YANBU NATIONAL PETROCHEMICAL COMPANY (YANSAB) (A SAUDI JOINT STOCK COMPANY)
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REVIEW REPORT
FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2020
YANBU NATIONAL PETROCHEMICAL COMPANY (YANSAB) (A SAUDI JOINT STOCK COMPANY)
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2020
INDEX | PAGE |
Independent Auditor's Review Report | 1 |
Interim Condensed Statement of Financial Position | 2 |
Interim Condensed Statement of Income | 3 |
Interim Condensed Statement of Comprehensive Income | 4 |
Interim Condensed Statement of Changes in Equity | 5 |
Interim Condensed Statement of Cash Flows | 6 |
Notes to the Interim Condensed Financial Statements | 7 - 14 |
Yanbu National Petrochemical Company (YANSAB) - A Saudi Joint Stock Company
INTERIM CONDENSED STATEMENT OF FINANCIAL POSITION
As at 30 September 2020
(All amounts in Saudi Riyals '000 unless otherwise stated)
30 September | 31 December | ||
2020 | 2019 | ||
Note | (Unaudited) | (Audited) | |
ASSETS | |||
NON-CURRENT ASSETS | |||
Property, plant and equipment | 11,252,411 | 11,848,879 | |
Right-of-use assets | 4 | 153,436 | 170,935 |
Intangible assets | 26,144 | 27,291 | |
Other non-current assets | 154,325 | 180,599 | |
──────── | ──────── | ||
TOTAL NON-CURRENT ASSETS | 11,586,316 | 12,227,704 | |
──────── | ──────── | ||
CURRENT ASSETS | |||
Inventories | 674,322 | 735,943 | |
Trade receivables | 1,699,643 | 1,753,273 | |
Prepayments and other current assets | 211,326 | 166,417 | |
Short-term investments | 5 | 2,468,000 | 3,050,800 |
Cash and cash equivalents | 19,629 | 136,270 | |
──────── | ──────── | ||
TOTAL CURRENT ASSETS | 5,072,920 | 5,842,703 | |
──────── | ──────── | ||
TOTAL ASSETS | 16,659,236 | 18,070,407 | |
════════ | ════════ | ||
EQUITY AND LIABILITIES | |||
EQUITY | |||
Share capital | 6 | 5,625,000 | 5,625,000 |
Statutory reserve | 1,687,500 | 1,687,500 | |
Actuarial reserve | (52,793) | (7,994) | |
Retained earnings | 7,495,726 | 8,838,306 | |
──────── | ──────── | ||
TOTAL EQUITY | 14,755,433 | 16,142,812 | |
──────── | ──────── | ||
NON-CURRENT LIABILITIES | |||
Lease liabilities | 4 | 130,536 | 154,186 |
Employee benefits | 7 | 715,391 | 620,651 |
──────── | ──────── | ||
TOTAL NON-CURRENT LIABILITIES | 845,927 | 774,837 | |
──────── | ──────── | ||
CURRENT LIABILITIES | |||
Lease liabilities - current portion | 4 | 19,141 | 14,058 |
Trade payables | 498,100 | 457,346 | |
Accruals and other current liabilities | 8 | 462,116 | 555,418 |
Zakat payable | 9 | 78,519 | 125,936 |
──────── | ──────── | ||
TOTAL CURRENT LIABILITIES | 1,057,876 | 1,152,758 | |
──────── | ──────── | ||
TOTAL LIABILITIES | 1,903,803 | 1,927,595 | |
──────── | ──────── | ||
TOTAL EQUITY AND LIABILITIES | 16,659,236 | 18,070,407 | |
════════ | ════════ |
The attached notes from 1 to 16 form an integral part of these interim condensed financial statements.
