Annual Report 2010/11

Transcription

CHEMANEX PLC
P.O. Box 188
No. 52, Galle Face Court 2
Colombo 3
Sri Lanka
CHEMANEX PLC
CHEMANEX PLC
www.chemanex.com
This Chemanex PLC Annual Report has been
produced by Smart Media The Annual Report Company whose
greenhouse gas emissions resulting from
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C LO S E D R A N K S
CONTENTS
02
04
08
10
14
17
22
24
26
42
44
45
47
60
61
62
63
64
Year at a Glance
Chairman’s Review
Managing Director’s Review
Management Discussion & Analysis
Financial Review
Information to Shareholders and Investors
Board of Directors
Management Committee
Sustainability Development & Global Reporting
Initiatives at Chemanex Group
Human Capital
Environmental Sustainability
Corporate Social Responsibility
Corporate Governance
Report of the Audit Committee
Report of the Remuneration Committee
Report of the Nominations Committee
Chief Executive Officer’s and Chief Finance Officer’s
Responsibility Statement
Risk Management
Financial Reports
68
Annual Report of the Board of Directors on the State of
Affairs of Chemanex PLC
74
Directors’ Responsibility for Financial Reporting
75
Independent Auditors’ Report
76
Income Statement
77
Balance Sheet
78
Statement of Changes in Equity
79
Cash Flow Statement
80
Notes to the Financial Statements
112 Consolidated Statement of Value Added
113 Group Structure
114 Decade at a Glance - Group Financials
115 Glossary of Financial Terms
117 Notice of Meeting
Enclosed - Form of Proxy
Inner Back Cover - Corporate Information
The Chemanex ‘family’ has always been a close one. Often, particularly when times are good, family ties tend to get
overshadowed by the results of enterprise. This is not so at Chemanex. In a challenging year we closed ranks…bonded
tight...and tapped into those special qualities that only close family can possess...delivering innovation and product
enhancements that belied the harsh business climate. It is safe to say that our ‘family ties’ are the best ‘adhesive’ we’ve
ever produced...it’s world class...it’s kept us focussed...its delivered results!
Corporate Vision
To be a globally recognised and responsible corporate leader in manufacturing and
exporting value-added speciality compounds and intermediates.
Mission Statement
Embodying Excellence through Corporate Stewardship.
The Value that define us…

