statement
on internal
control
RESPONSIBILITY OF THE BOARD OF DIRECTORS
The Board of Directors of Southern Acids (M) Berhad (“the Board”) affirms its commitment, and acknowledges its overall responsibility, in maintaining a sound system of internal control in the Group to safeguard shareholders’ investments and assets of the Group.
Notwithstanding the above, the Board also recognises that the internal control system in place can only reduce but not eliminate the possibility of poor judgment in decision making;
human error; control process being deliberately circumvented by employees; management overriding controls; and the occurrence of unforeseeable circumstances. Consequently, the system can therefore provide only reasonable but not absolute assurance against failure to achieve business objectives or any material misstatement, operational failures, fraud, losses or breaches of laws and regulations.
The following statements outline the state of internal control within the Group during the current financial year.
RISK MANAGEMENT FRAMEWORK
The Board recognises the importance of sound internal control and risk management practices and good corporate governance as an on-going process. For this reason, the Group strives to embed a risk management process in the conduct of its day-to-day business operations so as to provide reasonable assurance of achieving the Group’s business objectives while safeguarding Group’s assets and enhancing shareholders’ investment.
The management is entrusted with the responsibility of managing risks and internal controls associated with the operations, and ensuring compliance with applicable laws and regulations. The main underlying principles of the Group Risk Management policy are:
• each division is expressly informed to be responsible for managing the risks associated with its business and investment objectives, as risk management is a collective responsibility;
• improve decision making, planning and prioritisation based on comprehensive understanding of the reward to risk balance;
• all material risks are to be identified, analysed, treated, quantified where possible, monitored and reported; and
• risk management is to be embedded within the Group strategic planning process, performance measurement system and day-to-day operations
During the financial year under review, the Company has appointed KPMG Management &
Risk Consulting Sdn. Bhd. to provide Enterprise Risk Management (“ERM”) services for the Group. The engagement involves KPMG’s assistance in establishing a structured enterprise risk management framework for the Group, focusing on Southern Acids Industries Sdn. Bhd., a wholly owned subsidiary of the Company, as the pilot company for a full scope ERM project to be carried out. Once completed, the management will then roll out the ERM projects to the rest of the companies in the Group. In essence, the structured ERM framework seeks to
Always on Track to Identify and Manage Risks
Always on Track to Identify
and Manage Risks
ANNUAL REPORT 2012 S O U T H E R N A C I D S ( M ) B E R H A D ( 6 4 5 7 7 - K )
RISK MANAGEMENT FRAMEWORK (cont’d)
identify principal risks affecting or likely to affect the Group, and helps to enable the implementation of appropriate and adequate systems to manage these risks on a prioritised basis.
KEY INTERNAL CONTROL SYSTEM
The Board is fully committed in ensuring that a proper control environment is maintained and there is an on-going process for identifying, evaluating and managing the significant risks faced by the Group. The key processes that the Board has established to review the adequacy and integrity of the system of internal controls are as follows:
• a formal and clear organisation structure for the operating units with defined reporting lines and responsibilities to the Board level, with respective authority limits defined in the Group Policies and Authorities (“GPA”), to ensure accountabilities in risk management and control activities.
• comprehensive management reports are generated on a regular and consistent basis to facilitate the Board and the Management in performing financial and operational reviews.
• regular Board and Senior Management meetings and visits to operating units to assess the Group’s performance and controls.
• training and development programmes are conducted and actively encouraged to ensure that employees are kept up-to-date with necessary competencies to carry out their respective duties towards achieving the Company’s objectives.
• the Audit Committee reviews the quarterly financial statements and performance of the Group before they are tabled to the Board for review and approval. The Board through the Audit Committee also reviews reports from Internal Audit Department (“IAD”) on internal control, to help to ensure the adequacy and integrity of the internal control system of the Group.
• the embedment of internal audit function by the IAD in the governance process. The IAD, which is independent of Management, and carry out its functionalities within the Audit Charter approved by the Audit Committee and the Board, performs internal audit in diverse areas and environment for the review of internal control;
management; financial accounting and reporting; and operational activities within the Group. The internal audit efforts are directed towards areas of significant
risks as identified by Management and the risk management process. The IAD reports, functionally to the Audit Committee, and administratively to the group chief executive officer.
