Investor Presentaiton slide image

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 89
View entire presentation