Daring to Envision Innovation and Invention

Commitment towards Excellence

One Family Unbroken

A Deep-Rooted Culture of Professional Ethics

Pioneering Global Leadership

Sustainability as Strength
37 years in
Year at a Glance
Company
Year ended 31 March
Earnings Highlights and Ratios
Revenue
Rs. ’000s
Profit Before Tax
Rs. ’000s
Taxation
Rs. ’000s
Profit for the Period
Rs. ’000s
Profit Attributable to Equity Holders
Rs. ’000s
Dividends
Rs. ’000s
Earnings Per Share
Rs.
Dividend Cover
No. of Times
Return on Shareholders’ Equity
%
Pre-Tax Return on Shareholders’ Equity
%
Return on Assets
%
Interest Cover
No. of Times
2011
2010
Change (%)
2011
2010
Change (%)
549,804
110,125
29,085
81,040
81,040
31,500
5.15
2.57
7.23
9.82
5.67
12.57
497,258
82,577
26,790
55,786
55,787
55,787
3.54
1.42
5.17
7.65
4.14
5.50
10.57
33.36
8.57
45.27
45.27
(20.00)
45.27
81.58
39.87
28.40
36.76
128.34
999,552
68,023
36,349
31,674
31,675
36,929
2.34
1.17
2.88
5.31
2.03
7.73
969,428
155,081
35,251
119,830
96,211
39,375
6.11
2.44
7.49
12.08
5.78
9.04
3.11
(56.14)
3.11
(73.57)
(61.62)
(20.00)
(61.62)
(52.02)
(61.54)
(56.05)
(64.88)
(14.52)
Balance Sheet Highlights and Ratios
Total Assets
Total Debt
Net Debt
Shareholders' Funds
No. of Shares in Issue
Net Assets Per Share
Debt/Equity
Debt/Total Assets
Liquidity
Financial Leverage
Rs. ’000s 1,429,648
Rs. ’000s
169,800
Rs. ’000s
(149,435)
Rs. ’000s 1,121,078
’000s
15,750
Rs.
71.18
%
15.15
%
11.88
No. of Times
2.88
No. of Times
2.44
1,345,925
82,317
(343,416)
1,079,413
15,750
68.53
7.63
6.12
3.03
1.07
6.22
(106.28)
56.49
3.86
0.00
3.86
(98.61)
(94.20)
(4.82)
128.25
1,819,970
202,982
(284,306)
1,281,536
15,750
81.37
15.84
11.15
2.73
1.12
1,665,108
83,198
(499,843)
1,283,982
15,750
81.52
6.48
5.00
5.26
1.26
9.30
(143.97)
43.12
(0.19)
0.00
(0.19)
(144.44)
(123.21)
(48.14)
(11.60)
Market/Shareholder Information
Market Price Per Share
Market Capitalisation
Enterprise Value
Price Earnings Ratio
Dividends Per Share
Dividend Payout
Dividend Yield
ROE
ROCE
Rs.
133.40
Rs. ’000s 2,101,050
Rs. ’000s 1,951,615
No. of Times
25.93
Rs.
2.00
%
38.87
%
1.5
%
7.23
%
9.27
130.25
2,051,438
1,708,022
36.77
2.50
70.58
1.92
5.17
8.69
2.42
2.42
14.26
29.50
(20.00)
(44.93)
(21.89)
39.87
6.70
133.40
2,101,050
1,816,744
56.89
2.00
85.30
1.5
2.88
4.90
130.25
2,051,438
1,551,595
21.32
2.50
40.93
1.92
7.49
11.58
2.42
2.42
17.09
(166.83)
(20.00)
108.42
(21.89)
(61.54)
(57.69)
Other
Total Value Added
Distributed to Government
Employees
Shareholders
Others
Total Employees
2
Group
CHEMANEX PLC Annual Report 2010/11
Rs. ’000s
215,631
208,515
3.41
306,200
360,853
(15.15)
Rs. ’000s
Rs. ’000s
Rs. ’000s
Rs. ’000s
Nos.
34,101
71,587
39,375
70,568
135
36,059
76,979
78,750
16,727
134
(5.43)
(7.00)
(50.00)
321.88
(0.75)
40,065
140,919
39,375
85,841
296
48,456
131,741
78,750
101,906
278
(17.32)
6.97
(50.00)
(15.76)
6.47
Financial
Highlights
Chairman’s Review
On behalf of the Board of Directors, I take pleasure in welcoming
you to the 38th Annual General Meeting of the Company. The
Annual Report and review of our activities together with the audited
Statement of Accounts of the Group for the year ended 31 March 2011,
highlights the depth and the resilience of the diverse portfolio of
businesses we operate in a challenging environment.
The Sri Lankan economy recorded an impressive average growth rate
of 8% for the year which is the second best GDP growth ever achieved
since independence. The major sectors of the Economy namely,
Agriculture, Industry and Services registered significant growth of
7%, 8.4% and 8%, respectively in an environment of peace and hope.
This then could be considered the foundation for the realisation of
the full potential of the country. Inflation as measured by Colombo
Consumer’s Price index recorded an increase of 5.9% YOY in 2010
compared to the 3.4% YOY in 2009. The GDP per capita at market
SRI LANKA IS NOW
underscored by a rapid
improvement in tourist arrivals
4
price was estimated at USD 2,399/-,
an increase of 16.6% compared to the
previous year. Gross savings at current
prices increased by a significant 19%
to Rs. 1,360.1 Bn, raising overall
savings to 24.3% of GDP which in turn
will boost investment.
Industry and Services sector benefitted
by a near 30% increase in apparel
exports within the background of the
withdrawal of the GSP + facility, the
rapid expansion of mobile phones
users and an acceleration in internet
penetration. Improved connectivity will
boost educational infrastructure and
capacities which augurs well for the
future. Good weather and the initiatives
originated by Government resulted in
good harvests with the exception of
coconut. Improved prices for tea and
rubber helped to boost production,
thus pushing the agricultures
contribution to GDP by 7% compared
to the 3.2% in the previous year.
The growth rate of Minor Export Crops
such as cloves, sesame, cashew nuts,
etc., were impressive in the reference
year. The paddy production recorded a
growth rate of 17.5% while the fishing
industry expanded by 12.2% with
the Northern and Eastern coastline
becoming accessible to the fishing
community due to the prevailing
peaceful environment. Sri Lanka
is now an oasis in a troubled world
underscored by a rapid improvement
in tourist arrivals. Notable growth
in electricity generation augurs well
for future industrial expansions
within the country. The construction
sub-sector expanded by 9.3% for the
year, supported by a number of new
infrastructure development projects,
undertaken by the Government.
Sri Lanka’s export earnings increased
by 15.2%, which was a 3.4%
improvement at constant prices.
Chemanex Group delivered satisfactory
results for the year following the dawn
of a peaceful environment even though
exports were adversely impacted due
to the turbulence and uncertainties
in Global markets. Our exports to
the detergent industry namely the
anti-soil-redeposition agent which
recorded a significant improvement
in the previous year failed to deliver
results in line with our expectations,
due to the unprecedented increase in
the raw material prices as well as the
appreciation of the Rupee. Adhesive
and textile auxiliary exports generated
lower than expected results with
Research & Development lagging in
generating initiatives to expand our
offerings to identified new markets.
Glove exports, which faced a major
setback in the previous years, bounced
back and recovered to record a
reasonable return. For the mediumterm, we have planned further
investments in this area to improve
our offering with a number of other
customers in mind.
CAL Exports Lanka (Pvt) Limited
recorded a turnover of Rs. 330.7 Mn
and a profit before tax of Rs. 6.3 Mn
for the year. Turnover and the gross
profit have dropped by 15.6% and
65%, respectively compared to the
previous year. CAL Exports with ISO
certification, has maintained its 100%
vendor compliance status with the
major multinationals with whom
we conduct business. The main raw
material though available, doubled
in price, setting in motion rapid
price revisions. We however, could
not recover the entirety of the price
increases from our customers with
Chinese producers quoting untenable
prices, obviously encompassing
subsidies and quality manipulation.
Consequently, our margins were under
pressure in order to retain hard won
customers. Our R & D team developed
the use of alternative raw materials,
available at competitive prices which
would help us in the medium term.
CAL Exports Lanka (Pvt) Limited won
three prestigious awards for their
performance during the year. The
Company that won a Gold award in the
Industry Sector-Extra Large category
in the 18th NCE Annual Exports
Awards, was adjudged the winner in
the Medium Category and the Runnersup in the Manufacturing, Chemical
and Ceramic Sector in the National
Business Excellence Awards 2010.
Yasui Lanka (Pvt) Limited, an ISO
certified Company engaged in the
manufacture of seamless knitted
Chairman’s Review
gloves, recorded a turnover of
Rs. 104 Mn returning a profit before
tax of Rs. 3.7 Mn for the year. The
Company has recovered following
substantial losses in the previous
two years due to the global financial
meltdown. Yasui Lanka (Pvt) Limited
invested in twenty five state-of-theart machines from Japan anticipating
enhanced future orders. Further steps
would be taken to enhance our product
portfolio as well as our customer base
in the coming years.
Chemanex Exports (Pvt) Limited,
a fully-owned subsidiary of
Chemanex PLC, recorded a turnover of
Rs. 42 Mn and a profit before tax of
Rs. 9.9 Mn for the year. The Pakistan
market built with considerate effort
on our part, yielded poor returns with
the continuing economic and political
unrest with the spill-over of the war
in Afghanistan. We have now seen a
slight improvement which offers some
opportunities for improved trade in the
coming years.
Chemcel (Pvt) Limited, a Joint Venture
set up between Chemanex PLC and
our Parent Company CIC Holdings
PLC has planned to complete the
first phase of the production plant
at the Mirigama EPZ. Production is
expected to commence by July this
year. Technical assistance for the
project has been secured from a
US-based multinational company.
The second phase of the project is
scheduled to commence no sooner a
suitable location is secured and the
necessary environmental clearances
obtained. For the present, we have
achieved encouraging results from our
pilot-scale operation at Ratmalana.
As indicated in our previous Report,
the value addition process to the
intermediate product is to be done at
a different location, thus separating
the dry and wet processes, minimising
risk with an eye on reducing
exposure of the proprietary technical
information of our North American
customer. As agreed, a part of the
Consultancy Fee and a significant part
of the equipment cost for the second
phase of the project is to be funded by
the US-based company to be re-paid
by us from our future revenue.
Annual Report 2010/11 CHEMANEX PLC
5
Chemanex PLC, recorded an increase
in turnover by 11% compared to
the last year, due to the recovery of
domestic economic activity with the
prevailing peaceful environment.
The Company recorded a profit before
tax of Rs. 110.1 Mn for the year
compared to the Rs. 82.6 Mn recorded
in the previous year. The above
profit includes a sum of Rs. 18.4 Mn
received from the liquidator of
Chemanex Adhesives (Pvt) Limited,
our former export Company. Interest
income of Rs. 35.6 Mn earned for
the year recorded a shortfall of
Rs. 48.2 Mn in comparison to the
previous year, due to the reduction
of funds available for investment
coupled with a significant decline
in interest paid on bank deposits in
the market. Chemanex PLC was the
recipient of two prestigious awards
during the year. The Company won
the Silver Award in the Manufacturing
Category for “Excellence in Reporting”
organised by The Institute of Chartered
Accountants of Sri Lanka and a Merit
Certificate in the Manufacturing
Sector at the competition for the SAFA
Best Presented Accounts Awards
2009, organised by the South Asian
Federation of Accountants.
was appointed during the year to
review and formulate strategies for
Sustainable Development with Board
representation for this purpose.
The Group turnover, at Rs. 999.56 Mn,
records an increase of Rs. 30 Mn, in
comparison to the previous year, while
profit before tax stood at Rs. 72.4 Mn,
for the year.
Mr. L de Mel resigned from the Board of
Directors with effect from 30 September
2010. I take this opportunity to thank
him for his valuable advice and
commitment to the Group during
his tenure of four years. Mr. M.D.
Wickramasinghe, currently the
Managing Director of Fitch Ratings
Lanka, an Engineer by profession,
accepted our invitation to join the Board
of Directors and was appointed as an
Independent Non-Executive Director
of the Company with effect from
1st October 2010.
Chemanex PLC invested a further
Rs. 25 Mn in the Eco Tourism project
titled Rainforest Ecolodge (Pvt)
Limited at Deniyaya on the border
of the Singharaja Rain Forest. Our
total investment in this venture now
amounts to Rs. 78.125 Mn. Chemanex
PLC now owns 24% of the total equity
of Rainforest Ecolodge (Pvt) Limited
and thus remains the single largest
shareholder. The project has got over
the many obstacles, which delayed
implementation and is expected to
commence operations in the coming
season. Our other Equity Accounted
Investees, Commercial Insurance
Brokers (Pvt) Limited and Crop
Management Services (Pvt) Limited
performed satisfactorily during the year.
Chemanex PLC now owns 24% of the
total equity of Rainforest Ecolodge
(Pvt) Limited and thus remains the
single largest shareholder.
Chemanex Group commenced
reporting on Third Generation
Global Reporting Initiatives with
effect from 2010/11 financial year,
clearly emphasising the Group’s
commitment for sustainable
development. Further, a Committee
6
Chairman’s Review
The Company paid an interim dividend
of Rs. 1/- per share in February 2011
out of the dividend received from
investments. Your Directors now
recommend a final dividend of
Rs. 1/- per share for the year, thus
giving effect to a payout ratio of 39% of
the profits for the year.
In conclusion, while confirming
that there were no violations of the
Provisions of the Code of Business
Conduct and Ethics adopted by the
Company in accordance with the best
practices on Corporate Governance
issued by The Institute of Chartered
Accountants of Sri Lanka, I take this
opportunity on behalf of the Board of
Directors of the Company to thank
our local and foreign customers for
their continuing support, confidence
and patronage. I also wish to thank
my colleagues on the Board for their
valuable advice and for the many
insights which made my task easier.
My thanks and appreciation also goes
to the staff at all levels who have
amply demonstrated their capacity
for hard work. Finally, I take this
opportunity to thank our shareholders,
who have been with us through good
times and not so great times for their
forbearance and support in all our
endeavours.
B.R.L. Fernando
Chairman
24 May 2011
Chairman’s Review
7
The Dawn of Hope
2011 heralds a new dawn with the gradual recovery of the Asian economies,
and indeed the global market, although the first half of 2011 is likely
to witness slowing down of international trade. The recovery in the
US economy is proceeding gradually, while the European markets are
struggling with fiscal consolidation measures. Such a backdrop reflects
Chemanex Group’s strenuous attempts to export value-added chemicals
globally and explore potential markets around the world. However, the
Company this year looks towards capitalising on the sustained growth
momentum of the Sri Lankan economy with development prospects
improving significantly. Inflation rates have also remained broadly stable
since 2010, thus lending credibility to the local economy and raising
aspirations of the Company.
Thus, Chemanex Group is focused in becoming one of the best export
companies in Sri Lanka, providing good returns to all our stakeholders and
raising the bar continuously. We also aim high by expanding our product
portfolio in the near future.
We have successfully expanded our brand
portfolio and invested in
in order to consolidate and procure
revenue and stabilise our corporate image
8
Conquering Mounting
Challenges
Chemanex Group is currently
facing a frail export market which
is losing volume continuously. We
face difficulties in keeping the prices
of our final products down and are
consistently challenged to mitigate
the costs of our production process
in order to maximise slim profit
margins. We continue to compete
with ‘low economies’ for the best
price on products and a good share
of the export market. The general
demand for exports has decreased
considerably for the Company due
to multiple, intertwined reasons.
Trading powerhouses like China
pose as immediate competitors with
suppressed local currencies and
mass-scale supplies. The unreasonable
escalation of raw material prices is
a bane to the sustained growth of
our export trajectory. The Company’s
biggest challenges to date, have been
the rising costs associated with high
energy consumption, the steep rise
in raw material prices and associated
production costs and heightened
market competition.
Monetary flows in the international
market have also impacted the
Company’s aspirations to haul massive
revenues in exports and to expand our
overall trade operations on a mass
scale. The quantitative easing of the
US Economy has affected the exports
of Sri Lankan companies, as millions
of US Dollars are being pumped
into the US Economy by the Federal
Reserve to spur growth. Such surplus
Dollars have trickled down to the
economies of developing countries with
emerging economies as ‘hot money’
and strengthening local currencies,
thus proving detrimental to price
negotiations. The appreciation of the Sri
Lankan Rupee has severely damaged
the export targets of Chemanex Group
during the year partly due to the above
factors. However, we are confident of
the Company’s resilience in the face
of economic challenges. Our values of
collectivism, steely determination, hard
work and dedication is serving us well
in exploiting new markets, developing
new products locally and forging bonds
with international manufacturers and
suppliers.
The Scale of Operations
We are proud to state that despite
intertwining problems, Chemanex
PLC has achieved significant growth
in the field of local operations. We
have successfully expanded our brand
portfolio and invested in new projects
locally in order to consolidate and
procure revenue and stabilise our
corporate image. Thus, the Company
has begun operations in the food and
oil-based product industry and also
invested heavily in the hospitality/
tourism sector by becoming a key
stakeholder in the Rainforest
Ecolodge (Pvt) Limited at the edge
of the Sinharaja Rainforest. This
grandiose, luxury project will be opened
for operations in July this year and is
certainly a feather in our cap since this
is another instance where the Company
is exploring diverse and new avenues for
investment and revenue procurement.
However, our Export market continues
to suffer, bearing the brunt of
fluctuating market prices for raw
materials and obstacles in supply
chains. Chemanex Adhesives (Pvt)
Limited and CAL Exports Lanka (Pvt)
Limited were successfully merged
to simplify operations and also
lower overall costs. We are currently
attempting to venture into new world
markets to sustain this subsidiary.
Chemanex Exports (Pvt) Limited
another subsidiary of the Group has
achieved reasonable success through
a reawakening of the Pakistani market,
which was earlier impacted by political
volatility and public unrest in the
region. This subsidiary is also gearing
towards exploring new Asian markets
such as Bangladesh. Yasui Lanka (Pvt)
Limited another Company belonging to
Chemanex Group, has also witnessed
a steady increase in business and has
recently begun experimenting in new
product lines using new material. Yasui
Lanka has also invested in state-ofthe-art machinery to boost the quality
and quantity of production. Our most
ambitious venture to date, Chemcel
(Pvt) Limited, which has the ardent
support and financial backing of
overseas partners, will be successfully
completing its first phase shortly. The
Company intends to begin the ‘second
phase’ of the project, which will add a
new dimension to the overall outlook
of Chemanex Group. We are already
scouting for a convenient location to
begin the purification process required
for the second phase.
Exemplary Corporate Citizenship
and Social Commitment
The Company is fully committed
towards driving corporate social
responsibility in the new year and
has invested in many social and
environmental projects centring on
education, the uplifting of livelihoods
and promoting energy conservation in
the spirit of the UN’s Global Compact
and Millennium Goals. We are nurturing
multiple pre-schools in Passara
and also supporting the Sangabodhi
Central College in Mahiyangana. These
schools lack basic infrastructural
and substantial facilities. Whilst in
Passara, we are enthusiastically
supporting the administration with
technical and infrastructural facilities,
the Sangabodhi Central College in
Mahiyangana is currently being utilised
to implement our pilot project in
developing English language skills.
The Company aims to expand this
project in the North, in the near future.
Furthermore, the Company’s firm belief
in promoting eco-tourism is evident in
its commitment as a stakeholder in the
Rainforest Ecolodge (Pvt) Limited near
Sinharaja Forest, with an investment
exceeding Rs. 75 Mn. so far spent.
One Family Unbroken
Although facing many difficult
challenges, the Chemanex Group of
Companies remains focused on the
future and continues to grow steadily in
confidence and stature. This is primarily
through the close-knit family values that
we have incorporated in our corporate
governance and general administration.
Indeed, we are one family, bonding
closely and sustaining each other. We
remain strong in adversity and rise above
obstacles. Christmas parties, New Year
activities and competitions, office trips,
benefit plans for staff members, extra
special safety procedures for factory
workers and regular bonding sessions
over lunch/tea demonstrates the values
the Chemanex family shares with each
other. It is this spirit of togetherness that
will enable us to reach for the stars and
strive to perform well. As the Managing
Director of the Company, I applaud our
values of collectivism and look forward to
a brighter and better 2011/2012.
M.P. Jayawardena
Managing Director/CEO
24 May 2011
9
Chemanex Group, commenced
business operations on a minor
scale in 1974 and through the years
dynamically evolved and firmly
established its presence locally as
well as globally. The Group completed
the financial year 2010 /11 with
mixed but satisfactory results.
With the stoppage of hostilities in
mid-2009 and the end of the civil
war, a peaceful era has dawned on
the country creating a conducive
environment for local businesses to
thrive. A significant improvement is
evident in infrastructure development
throughout the country promising a
better future for trade and commerce.
Chemanex Group, which has grown to
be a mini conglomerate in Sri Lanka
over a period of 37 years, managed
to reap benefits under favourable
local marketing conditions. However,
currently it is entangled with setback
in its international operations
centred on exports, due to negative
macroeconomic conditions that
prevail globally.
The Chemanex Group sees many new
opportunities for trade on the horizon,
especially with current developments
taking place within the country during
an era of peace and have thus taken
steps to capitalise on them. Innovative
thinking and the strong bonds of the
corporate family have been identified
as pivotal for the critical success of the
Group. The Group also has managed
to improve core competencies such
as strong customer relations and
Products of our own
manufacture managed to enjoy
maximum vendor compliance in order
to further strengthen the Group’s
business activities.
Chemanex Group has reviewed
and amended its vision statement
together with the mission statement,
incorporating the principles of
sustainable development into its
strategy. In the process, we have
identified our underlying values which
have created a sound platform for our
present and future activities.
The buoyancy of the Sri Lankan
economy in 2010 has created many
hopeful opportunities for the future.
The economy recorded an impressive
average growth rate of 8%, the second
best GDP growth ever achieved since
independence. The three major sectors
of the Economy, Agriculture, Industry
and Services, registered significant
growth rates of 7%, 8.4% and 8%,
respectively in 2010 over the previous
year. Out of such major sectors, the
Industry and Services sector grew in
an unprecedented way, registering the
highest growth since 2002.
Inflation as measured by Colombo
Consumer’s Price index recorded
a 5.9% YOY in 2010, whereas it was
3.4% YOY in 2009. The GDP per capita
income at market price was estimated
at USD 2,399 in 2010, an increase of
16.6% compared to the previous year.
Gross savings at current prices was
increased by 19% to Rs. 1,360.1 Bn.,
constituting 24.3% of GDP.
The growth rate of Minor Export
Crops such as cloves, sesame seed,
cashew nuts, etc., were impressive in
the reference year. Paddy cultivation
grew by 17.5% and the fishing
industry by 12.2% in 2010, triggered
by the restoration of peace across
the country, specially in the North
in their respective markets
10
and the East. Notable growth of
7.8% in electricity, gas and water
against the previous year of 3.7%,
certainly will help secure future
industrial expansions within the
country. The construction sub-sector
indicated a 9.3% growth for the year
2010 supported by the introduction
of new development projects. The
overall service sector marked 8%
growth registering the highest-ever
growth since 2002. Sri Lanka’s export
earnings increased by 15.2% in 2010,
recording a 3.4% improvement at
constant prices.
Local Marketing Operations
The Chemanex Group constitutes of
Chemanex PLC, the Groups’ holding
Company, and its Subsidiaries that
are involved in a range of business
operations. Chemanex PLC is
engaged in the manufacturing
and marketing of ‘Nexobleech’ a
bleaching agent for crepe rubber
industry, and ‘Stop’ a Dot 3 Brake Oil
for fleet owners and for passenger
transport vehicles. Furthermore, the
Company also engage in the import
and distribution of intermediates
mainly for individualised businesses
and sectors. The Company has taken
steps to expand its product portfolio
in the coming year in line with the
existing product portfolio. In addition
to this, we have synchronised with the
upstream and downstream operations
towards achieving a sustainable
development. ‘Nexobleech’ was
developed with the assistance of
the Rubber Research Institute of
Sri Lanka as an alternate for prevailed
carcinogenic oil-based bleaching
agents which caused a detrimental
effect to the environment. With the
introduction of water-based bleaching
agents, we have been able to introduce
a more environmental friendly product
to the people with zero health hazards
involved in manufacturing.
Chemanex PLC also acts as the agent
for world renowned manufacturers
and distributes their products locally,
thus powering continuous effort
to create a dialogue between the
manufacturer as well as the users with
the view to creating an environment of
continuous product development. As a
result, we are among the pioneers who
introduced lead-free pigments to the
local market. We also have planned to
enter into the lubricant market in the
coming year to fulfil a vacuum in the
market.
Our local operations are grouped
under six departments namely,
Consumer Chemicals, Rubber
Chemicals, Pigments and Resins,
Estate Chemicals, Industrial Chemicals
and Food Products. Our Company has
gathered decades-long experience
in handling the requirements of the
local market and have accordingly
tailor-made products to suit current
domestic needs. We act as an industry
leader in the import and distribution
catering to these market sectors.
The Company’s chemical import and
distribution operation managed to
generate a satisfactory contribution
to the bottom line of the Group during
the year under review. Products of
our own manufacture managed to
enjoy healthy market shares in their
respective markets. The Company’s
paints distribution operation as a
channel partner of Akzo Nobel Paints
Lanka (Pvt) Limited was confined to
a limited area due to the continuous
negative results which impacted the
overall group performance. We operate
a paint distribution depot on behalf
of Akzonobel which has performed
satisfactorily during the year.
During the year, Chemanex PLC
won two prestigious awards for
their performance. The Company
won the Silver award at the Annual
Report Awards 2010 organised by The
Institute of Chartered Accountants
of Sri Lanka, and won a Certificate of
Merit at the Best Presented Accounts
and Corporate Governance Disclosure
Awards 2009, organised by South
Asian Federation of Accountants for
excellence in Annual Report in the
Manufacturing Category.
1
1. Yasui production facility was
further upgraded and the
production team was trained
to comply with future market
requirements.
2. Support staff of the Chemanex
stores achieved set targets
successfully during the year.
2
1
11
EXPORT OPERATIONS
Speciality chemicals and additives
Chemanex Group continued to focus
on venturing into global markets
through manufacturing and exporting
its products in the year under review
as well. The Group experienced an
unprecedented increase in certain
raw material prices required for
operations which created a substantial
negative impact. The strengthening
of the Rupee also further affected
our exports. Upward movement in oil
prices again triggered an increase
in raw material price in the world
market. We could not transfer the
total increase or the surplus price
to our customers, as a result our
profit margins were marginalised and
compromised. The Group’s short-term
strategy was to retain the customerbase intact during this difficult
period. Our R & D has confirmed the
possibility of using alternative raw
materials with competitive prices
available in the market. Further,
steps have been taken to improve the
production efficiencies in order to
contain cost of production.
The Group’s export portfolio
comprising, Anti-soil Redeposition
Agent for the detergent manufacturing
industry, Speciality Chemicals for the
textile and ceramic industries and
liners for work-ware, could not achieve
expected results for the year 2010/11.
Core raw materials used by us
for Anti-soil Redeposition Agent
manufacturing were substantially
increased in the world market due
to change in weather patterns and
increase in oil prices.
CAL Exports Lanka (Pvt) Limited, a
company which is accredited with
ISO 9001:2000 certification supplies
speciality chemicals and adhesives to
export markets in Europe, the Middle
East, Africa, Asia, Australia and New
Zealand. Demand for our Anti-soil
Redeposition Agent used in washing
powder formulations in the detergent
industry was significant during the
year. With further improvement to
our product quality, we are now well
recognised for stringent quality
standards by multinational companies,
12
to whom we supply and have obtained
100% vendor compliance and most
preferred supplier status.
During the year under review, CAL
Exports Lanka (Pvt) Limited won
three prestigious awards. The
Company won the Gold award in the
Extra Large Sector at the 18th NCE
Exports Awards organised by National
Chamber of Exporters. The Company
also won two awards in different
sectors at the National Business
Excellence Awards 2010 organised by
The National Chamber of Commerce.
Chemcel (Pvt) Limited commenced its
focus on R & D a few years back on a
super adsorbent using the technical
support of a US multinational
company which is among the forefront
of manufacturing biodegradable
products. This Company is continuing
its focus and is planning to start
commercial production in the near
future. The Company acquired a
factory at Mirigama EPZ for its
operations. Refurbishment of the
factory building at Mirigama EPZ
is completed and the process of
installing and commissioning the
machines and equipment under
the first phase of the project has
commenced. We have already obtained
the necessary approvals from the
Board of Investment of Sri Lanka and
the Central Environment Authority
for this project. Furthermore, we are
in the process of finalising a location
for the second phase of the project.
Progress meetings are held very
frequently with the participation of
the relevant Board Members and
the Senior Management to advise on
specific requirements.
Chemanex Exports (Pvt) Limited, a
company which is also accredited
with ISO 9001:2000 certification,
manufactures yarn sizing chemicals
used in the textile industry to
strengthen the yarn to facilitate
weaving. The Company completed a
successful year achieving budgeted
targets. The Company has taken
steps to widen its customer base
and therefore, satisfactory results
could be expected in the coming year.
Our products have achieved high
quality standards due to excellent
water solubility and good film
forming characteristics. However,
our main export market of Pakistan,
is continuously affected by prevailing
political and economic unrest.
Intermediate for Work-wear
Yasui Lanka (Pvt) Limited, a
Company which is accredited with
ISO 9001:2000, manufactures
seamless knitted gloves and liners
for applications such as product
handling and mechanical protection
for automobile repair and assembly,
agriculture and many other areas
where safety is an essential factor.
The Company operates in a niche
market and due to quality control
and timely delivery, it has been able
to create a competitive edge in the
markets which it operates. The light
weight and close fit of our glove
provides better finger sensitivity, which
is essential for precision work, and
we are able to manufacture liners
according to customer specifications,
using state-of-the-art Japanese and
German technology. The Company
managed to secure regular orders
during the year and managed to record
a marginal profit after generating
substantial losses in the previous two
consecutive years due to the financial
crisis which prevailed.
Raw material prices used to
manufacture work-ware went up
in the world market and the Rupee
appreciation also affected the
Company’s operations negatively.
We got the necessary certification for
our products and all our supplies are
certified for their quality. The Company
acquired twenty five state-of-the-art
knitting machines at a cost of
Rs. 42.5 Mn anticipating future
enhanced orders. Strategies are
in place for future revitalisation of
its performance by expanding its
product portfolio and international
customer base.
Yasui Lanka managed to post a
reasonable profit after recording
substantial losses in previous two
consecutive years.
During the year, Group’s systems
and controls were further upgraded
and strengthened. Internal audits
were carried out and their reports
were discussed in detail including
the corrective actions taken by the
management as explained in the
Report of the Audit Committee on
page 60. Chemanex Group complied
with all its legal and statutory
requirements during the year under
review. Chemanex Group recognises
risk management as a core business
process and has adopted a proactive
approach on a continual basis that
centres on a good risk reporting
system. Therefore, an integrated
risk management process has been
planned and implemented within
the Group in line with its objectives,
strategies and procedures.
As a responsible corporate citizen,
Chemanex Group recognises the goal
of sustainable development and fully
committed to achieve the objectives.
Therefore, Chemanex Group
commenced reporting on the third
generation Global Reporting Initiative’s
sustainability reporting guidelines
with effect from year under review.
The detailed report on sustainability
development and Global Reporting
Initiatives at Chemanex Group is given
on pages 26 to 41 of this Report.
1. A. Wijesinghe who joined the
support staff of the Company in
1977 subsequently promoted to the
executive grade with sheer dedication.
2. Installation and commissioning at
Chemcel plant at Mirigama EPZ is
progressing at a rapid phase.
4. State-of-the-art dryer was
commissioned at Ratmalana production
facility with the aim of reducing cost
of production as well as with added
environmental friendly features.
1
2
3
13
FINANCIAL REVIEW
Financial year 2010/11 was a
challenging year for Chemanex Group.
Whilst local operations generated
satisfactory performance, the Group’s
exports operations struggled to
maintain the momentum. Sri Lankan
Rupee appreciated considerably
against the US Dollar in 2010, making
us less competitive in the international
market. This unfavourable situation
was further aggravated with
unprecedented increase in raw
material prices in the world market
during the financial year under
consideration.
The turnover of Chemanex PLC,
increased by 10.6% to Rs. 549.8 Mn
for the year under review supported
by prevailed favourable local
marketing conditions. The Company
also managed to maintain better
margins compared to the previous
year and recorded a gross profit of
Rs. 148.8 Mn, maintaining a 27% gross
margin from its operations. Gross
profit increased by 16% compared to
the previous year of Rs. 128.17 Mn.
Other income includes a profit of
Rs. 18.4 Mn received from liquidation
of Chemanex Adhesives (Pvt) Limited.
In 2009, the management decided
to amalgamate the operations of
CAL Exports Lanka (Pvt) Limited and
Chemanex Adhesives (Pvt) Limited,
since both companies were engaged
in similar lines of businesses. The
Company has invested its excess funds
in the share market after carefully
analysing the market movements and
the performance of each Company
which is expected to generate positive
results in the coming year. The details
of the short-term investment in the
share market is given on page 102
of the Annual Report, Note 21 to the
Accounts. As per the LKAS 40, land
and buildings belonging to Chemanex
PLC, situated at Ratmalana is rented
out for subsidiaries have been
classified as Investment Property
from this financial year onwards.
Further, land situated at Wadduwa
and Muthurajawela also has been
reclassified as Investment Property.
The investment of Rs. 6.5 Mn
made in NTS Interlining (Pvt) Limited,
a couple of years ago was fully provided
for due to continuous negative results
generated. Inventory levels and trade
and other receivables have increased
substantially from its previous year
levels due to expectations on future
scaling up in its operations. The
operating expenses of the Company
dropped by 8.4% due to efficient
management and strengthened
controls. Distribution expenses too
dropped by 9.0% irrespective of the
increase in revenue. Administration
expenses dropped by 6% and
financing expenses by 48% for the
year, compared to the previous year.
Profit before tax increased by 33% to
Rs. 110.1 Mn for the financial year.
Net profit for the period increased
by 45% to Rs. 81 Mn for the period,
clearly indicating the improvement in
1
2
performance. The Company recorded
a basic earnings per share of
Rs. 5.15 compared to the previous
year’s Rs. 3.54. The Company paid a
dividend of Rs. 2.00 per share in line
with its past records. The Company
also recorded a dividend payout of
38.87% for 2010/11 compared to
previous record of 70.58%, decrease of
44.93%. Also dividend cover increased
1.15 times from its previous year’s
recorded of 1.42 times by 82%. In
the year under review, the return of
shareholders’ equity increased to
7.23% from 5.17% in previous year by
40%. Total assets of the Company as
well as shareholders’ funds improved
by 6.22% and 3.86% respectively in the
year under review.
During the year, the Company
invested a further Rs. 25 Mn in
Rain Forest Ecolodge (Pvt) Limited,
increasing its holding to 24.42%, and
became the largest single shareholder
of the Eco Tourism Company. The Group
commenced consolidating the results of
Rain Forest Ecolodge (Pvt) Limited, as
an equity accounted investee with effect
from 31 March 2011. Cash and cash
equivalents of the Company stood at
Rs. 81.9 Mn as at year end, compared
to the Rs. 320.4 Mn, recorded last year.
The main reason for the decline was
the investment made in Chemcel (Pvt)
Limited, which is expected to start
its commercial operations in the
coming year.
Our flagship export Company, CAL
Exports Lanka (Pvt) Limited,
recorded a turnover of Rs. 330.7 Mn
compared to the previous year’s
Rs. 391.8 Mn, with a drop of 15.7%. The
Company’s margins squeezed due to
1. CAL Exports production team
performed well during a difficult
year of operation.
2. Chemcel pilot plant at Ratmalana
has achieved encouraging results
during the year.
3. Power factor correctors
established at Ratmalana has
improved the electricity utilisation
to 0.98.
4. Our paint distribution operation
performed satisfactorily during
the year.
14
3
4
unprecedented increase in raw material
prices in the world market coupled with
the Rupee appreciation against the US
Dollar. The Company recorded a profit
before tax of only Rs. 6.3 Mn compared
to the previous year’s Rs. 78 Mn.
Operating expenses dropped by 31.6%
proportionately to loss of revenue. Gross
margins stood at 12% compared to
the previous year’s healthy 28%, since
we could not transfer the total cost
escalations to our buyers.
As a result, basic earnings per share of
the Company dropped to Rs. 1.05 from
the previous year recorded of Rs. 13.41,
by 92%. The Company invested Rs. 18.9
Mn and Rs. 9.8 Mn respectively in a
Rotary Drum Dryer and a Compactor
during the year. Both machines are
state-of-the-art machinery and would
generate substantial cost reductions,
improving our competitiveness in
the international markets that we
operate. Compactor would help us to
manufacture products with different
specifications as required by our
European buyers. Net assets per share
of the Company dropped to Rs. 27.40
from last year’s record of Rs. 29.10. The
Company’s short-term strategy was to
retain its customer base intact, even by
supplying at a break-even price.
Chemanex Exports (Pvt) Limited, a
fully-owned subsidiary of Chemanex
PLC recorded a turnover of Rs. 41.9 Mn
for the year, compared to the last year
record of Rs. 43.5 Mn. The Company
managed to maintain its profit margin
steady as in the last year and recorded
a profit before tax of Rs. 9.9 Mn. The
Company could not perform to its full
potential due to negative economic
and political sentiments prevailed
in its main market, Pakistan. The
Company recorded an earnings per
share of Rs. 10.06 compared to the
previous year’s Rs. 9.82. Net assets
per share of the Company also
increased to Rs. 115.87 from last
year’s record of Rs. 108.30.
Yasui Lanka (Pvt) Limited recorded a
turnover of Rs. 104 Mn for the year,
generating a profit before tax of
Rs. 3.7 Mn after recording substantial
losses in previous two consecutive
years. The Company has maintained
16% gross margin from its operations
for the year. Yasui Lanka (Pvt) Limited
invested Rs. 42.5 Mn to purchase 25
machines during the year, expecting
additional future orders from its
customers. The Company recorded a
earnings per share of Rs. 0.63 for the
year, which is an improvement from
the previous year record of negative
Rs. (4.39). Net assets per share of the
Company recorded Rs. 15.99 from the
previous record of Rs. 15.36.
times in 2010. Price Earning Ratio of
the Company improved by 167% to 56
times in 2011.
The first phase of the supper absorbent
project, under Chemcel (Pvt) Limited
will be completed within the near future
and the second phase of the project
also will be started once a suitable
location is secured. The Company has
so far invested Rs. 215 Mn for the first
phase of the project.
Return on equity and the return on
capital employed of the Group were
at 2.88% and 4.90% respectively from
its previous year record of 7.49% and
11.58% respectively.
The revenue of the Chemanex Group
increased by 3% to Rs. 999.6 Mn for
the year mainly contributed by local
operations. However, the gross profit
dropped by 14% to Rs. 185.7 Mn mainly
due to under performance of export
operations. Profit before tax dropped
to Rs. 68 Mn by 56% from previous
year record of Rs. 155 Mn. Cash and
cash equivalents of the Group stood at
Rs. 216.7 Mn against the Rs. 476.7 Mn
recorded for the previous year. The
annualised earnings per share and
dividend per share of the Group
recorded at Rs. 2.34 and Rs. 2.50
respectively as at end March 2011.
The Group recorded a return on assets
of 2.03% for the year 2011, compared
to the 5.78% recorded in previous
year. It is noteworthy that new capital
investment at Chemcel (Pvt) Limited
has not generated results to date.
The interest cover of the Group was
recorded at 7.73% for 2011 and 9.04%
in 2010. Total Assets of the Group
stood at Rs. 1.8 Bn at end of the
year, reflecting a 9.3% improvement,
compared to the previous year. Total
debt of the Group increased to
Rs. 203 Mn from Rs. 83 Mn in 2010
and the position of the shareholders’
funds, dropped marginally by 0.2% to
Rs. 1.3 Bn. Number of shares in issue
remained same at 15,750,000 and net
assets per share dropped marginally
to Rs. 81.37 from Rs. 81.52 recorded
in previous year. Debt to equity ratio
of the Group recorded at 15.84% as at
the end of the year under review and
Debt to total Assets at 11.5%. Liquidity
position of the Group recorded at
2.73 times in 2011 from 5.26 times in
2010. Financial leverage of the Group
recorded at 1.07 times from 1.21
15
Prospects for Future
Our Export Destinations
7 32 20
3
14
48
17
12
4
5
24
39 43
9
18
46
13
25
31
29
44
23
15
28
41 40
47
8
22
36
37
26
21
45
10
49
38
33
27
11
2
32
34
42
1
19
35
16
EMERGING
1. Argentina
2. Brazil
3. Canada
4. Czech Republic
5. Hungary
6. Israel
7. Lebanon
8. Mexico
9. Morocco
16
10.
11.
12.
13.
14.
15.
16.
17.
Nigeria
Peru
Poland
Romania
Russia
South Korea
Sudan
USA
6 30
EXISTING
18. Algeria
19. Australia
20. Bahrain
21. Bangladesh
22. China
23. Egypt
24. France
25. Greece
26. India
27. Indonesia
28. Iran
29. Japan
30. Jordan
31. Libya
32. Madagascar
33. Malaysia
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
Mauritius
New Zealand
Oman
Pakistan
Philippines
Portugal
Qatar
Saudi Arabia
South Africa
Spain
Syria
Thailand
Tunisia
UAE
United Kingdom
Vietnam
INFORMATION TO SHAREHOLDERS AND INVESTORS
1. STOCK EXCHANGE LISTING
20 September 2010
Date of Listing in Colombo Stock
Exchange: 16 December 1974
The price band imposed on 04 August
2010 was revised by introducing a new
formula.
Identification Symbol in Colombo
Stock Exchange: “CHMX.N”
2. Share Market At A Glance
The peaceful environment and
favourable market sentiments
growing within the country pushed
the Colombo Stock Exchange (CSE) to
new heights during the year 2010/11.
All Share and Milanka Price indices
recorded at 7,226.12 and 6,874.74
respectively resulting 94% and 61%
improvements compared to the
previous year recorded 3,725 and
4,271 respectively.
Nevertheless, the year just concluded
was a period with many regulatory
measures imposed by Securities and
Exchange Commission of Sri Lanka
(SEC), the regulatory body of CSE,
in order to mitigate unwarranted
overheating in CSE and thereby to
secure the inventors’ funds. The
following measures were imposed by
the SEC during the year under review.
The period of the band was also
reduced to 15 days.
29 November 2010
The credit restriction was released to
settle 50% of the credit before
31 March 2011 and balance before
30 June 2011.
30 December 2010
Brokers were permitted to force-sell
at T+5 day if the investor defaults to
settle credit on T+3 period.
However, irrespective of above
measures, the ASPI recorded a new
height of 7,811.82 on 14 February 2011
and the MPI recorded its highest during
the year at 7,829.05 on 01 October 2010.
04 August 2010
Imposition of 10% price band
(upward and downward).
14 September 2010
Announcement on credit restriction to
T+3 with effect from 01.01.2011.
17
3. CHEMANEX’S SHARE PRICE IN THE MARKET
The highest share price for the year of Chemanex PLC recorded on the 07 February
2011 at Rs. 174.70 compared to Rs. 155/- recorded for the last financial year. The
average share price (value of shares traded divided by number of shares traded
for the financial year) of Rs. 153.17 for the year under review recorded an increase
of 64% compared to the average share price of Rs. 94 for the previous year. The
lowest share price recorded on 29 November 2010 at Rs. 115/-.
Date
2011
Price
Rs.
Date
2010
Price
Rs.
Date
Highest Price
07.02.2011
174.70
08.10.2009
155.00
08.05.2008
Lowest Price
29.11.2010
115.00
01- 07.04.2009
50.00
29.12.2008
2009
Price
Rs.
65.00
37.00
Average Price
153.17
94.00
53.00
Last traded Price
133.40
130.25
49.50
No. of transactions
No. of shares traded
Value of shares traded (Rs.)
1,479
5,051
4,099
2,454,200
4,935,600
3,488,800
375,907,555
463,448,750
184,314,600
During the year under review, the total number of shares traded recorded as
2,454,200 resulting a dip from 4,935,600 shares recorded for the previous year.
18
Key Ratios of the group for your Investment Decisions
Earnings Per Share (Rs.)
2011
2010
2009
2.34
6.11
20.76
P/E Ratio (Times)
55.45
21.32
2.38
Net Assets per Share (Rs.)
81.37
81.52
77.60
Return on Assets (%)
2.03
5.78
19.29
Dividend per Share (Rs.)
2.00
2.50
10.00
ROCE
4.90
11.58
26.18
ROE
2.88
7.49
26.75
Please also refer to the Year at a Glance on page 2 for more information.
4. MARKET CAPITALISATION
The market capitalisation as at 31 March 2011 recorded at Rs. 2,101.05 Mn compared to Rs. 2,051.44 Mn recorded
as at 31 March 2010, which is an improvement of 2.42%. The value of shareholders’ funds for the year under review
recorded at Rs. 1,281.54 Mn. compared to Rs. 1,283.98 Mn. recorded for the previous financial year.
5. DIVIDEND PAYMENT
Your Company maintained a high dividend payout ratio in the past, whilst making reserves for future investment
opportunities. For the year 2010 it paid a dividend of Rs. 2.50 a share. An interim dividend of Rs. 1/- per share
was already paid in the month of February 2011 and the Board has proposed a final dividend of Rs. 1/- per share,
subject to the approval of shareholders.
19
6. Analysis of Shareholders as at 31 March 2011
Range of Shareholding
No. of Shareholders
2011
No. of
Shares
%
No. of Shareholders
2010
No. of
Shares
%
1
-
1,000
894
242,565
1.54
899
240,597
1.53
1,001
-
10,000
279
963,101
6.11
287
1,002,527
6.37
10,001
-
100,000
68
2,168,127
13.77
71
2,237,519
14.21
100,001
-
1,000,000
10
2,809,451
17.84
9
2,942,601
18.68
Over
-
1,000,000
2
9,566,756
60.74
2
9,326,756
59.22
1,253
15,750,000
100.00
1,268
15,750,000
100.00
Total
Categories of Shareholders
Individuals
1,198
4,089,396
25.96
1,203
3,782,182
24.01
Institutions
55
11,660,604
74.04
65
11,967,818
75.99
Total
1,253
15,750,000
100.00
1,268
15,750,000
100.00
Resident
1,215
15,643,056
99.32
1,226
15,627,306
99.22
Non-Resident
Total
38
106,944
0.68
42
122,694
0.78
1,253
15,750,000
100.00
1,268
15,750,000
100.00
7. Public ShareHolding as at 31 March 2011
Name of Shareholder
No. of Shares
%
15,750,000
100.00
CIC Holdings PLC
7,939,373
50.41
CIC Trustees for Charitable and Educational Trust Fund
1,627,383
10.33
93
0.00
446,604
2.84
Total Number of Shares Issued
Exclude Holdings of (a) Parent Company
(b) Equity Accounted Investee
Commercial Insurance Brokers (Pvt) Limited
(c) Subsidiaries of the Parent Company
CIC Agribusinesses (Pvt) Limited
(d) Directors and members of their families (Spouses and Children under 18
years of age and/or their Nominees)
Public Holding
20
56,835
0.36
10,070,288
63.94
5,679,712
36.06
8. Twenty Largest Shareholders The twenty largest shareholders as at 31 March 2011 are given below:
2010
No. of Shares
Name of Shareholder
2011
No. of Shares
CIC Holdings PLC
7,939,373
50.41
7,699,373
48.88
CIC Trustees for Charitable & Educational Trust Fund
1,627,383
10.33
1,627,383
10.33
Mr. S.K. Wickremesinghe
845,245
5.37
845,245
5.37
Sakuvi Investment Trust (Pvt) Limited
602,366
3.82
612,566
3.89
CIC Agribusinesses (Pvt) Limited
446,604
2.84
446,604
2.84
%
Seylan Bank PLC/Brown & Company PLC
183,300
1.16
J.B. Cocoshell (Pvt) Limited
142,485
0.90
Mr. J.R. De Silva
133,450
Miss S.S. Srikanthan
123,300
Ms. S.S. Srikanthan
Seylan Bank PLC/Prime Lands (Pvt) Limited
–
%
–
142,485
0.90
0.85
3,850
0.02
0.78
123,300
0.78
122,400
0.78
122,400
0.78
105,300
0.67
Mr. S. Srikanthan
105,001
0.67
Bank of Ceylon No. 1 Account
–
100,001
–
0.63
100,000
0.63
–
–
Lanka Orix Leasing Company PLC
95,800
0.61
–
–
Mr. S.S. Srikanthan
92,823
0.59
92,823
–
0.59
Mr. S.N. Kumar
89,900
0.57
Bensons Limited
83,286
0.53
83,286
0.53
–
Mrs. M.C. Abeyasekera
81,546
0.52
81,546
0.52
Dr. H.S.D. Soysa
68,429
0.43
68,429
0.43
Mrs. B.E. De Saram (Deceased)
68,358
0.43
68,358
0.43
13,056,349
82.89
12,117,649
76.92
9. Movement in Share Capital
Type of Issue
Year of Issue
Ratio
No. of Shares (’000)
Initial Capital
1974
–
Bonus
1976
1:1
40
80
Bonus
1977
1:1
160
Rights
1983
1:1
320
Rights
1986
9:16
500
Rights
1989
1:2
750
Debenture
1990
1:2
1,125
Rights
1991
1:4.5
1,375
Rights
1992
1:2.75
1,875
Rights
1993
1:3
2,500
Rights
1995
1:5
3,000
Bonus
1998
1:6
3,500
Bonus/Rights
2005
1:4/1:5
5,250
Sub Division
2008
3:1
15,750
21
Board of Directors
7
5
6
1
22
4
3
8
2
1. B.R.L. Fernando - Chairman
5.Prof. U.P. Liyanage
Joined the Board of Directors of Chemanex PLC in 1988.
A Fellow of The Institute of Chartered Accountants of
Sri Lanka. Currently, functioning as Non-Executive Chairman
of CIC Holdings PLC, Akzo Nobel Paints Lanka (Pvt) Limited,
CIC Agribusinesses (Pvt) Limited, CIC Feeds (Pvt) Limited and
Commercial Development Company PLC. Deputy Chairman
of the Commercial Bank of Ceylon PLC and Non-Executive
Director of Ceylon Tea Brokers PLC, First Guardian Equities
(Pvt) Limited, Rainwear (Pvt) Limited and subsidiaries/equity
accounted investees of the CIC Group. Serves as the
Co-Chairman of the National Council for Economic
Development (Agriculture Cluster) and Governor of the
Business Development Centre.
6.S.P.S. Ranatunga
2. M.P. Jayawardena - Managing Director/CEO
Appointed to the Board of Chemanex PLC in May 1994
and assumed duties as the Managing Director/CEO in
April 2007. A Fellow of The Institute of Chartered Accountants
of Sri Lanka and Certified Professional Managers.
A Non-Executive Chairman of The Finance Company PLC,
a Non-Executive Director of CIC Holdings PLC, Keells Food
Products PLC, Ram Rating (Lanka) Limited and a number
of unlisted companies in the CIC Group. Served Zambia
Consolidated Copper Mines Limited for 13 years and held
several senior positions including Head of Treasury. Deputy
Chairman of Ceylon National Chamber of Industries and a
Member of the Monetary Policy Consultative Committee of
the Central Bank of Sri Lanka.
Joined Chemanex PLC in 1977 and was invited to the Board
of Directors in August 2007. He was appointed as Chief
Operating Officer in January 2010. He is specialised in the
areas of Industrial Chemicals and its technical applications
and counts more than 30 years of experience in local and
international marketing. He has received training at AOTS,
Japan in Japanese Management & Practices and also have
received overseas technical training. He is also a Director of
many other subsidiary companies in the Chemanex Group.
4.D. Chandrasekara
Appointed to the Board of Chemanex PLC in August 2008.
Holds a BSc. (General) Degree from the University of Ceylon,
a Higher National Diploma in Chemical Engineering from
College of Technology, Huddersfield, U.K. and a Postgraduate
Diploma in Chemical Engineering from University College
London, UK. Fellow of the Institute of Engineers, Sri Lanka
and a Chartered Engineer. Obtained extensive experience in
Refinery Management, Energy Management and Planning
and Conservation at both National level and at Refinery
level. Trained and gathered experience in negotiating Fuel
Supply Agreements for Build-Operate-Own-Transfer power
projects. Represented Sri Lanka at a number of international
conferences including Asia Pacific Energy Studies Consultative
Group at East West Centre, Hawaii and the World Energy
Conference Asia Pacific Regional Forum in Australia. Was a
Director of Sri Lanka Sustainable Energy Authority.
Joined the Board of Chemanex PLC in October 2005. Chief
Executive Officer of CIC Holdings PLC. Holds a Degree from the
University of Delhi and a Master’s in Business Administration,
UK. Non-Executive Director of a number of unlisted companies
in the CIC Group including Akzo Nobel Paints Lanka (Pvt)
Limited. He also functions as the President of the Sri Lanka/
Africa/Middle East Business Council and the Vice-President of
the Sri Lanka-Maldives Bilateral Business Council of the Ceylon
Chamber of Commerce. He has led several Ceylon Chamber of
Commerce Trade Delegations to different countries.
7.A.V.P. SILVA
3.A. Mapalagama - Chief Operating Officer
Appointed to the Board of Directors of Chemanex PLC in
October 1999. Holds a MBA and a PhD. in Marketing. A Fellow
of the Chartered Institute of Marketing (CIM). Director and
Chairman of the Board of Management of the Postgraduate
Institute of Management (PIM). Director of Ceylon Cold Stores
PLC, Diesel & Motor Engineering PLC (DIMO), Talawakelle
Tea Estates PLC, Arpico Plastics, Kuruwita Textile Mills PLC,
Q & E Advertising and Commercial Bank PLC. A former
Chairman of Chartered Institute of Marketing, Sri Lanka
Region, and Trustee of the International Board of Chartered
Institute of Marketing.
Appointed to the Board of Directors of Chemanex PLC in
September 2001. A Fellow of The Institute of Chartered
Accountants of Sri Lanka and Association of Accounting
Technicians of Sri Lanka. Managing Director/Chief Executive
Officer of CIC Feeds (Pvt) Limited, CIC Vetcare (Pvt) Limited,
CIC Poultry Farms Limited and CIC Bio Security Breeder
Farms Limited. Director of CAL Exports Lanka (Pvt) Limited
and Crop Management Services (Pvt) Limited.
8. M.D. Wickramasinghe
Appointed to the Board of Chemanex PLC in October 2010.
Currently, Country Head and CEO of Fitch Ratings Lanka
Limited. Prior to that a short stint at Dialog Telekom PLC, as
Head of Treasury & Corporate Finance. Senior Consultant
with Ernst & Young for a period of two years. Consultant to
SEC on the Capital Market Master Plan Project. Facilitated
projects for Clean Development Mechanism (CDM) projects
and bid process management for Public Private Partnership
(PPP) projects. Business plan to set-up a Carbon Fund and
a strategic plan for a leading bank were among the other
leading consultancies. 13 years experience in investment
banking as Group MD/CEO of First Capital a boutique
investment bank. Prior to this worked at Commercial Bank of
Ceylon PLC as a Treasury Dealer for 5 years. With a Degree
in Civil Engineering from the University of Bombay in 1986,
worked as a Site Engineer with the consultants to the project,
Joint Venture Samanalawewa (JVS). The work involved
quantity surveying at the power station and site engineer to
the dam site supervising work on the spillway, investigation
tunnels and stabilisation work of the dam.
Board of Directors
23
1. M.P. Jayawardena
Profile given on page 23.
2.A. Mapalagama
Profile given on page 23.
3.T.S.G. DANIEL
Joined the Company in 2011 and presently functions as
Exports Manager. Holds a LLB (Honours) Degree
from the University of London and a BA (Honours) in
English from the University of Colombo. A member of
the Sri Lanka Bar Association, she is also an Attorneyat- Law. Holds a Master’s Degree in Law (L.L.M.) from
the University of London as well a postgraduate Diploma
in Global Security from Uppsala University, Sweden.
4.S. De Silva
Chartered Chemist & holds a B.Sc. Degree in Chemistry
from the University of Peradeniya. Serves on the Board
of Directors of Colombo Industrial Agencies Limited,
CISCO Specialty Packaging (Pvt) Limited. Accounts for
over 30 years in technical and commercial experience in
the CIC Group.
5.E.S.L. Fernando
Joined the Company in 1982 and presently functions
as Manager - Finance & Administration. During his
career of 25 years, he has obtained extensive exposure
in Finance, Administration, Imports & Exports. He is a
Director of Chemanex Exports (Pvt) Limited.
24
6.W.M.F.A.B. Fernando
Manager - Financial Planning and Company Secretary
to the Group subsidiary companies. A Fellow of The
Institute of Chartered Accountants of Sri Lanka and
holds a Master’s Degree in Business Administration (Finance) from the University of Colombo. Holds a
Business Administration Special Degree from the
University of Sri Jayewardenepura. She is a Director
of Yasui Lanka (Pvt) Limited.
7. M.N. Hassan
Group Marketing Manager - Exports. Holds a Diploma
in Rubber Technology, University of Sri Lanka, in 1979.
Fellow of the Plastics and Rubber Institute of UK. Fellow
of the Institute of Materials, Minerals and Mining of
UK. Vice-President of The Sri Lanka-Poland Business
Council, Sri Lanka-Nordic Business Council. Member
of the committee on Polymer Science and Technology,
a national level committee on Institute -Industry
Partnership. He is a Director of Yasui Lanka (Pvt) Limited.
8.J.M.V.N. Jayaweera
Joined the Company in 2007 as Production Manager.
Holds a Bachelor of Science Degree, specialised in
Chemical & Process Engineering from the University
of Moratuwa. An Associate Member of the Institute of
Engineers of Sri Lanka.
9. K.S.L.S. Kalansooriya
as Manager - Engineering. An Associate Member
of Institute of Engineers of Sri Lanka and holds a
Bachelor of Science Degree specialised in Mechanical
Engineering from the University of Peradeniya.
10.R.S.J. Perera
Joined the Company in December 2000 as a ManagerSecurity. A former sSenior Superintendent of Police with
38 years of experience in criminology, man management
and security concerns. A member of the International
Police Association. Assistant Secretary of the Senior
Police Officers’ Association. A life member of the
Industrial Security Foundation of Sri Lanka, elected
Secretary for the current year.
11. B.M.C.D. sarathchandra
Plant Manager Yasui Lanka (Pvt) Limited. An Associate
Member of the Institute of Engineers of Sri Lanka and
holds a Bachelor of Science Degree specialised in
Production Engineering from the University of Peradeniya.
12.S. Shanker
IT Manager. He is a Chartered IT Professional Member of
the Chartered Institute for IT (BCS - UK). Holds HDIT from
the University of Colombo School of Computing. Holds ICT
Qualification from Australian Computer Society. Also holds
a Diploma in Project Management (UK). He Accounts for
over 19 years of work experience in the field of ICT.
13.A.N. Sugathapala
as Chief Finance Officer/Company Secretary. Holds a
B.Sc. Administration (Econ.) (Honours) Degree from
the University of Sri Jayewardenepura. A Fellow of The
Institute of Chartered Accountants of Sri Lanka and
holds a Master’s Degree in Business Administration
(Marketing) from Charles Stuart University, Australia.
Also an Associate Member of the Institute of Chartered
Ship Brokers, U.K. He is a Director of Chemanex Exports
(Pvt) Limited, Yasui Lanka (Pvt) Limited and Chemcel
(Pvt) Limited.
14. G.G. Wellala
as the Deputy Marketing Manager. Holds a B.Sc.
(Agriculture) Degree from the University of Peradeniya.
Accounts for more than 15 years of extensive experience
in Industrial Chemicals, especially Estate Chemicals.
8
13
11 14
6
10
5
3
7 6
2
13
1
24
4
12
5
10
8
7
9
9
11
25
SUSTAINABILITY DEVELOPMENT AND GLOBAL REPORTING INITIATIVES AT
CHEMANEX GROUP
Chemanex Group recognises that the
goal of sustainability development is to
meet the needs of the present without
compromising the ability of future
generations to meet their own needs.
As a responsible corporate citizen we
recognise that Chemanex PLC has a
pivotal role to play in achieving these
goals within the Group. Furthermore
sustainable development demands
new and innovative choices and ways
of thinking. We recognise that to
support this expectation, as well as
to communicate clearly and openly
about the substances of sustainability,
a trusted and credible framework of
sustainable reporting, that can be
used by organisations is required.
This has been fulfilled by the Global
Reporting Initiatives (GRI), founded
in 1997 and further enriched by the
third generation (G3), Sustainability
Reporting Guidelines released in
2006. By adherence to GRI reporting
we are committed to the practice
of measuring, disclosing and being
accountable for internal and external
stakeholders for organisational
performance towards the goal of
sustainable development.
Chemanex Group commenced
reporting on the third generation GRI’s
sustainability reporting guidelines with
effect from 2010/11 financial year. We
declare that the Chemanex Group has
applied the GRI Application of level C.
As per the GRI materiality concept,
information included in our report
covers topics and indicators that reflect
the organisation’s significant economic,
environmental and social impacts
both upstream and downstream
that would substantively influence
the assessments and decisions of
stakeholders. In our report we have
identified our stakeholders and have
made all attempts to respond to their
reasonable expectations and interests.
As per GRI guidelines we recognise
stakeholders including entities or
individuals that can reasonably be
expected to be significantly affected by
the organisation’s activities, products
and/or services, and whose actions can
reasonably be expected to significantly
affect the ability of the organisation to
successfully implement its strategies
and achieve its objectives. This report
has been presented with the emphasis
26
on underlying how Chemanex Group
contributes towards sustainability
development at present and focusing
on future plans for the improvement
of economic, environmental and social
conditions on local and global levels.
Therefore, we have sincerely disclosed
both favourable and unfavourable
results with proposed future actions
to be taken. Our report represents the
performance of Chemanex PLC and
its subsidiaries, CAL Exports Lanka
(Pvt) Limited, Chemanex Exports (Pvt)
Limited, Chemcel (Pvt) Limited and
Yasui Lanka (Pvt) Limited.
The Group Sustainable Development
Committee consists of following Board
Members.
Prof. U.P. Liyanage - Committee Chairman
M.P. Jayawardena
A. Mapalagama
Organisational Profile
Chemanex is a globally recognised
and responsible corporate in
manufacturing and exporting valueadded speciality compounds and
intermediates. Chemanex also acts as
Agents and Distributors.
Chemanex Group consists of
Chemanex PLC, the holding company
and four subsidiaries and three equity
accounted investees. Details of the
operations of each entity is given in
Management Discussion and Analysis
segment of the Annual Report in
page 10 to 13.
Report Parameters
In order to determine the materiality of
the information included in this report,
the following factors have been taken
into consideration:
sustainability interests and
concerns raised by stakeholders.
 The
critical success factors.
 Our
core competencies and
their significance for sustainable
development.
Memberships in Association
and advocacy organisations
1. Ceylon Chamber of Commerce.
2. National Chamber of Commerce.
3. Ceylon National Chamber of
Industries.
4. National Chamber of Exporters of
Sri Lanka.
5. Export Development Board.
6. United Nations Global Compact.
7. Sri Lanka Institute of Directors.
8. Sri Lanka Institute of Packaging.
9. Plastic & Rubber Institute.
10. Exporter’s Association of
Sri Lanka.
11. Sri Lanka-Germany Business
Council.
12. Sri Lanka-Poland Business
Council.
13. Sri Lanka-Malaysia Business
Council.
14. Sri Lanka-Nordic Business
Council.
15. Sri Lanka-China Business Council.
The Stakeholder Analysis
Chemanex continuously engaged
with its stakeholders and strive to
develop a constant dialogue with
them. We have identified following key
stakeholders of our operations and
also remain vigilant on other potential
stakeholders as well:
 Local
and International Customers
and Suppliers
 The
 Employees,
 Relevant
 Government
laws, regulations,
international agreements and
voluntary agreements of significance
to the Group and its stakeholders.
 Recognised
impacts, risks
and opportunities that affect
sustainability.
 Our
values, policies, strategies,
management systems, goals
and targets.
Labour Contractors and
Board of Directors
and Government
Regulatory Bodies
 Shareholders
 Media
 Associations
Groups
and Civil Society
 CSR
rating organisations such as
UN Global Compact.
 General
Public.
G3 ENVIRONMENTAL PERFORMANCE INDICATORS
GRI
Indicator
Performance
GRI Description
2009
2010
2011
6,100
6,486
5,030
ASPECT: MATERIALS
CORE
EN 1
Material used by weight or
volume.
CORE
EN 2
Percentage of materials
used that are recycled input
material.
Total material used in Metric
Tons for manufacturing by
the Group.
From the waste material, a majority is
recovered. This has resulted a reduction in the
standard loss from 6% to 2%.
ASPECT: ENERGY
CORE
CORE
EN 3
EN 4
Direct energy consumption
by primary energy source.
EN 5
72,265
87,530
95,043
Energy (Gj).
2,688
3,256
3,535
568,462
448,295
847,615
2,046
1,614
3,051
4,734
4,870
6,586
0.78
0.75
Indirect energy consumption Electricity (kwh).
by primary source.
Energy (Gj).
Total direct and indirect
energy consumption per
material used.
ADD
Fuel Litres.
Energy saved due to
conservation and efficiency
improvements.
Total energy (Gj).
Total energy consumption
per Metric Ton.
1.31 *
1. Deliveries are pre-planned to minimise the
fuel consumption.
2. Four sub-stores are established outside
Colombo which has reduced transport
requirement.
* Total energy consumption has increased
sharply due to re-commencement of
Yasui Lanka operations.
ADD
ADD
EN 6
EN 7
Initiative to provide energy
efficient or renewable
energy-based products and
services, and reductions in
energy requirements as a
result of these initiatives.
1. Exploring the possibilities to use LED
technology for minimising power utilisation.
Initiatives to reduce indirect
energy consumption and
reductions achieved.
1. A power factor corrector is installed, which
has increased the electricity utilisation to
0.98. This is applicable for all the plants at
Ratmalana.
2. Already installed an energy efficient dryer at
Ratmalana manufacturing plant at a cost of
Rs. 18.9 Mn.
2. Transparent roofing and cladding sheets are
used to maximise daylight usage (we have
planned to knock off about 200 fluorescent
lights at Mirigama plant).
3. For new installations it is made compulsory
to use energy efficient bulbs and fittings.
4. Turbine ventilators and monitor roofs are
used to minimise air-conditioners/fans
utilisation.
SUSTAINABILITY DEVELOPMENT AND GLOBAL REPORTING INITIATIVES AT CHEMANEX GROUP
27
GRI
Indicator
GRI Description
Performance
2009
2010
2011
6,049
6,659
9,899
0.99
1.03
1.97
ASPECT: WATER
CORE
EN 8
Total water withdrawal by
source.
Total water withdrawal (M3).
Total withdrawal per ton.
ADD
EN 9
Water sources significantly
affected by withdrawal of
water.
The Company used water from Municipal water
delivery system, therefore, does not affect any
natural water source.
ADD
EN 10
Percentage and total
volume of water recycled
and reused.
At present Group’s operations do not require
large quantities of water.
CORE
EN 11
Location and size of land
owned, leased, managed
in or adjacent to, protected
areas and areas of high
biodiversity value outside
protected areas.
We do not have lands owned, leased, managed
in or adjoining to protected areas and areas of
high biodiversity value outside protected areas.
Breakdown of lands are as follows:
Geographic
location
Land extent
Type of
operation
Ratmalana
(Owned)
2 acres
Manufacturing
Colombo
(Rent)
10,465 sq. ft.
Office
Wadduwa
(Owned)
2 acres
Muturajawela
(Owned)
8 acres
Investment
Property
Mirigama
(Leased)
6 acres
Manufacturing
Nil
Nil
Nil
CORE
EN 12
Description of significant
impact of activities,
products and services on
biodiversity in protected
areas of high biodiversity
value outside protected
areas.
ADD
EN 13
Habitats protected or
restored.
There is no adverse impact on natural habitats
from our operations.
ADD
EN 14
Strategies, current
action and future plans
for managing impact on
biodiversity.
The Group on a policy level have no plans to
engage in any activity which has a negative
impact on biodiversity.
ADD
EN 15
Number of IUCN Red
List species and national
conservation list species
with habitats in areas
affected by operation, by
level of extinction risk.
None of our operations are located in critical
areas specialised by the indicator.
28
GRI
Indicator
Performance
GRI Description
2009
2010
2011
ASPECT: EMISSION, EFFLUENT AND WASTE
CORE
EN 16
Total direct and indirect
greenhouse gas emission by
weight.
CORE
EN 17
Other relevant indirect
greenhouse gas emissions
by weight.
ADD
EN 18
Initiatives to reduce
greenhouse gas emissions
and reductions achieved.
CORE
EN 19
Emission of ozone-depleting
substance by weight.
CORE
EN 20
NO, SO, and other
Significant air emissions by
type and weight.
At present our Group does not have a mechanism
to quantify greenhouse gas emissions which we
believe to be very minimal. However, we have
initiated a mechanism to quantify such emissions
in the future, if any, and to compute carbon
footprint of our individual operations as well as
of the Group with a view to minimise the same.
Further, Group activities does not emit ozone
depleting substance at any stage.
CORE
EN 21
Total water discharge by
quality and destination.
We do not discharge process water other than
rain water to the environment.
CORE
EN 22
Total weight of waste by type Total amount of waste and disposal method.
generated (MTs).
142
209
137
Solid waste, discharged as per Local
Government regulations.
As a percentage of total input.
2.3
3.2
2.7
1. All effluents are discharged as per the Local
Government regulations.
2. Following process improvements were
implemented in order to minimise waste:
CORE
EN 23
Total number and volume of
significant spills.
ADD
EN 24
Weight of transported,
imported, exported or
treated waste deemed
hazardous under the terms
of Basel Convention Annex i,
ii, iii and vii and percentage
of transported waste
shipped internationally.

