Sabah Al-Ahmed Al-Jaber Al-Sabah His Highness The Crown Prince Sheikh Nawaf Al-Ahmed Al-Jaber Al-Sabah ANNUAL REPORT 2013 CONTENTS BOARD OF

38th ANNUAL REPORT 2013

ANNUAL REPORT 2013

Kuwait Shareholding Company (Public)Incorporated in Kuwait under

An Amiri Decree issued on 02/04/1974

Authorized & Paid-up Capital : KD 16,348,437

Kuwaiti Dinars Sixteen Million Three Hundred Forty Eight Thousand

Four Hundred Thirty Seven

Commercial Registration No : 20735Head Office : Gate No.7, Shuwaik PortP.O.Box : 21998, Safat 13080, Kuwait

Tel : 2462 4000Fax : 2483 0291

website : www.heisco.comemail : [email protected]

ANNUAL REPORT 2013

ANNUAL REPORT 2013

His Highness The Amir of Kuwait

Sheikh Sabah Al-Ahmed Al-Jaber Al-Sabah

His Highness The Crown Prince

Sheikh Nawaf Al-Ahmed Al-Jaber Al-Sabah

ANNUAL REPORT 2013

CONTENTS

BOARD OF DIRECTORS ........................................................................................................................................ 5

BOARD OF DIRECTORS REPORT ................................................................................................................. 6-12

INDEPENDENT AUDITORS REPORT ................................................................................................................. 14-15

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 2013 ....................................................... 16

CONSOLIDATED STATEMENT OF INCOME 2013 ................................................................................... 17

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 2013 ................................................. 18

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 2013 ....................................................... 19

CONSOLIDATED STATEMENT OF CASH FLOWS 2013 .................................................................... 20

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2013 ..................................................... 21-47

HEISCO AT A GLANCE ...................................................................................................................................... 50-61

ANNUAL REPORT 2013

5

BOARD OF DIRECTORS

JUHAIL MOHAMMED ABDUL RAHMAN JUHAILChairman

ADNAN MUSAED KHALIFA AL KHARAFIVice Chairman

HUSSAIN MURAD BEHBEHANIDirector

AZZAM ABDUL AZIZ AL FULAIJDirector

GHAZI AHMAD AL MIJREN AL ROUMIDirector

6

ANNUAL REPORT 2013

Projects Ongoing During the Year 2013 :-

• A three year contract awarded by the US Army for dry docking, repairs and maintenance of miscellaneous vessels at HEISCO Shipyard.

• Agency agreement with DAMEN Shipyard (Netherland) for designing, construction and delivery of 14 nos. tug boats for Kuwait Oil Company.

• Supply of technical marine specialized manpower for Kuwait Oil Company.

• COSIS project for three years, preservation and maintenance of US Army vessels at Kuwait Naval Base.

• Miscellaneous repairs and maintenance to several vessels for Hyundai Engineering & Construction Co. (South Korea) at HEISCO's Shipyard.

Projects Awarded During the Year 2013 :-

• Conversion of Flat Top Barge to Spud Barge at HEISCO's Shipyard for Hyundai Engineering & Construction Co. (South Korea).

• A two year contract by Ministry Of Interior (Kuwait Coast Guard Department) for Dry Docking and Repairs of their fleet at HEISCO's Shipyard.

• A three year contract by Kuwait Fire Services Directorate for Dry Docking and Repairs of their fleet at HEISCO's Shipyard.

• A five year contract by Kuwait Oil Company for dry docking and repairs of their fleet at HEISCO's Shipyard.

Agreements & Other achievements During the Year 2013 :-

• Added 2 new Representative agreements with Local Companies.

• Renewal / Amendments of Representative Agreements with our valued Local & International Clients.

• Teaming Agreements with several US Companies for (Service Life Extension Plan) Program (SLEP).

• Non- Disclosure Agreement and Memorandum of Understanding with International

TO OUR SHAREHOLDERS,

The Board of Directors of the Company convey its greetings and is pleased to express its deep appreciation for your continued interest in the achievements of the Company in all sectors.

The Board of Directors is pleased to submit the 38th Annual Report which sets out the activities and performance of the Company during the Year 2013, which also contains the main indicators of the consolidated Financial Statements of Heavy Engineering Industries & Shipbuilding Company K.S.C (Public) and its subsidiary, Gulf Dredging and General Contracting Company K.S.C (Closed) for the year ended on 31.12.2013.

SHIPYARD OPERATIONS:

Projects Completed During the Year 2013 :-

• Conversion of Flat Top Barge to Spud Barge at HEISCO's Shipyard for Hyundai Engineering & Construction Co. (South Korea).

• Major rehabilitation project for Iraqi Dredger “TSHD Basrah” for the General Company for Ports of Iraq.

• Submarine cable diving services with Gulf Dredging (Subsidiary of HEISCO) at Al Khafji - Joint Operations, Saudi Arabia.

Repair Bay Overview

BOARD OF DIRECTORS REPORT FOR 2013

Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public)

7

ANNUAL REPORT 2013

Companies for the upcoming potential projects.

• Procurement of Central Compressors Connected to the underground Air Network to feed all work areas at HEISCO's Shipyard (system capacity of 10160 CFM).

• Established and registered HEISCO's Branch in Iraq.

• Participated in the (Seatrade Middle East Workboats & Offshore Marine Exhibition), the largest Middle East Marine Exhibition which took place in Abu Dhabi National Exhibition Centre, UAE.

• Renewed the membership of the International Marine Contractors Association (IMCA).

• Registered HEISCO's Shipyard with the US Federal Government’s in the System for Award Management (SAM).

• Re-Registration of HEISCO's Shipyard for the US Navy Master Program Agreement for Ship Repair.

• Conducted the Handing over ceremony of “ TSHD Basrah ” to the General Company for Ports of Iraq.

• Updated the official Persian Shipyard Brochure.

OIL & GAS OPERATIONS:


• Pipeline Repair, Replacement, Modification and Construction Works in West Kuwait Areas for Kuwait Oil Company.

• Construction of Main Intake (20MW) New Elevated (A-27) Substation at South East Kuwait for Kuwait Oil Company.

• Design, Fabrication, Supply & Erection of Three Water Storage Tanks for LSFO Part-A Pipeline Project with the main contractor for Kuwait Oil Company.

• Rehabilitation of Plate Type, Shell & Tube Type Heat Exchangers for Kuwait Oil Company.

“TSHD Basrah” Handing Over Ceremony

HEISCO stand in Seatrade Middle East Workboats & Offshore Marine Exhibition,

Abu Dhabi National Exhibition Centre, UAE.

Construction of Substations

8

ANNUAL REPORT 2013

• Piping Spools Prefabrication and Painting Works for Fourth Gas Train (FGT) Project with the main contractor for Kuwait National Petroleum Company.

• Structural Steel Works for Valve Pits for LSFO Part-B Pipeline Project with the main contractor for Kuwait Oil Company.

• Duplex & Super Duplex Stainless Steel Piping Fabrication for EWIP-I/SWIP-II Project with the main contractor for Kuwait Oil Company.


• Part B – Pipeline Works for Installation of FG, Gas Oil Pipelines and Pumping Station from Mina Al Ahmadi to Al-Zour and Shuaiba Power Stations with the main contractor for Kuwait Oil Company.

• Part A – Pipeline Works for Installation of Low Sulphur Fuel Oil (LSFO), FG and Gas Oil Pipelines from Mina Al Ahmadi to Sabiya and Doha Power Stations with the main contractor for Kuwait Oil Company.

• Electrical & Instrumentation works of Valve Pits for LSFO – Part A Pipeline Project with the main contractor for Kuwait Oil Company.

• Pipeline Construction Works for Gas Flaring Reduction Project for Joint Operations at Wafra.

• Design, Fabrication, Supply & Erection of Storage Tanks for Wara Pressure Maintenance Project with the main contractor for Kuwait Oil Company.

• Flowline and Associated Works to new GC-16 and Existing facilities at West Kuwait Areas for Kuwait Oil Company.

• Construction of Storage Tanks and Related Painting and Cathodic Protection System works at Booster Station - BS-171 at West Kuwait with the main contractor for Kuwait Oil Company.

• Mechanical Maintenance Services at Shuaiba South Power Station & Al-Zour South Power Station for the Ministry of Electricity and Water.

• Electrical & Instrumentation Works for New Um Al Aish LPG Plant with the main contractor for Kuwait Oil Tankers Company.

• Construction of Gas Oil Fuel Tank and Auxiliary at Al-Zour South Power Station for the Ministry of Electricity and Water.

• Professional Manpower Supply Services for Khafji Joint Operations.

• Operations and Maintenance of Sludge Handling & Treatment Facility at Mina Abdullah Refinery for Kuwait National Petroleum Company.

• Chemical Cleaning of Boilers at all Power Generation Stations of Ministry of Electricity and Water.

• Installation of Main Extraction Control Valves (ECVs) at Sabiya Power Generation & Water Distillation Station for Ministry of Electricity and Water.

• Combustion System Upgrade/Improvement of Boilers at Al-Zour South Power Station for Ministry of Electricity and Water.

