Investor Presentaiton
ANNUAL REPORT 2020
88
Notes to the Financial Statements
For the year ended 31 December 2020
24(a) Current Loans and Borrowings
In thousands of naira
Intercompany loan
26
Financial Risk Management and Financial Instruments
The Company has exposure to the following risks from its use of financial instruments:
2020
2019
⚫ Credit risk
• Liquidity risk
Short Term Finance
GMT Nigeria Limited
(b)
Non Current Loans and Borrowings
In thousands of naira
Intercompany loan
CBN loan
Note 24 (i)
Note 24 (ii)
61,864,706
988,314
Note 24 (iii)
62,853,020
2,086,943
2,086,943
2020
2019
Note 24 (i)
Note 24 (iv)
7,422,395
2,300,000
9,722,395
i) Intercompany loan: There was intercompany loan of USD 174 million at the end of the year (2019: Nil), received from
FrieslandCampina B.V., Netherlands at interest rate of 4.5%.
ii) The short term finance relates to dollar overdraft on trade finance at the end of the year.
iii) There was no borrowings from GMT in 2020, (2019: #2.087 million) The borrowings in 2019 represents the invoice
amount paid on behalf of the Company by GMT Nigeria Limited for the purchase of finished goods and raw materials. The
Company engaged GMT, a logistics provider to assist with the importation and clearing of some raw materials and finished
goods. The payment term is one hundred and eighty (180) days from the invoice date and Interest is charged at the rate
of 14.0%.
iv) The company received a Term loan (CBN Differentiated Cash Reserve Requirement) of #2.3 billion from CBN, for
FrieslandCampina WAMCO dairy development. The Company will recognise government grant of #725 million on the
loan.
25
Lease Liabilities
In thousands of naira
Current
Non current
Note
2020
2019
100,000
791,455
891,455
The Company entered into a lease agreement with the Niger State Government to develop local dairy production at the
Bobi grazing reserve in the state. The Niger State Government agreed to lease up to 10,000 hectares of the reserve to
the Company for 40 years. As a result of this, a lease liabilities and right of use asset of #891 million has been recognised
in line with IFRS 16.
⚫ Market risk
This note presents information about the Company's exposure to each of the above risks, the Company's objectives,
policies and processes for measuring and managing risk, and the Company's management of capital. Further quantitative
disclosures are included throughout these financial statements.
Risk Management Framework
The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management
framework. The Board of Directors has established the Management Team, which is responsible for developing and
monitoring the Company's risk management policies. The Management Team reports regularly to the Board of Directors
on its activities.
The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set
appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to reflect changes in market conditions and the Company's activities. The Company, through its
training and management standards and procedures, aims to develop a disciplined and constructive control environment
in which all employees understand their roles and obligations.
The Audit Committee oversees how management monitors compliance with the Company's risk management policies and
procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.
The Company also has an Internal Audit department that undertakes both regular and ad hoc reviews of risk management
controls and procedures, the results of which are reported on a regular basis.
(a)
Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or a counterparty to a financial instrument fails to
meet its contractual obligations that arises principally from the Company's receivable from customers, cash and cash
equivalents and derivative assets.
i.
Exposure to credit risk
The Company has no significant concentration of credit risk, with exposure spread over a large number of parties. Cash
and cash equivalents are placed with banks and financial institutions which are regulated.
The carrying amount of financial assets represents the maximum credit exposure.
Financial assets at amortised cost
As part of its strategic relationship with its customers, the Company provides credit to its key customers. Management
has credit policies in place and the exposure to credit risk is monitored on an ongoing basis. Under the credit policies
all customers requiring credit over a certain amount are reviewed and new customers are analysed individually for
creditworthiness before the Company's standard payment and delivery terms and conditions are offered. The Company's
credit assessment process may include specified cash deposits by new customers and bank guarantees provided to the
Company by the customers. Credit limits are established for qualifying customers and these limits are reviewed regularly
by the credit control unit. Customers that fail to meet the Company's benchmark creditworthiness may transact with the
Company only on a prepayment basis.
The credit control unit is charged with the review of each customer's credit limit in line with the customer's performance
in the preceding period and perceived risk factor assigned to the customer.
In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether
they are an individual or legal entity, whether they are a key distributor or retail distributor, geographic location, and
existence of previous financial difficulties. Trade and other receivables relate mainly to the Company's wholesale and
retail customers.
Amount due from related parties at year end represents balance outstanding on sales made to related parties. Other
receivables represent unclaimed dividends with the registrars, staff advances and receivables.
The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade
and other receivables. The main components of this allowance are a specific loss component that relates to individually
significant exposures, customers with outstanding amounts but have not placed orders or traded for a prolonged period
of time (usually one year) and a collective loss component established for groups of similar assets in respect of losses
that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of
payment statistics.
FrieslandCampina WAMCO Nigeria PLC
FrieslandCampina WAMCO Nigeria PLC
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