Fixing of a new dryer at a cost of Rs. 18.9 Mn
and have been able to reduce the waste
by 1%.

Dust extractor system was placed at a
cost of Rs. 2.6 Mn. Materials are extracted
and reused.

Over sized materials are pulverised and
reused.

Performance of the machinery are
continuously evaluated and upgraded
where necessary, in order to minimise
standard process losses.
Nil
Nil
Nil
We do not import or export materials deemed
‘hazardous’ under the terms of the Basel
convention.
29
GRI
ADD
EN 25
Indicator
Identify, size, protected
status, and biodiversity
value of water bodies and
related habitats significantly
affected by the reporting
organisation’s discharge of
water and run-off.
GRI Description
Performance
2009
2010
2011
We discharge only rain water into the Municipal
water drainage system. Solid waste is
discharged as per Local Government regulations
at designated locations for such discharge.
ASPECT: PRODUCTION AND SERVICES
CORE
EN 26
Initiatives to mitigate
environmental impact of
products and services, and
extent of impact mitigation.
1. Developed and introduced a water-based
chemical as a whitening agent for crepe
rubber industry replacing an oil-based
chemical.
2. Pioneer in introducing lead-free pigments for
paints and printing industries in Sri Lanka.
CORE
EN 27
Percentage of product sold
and the packaging materials
that are reclaimed by
category.
Majority of our packing materials are re-usable.
ASPECT: COMPLIANCE
CORE
EN 28
Monetary value of
significant fines and
total number of nonmonetary sanctions for
non-compliance with
environmental laws and
regulations.
Nil
Nil
Nil
ASPECT: TRANSPORT
ADD
EN 29
Significant environmental
impact of transporting
products, other goods and
materials used for the
organisation’s operations,
and transporting members
of the workforce.
There is no significant impact to the
environment from transportation of
our products, raw materials or staff.
ASPECT: OVERALL
CORE
30
EN 30
Total environmental
protection expenditures and
investments by type.
1. Dust extractor system - Rs. 2.6 Mn
2. New dryer - Rs. 18.9 Mn
G 3 LABOUR PRACTICES AND DECENT WORK PERFORMANCE INDICATORS
GRI
Indicator
GRI Description
Performance
2009
2010
2011
170
176
181
60
102
115
3
6
5
Total employee turnover.
13
19
14
Rate of turnover %.
7.6
10.8
7.7
20-25
2
1
2
26-30
2
3
2
31-35
2
3
1
36-40
1
0
2
41-45
2
4
0
46-50
0
2
0
51-55
1
1
1
>55
3
5
6
10
13
8
3
6
6
ASPECT: EMPLOYMENT
CORE
CORE
LA 1
LA 2
Total workforce by employee Full time.
type, employment contract
Outsourced.
and region.
Total number and rate of
employee turnover by age
group, gender and region.
The total number of
employees in the reporting
year minus the number of
employees in the previous
year.
Employee turnover by age group
Employee Turnover by gender
Male
Female
ADD
LA 3
Benefits provided to fulltime employees that are
not provided to temporary
or part-time employees, by
major operations.

Reimbursement of employee education expenses in relevant fields.

Financial assistance for higher education and undergraduate education
extended to children of employees.

Reimbursement of medical and healthcare expenses.

Financial assistance to the employees’ funeral.

Loan schemes at subsidised interest rates.
ASPECT: LABOUR MANAGEMENT RELATIONS
CORE
LA 4
Percentage of employees
covered by collective
bargaining agreements.
We do not have employee unions, therefore no collective bargaining
agreements available. The Company has not discouraged having collective
bargaining agreements at any stage.
CORE
LA 5
Minimum notice (period)
regarding operational
changes, including whether
it is specified in collective
agreements.
There is no specific minimum notice period. The time period with regard to the
changes in operations would be decided by mutual agreement between the
management and the employees.
31
GRI
Indicator
GRI Description
Performance
2009
2010
2011
ASPECT: OCCUPATIONAL HEALTH AND SAFETY
ADD
LA 6
At present there are no such Committees. However, systematic occupational
Percentage of local
health and safety programmes are available covering the entire staff.
workforce represented
informal joint managementworker health and safety
committees that help
monitor and advice on
occupational health and
safety programmes.
CORE
LA 7
Rate of injury, occupational
diseases, lost days and
absenteeism, and number
of work-related fatalities by
region.
CORE
LA 9
Health and safety
topics covered in formal
agreements with trade
unions.
Year
Rate of injury
Nil
Nil
Nil
No. of lost working days
Nil
Nil
Nil
No. of work-related fatalities
Nil
Nil
Nil
Occupational disease
Nil
Nil
Nil
Absenteeism
Nil
Nil
Nil
We do not have trade unions, however, health and safety topics are covered
at the time of engagement to the entity and frequently updated during the
working period.
ASPECT: TRAINING AND EDUCATION
CORE
LA 10
Average hours of training
per year per employee by
employee category.
Average hours of training
per employee for the entire
group.
Total amount spent Rs.
ADD
LA 11
Programmes for skills
management and lifelong
learning that support
continuous employability.
1 hr
1 hr
5.5 hr
227,550
125,384
2,225,917
We recognise professional memberships and encourage continuous skill
development and lifelong learning to our employees. Employees are
reimbursed the total cost incurred on their higher education such as MBAs.
During the year, following local and international training /educational
programmes were sponsored by the Company.
Period
No. of
Employees
Attended
Advanced process engineering in relation to
commerical production in Canada and USA
01 Month
02
AOTS Programme in Japan
02 Weeks
01
04 days
14
22
21.5
Description
Advance Management Programme for Senior
Managers conducted by a UK based consultant
ADD
32
LA 12
Percentage of employees’
received regular
performance and career
development reviews.
%
20
GRI
Indicator
Performance
GRI Description
2009
2010
2011
ASPECT: DIVERSITY AND EQUAL OPPORTUNITY
CORE
LA 13
Composition of governance bodies and breakdown of employees per category according to gender, age group,
minority, group membership and other indicators of diversity.
LA 13
Employee per category according to Age - 31 March 2011
Management
Staff
Tech/
Supervisory
Clerical &
Allied
Minor
Staff
Charge
Hand
SemiSkilled
20-25
0
4
8
26-30
6
6
14
3
31-35
5
2
1
3
1
6
36-40
11
3
4
7
3
2
30
41-45
8
3
2
9
5
28
46-50
6
4
2
12
4
51-55
3
2
1
4
2
>55
8
2
5
Unskilled
Drivers
Total
12
1
3
32
1
19
1
29
4
16
15
181
Employee per category according to Service - 31 March 2011
Management
Staff
Tech/
Supervisory
Clerical &
Allied
0-5
20
7
6-10
6
11-15
6
16-20
8
21-25
2
26-30
3
>31
2
Minor
Staff
Charge
Hand
SemiSkilled
Unskilled
Drivers
Total
23
5
1
12
2
70
6
4
9
2
3
1
31
2
2
5
11
2
1
30
5
3
10
2
28
2
1
1
1
7
2
2
2
1
1
1
1
10
1
5
181
Employee per category according to Gender
Male
Female
Total
2008/09
2009/10
2010/11
136
141
146
34
35
35
170
176
181
Employee per category according to Ethnicity
2008/09
2009/10
2010/11
163
170
173
Tamil
3
3
5
Muslim
1
1
1
Malay
3
2
2
170
176
181
Sinhala
Total
33
GRI
Indicator
GRI Description
Performance
2009
2010
2011
ASPECT: TRAINING AND EDUCATION
CORE
LA 14
Ratio of basic salary of
For all employee categories the ratio of basic salary of men to women is 1:1.
men to women by employee
category.
G 3 human rights PERFORMANCE INDICATORS
GRI
Indicator
GRI Description
Performance
2009
2010
2011
ASPECT: INVESTMENT AND PROCUREMENT PRACTICES
CORE
HR 1
number of significant
investment agreements
that include human rights
clauses or that have
undergone human rights
screening.
The principal activities of the Company are manufacturing and exporting
value added speciality compounds and intermediates and act as agents and
distributors. We do not intend to diversify our activities into any other area at
present and therefore there are no such significant investment agreements.
CORE
HR 2
Percentage of significant
suppliers and contractors
that have undergone
screening on human rights
and actions taken.
At present we do not screen our significant suppliers and contractors on
human rights. Steps will be taken to incorporate such requirements to the
contracts in future.
ADD
HR 3
The Group does not have a policy or a procedure to train employees on aspects
Total hour of employee
of human rights.
training on policies and
procedure concerning
aspects of human rights that
are relevant to operations,
including the percentage of
employees trained.
ASPECT: NON-DISCRIMINATION
CORE
HR 4
No incidents of discrimination have been reported during the last three years.
Total number of incidents
of discrimination and action
taken.
ASPECT: FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING
CORE
34
HR 5
Operations identified in
which the right to exercise
freedom of association and
collective bargaining may
be at significant risk, and
action taken to support
these rights.
No operations have been identified with any extraordinary risk. The employees
are given a fair opportunity to express their opinions and employee opinions are
widely welcome.
GRI
Indicator
GRI Description
Performance
2009
2010
2011
ASPECT: CHILD LABOUR
CORE
HR 6
Operations identified as
having significant risks for
child labour, and measures
taken to contribute to the
estimation of child labour.
The Company conforms to the labour laws of Sri Lanka, therefore does not
employ any person under the age of 18 years. The age at all levels are being
verified prior to the commencement of formal interviews.
ASPECT: FORCED AND COMPULSORY LABOUR
CORE
HR 7
Operations identified as
having significant risk
for incidents of forced or
compulsory labour, and
measures to contribute to
the elimination of forced or
compulsory labour.
No forced labour or compulsory labour are being engaged in the Group. Towards
ensuring this, the Group as a policy, neither retain any original documents
belonging to the employees, nor a guarantee/cash deposit.
ASPECT: SECURITY PRACTICES
ADD
HR 8
Percentage of security
personnel trained in the
organisation’s policies or
procedures concerning
aspects of human rights
that are relevant to the
operations.
Chemanex has not trained the security personnel specifically on human rights.
All such instances are strictly handled by the HR Department.
ASPECT: INDIGENOUS RIGHTS
ADD
HR 9
of violations involving rights
of indigenous people and
actions taken.
Our operations have not violated the rights of indigenous people in whatsoever.
35
G 3 society PERFORMANCE INDICATORS
GRI
Indicator
GRI Description
Performance
2009
2010
2011
ASPECT: COMMUNITY
CORE
SO 1
Nature, scope, and
effectiveness of any
programmes and practices
that assess and manage
the impact of operations
on communities, including
entering, operating and
exiting.
There is no impact from our present activities on communities and all new
operations are evaluated through a rigorous process before embarking in order
to mitigate such possible impacts if any.
ASPECT: CORRUPTION
CORE
SO 2
number of business units
analysed for risk related to
corruption.
100%
100%
CORE
SO 3
Percentage of employee
trained in organisations
anti-corruption policies and
procedures.
CORE
SO 4
Action taken in response to No incidents of corruption have been reported during last three years.
incidents of corruption.
100%
No formal training as such. However, at the
point of recruitment, Company policy on
anti-corruption is well explained.
ASPECT: PUBLIC POLICY
CORE
SO 5
Public policy positions and The Company does not get involved in public policy development rather than
participation in public policy adhering to the same.
development and lobbying.
ADD
SO 6
Total value of financial and
in-kind contributions to
political parties, politicians
and related institutions by
country.
Nil
Nil
Nil
As a policy, Group does not make such
contributions to politicians or related institutions
ASPECT: ANTI-COMPETITIVE BEHAVIOUR
ADD
SO - 7 Total number of legal
actions for anti-competitive
behaviour, anti-trust, and
monopoly practices and
their outcomes.
Nil
Nil
Nil
Nil
Nil
Nil
ASPECT: COMPLIANCE
CORE
36
SO 8
Monetary value of significant
fines and total number of
non-monetary sanctions for
non-compliance with laws
and regulations.
G 3 product responsibility
GRI
Indicator
Performance
GRI Description
2009
2010
2011
ASPECT: CUSTOMER HEALTH AND SAFETY
CORE
PR 1
Life cycle stages in which
health and safety impacts of
products and services are
assessed for improvement,
and percentage of
significant products and
service categories subject
to such procedures.
ADD
PR 2
of non-compliance with
regulation and voluntary
codes concerning health
and safety impacts of
products and services
during their life cycle, by
type of outcomes.
All products are carefully assessed for health
and safety impacts at different stages of product
life cycle.
Nil
Nil
Nil
ASPECT : PRODUCT AND SERVICE LABELLING
CORE
PR 3
Type of product and service
information required by
procedures and percentage
of significant products and
services subject to such
information requirements.
ADD
PR 4
regulations and voluntary
codes concerning product
and service information
and labelling, by type of
outcome.
ADD
PR 5
Practices related to
customer satisfaction,
including results of surveys
measuring customer
satisfaction.

Knitted Gloves - Raw material are purchased as per EU standard - i.e. with
Oeko - Tex Standard 100.
 Brake Oil - Dot 3 Brake oil is manufactured according to the international
standard of SAE J1703F.
 Ominicide - The product is registered under Department of Agriculture.
 Nexobleech - A quality assurance certificate is obtained from Rubber
Research Institute for each batch.
Nil
Nil
Nil
We have been recognised for 100% vendor compliance and as a most preferred
supplier by our international buyers. All customer complaints are properly
recorded and promptly attended.
37
GRI
Indicator
GRI Description
Performance
2009
2010
2011
ASPECT: MARKETING COMMUNICATION
CORE
PR 6
Programmes for adherence
to laws, standards and
voluntary codes related to
marketing communications,
including advertising,
promotion and sponsorship.
ADD
PR 7
regulations and voluntary
codes concerning marketing
communications including
advertising promotion,
and sponsorship by type of
outcomes.
All marketing communications are carried out
as per local laws and standards.
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
ASPECT: CUSTOMER PRIVACY
ADD
PR 8
Total number of
substantiated complaints
regarding breaches of
customer privacy and loss
of customer data.
ASPECT: COMPLIANCE
CORE
38
PR 9
Monetary value of
significant fines for
non-compliance with laws
and regulations concerning
the provision and use of
products and services.
G 3 Economic performance
Performance
GRI
Indicator
GRI Description
2009
Rs. Mn
2010
Rs. Mn
2011
Rs. Mn
1,602
1,127
1,080
Less: Purchase cost &
services
(998)
(766)
(774)
Total value added
604
361
306
Employees
133
132
141
Government
46
48
40
Donations/CSR activities
01
06
01
Shareholders
110
79
39
Others
314
96
85
Total value distributed
604
361
306
ASPECT: ECONOMIC PERFORMANCE
CORE
EC 1
Direct economic value
generated and distributed
including revenues,
operating costs, employee
compensation, donations
and other community
investments, retained
earnings and payments
to capital providers and
government.
CORE
EC 2
Financial implications
and other risks and
opportunities for the
organisation’s activities due
to climate change.
CORE
EC 3
Coverage of the
organisation’s defined
benefit plan obligation.
Revenues
Distributed as follows;
Climate changes have directly affected to our
raw material prices in the world market.
There was a severe raw material shortage
due to floods and droughts.
A defined benefit plan is a post-employment benefit plan other than a defined
contribution plan.
The retirement benefit obligation of the Group is based on the actuarial
valuation using Projected Unit Credit (PUC) methods as recommended by
Sri Lanka Accounting Standard No. 16 (Revised 2006) - ‘Employee Benefits’.
The Group recognises all actuarial gains and losses arising from the defined
benefits plans immediately in the Income Statements.
The liability is disclosed under non-current liabilities in the Balance Sheet and
not externally funded.
The Group makes gratuity payments to its employees on the following basis:
Length of Service
Years
No of Months Salary Entitled
0-9
½ month salary for each completed year
10 - 14
¾ month salary for each completed year
15 - 16
15 months salary in total
17 - 18
19 - 20
21 - 22
23 - 24
25 - 40
Over 41
½ month salary in total
However, as per the Payment of Gratuity Act No. 12 of 1983, the liability to an
employee arises only on completion of 5 years of continued service.
The Company also contributes 12% and 3% respectively for the Employee
Provident Fund (EPF) and Employee Trust Fund (ETF).
39
Performance
GRI
CORE
EC 4
Indicator
GRI Description
2009
Rs. Mn
2010
Rs. Mn
2011
Rs. Mn
Legal Liability
31.3
26.8
34.4
Actuarial Liability
51.3
47.7
47.3
EPF (annual contribution)
8.8
9.2
9.6
ETF (annual contribution)
2.2
2.3
2.4
Nil
10.2
Nil
Significant financial
assistance received from
Government.
Grant from the Export Development Board on
account of enhanced exports during a difficult year.
ASPECT: MARKET PRESENCE
CORE
EC 5
Range of ratios of standard
entry level wage compared
to local minimum wage
of significant locations of
operations.
Our standard entry level salaries are based on the minimum salary standards
set by the Board of Investment of Sri Lanka and as per the Shop and Office
Act No. 19 of 1954.
CORE
EC 6
Policy, practices, and
proportion of spending on
locally-based suppliers
at significant locations of
operation.
The Company policy is to procure goods and services to meet our requirements
and standards at the lowest available price.
Total indirect cost incurred
on suppliers (Rs. Mn)
297
152
230
As a percentage %
29.7
20.2
27.5
CORE
EC 7
Procedures for local hiring
and proportion of senior
management hired from
the local community at
locations of significant
operation.
At present we have only two major locations of operation. For all significant
vacancies, advertisements are placed and selection is done through a rigorous
and well-documented procedure. If specialised roles are required, they are
filled through head hunting or referral. All our senior managers at present are
locally hired.
CORE
EC 8
Development and impact of
infrastructure investments
and services provided
primarily for public benefit
through commercial, in
kind, or bono engagement.
Major Projects
2010/11
1. English Teaching Programme at Sri Sangabodhi Vidyalaya at
Mahiyanganaya. (please refer CSR report in pages 45 and 46 for details).
2. Assistance to pre-schools operating under St. Judes Shrine, Passara
(please refer CSR report on pages 45 and 46 for details).
2009/10
1. Contribution towards the settlement of Internally Displaced Persons.
2. Nagamu Purawara - Organised by the Government of Sri Lanka.
3. Assistance to pre-schools operating under St. Judes Shrine, Passara.
2008/09
1. Drinking water project for Uhana Tissapura Vidyalaya at Ampara.
2. Assistance to pre-schools operating under St. Judes Shrine, Passara.
3. Assistance to Freedom Home (Mental Patients Rehabilitation), Kelaniya.
40
AWARDS RECEIVED BY CHEMANEX GROUP
2010/11
CAL EXPORTs LANKA (PVT) Limited
ACCREDITATIONS
CHEMANEX PLC

NCE 17th Annual Export Awards Industry Sector - Large Category Gold Award
Following companies are accredited
with ISO 9001:2000 certification:
National Business Excellence
Awards 2009 - Manufacturing,
Chemical and Ceramic Sector Runner-up
 Chemanex
 The
Institute of Chartered
Accountants of Sri Lanka - Annual
Report Awards 2010 - Manufacturing
Sector - Silver Award
Best Presented Accounts
Awards 2009 - Certificate of Merit in
the Manufacturing Sector.

 SAFA
 NCE
18th Annual Export Awards Industry Sector - Extra Large
Category - Gold Award
 National
Business Excellence
Awards 2010 - Manufacturing,
Chemical and Ceramic Sector Runner-up
 National
Business Excellence
Awards 2010 - Medium Category Winner
2009/10

 CAL
Exports Lanka (Pvt) Limited
 Yasui
Exports (Pvt) Limited
Lanka (Pvt) Limited
Following Company has obtained CE
marking for its products:
National Business Excellence
Awards 2009 - Medium Category 1st Runner-up
 Yasui
2008/09
CHEMANEX PLC
 The
Companies - Silver Award
Production facilities of the following
Companies are certified by the Central
Environmental Authority:
 Chemanex
 CAL
Export Awards 2007 - Large
Category Export - Industry Sector Silver Award
PLC
Exports Lanka (Pvt) Limited
 Chemanex
 Chemcel
 Yasui
 NCE
Lanka (Pvt) Limited
Exports (Pvt) Limited
(Pvt) Limited
Lanka (Pvt) Limited
CHEMANEX PLC
 National
Business Excellence
Awards (NBEA) 2009 - Trading
Sector - Winner
Yasui Lanka (Pvt) Limited
 National
Business Excellence
Awards 2008
 ACCA
- Manufacturing Apparel Textile and
Leather Products Sector Runner-up
 The
- Best Global Reach - Runner-up
Sri Lanka Sustainability
Reporting Awards 2009 - Small
Scale Category - Runner-up
Companies - Silver Award
 SAFA
Best Presented Accounts
Awards 2008 - Manufacturing
Sector - 1st Joint Runner-up
OUR ACHIEVEMENTS
41
Human Capital
Chemanex PLC has developed a
corporate Code of Conduct centred
on values of professionalism and
conducts business within Chemanex
Group, based on esteemed principles
of Good Governance. A constantly
evolving Human Resource Policy
also marks the cornerstone of our
operations. Our comprehensive
human resource policy covers terms
and conditions of employment,
professional ethics and general
conduct, employee responsibilities,
remuneration/employee benefits and
staff development, security, safety,
health and environment, staff social
activities, staff communication and
grievance handling.
As a Company pioneering the
manufacturing and exporting of
chemicals to local and global markets,
Chemanex possesses a hard-working
and dedicated team whose dynamism,
motivation and out-of-the box thinking
has provided the Company with the
competitive edge to maintain its
current dominant market positioning
despite challenging external working
conditions and environments. Our
human capital remains the single
most crucial cog in the wheel of our
organisation’s development, growth
and sustainability.
The collective strength of the
Chemanex team - their attitudes,
skills and abilities - have contributed
significantly in enhancing our Group’s
performance and productivity levels.
This is further developed by the
noteworthy investments we infused
in order to create an empowering,
knowledge-based culture, which
naturally permeates the positives
of a good work ethic, philosophy
of life, equitable balance, rewards,
remuneration, recognition and a
personnel retention policy. Our
cohesive ’hire to retire‘ human capital
management strategy has ensured
that our employees remain with us
for longer periods than in the industry
norm, displaying a very low employee
turnover.
42
The key strategies employed in
developing our human capital is based
on intensive training and long-term
development, creating opportunities
for good professional and personal
balance through recreation,
entertainment, extra curricular
activities and the instigation of welfare
for the Company’s employees and
their families.
Training and Development for this
year included both local and foreign
training, punctuated with continuous
customised training organised and
conducted by external resource
persons to enhance overall knowledge
and skill levels. Consistently honing
Professional Development skills is a
proactive method that’s encouraged
amongst Corporate Management
to effectively keep them abreast
of relevant industry trends and
to expand their overall levels of
specialised knowledge. The Group
encourages professional and technical
knowledge, furthered by granting
financial assistance and professional
consultancy for team members
wishing to pursue higher studies.
The annual performance review
identifies training needs via gap
analysis for senior management
which then assists to prepare a
comprehensive training calendar
aligned to specific/targeted needs.
The Group also sets challenging but
attainable targets for team members
annually for added motivation
and dynamism. Our dedicated HR
Department develops procedures
that would enable these targets to
be converted to quantified results,
integrating tools and processes
in order to stimulate high-end
performance. Our human capital
management approach aligns the
goals of our employees with the
aspirations of the Group and propels
such an alignment to tally with
specific, measured and realistic
business objectives. Objectives for the
executives are set at the beginning of
the financial year in concurrence with
the Company’s objective at the end
of the fiscal period, which is directly
linked to the perks and other benefits
to the employee.
The Company continues to underscore
the notion of the Corporate Family,
through its various activities and
events, which boost team morale
and heighten the sense of collective
connectivity. The Long Service Awards
was held for the fourth time by the
Group in the year 2010, and this event
has been continuously held once in
every three years. The Chemanex
Sports Club which operates under the
aegis of Chemanex PLC organised its
full calendar of activities for the team
and their families ranging from the
annual picnic, a family get together,
New year celebrations, Christmas
Party and the sports day. Almost 100%
participation in these events shows
the affection and the love employees
have towards the organisation. These
events instil a sense of camaraderie
and emphasise the spirit of
togetherness among team members
and their families, who are invited to
join some of the events as well.
We also strive to create a conducive
work environment for our team,
improving facilities and amenities and
concretising their rights and liberties
so that the general framework of
their day life at the work place/
factory will improve. Several initiatives
including comprehensive training
sessions on safety and the use of
safety equipment, accentuated by
safety audits carried out, by external
safety experts, ensure that our team
works in a safe and hazard-free
environment with all danger-inducing
gaps/threats identified and resolved
urgently. During the past year two
safety audits were carried out by an
external industry expert and their
recommendations were immediately
implemented with great efficiency.
We implement an open door policy
which affords Company staff the
freedom to articulate their ideas
and suggestions, which in turn has
helped the Group to uplift and improve
its prevailing standards through
transparent discussions. Job security
has remained strong with the Group
operating successfully through the
global economic and financial crisis,
which has served to nurture and
stabilise the strong bonds we have
constructed with our employees over
the years.
Our customers continually commend
us on our continuous improvement
in both productivity and service
delivery. These positives are due
to the commitment and sense of
competitiveness that our team
members have imbued. Each and
every employee at Chemanex Group
claims ownership in ensuring the
growth and success of the Group and
is considered a passionate stakeholder
in fostering the development and
welfare of the organisation.
We are also proud to be an
equal opportunity employer,
where meritocracy remains the
fundamentally valid point of
assessment in granting rewards and
recognising and upholding human
rights as the foundation to human
dignity and civilised way of life.
Chemanex respects cultural diversity
and pluralism and we infuse these
universally avowed beliefs in the way
we treat our most valuable business
component - our employees.
We have instituted a number of welfare
measures within the Group including
workman’s compensation, bonus
payments, productivity incentives,
meal allowances, staff loan facilities
for various purposes, educational aid
schemes, comprehensive medical
insurance which covers a variety of
areas, professional subscriptions
and weekend allowances, in order to
highlight the Company’s commitment
towards sustaining its human
infrastructure. The Chemanex Trust
Fund established under the aegis of
Chemanex PLC continues to provide
team members and their families with
financial assistance for needs aligned
to the principal strategies of the Fund.
Four scholarships for secondary and
higher educational purposes were
presented to team members’ children
to implement our higher ideals.
Regular comprehensive health
checks are carried out for head office
employees as well as for all factory
staff. As per the health checks carried
out in the year 2010, it confirmed
that none of our factory staff are
affected with ill-health and we have
taken adequate measures to ensure
that all our employees receive the
best medical attention under varying
circumstances.
An analysis of employees in terms
of age, service, gender, ethnicity and
training programmes conducted
etc is given on page 33 under G3
labour practices and decent work
performance indicators, LA 1 and to
LA 14.
1. Section of our workforce
sponsored for extensive (one
year long) training in Japan.
2. Events organised for the team
and their families have recorded
almost 100% participation.
3. Production team who obtained
overseas training in Japan, USA
and Canada.
1
2
2
Human Capital
3
43
Environmental Sustainability
Reducing an organisation’s carbon
footprint has become a business
fundamental within the framework
of triple bottom line reporting. The
business activities and decisions made
by corporate entities have negative or
positive impacts on the environment,
as determined by the raw materials
and resources it consumes, as well
as the quality and quantity of waste
and effluents being discharged into
the environment. The negativity
surrounding chemical manufacturing
and its inherent processes, bad
management of resources and
waste and the general lackadaisical
attitude pervading communities with
regard to environmental pollution has
seen the increase of Green House
Gas emissions, a plundering of the
earth’s resources and rapid climate
change which is impacting the global
environment.
It is imperative therefore, that
organisations like Chemanex,
undertake the responsibility of
creating a sustainable planet which
will be conducive to continuing the
symbiotic relationship that exists
between humans, animals and nature.
Our business approach therefore is
to create a long-term shareholder
value with minimum impact to the
environment, while engaging in
activities that will minimise and
alleviate environmental pollution
as well as promote sustainable
development on a macro scale.
Given the corporate emphasis
on environmental sustainability
throughout our organisation to reduce
carbon footprint to the bare minimum,
several initiatives focusing primarily
on waste and water management
have been successfully implemented.
Our product and storage sites as
well as our effluent management
initiatives are certified and licensed
by the Central Environmental
Authority who also conduct audits
on a regular basis to ensure our
compliance and conformance to the
stringent standards highlighted within
the licensing process. We strictly
adhere to Occupational Health and
Safety requirements as dictated by
the regulatory authorities to ensure
a safe, hygienic and accident-free
workplace for our employees at all
times. Numerous measures have
been established to ensure minimum
hazard emissions while, intense
training is conducted amongst our
employees on relevant issues such as
environmental awareness, protection
and conservation.
A dust extractor system was
established in our manufacturing
plants as a significant investment
to minimise air pollution in the
manufacturing process. Further, the
processes involving the discharge
of effluents stringently adhere to
accepted best practices and do not
harm the fauna, flora or ecosystems
around our factory locations under any
circumstance. We have also mitigated
the challenges surrounding the
imprudent use of land resources by
ensuring that land used by Chemanex
is utilised astutely and with great
regard for the environment, yielding
value-added returns for generations
to come.
Chemanex PLC continues to strive to
create Eco-Advantage by incorporating
environmental issues relating to
sustainability in its business operations
on a continuous basis. The environment
remains at the heart of its sustainability
programme with large investments
committed towards boosting local
communities within environmentally-
sanctified areas. This is manifestly
evident in the Company being one of
the biggest stakeholders with 24.4% in
the soon to be opened Rainforest Eco
Lodge built on the edge of the Sinharaja
Rainforest. The Company also plans to
expand specific projects that protect
and improve the natural and built
environments and fosters social and
community well-being.
Chemanex PLC’s pledge to the future
is to be a good corporate citizen of the
world, protecting the earth’s natural
resources through innovation and the
more efficient use of land, energy,
water and the ethical manufacture,
supply and export of chemicals. Our
deep-rooted dedication towards such
a ‘green stance’ is embodied in our
efforts in becoming carbon-neutral
and tracking our carbon footprints in
a conscious manner through a leading
carbon consulting company in
Sri Lanka. The steps that we have taken
to ensure our commitment towards
becoming carbon neutral is evident
even in small measured steps such
as minimising the use of fluorescent
light bulbs in our factory and the use
of energy conserving methods when
manufacturing chemicals.
An analysis of Environmental
Performance Indicators under G3.
Global Reporting Initiatives is given on
pages 26 to 41.
the corporate emphasis on
environmental sustainability
throughout our organisation to reduce
to the bare minimum
44
CORPORATE SOCIAL RESPONSIBILITY
Chemanex Group strongly conforms
to the concept of Corporate Social
Responsibility (CSR) or Corporate
Social Performance which remains
firmly ingrained in our business
model, while monitoring and ensuring
adherence to statutory requirements
and ethical standards, practiced
and complied with both globally and
locally. This raises immense concern
regarding the impact that our business
activities have on our consumers,
employees, other stakeholders
and the community, as well as the
environment. Taking these precepts
of CSR a step further, we have also
begun engaging in activities that
enhance community growth and
development, voluntarily eliminating
practices that could be harmful to the
environment, regardless of legalities.
Taking this into consideration, we
have included public interest as a vital
component of our corporate decisionmaking process which paves the
path for us to become a sustainable
and responsible business entity.
With stakeholders demanding that
businesses function on the principles
of ethics, values, transparency and
accountability, we are now moving
towards introducing the dynamics of
‘ethicism’ and ethical stewardship
into our daily operations. Thus,
ours is a similar approach to that
advocated by The World Business
Council for Sustainable Development
which promotes that “Corporate
Social Responsibility is the continuing
commitment by business to behave
ethically and contribute to economic
basic requirements, such as health
and social-related issues. Given
the magnitude of the problem, we
were one of the first corporates to
contribute a significant amount of
funds, totalling Rs. 5 Mn towards the
resettlement of these people ensuring
that they return to their homes and
strive to get back to normalcy.
development while improving the
quality of life of the workforce and
their families as well as of the local
community and society at large”.
At Chemanex we believe that social
responsibility is an integral part of
the wealth-creation process - which
if managed properly should enhance
the competitiveness of business and
maximise the value of wealth creation
to society. This is why it is essential
to practice CSR more during financial
turbulence.
Our presence as a leader in business
is not simply confined to Sri Lanka, but
reaches the international landscape.
Therefore, the impacts of our
business and the responsibility that
automatically accrues from it reaches
beyond simple geographic boundaries
towards a more complex dynamic of
global trade that govern the world.
This year, Sri Lanka emerged from
a three, decade civil war, having
eliminated the scourge of terrorism
and embarked on a new journey
filled with hope and peace. But with
these new chapters opening up, the
postscript to the war also brought
with it one of the largest humanitarian
crises the country has seen. Large
numbers of internally-displaced
people were rehabilitated in camps
and required urgent attention to fulfil
At Chemanex, we believe in practising
CSR through inclusive development
based on strategic partnerships, which
stresses on a holistic sense of purpose
and enhanced ethical competitiveness.
Traditionally, the role of business
in development has been limited
to a narrowly defined concept of
corporate social responsibility which
is then mainstreamed into Company
policy. Our Company attempts to
shirk away from such mandatory
modes of ‘responsibility’ that are
limited to a few CSR projects. The
triple bottom line was known to be
about making sure that corporations
and the private sector were seen as
‘good’ players and thus enhancing
market share or profitability through
social responsibility. Chemanex
Group aims to take CSR one step
further and embed it as a way of
corporate governance and corporate
virtue in day-to-day administration.
Chemanex has embarked a
long-term plan to uplift the English
education at Sangabodhi Central
College at Mahiyanganaya. Further,
assistance was granted for multiple
pre-schools established and
managed by St. Jude’s Church in
Passara.
45
Contributing to the community and
sustaining the environment while
making profits is all about maintaining
integrity in managing resources
effectively. It is about self-governance
and self-regulation which increases
efficacy and creates harmony within
the context which businesses operate.
Strategic partnerships is not simply
about outsourcing responsibility,
but sharing dividends, burdens
and risks equitably. It is about
mutual development and achieving
common goals together. It is about
social responsibility that is beyond
the corporation necessitated by
compliance to laws and regulations.
It is about realising that corporations
are made up of people that operate
within society, again made up of
individuals. Therefore, when making
business choices, our Company
always be conscious of sustaining
the community within which the
business is situated. People, their
choices and actions, whether involved
in the business or as members of a
community, can become the most
volatile risk factor to the sustainability
of a business. Thus, when choices
are made with the entire community
in mind, risks and opportunities are
shared. This in turn will ensure that
the community fully-supports and
promotes the development of business
which see as mutually beneficial and
ethical ensuring the value-addition
for business which enhances its
capacity for competition. Our vision
can be seen in action in a number
of under-developed pre-schools in
Passara, a school in a remote part
of Mahiyangana, and in the future
schools and universities in the North.
We have also teamed-up with the
UN’s Global Compact to fulfill the
Millennium Development Goals and
remain dedicated in buttressing
our vision of universal education,
poverty alleviation, anti-corruption
and transparency, labour rights and
collective rights in the workplace and
environmental protection through
sustainable options and energy
conservation. The Company recently
consulted with a pioneering carbon
consultancy firm to map its carbon
footprint and become a strategic
partner in carbon monitoring. Given
46
the fact that Sri Lanka’s Environment
Minister has recently stated that the
protection of the environment and its
natural resources is a vital condition
for the sustainable development
of the country, Chemanex remains
committed in ensuring that the UN’s
goals relating to environmental
preservation are adhered to as a part
of our corporate vision.
ACCA Sri Lanka adjudged Chemanex
PLC as a runner, up in the small
scale category at the ACCA Sri Lanka
Sustainability Reporting Awards in
2009, which judges the submissions
of Company disclosures on stringent
criteria based on the Global Reporting
Initiative guidelines. The panel of
judges commended the Company
on a coherent readable report with
adequate coverage of essentials
equipped with a great sense of
commitment to sustainability.
This and the fact that we adhere
strictly to compliance and reporting
initiatives laid down by global best
practice entities has served us well
in capturing and strengthening our
international markets and in being
able to nurture strong relationships
with stakeholders both in Sri Lanka
and abroad.
As mentioned before, our pre-schools
development project continued this
year where assistance was granted for
a number of pre-schools established
and managed by St. Jude’s Church
in Passara. The Company has also
invested human labour and English
language skills of its own staff to
the Sangabodhi Central College in
Mahiyangana. The school which is in a
remote, poverty-stricken area of
Sri Lanka is in dire need of assistance
to sharpen the language skills of the
students in order for them to compete
in the local job market and enhance
their overall capabilities. The Company
sent various members of its staff to
assess the need for infrastructural
facilities, draft project proposals,
evaluate student skills and assess
them and also train teachers in
English language. We headed a pilot
project there recently and intend to
implement a concrete project by the
end of the year by making room for
an in-station full time English teacher
sponsored by the Company.
CORPORATE SOCIAL RESPONSIBILITY
The Chemanex Education Trust Fund
established under the patronage
of Chemanex PLC, continued its
support towards the students and
staff in the spheres of secondary
and higher education. This year, we
supported two undergraduates and
several secondary school students,
while continuing commercial training
for undergraduates from various
local universities. The Company
is also a keen contributor to the
Martin Wickremesinghe Trust Fund,
the Colombo Centre for Special
Education and the Sri Lanka Council
for the Blind. Numerous initiatives
pertaining to education within the
plantation community such as training
programmes, seminars and social
events gained the active support of
the Company as well.
We are fully-compliant with all
standards, laws and regulations laid
down by the Employers’ Federation
of Ceylon and uphold human rights
and environmental protection as
being fundamentals in business
sustainability. As detailed in our
Human Capital Review found on
page 42 of this Annual Report, our
HR policy emphasises employee
empowerment through continuous
education and training.
Public companies are now among the most accountable organisations in society. Business
organisations need to achieve their short-medium-and long-term objectives in a sustainable manner.
The entire process of achieving these goals and objectives are the collective responsibility of the Board
of Directors. Good Corporate Governance practices are important for the sustainability of business as
it focuses on better risk management practices through enhanced accountability and transparency.
Further, it also helps to the socio and economic development of the country.
Chemanex PLC and its subsidiaries endorse and are fully-committed to the Code of Best Practices on
Corporate Governance since sound and transparent governance certainly contributes to value creation
and improves results of an organisation, which would help to build trust among our stakeholders.
Chemanex PLC has taken all possible steps to adhere to the Code of Best Practice on Corporate
Governance issued by the Institute of Chartered Accountants of Sri Lanka, together with the Securities
and Exchange Commission of Sri Lanka. Further, the Company adheres to the Corporate Governance
Requirements under the Listening Rules published by the Colombo Stock Exchange.
Following is a complete disclosure of our adherence to the Code of Best Practice on Corporate
Governance issued by The Institute of Chartered Accountants of Sri Lanka.
Code of Best Practice on Corporate Governance
Section 1 - The Company
A. Directors
A.1. The Board
Principle A.1
Every public company should be headed by an effective Board, which should lead and control the Company.
The Company Adherence
The Board comprises one Non-Executive Chairman and seven Directors. All the Directors who are
business leaders have acquired a wealth of experience and proven ability in the fields of management,
marketing, finance, engineering, economics and manufacturing.
A.1.1
The Board meets on a quarterly basis or even more frequently if the necessity arises and the Board
has met five times during the year under review.
Name of Director
Type
Attendance (%)
B.R.L. Fernando
M.P. Jayawardena
D. Chandrasekara
L. de Mel (resigned w.e.f. 30.09.2010)
Prof. U.P. Liyanage
A. Mapalagama
S.P.S. Ranatunga
A.V.P. Silva
M.D. Wickramasinghe
Non-Executive Chairman
Executive Director
Non-Executive Director
Independent Non Executive Director
100
100
80
100
80
100
80
80
100
(appointed w.e.f. 01.10.2010)
47
CORPORATE GOVERNANCE
FRAMEWORK
BOARD OF DIRECTORS
Board Integrated
Sustainability
Development
Committee
Board
Integrated Risk
Management
Committee
Board Audit
Committee
Board
Board
Nominations Remuneration
Committee
Committee
MD/CEO
Management
Committee
Internal/
External
Auditors
Group Heads/
SBU Heads
A.1.2