• The Management reviews the findings of the IAD and adopts the recommendations put forth by the IAD, where appropriate.
WHISTLE BLOWING POLICY
The Group has established a whistle blowing policy to provide employees, customers and vendors an avenue to raise matters of serious concerns that could have an impact on the Group, as in line with the commitment of SAB to the highest possible standards of ethical, moral and legal business conduct and its commitment to open communication. The said policy encourages employees to report actual or suspected malpractice, misconduct or violations of the company’s policies and regulations in a safe and confidential manner.
EXTERNAL AUDITORS
The external auditors, where applicable, issue Management Letter highlighting issues and weaknesses that came to their attention during the conduct of their normal audit procedures.
The external auditors have also reviewed this Statement on Internal Control and reported to the Board that nothing has come to their attention that causes them to believe that the statement is inconsistent with their understanding of the processes adopted by the Board in reviewing the adequacy and integrity of the system of internal controls.
CONCLUSION
The Board is of the view that the system of internal control that has been put in place throughout the Group is adequate. Notwithstanding this, the Board will ensure that review on the internal controls is carried out continuously to ensure on-going adequacy and effectiveness of the system of internal controls and risk management practices to attend to the robust operating environment.
During the financial year under review, there were no material internal control failures or adverse events that have directly resulted in any material losses to the Group.
This statement is made in accordance with a resolution of the Board dated 9 August 2012.
46
statement on internal control (cont’d)
financial statement
Report of the Directors 48
Independent Auditors’ Report 53
Income Statements 56
Statements of Comprehensive Income 57
Statements of Financial Position 58
Statements of Changes in Equity 60
Statements of Cash Flows 63
Notes to the Financial Statements 66
Supplementary information on disclosure of realised and 134 unrealised profits
Statement by Directors 135
Declaration by the Officer Primarily Responsible for the 135
Financial Management of the Company
ANNUAL REPORT 2012 S O U T H E R N A C I D S ( M ) B E R H A D ( 6 4 5 7 7 - K )
The directors of SOUTHERN ACIDS (M) BERHAD have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31 March 2012.
PRINCIPAL ACTIVITIES
The Company is principally an investment holding company. During the current and previous financial years, the Company had been involved in the sales and marketing of oleochemical products for a wholly-owned subsidiary company, and had ceased such activities on 31 July 2011.
The principal activities of the subsidiary companies are disclosed in Note 15 to the Financial Statements.
Other than those disclosed above, there have been no significant changes in the nature of the activities of the Company and of its subsidiary companies during the financial year.
RESULTS OF OPERATIONS
The results of operations of the Group and of the Company for the financial year are as follows:
The Group The Company
RM’000 RM’000
Profit before tax 41,275 5,897
Income tax expense (13,261) (2,244)
Profit for the year 28,014 3,653
Attributable to:
Equity holders of the Company 19,924 3,653
Non-controlling interests 8,090 –
28,014 3,653
In the opinion of the directors, the results of operations of the Group and of the Company during the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature.
48 directors’report
DIVIDENDS
A final dividend of 6.0 sen, tax exempt, per ordinary share of RM1.00 each, amounting to RM8,216,048 proposed in the previous financial period and dealt with in the previous directors’ report was paid by the Company on 28 October 2011.
The directors propose a final dividend of 6.67 sen per ordinary share of RM1.00 each, less 25% tax, amounting to RM6,846,707 in respect of the current financial year. This dividend is subject to approval by the shareholders at the forthcoming Annual General Meeting of the Company and has not been included as a liability in the financial statements.
RESERVES AND PROVISIONS
There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements.
ISSUE OF SHARES AND DEBENTURES
The Company has not issued any new shares or debentures during the financial year.
SHARE OPTIONS
No options have been granted by the Company to any party during the financial year to take up unissued shares of the Company.
No shares have been issued during the financial year by virtue of the exercise of any option to take up unissued shares of the Company. As at the end of the financial year, there were no unissued shares of the Company under options.
OTHER STATUTORY INFORMATION
Before the statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the directors took reasonable steps:
(a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts, and have satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and
(b) to ensure that any current assets which were unlikely to realise their book values in the ordinary course of business have been written down to their estimated realisable values.
S O U T H E R N A C I D S ( M ) B E R H A D ( 6 4 5 7 7 - K ) ANNUAL REPORT 2012