• Supply of Oil & Gas Separators and Scrubbers with the main contractor for Kuwait Oil Company.

• Structural Steel Fabrication for Wara PMP Project with the main contractor for Kuwait Oil Company.

HEISCO's Workshop for Mechanical Maintenance Services at Joint Operations

in Wafra

9

ANNUAL REPORT 2013

• Structural, Mechanical, Piping, Painting, Electrical & Instrumentation works for North LPG Tank Farm (NLTF) Project with the main contractor for Kuwait National Petroleum Company.

• Structural Steel Fabrication for North LPG Tank Farm Project with the main contractor for Kuwait National Petroleum Company.

• Secondment Manpower Supply Services for Kuwait National Petroleum Company.

• Mechanical Maintenance Services for the Joint Operations at Wafra.


• Civil, Buildings, Piping and Mechanical Works for Tail Gas Treatment Unit No.99 Project at Mina Al Ahmadi Refinery with the main contractor for Kuwait National Petroleum Company.

• Civil & Mechanical Works for Al-Zour Water Distribution Complexes-II Project with the main contractor for Ministry of Electricity and Water.

• Electrical and Instrumentation Works for Halon Phase Out Project at MAA Refinery with the main contractor for Kuwait National Petroleum Company.

• Civil Works at Mina Al Ahmadi Refinery for

EPC of Preparatory for Clean Fuel Project with the main contractor for Kuwait National Petroleum Company.

• New Shipping Control Valve Station at Mina Saud for CHEVRON (Saudi Arabia).

• Fiber Optic Cable Testing and Termination Works of Halon Phase Out Project at MAA, MAB, SHU Refineries with the main contractor for Kuwait National Petroleum Company.

• Re-Tubing of Heat Exchangers during Major Shutdowns at Mina Al Ahmadi Refinery for Kuwait National Petroleum Company.

• Modification of Skin Casing of Boiler at Sabiya Power Station with the main contractor for Ministry of Electricity and Water.

• Rehabilitation of Tube Type Heat Exchangers for Kuwait Oil Company.

• Reconditioning of Plate Heat Exchangers for EQUATE.

• Cold Bending of Pipes for Wara Pressure Maintenance Project with the main contractor for Kuwait Oil Company.

• Surge Vessel for AL-Zour Water Distribution Complexes-II Project with the main contractor for Ministry of Electricity and Water.

• Skid & Piping Works for New GC-16 Project with the Filter Package Vendor for Kuwait Oil Company.

• Nutshell Filter Vessels & Skid Fabrications for Wara Pressure Maintenance Project with the Filter Package Vendor for Kuwait Oil Company.

• Manufacturing & Supply of Storage Tank for Telemetry System Project with main contractor for Kuwait Oil Company.

• Fabrication & Supply of Structural Steel for Telemetry System Project with main contractor for Kuwait Oil Company.

• Pressure Vessels for New BS-132 & Enhancement Project with main contractor for Kuwait Oil Company.

• LP Separators & Manifolds for GC-17 for Kuwait Oil Company.

Structural Steel Fabrication for KNPC

10

ANNUAL REPORT 2013

OFFSHORE OPERATIONS:



• Cleaning and removal of residuals from sea bottom in front of marine berths (1-7) at Shuwaikh Port, Kuwait for Kuwait Port Authority.

• Dredging of the Small Boat Harbor to "–9" ACD Mubarak Al Kabeer Seaport Project, Phase -1, Stage -2 for Ministry of Public Works, under Subcontract Agreement with the main contractor for the Ministry of Public Works.

• Supply of fill material to Boubyan Seaport Project, Phase-1, Stage-2, with the main contractor for the Ministry of Public Works.

• Enhancement of North Pier Facilities at Mina Al Ahmadi Refinery with the main contractor for Kuwait National Petroleum Company.

• Submarine trenching and maintenance of trench 3,500 mts from shore line , cable laying & backfilling of trench, Al Khafji with the main contractor for Joint Operations.

• Supply of Rocks to New Doha Port Project Stage - 1, State of Qatar with the main contractor for the (New Port Project Steering Committee).

• Rock Supply for Az-Zour North Power Station Phase-1 "Independent Water and Power Project"(IWPP), with the main contractor for the Ministry of Electricity and Water.

ONSHORE OPERATIONS:

• Excavation and Dewatering works for Installation of (LSFO) Pipeline project from Mina Al Ahmadi to Sabiya and Doha Power stations with HEISCO for Kuwait Oil Company.

GULF DREDGING & GENERAL CONTRACTING CO. K.S.C (Closed)(Owned subsidiary)

Construction, Completion & Maintenance of Police Officers Club at Abu Al Hassaniya -

Kuwait

Mubarak Al Kabeer Seaport, Phase -1, Stage-2, Design, Fabrication & Supply of Concrete

Pontoon

Construction of New Houses in South Ahmadi Kuwait – Kuwait Oil Company (KOC)

11

ANNUAL REPORT 2013

• Onshore Civil Works for New Booster Station Project (BS-171) at West Kuwait with the main contractor for Kuwait Oil Company.



• Offshore & Intake Structure works for Az-Zour North Power Station Phase-1 "Independent Water and Power Project" (IWPP), with the main contractor for the Ministry of Electricity and Water.

• Supply & Replacement of Fenders at Berth No. 18 & 19 in Sea Island of Mina Abdallah Refineries for Kuwait National Petroleum Company.

• Dredging 5.0 million m3 at temporary access channel – Sheikh Jaber Al Ahmad Al Sabah Causeway, Kuwait with main contractor for the Ministry of Public Works.

• Construction, Completion & Maintenance of Police Officers Club Marina at Abu Al Hasaniya (Kuwait) for the Ministry of Interior.

• Rock Supply for Az-Zour North Power Station Phase-1 "Independent Water and Power Project" (IWPP), with the main contractor for the Ministry of Electricity and Water.



• Mubarak Al Kabeer Seaport, Phase -1, Stage-1. Design and construction of Roads, Rails, Bridges and Soil improvement works (China Harbour Engineering Company Limited – Gulf Dredging & General Contracting Co., Shaheen Al Ghanim Co- Joint Venture) for the Ministry of Public Works.

• Design, Fabrication, Supply & Installation of Concrete Pontoons for Mubarak Al Kabeer Seaport Project, Phase -1, Stage -2 with main contractor for the Ministry of Public Works.

• Supply of Rocks to Mubarak Al Kabeer Seaport Project, Phase-1, Stage-2, with main contractor for the Ministry of Public Works.

ONSHORE OPERATIONS:

• Civil, Building & Temporary Facilities works for the New Acid Gas Removal Plant (NAGRP) revamp project with the main contractor for Kuwait National Petroleum Company.

Civil Construction Works BS-171 West Kuwait – Kuwait Oil Company

(KOC)

Civil Construction Works BS-171 West Kuwait – Kuwait Oil Company

(KOC)

12

ANNUAL REPORT 2013

• Supply of Rocks to New Doha Port Project Stage - 1, State of Qatar with the main contractor for the New Port Project Steering Committee.

• Dredging & Reinstatement of Breakwater of Marina for private sector.

ONSHORE OPERATIONS:

Awarded projects:

• Construction of New Houses in South Ahmadi (Kuwait) for Kuwait Oil Company.

Dewatering works for Installation of LSFO Pipeline Project from Mina Al Ahmadi to

Sabiya and Doha Power Stations for Kuwait Oil Company (KOC)

FINANCIAL HIGHLIGHTS

• Revenue decreased from KD 86.364 Million in year 2012 to KD 81.839 Million in year 2013 reflecting a decrease of 5.24%

• Gross Profit decreased from KD 7.203 Million in year 2012 to KD 7.171 Million in year 2013

• General and administrative expenses decreased from KD 4,025,458 in year 2012 to KD 3,994,713 in year 2013

• Net Profit increased from KD 1,652,294 in year 2012 to KD 1,852,898 in year 2013

• Earnings per share increased from 10.11 Fils in year 2012 to 11.33 Fils in year 2013

In conclusion, the Board of Directors expresses its deep appreciation and thanks to all Ministries and Official Departments of the State and to all Companies, Establishments, Institutions and Banks which have cooperated with the Company during the year 2013.

In particular, we express our thanks and appreciation to all the personnel of the Company and wish them continued progress and success.