The Company is managed by a competent Board of Directors who formulates, reviews and
monitors the implementation of sound business strategies.

The Board is responsible for the shareholders for creating and delivering sustainable shareholder
value. The Board reviews the performance of the Company CEO periodically and ascertains whether
the targets set out at the beginning of the review period have been achieved. They also ensure the
competence of the CEO and Senior Managers of the Company while ensuring succession strategies
with respect to the CEO and Senior Managers. The Board periodically reviews the effectiveness of
Internal controls, compliance with legal and ethical standards and management of risk. The Board
has ensured that all stakeholder interests are considered in corporate decisions, whilst ensuring
that the Company’s values and standards are set with emphasis on adopting appropriate accounting
policies and fostering compliance with financial regulations.
A.1.3
The Board collectively and Directors individually act in accordance with the laws of the country as
applicable to the business enterprise and the Board obtains independent professional advice from
external parties at the expense of the Company as and when required.
A.1.4
Company has appointed a Chartered Accountant to function as the Secretary of the Board who
ensures that proper Board procedures are followed.
A.1.5
All Directors of the Board bring an independent judgment to bear on issue of strategy, performance
resources and standards of conduct. The Board promotes a conducive environment whereby
demanding contribution from the Non-Executive Directors are welcomed and encouraged. The Board
fully supports and have empowered the MD/CEO in implementing decisions.
48
A.1.6
Every Director dedicates adequate time and effort in order to ensure that the duties and
responsibilities owed by him to the Company are satisfactorily discharged. In addition to attending
Board meetings, the relevant Board Members attend Board Sub Committee Meetings as and when
required. The Board Sub-Committees are as follows:

Board Audit Committee

Board Nominations Committee

Board Remuneration Committee

Board Integrated Sustainability Development Committee

Board Integrated Risk Management Committee
A.1.7
Every Director is satisfactorily aware of matters specific to the industry that the Company is operating in.
A.2 Chairman and Chief Executive Officer
Principle A.2
There are two key tasks at the top of every public company, conducting the business of the Board,
and facilitating executive responsibility for management of the Company’s business. There should be
a clear division of responsibilities at the head of the Company, which will ensure a balance of power
and authority, such that no one individual has unfettered power of decision making.
A.2.1
The positions of Chairman and CEO at Chemanex PLC are separated in order to ensure that no
individual in the Company has unfettered decision-making power. Therefore, there is a clear division
of responsibilities at the head of the Company, which will ensure balance of power and authority.
The Chairman of Chemanex PLC is a Non-Executive Director who conducts Board proceedings in his
capacity as head of the Board of Directors. The CEO is responsible for running the Company’s
day-to-day business activities.
A.3 Chairman’s Role
The Chairman’s role in preserving Good Corporate Governance is crucial. As the person responsible
for running the Board, the Chairman should preserve order and facilitate the effective discharge of
Board functions.
A.3.1
The Chairman conducts Board proceedings in a appropriate manner and ensures effective
participation of both Executive and Non-Executive Directors, whilst encouraging to make an effective
contribution within their respective capabilities for the benefit of the Company.
The Chairman of the Board is a Chartered Accountant who possesses a wealth of experience and
ensures good governance and effective discharge of Board functions.
He also maintains the balance of power in the Board, whilst ensuring the Board is in complete control
of the Company’s affairs and obligations towards shareholders and other stakeholders.
A.4 Financial Acumen
Principle A.4
The Board should ensure the availability amongst its members of those with sufficient financial
acumen and knowledge to be able to offer guidance on matters of finance.
The Board consists of three Senior Chartered Accountants, whose financial acumen and expertise are
available on matters relating to finance.
49
A.5 Board Balance
Principle A.5
It is preferable for the Board to have a balance of Executive and Non-Executive Directors (including
Independent Non-Executive), such that no individual or small group of individuals can dominate the
Board’s decision making.
The Board consists of eight Directors of whom two are executive and six are non-executive including
the Chairman of the Board. Out of the six Non-Executive Directors three are independent ensuring
that no individual or small group of individuals can dominate the Board’s decisions.
Board Composition and Directors Independence
Name of Director
Type
Shareholding
B.R.L.Fernando
Non-Executive Chairman
Yes
M.P. Jayawardena
Managing Director
No
D. Chandrasekara
No
L. de Mel (Resigned w.e.f. 30.09.2010)
No
Prof. U.P. Liyanage
No
A. Mapalagama
Executive Director
Yes
S.P. S. Ranatunga
No
A.V.P. Silva
No
M.D. Wickramasinghe
No
(Appointed w.e.f. 01.10.2010)
A.5.1
Six of the eight Directors of the Board are Non-Executives including the Chairman of the Company.
A.5.2
Three of the six Non-Executive Directors are independent, which amounts to 50% of the Non-Executive
Directors appointed to the Board.
A.5.3
All Non-Executive Independent Directors are independent of management and free of any business or
other relationship that could materially interfere with or could reasonably be perceived to materially
interfere with the exercise of their unfettered and independent judgment.
A.5.4
Each Non-Executive Director has submitted a signed and dated declaration for the year ended
31 March 2011 of his independence against the specified criteria set out by Schedule H of the Code.
A.5.5
The Board has determined as to the independence of each Non-Executive Director based on annual
declaration made by each Non-Executive Director. Prof. U.P. Liyanage has continuously served in the
Board for a period exceeding nine years. However, the Board of Directors of the Company has taken all
relevant matters into consideration and is of the opinion that the Director is nevertheless independent.
The following Directors are deemed to be Independent Directors:
Prof. U.P. Liyanage
D. Chandrasekara
M.D. Wickramasinghe
A.5.6 & A.5.7
The requirement to appoint a Senior Independent Director does not arise as the roles of Chairman
and CEO are separated.
A.5.8
Chairman meets with the Non–Executive Directors without the presence of Executive Directors as and
when required.
A.5.9
There were no concerns raised by the Directors during the year, which need to be recorded in the
Board Meeting Minutes.
50
A.6 Supply of Information
Principle A.6
The Board should be provided in a timely manner with information in a form and of a quality
appropriate to enable it to discharge its duties.
A.6.1
The Board of Directors is provided with timely and accurate management information as and when
required. The Board is fully aware of all the important developments within the Group and further
enquires are made by them where necessary.
A.6.2
The Minutes, Agenda and papers required for Board Meetings are provided to the Directors within
a reasonable time before the meeting, to facilitate its effective conduct.
A.7 Appointments to the Board
Principle A.7
There should be a formal and transparent procedure for the appointment of new Directors to the Board.
A.7.1 & A.7.2
A Nominations Committee has been established to make recommendations for the appointment of
Directors to the Board. The composition of the Nominations Committee is as follows:
Name of Director
Type
B.R.L.Fernando (Chairman)
D. Chandrasekara
M.P. Jayawardena
Executive Director
Prof. U.P. Liyanage
S.P. S. Ranatunga
A.V.P. Silva
The Committee is responsible for identifying and recommending suitable contenders for appointment
as Non-Executive Directors to the Board of Chemanex PLC.
The Report of the Nominations Committee is set out on page 62 of the Annual Report.
A.7.3
A profile of the Directors is set out on page 23 giving their qualifications and experience. Upon the
appointment of a new Director to the Board, the Company forwards a brief description of the Director
to the CSE, which in turn informs to the shareholders of the Company.
A.8 Re-Election
Principle A.8
All Directors should be required to offer themselves for re-election at regular intervals and at least
once in every three years.
A.8.1 & A.8.2
As per the Articles of Association of the Company, one-third of the Directors excluding Chairman
and Managing Director shall retire from office by rotation, once in three years, and are eligible for
re-election at each Annual General Meeting.
51
A.9 Appraisal of Board Performance
Principle A.9
Board should periodically appraise their own performance in order to ensure that prime Board
responsibilities are satisfactorily discharged.
A.9.1, A.9.2 & A.9.3
The Board is accountable for the proper stewardship of the Company’s affairs to the shareholders of
the Company.
The Board has independent self-assessment procedure, which covers the following basic areas:

Review of the strategy setting process of the Company and the effectiveness of such strategies.

Review the budgetary targets and the progress made in achieving such targets.

Periodic review of the Company’s accounting and financial reporting to assess the integrity.

Periodic evaluation of risk exposure to the Company from its operations and measures taken to
mitigate such risks.

Periodic review of compliances by the Company with legal and regulatory requirements.

Evaluation of the performance of the CEO, COO and the Management Committee on annual basis.

To formulate a clear succession plan for senior managerial positions of the Company.

Periodic evaluation of performance of Board Committees.

Monitoring and managing conflicts of interest of management, Board Members and shareholders
including misuse of corporate assets and abuse in related party transactions.
A.10 Disclosure of Information in Respect of Directors
Principle A.10
Shareholders should be kept advised of relevant details in respect of Directors.
A.10.1
A brief profile including the name, qualifications, experience and other relevant information of
the Board members are set out on page 23.
Related party transactions, which also disclose material business relationships with Directors of
the Company are given on page 107.
A.11 Appraisal of Chief Executive Officer
Principle A.11
The Board should be required, at least on an annual basis to assess the performance of the Chief
Executive Officer.
A.11.1 & A.11.2
The Board sets long-term and short-term financial and non-financial targets to the CEO and reviews
his achievements annually. These targets are set as per the short-medium-and long-term goals and
objectives of the Company.
52
B. Directors’ Remuneration
Principle B.1
Companies should establish a formal and transparent procedure for developing a policy framework on
executive remuneration and for fixing the remuneration packages of individual Directors. No Director
should be involved in deciding his or her own remuneration.
B.1.1 & B.1.2
A Remuneration Committee has been appointed comprising of Non-Executive Chairman of the
Group and two Independent Non-Executive Directors. The Committee reviews the Company policy
relating to the terms and conditions and benefits of employment including that of the Chief Executive
Officer and payment of bonuses for Executive Directors and Management staff. The remuneration of
the Board Executive Directors and Senior Managers is fixed to commensurate with their experience
and expertise in different disciplines. Directors’ fees is determined as a percentage of the Managing
Director’s emoluments.
B.1.3
The Committee gathered twice during the year and the participation of the members at meetings
were as follows:
Name of Director
Type
Attendance (%)
B.R.L. Fernando (Chairman)
Non-Executive Chairman of the Group
D. Chandrasekara
100
50
Prof. U.P. Liyange
100
B.1.4
The remuneration of the Board in total is disclosed in Notes to the financial statements, in page 90.
The report of the Remuneration Committee is set out on page 61 of this Annual Report.
B.1.5
CEO of the Company attends the meetings by invitation and discusses and agrees with the Committee
proposals relating to the remuneration of the other Executive Director and management staff.
B.2 The Level and Make Up of Remuneration
Principle B.2
Levels of remuneration of both Executive and Non-Executive Directors should be sufficient to attract
and retain the Directors needed to run the Company successfully, but companies should avoid paying
more than is necessary for this purpose. A proportion of Executive Directors’ remuneration should be
structured so as to link rewards to corporate and individual performance.
B.2.1 to B.2.9
The Committee decides the packages to attract, retain and motivate Executive Directors of the
Company. They judge the position of the Company in line with other similar companies. They also
take into consideration the Group policy on annual increments etc., and more concern on the
performance of each member.
There are no executive share options available and the gratuity payments are in a uniform manner
available to all employees of the Company including Executive Directors.
B.3 Disclosures of Remuneration
Principle B.3
The Company’s Annual Report should contain a statement of remuneration policy and details of
remuneration of the Board as a whole.
B.3.1
Total of the remuneration paid to the Directors and rest of the staff is set out in Notes to the financial
statements on page 90 and the Report of the Remuneration Committee on page 61 contains details of
remuneration policy of the Company.
53
C. Relations with Shareholders
C.1 Constructive Use of the AGM and Conduct of General Meetings.
Principle C.1
Board should use the AGM to communicate with shareholders and should encourage their participation.
C.1.1
All proxy notes are counted and if a poll is called it is announced the level of proxies lodged on
each resolution.
C.1.2
A separate resolution is proposed at the AGM on each substantially separate issue, such as adoption
of the report and accounts, etc.
C.1.3
Chairman of the Audit, Remuneration and Nominations Committees are available to
answer questions at the AGM.
C.1.4
As per the Companies Act No. 07 of 2007, Notice of the AGM and related papers are sent to
shareholders before 15 working days.
C.1.5
With every Notice of General Meeting, a summary of the procedures, governing voting at General
Meetings are circulated to the shareholders.
C.2 Major Transactions
Principle C.2
Further to compliance with the requirements under the Companies Act, Directors should disclose to
shareholders all proposed corporate transactions, which if entered into, would materially alter/vary
the Company’s net asset base or in the case of a company with subsidiaries, the consolidated group
net asset base.
C.2.1
Company would take steps to appraise the shareholders of ‘Major Transactions’ as and when such
transaction is taking place.
D. Accountability and Audit
D.1 Financial Reporting
Principle D.1
The Board should present a balanced and understandable assessment of the Company’s position and
prospects.
D.1.1
The Board acknowledges its responsibility and takes all the necessary steps to present a balanced
and understandable assessment of the Company’s interim financial statements and other public
reports for regulators and to fulfill all statutory requirements.
D.1.2
Annual Report of the Board of Directors on the state of affairs of Chemanex PLC is given on pages
68 to 73 contains the declarations made by the Directors in respect of the Corporate Governance
requirements.
D.1.3
Statement of Directors’ responsibility for the preparation of financial statements is given on page 74
Auditors Report on the financial statements of the Company for the year ended 31 March 2011 is given
on page 75 containing a statement about their reporting responsibilities.
54
D.1.4
A detailed account of the activities and results of the Company are contained in the Management
Discussion & Analysis and Financial Review on pages 10 to 21.
D.1.5
The Directors have carefully analysed the matters to which the Board should give consideration
when adopting the going concern assumption, which is included in the Annual Report of the Board of
Directors on the affairs of the Company on pages 68 to 73.
D.1.6
Company will take steps to summon an Extraordinary General Meeting in the event of the net assets
of the Company falls below one half of the Company’s shareholders’ funds.
D.2 Internal Control
Principle D.2
The Board should maintain a sound system of internal controls to safeguard shareholders’ investment
and the Company’s assets.
D.2.1
The Directors of the Company review the internal controls of the Company periodically and have
reported in the Annual Report of the Board of Directors on the state of affairs of the Company on
pages 68 to 73 to the financial statements.
D.3 Audit Committee
Principle D.3
The Board should establish formal and transparent arrangements for considering how they should
apply the financial reporting and internal control principles and for maintaining an appropriate
relationship with the Company’s Auditors.
D.3.1 & D.3.2
The Audit Committee comprises of three Independent Non-Executive Directors and one NonExecutive Director.
The Chairman of the Audit Committee is an Independent Non-Executive Director with relevant
professional background and experience.
The Chief Executive Officer, the Chief Operating Officer and the Chief Finance Officer attend the
meeting by Invitation. During the year, the participation of the members of the Audit Committee
Meetings was as follows:
Name of Director
Non-Executive Independent Director
Attendance (%)
Prof. U.P. Liyange (Chairman)
D. Chandrasekara
B.R.L. Fernando
100
M.D. Wickramasinghe
100
86
86
By Invitation
M.P. Jayawardena
MD/CEO
100
A. Mapalagama
COO
100
A.N. Sugathapala
CFO
100
The Board Secretary functions as the Secretary to the Audit Committee. The Internal Auditors participated
for the relevant meetings where their reports were discussed and their attendance was 100%.
The report of the Audit Committee is set out on page 60 of the Annual Report.
D.3.3
The Audit Committee has written terms of reference dealing clearly with its authority and duties.
55
D.4 Code of Business Conduct and Ethics
Principle D.4
Companies must adopt a Code of Business Conduct and Ethics for Directors, and members of the senior
management team and must promptly disclose any waivers of the Code, for Directors or others.
D.4.1
A Code of Business Conduct & Ethics is in place for Directors and members of the senior
management team and they have complied with the same.
D.4.2
The Chairman has affirmed in his statement non-violation of the provisions of the Code of Business
Conduct and Ethics adopted by the Company in accordance with the best practice on Corporate
Governance issued by The Institute of Chartered Accountants of Sri Lanka.
D.5 Corporate Governance Disclosures
Principle D.5
Directors should be required to disclose the extent to which the Company adheres to established
principles and practices of good Corporate Governance.
D.5.1
This report address this requirement.
Section 2 - Shareholders
E. INSTITUTIONAL INVENTORS
E.1 Shareholder Voting
Principle E.1
Institutional shareholders have a responsibility to make considered use of their votes and should be
encouraged to ensure their voting intentions are translated into practice.
E.1.1
Annual General Meeting is used to have an effective dialogue with the shareholders on matters, which
are relevant and concerned to the general membership.
E.2 Evaluation of Governance Disclosures
Principle E.2
When evaluating companies’ governance arrangements, particularly those relating to Board Structure
and composition, institutional investors should be encouraged to give due weight to all relevant
factors drawn to their attention.
E.2
Institutional investors are encouraged to give due weight to all relevant factors drawn to their
attention, in relation to the Company’s governance arrangements particularly those relating to Board
Structure and composition.
56
F. OTHER INVEStors
Principle F.1
Individual shareholders, investing directly in shares of companies should be encouraged to carry out
adequate analysis or seek in independent advice in investing or divesting decisions.
F.1 Investing/Divesting decision
Individual shareholders are encouraged to carry out adequate analysis or seek independent advice in
investing or divesting decisions.
Principle F.2
Individual shareholders should be encouraged to participate in General Meetings of companies and
exercise their voting rights.
F.2 Shareholder Voting
Individual shareholders are encouraged to participate in the General Meeting and exercise their voting
rights.
Following table confirms our adherence to the corporate Governance rules introduced
by the Colombo Stock Exchange for listed companies
Rule
Adherence
7.10.1 Non-Executive Directors
(a) The Board of Directors of a listed company shall include
at least  two
Non-Executive Directors; or
 such
number of Non-Executive Directors equivalent to one-third
of the total number of Directors, whichever is higher.
The Board consists of eight Directors.
Out of the eight Directors six are NonExecutive Directors, which is more than
one-third of the total number of Directors.
(b) The total number of Directors is to be calculated based on the
number as at the conclusion of the immediately preceding
Annual General Meeting.
(c) Any change occurring to this ratio shall be rectified within
90 days from the date of the change.
7.10.2 Independent Directors
(a) Where the constitution of the Board of Directors includes only
two Non-Executive Directors in terms of Clause 1 above,
both such Non-Executive Directors shall be ‘independent’.
In all other instances, two or 1/3 of Non-Executive Directors
appointed to the Board of Directors, whichever is higher shall
be ‘independent’.
Out of the six Non-Executive Directors, three
are independent, which is 50% of the total
number of Non-Executive Directors appointed
to the Board.
(b) The Board shall require each Non-Executive Director to submit
a signed and dated declaration annually of his/her independence or
non-independence against the specified criteria. A specimen of the
said declaration is given in Appendix 1 of this section.
Each Non-Executive Director has submitted a
signed and dated declaration annually of his
independence based on the criteria specified
by CSE.
7.10.3 Disclosures Relating to Directors
Based on the declarations made by the
Non-Executive Directors and as per the other
information available at the end of the year,
the following Directors are determined to be
independent:
Prof. U.P. Liyanage
D. Chandrasekara
M.D. Wickramasinghe
(a) The Board shall make a determination annually as to the
independence or non-independence of each Non-Executive
Director based on such declaration and other information
available to the Board and shall set out in the Annual Report,
the names of Directors determined to be ‘independent’.
57
Rule
Adherence
(b) In the event a Director does not qualify as ‘independent’ against any
of the criteria set out below, but if the Board taking into account all
the circumstances, is of the opinion that the Director is nevertheless
‘independent’, the Board shall specify the criteria not met and the basis
for its determination in the Annual Report.
Prof. U.P. Liyanage has served on the Board for
more than nine years. However, the Board after
taking into account all other circumstances
listed down in Rule 7.10.4 - ‘Criteria for
Defining Independence’, is of the opinion that
the said Director is nevertheless independent.
(c) In addition to disclosures relating to the independence of a Director set
out above, the Board shall publish in its Annual Report a brief resumé of
each Director on its Board, which includes information on the nature of
his/her expertise in relevant functional areas.
A profile of each Director is set out on pages 23
of this Annual Report.
(d) Upon appointment of a new Director to its Board, the Company shall
forthwith provide to the Exchange a brief resumé of such Director for
dissemination to the public. Such resumé shall include information on
the matters itemised in paragraphs (a), (b) and (c) above.
Complied by forwarding the necessary
information to CSE.
7.10.5 Remuneration Committee
A listed company shall have a Remuneration Committee in conformity
with the following:
(a) Composition
The Remuneration Committee shall comprise a minimum of two
Independent Non-Executive Directors (in instances where a
company has only two Directors on its Board); or Non-Executive
Directors, a majority of whom shall be independent, whichever
shall be higher.
 In
a situation where both the Parent Company and the Subsidiary
are ‘listed companies’, the Remuneration Committee of the Parent
Company may be permitted to function as the Remuneration
Committee of the Subsidiary.
 However,
if the Parent Company is not a listed company, then the
Remuneration Committee of the Parent Company is not permitted to
act as the Remuneration Committee of the Subsidiary. The Subsidiary
should have a separate Remuneration Committee.
 One
Non-Executive Director shall be appointed as Chairman of the
Committee by the Board of Directors.
(b)Functions
The Remuneration Committee shall recommend the remuneration
payable to the Executive Directors and Chief Executive Officer of the
listed company and/or equivalent position thereof, to the Board of
the listed company, which will make the final determination upon
consideration of such recommendations.
(c)Disclosure in the Annual Report
The Annual Report should set out the names of Directors (or persons
in the Parent Company’s Committee in the case of a Group Company),
comprising the Remuneration Committee, contain a statement of the
remuneration policy and set out the aggregate remuneration paid to
Executive and Non-Executive Directors.
 The
Term ‘remuneration’ shall make reference to cash and all noncash benefits whatsoever received in consideration of employment
with the listed company. (excluding statutory entitlements such as
Employees’ Provident Fund and Employees’ Trust Fund).
58
The Chemanex PLC has a Remuneration
Committee in line with the requirements of
CSE rulings.
The Remuneration Committee has three
Non-Executive Directors, two of whom are
independent.
Not applicable.
Not applicable.
Mr. B.R.L. Fernando, Non-Executive Chairman
of the Company, is the Chairman of the
Committee.
Remuneration Committee recommends
the CEO’s and the Executive Directors’
remuneration to the Board to make the
final decision.
Aggregated remuneration paid to the Executive
and Non-Executive Directors is given on
page 90.
Remuneration policy is explained in the Report
of the Remuneration Committee on page 61
and members of the Committee are as follows:
B.R.L. Fernando - Chairman
D. Chandrasekara
Prof U.P. Liyanage
Rule
Adherence
7.10.6 Audit Committee
A listed company shall have an Audit Committee in conformity with the
following:
Audit Committee consists of four
Non-Executive Directors, three of whom are
independent, including the Chairman of the
Committee.
(a) Composition
The Audit Committee shall comprise a minimum of two Independent NonExecutive Directors (in instances where a company has only two Directors
on its Board); or Non-Executive Directors, a majority of whom shall be
independent, whichever shall be higher.
 In
a situation where both the Parent Company and the Subsidiary are
‘listed companies’, the Audit Committee of the Parent Company may
function as the Audit Committee of the Subsidiary.
The Chief Executive Officer, the Chief Operating
Officer, the Chief Financial Officer and the
External Auditors of the Company attend
meetings by invitation. One member of the Audit
Committee is a Fellow Member of The Institute
of Chartered Accountants of Sri Lanka.
 However,
if the Parent Company is not a listed company, then the Audit
Committee of the Parent Company is not permitted to act as the Audit
Committee of the Subsidiary. The Subsidiary should have a separate
Audit Committee.
 One
Non-Executive Director shall be appointed as Chairman of the
Committee by the Board of Directors.
 Unless
otherwise determined by the Audit Committee, the Chief
Executive Officer and the Chief Financial Officer of the listed company
shall attend Audit Committee meetings.
 The
Chairman or one Member of the Committee should be a member
of a recognised professional accounting body.
The Audit Committee reviews to ensure that
the quarterly and annual financial statements
include overseeing of the preparation, presentation and
adequacy of disclosures in the financial statements of a listed entity, in have been prepared in conformity with the
Sri Lanka Accounting Standards before
accordance with Sri Lanka Accounting Standards.
publishing the same.
 Overseeing of the entity’s compliance with financial reporting
The Company has complied with financial
requirements, information requirements of the Companies Act
reporting requirements and information
and other relevant financial reporting related regulations and
requirements in the preparation of the
requirements.
financial statements.
 Overseeing the processes to ensure that the entity’s internal controls
and risk management, are adequate, to meet the requirements of the The Committee monitors and reviews the
effectiveness of the Company’s internal
Sri Lanka Auditing Standards.
control system and the independence and the
 Assessment of the independence and performance of the entity’s
objectivity of the external auditors as a part of
External Auditors.
its duties.
(b)Functions
 Shall
 To
make recommendations to the Board pertaining to appointment,
reappointment and removal of External Auditors and to approve the
remuneration and terms of engagement of the External Auditors.
(c)Disclosure in the Annual Report
The names of the Directors (or persons in the Parent Company’s
Committee in the case of a Group Company) comprising the Audit
Committee should be disclosed in the Annual Report.
The Committee shall make a determination of the independence of
the Auditors and shall disclose the basis for such determination in the
Annual Report.
The Annual Report shall contain a report by the Audit Committee, setting
out the manner of compliance by the entity in relation to the above,
during the period to which this Annual Report relates.
The Audit Committee of the Company
comprised of following members:
Prof. U.P. Liyanage - Chairman
D. Chandrasekara
B.R.L. Fernando
M.D. Wickramasinghe
Necessary disclosures are made on the Report
of the Audit Committee on page 60.
59
Report of the Audit Committee
Composition of the committee and the Attendance of the Members
Name of Director
Type
No. of meetings
held - 7
Attendance
86%
D. Chandrasekara
86%
B.R.L. Fernando
L. de Mel (Resigned w.e.f. 30.09.2010)
75%
M.D. Wickramasinghe (Appointed w.e.f. 01.10.2010)
100%
The Committee held seven meetings
during the last financial year. The
Internal Auditors, Messrs Jayasinghe &
Company attended all meetings where
Internal audit Reports were discussed.
In accordance with Corporate
Governance guidelines of ’Code
of Best Practice on Corporate
Governance‘ set out by the Institute of
Chartered Accountants of
Sri Lanka and Securities and
Exchange Commission of Sri Lanka,
the Board-appointed Audit Committee
is comprised of four Non-Executive
Directors. Prof. U.P. Liyanage,
functions as the Chairman of the
Committee and Mr. D. Chandrasekara,
Mr. B.R.L. Fernando and Mr. M.D.
Wickramasinghe, who were appointed
to the Committee function as
Committee members. Mr. B.R.L.
Fernando is a Fellow Member of The
Institute of Chartered Accountants of
Sri Lanka. The Managing Director, the
Chief Operating Officer and the Chief
Finance Officer together with Internal
Auditors attend meetings by invitation.
The financial knowledge, business
acumen and the independence of
the members are brought to bear
on matters that come within their
purview.
The primary concerns of the
Committee are to establish formal
and transparent arrangements for
considering how the accounting
policies should be selected and
applied, financial reporting and
internal control principles and
maintaining an appropriate
relationship with the Company’s
Auditors. The roles and responsibilities
of the Committee are defined in the
Audit Committee Charter. The Audit
Committee is empowered to review
any activity within the Company. The
Committee defines the responsibility
for the internal audit function,
considers recommendations made
by the Internal and External Auditors,
reviews their reports and takes
necessary action. The Committee also
makes recommendations to the Board
on appointments, re-appointments,
the removal of External Auditors and
Internal Auditors and recommends
their terms of engagement and
remuneration.
During the year, the Committee
reviewed eight reports up to
September 2010 that were forwarded
by the Internal Auditors. The Reports
are submitted bimonthly as they
carry out the audits in accordance
with a scheduled programme.
100%
In addition, separate audits are carried
out if the need arises. The Committee
reviews all operations focusing on the
effectiveness of the internal control
system, thus ensuring that a reliable,
well-managed, financial reporting
system is in place. The Committee
also focuses on the adequacy of
disclosures in the financial statements
as required by the Sri Lanka
Accounting Standards, the Companies
Act and other relevant financial
reporting regulations.
Having assessed the internal
controls, the Committee is of the
view that adequate controls and
procedures are in place to provide
reasonable assurance that the
Company’s investments and assets
are safeguarded. The Compliance
Report was monitored to ensure the
necessary compliance with statutory
requirements. A special meeting was
structured with the External Auditors
to review their audit methodologies
and survey management letters,
together with the management
response. The Audit Committee also
acted upon the implementation of the
Audit recommendations and noted that
internal controls within the Company
are designed to provide reasonable
but not concrete assurance to the
Directors, in order to monitor the
financial position of the Group.
The Company’s Code of Ethics
encourages staff at all levels to
pave the way for Good Corporate
Governance.
Prof. U. P. Liyanage
Chairman - Audit Committee
24 May 2011
60
Report of the Remuneration Committee
Composition of the Committee and the Attendance of the Members
Name of Director
Type
D. Chandrasekara
50%
Prof. U.P. Liyanage
100%
The Remuneration Committee consists
of three (3) Non-Executive Directors
of whom two are independent. The
Chief Executive Officer participates in
Committee meetings by invitation but
does not participate in any discussions
on his own remuneration. Brief profiles
of the members are given on page 23 of
the Annual Report.
The Committee held two (2) meetings
during the year to review the
compensation structures and the
performance evaluation procedures
of the senior management staff. The
compensation policy of the Group is
designed to attract and retain qualified
and competent personnel to achieve
the strategic goals of the Group.
The Committee has formulated the
rewards system, in line with the legal
requirements and accepted norms
prevailing in the country.
No. of meetings
held - 2
Attendance
100%
The Remuneration Committee
undertakes the following functions:

Establishing remuneration policies
and procedures of the Company
and the Group and conducting
necessary revisions thereof.

