atio
n re
gard
ing
the
grou
p’s
repo
rtab
le s
egm
ents
is p
rese
nted
bel
ow.
Th
e fo
llow
ing
is a
n an
alys
is o
f the
gro
up’s
rev
enue
and
res
ults
by
repo
rtab
le s
egm
ent:
cam
eroo
n$’
00
0
cote
d’iv
oire
$’0
00
dr c
ong
o
$’0
00
ind
ones
ia$’
00
0th
aila
nd
$’0
00
sin
gap
ore
$’0
00
tota
l$’
00
0el
imin
atio
n$’
00
0n
et$’
00
0
gro
up
Year
end
ed d
ecem
ber
31, 2
012
rev
enue
Rev
enue
from
ext
erna
l cus
tom
ers
–
1,0
74 –
–
38
1,73
272
1,46
61,
104,
272
–
1,10
4,27
2In
ter-
segm
ent r
even
ues
86,4
8615
7,67
35,
557
155,
518
167,
909
–
573
,143
(573
,143
) –
86
,486
158,
747
5,55
715
5,51
854
9,64
172
1,46
61,
677,
415
(573
,143
)1,
104,
272
res
ults
Segm
ent r
esul
ts31
,814
20,
753
2,43
3 6
60 3
9,96
4 3
5,34
9 1
30,9
73 6
,334
137
,307
Shar
e of
pro
fit o
f ass
ocia
tes
4,12
9U
nallo
cate
d co
rpor
ate
expe
nse
(87,
368)
Inte
rest
inco
me
4,
292
Inte
rest
exp
ense
(6
,630
)P
rofit
bef
ore
tax
51
,730
Inco
me
tax
expe
nse
(8,8
21)
Pro
fit fo
r th
e ye
ar 4
2,90
9
oth
er s
egm
ent i
nfor
mat
ion
Addi
tions
to p
lant
atio
n as
sets
and
pro
pert
y, p
lant
and
equ
ipm
ent
24,
263
7,0
31 9
77 3
,709
6,8
68 2
,469
45,
317
–
45,3
17D
epre
ciat
ion
of p
lant
atio
n as
sets
and
pro
pert
y, p
lant
and
equ
ipm
ent
(6,0
92)
(2,3
02)
(245
)(1
,653
) (3
,238
)(7
30)
(14,
260)
–
(14,
260)
Allo
wan
ce fo
r in
vent
orie
s(1
23)
–
–
–
–
–
(123
) –
(1
23)
Allo
wan
ce fo
r do
ubtf
ul o
ther
rec
eiva
bles
(220
) –
–
–
–
–
(2
20)
–
(220
)Fa
ir v
alue
loss
on
finan
cial
der
ivat
ives
–
–
–
(79)
17
3,3
60 3
,298
–
3,2
98
at d
ecem
ber
31, 2
012
Segm
ent a
sset
s25
0,54
996
,020
7,58
955
,604
176,
643
780,
458
1,36
6,86
3(6
08,7
96)
758,
067
Una
lloca
ted
asse
ts31
7,58
0C
onso
lidat
ed to
tal a
sset
s1,
075,
647
Segm
ent l
iabi
litie
s 5
7,69
7 4
6,54
55,
897
55,
836
176,
104
250
,368
592
,447
(383
,574
) 2
08,8
73
111GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
38
seg
MeN
t IN
for
Mat
IoN
(Co
Nt’
d)
cam
eroo
n$’
00
0
cote
d’iv
oire
$’0
00
dr c
ong
o
$’0
00
ind
ones
ia
$’0
00
thai
lan
d$’
00
0si
ng
apor
e$’
00
0to
tal
$’0
00
elim
inat
ion
$’0
00
net
$’0
00
gro
up
Year
end
ed d
ecem
ber
31, 2
011
rev
enue
Rev
enue
from
ext
erna
l cus
tom
ers
822
2,12
0–
– 55
9,60
563
1,72
61,
194,
273
– 1,
194,
273
Inte
r-se
gmen
t rev
enue
s13
0,45
715
7,36
8–
239,
508
41,
017
–
568
,350
(568
,350
) –
13
1,27
915
9,48
8–
239,
508
600,
622
631
,726
1,76
2,62
3(5
68,3
50)
1,19
4,27
3
res
ults
Segm
ent r
esul
ts66
,206
33,7
71–
11,8
0733
,625
19,5
4716
4,95
65,
728
170,
684
Shar
e of
loss
of a
ssoc
iate
s(8
9)U
nallo
cate
d co
rpor
ate
expe
nse
(60,
443)
Inte
rest
inco
me
2,36
5In
tere
st e
xpen
se (5
,056
)P
rofit
bef
ore
tax
107,
461
Inco
me
tax
expe
nse
(16,
387)
Pro
fit fo
r th
e ye
ar 9
1,07
4
oth
er s
egm
ent i
nfor
mat
ion
Addi
tions
to p
lant
atio
n as
sets
and
prop
erty
, pla
nt a
nd e
quip
men
t11
,725
2,12
7–
1,98
31,
287
784
17,9
06–
17,9
06D
epre
ciat
ion
of p
lant
atio
n as
sets
and
prop
erty
, pla
nt a
nd e
quip
men
t(5
,715
)(1
,723
)–
(1,6
27)
(4,0
48)
(353
)(1
3,46
6)–
(13,
466)
Allo
wan
ce fo
r in
vent
orie
s(5
43)
– –
– (5
05)
(318
)(1
,366
)–
(1,3
66)
Allo
wan
ce fo
r do
ubtf
ul o
ther
rec
eiva
bles
(206
)(6
1)
– –
––
(267
)–
(267
)Fa
ir v
alue
loss
on
finan
cial
der
ivat
ives
–
–
– (1
36)
(551
) (4
,379
) (5
,066
) –
(5
,066
)
at d
ecem
ber
31, 2
011
Segm
ent a
sset