2
Yanbu National Petrochemical Company (YANSAB) - A Saudi Joint Stock Company
INTERIM CONDENSED STATEMENT OF INCOME (UNAUDITED)
For the three-month and nine-month periods ended 30 September 2020 (All amounts in Saudi Riyals '000 unless otherwise stated)
Three-month period ended | Nine-month period ended | |||||
30 September | 30 September | |||||
Note | 2020 | 2019 | 2020 | 2019 | ||
Revenue from contracts with customers | 1,440,728 | 1,422,744 | 3,656,362 | 4,582,750 | ||
Cost of revenue | (1,163,518) | (1,126,690) | (3,042,774) | (3,382,600) | ||
──────── | ──────── | ──────── | ──────── | |||
GROSS PROFIT | 277,210 | 296,054 | 613,588 | 1,200,150 | ||
Selling and distribution expenses | (17,919) | (11,463) | (54,218) | (50,616) | ||
General and administrative expenses | (58,249) | (79,209) | (203,054) | (235,690) | ||
──────── | ──────── | ──────── | ──────── | |||
INCOME FROM MAIN OPERATIONS | 201,042 | 205,382 | 356,316 | 913,844 | ||
Finance income | 9,118 | 17,041 | 43,112 | 70,251 | ||
Finance costs, net | (6,420) | (6,847) | (18,362) | (20,683) | ||
Other income, net | 15,945 | 23,756 | 45,822 | 42,591 | ||
──────── | ──────── | ──────── | ──────── | |||
INCOME BEFORE ZAKAT | 219,685 | 239,332 | 426,888 | 1,006,003 | ||
Zakat | 9 | (24,051) | (27,277) | (81,968) | (87,179) | |
──────── | ──────── | ──────── | ──────── | |||
NET INCOME FOR THE PERIOD | 195,634 | 212,055 | 344,920 | 918,824 | ||
════════ | ════════ | ════════ | ════════ | |||
Earnings per share (EPS) | ||||||
Weighted average number of ordinary shares ('000) | 10 | 562,500 | 562,500 | 562,500 | 562,500 | |
════════ | ════════ | ════════ | ════════ | |||
Basic and diluted earnings per share attributable to | ||||||
ordinary equity holders of the Company | ||||||
(Saudi Riyals) | 10 | 0.35 | 0.38 | 0.61 | 1.63 | |
════════ | ════════ | ════════ | ════════ |
The attached notes from 1 to 16 form an integral part of these interim condensed financial statements.
3
Yanbu National Petrochemical Company (YANSAB) - A Saudi Joint Stock Company
INTERIM CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
For the three-month and nine-month periods ended 30 September 2020 (All amounts in Saudi Riyals '000 unless otherwise stated)
Three-month period ended | Nine-month period ended | |||||
30 September | 30 September | |||||
Note | 2020 | 2019 | 2020 | 2019 | ||
Net income for the period | 195,634 | 212,055 | 344,920 | 918,824 | ||
Other comprehensive income | ||||||
Items not to be reclassified to statement of income | ||||||
in subsequent periods: | ||||||
Re-measurement loss on defined benefit plans | 7 | (17,392) | (66,971) | (44,799) | (100,209) | |
──────── | ──────── | ──────── | ──────── | |||
TOTAL COMPREHENSIVE INCOME FOR | ||||||
THE PERIOD | 178,242 | 145,084 | 300,121 | 818,615 | ||
════════ | ════════ | ════════ | ════════ |
The attached notes from 1 to 16 form an integral part of these interim condensed financial statements.
4
Yanbu National Petrochemical Company (YANSAB) - A Saudi Joint Stock Company
INTERIM CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
For the nine-month period ended 30 September 2020
(All amounts in Saudi Riyals '000 unless otherwise stated)
Share | Statutory | Actuarial | Retained | ||
capital | reserve | reserve | earnings | Total | |
Balance as at 1 January 2019 | 5,625,000 | 1,687,500 | 85,286 | 9,857,909 | 17,255,695 |
Net income for the period | - | - | - | 918,824 | 918,824 |
Other comprehensive loss for the period | - | - | (100,209) | - | (100,209) |
Total comprehensive income for the period | - | - | (100,209) | 918,824 | 818,615 |
Dividends (note 15) | - | - | - | (2,109,375) | (2,109,375) |
───────── | ───────── | ───────── | ───────── | ───────── | |
Balance as at 30 September 2019 | 5,625,000 | 1,687,500 | (14,923) | 8,667,358 | 15,964,935 |
═════════ | ═════════ | ═════════ | ═════════ | ═════════ | |
Balance as at 1 January 2020 | 5,625,000 | 1,687,500 | (7,994) | 8,838,306 | 16,142,812 |
Net income for the period | - | - | - | 344,920 | 344,920 |
Other comprehensive loss for the period | - | - | (44,799) | - | (44,799) |
Total comprehensive income for the period | - | - | (44,799) | 344,920 | 300,121 |
Dividends (note 15) | - | - | - | (1,687,500) | (1,687,500) |
───────── | ───────── | ───────── | ───────── | ───────── | |
Balance as at 30 September 2020 | 5,625,000 | 1,687,500 | (52,793) | 7,495,726 | 14,755,433 |
═════════ | ═════════ | ═════════ | ═════════ | ═════════ |
The attached notes from 1 to 16 form an integral part of these interim condensed financial statements.