Reviewing salaries and benefits of
the Managing Director/CEO, the
Chief Operating Officer and the
Senior Management.

Formulating and reviewing the
overall criteria in determining the
bonuses for the Managing Director,
the Executive Director, Management
and other staff members of the
Company and the Group.

To ensure that the financial rewards
offered by the Group to employees
are sufficient to attract people of the
calibre required for effective running
of the Group and to produce the
required returns to its shareholders.

Succession planning of the senior
management at the Company and
the Group.
B.R.L. Fernando
Chairman - Remuneration Committee
24 May 2011
61
Report of the Nominations Committee
Composition of the committee and the Attendance of the Members
Name of Director
Type
No. of meetings
held - 1
Attendance
100%
D. Chandrasekara
100%
M.P. Jayawardena
Executive Director
100%
Prof. U.P. Liyanage
100%
S.P.S. Ranatunga
100%
A.V.P. Silva
100%
A brief profile of the members of the
Committee are given on page 23 of the
Annual Report.
Chemanex PLC with effect from
1 October 2010. A brief résumé of
Mr. M.D. Wickramasinghe is as follows:
The Nominations Committee holds
essential decision-making powers and
is responsible for the following:
Mr. M.D. Wickramasinghe currently
serves as the Country Head and CEO
of Fitch Ratings Lanka Limited. Prior
to that, he was attached to Dialog
Telecom PLC as Head of Treasury &
Corporate Finance.

Establish criteria in order to select
new Directors.

Appoint or promote suitable
persons to the post of Chief
Executive Officer and key
managerial positions.

Review the composition and
competencies of the Board from
time to time.

Review and recommend the
succession arrangements
for retiring Directors and key
management personnel
The Nominations Committee
assesses the required competencies
and experience of new Members of
the Board in line with the strategic
demands of the Company. The
Committee also identifies suitable
Non-Executive Directors to fill any
vacancy on the Board of Directors.
During the year under review,
the Committee met once (1) and
recommended the appointment of
Mr. M.D. Wickramasinghe as an
Independent Non-Executive Director of
He also served as a Senior Consultant
with Messrs Ernst & Young for a
period of two years, in addition to
acting as a Consultant to SEC on the
Capital Market Master Plan Project.
He facilitated a project for Clean
Development Mechanism project
(CDM) and handled bid process
management for Public Private
Partnership projects (PPP). A business
plan to setup a Carbon Fund and
formulating a strategic plan for a
leading bank were among the other
leading consultancies.
He has thirteen years, experience
in investment banking as the Group
MD/CEO of ’First Capital‘, a boutique
investment bank. Prior to this, he
worked at Commercial Bank of Ceylon
as a Treasury Dealer for five years.
He holds a Degree in Civil Engineering
from the University of Bombay in 1986,
and has worked as a Site Engineer
with the consultants to the project,
’Joint Venture Samanalawewa.‘
B.R.L. Fernando
Chairman - Nominations Committee
24 May 2011
62
Chief Executive Officer’s and Chief Finance Officer’s
Responsibility Statement
of the Company were consistently
followed. However, there are inherent
limitations that should be recognised
in weighing the assurances provided
by any system of internal control and
accounting.
The financial statements are prepared
in conformity with the requirements of
the Sri Lanka Accounting Standards
issued by The Institute of Chartered
Accountants of Sri Lanka, Companies
Act No. 7 of 2007, Sri Lanka Auditing
Standards, the Listing Rules of
the Colombo Stock Exchange and
Code of Best Practice on Corporate
Governance issued jointly by The
Institute of Chartered Accountants
of Sri Lanka and Securities and
Exchange Commission of Sri Lanka.
The financial statements were audited
by the Independent Auditors. Messrs
KPMG Ford, Rhodes, Thornton & Co.,
Chartered Accountants.
The Board of Directors and the
Management of our Company
accept responsibility for the integrity
and objectivity of these financial
statements. The estimates and
judgments relating to the financial
statements were made on a prudent
and reasonable basis, in order that
the financial statements reflect in
a true and fair manner, the form
and substance of transactions, and
reasonably present the Company’s
state of affairs. To ensure this, the
Company has taken proper and
sufficient care in installing a system
of internal controls and accounting
records, for safeguarding assets, and
for preventing and detecting frauds as
well as other irregularities, which is
reviewed, evaluated and updated on an
ongoing basis. Our Internal Auditors
have conducted periodic audits to
provide reasonable assurance that the
established policies and procedures
The Audit Committee of our Company
meets periodically with the Internal
Auditors and the Independent auditors
to review the manner in which
these Auditors are performing their
responsibilities, and to discuss
auditing, internal control and
reporting issues. To ensure complete
independence, the Independent
Auditors and the Internal Auditors
have full and free access to the
members of the Audit Committee to
discuss any matter of substance.
M.P. Jayawardena
A.N. Sugathapala
Chief Finance Officer
24 May 2011
63
Risk Management
In the contemporary business
environment, Risk Management is
a central part of any organisation’s
strategic management. It is the
process whereby organisations
methodically address the risks
attaching to their operations with
the objective of achieving maximum
sustained benefit within each
activity and across the portfolio of
all activities. It is made through a
systematic process of identification,
assessment and ranking or
prioritisation of any possible negative
results of one or more future events of
a business organisation.
A good risk management practice
increases the probability of success,
and reduces both the probability of
failure and the uncertainty of achieving
the organisation’s objectives. It is
pursued by the coordinated and
economical application of resources
to monitor, mitigate and eliminate
such risks in order to control their
probability and/or impact. Today,
business organisations are operating
in ever-increasing turbulent
environments as underscored by the
economic and financial downturns
that were faced by global economies
during the past two years. Spillover
effects of the recent global financial
meltdown can be seen around the
world even today. Therefore, managing
risks in a business organisation is of
paramount importance, and most of
the organisations today recognise risk
management as an integral corporate
process, rather than an isolated
function.
We at Chemanex recognise risk
management as a core business
process and have adopted a proactive
approach on a continual basis that
centres on a good risk reporting
system which would enable the
Company to serve its stakeholders
more effectively. We have planned
and implemented an integrated risk
management process within the Group
in line with the objectives, strategies
and procedures of the organisation.
64
Our continuous risk management
process covers the following key areas,
namely:
1. Identifying and ranking risk
2. Defining appropriate action
3. Monitoring and controlling
1. Identifying and ranking the
risks
At Chemanex Group, the identification
and ranking of risks were done
internally by the Senior Management
through various self-assessments
on the basis of past experience and
current market conditions and on
certain necessitated occasions,
external consultants’ services were
introduced. However, more emphasis
has been given to Board level
representations to the Committee.
Such identified risks are then
evaluated in terms of their probability
or likelihood of occurrence and the
negative impact they have on business
organisations if they occur. We have
been able to map such probable risks
as low, medium and high on page 65 of
the Report.
2. Defining appropriate actions
for managing these risks
In this stage, appropriate risk
management approaches were
defined in order to transfer, eliminate
or mitigate the identified risks.
Inherent risks are accepted by the
organisation according to the nature
of the operations, and insurable
risks have been identified separately.
Furthermore, concrete steps have
been taken to mitigate and manage
risks, other than inherent risks and
insurable risks.
3. Monitoring and Controlling
The defined risk management
approaches and procedures are
monitored, evaluated and reviewed on
a continual basis for upgrading them
to address the risks in a more effective
and efficient manner.
Our reporting and monitoring
mechanism adequately allows the
senior management of the Company
as well as the stakeholders to evaluate
if risks are being properly taken
into consideration and effectively
addressed on a continuous basis.
We monitor risks regularly with the
active participation of the entire
senior management, keeping in
mind the changes taking place in the
business environment, both locally and
internationally.
We have company-wide integrated
procedures in place to monitor and
control risks and have categorised
risks that are specific to our Group
under six broad headings, namely,
strategic risks, financial risks,
operational risks, technical risks,
market risks and intangible risks.
As the result of the above mentioned
risks, risk management needs a
more pragmatic approach for the
survival of businesses in today’s
volatile financial environment. In such
circumstances, we have established
and implemented Key Performance
Indicators and have identified Critical
Success Factors in line with accepted
business process. Quarterly check
lists are prepared by the Finance
Department and operational check
lists by the Marketing, Production and
other key Departments on a regular
basis. Furthermore, for marketing
and operational purposes, weekly
meetings are conducted whereby
brainstorming and system analysis
techniques are used, discussed and
monitored in order to identify possible
risks relating to market competition,
changes in prices, day-to-day progress
on business operations, etc.
During this financial year, the
composition of the Risk Management
Committee was restructured and
further strengthened by appointing
distinguished Board Members to the
Committee. The Risk Management
Committee now consists of the
following Board Members:

M.D. Wickramasinghe (Chairman)

D. Chandrasekara

M.P. Jayawardena

A. Mapalagama
A general policy framework focusing
on the operational mechanisms of
the Risk Management Committee
will be developed within the financial
year, ensuring that all possible risk
factors that can affect the progression
of the entire Group are taken into
consideration.
Strategic Risks
Business organisations develop
strategies to achieve their long-term
goals and objectives. Further, valuable
resources are deployed to achieve
these goals that have an opportunity
cost. At Chemanex, we identify
strategic risks as having a current
and prospective impact on earnings
or capital losses arising from adverse
business decision-making, which also
includes a gross lack of responsibility
for environmental changes.
Financial Risks
Financial risks occur when a company
does not have adequate cash flow
to meet its financial obligations.
Haphazard financing reduces the
actual return from what was initially
planned and forecast. In this context,
the treasury management at our
Group plays a major role in working
towards and achieving the desired
results. In addition, exchangerate risks and interest-rate risks
are addressed separately using
appropriate measures.
Operational Risks
Marketing Risks
Being a science-based chemical
company, we are fully aware of the
possible inherent operational risks
such as the arising hazards at our
factories, plants and workplace.
To counter such possibilities,
industrial actions, disaster recovery
management and other appropriate
procedures are implemented at all
our sites, including emergency plans
which are tested and certified by
independent experts periodically.
Being an export-oriented Company,
we keenly assess the changes taking
place in the global market regularly.
This has assisted us to identify and
understand ever-changing client
requirements and develop our
product/brand portfolio accordingly.
In addition, we are always vigilant
with regards to new competition and
are ready to change our strategies to
counter competitive market conditions
and movements.
Technical Risks
Intangible Risks
Necessary steps have been taken
within the Group to counter possible
losses due to breakdowns in
manufacturing processes and faults
in engineering designs that arise
due to not having the appropriate
technological processes, up to date
research and development procedures
and deficiencies in quality assurance.
Key performance indicators are set to
monitor the results continually.
Intangible risks are by definition
the most difficult to identify, yet
could have a 100% probability of
occurrence. Such risks may arise
from a lack of knowledge, ineffective
operational procedures and numerous
other causes which could hinder
organisational productivity. The
senior management of the Company
identifies and evaluates the intangible
risks pertaining to our business
activities on a regular basis and
external experts’ services are obtained
when necessary.
Probability of occurrence
Low
Medium
High
Future
Potential
Identified Risk
Internal Risk Factors
Contractual compliances
Disaster recovery
Hazard control
Human resources
Culture values
Inadequate knowledge
Reporting currency vs transaction currency
Liquidity and leverage
Adherence to emission norms
External Risk Factors
Exchange rate fluctuations
Political environment
Competitive environment
Inflation and cost structure
Energy prices and other commodity prices
Competition from low-cost produces
Laws and regulations regarding the protection of the
environment and the promotion of health and safety
Risk Management
65
Financial
Reports
Financial Calendar
Interim Quarterly Results
First quarter results. ..................................................................... 29 July 2010
Second quarter results............................................................ 28 October 2010
Third quarter results................................................................ 21 January 2011
forth quarter results......................................................................25 May 2011
Interim dividend of Rs. 1/- per share paid.............................11 February 2011
Final dividend of Rs. 1/- per share proposed........................... ... 24 May 2011
Thirty-eighth Annual General Meeting. ..................................... 30 June 2011
68 Annual Report of the Board of Directors on the State of Affairs of Chemanex PLC
74 Directors' Responsibility for Financial Reporting
75 Independent Auditors' Report
76 Income Statement
77 Balance Sheet
78 Statement of Changes in Equity
79 Cash Flow Statement
80 Notes to the Financial Statements
Annual Report of the Board of Directors on the State of
Affairs of Chemanex PLC
The Board of Directors has pleasure in presenting to the
members, the 38th Annual Report of Chemanex PLC
together with the Audited statement of accounts for the
year ended 31 March 2011, the Auditors’ Report on such
financial statements, conforming to the requirements of the
Companies Act. The Report also includes certain disclosures
required to be made under the Listing Rules of the Colombo
Stock Exchange as a listed Company and are guided by the
recommended Best Practice on Corporate Governance of The
Institute of Chartered Accountants of Sri Lanka.
Chemanex PLC, a public limited liability Company, was
incorporated in Sri Lanka on the 28 August 1974 under the
Companies’ Ordinance, Chapter 145 of the Revised Legislature
Enactments - 1956, quoted in the Colombo Stock Exchange
from 16 December 1974 and was re-registered under the
Companies Act No. 7 of 2007 on 6 August 2007, with the
registration No. PQ 64.
Review of the Year
The statement of accounts was accepted and approved by the
Board of Directors on 24 May 2011. The Chairman’s Review
(pages 4 to 7), the Chief Executive Officer’s Review (pages 8 to 9)
and Management Discussion and Analysis (pages 10 to 13) in the
Annual Report set out the state of affairs and performance of the
Company and the Group during the year and incorporate events
subsequent to the date of the Balance Sheet.
Principal Activities
Chemanex PLC, the Group’s holding Company, manages its
subsidiaries consisting of a range of business operations
which together constitute the Chemanex Group. The Group
is engaged with the manufacturing and marketing of value
added speciality compounds and intermediates for the local
as well as international markets. Chemanex PLC also acts as
agents and distributors in the domestic market. There were
no significant changes in the activities of the Company in the
year under review.
Parent Company and Ultimate Parent Company
The Parent Company of the Group is CIC Holdings PLC. The
ultimate Holding Company is Paints and General Industries
Limited.
68
Subsidiaries
The subsidiaries and their activities within the Group and their
business activities are described in the Group Structure on
page 113 of this Report.
Equity accounted investees and their Activities
The equity accounted investees within the Group and their
business activities are described in the Group Structure on
page 113 of this Report.
Corporate Donations
Donations made during the year amounted to Rs. 986,065/(2011 - Rs. 5,992,222/-). inclusive of payments totalling
Rs. 850,000/- (2011 - Rs. 5,500,000/-) to Government approved
charities.
Future Developments
The Group is in the process of expanding its production
capacity and product range for the export markets. Our
export Companies maintain their competitiveness in most
markets in terms of price and delivery. An overview of the
future developments of the Company and the Group is given
in the Chairman’s Review (pages 4 to 7), The Chief Executive
Officer’s Review (pages 8 to 9) and Management Discussion
and Analysis (pages 10 to 13).
Financial Statements
The financial statements of the Company and the Group for
the year ended 31 March 2011 which have been prepared in
accordance with the Sections 150 and 152 of the Companies
Act No. 7 of 2007 and duly signed, are presented on pages 76
to 111 of the Annual Report.
Accounting Policies
The accounting policies adopted in the preparation of the
financial statements are given on pages 80 to 87 of the
Annual Report.
The accounting policies adopted are consistent with those of
the previous financial year other than the accounting policy on
Investment Property as stated in accounting policy No. 3.3 on
land & buildings, which was adopted during the year.
Financial Results and Appropriations
2011
2010
Company
Group
Company
Group
Rs. ‘000
Rs. ‘000
Rs. ‘000
Rs. ‘000
Profit for the year after providing for depreciation
110,125
68,024
82,577
From which a deduction is made for taxation
(29,085)
(36,349)
(26,790)
(35,251)
81,040
31,675
55,787
119,830
From which has been adjusted for share of non-controlling interest
–
Profit available to equity holders of the Company
To which must be added the unappropriated profit brought forward
from the previous year
–
5,254
155,081
(23,619)
81,040
36,929
55,787
96,211
605,367
771,015
588,955
714,179
To which must be added the adjustment due to liquidation of subsidiary
–
–
35,921
–
Making available for appropriation an amount of
686,407
843,865
644,742
810,390
Out of which, an interim dividend of Rs. 1/- per share (2010 - Rs. 1/-)
(15,750)
(15,750)
(15,750)
(15,750)
Leaving a balance of
670,657
828,115
628,992
794,640
Your Directors have recommended payment of a final dividend of Rs. 1/(2010 - Rs. 1/50)
(15,750)
(15,750)
(23,625)
(23,625)
Unappropriated carried forward
654,907
812,365
605,367
771,015
Group Investment
Net Investments of the Group during the year other than
investments in subsidiaries and equity accounted investees
amounting to Rs. 77.2 Mn. Details of investments held by the
Company and the Group are given in Note 16 and 21 to the
Capital Expenditure
Expenditure on the acquisition of property, plant and
equipment of the Company and the Group amounted to
Rs. 7.9 Mn. and Rs. 171.3 Mn., respectively. Information
relating to the movement in property, plant and equipment is
given in Note 10 to the financial statements.
Market Value of Freehold Properties
Directors’ Responsibility for
Financial Reporting
The Directors are responsible for the preparation of
financial statements to reflect a true and fair view of the
state of its affairs. The Directors are of the view that these
financial statements have been prepared in conformity with
the requirements of the Sri Lanka Accounting Standards,
Companies Act No. 7 of 2007, Sri Lanka Accounting and
Auditing Standards Act No. 15 of 1995 and the Listing Rules of
the Colombo Stock Exchange.
The Directors’ Responsibility in relation to the financial
reporting is given on page 74 which forms an integral part of
the Annual Report of the Board of Directors.
Directors’ Shareholdings
Freehold land of the Group acquired in 1975, was valued by a
qualified Valuer in December 2009. The revaluation of the land
was reflected in the books as at that date. Details of revaluation
is provided in Note 10.6 to the financial statements.
The Directors of the Company, together with their spouses,
held 56,835 shares as at 31 March 2011. This amounted to
0.36% of the total number of shares issued by the Company.
Environment Protection
Shareholdings of the Directors together with their spouses
are as follows:
Initiatives taken by the Company to preserve the environment
are presented on pages 44 to 46 of this Report. The Company
has not engaged in any activity that is harmful to the
environment. Further, the Group commenced reporting as per
Global Reporting Initiative Guidelines from 2010/11 onwards.
As at 31 March
B.R.L. Fernando
A. Mapalagama
Total
Annual Report of the Board of Directors on the State of Affairs of Chemanex PLC
2011
2010
52,941
52,941
3,894
3,894
56,835
56,835
69
Related Party Transactions
Directors’ Interests in transactions or proposed transactions
if any, with the Company have been declared and are detailed
in Note 37 to the Accounts. The Directors have no direct
or indirect interest in any other transaction or proposed
transaction with the Company.
Directors' Interest Register
The Directors' Interest Register is maintained by the Company
as per the Companies Act No. 7 of 2007. All Directors have
made general disclosures and declarations as provided
in Section 192 (2) of the said Act. Each Non-Executive
Director has submitted signed and dated declaration of his
independence and non-independence against the specified
criteria as provided in the Section 7 of Rules on Corporate
Governance published by the Colombo Stock Exchange. The
related entries were made in the Interest Register during the
year under review.
As per the declaration made, Prof. U.P. Liyanage has served
on the Board for more than nine years. However, as per the
Section 7.10.3 (b) of the Listed Rules on Corporate Governance
published by the Colombo Stock Exchange, the Board, after
taking into account all other circumstances listed under Rule
7.10.4, 'Criteria for Defining Independence' is of the opinion
that the said Director is nevertheless independent.
Directors’ interests in contracts and remuneration paid to
Directors, etc. have also been included in the Interest Register
which is made available for inspection under the Companies
Act No. 7 of 2007.
Directors’ Remuneration
Directors’ remuneration in respect of the Company and the
Group, for the financial year ended 31 March 2011 is given
in Note 6 (C) of the financial statements on page 90 of the
Annual Report.
Directors
The names of the Directors as at the end of the accounting
period together with Directors who ceased to hold offices of
the Company during the accounting period are as follows:
M.P. Jayawardena - Managing Director/CEO
A. Mapalagama - Chief Operating Officer
D. Chandrasekara
L. De Mel (Resigned w.e.f. 30.09.2010)
Prof. U.P. Liyanage
S.P.S. Ranatunga
A.V.P. Silva
Appointments and Resignations
Mr. L. de Mel resigned from the Board of Directors of
Chemanex PLC with effect from 30 September 2010.
70
Mr. M.D. Wickramamasinghe appointed to the Board of
Directors of Chemanex PLC with effect from 1 October 2010.
Retirement by Rotation and Re-election
Mr. A. Mapalagama retires by rotation in terms of Clause 24 (6)
of the Articles of Association of the Company and being eligible,
is recommended for re-election with the unanimous support of
the Board.
Mr. A.V.P. Silva retires by rotation in terms of Clause 24 (6)
of the Articles of Association of the Company and being
eligible, is recommended for re-election with the unanimous
support of the Board.
Mr. M.D. Wickramamasinghe appointed by the Board with
effect from 1 October 2010 retires in terms of Clause 24 (2)
of the Articles of Association of the Company and being
eligible, is recommended for re-election with the unanimous
support of the Board.
Mr. D. Chandrasekera has completed 70 years of age. In
terms of the Section 210 of the Companies Act No. 7 of 2007,
no person shall be capable of being appointed a Director of a
public company if he has attained the age of 70 years.
However, in terms of section 211 of the Companies Act No. 7
of 2007, nothing in section 210 shall prevent the appointment
of a Director who has attained the age of 70 years, or require a
Director who has attained that age to retire if his appointment
is or was made or approved by a resolution passed by the
Company at a general meeting which declares that the age
limit referred to in Section 210 shall not apply to that Director.
However, any resolution approved at a general meeting will be
valid only for one year from his appointment.
In this connection a special notice has been received by the
Company from Mr. R. Skandakumar a shareholder of the
Company informing his intention to move a Resolution stating
that section 210 of the Companies Act No. 7 of 2007 shall not
apply to Mr. D. Chandrasekera (Resolution is stated on
page 117 under Notice of Meeting).
Mr. D. Chandrasekera being eligible for re-election is
recommended by the Board of Directors unanimously from
the conclusion of the forthcoming AGM to the next AGM.
Directors’ Meetings and Board
Committee Meetings
The Board while assuming the overall responsibility and
accountability in managing of the Company, has also
appointed Board Committees conforming to the Corporate
Governance Rules of the Colombo Stock Exchange and Code
of Best Practices of The Institute of Chartered Accountants of
Sri Lanka.
The number of Directors’ meetings, including Board Committee meetings and the attendance of the
Directors at those meetings are as follows:
Number of Board Meetings held during the year - 5
Name
Attendance
100%
M.P. Jayawardena - Managing Director/CEO
Executive Director
100%
D. Chandrasekera
80%
100%
Prof. U.P. Liyanage
A. Mapalagama
Executive Director
S.P.S. Ranatunga
A.V.P. Silva
80%
100%
80%
80%
100%
Audit Committee
Number of meetings held during the year - 7
Name
Attendance
B.R.L. Fernando
86%
D. Chandrasekera
86%
M.D. Wickramasinghe (Appointed w.e.f. 01.10.2010) Independent Non-Executive Director
100%
100%
75%
The Report of the Audit Committee is given on page 60 of the Annual Report.
Remuneration Committee
Name
Attendance
D. Chandrasekera
100%
50%
Prof. U.P. Liyanage
100%
The Report of the Remuneration Committee is given on page 61 of this Report.
Nominations Committee
Name
Attendance
100%
D. Chandrasekera
100%
M.P. Jayawardena
Executive Director
100%
Prof. U.P. Liyanage
100%
S.P.S. Ranatunga
100%
A.V.P. Silva
100%
The Report of the Nominations Committee is given on page 62 of this Report.
71
Dividends
Vision and Corporate Conduct
An interim dividend of Rs. 1/- per share amounting to
Rs. 15,750,000/- was paid in February 2011 and the Directors
have recommended the payment of a final dividend of
Rs. 1/- per share amounting to Rs. 15,750,000/- for the
year ended 31 March 2011. Further, as required by the
Section 56 (2) of the Companies Act No. 7 of 2007, the Board
of Directors confirms that the Company, based on the
information available as at present, satisfies the Solvency Test
immediately after the distribution, and in accordance with the
Section 57 of the Companies Act No. 7 of 2007 has obtained a
certificate from the Auditors.
The Vision, Mission and the Corporate Values of the Group
are given on the page 2 of this Report. The business activities
of the Group are conducted with the highest level of ethical
standards in line with the Company Vision.
Revenue
The revenue generated by the Company amounted to
Rs. 550 Mn. (2010 - Rs. 497 Mn.) whilst Group revenue
amounted to Rs. 1 Bn. (2010 - Rs. 969 Mn.). Contribution to
Group revenue from different business segments is provided
in Note 1 to the financial statements on page 88.
Taxation
Taxation has been computed at the rates, given in Note 7 to
the financial statements.
Independent Auditors
The financial statements of the Company for the year have
been audited by Messrs KPMG Ford, Rhodes, Thornton & Co.,
Chartered Accountants who are the retiring Auditors, and
have expressed their willingness to continue as Auditors of
the Company and a resolution proposing their reappointment
as Auditors will be tabled at the Annual General Meeting.
The Report of the Independent Auditors is given on page 75.
Audit fees, audit-related services and non-audit fees for the
current financial year are Rs. 697,000/- and Rs. 239,327/-,
respectively.
The Auditors do not have any relationship other than that of
Auditors or interests, in the Company or any of its Subsidiaries
for the year ended 31 March 2011.
Equitable Treatment to Shareholders
The Company has made all endeavours to ensure equitable
treatment to all shareholders.
Risk Management
The Board of Directors and the Management of the Company
including CEO and CFO have put in place a comprehensive
risk identification, measurement and mitigation processes.
A detailed overview of the processes is outlined in the Risk
Management Report on page 64.
Systems and Internal Controls
The Board periodically reviews and ensures that the
comprehensive systems of internal controls are in place that
require to carry on the business in an orderly manner, to
safeguard assets and secure as far as possible the accuracy
and reliability of the financial records of the Group. The
Company has outsourced the internal audit function to a firm
of Chartered Accountants who reviews and reports on the
effectiveness of financial, operational, and compliance controls
and risk management of the Group on a regular basis.
Stated Capital
The Stated Capital of the Company was Rs. 126,250,000/comprising 15,750,000 ordinary shares as at 31 March 2011.
Share Information
Information relating to earnings, dividends, net assets and
market price per share is given in the ten-year summary on
page 114 of the Annual Report. Information on Share Trading
is given on page 17 of the Annual Report.
Shareholdings
Professional services in relation to tax compliance are
provided by BDO Partners.
There were 1,253 registered shareholders holding 15,750,000
ordinary shares of the Company as at 31 March 2011. The
distribution of shareholdings is given on page 20 of this Report.
Substantial Shareholdings
Systems and Procedures are in place as good Corporate
Governance is an integral part in today’s corporate
culture. The practices in this regard are given in Corporate
Governance section of this Report on page 47.
A list of the top 20 shareholders is given on page 21 of the
Annual Report.
72
Annual Report
Events After the Balance Sheet Date
The Board of Directors approved the consolidated financial
statements on 24 May 2011. The appropriate number of
copies of this Report will be submitted to the Colombo
Stock Exchange and the Sri Lanka Accounting and Auditing
Standards Monitoring Board. As required by the Section
170 (1) of the Companies Act No. 07 of 2007, duly signed
financial statement of the Company and the Group together
with auditor's report will also be delivered to Registrar of
Companies for registration on 3 June 2011.
There were no material events that occurred subsequent to
the Balance Sheet date other than disclosed in Note 32 to the
financial statements that require adjustment to or disclosure
in the financial statements.
Compliance with Laws and Regulations
There are no commitments which require adjustments or
disclosure other than stated above as at the Balance Sheet date.
The Company has not engaged in any activity against the
prevailing laws and regulations of the country. Compliance in
provisions in law and regulations is confirmed to the Board at
all Board Meetings of the Company and its Subsidiaries.
Statutory Payments
The Directors confirm that to the best of their knowledge, all
statutory payments to the Government and other Statutory
Institutions including employee-related payments have
been made in time. Compliance with statutory payments is
confirmed to the Board at all Board Meetings of the Company
and its Subsidiaries.
Human Resource
The Company’s human resource management policies and
practices are designed to retain and develop its employees to
ensure their optimum contribution towards the achievement
of the Company goals and objectives. A detailed overview is
outlined in the Human Capital Report on page 42.
Commitments
In terms of 'Equity Support Agreement' entered into in respect of
Chemcel (Pvt) Limited the estimated amount yet to be financed
for completion of the project amounts to Rs. 70 Mn.
Notice of Meeting
Notice of Meeting of the 38th Annual General Meeting is given on
page 117.
Acknowledgement of the Contents of the Report
As required by Section 168 (1) (k) of the Companies Act No. 7
of 2007, the Board of Directors does hereby acknowledge the
contents of this Annual Report.
Signed in accordance with the resolution adopted by
the Directors.
For and on behalf of the Board,
Corporate Social Responsibility
B.R.L. Fernanado - FCA
All activities embarked by the Company in this regard are given
under Sustainability Report of this Annual Report on page 26.
Chairman
Going Concern
The Board of Directors is satisfied that the Company,
its Subsidiaries and equity accounted investees have adequate
resources to continue its operations in the foreseeable future
to justify the going concern basis adopted in preparing these
M.P. Jayawardena - FCA
A.N. Sugathapala - FCA
Board Secretary
24 May 2011
73
Directors’ Responsibility for Financial Reporting
The responsibility of the Directors, in relation to the financial
statements of the Company and its Subsidiaries, is set out in
the following statement.
As per the provisions of the Companies Act No. 7 of 2007, the
Directors are required to prepare the financial statements for
each financial year and present them to a General Meeting
of the Company. These financial statements consist of the
following:
i.
an income statement, which presents a true and fair view
of the profit or loss of the Company and its Subsidiaries
for the financial year; and
ii. a Balance Sheet, which presents a true and fair view of
the state of affairs of the Company and its subsidiaries as
at the end of the financial year, and which comply with the
requirements of the Act.
As per the Act, the Directors of the Company are required
to ensure, in preparing these financial statements, that a. the appropriate accounting policies have been
selected and adopted in a consistent manner and
material departures thereof, if any, have been
disclosed and explained;
b. all applicable Accounting Standards, as relevant, have
been followed;
c. judgements and estimates have been made which are
reasonable and prudent;
d. the Company has adequate resources to continue in
operation to justify the application of going concern
basis in preparing these financial statements;
e. the Company maintains sufficient accounting records
to disclose, with reasonable accuracy, the financial
position of the Company and of the Group, and to
ensure that the financial statements presented,
comply with the requirements of the Companies Act.
The Directors are also responsible for taking reasonable
steps to safeguard the assets of the Company and of the
Group and to give proper consideration in this regard
to establish appropriate internal control systems with a
view to preventing and detecting frauds and any other
irregularities.
74
The Directors are required to prepare the financial statements
and to provide the Auditors with every opportunity to take
whatever steps and undertake whatever inspections they may
consider to be appropriate to enable them to give their Audit
Opinion.
The Directors are of the view that they have discharged their
responsibilities as set out in this statement.
Compliance Report
The Directors confirm that to the best of their knowledge,
all taxes, duties and levies payable by the Company and its
Subsidiaries, all contributions, levies and taxes payable on
behalf of and in respect of the employees of the Company and
its Subsidiaries, and all other known statutory dues as were
due and payable by the Company and its Subsidiaries as at
the Balance Sheet date have been paid or, where relevant,
provided for, except as specified in Note 34 to the financial
statements covering contingent liabilities.
Further, as required by the Section 56 (2) of the Companies
Act No. 7 of 2007, the Board of Directors confirm that the
Company, based on the information available as at present,
satisfies the Solvency Test immediately after the distribution,
in accordance with the Section 57 of the Companies Act No. 7
of 2007, and have obtained a certificate from the Auditors, prior
to recommending the final dividend of Rs. 1/- per share for this
year, which is to be approved by the shareholders at the Annual
General Meeting to be held on 30 June 2011.
By Order of the Board,
A.N. Sugathapala
Board Secretary
24 May 2011
Independent Auditors' Report
TO THE SHAREHOLDERS OF CHEMANEX PLC
Report on the Financial Statements
We have audited the accompanying financial statements of
Chemanex PLC and the consolidated financial statements
of the Company and its subsidiaries as at 31st March 2011
which comprise the balance sheet as at 31st March 2011, and
the income statement, statement of changes in equity and
cash flow statement for the year then ended, and notes to the
financial statements set out on pages 80 to 111.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair
presentation of these financial statements in accordance with
Sri Lanka Accounting Standards. This responsibility includes:
designing, implementing and maintaining internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement,
whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting
estimates that are reasonable in the circumstances.
Scope of Audit and Basis of Opinion
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit
in accordance with Sri Lanka Auditing Standards. Those
standards require that we plan and perform the audit to obtain
reasonable assurance whether the financial statements are
free from material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
policies used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation.
We have obtained all the information and explanations which
to the best of our knowledge and belief were necessary for
the purpose of our audit. We therefore believe that our audit
provides a reasonable basis for our opinion.
Opinion
In our opinion, so far as appears from our examination,
the Company maintained proper accounting records for the
year ended 31st March 2011 and the financial statements
give a true and fair view of the Company’s state of affairs as at
31st March 2011 and its profit and cash flows for the year then
ended in accordance with Sri Lanka Accounting Standards.
In our opinion, the consolidated financial statements give
a true and fair view of the state of affairs as at 31st March
2011 and the profit and cash flows for the year then ended,
in accordance with Sri Lanka Accounting Standards, of the
Company and its subsidiaries dealt with thereby, so far as
concerns the members of the company.
Report on Other Legal and Regulatory Requirements
These financial statements also comply with the requirements
of Section 153(2) to 153(7) of the Companies Act No. 07 of 2007.
KPMG Ford, Rhodes, Thornton & Co.
Chartered Accountants
Colombo
24 May 2011
75
Income Statement
Company
For the year ended 31 March
Revenue
Note
2010 Rs. '000 2011
Rs. '000 2010 Rs. '000 549,804
497,258
999,552
969,428
Cost of sales
(401,017)
(369,084)
(813,818)
(753,573)
Gross profit
148,787
128,174
185,734
215,855
Other income
1
2011
Rs. '000 Group
102,124
108,030
64,836
137,923
Administrative expenses
2
(84,966)
(90,739)
(123,555)
(121,352)
Selling and distribution expenses
(33,047)
(36,302)
(39,358)
(53,057)
Other expenses
3
(13,252)
(8,250)
(13,252)
(8,250)
Financing cost
4
(9,521)
(18,336)
(10,110)
(19,285)
Share of profits of equity accounted
investees (net of income tax)
5
3,729
3,247
Profit before taxation
6
110,125
82,577
68,024
155,081
Income tax expense
7
(29,085)
(26,790)
(36,349)
(35,251)
81,040
55,787
31,675
119,830
81,040
55,787
36,929
96,211
Profit for the period
–
–
Attributable to:
Equity holders of the Company
Non-controlling interest
(5,254)
23,619
81,040
55,787
31,675
119,830
–
Profit for the year
–
Basic earnings per share (Rs.)
8
5.15
3.54
2.34
6.11
Dividend per share (Rs.)
9
2.00
2.50
2.00
2.50
(Inclusive of proposed dividend)*
* Interim Dividend paid and Final Dividend proposed, are taken into consideration for computation. Final Dividend proposed is to
be approved at the Annual General Meeting.
Notes from pages 80 to 111 form an integral part of these financial statements.
Figures in brackets indicate deductions.
76
Balance Sheet
Company
As at 31 March
ASSETS
Non-Current Assets
Property, plant & equipment
Investment property
Deposit on leasehold property
Intangible assets
Investments in subsidiaries
Investments in equity accounted investees
Other long-term investments
Deferred tax assets
Total non-current assets
Current Assets
Inventories
Trade & other receivables
Due from related companies
Short-term investments
Cash & cash equivalents
Total current assets
Total Assets
EQUITY & LIABILITIES
Stated capital
Capital reserves
General reserves
Retained earnings
Total equity attributable to equity holders of the Company
Total Equity
Non-Current Liabilities
Long-term interest bearing borrowings
Retiring benefit obligations
Current Liabilities
Trade & other payables
Current portion of long-term interest bearing borrowings
Income tax payable
Due to related companies
Short-term interest bearing borrowings
Total current liabilities
Total Liabilities
Total Equity & Liabilities
Group
2011
Rs. '000
2010
Rs. '000
2011
Rs. '000
2010
Rs. '000
34,664
209,266
–
–
239,885
78,877
71,586
10,579
644,857
52,392
208,480
–
–
246,065
752
127,961
13,694
649,344
412,187
87,066
299,390
83,731
13,964
15,109
32,686
–
147,353
71,586
16,721
781,563
32,686
–
64,478
127,961
21,595
644,950
18
19
20
21
104,434
131,689
229,433
68,435
250,800
784,791
1,429,648
68,828
103,455
98,565
24,601
401,132
696,581
1,345,925
255,381
276,935
18,803
68,435
418,853
1,038,407
1,819,970
160,550
242,021
34,545
24,601
558,441
1,020,158
1,665,108
22
23
24
24
126,250
91,330
232,841
670,657
1,121,078
–
1,121,078
126,250
91,330
232,841
628,992
1,079,413
–
1,079,413
126,250
94,330
232,841
828,115
1,281,536
109,877
1,391,413
126,250
101,026
262,066
794,640
1,283,982
138,404
1,422,386
25
26
186
35,864
36,050
868
35,413
36,281
186
47,346
47,532
868
47,739
48,607
27
25
70,796
681
4,490
27,620
168,933
272,520
308,570
1,429,648
37,357
577
11,017
100,498
80,782
230,231
266,512
1,345,925
148,719
681
1,890
27,620
202,115
381,025
428,557
1,819,970
68,604
577
11,516
31,665
81,753
194,115
242,722
1,665,108
Note
10
11
12
13
14
15
16
17
28
29
It is certified that the financial statements have been prepared in compliance with the requirements of the Companies
Act No. 07 of 2007.
A.N. Sugathapala
Chief Finance Officer/Company Secretary
The Directors are responsible for the preparation and presentation of these financial statements.
Signed for and on behalf of the Board by,
B.R.L. FernandoM.P. Jayawardena
Chairman
24 May 2011
77
Statement of Changes in Equity
For the year ended 31 March 2011
Attributable to Equity Holders of the Company
Stated
Capital
Rs. '000
Capital Reserve Rs. '000 General
Reserve
Rs. '000
Retained Earnings Rs. '000 Total NonControlling
Interest
Total Equity Rs. '000 Rs. '000 Rs. '000 126,250
46,934
232,841
651,955
1,057,980
– – Company
Balance as at 1 April 2009
Dividends to shareholders Final (2008/09)
–
–
–
(63,000)
(63,000)
– – Interim (2009/10)
–
–
–
(15,750)
(15,750)
– – Surplus on revaluation
–
Profit for the year
–
Balance as at 31 March 2010
126,250
44,396
–
91,330
–
–
–
232,841
44,396
55,787
55,787
– – 628,992
1,079,413
– – Dividends to shareholders Final (2009/10)
–
–
–
(23,625)
(23,625)
– – Interim (2010/11)
–
–
–
(15,750)
(15,750)
– – Profit for the year
81,040
81,040
– – 126,250
–
91,330
–
232,841
–
670,657
1,121,078
– – 126,250
56,630
262,066
777,179
1,222,125
50,491
Group
Balance as at 1 April 2009
1,272,616
–
–
–
(63,000)
(63,000)
(2,700)
(65,700)
Interim (2009/10)
–
–
–
(15,750)
(15,750)
–
(15,750)
44,396
–
44,396
Surplus on revaluation
–
44,396
–
–
Increase in non-controlling investment
in subsidiary
–
–
–
–
–
69,900
Change in effective holding of subsidiary
–
–
–
–
–
(2,906)
(2,906)
Profit for the year
126,250
101,026
262,066
69,900
96,211
96,211
23,619
119,830
794,640
1,283,982
138,404
1,422,386
(10,378)
–
–
–
(23,625)
(23,625)
Interim (2010/11)
–
–
–
(15,750)
(15,750)
–
–
–
Adjustment due to liquidation
of subsidiary
–
(6,696)
(29,225)
35,921
36,929
36,929
(5,254)
31,674
94,330
232,841
828,115
1,281,536
109,877
1,391,413
–
Profit for the year
126,250
(34,003)
–
(15,750)
–
(1,583)
(1,583)
–
(11,312)
(11,312)
Details of the Capital Reserve and General Reserve are given in Note 23 and 24 to the financial statements.
Company
Group
2011
Rs. '000 2010 Rs. '000 2011
Rs. '000 2010 Rs. '000 670,657
628,992
Analysis of Retained Earnings carried forward
670,657
628,992
Subsidiaries
Company
–
–
88,982
101,922
Equity accounted investees
–
–
68,476
63,726
828,115
794,640
670,657
78
628,992
Cash Flow Statement
Company
Note
Group
2011
Rs. '000 2010 Rs. '000 2011
Rs. '000 2010 Rs. '000 119,646
100,913
74,405
171,119
19,382
2,556
(1,741)
(6,013)
19,728
1,626
(4,334)
(10,963)
47,510
7
(2,365)
(6,013)
41,540
–
(7,029)
(10,963)
Cash Flow from Operating Activities
Profit before interest and tax
Adjustments for:
Depreciation on property, plant & equipment
Depreciation on investment property
Gain on disposal of property, plant & equipment
Gain on disposal of other investments
Gain on liquidation of subsidiary
Gain on translation of foreign currencies
Negative goodwill on equity accounted investee
Reversal of export claims
Provision for fall in value of short-term investment
Provision for fall in value of long-term investment
Interest income
Dividends income
Amortisation of lease deposit
Provision for retiring gratuity
Operating profit before working capital changes
(Increase)/decrease in inventories
(Increase)/decrease in trade & other receivables
Increase/(decrease) in trade & other payables
Cash Generated from/(used in) Operations
Interest paid
Income tax paid
Retiring gratuity paid
Net cash inflow/(outflow) from operating activities
(18,414)
–
419
–
–
–
6,544
3,250
(35,636)
(39,901)
–
3,143
53,235
(35,606)
(132,708)
(39,439)
(154,518)
(9,521)
(32,496)
(2,692)
(199,227)
150
–
–
–
3,250
(83,767)
(8,816)
–
9,084
26,871
8,146
222,207
42,346
299,570
(18,336)
(42,468)
(12,171)
226,595
Cash Flows from Investing Activities
Proceeds from disposal of property, plant & equipment
Proceeds from disposal of other investments
Acquisition of intangible asset
Investment in leasehold property
Investment in subsidiaries
Investment in equity accounted investee
Dividends income from equity accounted investees
Dividends income from non-group companies
Interest income
Acquisition of property, plant & equipment
Other investments
Net payment to non-controlling interests
Net cash inflow/(outflow) from investing activities
4,711
32,845
–
–
(1,800)
(25,000)
1,077
38,824
35,636
(7,965)
(77,211)
–
1,117
6,199
77,516
–
–
(73,100)
–
1,548
7,268
83,767
(103,857)
(111,618)
–
(112,277)
–
(25,000)
1,077
12,673
33,494
(171,310)
(77,211)
(23,273)
(206,677)
Cash Flows from Financing Activities
Repayment of long-term loans
Capital payment of finance lease
Dividends paid
Net cash inflow/(outflow) from financing activities
(578)
(39,375)
(39,953)
(100,000)
(474)
(78,750)
(179,224)
(578)
(39,375)
(39,953)
(100,000)
(474)
(78,750)
(179,224)
(238,063)
320,350
(419)
81,868
(64,906)
385,406
(150)
320,350
(251,758)
476,688
(8,192)
216,738
24,572
477,580
(25,464)
476,688
250,800
(168,933)
81,868
401,132
(80,782)
320,350
418,853
(202,115)
216,738
558,441
(81,753)
476,688
Net change in cash & cash equivalents
Cash & cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash & cash equivalents held
Cash & cash equivalents at the end of the year
Analysis of cash & cash equivalents at the end of the year
Bank & cash balances
Short-term bank borrowings (Note 29)
–
–
–
–
8,192
(2,099)
–
–
6,544
3,250
(33,494)
(12,673)
1,145
3,798
88,207
(94,831)
(19,172)
76,070
50,275
(10,110)
(41,103)
(4,191)
(5,129)
10,028
32,845
–
–
–
25,464
–
(2,232)
(2,906)
–
3,250
(78,514)
(581)
–
11,460
150,608
(2,305)
200,804
(13,936)
335,171
(19,285)
(46,216)
(15,117)
254,553
8,895
77,516
(1,938)
(15,160)
–
–
1,548
581
78,514
(156,295)
(111,618)
67,200
(50,757)
79
1. GENERAL
1.2.3 Functional and Presentation Currency
1.1 Reporting Entity
The financial statements are presented in Sri Lankan
Rupees, which is the Group’s functional currency. All financial
information presented in Sri Lankan Rupees Thousands
(Rs. ‘000) unless otherwise indicated.
Chemanex PLC, is a limited liability Company incorporated and
domiciled in Sri Lanka. The ordinary shares of the Company
are listed on the Colombo Stock Exchange of Sri Lanka. The
address of the Company’s registered office and the principal
place of business is No. 52, Galle Face Court 2, Colombo 03.
The consolidated financial statements of Chemanex PLC as
at and for the year ended 31 March 2011 comprise the
Company, its subsidiaries (together referred to as the ‘Group’)
and the Group’s interest in Equity Accounted Investees.
Descriptions of the nature of the operations and principal
activities of the Company, its Subsidiaries and Equity Accounted
Investees are given on page 113 and inner back cover.
The ultimate Parent Company of the Group is Paints &
General Industries Limited and Parent Company of the Group
is CIC Holdings PLC.
The financial statements of all companies in the Group other
than mentioned in Note 36 to the financial statements are
prepared for a common financial year, which ends on 31 March.
1.2 Basis of Preparation
1.2.1 Statement of Compliance
The financial statements have been prepared in accordance
with Sri Lanka Accounting and Auditing Standards Act No. 15
of 1995, which requires compliance with Sri Lanka Accounting
Standards (SLASs) promulgated by The Institute of Chartered
Accountants of Sri Lanka (ICASL) and with the requirements
of the Companies Act No. 7 of 2007, the Listing Rules of
the Colombo Stock Exchange and Code of Best Practice
on Corporate Governance issued jointly by The Institute
of Chartered Accountants of Sri Lanka and Securities and
Exchange Commission of Sri Lanka.
The Board of Directors of the Company is responsible for the
preparation and presentation of these financial statements.
The financial statements were authorised for issue by the
Directors on 24 May 2011.
1.2.2 Basis of Measurement
The financial statements have been prepared on the historical
cost basis except for certain land and short-term investments
are measured/stated at fair value as explained in the
respective Notes to the financial statements.
1.2.4 Use of Estimates and Judgments
The preparation of financial statements in conformity with
SLASs requires management to make judgments, estimates
and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities,
income and expenses. Judgments and estimates are based on
historical experience and other factors, including expectations
that are believed to be reasonable under the circumstances.
Hence actual experience and results may differ from these
judgments and estimates.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised
if the revision affects only that period and any future periods
affected.
Information about significant areas of estimation uncertainty
and critical judgements in applying accounting policies that
have the most significant effect on the amounts recognised in
the financial statements is included in the following notes:

Note 10 - impairment of property, plant & equipment

Note 11 - impairment of investment property

Note 13 - impairment of intangible assets

Note 16 - impairment of short-term investments

Note 17 - deferred taxation

Note 21 - impairment of long-term investments

Note 26 - measurement of the defined benefit obligations
1.3 Significant Accounting Policies
The accounting policies adopted are consistent with those of
the previous financial year other than the accounting policy on
Investment Property as stated in accounting policy No. 3.3 on
land & buildings, which was adopted during the year.
Comparative information have been reclassified where
necessary to confirm with current year presentation.
The Directors have made an assessment of the Group's ability
to continue as a going concern in the foreseeable future, and
they do not intend either to liquidate or to cease trading.
80
2. Basis of Consolidation
2.4 Transactions Eliminated on Consolidation
The Consolidated Financial Statements (referred to as the
‘Group’) comprise the Financial Statements of the Company
and its subsidiaries and the Group’s interest in equity
accounted investees.
Intra-group balances, transactions and any unrealised income
and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements.
Unrealised gains arising from transactions with equity
accounted investees are eliminated against the investment to
the extent of the Group’s interest in the investee. Unrealised
losses are eliminated in the same way as unrealised gains,
but only to the extent that there is no evidence of impairment.
Subsidiaries, equity accounted investees are disclosed in
Note 14 and 15 to the financial statements.
2.1 Subsidiaries
Subsidiaries are those entities controlled by the Group. Control
exists when the Group has the power to govern the financial
and operating policies of an entity so as to obtain benefits
from its activities which is evident when the Group controls
the composition of the Board of Directors of the entity or holds
more than 50% of the issued shares of the entity or 50% of
the voting rights of the entity or entitled to receive more than
half of every dividend from shares carrying unlimited right to
participate in distribution of profits or capital.
The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control
commences until the date that control ceases.
2.5 Foreign Currency
Foreign Currency Transactions
Transactions in foreign currencies are translated into the
respective functional currencies of Group entities at exchange
rates applicable on the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies at the
reporting date are retranslated to the functional currency at the
exchange rate ruling at that date. Foreign currency differences
arising on retranslation are recognised in Income Statement.
Non-monetary assets and liabilities which are carried in terms
of historical cost in a foreign currency are retranslated at the
exchange rate that prevailed at the date of the transaction.
3. ASSETS AND BASES OF THEIR VALUATION
The interest of outside shareholders in Group companies is
disclosed separately under the heading of ‘Non-Controlling
Interest’.
2.2 Transactions with Non-Controlling Interests
The profit or loss and net assets of a subsidiary attributable to
equity interests that are not owned by the Parent, directly or
indirectly through subsidiaries, is disclosed separately under
the heading ‘Non-Controlling Interest’.
The Group applies a policy of treating transactions with NonControlling Interests as transactions with parties external to
the Group.
2.3 Equity Accounted Investees
Equity accounted investees are those entities in which the
Group has significant influence, but not control, over financial
and operating policies. Significant influence is presumed
to exist when the Group holds between 20% and 50% of the
voting power of the entity. Equity accounted investees are
accounted for using the equity method and are recognised
initially at cost. The Consolidated Financial Statements
include the Group's share of income and expenses and equity
movements of Equity Accounted Investees, from the date that
significant influence commences until the date significant
influence ceases. When the Group's share of losses exceeds
its investment in an equity accounted investee, the carrying
amount of that interest is reduced to nil and the recognition
of further losses is discontinued except to the extent that the
Group has incurred obligations or has made payments on
behalf of the investee.
Assets classified as current assets on the Balance Sheet are
cash and bank balances and those which are expected to be
realised in cash during the normal operating cycle or within
one year from the Balance Sheet date, whichever is shorter.
3.1 Property, Plant & Equipment - Owned Assets
3.1.1 Owned Assets
The property, plant & equipment are recorded at cost/
valuation less accumulated depreciation and impairment
losses as set out below:
Freehold land is stated at valuation determined by a professional
valuer. All other classes of assets are stated at cost.
When an asset is revalued, any increase in the carrying
amount is credited directly to a revaluation reserve, except to
the extent that it reverses a revaluation decrease of the same
asset previously recognised in the Income Statement, in which
case the increase is recognised in the Income Statement. Any
revaluation deficit that offsets a previous surplus in the same
asset is directly offset against the surplus in the revaluation
reserve and any excess recognised as an expense. Upon
disposal, any revaluation reserve relating to the asset sold is
transferred to retained earnings.
Items of property, plant & equipment are derecognised upon
disposal or when no future economic benefits are expected
from its use. Any gain or loss arising on derecognition of the
asset is included in the Income Statement in the year the
asset is derecognised.
81
The cost of property, plant & equipment is the cost of purchase
or construction together with any expenses incurred in bringing
the assets to its working condition for its intended use.
Expenditure incurred for the purpose of acquiring, extending
or improving assets of permanent nature by means of which
to carry on the businesses or to increase the earning capacity
of the business has been treated as capital expenditure.
The cost of property, plant & equipment is the cash price
equivalent at the recognition date. If payment is deferred
beyond normal credit terms, the difference between the
cash price equivalent and the total payment is recognised
as interest over the period of credit unless such interest is
recognised in the carrying amount of the item in accordance
with the allowed alternative treatment in SLAS 20.
(c) Non-Refundable Deposit on Leasehold Property
The initial cost incurred in obtaining the property is classified
as non-refundable deposit and amortised over the period of
the lease as per Sri Lanka Accounting Standard 19 - Leases.
Further details are given in Note 12 to the financial statements.
3.3 Investment Property
Investment property is property held either to earn rental
income or for capital appreciation or both, but not for sale
in the ordinary course of business, use in the production or
supply of goods or services or for administrative purposes.
Investment property is initially measured at its cost including
related transaction costs and is therefore carried at its
cost less any accumulated depreciation and any accumulated
impairment losses.
3.4 Subsequent Costs/Replacement of Parts
The carrying values of property, plant & equipment are
reviewed for impairment when events or changes in
circumstances indicate that the carrying value may not be
recoverable.
3.2 Leased Assets
(a) Finance Leases
Property, plant & equipment on finance leases, effectively
transfer to the Group substantially all of the risk and benefits
incidental to ownership of the leased items which are
capitalised and disclosed as Finance Leases at their cash
price and depreciated over the period. The Group is expected
to benefit from the use of the leased assets.
The corresponding principal amount payable to the lessor is
shown as a liability. Lease payments are apportioned between
the finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the outstanding balance
of the liability. The interest payable over the period of the
lease is transferred to an interest in suspense account. The
interest element of the rental obligations pertaining to each
financial year is charged to the Income Statement over the
period of lease.
The cost of improvements to leasehold property is capitalised,
disclosed as leasehold improvements and depreciated over
the unexpired period of the lease or the estimated useful lives
of the improvements, whichever is shorter.
The cost of replacing part of an item of property, plant &
equipment is recognised in the carrying amount of the item
if it is probable that the future economic benefits embodied
within the part will flow to the Group and its cost can be
measured reliably. The carrying amount of the replaced part
is derecognised in accordance with the derecognition policy
given below.
The costs of the day-to-day servicing of property, plant &
equipment are recognised in profit and loss as incurred.
3.5 Derecognition
The carrying amount of an item of property, plant &
equipment is derecognised on disposal; or when no future
economic benefits are expected from its use or disposal.
Gains and losses on derecognition are recognised in profit and
loss and gains are not classified as revenue.
3.6 Depreciation
Depreciation is charged to the Income Statement on a
straight-line basis over the estimated useful lives of items
of property, plant & equipment. Land is not depreciated.
Depreciation of property, plant & equipment commences
when the assets are available for use.
The estimated useful lives are as follows:
Buildings constructed
Before 31.03.92
20 years
(b) Operating Leases
After 31.03.92
10 years
Leases, where the lessor effectively retains substantially all of
the risk and benefits of ownership over the term of the lease,
are classified as operating leases.
Plant & machinery
6 years
Furniture & fittings
4 years
Data processing equipment
3 years
Motor vehicles
4 years
Equipment
3 years
Rentals paid under operating leases are recognised as an
expense in the Income Statement on a straight-line basis over
the term of the lease.
82
3.7 Intangible Assets
(f) Income Statement Amortisation
An intangible asset is recognised if it is probable that future
economic benefits that are attributable to the asset will flow
to the enterprise and the cost of the asset can be measured
reliably in accordance with SLAS 37 on intangible assets.
Accordingly, these assets are stated in the balance sheet
at cost less accumulated amortisation and accumulated
impairment losses.
Amortisation is recognised in profit and loss on a straightline basis over the estimated useful lives of intangible assets,
other than goodwill, from the date on which they are available
for use.
3.8 Investments
(a) Long-Term Investments
Quoted and unquoted investments in shares held on longterm basis are stated at cost.
(a) Goodwill
Goodwill acquired in a business combinations is initially
measured at cost being the excess of the cost of business
combination over the Group’s interest in the net fair value of
the identifiable assets, liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at cost less
any accumulated impairment losses. Goodwill is reviewed for
impairment, annually or more frequently if events or changes
in circumstances indicate that the carrying value may be
impaired.
In the parent Company’s financial statements, investments
in subsidiaries and equity accounted investees are carried at
cost under parent Company's accounting policy for long-term
investments.
Provision for fall in value is made when in the opinion of the
Directors there has been a decline other than temporary in
the value of the investment.
(b) Negative Goodwill
(b) Short-Term Investments
Any excess of acquirer’s interest in the net fair value of the
acquiree’s identifiable assets, liabilities and contingent
liabilities over the cost of a business combination is
recognised directly into the income statement.
The short-term investments are carried at lower of cost and
market value.
Provision for fall in value is made on a portfolio basis.
(c) Research Development Cost
(c) Market Value of Unquoted Equity
Expenditure on research activity, undertaken with the prospect
of gaining new scientific or technical knowledge
and understanding, is recognised in Income Statement
when incurred.
Development activities involve a plan or design for the
production of new or substantially improved products
and processes: Development cost is capitalised only if
development cost can be measured reliably, product or
process is technically and commercially feasible, future
economic benefits are probable, and Group intends to and
has sufficient resources to complete development and to use
or sell the asset. Expenditure capitalised includes the cost
of materials, direct labour costs and overhead costs that
are directly attributable preparing the asset for its intended
use. Other development costs are recognised in the Income
Statement when incurred.
(d) Other Intangible Assets
Other intangible assets that are acquired by the Group, which
have finite useful lives, are measured at cost less accumulated
amortisation and accumulated impairment losses.
Long-Term Investments
The unquoted equity investments have been valued at cost.
However, when there is a decline other than temporary, in the
value of a unquoted equity investment, the carrying amount is
reduced to recognise the decline.
3.9 Inventories
Inventories are stated at the lower of cost and net realisable
value. Net realisable value is the estimated selling price in
the ordinary course of business less the estimated costs of
completion and selling expenses. The general basis on which
cost is determined is as follows:
(a) All inventory items, except manufactured inventories
and work-in-progress at weighted average directly
attributable cost.
(b) Manufactured inventories and work-in-progress at
weighted average factory cost which include all direct
expenditure and appropriate share of production
overhead based on normal operating capacity.
(c)Goods-in-transit is stated at cost incurred till the arrival
of inventories.
(e) Subsequent Expenditure
3.10 Trade and Other Receivables
Subsequent expenditure is capitalised only when it increases
the future economic benefits embodied in the specific asset to
which it relates. All other expenditure, including expenditure
on internally-generated goodwill and brands, is recognised in
Income Statement as incurred.
Trade and other receivables are stated at their estimated
realisable amounts.
83
3.11 Cash and Cash Equivalents
3.13 Non-Current Assets Held for Sale
Cash and cash equivalents comprise cash balances and call
deposits. Bank overdrafts that are repayable on demand and
form an integral part of the Group’s cash management are
included as a component of cash and cash equivalents for the
purpose of the statement of cash flows.
Non-current assets (or disposal groups comprising assets
and liabilities) that are expected to be recovered primarily
through sale rather than continuing use are classified as
assets held for sale. Immediately before classification as
assets held for sale, the assets (or components of a disposal
group) are measured in accordance with the Group’s
accounting policies. Thereafter, generally the assets (or
disposal group) are measured at the lower of their carrying
amount and fair value less costs to sell.
3.12 Impairment
The carrying amounts of the Group’s assets are reviewed
at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then
the asset’s recoverable amount is estimated. For goodwill
and intangible assets that have indefinite lives or that are not
yet available for use, recoverable amounts are estimated at
each reporting date or more frequently, if events or changes in
circumstances indicate that they might be impaired.
(a) Calculation of Recoverable Amount
The recoverable amount of an asset or cash-generating unit
is the greater of its value in use and its fair value less costs
to sell. In assessing value in use, estimated future cash flows
are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time
value of money and the risks specific to the asset. A cashgenerating unit is the smallest identifiable asset group that
generates cash flows that largely are independent from other
assets and groups.
(b) Impairment/Reversal of Impairment
An impairment loss is recognised if the carrying amount of
an asset or its cash-generating unit exceeds its recoverable
amount. Impairment losses are recognised in Income
Statement. Impairment losses recognised in respect of
cash-generating units are allocated first to reduce the
carrying amount of any goodwill allocated to the units and
then to reduce the carrying amount of the other assets in the
unit on a pro rata basis.
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, impairment losses recognised
in prior periods are assessed at each reporting date for any
indications that the loss has decreased or no longer exists.
An impairment loss is reversed if there has been a change
in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the
asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
4. LIABILITIES AND PROVISIONS
Liabilities classified as current liabilities on the Balance Sheet
are those, which fall due for payment on demand or within
one year from the Balance Sheet date. Non-current liabilities
are those balances that fall due for payment after one year
from the Balance Sheet date.
All known liabilities have been accounted for in preparing the
4.1 Employee benefits
(a) Defined Benefit Plans
A defined benefit plan is a post-employment benefit plan
other than a defined contribution plan.
The retirement benefit obligation of the Group is based on the
actuarial valuation using Projected Unit Credit (PUC) methods as
recommended by Sri Lanka Accounting Standard No. 16 (Revised
2006) - 'Employee Benefits'. The Group recognises all actuarial
gains and losses arising from the defined benefits plans
immediately in the Income Statements.
The Liability is disclosed under Non-current liabilities in the
Balance Sheet and not externally funded.
The Group makes gratuity payments to its employees on the
following basis:
Length of Service
(years)
No. of Months Salary
0 -9
10 -14
¾ month salary for each completed year
15 -16
17 - 18
19 -20
21 -22
23 -24
25 -40
Over 41
However, as per the Payment of Gratuity Act No. 12 of 1983
the liability to an employee arises only on completion of 5
years of continued service.
84
(b) Measurement of the defined benefit obligations
Revenue from services is recognised in the Income Statement
The present value of the defined benefit obligations depends
on a number of factors that are determined on an actuarial
basis using a number of assumptions. Key assumptions used
in determining the defined retirement benefit obligations
are given in Note 26. Any changes in these assumptions will
impact the carrying amount of defined benefit obligations.
in proportion to the degree of completion of the transaction at
(c) Defined Contribution Plans - Employees' Provident
Fund/Mercantile Service Provident Society and Employees'
Trust Fund
A defined contribution plan is a post-employment plan under
which an entity pays fixed contributions into a separate entity
and will have no further legal or constructive obligation to
pay further amounts. Employees are eligible for contributions
to Employees’ Provident Fund/Mercantile Services Provident
Society and Employees’ Trust Fund in line with respective
Statutes and regulations. The Company contributes 12%,12%
and 3% of gross emoluments of employees to the Employees’
Provident Fund, Mercantile Services Provident Society and the
Employees’ Trust Fund respectively and is recognised as an
employee benefit expense when incurred.
4.2 Trade and Other Payables
Trade and other payables are stated at their cost.
4.3 Provisions
A provision is recognised in the Balance Sheet when the Group
has a legal or constructive obligation as a result of a past event
and it is probable that an outflow of economic benefits will be
required to settle the obligation.
5. INCOME STATEMENT
For the purpose of presentation of the Income Statement, the
function of expense method is adopted, as it represents fairly
the elements of the Company performance.
the Balance Sheet date.
A grant is recognised in the Income Statement in the year in
which it is received.
Gain on the disposal of investments held by the Group has been
accounted for in the Income Statement.
Gains and losses on the disposal of property, plant &
equipment determined by reference to the carrying amounts
have been accounted for in the Income Statement.
The profit earned by the Group before taxation in the Income
Statement is after making provision for all known liabilities
and for depreciation of property, plant & equipment.
5.2 Expenses
All expenditure incurred in the running of the business has
been charged to income in arriving at the profit for the year.
Repairs and renewals are charged to the Income Statement in
the year in which the expenditure is incurred.
Borrowing costs are recognised as an expense in the period in
which they are incurred.
5.3 Financing Cost
Financing cost comprises interest payable on borrowings.
6. Income tax
Income tax expense comprises current and deferred tax.
Income tax expense is recognised in Income Statement
except to the extent that it relates to items recognised directly
in equity, in which case it is recognised in equality.
6.1 Current Tax
5.1 Revenue
Revenue from the sale of goods is recognised in the Income
Statement when the significant risks and rewards of
ownership have been transferred to the buyer.
Rental income is recognised in the Income Statement on
accrual basis.
Dividend income is recognised in the Income Statement when
the right to receive the dividend is established.
Commission on direct sales is accounted for on cash basis.
Interest income is recognised in the Income Statement
as it accrues.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted
at the reporting date, and any adjustment to tax payable
in respect of previous years. The elements of income and
expenditure as reported in the financial statements and
computed in accordance with the provisions of the Inland
Revenue Act No. 10 of 2006 and amendments thereto.
6.2 Deferred Tax
Deferred tax is provided using the liability method on temporary
differences at the Balance Sheet date between the tax bases of
assets and liabilities, and their carrying amounts for financial
reporting purposes.
85
Deferred tax assets and liabilities are recognised for all
temporary differences. Deferred tax assets are recognised
for all deductible temporary differences, carrying-forward of
unused tax credits and unused tax losses, to the extent that it is
probable that taxable profit will be available against which the
deductible temporary differences, and the carrying-forward of
unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each
Balance Sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available
to allow all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at each
Balance Sheet date and are recognised to the extent that it
has become probable that future taxable profit will allow the
deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at tax rates
that are expected to apply to the year when the asset is
realised or liability is settled, based on the tax rates and tax
laws that have been enacted or substantively enacted as at
the Balance Sheet date.
Income tax relating to items recognised directly in equity is
recognised in equity.
Deferred tax assets and deferred tax liabilities are offset, if
a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred taxes relate to
the same taxable entity and the same taxation authority.
which is subject to risks and rewards that are different from
those of other segments.
Segmental Information is presented in respect of the Group's
industry and geographical segments. The Group’s primary
format for segment reporting is based on industry segments.
The industry segments are determined based on the Group’s
management and internal reporting structure.
Segmentation has been determined based on the activities
of the companies or the sector into which the products or
services are sold.
Inter-segment transfers are based on fair market prices.
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated
on a reasonable basis.
Segment capital expenditure is the total cost incurred during
the period to acquire property, plant & equipment, and
intangible assets other than goodwill.
9. General
9.1 Events Occurring after the Balance Sheet Date
All material post Balance Sheet events have been considered
and where appropriate adjustments or disclosures have been
made in Note 32 to the financial statements.
9.2 Commitments and Contingencies
7. CASH FLOW STATEMENT
There are no material capital commitments or Contingencies
which have been approved or contracted other than disclosed
in Note 33 and 34 to the financial statements.
The Cash Flow Statement has been prepared using the
‘indirect method’.
9.3 Earnings Per Share
Interest paid is classified as operating cash flows.
Dividend and interest income are classified as cash flows from
investing activities.
Dividends paid are classified as financing cash flows.
8. Segmental Reporting
A segment is a distinguishable component of the Group that
is engaged either in providing products or services (industry
segment), or in providing products or services within a
particular economic environment (geographical segment),
86
The Group presents basic and diluted earnings per share
(EPS) for its ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary shareholders
of the Company by the weighted average number of ordinary
shares outstanding during the period. Diluted EPS is
determined by adjusting the profit or loss attributable to
ordinary shareholders and the weighted average number
of ordinary shares outstanding for the effects of all dilutive
potential ordinary shares.
10. Effect of Accounting Standards issued but
not yet Effective
The following Accounting Standards have been issued by The
Institute of Chartered Accountants of Sri Lanka to be effective
for the financial periods beginning on or after 1 January 2012.

Sri Lanka Accounting Standard - SLAS 44 on 'Financial
Instruments; Presentation’

Sri Lanka Accounting Standard - SLAS 45 on ‘Financial
Instruments; Recognition and Measurement’

Sri Lanka Accounting Standard - SLAS 46 on ‘Financial
Instruments; Disclosures’

Sri Lanka Accounting Standard - SLAS 39 on ‘Share-based
Payment’
Following the convergence of Sri Lanka Accounting Standards
with the International Financial Reporting Standards, all
existing Sri Lanka Accounting Standards will be prefixed
as SLFRS or LKAS which refer to Sri Lanka Accounting
Standards corresponding to IFRS or IAS, respectively. The
Council of The Institute of Chartered Accountants of Sri Lanka
has mandated all specified business enterprises to adopt
these new Accounting Standards effective for financial periods
beginning on or after 1 January 2012.
The effect of application of these new Accounting Standards
will be substantially different to the effect of application of
existing Accounting Standards.
87
1. REVENUE
Company
2011
Rs. ’000
2010
Rs. ’000
Group
2011
Rs. ’000 2010 Rs. ’000 (A) Industry Segment Revenue
Chemicals
256,398
219,303
630,313
713,204
Paints
191,085
179,765
191,085
179,765
22,848
24,646
Consumer
Liners
–
–
22,848
24,646
102,578
1,681
15,918
Rent
20,510
15,918
20,510
Services
58,963
57,626
58,963
60,351
549,804
497,258
1,026,297
995,565
Intra-Group revenue
–
Total revenue from external customers
–
549,804
497,258
549,804
497,258
(26,745)
(26,137)
999,552
969,428
(B) Geographical Segment Revenue
Local
Exports
–
549,804
Intra-Group revenue
–
Total revenue from external customers
–
497,258
–
568,377
537,777
457,920
457,788
1,026,297
995,565
(26,745)
(26,137)
549,804
497,258
999,552
969,428
557,936
504,877
1,011,388
985,475
(C) Gross Revenue
Gross Revenue
Less:Turnover tax
(3,077)
(3,950)
(3,077)
(3,950)
Nation building tax
(5,055)
(3,669)
(5,055)
(4,346)
Freight
–
–
(395)
(1,765)
Commission
–
Net Revenue
549,804
–
497,258
(3,309)
999,552
(5,986)
969,428
2. Other Income
Income from investments - quoted
- unquoted
Interest income
Net gain on foreign currency translation
Gain on disposal of other investments
Gain on liquidation of subsidiary (Note 2.1)
513
68
513
68
39,388
8,748
12,160
513
35,636
83,767
33,494
78,514
419
150
8,192
25,464
6,013
10,963
6,013
10,963
18,414
–
–
–
1,741
4,334
2,365
7,029
Reversal of export claims
–
–
–
2,232
Export rebate received
–
–
–
10,234
Gain/(Loss) on disposal of property, plant & equipment
Negative goodwill on acquisition of equity accounted
investee (Note 2.2)
–
–
2,099
–
Effect of change in holding of Chemcel (Pvt) Limited
–
–
–
2,906
102,124
108,030
2.1 Liquidation of Subsidiary Chemanex Adhesives (Pvt) Limited
Total net assets of subsidiary
Amount receivable on liquidation
37,706
(11,312)
26,394
Carrying value of investment
(7,980)
Profit on liquidation
18,414
88
64,836
137,923
2.2 During the year, Chemanex PLC acquired another 2,500,000 shares of Rainforest Ecolodge (Pvt) Limited
increasing its equity holding up to 24.4%.
Company
2011
Rs. ’000
2010
Rs. ’000
Group
2011
Rs. ’000 2010
Rs. ’000 3. Other Expenses Donation to Government
–
5,000
–
5,000
Expenses incurred on investment property
3,458
–
3,458
–
Provision for fall in value of short-term investments (Note 21.1)
6,544
–
6,544
–
3,250
3,250
3,250
3,250
13,252
8,250
13,252
8,250
Provision for fall in value of long-term investment in
NTS Interlinning (Pvt) Limited (Note 16.1)
4. Financing Cost
Interest on long-term loans
Interest on short-term loans and overdrafts
Interest on finance lease
–
8,500
–
8,500
9,335
9,546
9,924
10,495
186
290
186
290
9,521
18,336
10,110
19,285
5. Share of Profits/(Loss) of equity accounted
investees - net of income tax
Group
2011
Rs. ’000 Rainforest Ecolodge (Pvt) Limited
2010 Rs. ’000 (1,128)
–
3,023
3,046
Crop Management Services (Pvt) Limited
1,834
201
3,729
3,247
89
6. Profit Before Tax
Company
Group
2011
Rs. ’000
2010
Rs. ’000
2011
Rs. ’000 2010 Rs. ’000 19,503
14,912
8,496
80,017
Paints
5,460
(9,260)
5,460
(9,260)
Consumer
1,676
(3,604)
1,676
(3,604)
–
–
10,596
(24,002)
3,729
3,571
(3,398)
406
(4,486)
208
(A) Industry Segment
Chemicals
Liners
Rent
Services
366
(2,071)
30,774
1,133
23,038
41,446
Other income
102,124
108,030
64,836
137,923
Other expenses
(13,252)
(8,250)
(13,469)
(8,250)
(9,521)
(18,336)
(10,110)
(19,285)
Finance cost
Share of profits of equity accounted investees - net of tax
3,729
3,247
110,125
82,577
68,024
155,081
30,774
1,133
14,915
(4,430)
–
8,123
45,876
–
–
(B) Geographical Segment
Local
Exports
–
30,774
1,133
23,038
41,446
Other income
102,124
108,030
64,836
137,923
Other expenses
(13,252)
(8,250)
(13,469)
(8,250)
(9,521)
(18,336)
(10,110)
(19,285)
Finance cost
Share of profits of equity accounted investees - net of tax
–
–
3,729
3,247
110,125
82,577
68,024
155,081
10,509
9,230
22,435
21,205
3,030
2,543
4,030
3,143
Audit fees - KPMG Ford, Rhodes, Thornton & Co.
425
373
697
712
Non-audit fees - KPMG Ford, Rhodes, Thornton & Co.
175
615
239
826
1,279
862
1,279
971
19,382
19,728
47,510
41,540
(C) Profit before Tax is Stated after Charging all Expenses
Including the Following:
Directors’ emoluments
Directors’ fees
Other auditors‘ fees
Depreciation on property, plant & equipment
2,556
1,626
7
Donations
Depreciation on investment property
636
5,992
986
5,992
Legal fees
1,632
335
1,997
390
211
87
259
87
26
38
26
1,681
1,396
Provision for bad debts
Bad debts written-off
Inventories written-off
–
1,340
317
1,762
Provision for inventories
–
728
–
Provision for investments
9,794
3,250
9,794
3,250
Staff training cost
1,121
75
2,226
126
728
Personnel cost*
45,462
41,093
104,488
83,331
EPF - Defined contribution plan cost
Salaries and wages
7,361
7,076
9,610
9,245
ETF - Defined contribution plan cost
1,845
1,788
2,407
2,329
Defined benefit plan cost
3,143
9,084
3,798
11,460
Ex-gratia
Total number of employees as at the end of the year
13,776
17,938
20,616
25,376
71,587
76,979
140,919
131,741
135
134
296
278
* Includes Directors' emoluments.
90
7. Income tax expense
(a) Income Tax on Current year Profits
Company
Group
2011
Rs. ’000
2010
Rs. ’000
2011
Rs. ’000 Chemanex PLC
25,970
28,440
25,970
28,440
1,905
11,678
27,875
40,118
Subsidiaries
–
25,970
(Over)/under provision in respect of previous year*
–
–
28,440
–
2010 Rs. ’000 –
(459)
25,970
28,440
27,416
40,118
3,115
(1,650)
3,115
(1,650)
–
–
1,759
(3,260)
32,290
35,208
Origination and reversal of temporary differences (Note 17)
Chemanex PLC
Subsidiaries
29,085
Tax on dividend income
–
Tax expense
29,085
26,790
–
26,790
4,059
43
36,349
35,251
* Includes Chemanex Adhesives income tax over provision in respect of previous year.
(b) Reconciliation of the Accounting Profit & Taxable Profit
Company
Profit before tax
Group
2011
Rs. ’000
2010
Rs. ’000
2011
Rs. ’000 2010 Rs. ’000 110,125
82,577
68,023
155,081
Share of profit of equity accounted investees
–
–
(3,729)
(3,247)
Intra-group adjustments
–
–
39,630
25,724
(72,213)
Income not subject to tax
(66,068)
(24,112)
(74,319)
42,639
49,167
70,638
89,940
Capital allowances
(10,400)
(9,903)
(34,344)
(28,929)
Allowable expenses
(3,192)
(17,671)
(4,690)
(25,034)
26,466
27,216
Disallowable expenses
Tax loss incurred for the year
–
–
Tax loss utilised for the year
–
–
Taxable income
73,104
Tax @ 10%
–
Tax @ 15%
–
Tax @ 35%
25,587
Social responsibility levy
Income tax on current year profit
80,058
–
–
28,020
(3)
(4,013)
87,672
164,525
628
7,448
1,240
1,513
25,595
30,563
384
420
412
594
25,970
28,440
27,875
40,118
Tax loss brought forward
–
–
48,078
33,146
Current year tax loss
–
–
26,466
27,216
Tax loss written-off during the year
–
–
Tax loss utilised during the year
–
–
Tax loss carried forward
–
–
24%
34%
Effective tax rate
–
(3)
(8,271)
(4,013)
74,541
48,078
41%
26%
91
(c) As per the Inland Revenue Act No. 10 of 2006 and subsequent amendments thereto, Chemanex PLC and all
other companies within the Group, excluding those which enjoy a tax holiday or concessionary rate of taxation as
referred to below are liable to income tax at 35% of the adjusted taxable profits for the year.
In terms of Sections 51/52 of the Inland Revenue Act, profits from qualifying exports of Chemanex Exports (Pvt)
Limited, enjoy a concessionary rate of tax of 15%.
The profits and income of Yasui Lanka (Pvt) Limited, enjoy a concessionary rate of tax of 15% up to and including
the year of assessment 2016/2017, in terms of the agreement entered into with the Board of Investment.
The profits and income of CAL Exports Lanka (Pvt) Limited, enjoyed a five-year tax holiday up to and including the year
of assessment 2008/2009, in terms of the agreement entered with the Board of Investment. In addition, the Company
would enjoy a concessionary rate tax of 10% for two years subsequent to the above and at 15% thereafter.
The Group tax expense is based on the taxable profit of each company in the Group. At present, the tax laws of Sri Lanka
do not provide for Group taxation.
8. Earnings per Share
The calculation of basic earnings per share is based on the profit attributable to the ordinary shareholders divided
by the weighted average number of shares outstanding during the year.
Company
Group
2011
2010
2011
2010 Profit attributable to ordinary shareholders (Rs. '000)
81,040
55,787
36,927
96,212
Total No. of shares ('000)
15,750
15,750
15,750
15,750
5.15
3.54
2.34
6.11
Basic earnings per ordinary share (Rs.)
There were no potentially dilutive ordinary shares outstanding at any time during the year.
9. Dividends per share
Company
2011
Rs. ’000 2010 Rs. ’000 Interim paid Rs. 1.00 per share (2009/10 - Rs. 1.00 per share)
15,750
15,750
Final proposed Rs. 1.00 per share (2009/10 - Rs. 1.50 per share)
15,750
23,625
Total dividend
31,500
39,375
Weighted average number of ordinary shares
15,750
15,750
2.00
2.50
Dividend per ordinary share (Rs.)
9.1 The interim dividend was paid on 11 February 2011.
9.2 The interim dividend of Rs. 1.00 per share represent redistribution of dividends received by the Company and
are therefore not subject to the 10% tax deduction.
9.3 The Directors have recommended Rs. 1/- per share final dividend payment for the year ended 31 March 2011
to be approved at the Annual General Meeting on 30 June 2011. This proposed dividend has not been recognised as
a liability as at 31 March 2011 until it is approved at the Annual General Meeting.
92
10. Property, Plant & Equipment
(a) Company
Cost
Plant & machinery
Motor vehicles
Leased vehicles
Other equipment
Capital work-in-progress
Depreciation
Plant & machinery
Motor vehicles
Leased vehicles
Other equipment
Carrying Value
Balance as at
31.03.2010
Rs. ’000
Additions
for the year
Rs. ’000
4,143
59,041
2,498
7,880
5,809
26,954
4,757
111,082
5,046
2,740
–
388
49
1,157
–
9,380
Balance as at
31.03.2010
Rs. ’000
Charge
for the year
Rs. ’000
3,605
23,517
1,718
3,671
5,533
20,646
58,690
52,392
763
12,753
625
1,774
173
3,294
19,382
Balance as at
31.03.2010
Rs. ’000
Additions
for the year
Rs. ’000
Disposals
for the year
Rs. ’000
–
(7,280)
–
(96)
–
(5,530)
–
(12,906)
Depreciation
on disposals
Rs. ’000
–
(4,333)
–
(88)
–
(5,516)
(9,937)
Amount
written off
Rs. ’000
–
–
–
–
–
–
(1,415)
(1,415)
Amount
written off
Rs. ’000
–
–
–
–
–
–
–
Transfers
for the year
Rs. ’000
–
–
–
–
–
–
(3,342)
(3,342)
Depreciation
on transfers
Rs. ’000
–
–
–
–
–
–
–
Balance as at
31.03.2011
Rs. ’000
9,189
54,501
2,498
8,172
5,858
22,581
–
102,799
Balance as at
31.03.2011
Rs. ’000
4,368
31,937
2,343
5,357
5,706
18,424
68,135
34,664
(b) Group
Cost/Valuation
Freehold land
Buildings
Plant & machinery
Motor vehicles
Leased vehicles
Other equipment
Capital work-in-progress
97,085
42,733
197,974
79,410
2,498
13,819
7,148
27,983
60,411
529,061
Disposals
for the year
Rs. ’000
–
–
79,172
20,966
–
1,169
407
1,424
106,602
209,740
Balance as at
31.03.2010
Rs. ’000
Charge
for the year
Rs. ’000
35,500
2,720
–
–
–
(20,005)
–
(143)
–
(5,589)
–
(25,737)
Depreciation
on disposals
Rs. ’000
Amount
written off
Rs. ’000
–
–
–
–
–
–
–
–
(1,415)
(1,415)
Amount
written off
Rs. ’000
Transfers
for the year
Rs. ’000
–
–
(37,014)
–
–
–
–
–
(3,342)
(40,356)
Depreciation
on transfers
Rs. ’000
Balance as at
31.03.2011
Rs. ’000
97,085
42,733
240,132
80,371
2,498
14,845
7,555
23,818
162,256
671,293
Balance as at
31.03.2011
Rs. ’000
Depreciation
Buildings
124,624
17,347
Motor vehicles
Plant & machinery
31,304
20,348
Leased vehicles
1,718
625
Other equipment
8,051
2,736
6,855
277
Carrying Value
–
–
–
–
38,220
–
–
141,971
–
–
39,264
–
–
–
2,343
(135)
–
–
10,652
–
–
–
7,132
(12,388)
21,619
3,457
(5,552)
–
–
19,524
229,671
47,510
(18,075)
–
–
259,106
299,390
412,187
93
10.1 There has been no impairment on property, plant & equipment which require a provision.
10.2 Cost of fully-depreciated property, plant & equipment still in use:
For the year ended 31 March 2011
Company
Rs. ’000 Buildings
Group
Rs. ’000 –
1,815
Plant & machinery
3,635
86,975
Motor vehicles
5,548
5,548
Other equipment
2,898
5,595
5,444
6,280
4,385
4,591
10.3 No borrowing cost was capitalised during the year.
10.4 Carrying Value
Company
At cost
At valuation
On finance lease
Group
2011
2010
2011
2010 34,509
51,612
314,947
201,525
97,085
97,085
–
–
155
780
155
780
34,664
52,392
412,187
299,390
10.5 Value of Land and Ownership
Ownership
Location
Land Extent in Acres
Chemanex PLC
No. 600, Sri Sasanajothi Mawatha, Ratmalana
2 Acres 2 Roods
Carrying Value
Rs. Mn
97.0
Land owned by the Group has been stated at revaluation. There are no tax implications or tax liabilities pertaining
to the revaluation of land.
10.6 Details of Revaluation
Property
Ownership
Method of Valuation
Effective Date of Valuation
Land
Chemanex PLC
Open market value method
December 2009
Property Valuer
K. Arthur Perera
A.M.I.V.
10.7 Cost of Freehold Land
The carrying amount of revalued land given above, if not revalued and stated at cost, would amount to Rs. 6.1 Mn.
10.8 Title Restriction on Property, Plant & Equipment
There were no restrictions on the title of property, plant & equipment of the Company or the Group as at the
balance sheet date.
10.9 Property, Plant & Equipment Pledged as Security for Liabilities
There were no items of property, plant & equipment pledged as security for liabilities.
10.10 The useful lives, residual values and depreciation methods of property, plant & equipment were reassessed
at the end of the financial year and it was decided that no changes are required for the year ended 31 March 2011.
94
11. INVESTMENT PROPERTY
(a) Company
Cost/Valuation
Freehold land
Buildings
Balance as at
31.03.2010
Additions
for the year
Rs. ‘000
Rs. ’000
191,216
44,762
235,978
Depreciation
Buildings
Carrying Value
–
–
Amount
written off
Transfers
from Capital
Work-in-progress
Rs. ’000
Rs. ’000
–
–
Balance as at
31.03.2010
Rs. ’000
Change for
the year
Rs. ’000
Amount
written off
Rs. ’000
27,498
208,480
2,556
Balance as at
31.03.2010
Additions
for the year
Amount
written off
Rs. ’000
Rs. ’000
Rs. ’000
Balance as at
31.03.2011
Rs. ’000
2,450
892
3,342
193,666
45,654
239,320
Depreciation
on transfers
Rs. ’000
Balance as at
31.03.2011
Rs. ’000
–
–
30,054
209,266
(b) Group
Cost/Valuation
Freehold land
Buildings
83,731
–
83,731
Depreciation
Buildings
Carrying Value
–
–
–
–
Balance as at
31.03.2010
Rs. ’000
Change for
the year
Rs. ’000
–
83,731
7
Amount
written off
Rs. ’000
Transfers
from Capital
Work-in-progress
Rs. ’000
Balance as at
31.03.2011
2,450
892
3,342
86,181
892
87,073
Depreciation
on transfers
Rs. ’000
Balance as at
31.03.2011
Rs. ’000
–
Rs. ’000
–
7
87,066
11.1 There has been no impairment on investment property which require a provision.
11.2 Cost of fully depreciated buildings included in investment property still in use amounts to
Rs. 18.35 Mn in the Company and Rs. 20.17 Mn in the Group as at 31 March 2011.
11.3 No borrowing cost was capitalised during the year.
11.4 Carrying Value
Company
Group
2011
Rs. ’000
2010
Rs. ’000
2011
Rs. ’000
2010 Rs. ’000
At cost
101,781
100,995
87,066
83,731
At valuation
107,485
107,485
–
–
209,266
208,480
87,066
83,731
95
11.5 Value of Land and Ownership
Ownership
Location
Land Extent in Acres
Chemanex PLC
No. 600, Sri Sasanajothi Mawatha, Ratmalana
2 Acres, 4 Roods
97.0
Pinwatte, Pohaddaramulla, Panadura, Wadduwa
2 Acres, 1 Rood
12.15 Perches
46.6
8 Acres, 1 Rood
15 Perches
39.6
Nugape, Pillagasowita, Uswetakeiyawa, Kandana.
Carrying
Value
Rs. Mn
Land owned by the Chemanex PLC other than that mentioned below have been stated at cost as the appreciation in
value is insignificant.
11.6 Details of Revaluation
Property
Ownership
Method of Valuation
Effective Date of
Valuation
Land located at No. 600, Sri
Sasanajothi Mawatha, Ratmalana
Chemanex PLC
Open market value December
method
Property
Valuer
K. Arthur Perera
A.M.I.V.
11.7 Cost of Freehold Land
The carrying amount of revalued land given above, had the said land being included at cost, would amount to Rs. 6.1 Mn.
11.8 Title Restriction on Investment Property
There were no restrictions on the title of investment property of the Company or the Group as at the Balance Sheet date.
11.9 Investment Property Pledged as Security for Liabilities
There were no items of investment property pledged as securities for liabilities.
11.10 Income & Expenditure on Investment Property
Company
Group
2011
Rs. ’000
2010
Rs. ’000
2011
Rs. ’000
2010 Rs. ’000
Rental income earned
20,510
15,918
9,986
9,447
5,366
5,247
3,529
3,630
Direct operating expenses
12. DEPOSIT ON LEASEHOLD PROPERTY
Group
2011
Rs. ’000
2010 Rs. ’000
Cost
15,109
15,160
Accumulated amortisation
(1,145)
Total
13,964
(51)
15,109
12.1 The above deposit is an upfront payment to acquire right to use the land and is stated at cost. It is amortised
on a straight line basis over the lease period.
12.2 Details of Lease Rental
Company
Chemcel (Pvt) Limited.
Location
Board of Investment of Sri Lanka in Mirigama Export Processing Zone.
Land extent
6 Acres 3 Roods 27 Perches.
Lease period
50 years commencing from 22 January 2010.
Rental
US$ 3,700 per acre per annum.
96
12.3 Lease Payments Recognised as an Expense
Group
Total lease payments made
Amount recognised as an expense
2011
2010 Rs. ’000
Rs. ’000
5,609
2,931
(488)
(3,418)
2,443
2,191
12.4 Future Minimum Lease Payments under Operating Lease of Land is as Follows:
Group
US$
Not later than one year
25,599
Later than one year and not later than five years
102,397
Later than 5 years
1,100,775
1,228,771
13. Intangible Assets
2011
Rs. ’000
2010
Rs. ’000 32,686
30,748
Movement of Development Expenses
Balance at the beginning of the year
Amount incurred during the year
1,938
–
Balance at the end of the year
32,686
32,686
Chemcel (Pvt) Limited has incurred the Development expenditure on a super absorbent project with technical
collaboration of a multinational company. With the commencement of the operations the above amount will be
amortised in full.
14. Investments in Subsidiaries
Company
No. of
Shares
Group
%
Holding
31.03.11
Rs. ’000
31.03.10 Rs. ’000 29,400
29,400
–
–
7,980
–
– 31.03.11
Rs. ’000 31.03.10 Rs. ’000 Unquoted Investments
3,675,000
70.0
Chemanex Adhesives (Pvt) Limited
840,000
70.0
860,000
100.0
47,000
47,000
–
– 14,000,000
70.0
140,000
140,000
–
– 2,286,000
69.2
23,485
21,685
–
– 239,885
246,065
–
–
Chemcel (Pvt) Limited
Company investments in subsidiaries (at cost)
–
14.1 The Subsidiaries of the Group are incorporated in Sri Lanka.
14.2 The main activities of the individual companies are given on page 113 of the Annual Report
14.3 Investments made by the Company during the year are as follows:
2011
No. of
Shares
Cost
Rs. ’000
2010
No. of
Shares
Cost
Rs. ’000
–
–
3,045,000
23,100
–
–
5,000,000
50,000
100,000
1,800
–
–
The Company increased its holding in Yasui Lanka (Pvt) Limited by 3% as at 31 March 2011.
14.4 Company has neither contingent liabilities nor capital commitments other than disclosed in Note 33 and 34 in
respect of subsidiaries.
97
15. INVESTMENTS IN equity accounted investees
Company
No. of
Shares
Group
%
Holding
31.03.11 Rs. ’000 31.03.10 Rs. ’000 7,812,500
24.4
78,125
239,999
40.0
200
200
200
200
55,200
46.0
552
552
552
552
78,877
752
78,877
752
31.03.11
Rs. ’000 31.03.10 Rs. ’000 Unquoted Investments
Rainforest Ecolodge (Pvt) Limited
Company investments in equity accounted
investees (at cost)
–
78,125
–
Share of post acquisition profit
971
–
50,568
48,410
16,937
15,316
68,476
63,726
147,353
64,478
Carrying value of investments in equity
accounted investees
15.1 The equity accounted investees of the Company are incorporated in Sri Lanka.
15.2 The main activities of the individual companies are given on page 113 of the Annual Report.
15.3 During the year Chemanex PLC acquired another 2,500,000 shares at a value of Rs. 25 Mn, in Rainforest Ecolodge
(Pvt) Limited increasing its holding up to 24.4%. Therefore the investment has been treated as an equity accounted investee
as at 31 March 2011.
15.4 There are no unrecognised share of losses of the equity accounted investees as at 31 March 2011.
15.5 Company has neither contingent liabilities nor capital commitments in respect of equity accounted investees.
15.6 Summarised Financial Information of Equity Accounted Investees
The following information has not been adjusted for Group share:
2011
Rs. ’000
2010
Rs. ’000 Revenue
104,515
91,375
Total expenses
(97,909)
(83,051)
6,606
8,324
Non-current assets
500,390
193,387
Current assets
102,735
41,126
Total assets
603,125
234,513
Non-current liabilities
30,880
37,961
Current liabilities
77,859
35,033
108,739
72,994
Net profit
Total liabilities
98
16. Other Long-Term Investments
Company
No. of
Shares
31.03.11
Rs. ’000
31.03.10 Rs. ’000 Group
31.03.11
Rs. ’000 31.03.10 Rs. ’000 Quoted Investments - at Cost
Commercial Bank of Ceylon PLC (non-voting)
110
3
3
3
3
Kelani Tyres PLC
200
5
5
5
5
Tokyo Cement Company (Lanka) PLC
2,700
14
14
14
14
22
22
22
22
80,000
400
400
400
400
4,600
46
46
46
46
2,680,001
20,956
20,956
20,956
20,956
500,000
50,000
50,000
50,000
50,000
1,200
12
12
12
12
15,000
150
150
150
150
650,000
6,500
6,500
6,500
6,500
Unquoted Investments - at Cost
Ceylon Tapes (Pvt) Limited
Ceylon Tapes (Pvt) Limited - 10% Debentures
CIC Agri Businesses (Pvt) Limited
CIC Feeds (Pvt) Limited
Devfern (Pvt) Limited
Equity Investments (Lanka) Limited
NTS Interlining (Pvt) Limited
7,812,500
–
78,064
Less: Provision for fall in value of investments
NTS Interlinning (Pvt) Limited (Note 16.1)
(6,500)
53,125
131,189
(3,250)
–
78,064
(6,500)
53,125
131,189
(3,250)
71,564
127,939
71,564
127,939
71,586
127,961
71,586
127,961
16.1 The Company has made a full provision of Rs. 6,500,000/- for fall in value of investment in NTS Interlinning
(Pvt) Limited in view of the continued losses made by the Company.
16.2 In the opinion of the Directors, the net realisable value of investments other than those investments for which
provisions have been made are higher than their cost.
16.3 In the opinion of the Directors any reduction in market value below cost is considered to be of temporary nature.
16.4 The Market Value of Quoted Shares as at 31st March 2011
No. of
Shares
31.03.11
Rs. ’000
31.03.10 Rs. ’000 Commercial Bank of Ceylon PLC (non-voting)
117
19
16
Kelani Tyres PLC
200
11
13
2,700
164
67
Tokyo Cement Company (Lanka) PLC
99
17. DEFERRED TAX Assets
Company
Group
31.03.11
Rs. ’000
31.03.10
Rs. ’000
31.03.11
Rs. ’000 31.03.10 Rs. ’000 At the beginning of the year
13,694
12,044
21,595
16,685
Origination and reversal of temporary differences
(3,115)
1,650
(4,874)
4,910
At the end of the year
10,579
13,694
16,721
21,595
31.03.2010
31.03.2011
Temporary
Difference
Rs. ’000
Tax
Effect
Rs. ’000
Temporary
Difference
Rs. ’000
Tax
Effect
Rs. ’000
Company
On temporary difference of property, plant & equipment
1,916
537
3,710
1,299
35,864
10,042
35,413
12,395
37,780
10,579
39,123
13,694
On temporary difference of property, plant & equipment
10,087
1,517
17,419
3,193
On retiring gratuity
47,345
11,420
47,738
13,726
Tax losses
31,530
3,784
31,175
4,676
88,962
16,721
96,332
21,595
On retiring gratuity
Group
17.1 The management has recognised the above deferred tax assets, as they are confident that the deferred tax
asset would be realised in future due to the availability of taxable profits in future periods.
17.2 The effective rates used to calculate the deferred tax are as follows:
Chemanex PLC
2011
2010
28%
35%
12%
15%
12%
15%
17.3 If the deferred tax rate change had not taken place the deferred tax asset of the Company would have been
Rs. 13.2 Mn and the Group Rs. 16.2 Mn.
17.4 The deferred tax asset of Chemcel (Pvt) Limited has not been recognised in the Balance Sheet in view of
the tax losses incurred by the Company amounting to Rs. 43 Mn as the management does not expect this to be
realised in near future.
18. Inventories
Company
31.03.11
Rs. ’000
31.03.10
Rs. ’000
Group
31.03.11
Rs. ’000 31.03.10 Rs. ’000 Raw materials and consumables
22,926
10,484
110,492
76,361
Finished goods
77,547
53,593
130,240
79,254
Goods-in-transit
Provision for inventories
18.1 Inventories recognised as an expense during the year
18.2 Inventories written off during the year
5,145
5,935
15,833
6,119
105,618
70,012
256,565
161,734
(1,184)
(1,184)
(1,184)
(1,184)
104,434
68,828
255,381
160,550
370,539
339,754
655,068
620,115
1,340
317
1,762
1,396
18.3 Bank facilities have been obtained on negative pledge of inventories.
18.4 Inventories are stated at lower cost or net realisable value, whichever is lower.
100 CHEMANEX PLC Annual Report 2010/11 Notes to the Financial Statements
19. Trade AND Other Receivables
Company
Trade receivables
Provision for bad and doubtful debts
31.03.11
Rs. ’000
31.03.10
Rs. ’000
31.03.11
Rs. ’000 31.03.10 Rs. ’000 97,308
98,457
101,513
104,513
(720)
96,588
Bills receivable (Note 19.3)
Group
(484)
(720)
(484)
97,973
100,793
104,029
–
78,806
94,829
32,469
3,168
92,532
38,475
2,632
2,314
4,804
4,688
131,689
103,455
276,935
242,021
–
Other receivables and prepayments
Loans [Note 19.4]
19.1 No loans have been given to the Directors of the Company.
19.2 Bank facilities have been obtained on negative pledge of trade receivables.
19.3 All the bills are receivable in US Dollars.
Company
Group
31.03.11
Rs. ’000
31.03.10
Rs. ’000
31.03.11
Rs. ’000 31.03.10 Rs. ’000 Balance at the beginning of the year
2,173
3,976
4,442
6,460
Loans granted during the year
1,485
1,280
1,921
1,397
3,658
5,256
6,363
7,857
(1,140)
(3,083)
(1,762)
(3,415)
2,518
2,173
4,601
4,442
114
141
203
246
2,632
2,314
4,804
4,688
50
56
84
83
31.03.11
Rs. ’000 31.03.10 Rs. ’000 19.4 Loans to Employees
Included in this amount are loans exceeding Rs. 20,000/granted to employees, the movement of which is as follows:
Recoveries made during the year
Loans not exceeding Rs. 20,000/Total at the end of the year
Number of employees included in the above closing balance
20. DUE FROM RELATED COMPANIES
Company
Group
31.03.11
Rs. ’000
31.03.10
Rs. ’000
25,413
27,096
–
–
17,963
12,693
–
–
89,542
44,231
–
–
77,712
–
–
–
467
513
467
513
CIC Holdings PLC
Akzo Nobel Paints Lanka (Pvt) Limited
927
789
927
20,789
17,363
13,243
17,363
13,243
18,803
34,545
Link Natural Products (Pvt) Limited
46
229,433
98,565
46
Annual Report 2010/11 CHEMANEX PLC 101
21. Short-Term Investments
Company
No. of
Shares
31.03.11
Rs. ’000
31.03.10 Rs. ’000 Group
31.03.11
Rs. ’000 31.03.10 Rs. ’000 Quoted Investments - at Cost
ACL Cables PLC
100,000
–
8,111
–
8,111
Colombo Land & Development Company PLC
101,500
1,079
–
1,079
–
Hatton National Bank PLC
Hotel Services (Ceylon) PLC
Hydro Power Free Lanka Limited
John Keells Hotels PLC
Laugfs Gas Limited - Voting
50,100
20,244
–
20,244
–
350,000
10,629
–
10,629
–
6,300
63
450,000
8,371
–
4,721
63
8,371
–
4,721
50,000
7,124
–
7,124
–
106,900
5,356
–
5,356
–
Laugfs Gas Limited - Non-voting
5,900
88
–
88
–
Merchant Bank of Sri Lanka PLC
300,000
14,603
–
14,603
–
National Development Bank PLC
20,012
7,384
9,365
7,384
9,365
2,500
38
Odel PLC
Seylan Bank PLC (Non-voting)
100,000
–
Investment at cost
74,979
Less: Change in fair value (Note 21.1)
(6,544)
Investment at lower of cost/market value
68,435
–
2,404
24,601
–
38
–
74,979
(6,544)
–
2,404
24,601
–
68,435
21.1 The Market Value of Quoted Shares as at 31 March 2011
No. of
Shares
Colombo Land & Development Company PLC
31.03.11
Rs. ’000
101,500
2,192
50,100
19,038
350,000
8,085
6,300
89
450,000
7,740
50,000
5,980
106,900
4,746
Laugfs Gas Limited - Non-voting
5,900
205
Merchant Bank of Sri Lanka PLC
300,000
13,860
National Development Bank PLC
20,012
6,404
Hotel Services (Ceylon) PLC
Hydro Power Free Lanka Limited
John Keells Hotels PLC
Laugfs Gas Limited - Voting
Odel PLC
2,500
Total
96
68,435
22. Stated Capital
Company
31.03.10 31.03.11
Fully paid ordinary shares
No. of Shares
Rs. ’000
No. of Shares
Rs. ’000
15,750,000
126,250
15,750,000
126,250
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one
vote per share at the meetings of the Company. All shares rank equally with regard to the Company's residual assets.
23. CAPITAL ReSERVES
Company
Reserve on revaluation of land
Sale of goodwill of EDP division
Scrip issue
Group
31.03.11
Rs. ’000
31.03.10
Rs. ’000
31.03.11
Rs. ’000 31.03.10 Rs. ’000 90,974
90,974
90,974
97,250
356
356
–
91,330
356
356
–
3,000
3,420
91,330
94,330
101,026
23.1 Scrip issue represents post-acquisition bonus issues made by subsidiary Chemanex Exports (Pvt) Limited.
24. REVENUE RESERVES
Company
Group
31.03.11
Rs. ’000
31.03.10
Rs. ’000
31.03.11
Rs. ’000 31.03.10 Rs. ’000 Balance at the beginning of the year
232,841
232,841
232,841
262,066
232,841
232,841
232,841
262,066
670,657
628,992
670,657
628,992
101,922
General Reserve
Retained Earnings
Holding company
Subsidiaries
–
–
88,982
Equity accounted investees
–
–
68,476
63,726
828,115
794,640
670,657
628,992
25. INTEREST BEARING BORROWINGS
Company
Group
Note
31.03.11
Rs. ’000
31.03.10
Rs. ’000
31.03.11
Rs. ’000 31.03.10 Rs. ’000 25.1
186
868
186
868
25.1
681
577
681
577
Repayable after one year
Finance lease obligations
Current portion of long-term interest
bearing borrowings
Finance lease obligations
25.1 Analysis of Finance Lease
Company
Group
31.03.11
Rs. ’000
31.03.10
Rs. ’000
31.03.11
Rs. ’000 31.03.10 Rs. ’000 190
954
190
954
Gross liability
Interest in suspense
(4)
186
(86)
(4)
868
186
(86)
868
Repayable within one year
Gross liability
763
763
763
763
Interest in suspense
(82)
(186)
(82)
(186)
Transferred to current liabilities
681
577
681
577
25.2 Details of Finance Lease Interest
Company
Interest
Rate
Lender
Repayment
Security
Chemanex PLC
13
Commercial Leasing
Company PLC
Equal monthly
instalment
Mortgage on
vehicle
Liability
as at 31.03.11
Rs. Mn
0.8
within 5 years
25.3 There are no liabilities payable after five years in the Company or the Group.
26. Retirement Benefit Obligations
Company
Group
31.03.11
Rs. ’000
31.03.10
Rs. ’000
31.03.11
Rs. ’000 31.03.10 Rs. ’000 35,864
35,413
47,346
47,739
35,413
38,500
47,739
51,396
3,143
9,084
3,798
11,460
Benefits paid during the year
(2,692)
(12,171)
(4,191)
(15,117)
35,864
35,413
47,346
47,739
Interest cost
4,250
4,619
5,728
6,169
Current service cost
2,790
1,495
4,095
2,572
Actuarial (gain)/loss
(3,897)
2,970
(6,025)
2,719
3,143
9,084
3,798
11,460
Cost of sales
975
2,381
1,599
3,090
Administrative expenses
980
3,987
1,011
5,654
Selling & distribution cost
1,188
2,716
1,188
2,716
Total
3,143
9,084
3,798
11,460
Present value of unfunded gratuity obligation
26.1 Movement in the Present Value of Retiring Gratuity
Balance at the beginning of the year
Provision for the year (Note 26.2)
26.2 Provision for the Year
Total
26.3 The Provision for the Year is Charged to the
Income Statement as Follows:
26.4 An actuarial valuation of the retirement benefit obligation of the Company and the Group was carried out as at
31 March 2011, by Messrs Actuarial & Management Consultants (Pvt) Limited, a firm of Professional Actuaries. The
valuation method used by the actuaries to value the fund is the ‘Projected Unit Credit’ Method (PUC), the method
recommended by the Sri Lanka Accounting Standard No. 16 (Revised 2006) on 'Employee Benefits'.
26.5 Actuarial Assumptions - Demographic
Mortality in service - A 67/70 mortality table issued by the Institute of Actuaries, London.
Withdrawal
The withdrawal rate at an age represents the probability of an active employee leaving within one year of that
age category due to reasons other than death, ill health and normal retirement. The withdrawal rate used in the
valuation of liability in respect of the active employees are 5% up to age 49 and thereafter zero.
Normal Retirement Age
55 years.
26.6 Actuarial Assumptions - Financial
Rate of Discount
In the absence of a deep long-term bond market in Sri Lanka, a long-term rate of 10.5% p.a. has been used to
discount future liabilities.
Salary Increases