s25
7,93
967
,431
–53
,148
179,
071
1,08
0,27
31,
637,
862
(596
,213
)1,
041,
649
Una
lloca
ted
asse
ts3,
908
Con
solid
ated
tota
l ass
ets
1,04
5,55
7
Segm
ent l
iabi
litie
s 7
3,74
5 1
8,35
0–
43,
530
187,
952
231
,895
555
,472
(373
,588
) 1
81,8
84
112
notes tofinancial statementsDecember 31, 2012
38 segMeNt INforMatIoN (CoNt’d)
The accounting policies of the reportable segments are the same as the group’s accounting policies described in Note 2. Segment profit represents the profit earned by each segment without allocation of interest income, interest expense and income tax expense. This is the measure reported to the chief operating decision makers for the purposes of resource allocation and assessment of segment performance.
For the purpose of monitoring segment performance and allocating resources between segments, the chief operating decision makers monitor the tangible and financial assets attributable to each segment.
The group has two major customers from the Singapore segment. Revenue from one major customer amounted to $347 million (2011: $242 million) and a second major customer amounted to $137 million (2011: $154 million).
All assets are allocated to reportable segments other than investment in associates (Note 14). Goodwill has been allocated to reportable segments as described in Note 20.
39 CoNtINgeNt lIaBIlItIes
Under a labour collective agreement entered into in November 2002, and which has since expired in November 2007 (“2002 Agreement”), a clause was included in that agreement which obliged the group’s subsidiary in Cameroon, being Hevecam Cameroon S.A. (“Hevecam”), to pay each employee a sum of money upon their retirement. This benefit was in addition to the compulsory monthly contributions made for each employee towards the State run retirement pension fund, known as CNPS.
In June 2009, the management of Hevecam signed a new collective agreement (“New Agreement”) for a period of 5 years expiring in 2014 (“Applicable Period”). The New Agreement includes a clause similar to the 2002 Agreement where Hevecam is required to make a lump sum payment to its employees upon their retirement during the Applicable Period. Accordingly, management has identified Hevecam’s employees who are expected to retire during the Applicable Period and a full accrual for the post-employment benefits, in accordance with the terms stipulated in the New Agreement, has been made as at December 31, 2012. As at December 31, 2012, the accrual for such post-employment benefits by Hevecam amounted to $1,290,000 (2011: $1,219,000).
No accrual is made for the remaining employees not expected to retire within the Applicable Period as management is confident that it would be successful in negotiating the terms of another collective agreement (effective after the Applicable Period) to exclude the requirement to make lump sum payments to its employees upon retirement.
With regards to employees retiring post 2014, management will address the potential payment in the new collective agreement with the relevant government departments to seek redress or compensation accordingly. Certain information required under FRS 37 on “Provisions, Contingent Liabilities and Contingent Assets” has not been disclosed in the note as the management is of the view that it is in the interest of the group.
113GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
40 oPeratINg lease arraNgeMeNts
group
2012 2011
$’000 $’000
minimum lease payments under operating leases recognised as an expense in the year 2,052 682
At the end of the reporting period, the group and the company have outstanding commitments under non-cancellable operating leases which fall due as follows:
group company2012 2011 2012 2011
$’000 $’000 $’000 $’000
Within one year 2,272 2,185 99 395In the second to fifth years inclusive 6,710 8,986 – –
8,982 11,171 99 395
Operating lease payments represent rentals payable by the group for certain of its office premises. Leases are negotiated for an average term of three years and rentals are fixed for that period.
41 dIVIdeNds
On June 14, 2012, in respect of the financial year ended December 31, 2011, a final one-tier tax exempt dividend of 0.22 cents per share (total dividend of $16,852,000) was paid to shareholders.
On may 24, 2011, in respect of the financial year ended December 31, 2010, a final one-tier tax exempt dividend of 0.3 cents per share (total dividend of $11,518,000) was paid to shareholders.
In respect of the current year, the directors proposed that a one-tier exempt dividend of 0.135 cents per share be paid to shareholders. This dividend is subject to approval by shareholders at the Annual General meeting and has not been included as a liability in these financial statements. The total estimated dividend to be paid is $10,341,000.
42 aCQuIsItIoN of suBsIdIarIes
(i) Acquisition of Ivoirienne de Traitement de Caoutchouc
On January 1, 2012, the group acquired Ivoirienne de Traitement de Caoutchouc (“ITCA”) for cash consideration of US$2.8 million ($3.6 million). This transaction has been accounted for by the acquisition method of accounting.
ITCA was established to undertake the operation of a 20,000 metric ton natural rubber processing factory in Dabou, Cote d’Ivoire. The group will provide the expertise in management of the factory processing operation, raw material procurement and marketing.
The effective date for the completion of the acquisition, as determined by management, is January 1, 2012.
114
notes tofinancial statementsDecember 31, 2012
42 aCQuIsItIoN of suBsIdIarIes (CoNt’d)
(i) Acquisition of Ivoirienne de Traitement de Caoutchouc (cont’d)
The net assets acquired in the transaction, and the goodwill arising, are as follows:
acquiree’sassets and
liabilities fair value
adjustment
fair valueof acquiree’s
assets and liabilities
$’000 $’000 $’000
Cash and cash equivalents 5,320 – 5,320Pledged fixed deposits 1,026 – 1,026Trade receivables 1,979 – 1,979Other receivables 636 – 636Property, plant and equipment 6,241 1,801 8,042Inventories 2,084 – 2,084Trade payables (1,333) – (1,333)Other payables (8,449) – (8,449)Income tax payable (578) – (578)Long-term loans (5,600) – (5,600)Net assets acquired 1,326 1,801 3,127
Less: Non-controlling interest (1,251)
Goodwill 1,710
Total consideration paid 3,586
Net cash inflow from acquisition:Cash consideration paid (3,586)Cash and cash equivalents acquired 5,320
1,734
The interests of a non-controlling shareholder recognised at the acquisition date were measured at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets.
Goodwill arose in the acquisition of ITCA because the cost of combination included a control premium. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and the assembled workforce of ITCA. These benefits are not separately recognised from goodwill because they do not meet the recognition criteria for identifiable intangible assets.
Acquisition-related costs amounting to $34,000 (2011: $405,000) have been excluded from the consideration transferred and have been recognised as an expense in the period, within the ‘administrative expenses’ line item in the consolidated income statement.
115GMG Global Ltd
Annual Report 2012
notes tofinancial statementsDecember 31, 2012
42 aCQuIsItIoN of suBsIdIarIes (CoNt’d)
(ii) Acquisition of Inobonto Holdings Group
On march 1, 2012, the group acquired Inobonto Holdings Pte Ltd and its subsidiary (“Inobonto Group”) for a total purchase consideration of IDR25.2 billion ($3.52 million), of which IDR12.6 billion ($1.76 million) was paid. In accordance with the share purchase agreement, a deferred cash consideration of $1.76 million (IDR12.6 billion) may be payable subject to the certain conditions met in relation to future land acquisitions. management has assessed that the probability of the cash consideration having to be paid out is low and accordingly, excluded the cash consideration in the goodwill computation. This transaction has been accounted for by the acquisition method of accounting.
Inobonto Holdings Pte Ltd is an entity incorporated in Singapore and holds 80% of the total issued and paid up share capital of PT Inobonto Indah Perkasa (“IIP”), a company established in the Republic of Indonesia for the purposes of land acquisition in North Sulawesi, Indonesia.
The effective date for the completion of the acquisition, as determined by management, is march 1, 2012.