5
Yanbu National Petrochemical Company (YANSAB) - A Saudi Joint Stock Company
INTERIM CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED) For the nine-month period ended 30 September 2020
(All amounts in Saudi Riyals '000 unless otherwise stated)
Nine-month period ended 30 September | |||
Note | 2020 | 2019 | |
OPERATING ACTIVITIES | |||
Income before zakat | 426,888 | 1,006,003 | |
Adjustment to reconcile income before zakat to net cash inflow from | |||
operating activities: | |||
Depreciation of property, plant and equipment and right-of-use assets | 863,289 | 1,018,350 | |
Amortisation of intangible assets | 3,431 | 3,170 | |
Reversal of provision for slow moving and obsolete inventories | (18,137) | - | |
Provision for employee benefits | 42,387 | 37,167 | |
Loss on disposal of property, plant and equipment | 2,176 | - | |
Finance costs | 18,362 | 20,683 | |
Finance income | (43,112) | (70,251) | |
──────── | ──────── | ||
1,295,284 | 2,015,122 | ||
Working capital adjustments: | |||
Inventories | 79,758 | (14,898) | |
Trade receivables | 53,630 | 301,066 | |
Prepayments and other current assets | (44,909) | 38,388 | |
Other non-current assets | 26,274 | 9,143 | |
Trade payables | 40,754 | (77,383) | |
Accruals and other current liabilities | (92,771) | (137,554) | |
──────── | ──────── | ||
Cash from operations | 1,358,020 | 2,133,884 | |
Finance costs paid | (5,102) | (6,508) | |
Employees' benefits paid | 7 | (5,706) | (6,185) |
Zakat paid | 9 | (129,385) | (128,795) |
──────── | ──────── | ||
Net cash flows from operating activities | 1,217,827 | 1,992,396 | |
──────── | ──────── | ||
INVESTING ACTIVITIES | |||
Short-term investments made | (5,085,800) | (2,037,000) | |
Proceeds from maturity of short-term investments | 5,668,600 | 2,625,788 | |
Purchase of property, plant and equipment | (250,749) | (500,308) | |
Purchase of intangible assets | (2,284) | - | |
Finance income received | 43,112 | 70,128 | |
──────── | ──────── | ||
Net cash flows from investing activities | 372,879 | 158,608 | |
──────── | ──────── | ||
FINANCING ACTIVITIES | |||
Payment of principal portion of lease liabilities | (19,316) | (17,101) | |
Dividends paid | (1,688,031) | (2,112,445) | |
──────── | ──────── | ||
Net cash flows used in financing activities | (1,707,347) | (2,129,546) | |
──────── | ──────── | ||
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS | (116,641) | 21,458 | |
Cash and cash equivalents at the beginning of the period | 136,270 | 26,200 | |
──────── | ──────── | ||
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 19,629 | 47,658 | |
════════ | ════════ | ||
SUPPLEMENTARY NON-CASH INFORMATION | |||
Right-of-use assets and lease liabilities | 19,619 | 171,107 |
The attached notes from 1 to 16 form an integral part of these interim condensed financial statements.
6
Yanbu National Petrochemical Company (YANSAB) - A Saudi Joint Stock Company
NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
For the nine-month period ended 30 September 2020
(All amounts in Saudi Riyals '000 unless otherwise stated)
1 COMPANY INFORMATION
Yanbu National Petrochemical Company (YANSAB) (the "Company") is a Saudi Joint Stock Company registered in Yanbu, Kingdom of Saudi Arabia under Commercial Registration number 4700009432 dated 14 Muharram 1427H (corresponding to 13 February 2006) in accordance with the Ministerial Resolution No. 49 dated 12 Muharram 1427H (corresponding to 11 February 2006) for the incorporation of the Company. The Company obtained its Industrial Licence number S/1367 on 18 Rajab 1426H (corresponding to 23 August 2005) and is engaged in the manufacturing of petrochemical products in accordance with the Company's by-laws and other Saudi Arabian applicable regulations. The Company commenced commercial operations on 1 March 2010. The registered office of the Company is located at Yanbu, P.O. Box 31396, Yanbu industrial city 41912.
