Ceylon Grain Elevators Annual Report 2012

Transcription

our corporate philosophy is centred upon the 3H principles of building a Healthy Organisation,
being an Honourable Winner and making an Honest Fortune. This business philosophy is derived
from our Parent Company, Prima Limited of Singapore.
Healthy Organisation
Developing a sound, effective and
efficient organisation system.
Promoting team sprit and reaching
out to create a “PRIMA FAMILY”
identity.
Our Vision
“To achieve complete poultry
integration synergies, ultimately
gaining export market
competitiveness”
Our Mission
To tap and harness business
opportunities by expanding into
various vertical integration projects.
This will lead to increase in Agriculture,
Aquaculture and Livestock production,
thus encouraging national progress
through nutritious protein-rich food to
the people of this Nation.
Honest Fortune
Establishing trust,
fairness and mutual
benefits with all within
our business circle.
Contributing to the
well-being of society.
Honourable Winner
Achieving success
through fair competition.
Striving towards
excellence.
Our Corporate Goals
Brief History
In line with our Chairman’s
directives and Prima Group
corporate philosophy, we will
continue to grow steadily in our
primary activities with the
ultimate goal of reaching the
status of an integrated
feedmilling business.
Life began for Ceylon Grain Elevators PLC (CGE) way back in December 1982, when the
Government of Sri Lanka and Prima Limited of Singapore inked an agreement beginning a
partnership that has endured three decades of yeoman service to the poultry industry in the
country.
Our future expansion plans shall
be within our management
capability and financial
resources.
To establish “PRIMA” and
“FARMERS’ CHOICE” as a brand
name synonymous with the very
best in high quality products.
To establish high standards of
good corporate governance,
improve transparency and the
standards of accountability to
shareholders.
Today, CGE is the largest operator in the poultry industry of Sri Lanka, establishing six subsidiary
companies operating not only in the field of poultry, but also offering products and services in
diverse fields.
CGE and the companies under its umbrella manufacture & distribute a wide range of feeds under
the “PRIMA” and “FARMERS’ CHOICE” brands.
They also operate poultry and hatchery breeder farms, commercial poultry and livestock farms.
They also engage in the processing, packaging and retailing of poultry and other meat products,
the import and sale of poultry equipment, veterinary products, produce aqua feed and provide a
state-of-the-art laboratory and consultancy service to customers and farmers throughout the
island.
Ceylon Grain Elevators PLC subsidiaries are:
• Three Acre Farms PLC
• Ceylon Pioneer Poultry Breeders Limited
• Ceylon Livestock & Agrobusiness Services (Pvt) Limited
• Ceylon Warehouse Complex (Pvt) Limited
• Ceylon Aquatech (Pvt) Limited
• Millennium Multibreeder Farms (Pvt) Limited
Ceylon Grain Elevators PLC associate company is:
• Prima Management Services (Pvt) Limited
2
CEYLON GRAIN ELEVATORS PLC
ANNUAL REPORT 2012
CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S REVIEW
Dear Shareholder,
I am pleased to present you the Annual Report and Audited
Financial Statements of Ceylon Grain Elevators PLC and its
subsidiaries for the financial year ended 31 December 2012. It
is my pleasure to invite you to the Annual General Meeting on
14 May 2013 at the Institute of Chartered Accountants of Sri
Lanaka Auditorium, 30A, Malalasekara Mawatha, Colombo 07 at
11.00 a.m.
2012 has been a very special year for your Company, as it
celebrated 30 years of delivering high quality products and
services to the nation. CGE has come a long way from its humble
beginnings, and is proud to have become one of the key players
in the industry. The Company’s strengths, innovation, efficiency,
transparency and quality have always been the key to its success,
backed the faith placed in its Board and Management by its
stakeholders, along with the trust placed in its products and
services by the entire nation.
Victorious in the face of challenges
The year 2012 was one fraught with many challenges for the
entire industry. However, your Company performed satisfactorily
under demanding circumstances, standing steady against the
gathering momentum of external factors that affected the
industry.
A few of the key challenges faced during the year were the
drastic increases in the prices of raw materials, unsteady
supplies, volatile market situations and fluctuating price
controls which eventually affected the Company’s bottom lines.
However, the Company did not let challenging conditions affect
performance, by taking timely measures to enhance efficiency
and productivity, reduce overheads, and optimise products and
services to gain market share. The results of these strategies can
be seen in the Company’s continued performance, with a 18%
increase in revenue, even though the Company’s profits dropped
due to higher operational costs across the board.
Global economy in review
The worldwide economic revival towards the end of 2010 saw
many emerging markets being closer to achieving the growth
potential they had attained before the global economic crisis in
2008. By mid-2011 however, optimism and momentum faded as
troubling events around the world dominated headlines.
With an unfavourable trend set in 2011, the 2012 global economy
faced many headwinds, including the on-going European debt
crisis, the U.S. fiscal cliff and the economic slowdown in major
emerging economies, including China. The World Bank estimates
the world economy grew just 2.3% in 2012, while developing
countries were responsible for more than half of global growth
within the year. As high-income countries continued to struggle,
political turmoil continued to rack the Middle East and North
Africa. The effects of the global crises were felt far and wide,
penetrating every industry.
While exchange loss caused by the Sri Lankan Rupee’s
depreciation from Rs. 114/- to Rs. 134/- against the US Dollar
stunted the Company’s potential, unfavourable weather
conditions worldwide had an impact on the global as well as local
agriculture industry. Major exporters either banned or restricted
exports due to scarcity in their own countries caused by harsh
weather conditions, which resulted in an unprecedented price
increases in many raw materials within the year.
Deceleration in Sri Lanka
In comparison to the major growth momentum that was
witnessed in 2010 and 2011, the year under consideration has
shown a deceleration in growth for the Sri Lankan economy,
as the country fell victim to heightened global challenges in
2012. Locally, factors such as excessive credit demand and high
imports, drought conditions that severely affected agriculture
and hydro power generation and heavy rains in the last quarter
of the year affected economic growth.
Thus, the year 2012 has been a year of consolidation following the
strong post-conflict recovery. Overall economic growth declined
to 6.5% from 8.3% in 2011, while annual average inflation was
7.6%. Unemployment fell to 4%, while GDP remained at around
US$ 59 billion. The overall fiscal deficit is estimated to be 6.2% of
GDP, down from 6.9% of GDP in 2011.
Despite the inclement weather conditions affecting the country’s
agricultural sector, Sri Lanka’s maize production reached
optimum production capacity, fulfilling local demand, which had
a positive impact on the poultry industry. While the agriculture
industry enjoyed Government tax concessions, an increase in
interest rates affected the industry negatively.
A marginal increase in per capita income from US$ 2,836 in 2011
to US$ 2,922 and its subsequent effect on purchasing power left
a positive footprint, evidenced by the increase in chicken meat
consumption from 5.7Kg per person the previous year to 6.2Kg.
This incremental pattern is expected to continue in the coming
years, speeding up as the global financial crisis dissipates and Sri
Lanka’s economy begins to enjoy predicted growth rates.
Strategies and achievements
Despite negative external factors that pressurised the industry,
the Group achieved a satisfactory 18% increase in revenue.
The Company paid special attention to its marketing initiatives
within the year, as it introduced new branding, memorable
advertising and consumer friendly packaging for its products. The
results of these efforts can be seen in the 10% increase in sales
volume, with excess demand recorded for processed chicken in
ANNUAL REPORT 2012
3
CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S REVIEW (Contd.)
most parts of the year, while feed prices were upward adjusted
number of times during the year with an overall increase in price
of 24%. However, the increase in sales volumes and prices proved
inadequate to recompense production overheads, causing an
overall drop in profits.
In 2012, CGE has successfully increased its production capacity of
broiler farming with the addition of three (3) new Environmentally
Controlled (EC) houses, which will further strengthen the
capability of the Company. Among CGE’s other accomplishments
in 2012 was receiving an accolade at the Institute of Chartered
Accountants of Sri Lanka (ICASL) Annual Report Awards, where
CGE won the Bronze Award in the Food and Beverage category,
recognizing the transparency and accountability of financial
reporting in your Company.
Towards a vibrant future
As the global as well as Sri Lankan economies gain slow but steady
momentum, CGE expects the poultry industry’s contribution to
the economy to increase at a greater pace. The consumption of
chicken meat is expected to increase to 6.4Kg per person within
2013, with an overall increase of up to 8Kg per person by 2017.
With future demand in mind, CGE aims to capture a larger share
of newly emerging markets through dynamic initiatives, while at
the same time increasing the Company’s capacity and offering
a diversified and innovative product line-up. The Company is in
the process of adding a new feed mill line which will extend its
production capacity, and plans to further augment production
with new EC houses in the near future.
Financial accomplishments
Dividends
Amidst challenging circumstances, CGE recorded a revenue
of Rs. 12,375 million, up 18% from Rs. 10,480 million in 2011.
However, even with an increase in revenue, the aforementioned
factors made a clear impact on the Group’s profits which fell
64% from Rs. 419 million in 2011 to Rs. 150 million in 2012.
Your Group has reported Rs. 134.6 million attributable to equity
holders for the year ended 31 December 2012.
I am pleased to announce that the Board of Directors
recommends a First and Final Dividend of Rs. 0.14 per share
for the financial year ended 31 December 2012, subject to the
approval of the Shareholders at the forthcoming Annual General
Meeting. As the Company is planning for capital investment in
the year 2013, we trust our decision will be understood and
appreciated by Shareholders as being one that is prudent and
will help the Company thrive in the near future.
Some of the clear-cut financial challenges that set back the
Company in achieving its financial goals were the steep drop
of the rupee against the US Dollar which caused a significant
foreign exchange loss, along with the costs incurred by increased
interest rates. The controlled price on chicken meat, which was
revised from Rs. 350/- to Rs. 380/- per kilo, proved inadequate to
cover additional costs incurred.
During the year under consideration, the Company also settled
the long outstanding customs case with Sri Lanka Customs on a
goodwill basis without admission of any liability.
As a strategic measure, CGE sold its stake in its associate company
Ceylon Agro Industries Limited, making a group profit of Rs. 447
million, which positively affected CGE’s finances.
Acknowledgements
On behalf of the Board of Directors, I take this opportunity to
thank you for the trust placed in Ceylon Grain Elevators PLC
as its valued Shareholders. I would like to express my sincere
appreciation towards our dedicated employees, growers and
customers for their determination and commitment during 2012.
I wish to convey to all our Shareholders and Investors a message
that the Company will remain steadfast in its efforts in the face of
the many challenges yet to come, and through perseverance and
dedication, will continue to emerge prosperous and victorious in
the years ahead.
Changes to the Board
The year saw the retirement of two esteemed members of the
Board, Mr. Cheng Chih Cheng, Robert and Mr. Cheng Chih Hui,
Peter. While thanking them for their dedication and service,
the Company welcomes new Directors Mr. Cheng Koh Chuen,
Bernard and Mr. Cheng Eng Loong who were newly appointed in
their place. On behalf of the Board of Directors, I take pleasure
in welcoming Mr. Cheng Koh Chuen, Bernard and Mr. Cheng
Eng Loong to the Board, and wish them a long and effective
contribution towards the success of the Company.
Cheng Chih Kwong, Primus
Chairman & Chief Executive Officer
Colombo, Sri Lanka.
2 April 2013
ANNUAL REPORT 2012
5
Management Discussion and Analysis
Industry Overview
The year 2012 has been a challenging year for economies across
the globe, with major financial crises headlining the year. The agri
and poultry industries too were affected globally by subsequent
volatile market situations, raw material prices hitting historical
high levels, adverse weather conditions and unsteady supplies.
However, despite these challenges, the global livestock industry
expanded, with a growth of around 2% over 2011. In Sri Lanka,
the rapid depreciation of the rupee against the US Dollar along
with inclement weather conditions affected the performance
of the industry, with overall economic growth in 2012 at about
6.5%.
Thus, the Central Bank of Sri Lanka adopted stringent policy
measures aimed at macroeconomic stabilisation in early 2012.
Higher policy rates, credit ceiling and lower levels of liquidity
led to higher market interest rates which resulted in curtailed
expansion in credit and import demand. Supply disruptions on
account of drought conditions caused inflation to rise to 7.6%.
Despite these shocks to the economy, Sri Lanka’s financial system
remained stable.
Amidst these challenges, Sri Lanka’s agriculture sector contributed
nearly 12% to National Gross Domestic Production. Agri-business
Income Tax remained at 12%, enabling the industry to perform
satisfactorily within the year.
Contributing around 1.2% of national GDP, Sri Lanka’s livestock
sub-sector is supported by some 1.2 million cattle, 0.4 million
buffalo, 13 million poultry, 0.3 million goats, 0.08 million pigs in
the country with negligible number of sheep, ducks and other
species. In Sri Lanka’s growing economy, chicken meat and eggs
remain the cheapest source of animal protein, and these two
sectors contribute to about 70% of the livestock sub-sector.
Segmental Review
Notwithstanding the many trials faced by the economy and
particularly the industry, the Company was able to increase its
revenue by 18% in 2012. However, escalating production costs
and a hostile industry atmosphere resulted in a 59.6% drop in
Earnings Before Interest and Taxes (EBIT) from Rs. 498 million in
2011 to Rs. 201 million in 2012.
The year in consideration has been a significant year for CGE,
as the Company celebrated its 30 anniversary in 2012. Though
the year has brought many tribulations for the industry, CGE
performed satisfactorily by taking timely measures to increase
its operational efficiency, increase its production, and optimise
its processes.
The Company also sold its stake in associate company Ceylon Agro
Industries Limited, making a group profit of Rs. 447 million, as a
strategic measure that will bode well for the Company’s future.
CGE was also able to settle the long outstanding customs case
with Sri Lanka Customs on a goodwill basis without admission
of any liability.
Segmental Sales
2012
2011Change
(Rs’000)(Rs’000) %
Feed Milling
9,721,980
7,869,680
23.5%
Broiler Farming &
Processed Chicken
2,648,901
2,382,978 11.2%
Poultry Breeder Farming
1,211,592 1,287,857 (5.9)%
125,865 124,494 1.1%
85,138 74,324 14.5%
Poultry Equipment
Silo & Warehouse Complex
Feed Milling
As the largest sector of the business, Feed Milling comprises the
sale of poultry, shrimp and other animal feed.
The Feed Milling sector set a milestone this year as it achieved
the highest sales figures in the sector in 30 years. The sector
contributed to 70% of the group’s revenue, a 3% increase over the
year before. The segment’s total sales grossed Rs. 9,722 million a
23.5% increase over 2011, with EBIT at Rs.219 million which was
a increase of 142.9% compared to the Rs. 90 million recorded
in 2011. The Company’s feed prices were upward adjusted a
number of times during the year with a 24% overall increase
in price, which unfortunately did not make the anticipated
impact on bottom lines. The sector’s end results were positively
influenced by profits made from the sale of associate shares.
However, the impact of the settlement of the case with Sri Lanka
Customs, significant exchange loss and increased operational
expenses affected the sector’s performance adversely.
6
ANNUAL REPORT 2012
Management Discussion and Analysis (Contd.)
The import of raw materials required for the sector remained
a growing challenge within the year, as key suppliers curtailed
their exports in view of inclement weather conditions affecting
volumes in their respective countries. Locally, the price of Meat
and Bone Meal (MBM) increased by 50% in 2012 while Soya Bean
Meal (SBM) increased by 99%. While the sharp depreciation
of the rupee led to higher exchange loss accumulation, the
35% CESS on imported maize continued to be enforced within
the year. However, the Government’s efforts to increase the
domestic maize production proved fruitful, as Sri Lanka’s maize
production was able to fulfill local demand in 2012, which is a step
in the right direction for the country. Despite this achievement,
a significant proportion of locally grown maize is not of the
desired quality due to poor post-harvesting practices and lack
of storage facilities. This has been a key factor in prompting the
agri industry to seek its inputs from foreign suppliers. However,
CGE contributed significantly to the local maize industry by
purchasing over one fifth of Sri Lanka’s annual maize production.
CGE faced the years’ challenges with dexterity, by making the
most of every opportunity. The Company dynamically managed
its output with altering market demands to minimise losses.
Alongside this, multiple-fold initiatives were taken companywide to enhance productivity levels and minimise costs through
creative formulation, productivity and manufacturing process
optimization. The Company utilised the application of advanced
inventory management technologies, and was able to maintain
its position of market leader with a market share of 36%.
Sales Value
Earnings Before
Interest and Taxes
Total Assets
Return on
Total Assets Employed
2012
2011Change
(Rs’000)(Rs’000) %
9,721,980
219,219
3,913,118
5.6%
7,869,680
23.5%
90,258 142.9%
3,793,506
3.2%
2.4% 133.3%
Broiler Farming and Processed Chicken
As CGE’s second largest revenue generator, this segment of the
business consists of the sale of live broiler chicken as well as
processed chicken meat.
Processed chicken sales revenues increased by 11.2% from
Rs. 2,383 million in 2011 to Rs. 2,649 million in 2012, continuing
to contribute a total of 20% to the Company revenue. However,
EBIT fell from Rs. 109 million in 2011 to a loss of Rs. 17 million
in 2012, attributable to high operational costs, unpredictable
market situations and increased prices of raw materials.
In 2012, drastic increases in the prices of raw materials affected
feed costs, creating a significant impact in the poultry industry
as a whole. Alongside this, unsteady supplies, fluctuating market
situations and the expansion of key players in the market created
an unstable industry atmosphere. Although the per capita income
remained relatively similar to last year with a slight increase from
US$ 2,836 in 2011 to US$ 2,922 in 2012, consumption of chicken
meat increased to 6.2Kg per person. Even though the maximum
retail price of processed chicken was increased from Rs. 350/per Kg to Rs. 380/- per Kg, this did not provide sufficient leeway
for the industry to pass on its costs to the end consumer.
To overcome these industry challenges, the Company employed
many measures including increasing its brand awareness,
introducing new marketing campaigns targeted at increasing its
consumer base and introducing consumer friendly branding to
ensure that CGE products will remain top-of-mind.
Sales Value
2012
2011Change
(Rs’000)(Rs’000) %
2,648,901
2,382,978
11.2%
Earnings Before
Interest and Taxes
(16,535)
109,270
NM
Total Assets
581,611
378,530
53.6%
(2.8%)
28.9%
NM
Return on Total
Assets Employed
Poultry Breeder Farming
The Company’s Poultry Breeder Farming segment consists of the
sale of Broiler and Layer Day Old Chicks (DOCs).
The segment’s contribution to the Company’s revenue
decreased by 2.1%, from 10.9% in 2011 to 8.8% in the year
under consideration. This was caused by the 5.9% drop in sales
revenue from Rs. 1,288 million in 2011, to Rs. 1,212 million in
2012. EBIT for the sector also fell by 54.8%, from Rs. 176 million
the previous year to Rs. 79 million in 2012.