The net liabilities assumed in the transaction, and the goodwill arising, are as follows:
acquiree’sassets and
liabilities fair value
adjustment
fair valueof acquiree’s
assets and liabilities
$’000 $’000 $’000
Cash and cash equivalents 12 – 12Property, plant and equipment 13 – 13Deferred expenditure 376 (376) – Other payables (297) – (297)Net liabilities assumed 104 (376) (272)
Less: Non-controlling interest 12
Goodwill 2,021
Total consideration paid 1,761
Net cash outflow from acquisition: Cash consideration paid (1,761) Cash and cash equivalents acquired 12
(1,749)
The interest of a non-controlling shareholder recognised at the acquisition date was measured at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net liabilities.
Goodwill arose in the acquisition of Inobonto group because the cost of combination included a control premium. management is of the view that the acquisition would enable the company to leverage on Inobonto’s established platform of natural rubber plantation and oil palm development and management know-how in Indonesia. These benefits are not separately recognised from goodwill because they do not meet the recognition criteria for identifiable intangible assets.
116
notes tofinancial statementsDecember 31, 2012
42 aCQuIsItIoN of suBsIdIarIes (CoNt’d)
(ii) Acquisition of Inobonto Holdings Group (cont’d)
Acquisition-related costs amounting to $175,000 have been excluded from the consideration transferred and have been recognised as an expense in the previous financial year, which is the period in which such costs were incurred, within the ‘administrative expenses’ line item in the consolidated income statement of the year ended December 31, 2011.
If the acquisition had been completed on January 1, 2012, the group’s profit for the year would have been $42,877,000 but the total group’s revenue for the period would not be affected.
43 eVeNt after the rePortINg PerIod
On January 14, 2013, the group successfully completed the acquisition of additional 44% equity interest in a subsidiary, PT Bumi Jaya, for a total purchase consideration of US$6.7 million ($8.2 million), of which US$5.0 million ($6.1 million) was paid as at January 18, 2013.
117GMG Global Ltd
Annual Report 2012
gmg global ltd & its subsidiaries major properties AS AT DEcEMBER 31, 2012
description location tenure
Plantations covering land area of 40,000 hectares
Niete, Cameroon 50 years from 1996 plus 50 years, renewable
Factory, hospital, workshop buildings and housing complex within plantation areas
Niete, Cameroon 50 years from 1996 plus 50 years, renewable
Land for plantations covering 18,365 hectares
Kribi, Cameroon Provisional concession received in 2012. Long term lease currently in process of finalization
Plantations covering land area of 45,198 hectares
meyomessala, Cameroon Final Concession decree obtained on 19/03/2013. Long term lease currently in process of finalization
Plantations covering land area of 1,580 hectares
Anguededou, Cote d'Ivoire 66 years leasehold from 1995
Factory buildings and housing complex within the plantation areas
Anguededou, Cote d'Ivoire 66 years leasehold from 1995
Factory buildings and housing complex covering land area of 6 hectares
Tanjung Tabalong, South Kalimantan
30 years leasehold from 2006
Factory buildings and housing complex covering land area of 1 hectare
Tanjung Tabalong, South Kalimantan
30 years leasehold from 2011
Factory buildings and housing complex covering land area of 12 hectares
Pontianak, West Kalimantan 30 years leasehold from 2010
Palm Plantation covering land area of 37 hectares
Songkhla, Thailand Freehold
Bungalow covering land areas of 1 hectares
Songkhla, Thailand Freehold
Factory building and housing complex covering land area of 15 hectares
Yala, Thailand Freehold
Factory building and housing complex covering land area of 13 hectares
Narathiwas, Thailand Freehold
Factory building and housing complex covering land area of 11 hectares
Suratthani, Thailand Freehold
Factory building and housing complex covering land area of 9 hectares
Pattani, Thailand Freehold
Vacant factory building and housing complex covering land area of 17 hectares
Trang, Thailand Freehold
118
gmg global ltd & its subsidiaries major properties AS AT DEcEMBER 31, 2012
description location tenure
Vacant factory building and housing complex covering land area of 5 hectares
Pattani, Thailand Freehold
Vacant factory building and housing complex covering land area of 7 hectares
Nakornsrithammarat, Thailand Freehold
Vacant factory building and housing complex covering land area of 5 hectares
Yala, Thailand Freehold
Vacant factory building and housing complex covering land area of 2 hectares
Narathiwas, Thailand Freehold
Vacant land area of 17 hectares Krabi, Thailand Freehold
Vacant land area of 4 hectares Chantaburi, Thailand Freehold
119GMG Global Ltd
Annual Report 2012
statistics of shareholdings AS AT 15 MARcH 2013
Number of Shares Issued (excluding Treasury Shares) : 7,660,198,772Class of shares : Ordinary sharesVoting rights (excluding Treasury Shares) : One vote per shareNumber (percentage) of Treasury Shares : 15,650,000 (0.20%)
shareholdINg of suBstaNtIal shareholders as at 15 MarCh 2013
direct interest deemed interest
Sinochem International (Overseas) Pte Ltd 3,915,932,370 Nil
Sinochem International Corporation (1) Nil 3,915,932,370
Estate of Joseph Gondobintoro, Deceased (2) 55 934,910,316
Jeffrey Gondobintoro (3), (4), (5) 6,853,550 905,641,902
Yudson Gondobintoro (3), (4) 13,207,432 905,641,902
mieke Bintati Gondobintoro (3), (4) 9,207,432 905,641,902
GmG Holding (HK) Ltd 781,339,068 Nil
Notes:
(1) Sinochem International Corporation is deemed interested in 3,915,932,370 shares, directly held by Sinochem International (Overseas) Pte Ltd.