BOARD OF DIRECTORS

ANNUAL REPORT 2013

13

Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its Subsidiaries

CONSOLIDATED FINANCIAL STATEMENTSAND AUDITORS’ REPORT

31 DECEMBER 2013

ANNUAL REPORT 2013

14

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Heavy Engineering Industries and Shipbuilding Company K.S.C.(Public) (the Parent Company) and its subsidiaries (collectively referred to as "the Group"), which comprise the consolidated statement of financial position as at 31 December 2013, and the consolidated statement of income, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of the consolidated financial statements that are free from material misstatements, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated 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 judgment, 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 and fair presentation of the financial statements 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 present fairly, in all material respects, the financial position of the Group as of 31 December 2013, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS


ANNUAL REPORT 2013

15

Report on Other Legal and Regulatory Requirements

Furthermore, in our opinion, proper books of accounts have been kept by the Parent Company and the consolidated financial statements, together with the contents of the report of the Parent Company’s Board of Directors relating to these consolidated financial statements are in accordance therewith. We further report that we obtained all the information and explanations that we deemed necessary for the purpose of our audit; and that the consolidated financial statements incorporate all the information that is required by Companies Law No. 25 of 2012, as amended, and by the Parent Company’s Memorandum of Incorporation and Articles of Association; that an inventory was duly carried out; and that, to the best of our knowledge and belief, no violations of the Companies Law No. 25 of 2012, as amended, or of the Parent Company’s Memorandum of Incorporation and Articles of Association have occurred during the year ended 31 December 2013 that might have had a material effect on the business of the Group or on its consolidated financial position.

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS(CONTINUED)


Rabea Saad Al-MuhannaLicence No. 152AHorwath Al-Muhanna & Co.

Bader A. Al-WazzanLicence No. 62ADeloitte & ToucheAl-Wazzan & Co.

Kuwait - 19 March 2014

ANNUAL REPORT 2013

16

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 31 DECEMBER 2013

Heavy Engineering Industries and Shipbuilding Company K.S.C. (Public) and its subsidiaries

The accompanying notes form an integral part of these consolidated financial statements.

Note 2013 2012

Assets

Non current assets

Property, plant and equipment 5 35,375,220 34,708,681Investments available for sale 6 2,509,692 2,861,690

37,884,912 37,570,371

Current assets

Inventories 7 5,417,118 6,076,420Contracts in progress 8 26,712,086 23,082,322Trade and other receivables 9 37,732,511 41,539,622Cash and cash equivalents 10 1,741,827 633,136

71,603,542 71,331,500

Total assets 109,488,454 108,901,871

Equity and liabilities

Equity

Share capital 11 16,348,437 16,348,437Statutory reserve 12 4,992,428 4,789,803General reserve 12 3,463,322 3,260,697Fair valuation reserve 162,328 171,163 Retained earnings 9,034,350 7,586,702

34,000,865 32,156,802

Non current liabilities

Post employment benefits 13 8,309,851 7,171,837Term loans 15 2,822,088 1,216,753

11,131,939 8,388,590

Current liabilities

Trade and other payables 14 35,773,386 41,852,944Bank overdrafts 15 20,890,600 18,811,065Term loans 15 7,691,664 7,692,470

64,355,650 68,356,479

Total liabilities 75,487,589 76,745,069

Total equity and liabilities 109,488,454 108,901,871

(All Amounts in Kuwaiti Dinars)

Adnan Musaed Khalifa Al KharafiVice Chairman

Juhail Mohammed Abdul Rahman JuhailChairman

ANNUAL REPORT 2013

17



CONSOLIDATED STATEMENT OF INCOME – YEAR ENDED 31 DECEMBER 2013

Note 2013 2012

Revenue 81,838,791 86,363,645

Cost of sales 16 (74,667,730) (79,160,274)

Gross profit 7,171,061 7,203,371

Other income 110,760 247,160

General and administrative expenses 17 (3,994,713) (4,025,458)

Investment income 18 168,076 227,889

Finance costs (1,247,597) (1,165,712)

Foreign exchange gain/(loss) 92,520 (95,396)

Profit before provisions and contribution to taxes and Board of Directors’ remuneration 2,300,107 2,391,854

Impairment loss on investments available for sale (273,861) (559,768)

Board of Directors’ remuneration (62,000) (62,000)

Contribution to Kuwait Foundation for Advancement of Sciences

(12,360) (22,441)

National Labour Support tax (76,350) (68,108)

Zakat expense (22,638) (27,243)

Net profit for the year 1,852,898 1,652,294

Basic and diluted earnings per share (fils) 20 11.33 10.11


ANNUAL REPORT 2013

18

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - YEAR ENDED 31 DECEMBER 2013


2013 2012

Net profit for the year 1,852,898 1,652,294

Other comprehensive income to be reclassified to Statement of Income in subsequent periods:

Changes in fair value of investments available for sale128,096 171,163

Impairment loss on investments available for sale recycled from equity (136,931) -

(8,835) 171,163

Total comprehensive income for the year 1,844,063 1,823,457



ANNUAL REPORT 2013

19

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ANNUAL REPORT 2013

20

Note 2013 2012

Operating activities

Net profit for the year 1,852,898 1,652,294 Adjustments for:Depreciation 5 5,047,432 5,040,157 Investment income 18 (168,076) (227,889)Finance costs 1,247,597 1,165,712 Impairment loss on investment securities 273,861 559,768 Gain on disposal of property, plant and equipment (57,177) (224,471)Post employment benefits accrued 13 1,937,171 1,572,400

Operating profit before working capital changes 10,133,706 9,537,971 Decrease/(increase) in inventories 659,302 (82,102)Increase in contracts in progress (3,629,764) (4,422,733)Decrease/(increase) in trade and other receivables 3,807,111 (10,112,224)(Decrease)/increase in trade and other payables (6,099,855) 4,001,389 Post employment benefits paid 13 (799,157) (452,454)

Net cash generated from/(used in) operating activities 4,071,343 (1,530,153)

Investing activities

Purchase of property, plant and equipment 5 (6,079,179) (5,987,466)Proceeds from sale of property, plant and equipment 422,385 319,725

Proceeds from redemption and sale of investments available for sale

69,302 41,534

Dividends received from investments 18 171,163 225,486

Net cash used in investing activities (5,416,329) (5,400,721)

Financing activities

Proceeds from term loans 1,604,529 1,101,049 Proceeds from bank overdrafts 2,079,535 8,252,755 Finance cost paid (1,205,111) (1,143,999)Dividends paid (25,276) (1,604,969)

Net cash generated from financing activities 2,453,677 6,604,836

Net increase/(decrease) in cash and cash equivalents 1,108,691 (326,038)Cash and cash equivalents at 1 January 633,136 959,174

Cash and cash equivalents at 31 December 10 1,741,827 633,136

CONSOLIDATED STATEMENT OF CASH FLOWS - YEAR ENDED 31 DECEMBER 2013




ANNUAL REPORT 2013

21


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2013

1. Incorporation and activities

Heavy Engineering Industries and Shipbuilding Company K.S.C (Public) (the Parent Company) is a shareholding company registered in Kuwait and was incorporated in the year 1974. The main activities of the Parent Company are shipbuilding, ship repair and other related marine activities and industrial and engineering contracting with specialisation in oil and energy sectors.

The Parent Company’s registered office is P. O. Box 21998, Safat 13080, Kuwait

The consolidated financial statements include the Parent Company’s financial statements and the financial statements of the following two subsidiaries together referred to as “the Group”.

Company Name Percentageof holding

Country

Gulf Dredging and General Contracting Company K.S.C (Closed)

99.92 % Kuwait

Kuwait International Company for Environmental Service and Industrial Inspection W.L.L

80 % Kuwait

The residual interest in these subsidiaries is held through a nominee, for the beneficial interest of the Parent Company. The Group is in the process of restructuring their shareholding in accordance with Companies Law No.25 of 2012 as amended and its executive regulations thereof.

The subsidiaries are mainly engaged in dredging and related marine and civil construction activities and in providing services related to industrial inspection of materials, quality control and environment.

The consolidated financial statements for the year ended 31 December 2013 were authorised for issue by the Board of Directors (the Board) on 19 March 2014 and are subject to the approval of shareholders at the annual general meeting.

2. Basis of preparation and significant accounting policies

2.1 Basis of preparation

These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board (IASB). These consolidated financial statements have been prepared under the historical cost basis of measurement as modified by the revaluation of financial assets classified as “available for sale”. These consolidated financial statements have been presented in Kuwaiti Dinar.

The preparation of these consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that may affect amounts reported in these consolidated financial statements, as actual results could differ from those estimates. It also requires management to exercise its judgment in the process of applying the Group accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to these consolidated financial statements are disclosed in Note 4.

(All Amounts in Kuwaiti Dinars unless otherwise stated)

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2.2 Significant accounting policies

The accounting policies used in the preparation of these consolidated financial statements are consistent with those used in the previous year, except for the following new and amended IASB Standards adopted during the year:

IFRS 7: Disclosures - Offsetting Financial Assets and Financial Liabilities (Amendments)

These amendments require an entity to disclose information about rights to set-off and related arrangements (e.g., collateral agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an entity’s financial position. The new disclosures are required for all recognised financial instruments that are set off in accordance with IAS 32 Financial Instruments: Presentation. The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with IAS 32. The adoption of these amendments has not resulted in any material impact on the consolidated financial statements of the Group.

IFRS 10: Consolidated Financial Statements

IFRS 10 replaces the consolidation guidance in IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation - Special Purpose Entities by introducing a single consolidation model for all entities based on control, irrespective of the nature of the investee (i.e., whether an entity is controlled through voting rights of investors or through other contractual arrangements as is common in special purpose entities). Under IFRS 10, control is based on whether an investor has 1) power over the investee; 2) exposure or rights, to variable returns from its involvement with the investee and 3) the ability to use its power over the investee to affect the amount of the returns. The adoption of this Standard has not resulted in any impact on the financial position or performance of the Group.