2012 was a year of fluctuating performance for both Layer
and Broiler DOC markets. During the last quarter of the 2011,
hatcheries across the country increased their output as the
demand for table eggs and chicken meat increased. The after
effects of this was seen in early 2012, as the surplus availability
of layer and broiler chicks in the market caused a sharp decline in
prices. At this point, the industry was forced to retailing hatching
eggs as table eggs in an attempt to control losses. Most hatcheries
including your Company scaled back their operations due to
this surplus market situation, and by the last quarter of 2012, a
significant number of hatcheries had cut back on importation of
parent stocks in an attempt to curb over production. However,
ANNUAL REPORT 2012
7
Management Discussion and Analysis (Contd.)
the average annual egg consumption has continued to be on the
rise at about 57 eggs per person in 2012.
CGE overcame these challenges by managing its output
efficiently by controlling its import of high quality grandparent
birds. The Company also took a strategic measure to release
excess hatching eggs for sale as table eggs when the market
situation demanded such a measure, which affected the segment
performance in a positive manner.
Sales Value
Earnings Before
Interest and Taxes
Total Assets
Return on
2012
2011Change
(Rs’000)(Rs’000) %
1,211,592
79,428
2,256,003
1,287,857 (5.9%)
175,549 (54.8%)
2,183,843
3.5%
3.3%
8.0% (56.2%)
Poultry Equipment
its modern art silos and warehouses complex. One of the distinct
advantage provided by owning its own warehouse complex is
the ability to purchase in bulk which enables the Company to
enjoy a better price advantage, while being able to outsource
excess storage facilities to third parties which gains additional
income for the Group.
The segment enjoyed increased rental income in 2012, growing
by 14.5%, from Rs. 74 million in 2011 to Rs. 85 million in 2012.
EBIT for the sector increased 25.5%, from Rs. 43 million in 2011
to Rs. 54 million in the year under consideration. This was
attributable to the Company’s increased attention to enhancing
a number of its internal procedures and processes during the
year.
Rental Income
85,138
74,324
14.5%
Earnings Before
Interest and Taxes
53,910
42,949
25.5%
396,970
421,078
(5.7%)
13.6%
10.2%
33.3%
Total Assets
The Poultry Equipment sector of the Group’s operations supplies
industry related poultry equipment, vaccines and drugs to
the industry. The aim of this sector is to enhance the overall
performance and productivity of the industry, by offering a
comprehensive range of branded products specialised for the Sri
Lankan market.
The sector recorded a 1.1% increase in sales during the year,
resulting in revenue of Rs. 126 million as compared to Rs. 124
million in previous year. EBIT for the sector gained 236.7%
positive growth, increasing from Rs. 6 million in 2011 to Rs. 21
million in 2012. The Company has been successful in increasing
the profits in this sector during the year and plans to increase the
growth of this sector in the years ahead.
2012
2011Change
(Rs’000)(Rs’000) %
Sales Value
125,865 124,494
1.1%
Earnings Before
Interest and Taxes
21,447 Total Assets
58,100 43,994
Return on
36.9%
14.5% 154.5%
6,370 236.7%
32.1%
Silo and Warehouse Complex Rental
CGE is able to exercise great flexibility in the purchase and
storage of key raw materials thanks to the efficient handling of
2012
2011Change
(Rs’000)(Rs’000) %
Return on
Growing in tandem with Sri Lanka
Challenging times like these have helped prove the Company’s
mettle, where CGE stood strong as the entire industry was set
back by the economic decline. As the situation begins to slowly
dissipate along with local and global economic recoveries,
CGE is confident that the Company’s performance too will
grow proportionately to the recovering markets. To this end,
the Company is well prepared to make the best of potential
opportunities, and is constantly working towards expanding
its capacity to stay in tandem with projected market demands.
Consistently innovating our product mix, setting in place a
perceptive growth strategy, providing outstanding customer
service, developing strong product distribution networks and
high quality products are key factors that will ensure that CGE
remains a key player in the industry for decades to come.
8
ANNUAL REPORT 2012
Sustainability Report
Through 30 years of spearheading the feed and poultry
industries in Sri Lanka, CGE has gained valuable insights on the
value of building a sustainable business. Consistent innovation
in our products, processes and management has enabled us
to become a leading corporate entity. Our stakeholders have
always been the strong foundation on which our Company is
built upon, while our business partners and end consumers have
been the compass that guides the business towards growth and
prosperity.
By infusing the best of international innovation and local knowhow, CGE has been successful in creating a brand that has
stood the test of time. Our products are renowned for their
uncompromised quality, which was proven even in this year
strewn with challenges, when our loyal buyers and consumers
continued to prefer our products over cheaper alternatives
available in the market.
Stringent corporate governance procedures, risk management,
transparency and accountability measures have helped the
Company enhance its sustainability. We are dedicated to bettering
ourselves year over year, while giving back to and protecting the
communities that we operate in. While bettering ourselves, we
also consider it as our duty to better our products in every way
possible, as we believe that our products are a reflection of the
Company’s values. Through these measures, CGE has been able
to create a sustainable and responsible business which is able to
stay true to its core values even in the face of adversity.
Developing our Human Resources
At CGE, our people play a key role in motivating and moving
the business forward, and thus they are our most important
resource. Our employees can best be described as a close-knit
family, where each has their own duties and responsibilities
which they strive to carry out with diligence. The Company who
acts as a parent always has its employees’ best interests at heart,
and helps them perform better and reach greater heights in their
personal lives and careers. By providing a collaborative work
environment where employees can thrive, the core corporate
philosophy of the ‘Prima Family’ has led to more job satisfaction
for the Company’s workforce, which is a key indicator of the
Company’s productivity.
Helping our employees better themselves is not only good for
the workforce, but an added benefit to the Company as well. A
well versed workforce is an efficient workforce, and thus the CGE
is always dedicated to provide training for its staff. In 2012, the
Company has conducted training and development programmes
spanning over 300 man-days, investing more time, expertise
and funds in empowering the professional development of its
employees in all sectors.
Development at CGE begins with its comprehensive induction
programme which is carried out continuously throughout the
year for the benefit of new employees. Two separate specialised
programmes have been formulated for Executive and NonExecutive levels, which enables new members of the Prima
Family to familiarise themselves with the Company’s systems
and procedures, while getting to know their colleagues better.
This enables seamless integration of new staff members into
the existing workforce and reduces the stress of a change of
environment on our new staff, while helping them to contribute
cohesively.
The Company’s comprehensive training programmes help
employees learn from industry experts within CGE and
from the wider industry. While the Company regularly hosts
customised workshops for staff, it also sends employees to
seminars conducted elsewhere. CGE’s dedication to employee
empowerment sees it offer a wide range of opportunities for
growth to its workforce. This includes overseas training, a regular
programme where promising candidates receive comprehensive
development programme in one of the world’s leading poultry
ANNUAL REPORT 2012
9
Sustainability Report (Contd.)
manufacturing companies. Employees are also regularly sent
Staff Classification
abroad to familiarise themselves with the best of international
expertise in particular fields at technical symposiums and
management workshops held in various countries.
As our employees grow, so does the Company. However, CGE
believes that it is not merely enough to enable employee growth
as recognition is a key catalyst in a motivated workforce. To
enable our talented employees with their career progression,
we continue to utilise our performance appraisal system which
No. of Employees
CategoryGroup Company
Snr. Managers & above
13
12
Managers & Asst.Mgrs
34
32
Snr. Executives & Exes
53
46
Non Executives
384
214
Total 484
304
is in line with that followed by Prima Group, Singapore. The
system provides recognition for employee performance, and
Snr. Managers & above
provides a pathway for individual employees to move to the next
Managers & Asst.Mgrs
stage of their career through an Executive and Non Executive
Snr. Executives & Exes
grading system. The succession planning system followed by the
Non Executives
Company includes the development of a second level for almost
all crucial positions in the business. These steps enable CGE to
run seamlessly and are instrumental in developing future growth
of the organization, as providing clearly defined career paths for
employees is an important factor which contributes to increased
job satisfaction levels.
The Employee Council facilitated by the Company provides an
opportunity for dialog between the management and other staff,
reinforcing the fact that employee participation and contribution
Gender Distribution
No. of Employees
GenderGroup Company
Male361
262
Female123
42
Total
484
304
towards decisions that affect work is of extreme importance to
the Company. CGE also prioritises the requirement for a safe and
Male
comfortable working environment for all employees.
Female
Besides helping our employees grow in their careers, the
Company also looks into the wellbeing and happiness of its
workforce. The ‘Get-to-gether’ which was immensely successful
Staff Analysis by Age
in 2011 was once again organised in 2012. This year, the Company
treated its employees to a full day trip to ‘Koggala Beach Hotel’,
AgeGroup Campany
a renowned resort in the vicinity of Galle. Commencing from
Colombo, employees and their families set journey to the resort
No. of Employees
<212
2
21-30117
76
on arrival. Fun and games for both adults and children followed
31-40136
83
by prize giveaways to winners were some of the highlights of
41-50145
91
the day. CGE also conducted its Annual Long Service Awards,
51-6082
51
where employees who had completed set numbers of years
60<2
1
in a privately chartered train, and enjoyed a myriad of activities
were presented with awards by the Higher Management in
appreciation of their loyal service.
Total
484
<21
21-30
31-40
41-50
51-60
60<
304
10
ANNUAL REPORT 2012
Enhancing Corporate Social Responsibility
Over the years, the Company has remained faithful to the
communities that it operates closely with, as it considers
Corporate Social Responsibility to much more than a mere
responsibility of an organisation. Thus, the main beneficiaries of
our CSR efforts tend to be communities located in close proximity
to CGE installations, although the Company also focuses on other
parts of greater society as well.
Sri Lanka Cricket. The championship is a valuable opportunity for
young talent to take the spotlight and show their potential, and
helps nurture the cricketers of tomorrow.
Giving back to society
CGE was also instrumental in uplifting the lives of maize farmers
and their families in 2012. The Company is proud to note that
it has purchased one fifth of Sri Lanka’s annual maize harvest.
The Company also buys above recommended price from local
farmers, while purchasing in cash terms which has helped to
boost morale and provide confidence to maize farmers across
Sri Lanka.
CGE provides valuable opportunities to up and coming
professionals to gain a solid start in their careers through our
internship programs. The Company regularly takes in new
internes from the Veterinary Council of Sri Lanka and from
leading universities across the isle, providing them with an ideal
environment where they learn about the inner workings of the
industry in a modern and collaborative environment.
Recognising our partners
The Company considers it one of its greater duties to empower
communities around its farming facilities which are mainly
located in rural areas. These areas face many hardships that
hinder day-to-day life, and thus CGE continued its initiative to
contribute towards the development of these areas by joining
hands together with provincial councils to build better roadways
in their localities. CGE together with the Bulathsinhala Provincial
Council continued with the upgrading of the Agaloya Road
leading to the Rajalimanna Village, which was heavily worn
out and had caused many travel and transportation problems
for residents in the surrounding areas. The Company also
partnered with the Beruwela Provincial Council to complete the
reconstruction of the Pinhena - Padagoda Road via Gurukanda,
which greatly benefited the people of the villages of Kalawila and
Kalawila Kanda.
CGE also continued to lend a helping hand in developing the
next generation of talented sportsmen and women in the
country. The Group continued to sponsor and support the Under
15 Prima Champions Trophy district tournament organised by
As the Company celebrated 30 years of success, we did not forget
that there were many individuals outside the Company who
helped us reach this milestone achievement, namely, our valued
Dealers. Thus as CGE celebrated its much awaited anniversary, it
conducted a ‘Dealer Gathering’ in honour of the extended Prima
Family.
ANNUAL REPORT 2012
11
At the event, long standing Dealers were felicitated and
honoured with awards and prizes, where Feed Dealers who had
served the Company for 30 years were given recognition with
celebratory plaques and valuable 22k gold coins, and Dealers
handling chicken based products with the Company for 10 years
were awarded with plaques and 18k gold coins.
Responsible product manufacturing
As a company involved in providing nutrition to the nation,
CGE places utmost importance on providing food safety for its
products. The Company which is ISO 9001-2008 certified, is
dedicated to assure high quality to our consumers, and follows
stringent safety and quality standards in its manufacturing
operations, complying with statutory regulations such as the
Animal Feed Act and other international standards such as
HACCP.
To maintain the quality of its output, CGE places priority in
maintaining the quality of its input. Thus it subjects all raw
materials that are acquired by the Company to strict quality
checks carried out by qualified professionals.
Nurturing a growing Sri Lanka
Brand Marketing and Development
One of the key factors that helped the Company achieve revenue
growth in the year under consideration was its increased
emphasis on brand marketing and development.
CGE continued its communication campaign with the theme of
“Prima Chicken - for Goodness Sake”, which was the new brand
positioning introduced in 2011, which epitomise the quality
and high standards that lie at the core of the Company’s values.
Advertising within the year continued to focus on the “Best Five”
introduced in 2011 which highlights the 5 benefits that the Prima
Chicken brand offers to its valued customers.
Aggressive brand promotion within the year helped achieving
more brand presence and awareness and multiple & innovative
media initiatives were taken indentifying the importance
of the brand presence in customer touch points as much
possible including catchy radio jingles, mobile games, out of
home & transit branding etc. Specific brand activation carried
out facilitated bringing the brand closer to the consumers
meaningfully and interactive nature of the promotion drew
target audience in great numbers.
CGE is engaged in a continuous effort to uplift the standards of
the poultry and feed industries in Sri Lanka, as a step forward
for the industry would also mean a step forward for the
country. Thus it provides the industry with quality feed, chicks,
processed chicken and poultry equipment. Moreover, it also
has invested in enhancing the industry’s technical knowledge
by encouraging employer and partner participation in relevant
technical symposiums and seminars. This in turn has greatly
contributed to help farmers to improve production yield by
means of technical assistance and know-how transfer within
the industry. The Company also carries out research on disease
prevention which helps both individual farmers and the industry
as a whole to protect their livestock from epidemic situations
that are common around the world.
The Company introduced more consumer friendly packaging for
processed chicken products that focused on easy recognition of
the Prima brand, while upgrading its packaging for feed with a
new systematic colour coding system for easy identification.
Environment
The Company plans to continue improving and diversifying its
product range in the coming years in pace with market trends
and demands, which will help CGE to continue setting the
benchmark in the future.
From the onset, the Company has emphasised on co-existing
with the natural environment. Over the years, it has taken many
measures to increase its environmental sensitivity and green
friendly aspects.
We are committed to protect the environment in and around
our installations, especially in our poultry farms, which operate
under a Central Environmental Authority (CEA) License which
stipulates national standards and monitors compliance through
regular inspections. We ensure that our operations have a
minimum effect on the surrounding environment by conforming
all CGE farms to stringent waste management protocols.
An innovative approach in this area is the waste disposal system
employed by CGE farms, which recycle waste into natural
fertilizer. This fertilizer is distributed free of charge, providing
valuable resources to farmers and growers at no cost.
CGE also enhanced its products for the out grower market, where
farmers are able to buy everything they need to run a successful
operation under one roof from feed, chicks, poultry equipment
to vaccinations and supplements. Though the Company has
focused on providing only the entire package to customers thus
far, it plans to further diversify by offering individual products
without the need of acquiring an entire solution. This would
provide more flexible options to customers, further we believe
that this will enhance the Company’s productivity in the long run.
12
ANNUAL REPORT 2012
Corporate Governance Review
Ceylon Grain Elevators PLC infuses constantly evolving
modern ethical practices into its business acumen, utilising a
performance-driven culture and a dynamic governance structure
that enables it to stay ahead even in the most demanding times.
Through the years, the Company has been able to win and
maintain the trust and loyalty of its shareholders, customers,
employees and other stakeholders by following a broad set
of principles and procedures which ensure integrity, fairness,
transparency and responsibility at all times. The governance
structure followed by CGE reflects the Company’s proud history,
its core values and its corporate social responsibilities, while
being in line with best practices of good corporate governance as
published by the Institute of Chartered Accountants of Sri Lanka,
the Companies Act No. 07 of 2007 and the Listing Rules of the
Colombo Stock Exchange.
Code of Conduct
Ceylon Grain Elevators PLC operates with a Code of Conduct
that sets the standard for sustainability, accountability and
transparency across its entire operations. Our Code of Conduct
is as follows:
• Always act in the best interest of the Company, ensuring
transparency in all matters
• Conduct business in an ethical manner at all times and in
keeping with international industry standards
• Continuous professional development along with Company
and Individual compliance with all rules and regulations
• Trust, professionalism and integrity in all partnerships and
transactions
The Chairman and the Company asserts that there have not
been any violations of CGE’s Code of Conduct in the year 2012.
Internal Governance Structure
The Internal Governance Structure of the Company comprises
the Board of Directors, which consists of the Chairman and
Chief Executive Officer, Executive Director and Group General
Manager, two Non-Executive Directors and two Independent
Non-Executive Directors with an intimate knowledge of the
industry and business.
The components of the internal governance structure are
designed in a way that ensures executive authority is well
devolved and delegated through a committee structure. This
assures that the CEO and functional managers are accountable
for the Group and the business units/sub-functions
respectively. Each component’s responsibilities, authorities
and accountabilities are set and agreed upon in advance, which
helps achieve seamless operating efficiency while enabling
healthy debate.
The Management Committee, headed by the Chief Executive
Officer empowered by the Board, is an integral part of the
Company’s management. The members of the Management
Committee are the Group General Manager, the General Manager,
Deputy General Manager, Board of Directors, Audit Committee
and Senior Management Committees. These positions and
committees are complemented by strong internal governance
systems and procedures - which act as the enablers of the
business plan. These mechanisms, within the internal governance
structure, ensure implementation and execution towards
upholding the Group’s Corporate Governance framework.
The Board of Directors and their responsibilities
The Board of Directors of CGE are responsible for:
• Appropriately managing the group on behalf of the
Shareholders
• Ensuring that the Group accomplishes its goals
• Meeting regularly to establish and maintain the Company’s
strategic direction
• Providing guidance to ensure that the Group is adequately
resourced and effectively controlled
• Reviewing the Group’s operating and financial performance
The Board of Directors are responsible for a number of other
duties that pertain to the supervision of corporate governance
issues. In the year under consideration, the Board sought
professional advice on matters that needed specialised expertise
such as litigation advice from the Company’s Lawyers. The
provision for the Company’s Directors to retire by rotation has
been recommended twice by the Board within the year. The
Board collectively, and Directors individually, act in accordance
with the laws of the Country, while all members of the Board
take collective responsibility for the management, direction
and performance of the Group. The Board’s principal roles and
functions are listed below.