The interim condensed financial statements of the Company for the nine-month period ended 30 September 2020 have been approved by the Board of Directors on 2 Rabi' I 1442H (corresponding to 19 October 2020).
2 BASIS OF PREPARATION
2.1 Statement of compliance
These interim condensed financial statements have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" ("IAS 34") endorsed in Kingdom of Saudi Arabia ("KSA").
These interim condensed financial statements do not include all the information and disclosures required in full set of annual financial statements and should therefore be read in conjunction with the Company's annual financial statements for the year ended 31 December 2019. In addition, results for the interim period ended 30 September 2020 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2020 (refer to note 2.4 below).
2.2 Basis of measurement
These interim condensed financial statements are prepared under the historical cost convention. For employee and other post- employment benefits, actuarial present value calculations are used.
2.3 Functional and presentation currency
These interim condensed financial statements are presented in Saudi Riyals (SR), which is the functional currency of the Company. All figures are rounded off to nearest thousands (SR '000) unless when otherwise indicated.
2.4 Significant accounting judgements, estimates and assumptions
The preparation of the Company's interim condensed financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. The significant judgments made by management in applying the Company's accounting policies and the methods of computation and the key sources of estimation are the same as those that applied to the financial statements for the year ended 31 December 2019. However, in the view of the current uncertainty due to COVID-19, any future change in the assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future periods. As the situation is rapidly evolving with future uncertainties, management will continue to assess the impact based on prospective developments (see also note 16).
7
Yanbu National Petrochemical Company (YANSAB) - A Saudi Joint Stock Company
NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (continued)
For the nine-month period ended 30 September 2020
(All amounts in Saudi Riyals '000 unless otherwise stated)
3 CHANGES TO THE COMPANY'S ACCOUNTING POLICIES
The accounting policies and methods of calculation adopted in the preparation of the interim condensed financial statements are consistent with those followed in the preparation of the Company's annual financial statements for the year ended 31 December 2019, except for the adoption of new standards effective as of 1 January 2020. The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
Several amendments and interpretations apply for the first time in 2020, but do not have an impact on the interim condensed financial statements of the Company. As required by IAS 34, the nature and effect of these changes are disclosed below.
3.1 Amendments to IFRS 3: Definition of a Business
The amendment to IFRS 3 clarifies that to be considered a business, an integrated set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. Furthermore, it clarified that a business can exist without including all of the inputs and processes needed to create outputs. These amendments had no impact on the interim condensed financial statements of the Company, but may impact future periods should the Company enter into any business combinations.
3.2 Amendments to IAS 1 and IAS 8: Definition of Material
The amendments provide a new definition of material that states "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. These amendments had no impact on the interim condensed financial statements of, nor is there expected to be any future impact to the Company.
4 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
Set out below, are the carrying amounts of the Company's right-of-use assets and lease liabilities and the movements during the period/year:
Nine-month period ended | Year ended | |||||
30 September 2020 | 31 December 2019 | |||||
Right-of-use | Lease | Right-of-use | Lease | |||
assets | liabilities | assets | liabilities | |||
At the beginning of the period/year | 170,935 | 168,244 | 179,331 | 171,789 | ||
Addition | 19,619 | 19,619 | 11,179 | 8,807 | ||
Adjustment | (18,870) | (18,870) | - | - | ||
Depreciation | (18,248) | - | (19,575) | - | ||
Interest expense | - | 5,550 | - | 10,014 | ||
Payments | - | (24,866) | - | (22,366) | ||
──────── | ──────── | ──────── | ──────── | |||
At the end of the period/year | 153,436 | 149,677 | 170,935 | 168,244 | ||
════════ | ════════ | ════════ | ════════ | |||
5 | SHORT-TERM INVESTMENTS |
Short-term investments represent Murabaha commodity placements with original maturity exceeding three month and maintained with local and foreign banks. These placements yield finance income at prevailing market rates.
6 SHARE CAPITAL
The Company's authorized, issued and fully paid share capital is SR 5,625 million which is divided into 562.5 million shares of SR 10 par value each. The Company is 51% owned by SABIC, and 49% owned by others or publicly traded.
8
Yanbu National Petrochemical Company (YANSAB) - A Saudi Joint Stock Company
NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (continued)
For the nine-month period ended 30 September 2020
(All amounts in Saudi Riyals '000 unless otherwise stated)
7 | EMPLOYEE BENEFITS | |||||
30 September | 31 December | |||||
2020 | 2019 | |||||
Defined benefits obligation (note 7.1) | 686,998 | 594,260 | ||||
Others | 28,393 | 26,391 | ||||
──────── | ──────── | |||||
715,391 | 620,651 | |||||
════════ | ════════ | |||||
7.1 | Defined benefits obligation | |||||
The following table represents the movement of the defined benefits obligation: | ||||||
Nine-month | ||||||
period ended | Year ended | |||||
30 September | 31 December | |||||
2020 | 2019 | |||||
Defined benefits obligation at beginning of the period/year | 594,260 | 451,054 | ||||
Current service cost | 39,950 | 42,685 | ||||
Interest cost on defined benefits obligation | 13,260 | 17,306 | ||||
Actuarial loss on the obligation | 44,799 | 93,280 | ||||
Payments during the period/year | (5,706) | (6,351) | ||||
Transferred in/(out), net | 435 | (3,714) | ||||
──────── | ──────── | |||||
Defined benefits obligation at the end of the period/year | 686,998 | 594,260 | ||||
════════ | ════════ | |||||
Net defined benefit expense: | ||||||
Three-month period ended | Nine-month period ended | |||||
30 September | 30 September | |||||
2020 | 2019 | 2020 | 2019 | |||
Current service cost | 13,241 | 10,536 | 39,950 | 31,990 | ||
Interest cost on defined benefits obligation | 4,420 | 4,718 | 13,260 | 14,224 | ||
──────── | ──────── | ──────── | ──────── | |||
Net defined benefits expense | 17,661 | 15,254 | 53,210 | 46,214 | ||
════════ | ════════ | ════════ | ════════ |
Significant assumptions used in determining defined benefits obligation for the Company are shown below:
30 September | 31 December | |
2020 | 2019 | |
Discount rate | 2.4% | 3.1% |
Salary increase rate - Executives | 4.5% | 4.5% |
Salary increase rate - Non-Executives | 6.0% | 6.0% |
Medical inflation rate | Note (a) below | Note (a) below |
Average retirement age | 58 | 58 |
- As at 30 September 2020 and 31 December 2019: 9% per annum in 2020 decreasing to 5% per annum in 2024 and 5% per annum onwards.
9
Yanbu National Petrochemical Company (YANSAB) - A Saudi Joint Stock Company
NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (continued)
For the nine-month period ended 30 September 2020
(All amounts in Saudi Riyals '000 unless otherwise stated)
8 | ACCRUALS AND OTHER CURRENT LIABILITIES | ||
30 September | 31 December | ||
2020 | 2019 | ||
Accrued liabilities | 371,384 | 434,633 | |
Amounts due to related parties | 75,381 | 104,903 | |
Dividend payable | 15,351 | 15,882 | |
──────── | ──────── | ||
462,116 | 555,418 | ||
════════ | ════════ | ||
9 | ZAKAT | ||
The movement in the zakat provision during the period/year is as follows: | |||
Nine-month | |||
period ended | Year ended | ||
30 September | 31 December | ||
2020 | 2019 | ||
At the beginning of the period/year | 125,936 | 119,271 | |
Provided during the period/year | 81,968 | 135,460 | |
Paid during the period/year | (129,385) | (128,795) | |
──────── | ──────── | ||
At the end of the period/year | 78,519 | 125,936 | |
════════ | ════════ |
The Company has filed its zakat returns with the General Authority of Zakat and Tax ("GAZT") and received the zakat certificates up to 31 December 2019. The Company has settled the zakat dues and cleared its zakat assessments with GAZT up to the year ended 31 December 2015. The GAZT raised assessment with additional withholding tax liability on dividend paid to non-resident shareholders amounting to SR 10.1 million for the years 2016 to 2019 and the Company paid the amount during the period ended 30 September 2020.
The final assessments of 2016 to 2019 have not yet been raised by the GAZT.
10 | EARNINGS PER SHARE | ||||||
The earnings per share calculation is given below: | |||||||
Three-month period ended | Nine-month period ended | ||||||
30 September | 30 September | ||||||
2020 | 2019 | 2020 | 2019 | ||||
Net income for the period (SR '000) | 195,634 | 212,055 | 344,920 | 918,824 | |||
════════ | ════════ | ════════ | ════════ | ||||
Weighted average number of ordinary shares | |||||||
('000) | 562,500 | 562,500 | 562,500 | 562,500 | |||
════════ | ════════ | ════════ | ════════ | ||||
Earnings per share (Saudi Riyals) - Basic and | |||||||
diluted | 0.35 | 0.38 | 0.61 | 1.63 | |||
════════ | ════════ | ════════ | ════════ |
There has been no item of dilution affecting the weighted average number of ordinary shares.
10
Yanbu National Petrochemical Company (YANSAB) - A Saudi Joint Stock Company
NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (continued)
For the nine-month period ended 30 September 2020
(All amounts in Saudi Riyals '000 unless otherwise stated)
11 FAIR VALUE MEASUREMENT
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability; or
- In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non- financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole, as follows:
- Level 1: quoted (unadjusted) market prices in active markets for identical assets or liabilities.
- Level 2: valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
- Level 3: valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
If the inputs used to measure the fair value of an asset or liability falls into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest input level that is significant to the entire measurement.
The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. There were no transfers among the levels during the period.
The management assessed that the fair value of cash and cash equivalents, short-term investments, trade and other receivables and trade payables approximate their carrying amounts largely due to the short-term maturities of these instruments.
11
Yanbu National Petrochemical Company (YANSAB) - A Saudi Joint Stock Company
NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (continued)
For the nine-month period ended 30 September 2020
(All amounts in Saudi Riyals '000 unless otherwise stated)
12 RELATED PARTY TRANSACTIONS AND BALANCES
Related parties represent the shareholders, directors and key management personnel of the Company, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Company's management. Following is the list of related party transactions and balances of the Company:
Transactions | |||||||||||
Related party | Nature of transactions | Three-month period ended | Nine-month period ended | Balance as at | |||||||
30 September | 30 September | 30 September | 30 September | 30 September | 31 December | ||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
- Amounts due from related parties
Saudi Basic Industries Corporation | Sale of products | 1,440,728 | 1,422,744 | 3,656,362 | 4,582,750 | 1,696,708 | 1,739,869 |
(SABIC) - (Parent) | Advances for purchase of materials, | ||||||
product sales and other transactions | 600 | 13,079 | 33,777 | 18,928 | 98,961 | 65,184 | |
Long term advance for logistics | - | - | - | - | 7,500 | 7,500 | |
Other related parties | Exchange of products | 1,597 | 7,713 | 20,204 | 7,784 | 598 | 11,286 |
Others | - | 5,167 | - | - | - | 4,845 | |
──────── | ──────── | ─────── | ─────── | ──────── | ──────── | ||
1,442,925 | 1,448,703 | 3,710,343 | 4,609,462 | 1,803,767 | 1,828,684 | ||
════════ | ════════ | ═══════ | ═══════ | ════════ | ════════ | ||
b) Amounts due to related parties | |||||||
Saudi Basic Industries Corporation | Payments on behalf of the Company | ||||||
(SABIC) - (Parent) | and other services rendered by the | ||||||
Parent | 441,958 | 508,362 | 1,855,918 | 1,576,588 | 222,848 | 282,015 | |
Research and technology fees | 20,234 | 28,455 | 73,127 | 91,655 | 10,371 | 69,270 | |
Saudi Aramco (Ultimate Parent) and | Procurement of feedstock and | ||||||
its subsidiaries (from 16 June 2020) | others | 76,192 | - | 142,978 | - | 293,629 | - |
Arabian Industrial Fibers Company | |||||||
(IBN RUSHD) (a related party) | Propane Tolling Agreement | 68,813 | 79,487 | 114,238 | 205,841 | 68,814 | 91,754 |
Other related parties | Storage services and others | 9,589 | 22,273 | 1,390 | 176,272 | 1,875 | 26,486 |
──────── | ──────── | ─────── | ─────── | ──────── | ──────── | ||
616,786 | 638,577 | 2,187,651 | 2,050,356 | 597,537 | 469,525 | ||
════════ | ════════ | ═══════ | ═══════ | ════════ | ════════ |
12
Yanbu National Petrochemical Company (YANSAB) - A Saudi Joint Stock Company
NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (continued)
For the nine-month period ended 30 September 2020
(All amounts in Saudi Riyals '000 unless otherwise stated)
12 RELATED PARTY TRANSACTIONS AND BALANCES (continued)
Key management compensation
Compensation for key management is as follows:
Three-month period ended | Nine-month period ended | ||||
30 September | 30 September | ||||
2020 | 2019 | 2020 | 2019 | ||
Salaries and other benefits | 1,301 | 1,255 | 5,279 | 4,866 | |
Post-employment benefits | 217 | 210 | 1,228 | 621 | |
─────── | ─────── | ─────── | ─────── | ||
1,518 | 1,465 | 6,507 | 5,487 | ||
═════════ | ═════════ | ═════════ | ═════════ |
Significant transactions with related parties were as follows:
- The Company has a service level agreement with SABIC (Shared Services Organization - SSO) for the provision of accounting, warehousing, human resources, information technology (ERP/SAP), transporting and arranging for delivery of materials related to the Company's spare parts, engineering, procurement and related services and other general services to the Company. The Company has also logistic service agreement with SABIC.
- Advances to SABIC represent the amounts paid by the Company according to shared service agreement to finance the purchase of the Company's materials and services.
- Almost all the Company's products are sold to SABIC ("the Marketer") under marketing and off‑take agreements.
Terms and conditions of transactions with related parties
Outstanding balances at the period ended 30 September 2020 are unsecured, interest free and settled in cash. There have been no guarantees provided or received for any related party receivables or payables. For the period ended 30 September 2020, the Company has not recorded any impairment of receivables relating to amounts owed by related parties. This assessment is undertaken each financial year by examining the financial position of the related parties and the market in which the related party operates.
13 SEGMENT INFORMATION
The Company's President and Board of Directors monitor the results of the Company's operations for the purpose of making decisions about resource allocation and performance assessment. They are collectively the chief operating decision makers (CODM) for the Company. The CODM review the results of the Company as a whole, as they believe that decision making cannot be done effectively in isolation for single products of the Company due to complex nature of the business, integrated facility where multiple products including downstream product movement are simultaneous and the nature of the products market. Hence, the whole Company is treated as a single operating segment, the results and financial position of which has been presented already.
The key evaluation criteria for segment performance is the net profit and this is evaluated and measured consistently throughout the accounting period. The non-current assets of the Company are based in Kingdom of Saudi Arabia and petrochemical products sales by the Company are made primarily to its parent company which is also based in Kingdom of Saudi Arabia.
14 COMMITMENTS AND CONTINGENCIES
As at 30 September 2020, the Company has commitments of SR 339 million (31 December 2019: SR 339 million) relating to capital expenditures.
The Company's bankers have issued, on its behalf, bank guarantees amounting to SR 0.4 million in the normal course of business as at 30 September 2020 (31 December 2019: SR 0.5 million).
13
Yanbu National Petrochemical Company (YANSAB) - A Saudi Joint Stock Company
NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (continued)
For the nine-month period ended 30 September 2020
(All amounts in Saudi Riyals '000 unless otherwise stated)
15 APPROPRIATION OF NET INCOME
On 15 March 2020, the General Assembly approved a distribution of cash dividend amounting SR 984.37 million (SR 1.75 per share) for the second half of the year 2019 which represents 17.5% of the nominal value of the shares. The total dividends for the year ended 31 December 2019 was SR 1,968.74 million (SR 3.50 per share).
On 11 May 2020, the Board of Directors announced the distribution of SR 703.13 million as cash dividends (SR 1.25 per share) for the first half of the year 2020 which represents 12.5% of the nominal value of the shares. The date of eligibility for this dividend distribution was to shareholders listed on the Tadawul (Saudi Stock Exchange) by the end of trading on 9 July 2020.
16 IMPACT OF COVID-19
The outbreak of novel coronavirus ("COVID-19") since early 2020, its spread across mainland China and then globally caused disruptions to businesses and economic activity globally including the Kingdom of Saudi Arabia and the declaration of this pandemic by the World Health Organization necessitated the Company's management to revisit its significant judgments in applying the Company's accounting policies and the methods of computation and the key sources of estimation applied to the annual financial statements for the year ended 31 December 2019.
During the period ended 30 September 2020, management has assessed the overall impact on the Company's operations and business aspects, and considered factors like effects on supply chain, impact of decreased oil prices, operating rates of its plants and lost volume, additional cost in supply chain, margin squeeze, and product demand. Based on this assessment, no significant adjustments were required in the interim condensed financial statements for the period ended 30 September 2020. However, in view of the ongoing uncertainty, any future change in the assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets and/or liabilities in future periods. As the situation is rapidly evolving with future uncertainties, management will continue to assess the impact based on prospective developments.
14
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Yanbu National Petrochemical Company SJSC published this content on 21 October 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 October 2020 08:49:02 UTC