IFRS 12: Disclosure of Involvement with Other Entities

IFRS 12 sets out the requirements for disclosures relating to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. The requirements in IFRS 12 are more comprehensive than the previously existing disclosure requirements for subsidiaries, for example, where a subsidiary is controlled with less than a majority of voting rights. The adoption of this Standard has not resulted in any material additional disclosures.

IFRS 13: Fair Value Measurement

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS. IFRS 13 defines fair value as an exit price. As a result of the guidance in IFRS 13, the Group re-assessed its policies for measuring fair values. IFRS 13 also requires additional disclosures.

Application of IFRS 13 has not materially impacted the fair value measurements of the Group. Additional disclosures where required, are provided in the individual notes relating to the assets and liabilities whose fair values were determined.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - 31 DECEMBER 2013(All Amounts in Kuwaiti Dinars unless otherwise stated)

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IAS 1: Financial Statement Presentation - Presentation of Items of Other Comprehensive Income (Amendment)

The amendments to IAS 1 introduce a grouping of items presented in other comprehensive income. Items that will be reclassified (‘recycled’) to profit or loss at a future point in time have to be presented separately from items that will not be reclassified. The adoption of this Standard has no effect on the financial position or performance of the Group.

IAS 1 Clarification of the requirement for comparative information (Amendment)

The amendment to IAS 1 clarifies the difference between voluntary additional comparative information and the minimum required comparative information. An entity must include comparative information in the related notes to the financial statements when it voluntarily provides comparative information beyond the minimum required comparative period. The Group has not included any additional voluntarily comparative information in its consolidated financial statements. The amendments have no impact on the Group’s financial position or performance.

IAS 19: Employee Benefits (Amendment)

Numerous changes or clarifications are made under the amended Standard. Among these numerous amendments, the most important change is making the distinction between short-term and other long-term employee benefits based on expected timing of settlement rather than employee entitlement. These amendments have no material impact on the consolidated financial position or performance of the Group.

IAS 27: Separate Financial Statements (as revised in 2011)

As a consequence of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. The Group does not present separate financial statements.

IAS 32: Tax effects of distributions to holders of equity instruments (Amendment)

The amendment to IAS 32 Financial Instruments: Presentation clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with IAS 12 Income Taxes. The amendment removes existing income tax requirements from IAS 32 and requires entities to apply the requirements in IAS 12 to any income tax arising from distributions to equity holders. The amendment did not have an impact on the consolidated financial information for the Group, as there is no tax consequences attached to cash or non-cash distribution.

Other amendments to IFRSs which are effective for annual accounting period starting from 1 January 2013 did not have any material impact on the accounting policies, financial position or performance of the Group.



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Standards issued but not yet effective

The following IASB Standards have been issued/amended but are not yet mandatory, and have not been adopted by the Group:

IFRS 9: Financial Instruments: Classification and Measurement

IFRS 9, as issued, reflects the first phase of the IASB’s work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. In subsequent phases, the IASB is addressing hedge accounting and impairment of financial assets. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the Group’s financial assets, but is not expected to have on financial liabilities. The Group will quantify the effect in conjunction with the other phases, when the final Standard including all phases is issued. The Standard was initially effective for annual periods beginning on or after 1 January 2013, but IASB in its November 2013 meeting tentatively decided to defer the mandatory effective date of IFRS 9 until the issue date of the completed version of IFRS 9 is known.

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

These amendments are effective for annual periods beginning on or after 1 January 2014 and provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. It is not expected that this amendment would be relevant to the Group, since none of the entities in the Group would qualify to be an investment entity under IFRS 10.

IAS 32: Financial Instruments: Presentation - Offsetting Financial Assets and Financial liabilities (Amendment)

The amendments clarify the meaning of “currently has a legally enforceable right to set-off” and also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The Group is currently assessing the impact that this Standard will have on the consolidated financial position and performance when become effective for annual periods beginning on or after 1 January 2014.

IAS 36: Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets (Amendment)

These amendments remove the unintended consequences of IFRS 13 on the disclosures required under IAS 36. In addition, these amendments require disclosure of the recoverable amounts for the assets or cash generating units for which impairment loss has been recognised or reversed during the period. These amendments are effective retrospectively for annual periods beginning on or after 1 January 2014 with earlier application permitted, provided IFRS 13 is also applied.

Adoption of other new or amended Standards are not expected to have material effect on the consolidated financial position or financial performance of the Group. Additional disclosures will be made in the consolidated financial statements when these Standards become effective.



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2.3 Consolidation

Subsidiaries are those enterprises, including special purpose entities, controlled by the Group. Control is achieved when the Parent Company has power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee; exposure or rights to variable returns from its involvement with the investee; and the ability to use its power over the investee to affect its returns. The Parent Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

The consolidated financial statements comprise the financial statements of the Parent Company and subsidiaries. The financial statements of the subsidiaries are prepared for the same reporting period as the Parent Company, using consistent accounting policies. All material inter-group balances and transactions, including inter-group profits and unrealised profits and losses are eliminated on consolidation.

Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date that control ceases. Control is achieved where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of the subsidiaries acquired or disposed of during the period are included in the consolidated income statement from the date of acquisition and up to the date of disposal, as appropriate.

Non-controlling interests represents the equity in the subsidiaries not attributable directly, or indirectly, to the equity holders of the Parent Company. Equity and net income attributable to non-controlling interests are shown separately in the consolidated statement of financial position, the consolidated income statement, the consolidated statement of comprehensive income and the consolidated statement of changes in Shareholders’ equity.

Losses within a subsidiary are attributed to the non controlling interest even if that results in a deficit balance.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:

• Derecognises the assets (including goodwill) and liabilities of the subsidiary

• Derecognises the carrying amount of any non controlling interest

• Derecognises the cumulative translation differences, recorded in equity

• Recognises the fair value of the consideration received

• Recognises the fair value of any investment retained

• Recognises any surplus or deficit in profit or loss

• Reclassifies the Parent Company’s share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate.



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2.4 Financial Instruments

Classification

The Group classifies its financial instruments upon initial recognition based on the purpose of acquiring these financial instruments. The Group classifies its financial assets as “loans and receivables” or “available for sale” and its financial liabilities as “other than at fair value through profit or loss”.

Loans and receivables

These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Group’s loans and receivables comprises of contracts in progress, trade and other receivables, and cash and cash equivalents.

Available for sale

These are non-derivative financial assets that are either designated in this category or not included in any other category and are principally those acquired to be held for an indefinite period of time, which could be sold when liquidity is needed or upon changes in prices.

Recognition and de-recognition

A financial asset or a financial liability is recognized when the Group becomes a party to the contractual provisions of the instrument. A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire; or when the Group has transferred substantially all the risks and rewards of ownership; or when it has neither transferred nor retained substantially all risks and rewards of ownership and it no longer has control over the asset or portion of the asset. If the Group has retained control, it shall continue to recognize the financial asset to the extent of its continuing involvement in the financial asset. A financial liability is derecognized when the obligation specified in the contract is discharged/ cancelled or has expired.

All regular way purchase and sale of financial assets are recognized on the trade date - the date on which the Group commits to purchase or sell the financial asset.

Offsetting

Financial assets and financial liabilities are only offset and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right to set off the recognized amounts and the Group intends to settle on a net basis.

Measurement

All financial instruments are initially recognised at fair value. Transaction costs that are directly attributable to the acquisition or issue are included as part of initial cost.

Loans and receivables are subsequently carried at amortized cost. The amortized cost is the amount at which the financial instrument is initially recognized minus principal repayments, plus or minus the amortization of premiums or discounts using effective interest rate, less any allowance for impairment.



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Available for sale financial assets are subsequently measured and carried at fair value and any resultant gains or losses arising from changes in fair value are recognized in other comprehensive income and accumulated in investment fair valuation reserve in equity. When the available for sale financial asset is disposed of or impaired, the related accumulated fair value changes earlier reported in equity are transferred to the consolidated statement of income as gains or losses. The translation gains or losses on non-monetary items classified as available for sale financial assets are included in equity.

Financial liabilities “other than at fair value through profit or loss” are subsequently measured and carried at amortized cost using the effective interest rate.

Financial guarantees are subsequently measured at the higher of the amount initially recognized less any cumulative amortization and the best estimate of the present value of amount required to settle any financial obligation arising as a result of the guarantee.

Fair values

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 of financial instruments carried at amortised cost is estimated by discounting the future contractual cash flows at the current market interest rates for similar financial instruments.

Impairment of financial asset

A financial asset is impaired if its carrying amount is greater than its estimated recoverable amount. An assessment is made at each consolidated statement of financial position date to determine whether there is objective evidence that a specific financial asset or a group of similar assets may be impaired. If such evidence exists, the asset is written down to its recoverable amount.