• Providing Strategic Direction
The Board is collectively responsible for establishing the
Group’s general direction, corporate policies, overall strategic
objectives and corporate plans, which are communicated to the
Management Committee. The Group has set out a schedule of
issues and decisions which may only be approved by the Board
as monitoring controls.
The Board’s approval is needed on all matters relevant to
overall strategy, annual budget, business plans, management
information,
reported
financial
statements,
dividends,
investments and business acquisitions. The Board of Directors
are also responsible for continually reviewing and monitoring
the Group’s performance against set objectives while directing
the Management Committee on specific action points.
ANNUAL REPORT 2012
13
Corporate Governance Review (Contd.)
• Communication with Shareholders
• Appointments to Board Committees
The Group engages with Shareholders on a wide range of issues,
The Board of Directors are responsible for appointing members to
as it believes in maintaining transparency at all times. The Board
the various Board Committees and ensuring that the Committees
is responsible for reporting statutory and relevant information
to shareholders in a timely and accurate manner. To ensure
transparency at all times, the Board has laid down policies in
relation to the keeping of proper accurate records of accounts
along with the preparation of financial statements, which
provide a fair and balanced view of the status of the Group.
The Board takes measures to report all statutory and relevant
act as per Terms of Reference provided by the Board. The Board
appoints Directors to the Audit and Remuneration Committee,
along with Directors and key Senior Management personnel
to the Management Committee. Each Committee acts by its
own set of Terms of Reference. An expanded review of each
Committee’s functions is provided further down in this report.
information along with disclosure of all major transactions
to Shareholders in a timely and accurate manner. The Group
encourages Shareholders to seek independent advice on
investing and divesting decisions. All quarterly and annual results
Board Composition
are prepared and presented in accordance with the Sri Lanka
The Board of Directors comprises six (6) members. The Group
Accounting Standards, the Companies Act No. 07 of 2007, the
is committed to maintaining a balanced Board to ensure long-
Colombo Stock Exchange policies and the Securities & Exchange
term value addition for all stakeholders, with an effective mix
Commission regulations.
of Executive, Non-Executive and Independent Non-Executive
• Overseeing Risk Management
Directors. Industry expertise and business brought forward
The Board of Directors are responsible for evaluating the
informed decisions for a sustainable and profitable future for
Group’s risk factors and current control systems and make policy
recommendations on risk elements and improvement of controls.
The establishment of the risk management process overseen
by the Board assures that an effective system is implemented
for identifying, evaluating and managing significant risks faced
by the Group in protecting its assets and processes. The risk
by these Board members enables the Company to make wellthe Company. The Board comprises two (2) Executive Directors,
two (2) Non-Executive Directors, and two (2) Independent
Non-Executive Directors. This Board composition complies
with the Listing Rules of the Colombo Stock Exchange, which
requires a composition of a minimum of 2 or 1/3 of the Board
management process is regularly reviewed by the Board on the
to be Independent Non-Executive Directors. While Board
basis of the guidelines set by relevant regulatory bodies. The
appointments follow a formal and transparent procedure, the
Management Committee is responsible for the detail, design and
Board periodically appraises their own performance in order to
operation of the system of internal controls pertaining to risk
ensure that their responsibilities are satisfactorily discharged in
management, while the Board maintains its overall responsibility
fairness to both the Company and its stakeholders. In the year
for managing risks within the Group. Ceylon Grain Elevators PLC
has in place a well-designed control framework comprising
clear structures and accountabilities, well understood policies,
procedures and budgeting & review processes. Each business
segment of the Group has a formal management structure with
clear responsibilities operating within appropriately defined
policies, covering the areas of product safety, financial matters,
health and safety, the environment, human resources, operation
matters, purchasing and engineering.
• Compliance
The Board is responsible for ensuring that the Group is always
in compliance with laws, regulations and other standards as laid
down by regulatory bodies of the country. The Board is regularly
updated with information pertaining to compliance and directs
the Management Committee with regard to required action
steps.
under consideration, an assessment was made of the Board
composition and it was concluded that the combined knowledge
and experience of the current Board matches the strategic
demands and direction of the Group. A brief profile of individual
Board members can be found on page 21 of this report.
Changes to the Board
The year under consideration has seen the retirement of two
members of the Board, Mr. Cheng Chih Cheng, Robert and
Mr. Cheng Chih Hui, Peter. The Company welcomed new Directors
Mr. Chenge Koh Chuen, Bernard and Mr. Cheng Eng Loong who
were newly appointed in their place.
14
ANNUAL REPORT 2012
Name of Director
Capacity
Shareholding
Member
Member
of Audit
of Remuneration
CommitteeCommittee
Mr. Cheng Chih Kwong, Primus
Chairman and Chief Executive Officer
397No No
Mr. Tan Beng Chuan
Executive Director & Group General Manager
NilNo No
Mr. Cheng Chih Cheng, Robert
(Resigned w.e.f. 31 July 2012)
Non-Executive Director
397
No
No
Mr. Cheng Chih Hui, Peter
397
No
No
Mr. Cheng Koh Chuen, Bernard
(Appointed w.e.f. 1 August 2012)
Nil
No
No
Mr. Cheng Eng Loong
Nil
No
No
Dr. Wickrema Sena Weerasooria
Independent
NilYesYes
Mr. Sunil Karunanayake
Independent Non-Executive Director
NilYesYes
Board Tenure, Retirement and Re-election
• The Directors are appointed and recommended for re-election
until their prescribed company retirement age.
• At each Annual General Meeting one third of the Directors,
retire by rotation on the basis prescribed in the Articles of
Association of the Company and are eligible for re-election.
The Directors who retire are those who have been longest in
office since their appointment / re-appointment. In addition,
any new Director who was appointed to the Board during the
year is required to stand for re-election at the next Annual
General Meeting.
positive relations between Executive and Non-Executive
Directors.
To have a suitable balance of power on the Board, the posts of
Chairman and Executive Director have been separated with clear
roles defined for each. The suitability of combining the roles of
Chairman and CEO is discussed and reviewed regularly. On the
basis of such discussions and reviews, the Board has deemed
that combining the two roles is more appropriate for the Group
at present to meet stakeholder and company objectives.
Continuous Training and Development
The Group is dedicated to empowering every member of its
• The re-election of Directors ensures that shareholders have
team with opportunities to better their skills and knowledge,
an opportunity to reassess the composition of the Board. The
and extends this policy to the Board of Directors as well. The
names of the Directors submitted for re-election are provided
development programmes available to Board members begin
to the shareholders in advance to enable them to make an
with comprehensive induction programmes that ensure that
informed decision on their election.
new Board members gather the required knowledge to integrate
• The names of the retiring Directors eligible for re-election
this year are mentioned in the Notice of the Annual General
Meeting of the Company.
The Chairman of the Board
The Executive Chairman of the Board, Mr. Cheng Chih Kwong,
Primus, is charged with a number of responsibilities including
providing leadership to the Board, ensuring Board effectiveness
in its multiple roles, chairing Board meetings to provide direction,
taking responsibility for the Board’s composition, facilitating the
effective contribution of Non-Executive Directors and ensuring
well and perform their functions with efficiency. The programme
which is conducted over a number of months includes
presentations from key members of Senior Management and
visits to the Group’s main operating businesses. If a Director
should require a deeper understanding on a particular area,
further follow-up meetings are arranged to provide this
knowledge to the Board member.
Supply of Information
The Board of Directors are supplied with timely, accurate and
comprehensive information to help them perform their various
duties successfully. This enables Board members to engage
ANNUAL REPORT 2012
15
in healthy debate and a process of optimised decision-making
towards the betterment of the Company. Directors are provided
with access to:
• Board minutes and reports which are circulated prior to Board
meetings
• Clarification or amplification on Board minutes if necessary
• Experts and other external professional services
• Advice and services provided by the Company’s Secretary
• Information as is necessary to carry out their duties and
responsibilities effectively and efficiently
• Information updates from management on topical matters,
new regulations and best practices as relevant to the Group’s
business
Board Meetings
In keeping with company governance principles, the Board met
four times during the year under consideration to discuss and
review the overall strategic development of the Group. The
Chairman is responsible for providing leadership to the Board and
the business at meetings, facilitating the effective contribution
of all members, implementing strategies and ensuring that
the Board operates effectively, in line with the interests of
Shareholders. The Company Secretaries, SSP Corporate Services,
are responsible on behalf of the Chairman ensuring that all Board
Meetings are conducted in a proper manner and that Directors
receive necessary relevant information prior to meetings, where
the Board reviews the Key Performance Indicators (KPIs). The
Company Secretaries also provide guidance to the Board to
ensure that good governance requirements are considered and
implemented. While, the Board is updated on the latest financial
position at Board Meetings by the Group General Manager,
Board Minutes are kept to ensure that concerns are recorded
in case of Directors having concerns about the matters of the
Company which cannot be unanimously resolved. However, such
a need did not arise during the year 2012.
Name of Director
Capacity
No. of meetings held
4
No. of meetings attended
4
Mr. Tan Beng Chuan
4
4
4
2
Non Executive Director
4
Nil
4
1
Mr. Cheng Eng Loong
4
1
4
4
4
3
Board Committees
The Board has delegated some of its functions to Board
Committees which maintain responsibility for monitoring,
reviewing and enhancing accountability in certain areas. This
measure safeguards good governance practices within the
Group. These Board Committees of CGE are as follows;
• Management Committee
• Remuneration Committee
• Audit Committee
These Committees carry out their duties and responsibilities as
per Terms of Reference set out by the Board. The proceedings of
the meetings are regularly communicated to the Board.
• The Management Committee
Selected and appointed by the Board of Directors. The
Management Committee is responsible for the following:
o Implementing Group strategy
o Monitoring business performance
o
Approving budgets and
recommendation to the Board
capital
expenditure
for
o Ensuring efficient management of the Group
The Management Committee has adequate authority delegated
to them by the Board in order to implement Board decisions. This
authority is exercised within the policy framework stipulated by
the Board.
The Management Committee meets once a month to discuss
and evaluate various topics including segmental performance
of the group, business development plans, financial and
operating budgets and forecasts, capital expenditure proposals,
management issues and Key Performance Indicators (KPIs).
The Board reviews reports from the Management Committee
pertaining to segmental performance, and also receives regular
reports from executives and sectional heads on key risk areas.
The Management Committee has the freedom to run the
business as they deem fit to meet the demands of the Group’s
customers and the strategic & financial targets that have been
16
ANNUAL REPORT 2012
set by the Board in addition to mentioned corporate guidelines.
This deregulated structure is essential to enable fast decision
making, speedy innovation at a rate demanded by customers
and providing consumers with products and services catered to
their specific needs.
• Remuneration Committee
The Remuneration Committee is responsible to the Board for
determining the remuneration policy for Executive Directors and
Senior Managers. The Remuneration Committee comprises two
(2) Independent Non-Executive Directors, one of whom is the
Chairman of the Committee, who is appointed by the Board. The
detailed Remuneration Committee Report appears on page 20
of this Report.
• Audit Committee
The Audit Committee is responsible for assisting the Board of
Directors in fulfilling its oversight responsibilities in the financial
reporting process. The Audit Committee consists of two (2)
Independent Non-Executive Directors, one of whom is the Chairman
of the Committee, who is appointed by the Board. The detailed
Audit Committee Report appears on page 19 of this Report.
Going Concern
The Group maintains sufficient financial resources together with
a diversified business model and a range of businesses. The Board
of Directors upon the recommendation of the Audit Committee
is satisfied that the Group have sufficient resources to continue
in operation for the foreseeable future. For this reason, they will
continue to adopt the going concern basis in preparing accounts.
Corporate Governance Compliance
CSE Rule Number and Subject
Corporate Compliance Status
Governance Principle
7.10.1(a)
Non-Executive Directors
Two or one third of the total
Compliant
number of Directors shall be
Non-Executive Directors,
whichever is higher.
7.10.2(a)
Independent Directors
Two or one third of Compliant
Non-Executive Directors
whichever is higher shall be
independent.
7.10.2(b)
Independent Directors
Each Non-Executive Director Compliant
should submit a declaration of independence / non-independence in the prescribed format.
7.10.3(a)
Disclosure relating to Directors
Names of Independent Directors
Compliant
should be disclosed in the
Annual Report.
7.10.3(b)
The basis for the Board to
Compliant
determine a Director is Independent, if criteria specified for Independent is not met.
7.10.3(c)
A brief resume of each Director
Compliant
should be included in the
Annual Report including the
area of expertise.
Remarks
Corporate Governance - Page 13
Corporate Governance - Page 13
Non-Executive Directors have
submitted declarations during
the year 2012
Board of Directors - Page 21
Specified criterias are met by
Independent Non-Executive
Directors
ANNUAL REPORT 2012
17
Corporate Governance Principle
Compliance Status
Remarks
7.10.3(d)
Forthwith provide a brief resume of new Directors appointed to the
Board with details specified in
7.10.3(a), (b) and (c).
Compliant
Compliant
The board has determined the
7.10.4(a-h)
Determination of Independence
Requirements for meeting criteria of ‘Independent’.
Independence of each
Non-Executive Directors during 2012
7.10.5
Remuneration Committee
A Listed entity shall have a
Remuneration Committee.
Compliant
Report – Page 20
Composition of The Committee shall consist of Remuneration Committee
Non-Executive Directors, a majority of whom shall be
7.10.5(a)
Compliant
Report – Page 20
independent.
7.10.5.(b)
Functions of The Remuneration Committee Compliant
shall recommend the remuneration of the Chief Executive Officer and
Executive Directors.
Report – Page 20
7.10.5.(c)
Disclosure in the Annual Report The Annual Report should set out:
relating to Remuneration a. Names of Directors comprising the Committee
Compliant
Report – Page 20
b. Statement of Remuneration Policy
Compliant
Remuneration Committee Report - Page 20
Compliant
Note 34.1 - Page 74
Compliant
Audit Committee Report - Page 19
Compliant
c. Aggregated remuneration paid to Executive and Non - Executive Directors
7.10.6
Audit Committee
A Listed Company shall have an Audit Committee.
7.10.6(a)
Composition of Audit Committee The Committee shall comprise of
Non-Executive Directors,
the majority of whom shall be
independent. The Chairman of the
Committee should be a Member
of a recognised professional
accounting body.
18
ANNUAL REPORT 2012
Corporate 7.10.6.(b)
Functions of Audit Committee
Governance Principle
(i) Overseeing of the preparation, presentation and adequacy of
disclosures in the financial
statements of a Listed Entity,
in accordance with Sri Lanka
Accounting Standards.
(ii) Overseeing of the Entity’s Compliance Status
Remarks
Compliant
Compliant
compliance with financial
reporting requirements,
information requirements
of the Companies Act and
other relevant financial reporting
related regulations and requirements.
(iii) Overseeing the processes to ensure that the Entity’s internal
controls and risk management
are adequate, to meet the
requirements of the Sri Lanka
Auditing Standards.
Compliant
(iv) Assessment of the independence and performance of the Entity’s
external auditors.
Compliant
7.10.6(c)
Disclosure in Annual Report relating to Audit Committee
(v) To make recommendations to the Compliant
board pertaining to appointment,
re-appointment and removal of external
auditors and to approve the
remuneration and terms of engagement
of the external auditors.
The Annual Report should set out:
a. Names of Directors comprising the Audit Committee.
Compliant
b. The Audit Committee shall make a determination of the independence of
the Auditors and disclose the basis for
such determination.
Compliant
c. The Annual Report shall contain a Report of the Audit Committee setting
out of the manner of compliance
with their functions.
Compliant
ANNUAL REPORT 2012
19
Audit Committee Report
The Audit Committee Report is an overview of the tasks and
responsibilities of the Audit Committee whose authorities are
approved and adopted by the Board.
CGE’s Audit Committee is responsible for maintaining a healthy
relationship with the Group’s external auditors. The Audit
Committee is also accountable for a number of other tasks,
such as overseeing the review of the Group’s internal financial
resources, controls and audit process. The Committee also
assists the Board in ensuring that financial and non-financial
information supplied to shareholders presents a fair assessment
of the Company’s position.
The Audit Committee consists of two (2) members as stipulated
by the guidelines set out by the Colombo Stock Exchange. Both
members are Independent Non-Executive Directors who are
appointed by the Board of Directors from amongst the Directors
of the Company. Furthermore, the Committee Chairman
Mr. Sunil Karunanayake, is a Member of the Institute of Chartered
Accountants of Sri Lanka, while the Company’s Internal Auditor
acts as the Secretary to the Audit Committee.
The Committee conducted meeting at such times as it was
deemed appropriate and necessary, meeting a total of four
times during the year under consideration, keeping in line with
the requirement that it meets a minimum of once a year. Upon
invitation, the meetings were also attended by the Executive
Director & Group General Manager of the Company , the General
Manager and the Financial Controller. During the year, the Audit
Committee received multiple reports from and held discussions
with the Group’s management and auditors.
Name
Capacity
No. of
No. of
meetingsmeetings
heldattended
Mr. Sunil
Chairman / 4
4
KarunanayakeIndependent
Dr. Wickrema
Sena Weerasooria
Member / 4
Independent
4
Mr. Darshana
De Silva
Secretary / Group
Internal Auditor
4
4
The Audit Committee has been engaged in manifold activities
during the year which included:
• Approving the auditors’ Terms of Engagement including their
remuneration, while in discussion with the auditors, assessed
their independence and objectivity and recommended their
re-appointment for the coming year at the Annual General
Meeting.
• The Committee has also reviewed the following areas:
• Financial statements published in the name of the Board
and the quality and acceptability of the related accounting
policies, practices and financial reporting disclosures
• Scope of the work of the Group’s Finance Department and
reports from that department
• Effectiveness of the systems for internal control, risk
management and compliance with financial services
legislation and regulations
• Results of the external audit
• Reports from the internal and external auditors on audit
planning and their findings on accounting and internal
control systems
Sunil Karunanayake
Chairman, Audit Committee
20
ANNUAL REPORT 2012
Remuneration Committee Report
The Remuneration Committee Report is a review of the
responsibilities and operations of the Remuneration Committee
of CGE.
The Group’s Remuneration Committee is responsible for
a number of key tasks, including the recommendation of
the remuneration policy for Executive Directors and Key
Management Personnel to the Board of Directors. Whilst the
Committee fulfils requirements stipulated by the Listing Rules
of the Colombo Stock Exchange, term ‘Remuneration’ in this
context refers to cash and all non-cash benefits what so ever
received in consideration of employment with CGE, excluding
statutory entitlements such as the Employees Provident Fund
and the Employees Trust Fund.
Members of the Remuneration Committee are chosen and
appointed from amongst the Company’s Directors by the Board.
While the Committee is directly responsible to the Board of
Directors, it consists of two (2) members, both of whom are
Independent Non-Executive Directors, as required by guidelines
set out by the Colombo Stock Exchange.