A 10% p. a. salary increment rate has been used in respect of the active employees.
26.7 As per the requirement of the Payment of Gratuity Act No. 12 of 1983 the retirement benefit obligation for the
Company and Group as at 31 March 2011, amounts to Rs. 28.8 Mn and Rs. 34.4 Mn respectively.
27. Trade AND other Payables
Company
31.03.11
Rs. ’000
31.03.10
Rs. ’000
Trade payables
9,622
13,826
Bills payable
4,713
Other creditors and accruals
–
Group
31.03.11
Rs. ’000 31.03.10 Rs. ’000 21,013
35,181
63,850
2,112
56,461
23,531
63,856
31,311
70,796
37,357
148,719
68,604
27.1 Currency wise Bills Payable
US Dollar
Euro
4,713
–
56,037
2,112
–
–
7,813
–
4,713
–
63,850
2,112
28. DUE TO RELATED COMPANIES
–
12,367
–
Chemanex Adhesives (Pvt) Limited
–
59,576
–
Akzo Nobel Paints Lanka (Pvt) Limited
CIC Holdings PLC
–
–
27,530
28,473
27,530
28,473
90
82
90
3,192
27,620
100,498
27,620
31,665
29. Short-term Interest Bearing Borrowings
Company
Group
31.03.11
Rs. ’000
31.03.10
Rs. ’000
31.03.11
Rs. ’000 31.03.10 Rs. ’000 166,500
78,810
196,291
78,810
2,433
1,972
5,824
2,943
168,933
80,782
202,115
81,753
Current Liability
Short-term loan
Bank overdraft
29.1 Bank facilities have been obtained on negative pledge over inventories and trade receivables.
30. FOREIGN CURRENCY TRANSLATIONs
The principal exchange rates used for translation purposes were:
Average
US Dollar
Euro
Australian Dollar
Japanese Yen
Year end
2011
2010
31.03.2011
31.03.2010
111.46
156.42
107.71
1.26
114.00
–
90.66
1.2006
109.59
158.32
112.27
1.3144
113.33
154.52
103.15
1.2099
31. Industry Segment information
Capital Expenditure
Depreciation
Total Assets
31.03.11
Rs. ’000
31.03.10
Rs. ’000
31.03.11
Rs. ’000
31.03.10
Rs. ’000
31.03.11
Rs. ’000
31.03.10
Rs. ’000
Assets
161,400
36,606
15,254
12,176
727,989
639,225
Paints
Chemicals
92
8
67
58
44,100
42,904
Consumer
–
Liners
Rent
Services
46,818
–
–
238
–
17,466
11,751
14,198
11,018
204,578
99,945
–
–
1,909
981
13,026
8,221
1,380
48,523
–
529
27,859
63,068
Investments
–
287,373
217,039
Unallocated
50
70,920
–
16,082
–
16,778
–
497,579
582,955
209,740
156,295
47,510
41,540
1,819,970
1,665,108
Retiring Benefit
Obligations
Liabilities
Chemicals
Paints
Consumer
Liners
Rent
Services
Others
Trade & Other
Payables
31.03.11
Rs. ’000
31.03.10
Rs. ’000
31.03.11
Rs. ’000
31.03.10
Rs. ’000
21,221
20,885
30,177
40,023
2,584
1,716
379
155
–
1,450
–
12,280
–
3,250
–
1,979
62,081
4,894
–
2,374
1,831
15,497
13,143
12,210
9,811
7,662
37,315
9,491
47,346
47,739
148,719
68,604
32. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE
Subsequent to the Balance Sheet date, the Company has sold its stake of 46% in Crop Management Services (Pvt)
Limited, an equity accounted investee for a consideration of Rs. 1,656,000/-. In view of the above, Crop Management
Services (Pvt) Limited ceased to be an equity accounted investee with effect from 19 May 2011.
The Board of Directors has recommended a final dividend of Rs. 1/- per existing ordinary share for 15,750,000
ordinary shares, subject to the approval of the shareholders.
No circumstances have arisen since the Balance Sheet date other than disclosed above which require adjustment
to or disclosure in the financial statements.
33. CAPITAL COMMITMENTS
In terms of ‘Equity Support Agreement’ entered into in respect of Chemcel (Pvt) Limited the estimated amount yet to
be financed for completion of the project is approximately Rs. 70 Mn.
There are no material capital commitments which have been approved or contracted other than disclosed above, as
at the Balance Sheet date.
34. CONTINGENT LIABILITIES
There were no material contingent liabilities as at the Balance Sheet date which require adjustments to or
disclosure in the financial statements.
35. COMPARATIVE FIGURES
Comparative figures have been re-classified in accordance with the current year presentation.
36. COMPANIES WITH DIFFERENT ACCOUNTING YEARS
The financial statements of Commercial Insurance Brokers (Pvt) Limited which has been drawn up to 31 December
as per their reporting requirements has been consolidated.
37. related party transactions
A. Parent and Ultimate Controlling Party
Ultimate Parent Company of the Group is Paints & General Industries Limited and Parent Company of the Group is
CIC Holdings PLC.
B. Transactions with Key Management Personnel
(i) Loans to Directors
No Loans have been given to the Directors of the Company.
(ii) Key Management Personnel Compensation
Key management personnel comprise of the Directors of the Company and key employees holding directorships in
subsidiaries of the Company.
Compensation Paid to Key Management Personnel
Group
2011
Rs. Mn
2010
Rs. Mn
22,435
21,205
444
11,677
Provision for retiring gratuity
7,613
5,694
Directors' fees
4,030
3,143
34,522
41,719
Directors' remuneration
Termination benefits
(iii) Other Transactions with Key Management Personnel
(a) The names of Directors of Chemanex PLC, who are also Directors of the subsidiary companies and equity
accounted investees are stated on page 113.
(b) Details of Directors’ shareholdings are given in the Annual Report of the Directors on the Affairs of the
Company on page 69.
There were no other transactions with key management personnel other than those disclosed below.
C. Transactions with companies in which the Directors of the entity hold Directorships
Mr. B.R.L. Fernando, Mr. M.P. Jayawardena, Mr. A. Mapalagama, Mr. D Chandrasekera, Prof.U. P. Liyanage,
Mr. S.P.S. Ranatunga, Mr. A.V.P. Silva and Mr. M.D. Wickramasinghe who are Directors of the Company are also
Directors or Key Management Personnel of the following companies and below mentioned transactions have been
carried out, by the Company with those companies during the year under consideration.
Transactions with Parent Company and Ultimate Parent Company
(a) CIC Holdings PLC (Parent Company)
Mr. B.R.L. Fernando, Mr. S.P.S. Ranatunga and Mr. M.P. Jayawardena who were Directors of Chemanex PLC
as at 31 March 2011, were also Directors of CIC Holdings PLC. The Company has carried out transactions with
Chemanex PLC during the year, and the details are as follows:
Nature of Transaction
2011
Rs. Mn
2010
Rs. Mn
Sales
2.5
0.2
Directors' fees paid
2.7
2.5
Secretarial fees received
1.6
1.4
10.3
19.6
Amount receivable
0.9
0.8
Amount payable
0.1
–
Processing fees
(b) Paints & General Industries Limited (Ultimate Parent Company)
Mr. B.R.L. Fernando, who was a Director of Chemanex PLC as at 31 March 2011 was also a Director of Paints &
General Industries Limited. The Company has carried out transactions with Chemanex PLC during the year, and
the details are as follows:
2011
Rs. Mn
2010
Rs. Mn
Sales
1.0
1.1
Amount receivable
0.9
0.2
Amount payable
–
1.0
Transactions with Subsidiaries
(a) Chemanex Exports (Pvt) Limited
Mr. M.P. Jayawardena and Mr. A. Mapalagama who were Directors and Mr. E.S.L. Fernando and Mr. A.N. Sugathapala,
Key Management Personnel of Chemanex PLC as at 31 March 2011, were also Directors of Chemanex Exports (Pvt)
Limited. The Company has carried out transactions with Chemanex PLC during the year, and the details are as follows:
2011
Rs. Mn
2010
Rs. Mn
Rent received
1.2
1.2
Commission received
0.9
1.0
Dividends received
1.9
0.4
Amount receivable
17.9
12.6
(b) CAL Exports Lanka (Pvt) Limited
Mr. M.P. Jayawardena, Mr. A.V.P. Silva and Mr. A. Mapalagama who were Directors of Chemanex PLC as at
31 March 2011, were also Directors of CAL Exports Lanka (Pvt) Limited as at 31 March 2011. The Company has
carried out transactions with Chemanex PLC during the year, and the details are as follows:
Rent received
Commission received
2011
Rs. Mn
2010
Rs. Mn
4.7
1.8
12.8
15.7
Dividends received
9.0
6.3
Interest received
2.1
7.4
25.4
27.1
Amount receivable
(c) Yasui Lanka (Pvt) Limited
Mr. M.P. Jayawardena and Prof. U.P. Liyanage who were Directors and Mr. M.N. Hassan, Mr. A.N. Sugathapala and
Mrs. W.M.F.A.B. Fernando who were Key Management Personnel of Chemanex PLC, were also Directors of
Yasui Lanka (Pvt) Limited as at 31 March 2011. The Company has carried out transactions with Chemanex PLC
during the year, and the details are as follows:
2011
Rs. Mn
2010
Rs. Mn
Rent received
2.3
1.7
Commission received
4.1
0.07
–
4.0
89.5
44.2
Interest received
Amount receivable
(d) Chemcel (Pvt) Limited
Mr. M.P. Jayawardena and Mr. D. Chandrasekera who were Directors of Chemanex PLC and Mr. A. N. Sugathapala,
who was a Key Management Personnel of Chemanex PLC, were also Directors of Chemcel (Pvt) Limited as at
31 March 2011. The Company has carried out transactions with Chemanex PLC during the year, and the details are
as follows:
2011
Rs. Mn
Amount payable
Amount receivable
2010
Rs. Mn
–
50.8
77.7
–
Transactions with Equity Accounted Investees
(a) Commercial Insurance Brokers (Pvt) Limited
Mr. M.P. Jayawardena, who was a Director of Chemanex PLC as at 31 March 2011, was also a Director of Commercial
Insurance Brokers (Pvt) Limited. The Company has carried out transactions with Chemanex PLC during the year, and
the details are as follows:
2011
Rs. Mn
2010
Rs. Mn
Insurance premium paid
6.3
7.2
Dividend received
0.9
1.4
Amount receivable
0.5
0.5
(b) Crop Management Services (Pvt) Limited
Mr. B.R.L. Fernando, Mr. S.P.S. Ranatunga and Mr. A.V.P. Silva, who were Directors of Chemanex PLC, were
also Directors of Crop Management Services (Pvt) Limited as at 31 March 2011. The Company has carried out
transactions with Chemanex PLC during the year, and the details are as follows:
Dividend received
2011
Rs. Mn
2010
Rs. Mn
0.2
0.2
Subsequent to the Balance Sheet date, the Company has sold its stake of 46% in Crop Management Services (Pvt)
Limited, an equity accounted investee for a consideration of Rs. 1,656,000/-. In view of the above Crop Management
Services (Pvt) Limited ceased to be an equity accounted investee with effect from 19 May 2011.
(c) Rainforest Ecolodge (Pvt) Limited
Mr. M.P. Jayawardena, who was a Director of Chemanex PLC as at 31 March 2011, was also a Director of
Rainforest Ecolodge (Pvt) Limited. The Company has carried out transactions with Chemanex PLC during the year,
and the details are as follows:
Investment
2011
Rs. Mn
2010
Rs. Mn
25
28.13
Transactions with other Related Parties
(a) Akzo Nobel Paints Lanka (Pvt) Limited
Mr. B.R.L. Fernando and Mr. S.P.S. Ranatunga, who were Directors of Chemanex PLC as at 31 March 2011, were also
Directors of Akzo Nobel Paints Lanka (Pvt) Limited. The Company has carried out transactions with Chemanex PLC
2011
Rs. Mn
2010
Rs. Mn
Purchases
179.1
171.7
Commission received
41.0
39.0
Rent received
10.0
9.4
Amount receivable
17.3
13.2
Amount payable
27.5
28.5
(b) CIC Agri Businesses (Pvt) Limited
Mr. B R.L. Fernando and Mr. S.P.S. Ranatunga, who were Directors of Chemanex PLC as at 31 March 2011,
were also Directors of CIC Agri Businesses (Pvt) Limited. The Company has carried out transactions with
Dividend received
2011
Rs. Mn
2010
Rs. Mn
–
2.5
(c) CISCO Speciality Packaging (Pvt) Limited
Mr. B.R.L. Fernando and, Mr. S.P.S. Ranatunga who were Directors of Chemanex PLC as at 31 March 2011, were
also Directors of CISCO Speciality Packaging (Pvt) Limited. The Company has carried out transactions with
Purchases
2011
Rs. Mn
–
2010
Rs. Mn
0.1
(d) CIC Feeds (Pvt) Limited
Mr. B.R.L. Fernando, Mr. S.P.S. Ranatunga and Mr. A.V.P. Silva who were Directors of Chemanex PLC as at 31 March
2011, were also Directors of CIC Feeds (Pvt) Limited. The Company has carried out transactions with Chemanex PLC
Dividend received
2011
Rs. Mn
5.0
2010
Rs. Mn
–
(e) CIC Vetcare (Pvt) Limited
Mr. B.R.L. Fernando, Mr. S.P.S. Ranatunga, Mr. M.P. Jayawardena and Mr. A.V.P. Silva who were Directors of
Chemanex PLC as at 31 March 2011, were also Directors of CIC Vetcare (Pvt) Limited. The Company has carried out
transactions with Chemanex PLC during the year, and the details are as follows:
2011
Rs. Mn
2010
Rs. Mn
Sales
5.4
3.3
Amount receivable
–
0.2
(f) Link Natural Products (Pvt) Limited
Mr. B.R.L. Fernando, who was a Director of Chemanex PLC as at 31 March 2011, was also a Director of Link
Natural Products (Pvt) Limited. The Company has carried out transactions with Chemanex PLC during the year,
and the details are as follows:
2011
Rs. Mn
2010
Rs. Mn
Vehicle rent
–
0.31
Amount receivable
–
0.04
(g) Commercial Bank of Ceylon PLC
Mr. B.R.L. Fernando who was a Director of Chemanex PLC as at 31 March 2011, was also a Director of Commercial
Bank of Ceylon PLC. The Company has carried out transactions with Chemanex PLC during the year, and the
details are as follows:
2011
Rs. Mn
2010
Rs. Mn
Interest received
2.9
7.3
Interest paid
0.6
1.9
40.8
1.0
140.6
113.8
Borrowings payable
Foreign currency deposits
(h) Chemanex Charitable & Educational Trust Fund
Mr. B.R.L. Fernando and Mr. M.P. Jayawardena who were Directors of the Company and Mr. A. N. Sugathapala
a Key Management Personnel of Chemanex PLC were also Trustees of Chemanex Charitable & Educational Trust
Fund as at 31 March 2011. The Trust has carried out transactions with Chemanex PLC during the year, and the
details are as follows:
Donations
2011
Rs. Mn
2010
Rs. Mn
0.5
0.5
Consolidated Statement of Value Added
Revenue
Add:Other income
Share of profits of equity accounted investees
Less: Cost of materials and services
Total value added
2011
Rs. '000 2010 Rs. '000 1,011,388
985,475
64,836
137,923
3,729
3,247
1,079,953
1,126,645
(773,753)
(765,792)
306,200
360,853
Share
%
Share
%
Distributed as follows:
To employees as remuneration
46
140,919
37
131,741
To the Government as taxes
13
40,065
13
48,456
To the providers of capital
as interest on loans
as non-controlling interest
To shareholders as dividends
3
10,110
5
19,285
(1)
(5,254)
7
23,619
13
39,375
22
78,750
41,540
Retained within the business
as depreciation
15
47,510
11
as reserves
11
33,475
5
17,462
Total value distributed
100
306,200
100
360,853
Quarterly Information At a Glance
Group 2010/2011
Quarter 1
Rs. '000
Quarter 2
Rs. '000
Quarter 3
Rs. '000
Quarter 4
Rs. '000
Year
Rs. '000
230,749
288,529
257,057
223,217
999,552
40,016
57,704
45,293
42,721
185,734
Profit before tax
7,110
35,940
20,923
4,050
68,023
Net profit
2,645
21,934
11,770
(4,674)
31,675
Total assets
1,676,330
1,712,136
1,685,752
1,819,970
1,819,970
Shareholders' funds
1,288,101
1,284,405
1,297,898
1,281,536
1,281,536
Turnover
Gross profit
112 CHEMANEX PLC Annual Report 2010/11
Group Structure
Company
% Principal
Holding Activity
2011
Rs. ’000
Directors
2010
Rs. ’000
Subsidiary
Manufacture &
M.P. Jayawardena
Stated capital
52, Galle Face Court 2,
Export of
E.S.L. Fernando
Total assets
Colombo 3.
Sizing Chemicals
100
Factory
50,000
50,000
123,566
116,262
A. Mapalagama
Total liabilities
23,922
23,121
A. Sugathapala
Net assets
99,644
93,141
41,920
43,507
600, Sri Sasanajothi Mawatha,
Revenue
Ratmalana.
Profit before tax
9,912
9,949
Incorporated on 7 December 1987
Profit after tax
8,653
8,443
70
Manufacture &
M.P. Jayawardena
Stated capital
Export
A. Mapalagama
Total assets
42,000
42,000
221,113
208,967
Colombo 3.
of Industrial
A.V.P. Silva
Total liabilities
77,258
56,183
Factory
Powder
Mrs. R. Sivagami
Net assets
143,855
152,785
Adhesives
R.N. Veerappan
Revenue
330,710
391,816
S.K. Wickremesinghe
Profit before tax
6,329
77,996
Profit after tax
5,508
70,400
Ratmalana.
Incorporated on 30 October 2003
Manufacture &
M.P. Jayawardena
Stated capital
33,000
33,000
Export of
Mrs. W.M.F.A.B. Fernando
Total assets
206,434
101,864
Colombo 3.
Knitted Liners
153,956
51,164
52,778
50,700
69
Prof. U.P. Liyanage
Total liabilities
Factory
M.N. Hassan
Net assets
A. Sugathapala
103,863
1,681
Ratmalana.
Profit before tax
3,665
(17,770)
Incorporated on 20 June 1996
Profit after tax
2,079
(14,481)
Manufacture &
M.P. Jayawardena
Stated capital
200,000
200,000
Export
D. Chandrasekera
Total assets
246,671
189,342
Colombo 3.
of Speciality
L. de Mel
Total liabilities
Factory
Chemicals
A. Sugathapala
Net assets
70
Revenue
78
2
168,288
186,854
–
–
Revenue
Ratmalana.
Profit before tax
(18,566)
(3,460)
Incorporated on 22 October 2002
Profit after tax
(18,566)
(3,460)
equity accounted investees
40
Insurance
A.L. Gooneratne
Stated capital
Brokering
M.P. Jayawardena
Total assets
Colombo 3.
D.M.D.K. Thilakaratne
Incorporated on 17 August 1987
Total liabilities
81,782
72,954
132,420
127,023
Revenue
104,516
91,376
10,880
8,704
7,797
7,841
Profit after tax
Former Managing
B.R.L. Fernando
Stated capital
Agents-Plantations
S.P.S. Ranatunga
Total assets
Colombo 2.
P.D.S. Ruwanpura
Total liabilities
A.V.P. Silva
Net assets
R.P.L. Weerasinghe
46
1,200
34,537
56
40
38,019
34,496
Revenue
4,177
561
Profit before tax
4,008
515
Profit after tax
4,003
484
Prema Cooray
Stated capital
319,968
230,975
N.J.H. Cooray
Total assets
350,848
266,523
50, Navam Mawatha
S.M. Hapugoda
Total liabilities
Colombo 2.
J.H.P. Kehelpannala
Net assets
Eco Tourisum
1,200
38,076
C/o. Ceylon Chamber of Commerce
24
6,000
199,977
Net assets
Profit before tax
199, Kew Road,
6,000
214,202
26,901
26,376
323,946
240,146
G.A. Aloysius
Revenue
4,954
1,126
D.R. Nordmann
Profit before tax
(4,741)
(3,536)
G.M. Perera
Profit after tax
(5,194)
(4,071)
D.C. Fernando
M.P. Jayawardena
S. Amalean
D.T.R. De Silva
Decade at a Glance - Group Financials
Year ended 31 March
2011
Rs. '000
2010
Rs. '000
2009
Rs. '000 2008
Rs. '000 2007 Rs. '000 2006 Rs. '000 2005 Rs. '000 2004 Rs. '000 2003 Rs. '000 2002 Rs. '000 Operating Results
Revenue
999,552
969,428
1,210,708
1,281,788
1,207,315
1,019,672
901,907
720,881
482,949
464,387
Gross profit
185,734
215,855
210,566
219,429
198,425
147,082
152,581
141,156
95,628
106,761
Financing cost
(10,110)
(19,285)
(35,457)
(17,569)
(9,582)
(8,207)
(2,914)
(1,477)
(843)
(8,356)
Share of profits from equity
accounted investees
3,729
3,247
32,697
127,067
103,984
83,333
77,483
65,810
38,541
33,626
Profit before taxation
68,024
155,081
359,745
206,342
190,410
131,789
141,921
134,055
75,548
81,449
Income tax expense
(36,349)
(35,251)
(33,955)
(19,413)
(15,679)
(12,793)
(16,207)
(18,514)
(11,728)
(17,116)
Profit after taxation
31,675
119,830
325,790
186,929
174,731
118,996
125,714
115,541
63,820
64,333
5,254
(23,619)
1,175
(8,597)
(16,611)
(2,539)
(5,503)
(7,971)
(2,845)
(7,374)
36,929
96,211
326,965
178,332
158,120
116,457
120,211
107,570
60,975
56,959
225,839
144,985
132,832
105,656
118,196
110,035
92,957
40,588
Profit attributable to equity
holders of the Company
Net Assets
412,187
299,390
Investment property
Property, plant & equipment
87,066
83,731
–
–
–
–
–
–
–
–
Deposit on leasehold property
13,964
15,109
–
–
–
–
–
–
–
–
Intangible assets
Investments
32,686
32,686
30,748
567
218,939
192,439
165,866
612,062
–
502,188
21,596
16,685
11,375
826,040
919,752
329,342
300,739
265,691
260,491
182,674
181,419
141,753
1,438,945
1,470,992
1,358,890
1,098,331
935,759
804,731
703,836
543,110
426,947
315,096
Non-current liabilities
–
–
–
–
–
–
–
132,755
16,721
–
–
–
152,571
657,382
–
–
–
250,401
Deferred tax asset
–
–
–
325,149
Net current assets
Non-current assets
–
–
433,384
–
–
262
(48,606)
(86,274)
(39,289)
(40,082)
(34,012)
(30,613)
(25,182)
(16,144)
(13,176)
1,422,386
1,272,616
1,059,042
895,677
770,719
673,223
517,928
410,803
302,182
126,250
126,250
126,250
126,250
126,250
126,250
126,250
82,500
82,500
82,500
94,330
101,026
56,630
85,376
85,376
56,630
56,630
56,630
56,630
11,586
(47,532)
1,391,413
Stated Capital and Reserves
Stated capital
Capital reserves
Revenue reserves
1,060,956
1,056,706
1,039,245
791,526
634,444
548,478
450,396
343,310
245,540
190,504
Shareholders’ funds
1,281,536
1,283,982
1,222,125
1,003,152
846,070
731,358
633,276
482,440
384,670
284,590
Total equity
109,877
138,404
50,491
55,890
49,607
39,361
39,947
35,488
26,133
17,592
1,391,413
1,422,386
1,272,616
1,059,042
895,677
770,719
673,223
517,928
410,803
302,182
2.88
7.49
26.75
17.78
18.69
15.92
18.98
22.30
15.85
20.01
Ratios
Return on shareholders‘ equity
%
Annual sales growth
%
3.11
(19.93)
(5.55)
6.17
18.40
13.06
25.11
49.27
4.00
20.46
Return on assets
%
2.03
5.78
19.29
12.32
12.98
11.16
12.60
15.13
11.57
14.14
Times
1:3
1:5
1:4
1:2
1:2
1:2
1:2
1:2
1:3
1:3
Current ratio
Share Information
Market value of a share
Rs.
133.40
130.25
49.50
45.00
190.25
109.25
136.75
110.00
79.75
44.00
Earnings per share
Rs.
2.34
6.11
20.76
11.32
10.04
7.39
7.63
20.49
11.61
10.85
Price earnings ratio
Times
56.89
21.32
2.38
3.97
18.95
14.78
17.92
5.37
6.87
4.06
Rs.
81.37
81.52
77.60
63.69
53.72
46.44
40.21
91.89
73.27
54.21
24.66
Net assets per share
Earnings yield
%
1.75
4.69
41.94
25.16
5.28
6.77
5.58
18.63
14.56
Dividend yield
%
1.50
1.92
20.20
3.71
0.70
1.07
0.86
2.73
3.26
5.68
Times
1.17
2.44
2.08
6.79
7.53
7.39
6.54
10.24
6.70
6.51
Rs.
2.00
2.50
10.00
1.67
1.33
1.17
1.17
3.00
2.60
2.50
Dividend cover
Dividend per share
Glossary of Financial Terms
Accounting Policies
Deferred Taxation
The specific principles, bases, conventions, rules and
practices adopted by an enterprise in preparing and
presenting financial statements.
Sum set aside for tax in the financial statements that will
become payable in a financial year other than the current
financial year.
Accrual Basis
Depreciation
Recording revenues and expenses in the period in which they
are earned or incurred, regardless of whether cash is received
or disbursed during that period.
The systematic allocation of the depreciable amount of an
asset over its useful life.
Amortisation
The systematic allocation of the depreciable amount of an
intangible asset over its useful life.
Capital Employed
Dividend Payout Ratio
Dividends as a percentage of profit attributable to
shareholders.
Dividends
Shareholders’ funds plus minority interest and debt.
Distribution of profits to holders of equity investments in
proportion to their holdings.
Capital Reserves
Dividend Cover
Reserves identified for specific purposes and considered not
available for distribution.
Profit attributable to ordinary shareholders divided
by dividend.
Cash Equivalents
Dividend Yield
Short-term, highly liquid investments that are readily
convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value.
Effective dividend per share as a percentage of the share price
at the end of the period.
Contingent Liabilities
A condition or situation existing at the Balance Sheet date
due to past events, where the financial effect is not recognised
because:
Earnings per Share
Profit attributable to shareholders divided by the weighted
average number of ordinary shares in issue during the period.
EBIT
1.The obligation is crystalised by the occurrence or nonoccurrence of one or more future events, or
Earnings before interest and tax
(includes other operating income).
2. A probable outflow of economic resources is not expected,
or
EV (Enterprise Value)
3. It is unable to be measured with sufficient reliability.
Market capitalisation plus net debt.
Interest Cover
Current assets divided by current liabilities.
Consolidated profit before interest and tax divided by finance
expenses.
Debt/Equity Ratio
Investment
Debt as a percentage of shareholders' funds
and minority interest.
An investment is an asset held by an enterprise for the
accretion of wealth through distribution.
Current Ratio
Market Capitalisation
Revenue Reserves
Number of shares in issue at the end of period multiplied by
the market price at end of period.
Reserves considered as being available for distribution.
Return on Capital Employed - ROCE
Non-Controlling Interest
That part of the net results of operations and of net assets
of a subsidiary attributable to interests which are not owned,
directly or indirectly through subsidiaries, by the Parent.
Profit before interest and tax as a percentage of capital
employed at the end of the year.
Shareholders’ Funds
Net Assets
Total of issued and fully paid share capital, capital reserves
and revenue reserves.
Total assets minus current liabilities minus long-term
liabilities minus non-controlling interest.
Segment
Net Assets per Share
Distinguishable component of an enterprise grouped in terms
of similarity of operations and location.
Net assets over number of ordinary shares in issue.
Subsidiary
Net Debt
Total debt minus cash and short-term deposits.
An enterprise that is controlled by another enterprise (known
as Parent).
Net Realisable Value
Total Debt
The estimated selling price in the ordinary course of business,
less the estimated costs of completion and the estimated
costs necessary to make the sale.
Long-term loans plus short-term loans and overdrafts.
Total Value Added
Market price per share (diluted) divided by earnings per share.
The difference between revenue (including other income)
and expenses, cost of materials and services purchased
from external sources.
Related Parties
Working Capital
Parties who could control or significantly influence the
financial and operating policies of the business.
Capital required for financing the day-to-day operations
computed as the excess of current assets over current
liabilities.
Price Earnings Ratio
Return on Assets - ROA
Profit after tax divided by the total assets.
Return on Equity - ROE
Profit attributable to shareholders as a percentage of
shareholders' funds at the end of the year.
116 CHEMANEX PLC Annual Report 2010/11 Glossary of Financial Terms
Notice of Meeting
Notice is hereby given that the Thirty-Eighth Annual General Meeting of Chemanex PLC will be held at the 9th Floor, Commercial
Bank Building, No. 1, Union Place, Colombo 2, on 30 June 2011 at 10.00 a.m. for the following purposes:
1.To receive and adopt the Annual Report of the Board of Directors on the State of Affairs of Chemanex PLC and the Statement
of Accounts for the year ended 31 March 2011 with the Report of the Auditors thereon.
2.To declare a final dividend as recommended by the Board of Directors.
3.To authorise the Directors to determine and make donations.
4.To re-elect Mr. A. Mapalagama as a Director who retires by rotation in terms of Clause 24 (6) of the Articles of Association of
the Company.
5.To re-elect Mr. A.V.P. Silva as a Director who retires by rotation in terms of Clause 24 (6) of the Articles of Association
of the Company.
6.To re-elect Mr. M.D. Wickramasinghe as a Director who has been appointed by the Board with effect from 1 October 2010 who
retires in terms of Clause 24 (2) of the Articles of Association of the Company.
7.To re-elect Mr. D. Chandrasekera who retires in terms of Section 210 of the Companies Act No. 7 of 2007. Pursuant to the
Section 211 of the Companies Act No. 7 of 2007, special notice of the following ordinary Resolution has been received by the
Company from a Member of the Company.
"That Mr. D. Chandrasekera who reached the age of 70 years be re-elected as a Director of the Company and it is hereby
declared that the provisions of the Section 210 of the Companies Act No. 7 of 2007 shall not apply to Mr. D. Chandrasekera."
8.To re-appoint Auditors Messrs KPMG Ford, Rhodes, Thornton & Co. and to authorise the Directors to determine their
remuneration in terms of Section 158 of the Companies Act No. 7 of 2007.
By Order of the Board
A.N. Sugathapala
Company Secretary
24 May 2011
Note
1. A member unable to attend is entitled to appoint a proxy to attend and vote in his/her place.
2.
A proxy need not be a member of the Company.
3.The completed Form of Proxy should be deposited at the Registered Office, No. 52, Galle Face Court 2,
Colombo 3 not less than 48 hours before the time fixed for the meeting.
4.
5.
A Form of Proxy will be found at the back of this Report.
Provided the final dividend as recommended by the Board is declared, it is proposed that the dividend
warrants be posted on 11 July 2011.
Notes
Form of Proxy
I/We, .....................................................................................................................................................................................................
of ..........................................................................................................................................................................................................
being a member/members of Chemanex PLC hereby appoint:
BENTOTAGE ROBERT LAKSHMAN FERNANDO
of Colombo, or failing him
MAHINDA PREETHIRAJ JAYAWARDENA of Colombo, or failing him
ANURA MAPALAGAMAof Colombo, or failing him
UDITHA PILANA LIYANAGEof Colombo, or failing him
SAMANTHA PRADEEP SAMARAWICKREMA RANATUNGAof Colombo, or failing him
ARUMADURA VINCENT PREMALAL SILVAof Colombo, or failing him
DAYARATNA CHANDRASEKERAof Colombo, or failing him
MANINDA DILIPA WICKRAMASINGHEof Colombo, or failing him
............................................................................................................................ of .............................................................................
as my/our proxy to represent me/us and* vote for me/our behalf at the Annual General Meeting of the Company to be held on the
30th day of June 2011 and at any adjournment thereof and at every poll which may be taken in consequence of the aforesaid meeting.
Signed this ................................................... day of ................................................ Two Thousand and Eleven.
....................................................................
Signature
* If you wish your proxy to speak at the meeting you should interpolate the words ‘to speak and' in the place indicated with an
asterisk and initial such interpolation.
Note
If no words are deleted or there is in the view of the proxyholder doubt (by reason of the way in which the instructions contained in the proxy
have been completed) as to the way in which the proxyholder should vote, the proxyholder will vote as he thinks fit.
Please see reverse of this form for instructions as to completion.
Instructions as to Completion
1.
Please perfect the Form of Proxy, after filling in legibly your full name and address, by signing in the space provided and filling
in the date of signature.
2. The completed Form of Proxy should be deposited at the Registered Office of the Company at the undernoted address not less
than 48 hours before the time appointed for the holding of the meeting.
3. A proxyholder need not be a member of the Company.
4. In the case of a Company/Corporation, the proxy must be under its Common Seal, which should be affixed and attested in the
manner prescribed by its Articles of Association.
Chemanex PLC
P.O. Box 188
Colombo 3
Form of Proxy
Corporate Information
Name of the Company
Chemanex PLC
Legal Form
A Public Limited Company
incorporated in Sri Lanka on
8 August 1974 under the Companies’
Ordinance and re-registered under
Companies Act No. 7 of 2007 on
6 August 2007.
Company Registration Number
New No. of Company - PQ - 64.
Old No. of Company - PBS 751
Tax Payer Identification Number (TIN)
124007518
Parent Company
CIC Holdings PLC
No. 199, Kew Road
Colombo 2.
Principal Activities
Manufacturing and marketing of
value-added speciality compounds and
intermediates. The Company also acts
as Agents and Distributors.
Stock Exchange Listing
The ordinary shares of the Company
are listed with the Colombo Stock
Exchange from 16th December 1974.
Registered Office
P.O. Box 188
No. 52, Galle Face Court 2,
Colombo 3.
Telephone: 00 94-11-2326845-8
Facsimile: 00 94-11-2445050, 2332568
E-mail: [email protected]
Website: www.chemanex.com
Auditors
KPMG Ford, Rhodes, Thornton & Co.
Chartered Accountants
No. 32 A,
Sir Mohamed Macan Markar Mawatha,
Colombo 3.
Company Lawyers
Nithya Partners
Attorneys-at-law
Bankers
Commercial Bank of Ceylon PLC
Standard Chartered Bank PLC
DFCC Vardhana Bank PLC
Sampath Bank PLC
Company Secretary
A.N. Sugathapala - FCA
Directors
M.P. Jayawardena
(Managing Director/CEO)
A. Mapalagama
(Chief Operating Officer)
D. Chandrasekera
Prof. U.P. Liyanage
S.P.S. Ranatunga
A.V.P. Silva
M.D. Wickramasinghe
Audit Committee
Prof. U.P. Liyanage (Chairman)
D. Chandrasekara
B.R.L. Fernando
M.D. Wickramasinghe
Remuneration Committee
D. Chandrasekara
Prof. U.P. Liyanage
Nominations Committee
M.P. Jayawardena
Prof. U.P. Liyanage
S.P.S. Ranatunga
A.V.P. Silva
D. Chandrasekara
Risk Management Committee
M.D. Wickramasinghe (Chairman)
D. Chandrasekara
M.P. Jayawardena
A. Mapalagama
Sustainable Development Committee
Prof. U.P. Liyanage (Chairman)
M.P. Jayawardena
A. Mapalagama
CHEMANEX PLC
P.O. Box 188
Colombo 3
Sri Lanka
CHEMANEX PLC
CHEMANEX PLC
www.chemanex.com
This Chemanex PLC Annual Report has been
produced by Smart Media The Annual Report Company whose
greenhouse gas emissions resulting from
the designing, photography, production,
project management, usage of paper and
printing are offset using verified
carbon offsets.
C LO S E D R A N K S

Annual Report 2010/11

Transcription

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