The amount of impairment loss is measured for financial assets carried at amortised cost as the difference between the asset’s carrying amount and the present value of estimated future cash flows, including amounts recoverable from guarantees and collateral, discounted at the financial asset’s original effective interest rate. If the financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. If in a subsequent period, the amount of the impairment loss decreases, the previously recognised impairment loss is reversed through the consolidated statement of income.

In the case of financial assets classified as available for sale, a significant or prolonged decline in the fair value of assets below its cost is considered in determining whether the financial assets are impaired. If any such evidence exists for available for sale financial assets, the cumulative loss measured is the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the consolidated statement of income. If in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss shall be reversed, with the amount of the reversal recognised in the consolidated statement of income. Impairment losses recognised on available for sale equity investments are, however, not reversed through the consolidated statement of income.



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2.5 Property, plant and equipment

Property, plant and equipment are carried at cost less accumulated depreciation and impairment losses, if any.

Depreciation is provided on a straight line basis on all property, plant and equipment, other than land which is determined to have an indefinite life. The rates of depreciation are based upon the following estimated useful lives:

• Dock and lifts 24 to 46 years• Buildings 12 to 56 years• Machinery and equipment 8 to 31 years• Other assets 2 to 33 years

The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date.

Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately is capitalised and the carrying amount of the component that is replaced is written off. All other expenditure are recognised in the consolidated statement of income as the expense is incurred.

Projects under construction are included in property, plant and equipment until they are completed and ready for their intended use. At that time, they are reclassified under similar assets and depreciation is calculated since then.

Gains and losses on disposals are determined by comparing proceeds with the carrying amounts and are recognised in the consolidated statement of income.

2.6 Inventories

Inventories are stated at the lower of cost and net realizable value. Costs are those expenses incurred in bringing each item to its present location and condition, determined on a weighted average cost basis. Net realizable value is the selling price less cost to sell.

2.7 Cash and cash equivalents

Cash and cash equivalents are defined as cash and bank balances and current investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and with original maturities of three months or less.

2.8 Post employment benefits

The Group is liable under Kuwait Labour Law to make payments under defined benefit plans to employees at termination of employment. The defined benefit plan is un-funded and is based on the liability that would arise on involuntary termination of all employees at the consolidated statement of financial position date. This basis is considered to be a reliable approximation of the present value of the Group’s liability.



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2.9 Provisions

Provisions are recognized when the Group has a legal or constructive obligation as a result of past events, and it is probable that an outflow of economic benefits will be required to settle that obligation. Provisions are reviewed at each consolidated statement of financial position date and adjusted to reflect the best current estimate of the obligation.

2.10 Foreign currencies

The functional currency of the Group is Kuwaiti Dinar. Transactions in foreign currencies are recorded at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are converted to Kuwait Dinar at the rate of exchange ruling at the consolidated statement of financial position date. All differences are taken to the consolidated statement of income.

2.11 Revenue recognition

Revenue from contracts involving the rendering of services is recognised by reference to the stage of completion of the contract based on internal surveys of work performed. When the outcome of the contract cannot be estimated reliably, revenue is recognised only to the extent of expenses that are incurred are recoverable. Variation orders and claims are recognised upon acceptance by customers. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. Revenue from sales transactions are recorded when goods are delivered.

Dividend income is recognised when the right to receive payment is established.

2.12 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the asset. Borrowing costs are recognized as an expense in the period in which they are incurred, except to the extent that they are capitalised.

2.13 Segment reporting

A segment is a distinguishable component of the Group that engages in business activities from which it earns revenues and incurs costs. The operating segments are used by the management of the Group to allocate resources and assess performance. Operating segments exhibiting similar economic characteristics, product and services, class of customers where appropriate are aggregated and reported as reportable segments.

3. Financial risk management

3.1 Financial risk factors

The Group’s use of financial instruments exposes it to a variety of financial risks such as credit risk, market risk and liquidity risk. The Group continuously reviews its risk exposures and takes measures to limit it to acceptable levels. Risk management is carried out by the finance department of the Group under policies approved by the Board.



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The Board approves policies for overall risk management and for specific areas such as credit risk; market risk comprising of foreign currency risk and interest rate risk; and liquidity risk. The finance department identifies and evaluates financial risks in close co-operation with the Group’s operating units.

The significant financial risks that the Group is exposed to are discussed below:

(A) Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation causing the other party to incur financial loss. The financial assets of the Group exposed to credit risk are contracts in progress, trade and other receivables and cash equivalents.

The Group transacts business with customers with financial stability and high credit worthiness. The Group’s cash balances are placed with financial institutions with high credit rating.

The table below shows the gross exposure to credit risk on the consolidated statement of financial position date without taking into account collateral or other credit mitigants:

2013 2012

Contracts in Progress 21,250,943 20,469,404 Trade and other receivables 36,331,599 40,689,686 Cash equivalents 1,589,441 528,244

59,171,983 61,687,334

(B) Market risk

(i) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Group is exposed to foreign currency risk arising from transacting business with certain customers in US Dollar and other foreign currencies.

The Group ensures that the net exposure is kept to acceptable levels and the management is monitoring the foreign currency exchange rates on a regular basis to identify any changes that may affect the Group’s operations.



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Following is the receivables/(payables) in foreign currency as of the date of the consolidated financial statements:

2013 2012

US Dollar (2,426,246) (3,817,950)Others currencies 61,661 557,554

(2,364,585) (3,260,396)

At 31 December 2013, if the Kuwaiti Dinar had strengthened by 5% against US Dollar with all other variables held constant, profit for the year would have been higher by KD 121,312 (2012: KD 190,897). Effect of change in the exchange rate does not have any material effect on the equity.

A 5% weakening of the Kuwaiti Dinar against the US Dollar would have had the equal but the opposite effect on profit.

(ii) Equity price risk

Equity price risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices caused by factors specific to the instrument or its issuer or factors affecting all instruments traded in the market.

The Group’s investments are primarily quoted on the Kuwait Stock Exchange. At 31 December 2013, if equity prices had increased by 5%, the equity of the Group would have been higher by KD 116,391 (2012: KD 133,507).

Alternatively, a 5% decrease in the equity prices would have had the equal but the opposite effect on the Group’s equity.

(iii) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group is exposed to interest rate risk arising from borrowings carrying variable interest rates as it exposes the Group to cash flow interest rate risk. The Group’s policy is to enter into derivative contracts to protect it from significant adverse impact from potential volatility in interest rates. However, at present the Group enjoys competitive interest rates from various banks in Kuwait.



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If as on 31 December 2013, the interest rates had increased by 5% the net profit would have been lower by KD 1,570,218 (2012: KD 1,386,014). Alternatively, a 5% decrease in the interest rates would have had the equal but the opposite effect on the Group’s net profits.

(C) Liquidity risk

Liquidity risk is the risk that the Group may not be able to meet its funding requirements. Prudent liquidity risk management implies maintaining sufficient cash and making available funding through an adequate amount of committed credit facilities. To manage this risk, the Group periodically assesses the financial viability of its customers and ensures that adequate funding facilities are available from its lenders.

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the consolidated statement of financial position date to the contractual maturity date. The balances disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying amounts balances as the impact of discounting is not significant.

Less than1 year

Between1 and 2 years


Total

At 31 December 2013

Term loans 8,017,761 2,210,852 882,047 11,110,660Trade and other payables 35,773,386 - - 35,773,386Bank overdrafts 21,792,608 - - 21,792,608

65,583,755 2,210,852 882,047 68,676,654

Less than1 year

Between 1 and 2 years


Total

At 31 December 2012

Term loans 8,095,084 246,376 1,156,624 9,498,084 Trade and other payables 41,852,944 - - 41,852,944 Bank overdrafts 19,618,573 - - 19,618,573

69,566,601 246,376 1,156,624 70,969,601



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3.2 Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the costs of capital. In order to maintain or adjust the capital structure, the Group monitors capital on the basis of gearing ratio. The ratio is calculated as net debt divided by total capital. Net debts calculated as total borrowings less cash and cash equivalents. Total capital is calculated as equity as shown in the consolidated statement of financial position plus net debt.

The gearing ratio as at 31 December 2013 and 2012 were as follows:

2013 2012

Total borrowings 31,404,352 27,720,288Less: cash and cash equivalents (1,741,827) (633,136)

Net debt 29,662,525 27,087,152Total equity 34,000,865 32,156,802

Total capital 63,663,390 59,243,954

Gearing ratio 46.59% 45.72%

3.3 Fair value of financial instruments

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. Fair values are obtained from current bid prices, discounted cash flow models and other models as appropriate. At December 31, the fair values of financial instruments approximate their carrying amounts.

Fair value estimation

The Company uses the following criteria for measurement of the fair value:

Level 1 : Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 : Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

Level 3 : Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).



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The following table presents the Company’s assets and liabilities that are measured at fair value as of 31 December.

Level 1 Level 2 Level 3 Total

2013Investments available for sale:

Listed shares 2,327,817 - - 2,327,817Unlisted shares - - 181,875 181,875

2,327,817 - 181,875 2,509,692

Level 1 Level 2 Level 3 Total

2012Investments available for sale:

Listed shares 2,670,145 - - 2,670,145Unlisted shares - - 191,545 191,545

2,670,145 - 191,545 2,861,690

The impact on the statement of financial position or the statement of changes in equity would be immaterial, if the relevant risk variables used to determine fair values for the unquoted securities were altered by 5%. During the year, there were no transfers between the levels.