Meetings of the Remuneration Committee were held at such
times as was deemed appropriate and necessary, with a total of
four meetings during 2012. This is in line with the requirement
that the Remuneration Committee meets at least once a year
to discuss matters pertaining to remuneration policies relevant
to the committee. During these meetings, the Committee has
invited the Company’s Executive Director, General Manager and
Financial Controller with an aim to gain more information on
which Committee decisions can be made.
Name
Capacity
Dr. Wickrema
Sena Weerasooria
No. of
No. of
meetingsmeetings
heldattended
Chairman / 4
Independent
4
Mr. Sunil
Member / 4
KarunanayakeIndependent
4
Mr. M. C. M. De Costa
4
Secretary / AGM
(Personnel, Security
& General Affairs)
4
The inclusive remuneration policies utilised by the Group aim to:
•
Provide alignment between remuneration and the
Company’s business objectives, so as to attract and retain
Key Management Personnel of a high calibre.
•
Motivate and reward key Management Personnel to achieve
challenging performance goals.
•
Ensure that executive rewards are in line with Shareholder
value.
•
Recognise both individual and corporate achievements and
thereby add value to the Company.
During 2012, the Remuneration Committee reviewed the
incentive provisions for Key Management Personnel and
concluded that the current framework was satisfactory. The total
of Directors’ remuneration paid during the year under review is
set out in Note 34 to the financial statements.
Chairman, Remuneration Committee
ANNUAL REPORT 2012
21
Board of Directors
Mr. Cheng Chih Kwong, Primus is the Chairman & Chief Executive
Officer of the Prima Group and its subsidiary companies. He is a
Certified Practicing Accountant (CPA) - Australia and also holds a
Diploma in Business Studies.
Mr. Cheng Koh Chuen, Bernard has been a Director of the
Company with effect from 1 August 2012. He also serves as a
Executive Director of Prima Group.
Mr. Cheng Chih Kwong, Primus is the Patron of Yuhua Citizens’
Consultative Committee and has served as the former Patron
of the Ulu Pandan Community Centre Building Fund Committee
and as the Vice Chairman (General Affairs Committee), Singapore
Chinese Chamber of Commerce & Industry (1999-2001).
Mr. Tan Beng Chuan
Mr. Tan Beng Chuan has been a Director of the Company & its
subsidiary companies since 2003. He serves as a Director of
Three Acre Farms PLC and its subsidiaries and also Ceylon Agro Industries Limited since 2003.
He is the Group General Manager of Prima Group of Companies,
Sri Lanka since 2003. He holds a B.Sc. Hon in Chemical Engineering
from University of Surrey, UK and a MBA in Management &
Marketing from University of Warwick, UK. Mr. Tan Beng Chuan
is the Executive Committee Member of Sri Lanka Singapore
Business Council and Immediate Past President of Sri Lanka
Canada Business Council. He is also the President Mentor and
Past President of Singapore (Sri Lanka) Club.
Mr. Cheng Chih Cheng, Robert has been a Director of the
Comapny since 1983. He also serves as a Director of Supra
Limited (Hong Kong), Prima Ceylon (Private) Limited (Sri Lanka),
Hapiways Management Services Pte Ltd (Singapore) and also as
the Assistant to the CEO at Prima Limited (Singapore).
Mr. Cheng Chih Cheng, Robert resigned w.e.f. 31 July 2012
He holds a Bachelor of Science in Business Administration and
also a MBA from the University of Southern California.
Mr. Cheng Eng Loong
Mr. Cheng Eng Loong has been a Director of the Company with
effect from 1 August 2012.
He holds a Bachelor of Science degree majoring in Biochemistry
and Chemistry from the National University of Singapore.
Mr. Sunil Karunanayake has been a Director of the Company
since 2009. He holds fellowships of the Institute of Chartered
Accountants of Sri Lanka & Chartered Institute of Management
Accountants (UK) and a MBA from the Post Graduate Institute
of Management of the University of Sri Jayawardenapura. He
has also obtained a Diploma in Commercial Arbitration from the
Institute of Commercial Law and Practice.
Mr. Sunil Karunanayake was formerly a Director / Secretary of
Brooke Bond Ceylon Limited and Commercial Controller of
Unilever Ceylon Limited - Tea Division. Currently he serves as the
Chief Financial Consultant at Associated Newspapers of Ceylon
Limited. In addition, he also serves two other listed companies in
the capacity of Non - Executive Director.
Mr. Cheng Chih Hui, Peter has been a Director of the Company
since 1995. He also serves as a Director of Supra Limited (Hong
Kong), Prima Ceylon (Private) Limited (Sri Lanka), Hapiways
Management Services Pte Ltd (Singapore) and also as a Business
Advisor at Prima Limited (Singapore).
Mr. Cheng Chih Hui, Peter resigned w.e.f. 31 July 2012 Dr. Wickrema Sena Weerasooria has been a Director of the
Company since 2009. He holds LLB (Hons.) and Ph.D (London).
He is an Attorney-at-law - Supreme Court of Sri Lanka, a Barrister
and Solicitor - Supreme Court of Victoria. Dr. Wickrema Sena
Weerasooria is a well known lawyer and legal academic. He was
the formerly Secretary of the Ministry of Plan Implementation,
Sri Lanka’s High Commissioner to Australia, Consultant to the
Central Bank and a former Associate Professor of Law Monash
University, Australia. He is currently a Senior Consultant to the
Post Graduate Institute of Management (PIM).
22
ANNUAL REPORT 2012
Risk Management Review
The Risk Management Review aims to provide an inclusive view
procedures which are covered by the Group’s system of internal
of the risk management systems, procedures and protocols that
controls. This includes the system of financial controls which
operate throughout the Group. The Risk Management Review
operate throughout the Group, and processes and systems
also seeks to provide assurance that activities undertaken by the
which focus on monitoring and reporting matters related to
business contributes towards an organization which constantly
the continued effectiveness of the system of internal controls.
works towards the better understanding and efficient mitigation
While the Risk Management processes at CGE provides a clear
of various risk factors that may affect the Group.
and structured approach to identifying risks, having an accurate
CGE defines the pivotal area of Risk Management as the
organised application of management policies, procedures
and practices for the establishment of relevant context,
identification, analysis, mitigation, monitoring and thereby
communication of all risks. While the Group’s Risk Management
framework is efficiently incorporated into the planning process,
the planning process itself focuses on the effective achievement
understanding of all possible risks allows the Group to measure,
prioritise and take appropriate actions to reduce losses. Risk
Management also provides the Group with other benefits,
including curbing the loss of valuable resources including time,
assets, income, property and people, protecting the reputation
and public image of the organisation, preventing or reducing
legal liabilities, and increasing the stability of operations.
of objectives through mitigation of relevant and related risks.
CGE continues to place great emphasis on the importance of
Through a dynamic process, risks are identified and evaluated
effective Risk Management, which it considers to be an integral
at appropriate levels throughout the organisation. This process
part of good management practice, which makes it an intimate
is regularly reviewed by the Management Committee as a part
part of its business planning and continuity. With this point of
of the Group’s organisational and operational approach to Risk
view in mind, Risk Management has become a matter of concern
Management.
for individuals across the organisation. CGE maintains a Risk
The Group’s Risk Management process ensures comprehensive
identification and understanding of the risks to which CGE is
exposed, and enables the design and implementation of an
effective plan to prevent losses or minimise the impact of any
Management structure with planning systems, reporting systems
and review processes which provide a robust and resolute basis
for the integration of Risk Management into the entity’s entire
management process.
loss in the event that it occurs. The timely recognition and
The principal risks associated with the Group’s activities and
appropriate handling of these operational threats is incorporated
their mitigation strategies are as follows.
into the Group’s Risk Management process.
Substantial strategic control of operational risks which require
efficient management are enabled through policies and
Risk Factor
Exchange Rate Risk
This risk arises from negative changes in exchange rates in
terms of foreign currency transactions. The Group imports
a large percentage of raw materials and also has substantial
loans denominated in foreign currencies. In the event of a
decline in the value of the Sri Lankan Rupee against foreign
currencies, there is an increase in raw material prices affecting
sales margins and increasing the debt burden in rupee terms.
Risk Mitigating Strategies
As a policy, changes in the international prices of raw materials are
passed on to the selling prices of the Group’s products in the domestic
market. This in effect provides a natural hedge against changes to
global prices and fluctuations in the value of the rupee. A substantial
fall of the Rupee against the US Dollar however can have a negative
impact on the Group’s operations and finances. Although the Group
is able to increase its products’ selling prices, these adjustments may
require time depending on the severity of the currency fall and existent
Government price controls.
The Group also utilises effective treasury operation strategies such as
forward bookings, swaps etc. to negate unfavourable effects of current
fluctuations.
ANNUAL REPORT 2012
23
Risk Management Review (Contd.)
Risk Factor
Credit Risk
Credit Risk is the risk of financial losses arising due to the The Group encourages customers to purchase goods on cash terms
unwillingness or inability of counter-parties to meet their by providing discounts for cash payments. This strategy has proved
extremely successful.
financial or contractual obligations in time and in full.
In addition to this, thorough credit checks pertaining to credit
worthiness are performed on customers before granting sales on
credit. The Group’s Finance and Sales Divisions closely monitor credit
sales to ensure repayment on due dates and also tie future sales based
on outstanding value.
The Group reviews the amount of Security for the Out-Grower Scheme
from time to time. CGE accepts only high quality collaterals as Security
for the Out-Grower Scheme. Furthermore, the Group also ensures that
Out-Grower Farmers receive a fair and sustainable Rearing Fee with
good extension services to improve their productivity, as a fair OutGrower Scheme is also important.
Human Capital and Labour Risk
Human Capital & Labour Risk is associated with losing talented The Group uses a series of strategies in motivating, developing, and
employees and experiencing an environment of unpleasant retaining its human capital.
labour relations.
CGE has a continuous provision for a comprehensive Career
Development program for its staff, which focuses on helping employees
to achieve their optimum potential and thereby improve job
performance and satisfaction. CGE lays greater emphasis on training
and development of staff with potential for career development,
providing them with the necessary know-how and appropriate skills
for personal development.
The Group has laid down clear policies for Career Development,
providing performance based career advancement.
CGE strives to maintain healthy relationships with all employees
through regular dialogues and discussions. The Group also ensures
compliance with all regulatory requirements with regard to benefits
applicable to employees.
Finally CGE provides attractive financial and performance based
incentives which are in line with or above the industry standards. The
Group also provides an attractive living facility and environment at its
farms.
Information Technology Risk
IT Risk is the risk associated with computer security, hardware, A well thought-out and secure Information Technology security
software and other information technology systems failing infrastructure has been implemented organisation wide. The security
structure includes: recovery strategies, data back-ups stored at
and causing disruption to business operations of the Group.
off-site locations, regular updating of virus scanners and firewalls,
maintenance of spare servers and other critical ICT hardware
components, and regular IT audits to ensure compliance relevant to
security infrastructure.
24
ANNUAL REPORT 2012
Risk Factor
Risk of Outbreaks of Disease
Outbreaks of communicable animal diseases can result in
significant losses of poultry flocks within a very short period
of time. In the past few years, the possibility of Avian Influenza
being transmitted to human beings has caused some concerns
among the public about consuming poultry products.
The Management of the Group extends the services of staff in providing
training to the farmers and out growers with regard to identifying and
controlling disease outbreaks. The Company also offers other services
such as veterinarian services in order to ensure the general health of
animals. These services have proved invaluable to both the farmer and
the Group in monitoring the development of birds and mitigating the
risk of disease.
CGE periodically reviews Bio-Security Practices and Policies to
ensure that Company policies are on par with industry standards.
The Management also emphasises on environmental safety and
sustainability when starting a new farm.
The Company is always open to the usage of updated vaccines and
medicines that are more effective in disease control which helps in
preventing outbreaks. CGE also continually reviews and improves
farm management practices especially in areas like administration of
vaccines and medicament etc.
The Company stresses on proper housing which takes into consideration
animal welfare and minimised stress to birds while Company feed
formulation strategies focus on building the health status of birds with
the aim of better hygiene and providing wholesome poultry products
to consumers.
Regulatory and Compliance Risk
Regulatory Risk is associated with changes in Government
policies, laws, regulations and statutes. Compliance Risk
relates to a company being able to comply with all the
laws, regulations and statutes applicable to a country.
Both Regulatory and Compliance Risk factors can affect the
business activities of the Group.
The Group constantly keeps abreast of changes to the regulatory
framework and ensures that CGE is always in compliance with all
requirements. The Group works in a collaborative manner with trade
associations in the industry, the All Island Poultry Association, and
other trade chambers who are part of advising and assisting regulatory
bodies on developing and adjusting regulations. CGE also maintains
cordial relationships with the regulatory bodies.
Risk of Market Demand for DOC
This refers to the risk of destroying DOCs due to a drop in The Company ensures that there is no unnecessary culling of DOCs
demand. As DOCs cannot be kept for more than a day, there is due to decreased demand by keeping abreast of market trends. By
a risk of destroying chicks when there is no demand for DOCs. predicting market demand ahead CGE is able to minimise the risk of
destroying DOCs. In the event that an unforeseen drop in demand
occurs, measures deemed necessary by the Management will be taken
to ensure continued quality and adherence to company policies and
product regulations.
Risk in Quality of the Product
Risk in quality of the Product through the bad condition of the CGE will upgrade the plant’s underperforming equipment and
present machinery and equipment at the Poultry Processing machinery with modern versions, while replacing poulty equipment
and machinery with new technology.
Plant.
ANNUAL REPORT 2012
25
Risk Factor
Competitive Risk
Competitive Risk is the risk that customers will purchase
competitor or alternative products due to variances in the
product offering. The Group recognises the importance
of sustaining mutually beneficial relationships with its
customers, poultry farmers, dealers and out-growers.
Providing customers with high quality products as and when
they require it is the basis of customer satisfaction. In the
event of failing to do so, the Group runs a risk of losing market
share and thereby incurring financial losses.
The Group and its individual companies take innovative measures to
mitigate Competitive Risks. CGE is engaged in continuous dialogues
with its customers and prospects to keep abreast of changing trends,
needs and purchasing behaviours of the market. By closely monitoring
customers, CGE is in a position to re-align its product offering to
match current customer needs and wants, being sensitive to current
customer requirements.
The Company ensures that the right competitive strategies are
practiced to keep CGE ahead. To this end, CGE captures customer
feedback on future needs, tracks social and cultural trends that
influence consumer demand and focuses on building customer loyalty
to ensure the continuation of repeat purchasing trends. A number of
indicators such as product return data, customer complaint indices,
the number of interactions between the Group and its customers,
the churn rate amongst the top twenty percent of customers and
revenue growth factors amongst targeted customer groups, are
regularly measured to gauge progress in managing these risks
effectively. Customer satisfaction in terms of products and services
is also monitored carefully through initiatives to establish customer
satisfaction as the Group’s number one priority and to use customer
feedback as a catalyst for improvement.
Key management personnel also work closely with the farmers and
the out-growers to ensure birds of the highest quality possible. This
involves various activities including sharing technical know-how,
guiding them in setting up farm infrastructure in accordance with the
latest rearing techniques.
In addition, CGE has put in place the industries’ best quality
standard process and ensures via its quality assurance systems, that
a consistently high level of quality is maintained in all products and
services marketed by the Group.
Risk of Environmental Issues
The Risk of Environmental Issues refers to environmental The Management of the Group provides the equipment for the disposal
issues which can be raised by housing and settlements in farm of solid waste. CGE also provides knowledge of good management
neighbourhoods.
practices for environmental protection to farm staff, such as ensuring
that removed poultry litter is not disposed of in an open environment.
The Company advises that all wastes should be packed and stored in
a sheltered space in order to avoid wetting by rain water, until such
time that waste is appropriately removed from the farm premises. The
Company also provides comprehensive knowledge on measures that
should be taken to keep the poultry litter dry at all times, along with
awareness of cleanliness and good housekeeping practices that should
always be practiced.
Risk of Major Breakdown
This refers to the risk of a major breakdown of the Poultry The Company maintains a sufficient stock for a minimum of one week’s
Processing Plant.
market demand.
26
ANNUAL REPORT 2012
Risk Factor
Procurement & Supply Chain Risk
This risk relates to the availability of quality raw materials in
the needed quantity, on the required time and at the right
price. Any supply shortfall could hinder the Group’s ability to
fulfil customer demands, which will in turn reflect negatively
on our bottom lines.
CGE’s procurement strategies operate on the basis that careful and
correct procurement policies will result in good quality end products.
The Group strives to address Procurement & Supply Chain Risk by
having multiple sources (Both locally and internationally) for all raw
materials. CGE also fosters the development of long term relationships
with its suppliers to gain influence and thereby enters into contractual
These risks include but are not limited to enforcement of a agreements.
new CESS while our RM shipments are in transit; local maize
harvest being of inadequate quality; insufficient supply of If a new CESS is imposed, the Company will minimise the quantities
local maize with restrictions on import of maize or substitutes; of orders and raw material bulk vessels. The Company also maintains
restrictions on the import of drugs and vaccines; receiving appropriate inventory levels sufficient for the requirements of 2 - 3
contaminated cargo; export restrictions on feed RM from months, and will turn to the closest suitable substitute in case of a
India; and key DOC importation countries being affected with shortage of drugs or vaccines. While CGE takes strict measures
in accordance with its Quality Management System to handle
Avian Influenza or other diseases.
contaminated cargo, it will encourage relevant authorities to take
steps to allow import of Genetically Modified Foods or promote the
cultivation of Soya in Sri Lanka in case of a shortage of feed RM. As
the Group keeps track of multiple DOC sources, it will develop new
suppliers in case key suppliers are unable to deliver for any reason.
ANNUAL REPORT 2012
27
Report of the Directors on the
State of Affairs of the Company
The Board of Directors is pleased to present their Report and
the Audited Financial Statements of the Company for the year
ended 31 December 2012. The details set out herein provide
pertinent information required by the Companies Act No. 07 of
2007, the Colombo Stock Exchange Listing rules and are guided
by recommended best accounting practices.
1. Principal Activities
The principal activities of the Company are manufacture
and sale of poultry, animal and other feed, manufacture and
sale of aquatic feed, import and sale of drugs and vaccines,
operation of outgrower farms and poultry processing and
distribution.
2. Review of Performance for the year ended 31 December
2012 and Future Developments
A review of the Company’s performance during the year,
with comments on financial results for the year ended 31
December 2012 and future developments is contained in the
Chairman and Chief Executive Officer’s Review (pages 2 to
3) and Management Discussion and Analysis (pages 5 to 7).
These reports, together with the financial statements reflect
the state of affairs of the Company.
A summary of the consolidated financial results of the
operations of the Group during the year ended 31 December
2012 is given below.
20122011
Rs.’000Rs.’000
122,317
465,900
28,066
(46,515)
150,383
419,385
15,797 72,966
Profit before taxation
Taxation
Profit after taxation
Attributable to
non - controlling interests
Net profit attributable to
shareholders
134,586 346,419
Retained profit brought forward
after dividends
1,514,049
1,167,630
Profit available for appropriation
1,648,635
1,514,049
Adjustments / Transfer to reserves
Nil
Nil
Other transfers / Adjustments
Nil
Nil
Balance carried forward
1,648,635
1,514,049
3. Financial Statements
The financial statements of the Company are given in pages
32 to 84.
4. Independent Auditors’ Report
The Independent Auditors’ Report on the financial
statements is given on page 31.
5. Accounting Policies
The accounting policies adopted in preparation of financial
statements are given on pages 37 to 46. There was no
material changes in the Accounting Policies adopted.
6. Interest Register
The Company maintains an Interest Register and the
particulars of those Directors who were directly or indirectly
interested in a contract of the Company are stated there in.
7. Directors’ Interest
None of the Directors had a direct or indirect interest in any
contracts or proposed contracts with the Company other
than as disclosed in the Note 34 to the financial statements.
8. Directors Remuneration and Other Benefits
Directors’ remuneration in respect of the Company for the
financial year ended 31 December 2012 is given in Note 34
to the financial statements.
9. Corporate Donations
Donations made by the Company amounted to Rs. Nil
(2011 - Rs. 55,000/-). No donations were made for political
purposes.
10.Directorate
The names of the Directors who held office during the year
are given below.
Mr. Cheng Chih Kwong, Primus Chairman and Chief
Executive Officer
Mr. Tan Beng Chuan Executive Director and
Group General Manager
Mr. Cheng Koh Chuen,Bernard
Mr. Cheng Eng Loong
Dr. Wickrema Sena Weerasooria Independent
Independent
The Board wishes to place on record the company’s sincere
appreciation to Mr. Cheng Chih Cheng, Robert and Mr. Cheng
Chih Hui, Peter for the valuable contribution extended to the
Company during their tenure on the Board.
In accordance with the provisions of Article 95 of the Articles
of Association of the Company, Mr. Cheng Koh Chuen,
Bernard retires and offers himself for re-election.
In accordance with the provisions of Article 95 of the Articles
of Association of the Company, Mr. Cheng Eng Loong retires
and offers himself for re-election.
28
ANNUAL REPORT 2012
Report of the Directors on the State of Affairs of the Company (Contd.)
A resolution for the re-appointment of Dr. Wickrema Sena
Weerasooria, who was 70 years of age on 17 July 2009 will be
proposed at the Annual General Meeting in terms of Section
211 of the Companies Act No. 07 of 2007. A special notice
has been given of this intention.
11.Directors’ Shareholdings
As at
As at
31.12.201231.12.2011
397
397
Mr. Tan Beng Chuan
Nil
Nil
Nil
Nil
Nil
Nil
Mr. Cheng Eng Loong
Nil
Nil
Nil
Nil
12.Auditors
The financial statements for the year ended 31 December
2012 have been audited by Messrs KPMG, Chartered
Accountants, who express their willingness to continue in
office. In accordance with the Companies Act No. 07 of 2007,
a resolution relating to their re-appointment and authorising
the Directors to determine their remuneration will be
proposed at the forthcoming Annual General Meeting.
17.Property, Plant and Equipment
An analysis of the property, plant and equipment of the
Company, additions and disposals made during the year,
depreciation charged during the year and current status of
values are set out in Note 13 to the financial statements.
18.Capital Commitments
Capital expenditure contracted for as at 31 December 2012
for which no provision has been made in the accounts are
set out in Note 29 to the financial statements.
19.Stated Capital
The issued and fully paid up stated capital of the
Company is Rs. 1,017,996,000/- divided into 60,000,000
ordinary shares. There was no change in the stated capital of
the Company during the year.
20.Reserves
Total reserves as at 31 December 2012 amounted to
Rs.1,042 million (2011 - Rs. 836 Million). The movement of
reserves is shown in the statement of changes in equity on
page 35.
21.Events subsequent to the reporting date
No significant events have occurred since the reporting
date other than those disclosed in Note 35 to the financial
statement.
14.Dividends
The directors propose for payment a First and Final Dividend
of Rs. 0.14 per share for the year ended 31 December 2012.
22.Employment Policies
The Company identifies Human Resources as one of the
most important factors bequeathing the survival and
growth of the Company in the current competitive business
environment. While appreciating and valuing the service
of our employees, a greater effort is being made to hire
the best talent from external sources, to bolster weak
areas and continue to maintain the highest standards
prevalent in the industry. Human Resource Head Count is
considered as a key indicator and recruitment is based
on annual manpower planning. The Company provides equal
opportunities. Greater emphasis is given to the areas of
training, professional development and ethical business
practices. All rewards and career opportunities are based on
merit and on performance.
15.Investments
Details of investments held by the Company are disclosed in
Note 16 & 17 to the financial statements.
23.Taxation
The tax position of the Company is given in Note 11 to the
financial statements.
16.Intangible Assets
An analysis of the intangible assets of the Company, additions
and impairments during the year and amortisation charged
during the year are set out in Note 15 to the financial
statements.
24.Share Information
Information relating to earnings, dividend, net assets and
market price per share is given on page 85 and information
on share trading is given on page 85.
The Auditors Messrs KPMG were paid Rs 2,765,000/- (2011
- Rs.2,400,000/-) as audit fees by the Company. As far as the
Directors are aware, the Auditors do not have any relationship
(other than that of an Auditor) with the Company other than
those disclosed above.
The Auditors also do not have any interest in the Company.
13.Group Turnover
Group Turnover amounted to Rs. 12,375 Million (2011 Rs. 10,480 Million).
ANNUAL REPORT 2012
29
Report of the Directors on the State of Affairs of the Company (Contd.)
25.Disclosure as per CSE Rule No.8.7 (i) (5)
Market price per share as at
31 December
Highest / lowest share price
20122011
Rs. Cts.
Rs. Cts.
59.50
105.50
110.00/36.00265.00/77.90
Earnings per share
3.43
2.28
Dividend per share
0.14
-
Net assets per share
34.33
30.90
26.Shareholding
The number of registered shareholders of the Company as at
31 December 2012 was 5,360. The distribution and analysis
of shareholdings are given on page 87.
27.Major Shareholders
The twenty largest Shareholders of the Company as at
31 December 2012, together with an analysis are given on
page 87.
28.Statutory Payments
The Directors to the best of their knowledge and belief
are satisfied that all statutory payments in relation to the
Government and the employees have been made on time.
29.Environment, Health and Safety
Company policy continues to ensure that all
Environmental, Health and Safety regulations are
strictly adhered to, minimizing any adverse effects to
the environment. Recycling of waste is carried out where
ever possible. Employees are provided with all personal
protective equipment as Health and well being which are our
prime concerns. Fire fighting and safety systems are in place
to safeguard the Company interest. Plans are in progress to
introduce emission free machinery for in-house operations
to eliminate air pollution.
30.Corporate Governance / Internal Control
The Corporate Governance and internal Control Policies of
the Company are given on pages 12 to 18.
31. Contingent Liabilities
Contingent Liabilities as at 31 December 2012 are set out in
Note 28 to the financial statements.
32.Annual General Meeting
The 30th Annual General Meeting of the Company will
be held on 14 May 2013 at the Institute of Chartered
Accountants of Sri Lanaka Auditorium, 30A, Malalasekara
Mawatha, Colombo 07 at 11.00 a.m.
By Order of the Board of
Ceylon Grain Elevators PLC
(Sgd.)
Chairman &
Chief Executive Officer
(Sgd.)
Tan Beng Chuan
Executive Director &
(Sgd.)
S S P Corporate Services (Private) Limited
Secretaries
Colombo
2 April 2013
30
ANNUAL REPORT 2012
Statement of the Directors’ Responsibility
The responsibility of the Directors in relation to the financial
statements of the Company and the Group is set out in the
following statement. The responsibility of the auditors, in
relation to the financial statements, is set out in their report
appearing on page 31.
The Companies Act No. 07 of 2007 requires the Directors to
prepare financial statements for each financial year which give a
true and fair view of the status of affairs of the Company and the
Group and of the profit or loss for that year.
In preparing these financial statements the Directors are
required to:
• Select suitable accounting policies and then apply them
consistently;
• Make judgments and estimates that are reasonable and
prudent;
• State whatever applicable accounting standards have been
followed, subject to any material departures and explained
in the financial statements; and
• Prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Group will
continue in business.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and the Group and to ensure
that the financial statements comply with the Companies Act.
The Directors are also responsible for taking such steps as they
deem reasonable or required in order to safeguard the assets
of the Company and the Group and in this regard to give proper
consideration to the establishment of appropriate internal
control systems with a view to prevent and detect fraud and
other irregularities.
The Directors are required to prepare the financial statements
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 express their audit opinion.
Compliance Statement
The Directors are of the view that they have discharged their
responsibilities as set out in this statement. They also confirm
that to the best of their knowledge, all statutory payments
payable by the Company and its subsidiaries as at the reporting
date have been paid or where relevant, provided for.
(Sgd.)
(Sgd.)
Tan Beng Chuan
Colombo
2 April 2013
ANNUAL REPORT 2012
31
Independent Auditors’ Report
TO THE SHAREHOLDERS OF CEYLON GRAIN ELEVATORS PLC
Report on the Financial Statements
We have audited the accompanying financial statements of
Ceylon Grain Elevators PLC (the “Company”) and the consolidated
financial statements of the Company and its subsidiaries (the
“Group”), which comprise the statements of financial position as
at 31 December 2012, the statements of comprehensive income,
statement of changes in equity and statement of cash flows
for the year then ended, and notes, comprising a summary of
significant accounting policies and other explanatory information
set out on pages 32 to 84 of this annual report.
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 purposes of our audit. We therefore believe that our audit
provides a reasonable basis for our opinion.
Opinion
Company
In our opinion, so far as appears from our examination, the
Company maintained proper accounting records for the year
ended 31 December 2012 and the financial statements give a
true and fair view of the financial position of the Company as
at 31 December 2012, and of its financial performance and its
cash flows for the year then ended in accordance with Sri Lanka
Accounting Standards.
Group
In our opinion, the consolidated financial statements give a true
and fair view of the financial position of the Company and its
subsidiaries dealt with thereby as at 31 December 2012 and of
its financial performance and its cash flows for the year then
ended in accordance with Sri Lanka Accounting Standards.
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.
Chartered Accountants
Colombo, Sri Lanka
2 April 2013
32
ANNUAL REPORT 2012
STATEMENT OF COMPREHENSIVE INCOME
All amounts in Sri Lankan Rupees thousands
Group
For the year ended 31 December Revenue
Notes
2012
2011
04
12,375,045 Cost of sales
(12,046,490)
Gross profit
Company
2012
10,479,840 2011
12,370,881 10,252,658
(9,653,770) (12,166,090) (9,730,683)
328,555 826,070 Other operating profit / (loss)
08
75,487 (38,951)
Other income
09
505,132 55,490 693,296 67,803
Selling and distribution expenses
(129,120)
(120,432)
(126,030)
(117,583)
Administrative expenses
(358,513)
(187,331)
(343,562)
(174,296)
Operating profit
05
421,541 534,846 428,495 297,899
Net finance expenses
10
(303,332)
(129,458)
(270,556)
(128,785)
Share of profit of associate
4,108 60,512 Profit before tax
122,317 465,900 157,939 169,114
11
28,066 (46,515)
48,034 (32,539)
150,383 419,385 205,973 136,575
Taxation
Profit after tax
Other comprehensive income
Total comprehensive income
- 150,383 204,791 521,975
- - - - - - 419,385 205,973 136,575
Total attributable to :
Equity holders of the parent
134,586 346,419 205,973 136,575
Non-controlling interests
15,797
72,966
-
-
150,383 419,385 205,973 136,575
Basic earnings per share (Rs.)
12
2.24
5.77
3.43 2.28
The notes on pages 37 to 84 form an integral part of these consolidated financial statements.
Figures in brackets indicate deductions.
ANNUAL REPORT 2012
33
STATEMENT OF FINANCIAL POSITION - Group
As at 31 December
Notes
2012
2011 As at 01.01.2011
ASSETS
Non-current assets
Property, plant and equipment
13
2,065,195 2,055,552 1,996,318
Leasehold right over land and buildings
14
489,535 504,591 520,885
Intangible assets
15
98,235 91,218 87,912
Investment in associate companies
16
11,172 290,576 230,064
Investment in subsidiary companies
17
- - Livestock
18
369,298 346,934 355,087
Deferred tax assets
26
67,106 13,922 19,230
Total non-current assets
3,100,541 3,302,793 3,209,496
Current assets
Inventories
20
2,232,993 1,721,768 1,410,954
Trade and other receivables
21
455,661 459,003 476,026
Amount due from affiliated companies
19
- - - Current tax receivable
39,835 34,434 34,322
Cash and cash equivalents
22
81,190 123,825 47,462
Total current assets
2,809,679 2,339,030 1,968,764
Total assets
5,910,220 5,641,823 5,178,260
EQUITY
Stated capital
30
1,017,996 1,017,996 1,017,996
Retained earnings
1,648,635 1,514,049 1,227,630
Total equity attributable to equity holders of the parent
2,666,631 2,532,045 2,245,626
Non-controlling interest
31 321,304 305,507 232,541
Total equity
2,987,935 2,837,552 2,478,167
LIABILITIES
Non-current liabilities
Deferred tax liabilities
26
121,243 122,392
129,425
Employee benefits
27
34,706 31,676
28,052
Amount due to affiliated companies 24
202,447 392,255 775,223
Total non-current liabilities
358,396 546,323 932,700
Current liabilities
Trade and other payables
23
426,870 445,044 418,042
Amount due to affiliated companies 24
1,158,549 1,406,745 902,876
Interest bearing borrowings
25
978,470 406,159 446,475
Total current liabilities
2,563,889 2,257,948 1,767,393
Total liabilities
2,922,285 2,804,271 2,700,093
Total equity and liabilities
5,910,220 5,641,823 5,178,260
These financial statements have been prepared in compliance with the requirements of the Companies Act No. 07 of 2007.
(Sgd.) K.A.R.S. Perera
Financial Controller
These financial statements were approved by the Board of Directors on 2 April 2013.
(Sgd.) Cheng Chih Kwong, Primus
(Sgd.) Tan Beng Chuan
Executive Director & Group General Manager 34
ANNUAL REPORT 2012
STATEMENT OF FINANCIAL POSITION - Company
As at 31 December
Notes
2012
2011 As at 01.01.2011
ASSETS
Non-current assets
13
283,192 274,390 246,081
14
114,262 116,830 120,615
Intangible assets
1598,23591,21887,912
16
33 128,484 128,484
17
351,039 361,625 361,625
Deferred tax assets
26
67,106 13,922 19,230
913,867 986,469 963,947
Current assets
Inventories
20
2,097,306 1,628,101 1,316,818
21
425,648 415,256 423,966
19
1,004,429 1,041,872 1,463,472
Current tax receivable
22
7,469 2,017 1,906
46,010 98,321 30,229
Total current assets
3,580,862
3,185,567 3,236,391
Total assets
4,494,729 4,172,036 4,200,338
EQUITY
30
1,017,996 1,017,996 1,017,996
Retained earnings
Stated capital
1,042,042 836,069 759,494
Total equity
2,060,038 1,854,065 1,777,490
LIABILITIES
Employee benefits
27
25,940 22,104 19,654
Amount due to affiliated companies
24
202,447 392,255 775,223
228,387 414,359 794,877
Current liabilities
23
313,818 339,849 24
1,174,746 1,421,088 901,298
25
717,740 142,675
435,182
Amount due to affiliated companies 291,491
2,206,304 1,903,612 1,627,971
Total liabilities
2,434,691
2,317,971 2,422,848
4,494,729 4,172,036 4,200,338
These financial statements have been prepared in compliance with the requirements of the Companies Act No. 07 of 2007.
(Sgd.) K.A.R.S. Perera
These financial statements were approved by the Board of Directors on 2 April 2013.
(Sgd.) Cheng Chih Kwong, Primus
(Sgd.) Tan Beng Chuan
ANNUAL REPORT 2012
35
STATEMENT OF CHANGES IN EQUITY
Group
For the year ended 31 December
Attributable to equity holders of the parent
Stated
capitalearnings interest
Balance as at 1 January 2011
Total comprehensive income for the period
1,017,996 Retained
Non-Total
Total controllingequity
1,227,630 2,245,626
232,541 2,478,167
- 346,419 346,419
72,966 419,385
- (60,000)
(60,000)
Transaction with owners
Dividend paid
- (60,000)
Balance as at 31 December 2011
1,017,996 1,514,049 2,532,045
305,507 2,837,552
1,017,996 1,514,049 2,532,045
305,507 2,837,552
134,586 134,586
15,797 150,383
1,648,635 2,666,631
321,304 2,987,935
- 1,017,996 Company
Stated RetainedTotal
capital
1,017,996 earningsequity
759,494 1,777,490
- 136,575 136,575
- (60,000)
(60,000)
Transaction with owners
Dividend Paid
1,017,996 836,069 1,854,065
1,017,996 836,069 1,854,065
205,973 205,973
1,042,042 2,060,038
- 1,017,996 36
ANNUAL REPORT 2012
STATEMENT OF CASH FLOWS
Group
Notes
2012
2011
Company
2012
2011
558,024
Operating activities
Cash generated from operations
32
(486,864)
787,063 (1,068,007)
Exchange loss
(184,438)
(58,360)
(186,273)
Interest received
5,520 5,434 4,709 Interest paid
(89,860)
(10,732)
(55,249)
(9,834)
27
(4,958)
(3,478)
(3,225)
(2,445)
Tax paid
(14,218)
(5,417)
(5,005)
-
(774,818)
714,510 (1,313,050)
492,117
Employee benefits paid
Net cash (used in) / generated from operating activities
(58,585)
4,957
Investing activities
13
(163,676)
Purchase of leasehold assets
14
(1,228)
Purchase of intangible assets
15
(19,471)
(13,884)
(19,471)
Proceeds from disposal of property, plant and equipment
20,654 6,735 38 5,623
Proceeds from disposal of associate company shares
730,616 - 730,616 -
Proceeds from dividend income
12,082 - 16,132 -
Net cash generated from / (used in) investing activities
- 18
(419,105)
(352,993)
159,872 (537,831)
(40,413)
Purchase of property, plant and equipment
Purchase of livestock
(177,689)
(1,228)
- 685,674 (63,257)
(13,884)
(71,518)
Financing activities
Dividend paid
- (60,000)
- (60,000)
Net borrowings
615,000 (88,000)
615,000 (338,000)
Net cash generated from / (used in) financing activities
615,000 (148,000)
615,000 (398,000)
Increase / (decrease) in cash and cash equivalents
54 28,679 (12,376)
22,599
Movement in cash and cash equivalents
At the beginning of the year
(10,334)
(39,013)
(22,354)
(44,953)
Increase / (decrease) in cash and cash equivalents
54 28,679 (12,376)
22,599
(10,280)
(10,334)
(34,730)
(22,354)
Cash and cash equivalents as at 31 December 22 (a)
ANNUAL REPORT 2012
37
Notes to the Financial Statements
1.
Reporting entity
1.1.General
Ceylon Grain Elevators PLC (the ‘Company’) is a “Quoted
2.
2.1.
Public Company” with limited liability, incorporated and
domiciled in Sri Lanka. The address of the Company’s
registered office is No.15, Rock House Lane, Colombo 15, Sri Lanka. The consolidated financial statements of
the Company as at and for the year ended 31 December
2012 comprise the Company and its subsidiaries and the
Group’s interest in associate, listed below.
Subsidiaries
• Three Acre Farms PLC
• Ceylon Pioneer Poultry Breeders Limited
• Ceylon Livestock and Agrobusiness Services (Private)
Limited
• Ceylon Warehouse Complex (Private) Limited
• Ceylon Aquatech (Private) Limited
• Millennium Multibreeder Farms (Private) Limited
Associate
• Prima Management Services (Private) Limited
Ceylon Grain Elevators PLC (CGE) was incorporated in
1982, when the government of Sri Lanka and Prima
Limited of Singapore signed an agreement. The Company
2.3.
Functional and presentation currency
The consolidated financial statements are presented in
Sri Lankan Rupees, which is the Company’s functional
currency, rounded to the nearest thousand, unless
otherwise stated.
2.4.
Use of estimates and judgments
The preparation of the consolidated financial statements
in conformity with Sri Lanka Accounting Standards
(SLFRS/LKAS) 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. Actual results may
differ from these 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 and in any future periods affected.
Singapore, holds 45.45% of the issued share capital of
Principal activities and nature of the operation
The main business of the Group is feed milling, broiler
farming, poultry processing and distribution, poultry
breeder farming operations, manufacture and sale of
aquatic feed, buying and selling of poultry equipment
and provision of silo and warehouse facilities and
transshipment.
1.3.
Number of employees
The average numbers of employees of the group and
company for the year are as follows.
Group
Full time
484 (2011 - 462)
Part time
760 (2011 - 759)
Company
Full time
304 (2011 - 288)
Part time
129 (2011 - 135)
The consolidated financial statements were authorised
for issue by the Board of Directors on 2 April 2013.
Basis of measurement
The consolidated financial statements have been
prepared on the historical cost basis except the
valuations of Retirement benefit obligation which is
disclosed in Note 27 to the financial statements.
1992 in the Food & Beverage Sector. Prima Limited,
1.2.
An explanation of how the transition to SLFRSs has
effected the reported financial position, financial
performance and cash flows of the Company and Group
is provided in Note 38.
2.2.
was listed in the Colombo Stock Exchange on 27 January
the Company.
Basis of preparation
Statement of compliance
The financial statements of the Company and those
consolidated with such comprise the statement of
financial position, statements of comprehensive
income, statements of other comprehensive income,
statement of changes in equity and statement of cash
flows together with the accounting policies and notes
to the financial statements. The consolidated financial
statements have been prepared in accordance with Sri
Lanka Accounting Standards (SLFRS/LKAS) as issued
by the Institute of Chartered Accountants of Sri Lanka
(ICASL) and the requirements of the Companies Act
No. 07 of 2007. These are the Company’s and Group’s
first financial statements prepared in accordance with
SLFRS and SLFRS 1 First-time Adoption of Sri Lanka
Financial Reporting Standards has been applied.
38
ANNUAL REPORT 2012
Notes to the Financial Statements (Contd.)
Information about critical judgments in applying
accounting policies that have the most significant effect
on the amounts recognised in the consolidated financial
statements is included in the following notes:
• Note 3.4.2
- lease hold right classification
• Note 3.7
- classification of investment
property
• Note 3.9
- key assumptions used in
discounted cash flow
projections
• Note 3.5
- intangible assets
• Note 3.14
- deferred taxation
• Note 3.10.3
- measurement of defined
benefit obligations, and
• Notes 3.11 and 3.19 - provisions and contingencies.
The consideration transferred does not include amounts
related to the settlement of pre-existing relationships
such amounts are generally recognised in profit or loss.
Transactions costs, other than those associated with the
issue of debt or equity securities, that the Group incurs
in connection with a business combination are expensed
as incurred.
3.1.2. Non-controlling interests
The total profit and loss for the year of the Company and
its subsidiaries included in consolidation are shown in
the consolidated income statement with the proportion
of profit and loss after taxation pertaining to minority
shareholders of subsidiaries being deducted as “Noncontrolling interest”. All assets and liabilities of the
Company and of its subsidiaries included in consolidation
are shown in the consolidated statement of financial
3.
Significant Accounting Policies
The accounting policies set out below have been applied
consistently to all periods presented in these financial
statements and preparing the opening SLFRS statement
of financial position as at 1 January 2011 for the purposes
of the transition to SLFRS, unless otherwise indicated.
The accounting policies have been applied consistently
by group entities.
3.1.
Basis of consolidation
3.1.1. Business combinations
Business combinations are accounted for using the
acquisition method as at the acquisition date - i.e. when
control is transferred to the Group. Control is the power
to govern the financial and operating policies of an entity
so as to obtain benefits from its activities. In assessing
control, the Group also takes into consideration potential
voting rights that are currently exercisable.
The Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling
interests in the acquiree; plus
• if the business combination is achieved in stages,
the fair value of the pre-existing equity interest in
the acquiree; less
• the net recognised amount (generally fair value)
of the identifiable assets acquired and liabilities
assumed.
When the excess is negative, a bargain purchase gain is
recognised immediately in profit or loss.
position. The interest of minority shareholders of
subsidiaries in the fair value of net assets of the Group
are indicated separately in the consolidated statement
of financial position under the heading “Non-controlling
interest”.
Changes in the Group’s interest in a subsidiary that
do not result in a loss of control are accounted for as
transactions with owners in their capacity as owners.
Adjustments to non-controlling interests are based on a
proportionate amount of the net assets of the subsidiary.
No adjustments are made to goodwill and no gain or loss
is recognised in profit or loss.
3.1.3. Subsidiaries
Subsidiaries are entities controlled by the Group. The
financial statements of subsidiaries are included in the
consolidated financial statements from the date, that
control commences, until the date that control ceases.
3.1.4. Loss of control
On the loss of control, the Group derecognises the assets
and liabilities of the subsidiary, any non-controlling
interests and the other components of equity related to
the subsidiary. Any surplus or deficit arising on the loss
of control is recognised in profit or loss.
3.1.5. Investments in associates
Associates are those entities in which the Group has
significant influence, but not control or joint control,
over the financial and operating policies. Significant
influence is presumed to exist when the Group holds
between 20 percent and 50 percent of the voting power
of another entity.
ANNUAL REPORT 2012
39
Investments in associates are accounted for under the
equity method and are recognised initially at cost. The
cost of the investment includes transaction costs. The
consolidated financial statements include the Group’s
share of the profit or loss and other comprehensive
income of equity-accounted investees, after adjustments
to align the accounting policies with those of the Group,
from the date that significant influence commences
until the date that significant influence or joint control
ceases.
When the Group’s share of losses exceeds its interest
in an equity-accounted investee, the carrying amount
of the investment, including any long-term interests
that form part thereof, is reduced to zero, and the
recognition of further losses is discontinued except to
the extent that the Group has an obligation or has made
payments on behalf of the investee.
3.1.6. Transactions eliminated on consolidation
Intra-group balances and 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.
3.2.
Foreign currency
3.2.1. Foreign currency transactions
Transactions in foreign currencies are translated to
the respective functional currencies of Group entities
at exchange rates at 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 at that date.
The foreign currency gain or loss on monetary items is
the difference between amortised cost in the functional
currency at the beginning of the year, adjusted for
effective interest and payments during the year, and
the amortised cost in foreign currency translated at the
exchange rate at the end of the year.
Non-monetary assets and liabilities that are measured
at fair value in a foreign currency are retranslated to
the functional currency at the exchange rate at the date
that the fair value was determined. Non-monetary items
that are measured based on historical cost in a foreign
currency are translated using the exchange rate at the
date of the transaction.
3.3.
Financial instruments
3.3.1. Non-derivative financial assets
The Group initially recognises loans and receivables on
the date that they are originated. All other financial
assets (including assets designated as at fair value
through profit or loss) are recognised initially on the
trade date, which is the date that the Group becomes a
party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the
contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the contractual
cash flows in a transaction in, which substantially all
the risks and rewards of ownership of the financial
asset are transferred. Any interest in such transferred
financial assets that is created or retained by the Group
is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net
amount presented in the statement of financial position
when, and only when, the Group has a legal right to
offset the amounts and intends either to settle them on
a net basis or to realize the asset and settle the liability
simultaneously.
The Group classifies non-derivative financial assets into
the following categories: financial assets at fair value
through profit or loss, held-to-maturity financial assets,
loans and receivables and available for sale financial
assets.
Financial asset is classified as at fair value through
profit or loss
A financial asset is classified as at fair value through
profit or loss if it is classified as held-for-trading or is
designated as such on initial recognition. Financial assets
are designated as at fair value through profit or loss if the
Group manages such investments and makes purchase
and sale decisions based on their fair value in accordance
with the Group’s documented risk management or
investment strategy. Attributable transaction costs are
recognised in profit or loss as incurred financial assets
at fair value through profit or loss are measured at fair
value and changes therein, which takes into account any
dividend income, are recognised in profit or loss.
Held-to-maturity financial assets
If the Group has the positive intent and ability to hold
debt securities to maturity, then such financial assets
are classified as held-to-maturity. Held-to-maturity
financial assets are recognised initially at fair value plus
any directly attributable transaction costs. Subsequent
40
ANNUAL REPORT 2012
liabilities into the other financial liabilities category.
Such financial liabilities are recognised initially at fair
value less any directly attributable transaction costs.
Subsequent to initial recognition, these financial
liabilities are measured at amortised cost using the
effective interest method.
to initial recognition, held-to-maturity financial assets
are measured at amortised cost using the effective
interest method, less any impairment losses.
Loans and receivables
Loans and receivables are financial assets with fixed
or determinable payments that are not quoted in an
active market. Such assets are recognised initially at fair
value plus any directly attributable transaction costs.
Subsequent to initial recognition, loans and receivables
are measured at amortised cost using the effective
interest method, less any impairment losses.
Loans and receivables comprise cash and cash
equivalents, current tax receivables, amount due from
affiliated companies and trade and other receivables.
Cash and cash equivalents comprise cash balances
and call deposits with maturities of three months or
less from the acquisition date that are subject to an
insignificant risk of changes in their fair value, and are
used by the Group in the management of its short-term
commitments.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative
financial assets that are designated as available-forsale or are not classified in any of the above categories
of financial assets. Available-for-sale financial assets
are recognised initially at fair value plus any directly
attributable transaction costs.
Subsequent to initial recognition, they are measured at
fair value and changes therein, other than impairment
losses and foreign currency differences on availablefor-sale debt instruments, are recognised in other
comprehensive income and presented in the fair value
reserve in equity. When an investment is derecognised,
the gain or loss accumulated in equity is reclassified to
profit or loss.
3.3.2. Non-derivative financial liabilities
The Group initially recognises debt securities issued
and subordinated liabilities on the date that they are
originated. All other financial liabilities are recognised
initially on the trade date, which is the date that the
Group becomes a party to the contractual provisions of
the instrument.
The Group derecognises a financial liability when its
contractual obligations are discharged, cancelled or
expire. The Group classifies non-derivative financial
Other financial liabilities comprise loans and borrowings,
debt securities issued, bank overdrafts, and trade and
other payables. 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 statement of cash flows.
3.3.3. Stated capital
Ordinary shares
Ordinary shares are classified as equity. As per the
Companies Act No. 07 of 2007, section 58(1), stated
capital in relation to a Company means the total of all
amounts received by the Company or due and payable
to the Company in respect of the issue of shares and in
respect of call in arrears.
3.4.
3.4.1. Recognition and measurement
Items of property, plant and equipment are measured
at cost less accumulated depreciation and accumulated
impairment losses.
Cost includes expenditure that is directly attributable to
the acquisition of the asset. The cost of self-constructed
assets includes the cost of materials and direct labour,
any other costs directly attributable to bringing the asset
to a working condition for its intended use, and the cost
of dismantling and removing the items and restoring
the site on which they are located and capitalised
borrowing cost. Purchased software that is integral to
the functionality of the related equipment is capitalised
as part of that equipment.
When parts of an item of property, plant and equipment
have different useful lives, they are accounted for
as separate items (major components) of property, plant
and equipment.
Gains and losses on disposal
Gains and losses on disposal of an item of property,
plant and equipment are determined by comparing the
proceeds from disposal with the carrying amount of
property, plant and equipment, and are recognised
net within “other income / other expenses” in profit or
loss.
ANNUAL REPORT 2012
41
Subsequent costs
The cost of replacing a part of an item of property, plant
and 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. The costs of the dayto-day servicing of property, plant and equipment are
recognised in profit or loss as incurred.
Derecognition
The carrying amount of an item of property, plant and
equipment is derecognised on disposal or when no
future economic benefits are expected from its use or
disposal. The gain or loss arising from derecognition of
an item of property, plant and equipment is included
in profit or loss when the item is derecognised. When
replacement costs are recognised in the carrying
amount of an item of property, plant and equipment,
the remaining carrying amount of the replaced part is
derecognised. Major inspection costs are capitalised. At
each such capitalization, the remaining carrying amount
of the previous cost of inspections is derecognised.
Depreciation
Items of property, plant and equipment are depreciated
from the date they are available for use or, in respect of
self-constructed assets, from the date that the asset is
completed and ready for use.
Depreciation is calculated to write off the cost of items
of property, plant and equipment less their estimated
residual values using the straight-line basis over
their estimated useful lives. Depreciation is generally
recognised in profit or loss, unless the amount is
included in the carrying amount of another asset. Leased
assets are depreciated over the shorter of the lease term
and their useful lives unless it is reasonably certain that
the Group will obtain ownership by the end of the lease
term. Land is not depreciated.
The estimated useful lives for the current and
comparative years are as follows:
Freehold building
20 - 50 years
Plant and machinery
16 2/3 years
Electrical and factory equipment 2 - 5 - 10 - 20 years
Farm equipment
5 - 20 years
Furniture and fittings and office equipment 10 years
Motor vehicles
5 years
Depreciation of an asset begins when it is available for
use and ceases at the earlier of the date that the asset
is classified as held-for-sale and the date that the asset
is derecognised. Depreciation methods, useful lives and
residual values are reviewed at each reporting date and
adjusted if appropriate.
Where the carrying amount of an asset is greater than
its estimated recoverable amount, it is written down
immediately to its recoverable amount.
Capital work in progress
Capital expenses incurred during the year which are
not completed as at the reporting date are shown as
capital work-in-progress, while the capital assets which
have been completed during the year and put to use are
transferred to property, plant and equipment.
3.4.2. Leased assets
Leases in terms of which the Group assumes substantially
all the risks and rewards of ownership are classified as
finance leases. Upon initial recognition the leased asset
is measured at an amount equal to the lower of its
fair value and the present value of the minimum lease
payments. Subsequent to initial recognition, the asset is
accounted for in accordance with the accounting policy
applicable to that asset.
Other leases are operating leases and any prepayments
are recognised in the consolidated statement of financial
position as lease hold rights. The lease hold rights under
operating leases are charged to the income statement
on a straight-line basis over the period of the lease.
When an operating lease is terminated before the lease
period has expired, any payment required to be made to
the lessor by way of penalty is recognised as an expense
in the period in which termination takes place.
The cost of improvements to or on leased property is
capitalised, and depreciated over the unexpired period of
the lease or the estimated useful lives of improvements,
whichever is shorter.
3.5.
Intangible assets
3.5.1. Other intangible assets
Other intangible assets that are acquired by the Group
and have finite useful lives are measured at cost less
accumulated amortization and any accumulated
impairment losses.
3.5.2. Subsequent expenditure
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 good will
and brands, is recognised in profit or loss as incurred.
42
ANNUAL REPORT 2012
3.5.3. Amortization
Amortization is recognised in profit or loss on a straightline basis over the estimated useful lives of intangible
assets, other than goodwill, from the date that they are
available for use.
The estimated useful lives for the current and
comparative years are as follows:
Computer software 10 years
Amortization methods, useful lives and residual values
are reviewed at each reporting date and adjusted if
appropriate.
3.6.
3.7.
Livestock
Livestock represents the unamortised parent and
grandparent livestock, used to breed day old commercial
chicks. Parent and grandparent birds include the growing
birds and the laying birds.
The growing birds are valued at directly attributable cost
incurred up to the commencement of laying period.
The laying birds are valued at cost less subsequent
amortizations. The amortization is made on straight-line
basis over the laying period after making due allowances
for carcass value.
Livestock is not valued at its fair value as the fair value
cannot be measured reliably due to non existence
of active markets for parent and grandparent birds
at different age categories and the complexity in
determining expected future cash flows for parent and
grandparent birds in different age, breed and genetic
merit.
Investment property
Investment property is property held either to earn
rental income or for capital appreciation or for 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 cost and subsequently carried at cost less
any accumulated depreciation and any accumulated
impairment loss.
Cost includes expenditure that is directly attributable to
the acquisition of the investment property. The cost of
self-constructed investment property includes the cost
of materials and direct labour, any other costs directly
attributable to bringing the investment property to a
working condition for their intended use and capitalised
borrowing costs.
Any gain or loss on disposal of an investment property
(calculated as the difference between the net proceeds
from disposal and the carrying amount of the item) is
recognised in profit or loss.
3.8.
Inventories
Inventories are measured at the lower of cost and
net realizable value after making due allowances for
obsolete and slow moving items.
Net realizable value is the estimated selling price in the
ordinary course of business, less the estimated costs
necessary to make the sale.
The cost incurred in bringing inventories to its present
location and conditions are accounted as follows.
Compounded feed
Cost is calculated using the weighted average cost
formula and the cost of finished goods and work in
progress comprises raw materials, direct labour, other
direct costs and related production overheads, but
excludes interest expenses.
Processed chicken
Processed chicken inventory is valued at direct cost
together with a directly attributable proportion of
overheads.
Eggs
Hatching eggs are valued at direct cost together with an
appropriate proportion of production overheads.
Livestock held-for-sale (parent birds)
The value of livestock held-for-sale is based on the
market price of livestock of similar age, breed and
genetic merit.
Poultry equipment, drugs, vaccine and sundry
Inventories
Poultry equipment, drugs, vaccine and sundry inventories
are valued at actual cost on weighted average basis after
making due allowance for obsolete and slow moving
items.
Out grower stock
Out grower stock represents the Company’s birds reared
at outside farms and is valued at directly attributable
cost.
ANNUAL REPORT 2012
43
3.9.
Impairment
3.9.1. Non-derivative financial assets
A financial asset not classified as at fair value through
profit or loss, including an interest in an equityaccounted investee, is assessed at each reporting date
to determine whether there is objective evidence that
it is impaired. A financial asset is impaired if there is
objective evidence of impairment as a result of one or
more events that occurred after the initial recognition
of the asset, and that loss event(s) had an impact on the
estimated future cash flows of that asset that can be
estimated reliably.
Objective evidence; that financial assets are
impaired includes default or delinquency by a debtor,
restructuring of an amount due to the Group on
terms that the Group would not consider otherwise,
indications that a debtor or issuer will enter bankruptcy,
adverse changes in the payment status of borrowers or
issuers, economic conditions that correlate with defaults
or the disappearance of an active market for a security.
In addition, for an investment in an equity security, a
significant or prolonged decline in its fair value below its
cost is objective evidence of impairment.
Financial assets measured at amortised cost
The Group considers evidence of impairment for
financial assets measured at amortise cost (loans and
receivables and held-to-maturity financial assets) at
both a specific asset and collective level. All individually
significant assets are assessed for specific impairment.
Those found not to be specifically impaired are, then
collectively assessed for any impairment that has been
incurred but not yet identified. Assets that are not
individually significant are, collectively assessed for
impairment by grouping together assets with similar risk
characteristics.
In assessing collective impairment, the Group uses
historical trends of the probability of default, the timing
of recoveries and the amount of loss incurred, adjusted
for management’s judgment as to whether current
economic and credit conditions are such that the actual
losses are likely to be greater or lesser than suggested by
historical trends.
An impairment loss in respect of a financial asset
measured at amortised cost is calculated as the
difference between its carrying amount and the present
value of the estimated future cash flows discounted at
the asset’s original effective interest rate. Losses are
recognised in profit or loss and reflected in an allowance
account against loans and receivables or held-to-
maturity investment securities. Interest on the impaired
asset continues to be recognised. When an event
occurring after the impairment was recognised causes
the amount of impairment loss to decrease, the decrease
in impairment loss is reversed through profit or loss.
Available-for-sale financial assets
Impairment losses on available-for-sale financial assets
are recognised by reclassifying the losses accumulated
in the fair value reserve in equity to profit or loss. The
cumulative loss that is reclassified from equity to profit
or loss is the difference between the acquisition cost, net
of any principal repayment and amortization, and the
current fair value, less any impairment loss recognised
previously in profit or loss. Changes in cumulative
impairment losses attributable to application of the
effective interest method are reflected as a component
of interest income. If, in a subsequent period, the fair
value of an impaired available-for-sale debt security
increases and the increase can be related objectively
to an event occurring after the impairment loss was
recognised, then the impairment loss is reversed, with
the amount of the reversal recognised in profit or loss.
However, any subsequent recovery in the fair value of an
impaired available-for-sale equity security is recognised
in other comprehensive income.
An impairment loss in respect of an equity-accounted
investee is measured by comparing the recoverable
amount of the investment with its carrying amount.
An impairment loss is recognised in profit or loss.
An impairment loss is reversed if there has been a
favourable change in the estimates used to determine
the recoverable amount.
3.9.2. Non-financial assets
The carrying amounts of the Group’s non-financial
assets, other than biological assets, investment
property, inventories and deferred tax 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. Goodwill and indefinite-life intangible assets
are tested annually for impairment. An impairment loss
is recognised if the carrying amount of an asset or cash
generating unit (CGU) exceeds its recoverable amount.
The recoverable amount of an asset or CGU is the
greater of its value in use and its fair value less costs
to sell. In assessing value in use, the 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
44
ANNUAL REPORT 2012
specific to the asset or CGU. For impairment testing,
assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use
that are largely independent of the cash inflows of other
assets or CGUs.
Impairment losses are recognised in profit or loss.
Impairment losses recognised in respect of CGUs are
allocated first to reduce the carrying amount of any
goodwill allocated to the CGU (group of CGUs), and then
to reduce the carrying amounts of the other assets in
the CGU (group of CGUs) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed.
For other assets, 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 amortization, if no
impairment loss had been recognised.
3.10. Employee benefits
3.10.1. Short-term employee benefits
Short-term employee benefit obligations are measured
on an undiscounted basis and are expensed as the
related service is provided. A liability is recognised for
the amount expected to be paid under short-term cash
bonus or profit-sharing plans if the Group has a present
legal or constructive obligation to pay this amount as a
result of past service provided by the employee, and the
obligation can be estimated reliably.
3.10.2. Defined contribution plan
A defined contribution plan is a post-employment
benefit plan under which an entity pays fixed
contributions into a separate entity and has no legal
or constructive obligation to pay further amounts.
Obligations for contributions to defined contribution
plans are recognised as an employee benefit expense in
profit or loss in the periods during which related services
are rendered by employees. Prepaid contributions are
recognised as an asset to the extent that a cash refund
or a reduction in future payments is available.
3.10.3. Defined benefit plan – gratuity
A defined benefit plan is a post employment benefit
plan other than a defined contribution plan. The Group’s
net obligation in respect of defined benefit plans is
calculated separately for each plan by estimating the
amount of future benefit that employees have earned in
return for their service in the current and prior periods.
That benefit is discounted to determine its present
value. Any unrecognised past service costs and the fair
value of any plan assets are deducted.
The calculation is performed annually by a qualified
actuary using the Projected Unit Credit (PUC) method
as recommended by LKAS 19 - “Employee Benefits”.
When the calculation results in a benefit to the Group,
the recognised asset is limited to the total of any
unrecognised past service costs and the present value
of economic benefits available in the form of any
future refunds from the plan or reductions in future
contributions to the plan. In order to calculate the
present value of economic benefits, consideration
is given to any minimum funding requirements that
apply to any plan in the Group. An economic benefit is
available to the Group if it is realizable during the life of
the plan, or on settlement of the plan liabilities. When
the benefits of a plan are improved, the portion of the
increased benefit related to past service by employees is
recognised in profit or loss on a straight-line basis over
the average period until the benefits become vested.
To the extent that the benefits vest immediately, the
expense is recognised immediately in profit or loss.
The assumptions based on which the results of actuarial
valuation was determined, are included in Note 27 to
the financial statements.
Unrecognised actuarial gain / losses are recognised
on the “Corridor Method” which allows the Group /
Company to recognise the actuarial gain / losses if it
exceeds 10 percent of either present value of total
defined benefit obligation or fair value of any plan
assets as per LKAS 19 - “Employee Benefits”. The excess
of the said limit is recognised over the expected average
remaining working life of the employees participated in
the plan.
However, according to the Payment of Gratuity Act
No.12 of 1983, the liability for the gratuity payment to
an employee arises only on the completion of 5 years of
continued service with the Company.
(a) Employees’ Provident Fund
The Group and employees contribute 12 percent
and 8 percent respectively on the salary of each
employee to the Employees’ Provident Fund.
(b) Employees’ Trust Fund
The Group contributes 3 percent of the salary of
each employee to the Employees’ Trust Fund. The
total amount recognised as an expense to the group
for contribution to ETF is disclosed in the notes to
ANNUAL REPORT 2012
45
3.11.
3.12.
Provisions
A provision is recognised if, as a result of a past event,
the Group has a present legal or constructive obligation
that can be estimated reliably; and it is probable that an
outflow, of economic benefits will be required to settle
the obligation.
Revenue recognition
Sale of goods
Revenue from the sale of goods in the course of
ordinary activities is measured at the fair value of the
consideration received or receivable, net of returns, trade
discounts and volume rebates. Revenue is recognised
when persuasive evidence exists, usually in the form of
an executed sales agreement, that the significant risks
and rewards of ownership have been transferred to the
customer, recovery of the consideration is probable, the
associated costs and possible return of goods can be
estimated reliably, there is no continuing management
involvement with the goods, and the amount of revenue
can be measured reliably. If it is probable that discounts
will be granted and the amount can be measured
reliably, then the discount is recognised as a reduction of
revenue as the sales are recognised. Revenue excludes
value added taxes or other sales taxes.
Rental income
Rental income received or receivable in the course
of ordinary activities is recognised as revenue in the
statement of comprehensive income on a straightline basis over the term of the lease. Lease incentives
granted are recognised as an integral part of the total
rental income.
Rental income from investment property is recognised
as other income in profit or loss on a straight-line basis
over the term of the lease.
Dividend income
Dividend income is recognised in profit or loss on
the date that the Group’s right to receive payment is
established.
Finance income
Finance income comprises interest income on funds
invested (including available-for-sale financial assets),
gains on the disposal of available-for-sale financial assets
and fair value gains on financial assets at fair value through
profit or loss. Interest income is recognised as it accrues in
profit or loss, using the effective interest method.
Other operating profits / losses
Other operating profits / losses consist of profits / losses
arising from out grower operations carried out by the
companies that use farms for out grower operations.
3.13.
Expenses
Operating lease payments
Where the Company has the use of assets under
operating leases, payments made under the leases are
recognised in the statement of comprehensive income
on a straight-line basis over the term of the lease. Lease
incentives received are recognised in the statement of
comprehensive income as an integral part of the total
lease expense over the term of the lease. Contingent
rentals are charged to the statement of comprehensive
income in the accounting period in which they are
incurred.
Finance costs
Finance costs comprise interest expense on borrowings,
unwinding of the discount on provisions and losses on
disposal of available-for-sale financial assets, fair value
losses on financial assets at fair value through profit
or loss and impairment losses recognised on financial
assets (other than trade receivables).
Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying
asset are recognised in profit or loss using the effective
interest method.
Foreign currency gains and losses on financial assets and
Other income
Gains / losses on the disposal of investments held by the
Group have been accounted for as other income in the
financial liabilities are reported on a net basis as either
statement of comprehensive income.
position.
Gains / losses on the disposal of property, plant and
equipment determined by reference to the carrying
amount and related expenses, have been accounted
for as other income in the statement of comprehensive
income.
finance income or finance cost depending on whether
foreign currency movements are in a net gain or net loss
3.14.
Taxation
Income tax expense comprises current and deferred tax.
Income tax is recognised in the statement of comprehensive
income except to the extent that it relates to items recognised
directly in equity, in which case it is recognised in equity.
46
ANNUAL REPORT 2012
Current tax
Current tax is the expected tax payable on the taxable
income for the year, using tax rates enacted at the
reporting date, and any adjustment to tax payable in
respect of previous years.
Deferred tax
Deferred tax is recognised using the statement of
financial position liability method, providing for
temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The
following temporary differences are not provided for
goodwill not deductible for tax purposes, the initial
recognition of assets or liabilities that affect neither
accounting nor taxable profit, nor differences relating
to investments in subsidiaries to the extent that they
will probably not reverse in the foreseeable future.
The amount of deferred tax provided is based on the
expected manner of realization or settlement of the
carrying amount of assets and liabilities, using tax rates
enacted or substantively enacted at the reporting date.
The principal temporary differences arise from
depreciation on property, plant and equipment, tax
losses carried forward, impairment of trade and
other receivables and provisions for defined benefit
obligations. Deferred tax assets relating to the carry
forward of unused tax losses are recognised to the
extent that it is probable that future taxable profit will
be available against which the unused tax losses can be
utilised.
A deferred tax asset is recognised only to the extent that
it is probable that future taxable profits will be available
against which the asset can be utilised. Deferred tax
assets are reviewed at reporting date and are reduced to
the extent that it is no longer probable that the related
tax benefit will be realised.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities
and assets, and they relate to income taxes levied by
the same tax authority on the same taxable entity, or on
different tax entities, but they intend to settle current
tax liabilities and assets on a net basis or their tax assets
and liabilities will be realised simultaneously.
3.15.
Segment reporting
A segment is a distinguishable component of the Group
that is engaged either in providing products or services
(business segment), or in providing products and
services within a particular economic environment
(geographical segment), which is subject to risks and
rewards that are different from those of other segments.
3.16.
Earnings / (loss) per share
The Group presents basic earnings / (loss) per share
(EPS) data 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.
3.17.
Events occurring after the reporting date
All material post reporting date events have been
considered and where appropriate adjustments or
disclosures have been made in respective notes to the
3.18.
Comparative figures
Where necessary, the comparative figures have
been reclassified to conform to the current year’s
presentation.
3.19.
Commitments and contingencies
Contingencies are possible assets or obligations that
arise from a past event and would be confirmed only
on the occurrence or non-occurrence of uncertain
future events, which are beyond the Company’s control.
Contingent liabilities are disclosed in Note 28 to the
financial statements. Commitments are disclosed in
Note 29 to the financial statements.
3.20.
New standards and interpretations not yet adopted
A number of new standards, amendments to standards
and interpretations are not yet effective for the year
ended 31 December 2012, and have not been applied in
preparing these consolidated financial statements.
These includes;
SLFRS 09 - ‘Financial Instruments’ which will be effective
from 1 January 2015.
The International Accounting Standard Board (IASB) has
issued IFRS 10, 11, 12 and 13 which are effective from
1 January 2013. However the Institute of Chartered
Accountants of Sri Lanka has decided to defer the
effective date of SLFRS 10, 11, 12 and 13.
The extent of the impact has not been determined.
Additional income taxes that arise from the distribution
of dividends are recognised at the same time as the
liability to pay the related dividend is recognised.
ANNUAL REPORT 2012
47
For the year ended 31 December 2012
04. SEGMENT INFORMATION
(a) Business segments
Feedmilling
Poultry
and broiler
breeder operation
farming
11,613,745 710,473 - 38,116 12,711 757,136 501,119 - 87,749 72,427 (1,418,431)
-
12,370,881 1,211,592 - 125,865 85,138 (1,418,431)
12,375,045
Segment results
(264,801)
94,617 21,257 55,012 12,688 (83,591)
Finance (expenses) / income
(270,556)
(32,850)
693,296 (16,016)
Shrimp
Poultry
Silo and
Elimination
farming equipment warehouse
Consolidated
/adjustment complex
Sales to outsiders
Inter segmental sales
Total revenue
Other income / (expenses)
Share of profit of associate company
Profit / (loss) before tax
- (2,364)
- 753 - - 74 - - (1,102)
(155,003)
122,317
53,910 48,034 (8,833)
1,409 (7,145)
(5,399)
205,973 36,918 (202)
14,186 48,511 -
-
-
-
Total comprehensive income 205,973 36,918 14,186 48,511 For the year ended 31 December 2011
Sales to outsiders
Inter segmental sales
Total revenue
Segment results
Finance expenses
Other income / (expenses)
Share of profit of associate company
(202)
505,132
4,108
21,331 -
(171,799)
4,108 (1,611)
(303,332)
-
45,751 Profit after tax
- 12,375,045
-
157,939 Taxation
- - (155,003)
28,066
150,383
-
-
(155,003)
150,383
9,595,809 815,775 - 45,380 22,876 - 10,479,840
656,849 472,082 - 79,114 51,448 (1,259,493)
-
10,252,658 1,287,857 - 124,494 74,324 (1,259,493)
10,479,840
230,096 175,119 20,644 43,324 15,070 479,356
(128,785)
(19)
(651)
(3)
67,803 53 - - Profit / (loss) before tax
169,114 175,153 Taxation
(32,539)
(4,629)
Profit after tax
136,575 170,524 Other comprehensive income
-
-
136,575 170,524 (4,897)
- 3,076 - (1,821)
- (1,821)
-
(1,821)
- (372)
- (129,458)
(15,070)
55,490
-
60,512 60,512
19,993 42,949 60,512 465,900
(5,719)
(3,628)
14,274 39,321 60,512 419,385
-
-
-
-
14,274 39,321 60,512 419,385
- - (46,515)
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ANNUAL REPORT 2012
04. SEGMENT INFORMATION (Contd.)
(b) Business segments (Contd.)
Feedmilling
Poultry
and broiler
breeder operation
farming
As at 31 December 2012
Segment assets
Associate
Shrimp
2,256,003 Silo and
Elimination/
farming equipment warehouse
3,490,267 Poultry
64,944 41,903 396,970 5,899,048
- 11,139 11,172
- (1,020,626)
-
(1,360,526)
5,910,220
- - Inter segment assets
1,004,429 - - Total assets
4,494,729 2,256,003 64,944 58,100 396,970 Segment liabilities
2,418,494 452,399 1,698 7,724 41,970 16,197 1,052,717 83,726 2,434,691 1,505,116 85,424 Capital expenditure
59,884 122,440 Depreciation/amortisation
31,403 80,143 Impairment of intangible assets
12,454 Total liabilities
Associate
1,540 - As at 31 December 2011
Segment assets
- - 3,001,680 2,183,843 76,620 16,197 - 7,724 (1,204,352)
93,682 (1,204,352)
183,147
- 1,029 - 114,115
12,454
- - - 29,651 (361,625)
5,351,247
- 162,092 290,576
- (1,056,215)
-
(1,255,748)
5,641,823
- - Total assets
4,172,036 2,183,843 76,620 43,994 421,078 Segment liabilities
2,303,628 455,164 3,404 7,803 34,272 14,343 1,014,710 93,493 2,317,971 1,469,874 96,897 Capital expenditure
77,141 114,432 Depreciation/amortisation
26,931 78,659 Impairment of intangible assets
10,578 - - 421,078 1,041,872 - 2,922,285
- Inter segment assets
2,090 - 823 - - 2,922,285
- - Total liabilities
-
51,712 128,484 Inter segment liabilities
(351,039)
33 Inter segment liabilities
- adjustment complex
Consolidated
14,343 - 7,803 - - - -
2,804,271
127,981 (1,250,527)
-
162,253
(1,250,527)
2,804,271
- 1,051 - - 191,573
- 108,731
- 10,578
ANNUAL REPORT 2012
49
04. SEGMENT INFORMATION (Contd.)
(c) Business segments (Contd.)
The Group is organised into five main business segments:
• Feed milling and broiler operations - manufacture and sale of feed, poultry broiler farming, processing and distribution of chicken.
• Poultry breeder farming operations - operation of grandparent, parent poultry breeder farms and hatcheries.
• Shrimp farming - integrated shrimp operation.
• Poultry equipment - import and sale of poultry equipment, drugs and vaccine.
• Silo warehouse complex and transshipment operations - operation of ultra modern silo and warehouse complex.
Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, receivables and operating cash and
exclude investments in subsidiaries. Segment liabilities comprise current and non-current liabilities. Capital expenditure comprises
additions to property, plant and equipment.
(d) Sales are made up as follows :
GroupCompany
2012 2011 20122011
Process chicken
3,000,068 2,719,105
3,000,068 2,719,105
Feedmilling
11,182,873 9,025,239
11,182,873 9,025,239
Poultry breeder farming
1,329,029 1,381,960
- -
Parent birds
29,050 26,266
- -
Poultry equipment and vaccine
130,615 129,935
- -
Silo warehouse complex and transshipment
97,301 84,942
- -
15,768,936 13,367,447 14,182,941 11,744,344
(1,418,431)
(1,259,493)
Elimination / adjustment
14,350,505 12,107,954
14,182,941 11,744,344
- -
Sales taxes [Note 4 (e)]
(1,975,460)
(1,628,114)
(1,812,060) (1,491,686)
12,375,045 10,479,840 12,370,881 10,252,658
(e) Sales taxes
Group
Nation building tax
Company
2012 2011 20122011
262,763 217,992
259,754 215,218
Value added tax
1,712,697 1,410,122
1,552,306 1,276,468
1,975,460 1,628,114
1,812,060 1,491,686
50
ANNUAL REPORT 2012
5. Operating profit
The following items have been charged / (credited) in arriving at operating profit:
GroupCompany
2012 2011 20122011
Directors’ emoluments 480480360360
Auditors’ remuneration - Audit service
4,615
4,025
2,765
2,400
- Other services
892
103
836
103
Legal fees
22,617
5,782
22,538
5,749
114,115
108,731
31,403
26,931
Loss on disposal of property, plant and equipment (Note 9)
(19,263)
(2,989)
Amortization of leasehold right (Note 14)
16,284
16,294
3,796
3,785
Amortization of intangible assets (Note 15)
12,454
10,578
12,454
10,578
Amortization of livestock (Note 18)
396,741
361,146
Depreciation on property, plant and equipment (Note 13)
(170)
(2,394)
- -
Reversal for bad and doubtful debts
(2,125)
(4,500)
(2,000)
(4,500)
Operating lease rentals - property
31,139
29,358
17,983
16,987
Settlement of custom case (Note 5.1)
115,000
-
115,000
-
Staff expenses (Note 7)
573,831
533,996
397,045
354,581
5.1 Settlement of custom case
Inquiry bearing number DG/ 97/1038 was held by Sri Lanka Customs in 1997/1998 into an alleged violation of Customs laws and a
forfeiture was imposed on the Company for / in a sum of Rs. 1,194,595,704/- by Sri Lanka Customs on 22 July 1998.
And whereas such forfeiture was challenged in the District Court Colombo Case No. 5195/Spl and Court of Appeal Case No. 839/98 by the
Company and whilst there was protracted litigation, another action was instituted by the Attorney General against the Company for the
recovery of the said forfeiture as a Debt in District Court proceedings bearing number 866/DR on 1 August 2001.
And whereas there have been negotiations between the parties regarding these rival claims of liability and non liability and which
negotiations have now culminated in the State accepting a sum of Rs. 115 million which the Company has agreed to pay in lieu thereof
without conceding liability and accordingly terms of settlement has been entered in District Court Colombo Case bearing No. 866/DR on
Friday 5 October 2012 and all other cases now stand withdrawn and dismissed without cost.
6. Temporary cessation of operation
On 1 November 2004 the directors temporarily ceased the operation of breeding, hatching and growing of prawns and sea cucumber of
Ceylon Aquatech (Private) Limited, a subsidiary of the Company.
The Management of the Company is of the view that the commercial operations of the Chilaw Farm could be recommenced. The assets
and liabilities as at the balance sheet date of the division were as follows:
As at 31 December
20122011
64,844
76,380
Total assets
64,944 76,620
Total liabilities
85,424
96,897
(20,480)
(20,277)
Net assets
ANNUAL REPORT 2012
51
7. Staff expenses
Group
Company
2012 2011 20122011
Salaries and wages
540,394 506,072 370,098 334,105
Social security costs
745 92 557 71
Defined contribution plans
24,704 20,730 19,329 15,510
Employee benefits (Note 27)
7,988 7,102 7,061 4,895
573,831 533,996 397,045 354,581
Average monthly number of persons employed by the Company and Group during the year:
- Full time
484 462 304 288
760 759 129 135
1,244 - Part time
1,221 433 423
Part time employees include contracted labourers hired from third parties and those who work on shift basis.
8. Other operating profit / (loss)
Other operating profit / (loss) wholly consist of profit / (loss) arising from out grower operations carried out at the commercial farms of
Three Acre Farms PLC which is a subsidiary of the Company.
9. Other income
Group
Company
2012 2011 20122011
Sundry income
24,860 18,216
35,631 30,411
Interest income
5,520 5,434 4,709 4,957
Amortization of amount due to affiliated companies - unearned income 34,829 34,829 Dividend income
12,082 Gain on disposal of associate shares
447,104 Loss on disposal of fixed assets
(19,263)
505,132 34,829 34,829
- 16,132 -
- 602,165 (2,989)
55,490
-
(170)
(2,394)
693,296 67,803
10. Net finance expenses
Group
Company
2012 2011 20122011
Net foreign exchange transaction losses
184,438 58,360
186,273 58,585
Interest expense on amount due to affiliated companies - non current
29,034 60,366
29,034 60,366
Interest expense - bank borrowings
89,860 10,732
55,249 9,834
303,332 129,458
270,556 128,785
52
ANNUAL REPORT 2012
11. Taxation
Group
Company
2012 2011 20122011
Current tax
21,041
Over provision
(1,751)
Deemed dividend tax
Deferred tax ( release ) / charge (Note 26)
ESC write off
6,193
(54,333) 784 (28,066) 47,663
-
68
(1,725) 509
46,515
1,334
27,231
(1,190)
-
5,006
(53,184) 5,308
-
(48,034) 32,539
Company
Under an agreement dated 12 February 2004, entered into by the Company and the Board of Investment of Sri Lanka (BOI), the Company
was entitled to an additional tax holiday of 3 years and a further additional tax exemption period of 5 years commencing from 17 December
2005 on profit and income earned by the Company from transshipment and bulk cargo operations and the operations of the feed mill and
the animal husbandry project. This exemption period was over by 17 December 2010 and the Company is liable to pay 12% as income tax
on profits and income earned for the year ended 2012/13.
The Company is liable to pay 28% as income tax on interest income earned by the Company. The tax losses carried forward as at
31 December 2012 amounted to Rs. 465,117,095/-.
Group
Three Acre Farms PLC is liable to pay income tax on profits and income earned at 12%. The tax losses available to carry forward as at
31 December 2012 amounted to Rs. 537,926,410/- (2011 - Rs. 414,463,924/-).
Ceylon Livestock and Agrobusiness Services (Private) Limited is liable to pay income tax at 28% on the profits and income earned by the
company.
Ceylon Pioneer Poultry Breeders Limited is liable to pay income tax at 28% on the profits and income earned by the company. The tax
losses available to carry forward as at 31 December 2012 amounted to Rs. 227,689,036/- (2011 - Rs. 227,645,420/-).
Millennium Multibreeder Farms (Private) Limited is liable to pay income tax at 12% on the profits and income earned by the company.
The tax losses available to carry forward as at 31 December 2012 amounted to Rs. 115,362,128/- (2011 - Rs. 154,445,430/-).
Ceylon Aquatech (Private) Limited is liable to pay income tax at 28% on the profits and income earned by the company. However, the tax
losses available to carry forward as at 31 December 2012 amounted to Rs. 19,316,721/- (2011 - Rs. 22,369,505/-).
Ceylon Warehouse Complex (Private) Limited is exempt from income tax on trading profits for a period of seven years reckoned from the
year in which the company commences to make profits in relation to its transactions or any year of assessment not later than five years
from the date of its commercial operations, whichever is the earlier. The company commenced commercial operations on 1 October 2000.
Hence the tax holiday commenced from 01 April 2004. The tax holiday has expired on 31 March 2011 and the company is liable for income
tax on the profits and income earned by the company at the rate of 10%.
ANNUAL REPORT 2012
53
11. Taxation (Contd.)
Reconciliation of effective tax rate
The tax on the results of the Group’s operations and the Company’s profit before tax differs from the theoretical amount that would rise
using the basic tax rate as follows:
Group
Company
2012 2011 20122011
Profit before tax
122,317 Share of profit of associate
(4,108)
118,209 465,900
157,939 (60,512)
405,388
169,114
- 157,939 169,114
Add: disallowable expenses
628,559 582,055
118,479 86,685
Deduct: allowable expenses
(132,994)
(585,078)
(123,903)
(41,374)
Deduct: income not subject to tax
(617,631)
(442,570)
(6,646)
Deduct: tax losses setoff
(42,138)
(59,199)
-
Profit / (loss) from trade and business
129,066
336,520
(465,116)
214,425
Add: interest income
4,771 5,362
4,764 5,355
- -
Taxable income
133,837
341,882
4,764
219,780
@ 10%
Income tax using the domestic corporation tax rate
3,405 1,578
@ 12% 8,710 38,915
@ 28% 8,926 7,170
Current tax
21,041
47,663
Over provision
(1,751) Deemed dividend tax
6,193 Deferred tax (release) / charge
(54,333)
ESC write off
784
-
- -
- 25,731
1,334 1,500
1,334 27,231
(1,190) 68
(1,725)
-
5,006 -
(53,184)
5,308
509
-
-
(28,066)
46,515
(48,034)
32,539
Further information about deferred tax is presented in Note 26.
12. Basic earnings per share
Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the weighted average number of shares
in issue during the year.
Group
Company
2012 2011 20122011
Net profit attributable to shareholders
134,586 346,419
205,973 136,575
Weighted average number of ordinary shares in issue (thousands)
60,000 60,000
60,000 60,000
2.24 5.77 3.43 2.28
Basic earnings per share (Rs.)
54
ANNUAL REPORT 2012
13. Property, plant and equipment
(a) Group
As at
01.01.2012
Additions/
WIP transfer
Disposals/
write off
As at
31.12.2012
Cost or Deemed Cost
Land
372,159 - (25,500)
346,659
Building
1,054,297 37,824 - 1,092,121
Plant and machinery, electrical and farm equipments
918,313
89,274 (16,139)
991,448
Furniture and fittings and office equipments
132,317 9,578 (390)
141,505
Motor vehicles
111,074 25,401 (3,630)
132,845
20,753 1,599 - 22,352
2,608,913
163,676
(45,659)
2,726,930
As at
Charge for
Disposals/
As at
01.01.2012
the year
write off
31.12.2012
Depreciation
Building
23,617 25,150 - 48,767
437,922
68,916 (4,958)
501,880
83,002 7,757 (315)
90,444
Motor vehicles
8,820 12,292 (468)
20,644
553,361 114,115
(5,741)
661,735
As at
As at
01.01.2012 31.12.2012
Carrying amount
Land
372,159 346,659
Building
1,030,680 1,043,354
480,391 489,568
49,315 51,061
Motor vehicles
102,254 112,201
20,753 22,352
2,055,552 2,065,195
Property, plant and equipment include fully depreciated assets, the cost of which as at 31 December 2012 amounted to Rs. 407,472,042/(2011-RS. 396,418,519/-)
(b) Company
As at
01.01.2012
Additions/
WIP transfer
Disposals/
write off
As at
31.12.2012
Cost or Deemed Cost
Land
40,314 - -
40,314
Building
28,164 1,656 -
29,820
226,839 31,983 (692)
258,130
123,294 9,570 (385)
132,479
Motor vehicles
60,349 14,174 (145)
74,378
19,471 (16,970)
- 2,501
498,431 40,413 (1,222)
537,622
As at
Charge for
Disposals/
As at
01.01.2012
the year
write off
31.12.2012
Depreciation
Building
562 596 -
1,158
144,054 15,138 (691)
158,501
74,109 7,742 (310)
81,541
Motor vehicles
5,316 7,927 (13)
13,230
224,041 31,403 (1,014)
254,430
As at
As at
01.01.2012
31.12.2012
Carrying amount
Land
40,314 40,314
Building
27,602 28,662
82,785 99,629
49,185 50,938
Motor vehicles
55,033 61,148
19,471 2,501
274,390 283,192
Property, plant and equipment include fully depreciated assets, the cost of which as at 31 December 2012 amounted to Rs. 154,265,637/(2011 - Rs. 141,623,343/-).
ANNUAL REPORT 2012
55
13. Property, plant and equipment (Contd.)
(c) Group
As at
01.01.2011
Additions/
WIP transfer
Disposals/
write off
As at
31.12.2011
Cost or Deemed Cost
Land
372,159 - - 372,159
Building
1,022,390 31,907 - 1,054,297
822,389 97,904 (1,980)
918,313
108,954 23,377 (14)
132,317
Motor vehicles
106,365 13,661 (8,952)
111,074
9,913 10,840 - 20,753
2,442,170 177,689 (10,946)
2,608,913
As at
01.01.2011
Charge for
the year
Disposals/
write off
As at
31.12.2011
Depreciation
Building
- 23,617 - 23,617
369,911 68,701 (690)
437,922
75,941 7,075 (14)
83,002
Motor vehicles
- 9,338 (518)
8,820
445,852 108,731
(1,222)
553,361
As at
As at
01.01.2011
31.12.2011
Carrying amount
Land
372,159 372,159
Building
1,022,390 1,030,680
452,478 480,391
33,013 49,315
Motor vehicles
106,365 102,254
9,913 20,753
1,996,318 2,055,552
(d) Company
As at
01.01.2011
Additions/
WIP transfer
Disposals/
write off
As at
31.12.2011
Cost or Deemed Cost
Land
40,314 - - 40,314
Building
27,144 1,020 - 28,164
213,716 14,103 (980)
226,839
100,059 23,249 (14)
123,294
Motor vehicles
54,675 13,661 (7,987)
60,349
8,247 11,224 - 19,471
444,155 63,257 (8,981)
498,431
As at
01.01.2011
Charge for
the year
Disposals/
write off
As at
31.12.2011
Depreciation
Building
- 562 - 562
130,998 13,553 (497)
144,054
67,076 7,047 (14)
74,109
Motor vehicles
- 5,769 (453)
5,316
198,074 26,931 (964)
224,041
As at
As at
01.01.2011
31.12.2011
Carrying amount
Land
40,314 40,314
Building
27,144 27,602
82,718 82,785
32,983 49,185
Motor vehicles
54,675 55,033
8,247 19,471
246,081 274,390
56
ANNUAL REPORT 2012
(e) Capital work in progress at the reporting date includes value of work not certified for farm buildings amounting to Rs. 22,352,000/(2011 - Rs.1,281,943/-) and the purchase of computer soft ware in the process of being installed Rs. Nil (2011 - Rs. 19,471,000/-).
(f) Property, plant and equipment include assets of the temporarily ceased division of Ceylon Aquatech (Private) Limited , the net book
value of which as of the reporting date amounted to Rs. 64,843,819/- (2011-Rs. 76,380,342/-).
(g) As per the exemption given in SLFRS 1 the Group measured items of property, plant and equipment at the date of transition to SLFRS at its fair value and use that fair value as its deemed cost at that date. For this purpose the Group revalued its land and building, plant
& machinery and hatchery equipments by an independent, professional valuer Mr. J.C. Leuke Bandara-Incorporated Valuer (Graduate
member of Institute of Valuers) and motor vehicles by an independent, professional valuer Wadduwa Auto Service (Member of the
Leasing Association of Sri Lanka). The valuation has been conducted on the basis of current market value. (h) Freehold Land carried at revalued amount (Rs.) :
Company
Location
Last
Land
Revalued
revaluation
extent
amount
date
as at
01.01.2011
40,314,000
Attanagalla farm, Attanagalla
01.01.2011
12 A - 2R - 15.7 P
40,314,000
Three Acre Farms PLC
Meegoda farm, Meegoda
Kosgama farm
01.01.2011
24 A - 0R - 3.17P
19,215,850
Aluthambalama, Kosgama
01.01.2011 20 A - 3R - 27.05P
10,041,150
Halwathura farm, Halwathura
01.01.2011
29,796,324
Bulathsinhala farm
Agaloya, Bulathsinhala
01.01.2011
54 A - 0R - 3.76P
60 A - 3R - 27P
56,045,250
Hijra Farm - A Pagoda, Beruwala
01.01.2011 41 A - 3R - 13.42P
66,534,200
Hijra Farm - B, Beruwala
01.01.2011
8 A - 3R - 3.71P
74,829,300
Makuluwatta farm, Waga
01.01.2011
12 A -2R -18.90P
6,098,235
262,560,309
Ceylon Pioneer Poultry Breeders Ltd.
Nilambe Farm, Office Junction, Galaha
01.01.2011
33 A -0R - 28.82P
39,541,310
Aswatte Farm, Kosgama
01.01.2011
5 A - 3R - 18.19P
7,522,838
Wewelpanawa Farm, Wewelpanawa
01.01.2011
27 A -3R - 20.47P
11,151,175
58,215,323
Ceylon Aquatech (Pvt) Ltd.
Chilaw Farm
01.01.2011
49 A - 1R -18P
11,068,365
11,068,365
ANNUAL REPORT 2012
57
(i) Freehold building carried at revalued amount (Rs.) :
Company
Location
Last
Number
Revalued
revaluation
of
amount
date
buildings
as at
Attanagalla farm, Attanagalla
01.01.2011
01.01.2011
56
27,144,325
56
27,144,325
Meegoda farm, Meegoda
01.01.2011
75
174,115,100
Kosgama farm, Aluthambalama, Kosgama 01.01.2011
50
56,436,575
Halwathura farm, Halwathura
59
73,168,100
01.01.2011
Bulathsinhala farm
Agaloya, Bulathsinhala
01.01.2011
79
182,574,885
Hijra Farm - A Pagoda, Beruwala
01.01.2011
33
83,219,135
Hijra Farm - B, Beruwala
01.01.2011
34
7,624,800
Makuluwatta farm, Waga
01.01.2011
45
69,447,700
375646,586,295
Ceylon Pioneer Poultry Breeders Ltd.
Nilambe Farm, Office Junction, Galaha
01.01.2011
15
9,619,730
Aswatte Farm, Kosgama
01.01.2011
36
51,085,000
5160,704,730
Millennium Multibreeder Farms (Pvt) Ltd. Wewelpanawa Farm, Wewelpanawa
01.01.2011
45
231,565,950
45231,565,950
Ceylon Aquatech (Pvt) Ltd.
Chilaw Farm
01.01.2011
32
56,388,900
3256,388,900
14. L easehold right over land and buildings
Group
Company
2012 2011 20122011
Balance at the beginning of the year
504,591 520,885
Addition for the year
1,228
Amortisation for the year
(16,284)
(16,294)
- Balance at the end of the year
489,535 504,591
116,830 120,615
1,228 -
(3,796)
(3,785)
114,262
116,830
The Company has an agreement to mortgage for Rs. 495mn over leasehold land & building, plant, machinery & equipment at No.15, