32. Contingencies and commitments

Contingent liabilities

Litigation matters in Egypt

A.      Privatization cases

a. In 2011, two former employees of Beni Suef Cement Company S.A.E. (BSCC), a Titan Group company in Egypt, filed an action before the Administrative Court of Cairo, seeking the nullification of the privatization of BSCC which took place in 1999 through the sale of BSCC’s shares to Financiere Lafarge after a public auction. Titan Group acquired in 1999 50% and in 2008 the balance of Lafarge’s interest in BSCC. Approximately 99.98% in the share capital of BSCC is held today by Alexandria Portland Cement Company S.A., a Titan group company listed in the Egyptian Stock Exchange. The Administrative Court of Cairo announced on 15.2.2014 the issuance of a first instance judgment which entirely dismisses the request for cancellation of the privatization of BSCC. The Court further judged the re-employment of ex employees who had left the company in the framework of voluntary redundancy schemes. BSCC reserves all its legal rights until it obtains an official copy of the said judgment and reviews all its aspects.

b. In June 2013, BSCC was notified of another lawsuit filed before the Administrative Court of Cairo seeking as in the above case to cancel the sale of the shares of BSCC to Financiere Lafarge. The case has been repeatedly adjourned and the next hearing has been scheduled for March 11, 2014. The view of BSCC’s lawyers is that the lawsuit is devoid of any legal or factual ground.

c. In 2012, an ex-employee of Alexandria Portland Cement Company SA (APCC), a Titan Group company in Egypt, brought an action before the Administrative Court of Alexandria against the President of the Republic of Egypt, the Prime Minister, the Minister of Investments, the Minister of Industry, the Governor of Alexandria, the Manager of the Mines and Salinas Project in Alexandria and the Manager of the Mines and Quarries Department in Alexandria seeking the annulment of the sale of the shares of APCC to Blue Circle Cement Group in 1999. APCC was not named defendant in the action. It should be noted that following a capital market transaction concluded in 2001, Blue Circle Cement Group was acquired by Lafarge Group, which subsequently sold its interest in APCC through two private transactions to Titan Group in 2002 and 2008. The case has been repeatedly adjourned and the next hearing has been scheduled for March 22, 1914. The view of ΑPCC’s lawyers is that the action is devoid of any legal and factual ground.

d. In May 2013, a new action was filed by 3 ex-employees of APCC seeking as in the above case the annulment of the sale of the shares of APCC to Blue Circle Cement Group. The action has been raised against the Prime Minister, the Minister of Investment, the Chairman of the holding company for chemical industries, the President of the Central Auditing Organization, the legal representative of Alexandria Portland Cement Company and the legal representative of Blue Circle industries. The case has been repeatedly adjourned and the next hearing has been scheduled for the 28.4.2014. The view of APCC’s lawyers is that the action is devoid of any legal and factual ground.

B.      Other cases

a. An individual residing in the vicinity of the plant of Alexandria Portland Cement Company SA (APCC), a Titan Group company in Egypt has filed an action before the Administrative Court of Alexandria against the Governor of Alexandria, the Head of El-Agamy District, the Minister of Trading and Industry, the Minister of Environment, the President of Alexandria Environmental Affairs Agency, the President of Industrial Development Authority and APCC, seeking the abolition of the administrative decision of the competent Egyptian authority which issued the operating license for the APCC plant in Alexandria, alleging violations of environmental and related regulation. APCC’s view is that the plant’s operating license has been issued lawfully and in full compliance with the relevant Egyptian laws and regulations.

b. In 2007, Beni Suef Cement Company S.A.( BSCC) , a Group subsidiary in Egypt, obtained the license for the construction of a second production line at the company’s plant through a bidding process run by the Egyptian Trading and Industrial Authority for the amount of EGP 134.5mil. The Egyptian Industrial Development Authority subsequently raised the value of the license to EGP251mil. In October 2008 BSCC filed a case before the Administrative Court against the Minister of Trade and Industry and the chairman of the Industrial Development Authority requesting an order obliging the Industrial Development Authority to grant the expansion license to BSCC for EGP 500. Alternatively, if the court rejects this request, BSCC is requesting the price to be the EGP134.5mil.offered by BSCC in the bid. The view of BSCC’s lawyers is that the case has a high probability of being won.

c. A non-governmental organization, the Nile Agricultural Organization, has raised a court case against Beni Suef Cement Company S.A.(BSCC) , a Group subsidiary in Egypt, claiming that BSCC has illegally occupied the plaintiff's land and is seeking compensation to the amount of EGP 300mil. The contested land however has been legally allocated to BSCC many years ago by the relevant authority, the New Urban Communities Agency, and since 1988 BSCC has held the licenses for the exploitation of the quarries on this land. The view of BSCC’s lawyers is that the case has a high probability of being won.

US- Pennsuco silo roof collapse

The roof of a concrete silo collapsed at the Group's subsidiary cement plant in Pennsuco (USA) on August 17, 2012, resulting in the fatality of one employee. The Group's own investigation has indicated that the collapse occurred due to a latent construction defect when the silo was built approximately 30 years prior by a contractor when the facility was owned by a company unrelated to Titan Group and its Florida subsidiary, Titan Florida LLC ( former Tarmac America LLC). However, the U.S. Department of Labor, Mine Safety and Health Administration (“MSHA”) issued an investigation report, finding that the accident was also due to management’s failure to correct silo defects and correspondingly issued two Notices of Violation with penalties totaling USD 108,000.

The subsidiary has taken exception to the report in a letter to MSHA, arguing these latent construction and design defects were not detectable prior to the accident. The deceased’s estate has commenced action against multiple parties who have performed construction and/or maintenance work on the silo in the past several years. The deceased’s estate has filed a motion to amend their complaint in order to bring a direct action against also Tarmac America LLC as a defendant in a wrongful death claim, however, it is premature to give an opinion as to the outcome with respect to any actions by the deceased's estate due to Tarmac America’s defense rights relating to tort immunity under Florida’s workers’ compensation laws.

There are no other litigation matters which may have a material impact on the financial position of the Company and the Group.

CO2 emissions

During the period of the severe economic downturn, the Group's available Carbon Dioxide emissions allowances exceeded the Group's production needs. However, recent EU decisions to further curtail CO2 emissions allowances for the cement industry, may lead to shortfalls in the future. On the basis of its current strategic planning the Group intends to manage any potential shortfall by foregoing lower margin sales opportunities, thus capping production at, or below, the level matching available allowances.