4. Significant accounting estimates and judgements

In the preparation of these consolidated financial statements, the Group makes estimates and assumptions concerning the future. The resulting accounting estimates will by definition, seldom equal the related actual results. The estimates and assumptions that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Fair value of unquoted equity investments

Valuation techniques for unquoted equity investments in which estimates are used are representing in the expected cash flows discount rates, return trades, adjusted local market prices, credit risks, related cost and other valuation techniques used by market participants.

The Group calibrates the valuation techniques periodically and tests these for validity using either prices from observable current market transactions in the same instrument or other available observable market data.



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Impairment losses of accounts receivable

The Group reviews its receivables to assess impairment on a regular basis. In determining whether an impairment loss should be recorded in the consolidated statement of comprehensive income, the Group makes judgments as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from the receivables. In particular, considerable judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of provisions required. Such estimates are necessarily based on assumptions about several factors involving varying degrees of judgment and uncertainty, and actual results may differ resulting in future changes to such provisions. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimated and the actual loss.

Impairment of inventories

Inventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made of their net realisable value. For individually significant amounts this estimation is performed on an individual basis. Amounts which are not individually significant, but which are old or obsolete, are assessed collectively and a provision applied according to the inventory type and the degree of ageing or obsolescence.

Impairment of property, plant and equipment

The Group reviews the property, plant and equipment to determine whether an impairment loss should be recognised. An estimate is set by the management in terms of amount and timing of expected cash flows as well as the discount rates used when calculating the value in use.

Revenue recognition

The Group uses the percentage of completion method in accounting for its fixed priced contracts. Use of percentage of completion method requires the Group to estimate the physical work performed to date as a proportion of the total work to be performed.

Judgements

Classification of investments

On acquisition of an investment, management has to decide whether it should be classified as “at fair value through profit or loss”, “loans and receivables”, “held to maturity” or as “available for sale”. In making that judgment the Group considers the primary purpose for which it is acquired and how it intends to manage and report its performance. Such judgment determines whether it is subsequently measured at cost or at fair value and if the changes in fair value of instruments are reported in the consolidated statement of income or directly in equity.



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Impairment of available for sale financial assets

The Group follows the guidance of IAS 39 to determine when an available-for-sale financial asset is impaired. A significant or prolonged decline in the fair value of equity instruments classified as available for sale is objective evidence of an impairment. Determining which is significant and which is prolonged requires judgement from management. In making this judgment, the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health of and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

Contingent liabilities

Contingent liabilities are potential liabilities that arise from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. Provisions for liabilities are recorded when a loss is considered probable and can be reasonably estimated. The determination of whether or not a provision should be recorded for any potential liabilities is based on management’s judgment.



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1

ANNUAL REPORT 2013

38

The depreciation charge has been allocated in the consolidated statement of income as follows:

2013 2012

Cost of sales 4,884,669 4,908,640General and administrative expenses 162,763 131,517

5,047,432 5,040,157

During the year, the Group acquired land and building amounting to KD 2,194,422 which is included in the total additions of KD 2,761,928 to land and building. The Group revalued this freehold land and building at KD 2,240,000 based on two independent valuators as at the reporting date and have been generally derived using market comparable method. As the significant valuation inputs used are based on unobservable market data, these are classified under level 3 fair value hierarchy.

The Group’s suit against the order of Kuwait Port Authority to terminate the lease contract for the property in Shuwaikh port, and to vacate the property was decided against the Group by the Court of Appeal. The Group has filed an appeal in the Court of Cassation against this order, which was accepted by the Court and suspended the execution of the order of the Court of Appeal until final decision is issued. The Court has not yet delivered its final decision.

However, on 1 October 2013, a Ministerial order has been issued by the General Secretariat for Economic Affairs at Ministries Council to extent the lease contract of all companies located inside Shuwaikh and Shuaiba Ports at new rates.

6. Investments available for sale

2013 2012

Quoted 2,327,817 2,670,144 Unquoted 181,875 191,546

2,509,692 2,861,690

During the year, the Group recognized an impairment loss of KD 273,861 (2012 – KD 559,768) in the consolidated statement of income. Quoted equities are traded in active markets. Investments in unquoted equities of KD 181,875 (2012 - KD 191,546) are valued based on valuation techniques using unobservable inputs.

Investments available for sale are denominated in the following currencies:

2013 2012

Kuwaiti dinar 2,327,817 2,670,144 US dollar 181,875 191,546

2,509,692 2,861,690



ANNUAL REPORT 2013

39

7. Inventories

2013 2012

Materials 5,508,635 6,225,267Provision for obsolete and slow moving items (91,517) (148,847)

5,417,118 6,076,420

This includes materials at sites and at the warehouse to be utilized in the projects.

8. Contracts in progress

2013 2012

Contract costs incurred 241,635,704 234,802,889 Recognised profits less expected losses 55,824,479 50,488,518

297,460,183 285,291,407 Progress billings (270,748,097) (262,209,085)

26,712,086 23,082,322

This represents unbilled portion of amounts due from customers for contracts work in progress and accordingly, it is considered as neither past due nor impaired.

Contracts in progress are denominated in the following currencies:

2013 2012

Kuwaiti dinar 26,056,029 20,854,885US dollar 452,056 2,112,724Other currencies 204,001 114,713

26,712,086 23,082,322

9. Trade and other receivables

2013 2012

Trade receivables 29,888,826 33,397,417Less: Provision for doubtful debts (1,212,627) (1,212,627)

28,676,199 32,184,790Contract retentions 4,019,354 5,393,439 Advances to subcontractors 935,234 700,350 Prepayments 465,678 462,908 Other receivables 3,636,046 2,798,135

37,732,511 41,539,622



ANNUAL REPORT 2013

40

The carrying amount of trade and other receivables approximately equals their fair value as they are short term balances maturing within one year.

Trade receivables that were due for less than one month are considered as neither past due nor impaired. As of 31 December 2013, trade receivables of KD 7,616,904 were neither past due nor impaired (2012 - KD 7,573,166) and trade receivables of KD 21,059,295 were past due but not impaired (2012 - KD 24,611,624).

The ageing of those trade receivables is as follows:

2013 2012

From 1 month up to 3 months 4,905,153 3,719,322 More than 3 months up to 6 months 2,896,100 5,017,680 More than 6 months up to 1 year 4,550,082 9,340,718 More than 1 year 8,707,960 6,533,904

Total 21,059,295 24,611,624

As of 31 December 2013, trade receivables of KD 1,212,627 (2012: KD 1,212,627) were past due and impaired.

The following is the movement on the Group’s provision for doubtful debts:

2013 2012

At 1 January 1,212,627 1,248,372 Provisions set off as bad debt - (32,745)Provisions no longer required - (3,000)

At 31 December 1,212,627 1,212,627

Trade and other receivables are denominated in the following currencies:

2013 2012

Kuwaiti dinar 34,820,143 37,223,694 US dollar 2,425,688 2,138,404 Other currencies 486,680 2,177,524

37,732,511 41,539,622



ANNUAL REPORT 2013

41

10. Cash and cash equivalents

2013 2012

Balances with banks 1,589,441 528,244 Cash on hand 152,386 104,892

1,741,827 633,136

The carrying amount of cash and cash equivalent approximates its fair value.

Cash and cash equivalents are denominated in the following currencies:

2013 2012

Kuwaiti dinar 498,528 407,894 US dollar 1,215,534 119,873 Other currencies 27,765 105,369

1,741,827 633,136

11. Share capital

The authorised, issued and fully paid up capital of the Parent Company is KD 16,348,437 comprising of 163,484,370 shares of 100 fils each (31 December 2012 - KD 16,348,437 comprising of 163,484,370 shares of 100 fils each).

Dividends

The Board of Directors of the Parent Company, subject to the approval of shareholders, recommends distribution of a stock dividend of five shares for every 100 shares held (2012: Nil) to the registered shareholders as of the date of the annual general meeting.

12. Reserves

a) Statutory reserve

In accordance with the Companies Law and the Parent Company’s Articles of Association, 10% of the net profit for the year has been transferred to statutory reserve. The Parent Company may resolve to discontinue such annual transfers when the reserve totals 50% of the Parent Company’s paid up share capital. Distribution of the reserve is limited to the amount required to enable payment of a dividend up to 5% of paid up share capital to be made in years when accumulated profits are not sufficient for the payment of a dividend of that amount.



ANNUAL REPORT 2013

42

b) General reserve

In accordance with the Parent Company’s Articles of Association, 10% of the profit for the year before deductions may be transferred to general reserve. The Parent company may resolve to discontinue such annual transfers by resolution of the shareholders’ upon a recommendation by the Board. The Board has proposed the transfer 10% of the net profit to general reserve (2012: 10%) for the year 2013.

13. Post employment benefits

The Group provides for an end of service benefit for its employees based on employment contracts and the Kuwait Labour Law.