(2) The Estate of Joseph Gondobintoro, Deceased, is deemed interested in all the shares, direct and deemed, held by Jeffrey Gondobintoro, Yudson Gondobintoro and mieke Bintati Gondobintoro.
(3) Jeffrey Gondobintoro, Yudson Gondobintoro and mieke Bintati Gondobintoro are deemed interested in 124,302,834 shares directly held by Panwell (Pte) Ltd.
(4) Jeffrey Gondobintoro, Yudson Gondobintoro and mieke Bintati Gondobintoro are deemed interested in 781,339,068 shares directly held by GmG Holding (HK) Ltd.
(5) 6,853,550 shares of Jeffrey Gondobintoro are held through Citibank Nominees S’pore Pte Ltd as bare trustee.
120
statistics of shareholdings AS AT 15 MARcH 2013
statIstICs of shareholdINgs as at 15 MarCh 2013
distribution of shareholdings
no. of shareholders no. of sharessize of holdings % %
1 – 999 1,588 10.71 880,554 0.011,000 – 10,000 4,819 32.51 22,617,993 0.3010,001 – 1,000,000 8,253 55.68 810,063,663 10.571,000,001 and above 163 1.10 6,826,636,562 89.12total 14,823 100.00 7,660,198,772 100.00
twenty largest shareholders
no. name no. of shares %
1 Sinochem International (Overseas) Pte Ltd 3,915,932,370 51.122 GmG Holding (HK) Limited 781,339,068 10.203 Citibank Nominees S’pore Pte Ltd 352,399,831 4.604 HSBC (Singapore) Nominess Pte Ltd 211,178,752 2.765 DB Nominees (S) Pte Ltd 203,945,693 2.666 Panwell (Pte) Ltd 124,302,834 1.627 Nomura Singapore Limited 116,680,000 1.528 Bank of Singapore Nominees Pte Ltd 110,422,292 1.449 DBSN Services Pte Ltd 84,041,200 1.1010 DBS Nominees Pte Ltd 77,902,680 1.0211 Phillip Securities Pte Ltd 72,398,810 0.9512 CImB Securities (S’pore) Pte Ltd 60,404,359 0.7913 BNP Paribas Nominees Singapore Pte Ltd 60,141,000 0.7914 OCBC Securities Private Ltd 57,277,009 0.7515 UOB Kay Hian Pte Ltd 56,360,489 0.7416 United Overseas Bank Nominees (Pte) Ltd 47,321,152 0.6217 See Yong Hang 31,172,000 0.4118 Tan Ng Kuang 30,000,000 0.3919 maybank Kim Eng Securities Pte Ltd 24,316,003 0.3220 DBS Vickers Securities (S) Pte Ltd 18,681,806 0.24
total 6,436,217,348 84.04
shareholdINgs held IN haNds of PuBlIC
Based on the information available to the Company as at 15 march 2013, approximately 36.6% of the issued ordinary shares (excluding treasury shares) of the Company are held by the public. Accordingly, Rule 723 of the Listing manual of the SGX-ST has been complied with.
GMG Global lTdCompany Registration Number: 199904244E
SGX Trading Code: 5IM.SIRegistered Office: 8 Marina View #34-05, Asia Square Tower 1, Singapore 018960Tel: (65) 6220 8638 Fax: (65) 6323 0737www.gmg.sgInvestor Relations Email: [email protected], [email protected] [email protected]
