BY FESTUS OKOROMADU
As the call for a green economy takes the centre stage globally, there are indications that some companies in the mining subsector in Nigeria are beginning to take steps to adopt global best practices toward ensuring environmentally friendly operations.
In this regard, the duo of BUA Cement Plc and Lafarge Africa Plc, key players in the cement manufacturing industry, a sector known for its environmental degradation activities, have indicated in their financial accounts for the year ended December 31, 2022 some semblance of commitment to improving their operating environment. Specifically, both companies have earmarked about N19.6 billion from their profit to foster a safe operating environment.
For instance, reporting on key financial decisions approved by the Board of Directors of BUA Cement Plc for the year 2022, PricewaterhouseCoopers, chartered Accountant, independent auditors to the firm identified the N12.7 billion set aside by BUA as significant. Similarly, KPMG Professional Services, while presenting its independent auditor’s report on Lafarge Africa Plc, noted that the company also set aside a sum of N6.9 billion for ‘off-spec’ clinkers arising from power fluctuations and other factors in the production process.
“By implication both companies made significant provisions for environmental concerns and sustainability of their operations. Although, decommissioning is considered a global best practice in the quarry industry, most operators in the extraction in Nigeria do not pay the necessary attention to it,” the Auditors said in a separate remark. Commenting on the gesture, PWC in its report to shareholders said: “As at 31, December 2022, the directors recognised provision for decommissioning liabilities amounting to N12.7 billion in relation to the restoration of active mining quarry sites to acceptable land use conditions.”
Expatiating on the implication on the financial account, PWC said it focused on the item due to the materiality of the provision and because the directors exercised significant judgment in estimating the liabilities.
While explaining the methodology deployed by the Board to arrive at the amount earmarked, PWC said, “We adopted a substantive approach in assessing the provision for decommissioning liabilities. On its part, the Board of Lafarge Africa said the off-spec clinker it provided for has accumulated across all plants and continues to suffer deterioration due to weather impact and low consumption.
“Consequently, management has performed an obsolescence assessment of the off-spec clinker across all plants and made an allowance of N 5.6 billion and N1.3 billion for Group and Company respectively in the consolidated and separate financial statements,” the report stated. KPMG said it considered the provision as a key audit matter due to the significance of the amount and the judgment exercised by management in the determination of the allowance.
Assuring shareholders of the appropriateness of the decision taken by the board, and why it approved it, the auditors said: “We made inquiries of management and evaluated management’s processes and procedures for the identification of off-spec clinker within its production process.
“We obtained management’s assessment of obsolescence allowance and checked the basis of the amount recognized as obsolescence allowance of off-spec’ clinker including the mathematical accuracy.
“We challenged management’s judgment applied in determining the amount of obsolescence allowance by checking the reasonableness of the pattern of production and consumption of off spec clinker applied by management in its assessment of its obsolescence allowance.
“We considered the adequacy of the Group and Company’s disclosures in relation to the allowance for obsolescence for inventories in line with the relevant accounting standard.”