Movements in the post employment benefits are as follows:

2013 2012

As at 1 January 7,171,837 6,051,891 Provision during the year 1,937,171 1,572,400 Paid during the year (799,157) (452,454)

As at 31 December 8,309,851 7,171,837

14. Trade and other payables

2013 2012

Trade payables 7,217,861 13,584,365 Retention 1,926,442 2,147,799 Due to employees 2,911,193 2,903,289 Dividend payables 751,872 777,148 Advances from customers 5,973,311 6,758,616 Accrued expenses 16,992,707 15,681,727

35,773,386 41,852,944

The carrying amount of account payables approximately equal their fair value as they are short term balances maturing within one year.



ANNUAL REPORT 2013

43

Trade and other payables are denominated in the following currencies:

2013 2012

Kuwaiti dinar 34,087,202 37,403,108US dollar 1,029,400 2,724,497Other currencies 656,784 1,725,339

35,773,386 41,852,944

15. Bank overdrafts and term loans

2013 2012

Current

Bank overdrafts 20,890,600 18,811,065 Term loans 7,691,664 7,692,470

28,582,264 26,503,535Non-current

Term loans 2,822,088 1,216,753

Total bank overdrafts and term loans 31,404,352 27,720,288

Bank overdrafts are repayable on demand. The effective rate of interest as at 31 December 2013 is 4.4% per annum (2012: 4.5%).

Term loans include:

• Kuwait Dinar loan facilities amounting to KD 4,841,752 (31 December 2012: KD 3,253,223) from local banks. Of the above, term loan amounting to KD 1,216,752 (31 December 2012: 1,411,417) is secured by mortgage of land. The effective rate of interest of these term loans as at 31 December 2013 is 4.58% per annum (31 December 2012:5.13%).

• US Dollar loan facility amounting to KD 5,672,000 (2012: KD 5,656,000) from a foreign bank. This facility is secured by a negative pledge over the Group’s assets. The effective rate of interest of this term loan as at 31 December 2013 is 4.16% per annum (2012 – 4.66%).



ANNUAL REPORT 2013

44

The following is the maturity analysis of term loans as at the consolidated statement of financial position date.

2013 2012

Up to 1 year 7,691,664 7,692,470 Between 1 to 2 years 1,989,328 194,664 Over 2 years 832,760 1,022,089

10,513,752 8,909,223

Bank overdrafts and term loans are denominated in the following currencies.

2013 2012

Kuwaiti Dinar 25,732,352 22,064,288 US Dollar 5,672,000 5,656,000

31,404,352 27,720,288

The fair value of term loans equals its carrying amount as they bear interest rates which, approximate the current rates in the market.

16. Cost of sales

2013 2012

Materials 24,131,115 25,440,143 Labour 20,509,168 21,147,171 Subcontracting expenses 9,427,552 13,399,238Equipment hire and operational overheads 12,358,654 12,421,629 Depreciation 4,884,669 4,908,640 Service order charges 2,120,651 1,131,607 Bank charges 479,662 401,843 Others 756,259 310,003

74,667,730 79,160,274

17. General and administrative expenses

2013 2012

Staff costs 3,270,253 3,511,788 Rent 78,527 80,814 Depreciation 162,763 131,517 Others 483,170 301,339

3,994,713 4,025,458



ANNUAL REPORT 2013

45

18. Investment income

2013 2012

Cash dividends received 171,163 225,486 Realised gain on investments at fair value through statement of income

- 5,663

Management fees paid (3,087) (3,260)168,076 227,889

19. Related party transactions

The Group has entered into transactions with related parties on terms approved by management. Transactions and balances with related parties (in addition to those disclosed in other notes) are as follows:

2013 2012

Key management compensationSalaries and other short term employee benefits 178,154 177,308Post-employment benefits 17,019 16,188Other benefits 157,782 275,763

352,955 469,259

20. Earnings per share

Earnings per share represent net profit for the year divided by the weighted average number of ordinary shares outstanding during the year as follows:

2013 2012

Net profit for the year 1,852,898 1,652,294Weighted average number of outstanding ordinary shares during the year

163,484,370 163,484,370

Earnings per share (fils) 11.33 10.11



ANNUAL REPORT 2013

46

NO

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40

ANNUAL REPORT 2013

47

22. Annual general meeting

The annual general meeting of the shareholders held on 19 May 2013 approved the consolidated financial statements of the Group for the year ended 31 December 2012.

23. Contingent liabilities and capital commitments

2013 2012

Contingent liabilities

Letter of guarantees 26,019,693 21,770,134

Capital commitments

Letter of credit 3,322,341 3,675,507

24. Comparative figures

Certain prior year amounts have been reclassified to conform to current year presentation with no effect on net profit or equity.



HEISCO AT A GLANCE

50

ANNUAL REPORT 2013

• Shipyard Operations

• Fabrication Workshop Operations

• Trading Operations

• Gulf Dredging & General Contracting Co K.S.C

(Closed) (A wholly ownedsubsidiary of HEISCO)

Oil & Gas Operations

Oil & Gas Operations (formerly known as Industrial

Contracts Division) was established in 1982 with

a view to diversify HEISCO’s activities by

expanding into Oil and Gas, Petrochemical and

Power Sectors in areas of Project Management,

Construction, Process Equipment Manufacturing

and Supply, Maintenance, Inspection Services

and Industrial Trading Activities.

Oil & Gas Operations’ services cover a diverse

range of clients and a variety of projects with

particular emphasis on expertise, experience,

capabilities and quality across all Engineering

and Management Functions.

Oil & Gas Operations are carried out through

the following two main broad divisions:

• Construction Operations

• Industrial Maintenance Operations

Construction Operations consists of following

six business units:

• Oil & Gas Services (Flowline) Unit

• Pipeline Unit

• Oil & Gas (Construction) Unit

• Electrical & Instrumentation Unit

Heavy Engineering Industries and Shipbuilding

Co. K.S.C (Public). HEISCO is a major Engineering,

Procurement and Construction (EPC) Contracting

company based in Kuwait with a diversified range

of business in Oil and Gas, Petrochemicals,

Power, Pressure Equipment Manufacturing,

Shipbuilding and Repair, Dredging & Marine

Construction, Major Civil Construction,

Maintenance and other industrial services

including Heavy Industry projects.

HEISCO’s commitment to its clients is proven by

its quality management system certification to

ISO 9001:2008, Occupational Health & Safety

Management System certification to OHSAS

18001:2007 standards and International Marine

Contractors Association (IMCA).

Activities in Brief:

HEISCO’s wide ranging fields of activities and

capabilities are operated through:

• Oil & Gas Operations

HEISCO AT A GLANCE

Oil & Gas Operations

51

ANNUAL REPORT 2013

• Tank Farms Unit

• Civil Unit

Industrial Maintenance Operations consists of

following two business units:

• Maintenance Unit

• Miscellaneous Services Unit

Storage Tanks

HEISCO is a leading storage tank manufacturer in

Kuwait with complete in-house facilities for full

turn-key projects from design, detailed

engineering, procurement, fabrication of tank

plates and appurtenances, to site erection,

installation of interconnecting pipe-works,

electrical connections, instrumentation, painting

and lining or coating.

HEISCO is the only Kuwaiti Company to possess

KOC approval for EPC of Storage Tanks up to a

capacity of 500,000 bbls.

The Codes followed are API 650, API 620 or

equivalent standards complete with all required

associated standards such as AWS A.1, ASME IX

etc., and surface preparation to Swedish Sa or

SPCC specifications with painting, coating or

lining to clients or international standard.

Pipelines

HEISCO’s extensive experience in Engineering,

Procurement & Construction of Pipeline projects

demonstrates its enormous capabilities for

executing major pipeline projects in the Oil &

Gas, Petrochemicals, Refineries, Power and Water

Sectors in Kuwait.

Maintenance

HEISCO is well known as one of the most reliable

maintenance contracting companies in Kuwait

catering to the Oil & Gas, Refineries,

Petrochemicals, Power & Water Sectors for

mechanical, electrical and instrumentation

maintenance services.

EPC of Storage Tanks

Installation of Pipelines

52

ANNUAL REPORT 2013

The in-house Maintenance Workshop Facility is

fully equipped with Lathe, Hollow Spindle Lathe,

Shaping, Horizontal Boring, Radial Drilling, Pipe

Threading, Valve Lapping, Mechanical Seal

Lapping and Welding Machines, as well as

Specialized Heat Exchanger Retubing Equipment

and Tools.

The facility is capable of undertaking various

services such as:

• Maintenance of all kinds of Rotating

Equipment like Turbines, Compressors,Pumps,

ID/FD Fans, etc.

• Maintenance of all types of machining

equipment such as crank shaft grinders,cam

shaft grinding, cylinder block line and

connecting rod bores, etc.

• Retubing of Shell & Tube Heat Exchanger and

Fin Fan Coolers.

• Repair/ Maintenance of Plate Heat Exchangers.

• Repairing all kinds of Valves such as Ball,Gate,

Globe, Check, Plug, Butterfly, etc.

• Dynamic Balancing of Impellers

• Repairing of Mechanical Seals

Quality Control & Testing Services

To ensure the fulfillment of its contractual, safety

and legal obligations, HEISCO has set up an

entirely independent Quality Control Department

300 MW Steam Turbine Overhauling at MEW Al-Zour Power Station

Installation of Extraction Control Valve at Sabiya Power Station

MEW Boilers Chemical Cleaning Services

53

ANNUAL REPORT 2013

in accordance with International Quality Systems.

HEISCO’s Quality Management System is certified

to ISO 9001:2008 and is in compliance with

API-Q1 specifications.

Today,HEISCO is one of the leading companies

providing QC services to various clients /

contractors in Oil & Gas, Refineries, Petrochemicals

and Power Sectors in Kuwait.

HEISCO has the most modern testing equipment

and highly skilled NDT technicians, inspectors

and inspection engineers to meet project

requirements related to Quality Control,

Inspection and NDE Services.

Major Services Provided:

• Corrosion Control

• Inspection & Quality Control

• Non Destructive Testing – RT/ UT/ AUT/ MT/

PT/ VT

• Metallurgical Analysis & Material Testing

• Welding Consultancy

• Heat Treatment

Fabrication Workshop Operations

HEISCO’s modern fabrication workshop facilities

are the preferred choice for Design, Manufacture

& Supply of Process Equipment serving the Oil &

Valve Testing Services at HEISCO - MAB Workshop

HEISCO Conducting Advanced AUT Seminar at KOC Office

HEISCO Conducting Live AUT Demo at KOC Office

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ANNUAL REPORT 2013

Gas, Refineries, Petrochemicals and Power

Sectors in Kuwait.

HEISCO’s commitment to its clients is proven by

its quality management system certification to

ISO 9001:2008 & Occupational Health & Safety

Management System certification to OHSAS

18001:2007 standards.

In addition, HEISCO’s facilities are trained to use

ASME U, U2, PP, S and National Board ‘R’ stamps,

API Monograms for separators (API - 12J) and

storage tanks (API 12D & 12F).

HEISCO has the capabilities to manufacture a

wide range of products such as:

• Pressure Vessels, Storage Tanks, Reactors

• Oil & Gas Separators, Desalters, Heaters

• Slug Catchers, Power Boilers, Columns &

Towers

• Shell & Tube Heat Exchangers, Pig Launchers

& Receivers, Gas Scrubbers

• Filter Vessels, Flares, other fabricated

equipment, piping, structures & services

Pressure Vessel Manufacturing

Pressure Vessel Painting

Vessel Ready for Dispatch

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ANNUAL REPORT 2013

Trading Operations

HEISCO’s dynamic marketing and sales force is

charged with responsibilities for promoting and

marketing the Products, Equipment and Services

of leading international companies to the local

Marine Industry, Oil & Gas and Power Utility

Sectors. HEISCO offers its customers an unrivalled

service of experience, technical competence and

reputation backed by after sales service from the

formidable engineering & maintenance resources

of our combined operations.

Products promoted by the company’s Trading

Operations to name a few are Boilers and Turbine

Spares, Solar Power Systems, CS/SS/AS, Seamless

Pipes, Welding Equipment, Consumables &

Automation, Blasting & Painting Equipment, Steel

Abrasives, Gratings, Oil Field Products & Pipeline

Accessories such as Quick Opening Closures etc.

Apart from the above products, HEISCO also

promotes the interests of large International EPC

Contractors in Kuwait by way of sponsorships.

Main Stores

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ANNUAL REPORT 2013

The workshops employ machines such as:

• Motor Analyzer PDMA

• Flux Core Automated Arc Welding Machine

• LASER Alignment Machine

• LASER Coupling Machine

• Dynamic Balancing Machine

• CNC Profile Cutting Machinery

• Submerged Automated ARC Welding

Machine

Conveniently located in Shuwaikh deep water harbor the shipyard is ideally placed to execute ship repair and construction.

HEISCO’s skilled and well trained work force has the ability to work in both marine and industrial fields.

Together with modern equipment and strong yard management team, HEISCO provides the correct combination to ensure excellent quality and delivery on time.

HEISCO is proud of its long reference list including major local, regional and international clients. HEISCO is an international ship repair company which aims to be the leader among Middle East shipyards by utilizing state- of -the-art equipment.

Docking in Syncrolift

Shipyard Operations

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ANNUAL REPORT 2013

Facilities & Services:

• Floating dry dock, 190 meters, for vessels up

to 35,000 ton dwt.

• Syncrolift accommodates vessels up to 5,000

ton dwt.

• 5 Berths, ranging from 90 meters to 230

meters with cranes.

• 5 Cranes, 10 to 30 tons, cover the yard open

areas.

• Afloat and along side repairs.

• Modification and conversion of vessels.

• Shipbuilding of specialized vessels.

• Steel and Aluminium Construction.

• Underwater and Diving services following the

International Marine Contractors Association

(IMCA) standards.

• Repair, testing, calibration of equipment and

machinery.

• Jet Propulsion, Repair / Overhauling.

• Agencies for major marine equipment and

devices.

Vessel in Floating Dock

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ANNUAL REPORT 2013

Gulf Dredging & General Contracting Company K.S.C (closed) was formed in 1975 as a Joint Shareholding Company of the Government of Kuwait and Ballast Nedam of Netherlands, to cater to the growing requirement of dredging in and around Kuwait. Starting off the business solely in dredging, Backhoe Dredger and Allied equipment, the Company concentrated in the Capital Dredging Projects in Kuwait. Later in 1980, the Company diversified into other areas of Marine Construction.

After the privatization of the Government of the State of Kuwait, GD became a subsidiary of the Heavy Engineering Industries & Shipbuilding Co. K.S.C (Public) – (HEISCO).

In the year 1999 GD Management established Civil Construction Division to carryout Civil and Infrastructure works and executed a number of complex projects. Since then Gulf Dredging has been classified as Class-I Civil Contractor & Class-IV in Roads & Infrastructure works by the Central Tenders Committee of the State of Kuwait.

Activities in Brief:

Offshore Operations:

• Dredging and Reclamation

• Construction of Ports, Harbors & Marinas

• Construction of Wharfs and Berths

• Breakwaters and Revetments

• Offshore Pipelines and Intake/Outfall Structures

• Offshore Cable Pulling Works

• Bathymetric, Hydrographic and Topographic surveys

• Piling

• Marine Transportation of Bulk Cargo

• Various Maintenance Services

GULF DREDGING & GENERAL CONTRACTING CO. KSC (Closed)

Second Submarine Power Cable Pulling – Al Khafji Joint Operations (Technip)

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ANNUAL REPORT 2013

Civil Construction works – New Acid Gas Removal Plant (NAGRP) Revamp, Project –

Kuwait National Petroleum Company (KNPC)

Onshore Operations:

• Construction and Infrastructure works

• Steel Structure Works

• Soil Treatment

• Dewatering

• Piling

• Value engineering

Gulf Dredging has its presence in the following GCC Countries:

• Saudi Arabia

• Qatar

• Oman

Certifications:

• CTC Grade-I in Civil Construction Works

• CTC Grade-IV in Roads & Infrastructure works

• Certified as Marine Contractor with Kuwait National Petroleum Company

• Member of IMCA (International Marine Contractors Association)

• ISO 9001:2008

• OHSAS 18001: 2007

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ANNUAL REPORT 2013

• Cargo Barges (Flat Top) up to 14000 Mt

• Flat Top Barges (for Marine Construction)

• (A) Frame Barge for fuel supply and anchor handling

• Diving Barges

• Anchor Pontoon for Dredger Floating Pipeline

• Survey Boats

• Speed Boats

Resources

Offshore Equipment:

Gulf Dredging is well equipped with Offshore Equipment comprising of:

• Cutter Suction & Dipper Dredgers

• Split Hopper Barges

• Tug Boats

• Work Boats

• Multicat Boat / 7 ton crane / fuel supply

• Fuel Supply Boats

• Jack-up Barge (Self Elevating Platform)

Cargo Barge 14000 Mt. ton Capacity

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ANNUAL REPORT 2013

Onshore Equipment :

GD is well equipped with Land Equipment com-prising of:

• Heavy Lifting Mobile & Crawler Cranes (capacity from 50 ton to 160 tons)

• Heavy Earth Moving Equipment such as Bulldozers, Graders, Wheel Loaders, Excavators and Dump Trucks.

• Piling Rigs for Sheet Piles, Concrete and Steel Tubular Piles with capacity to drive up to dia 2850 mm

• Auguring and Boring Equipment

• Dewatering Equipment

Logistics

• Capable of Sea Bulk Cargo Transport by

Special Barges with Capacity up to 14000 Mt

• Capable of Land Transport by Special Rock

Body Trucks / Trailers

• Private Berthing and Offloading Facilities at

Shuwaikh Port

Onshore Equipment

Documents

Sabah Al-Ahmed Al-Jaber Al-Sabah His Highness The Crown Prince Sheikh Nawaf Al-Ahmed Al-Jaber Al-Sabah ANNUAL REPORT 2013 CONTENTS BOARD OF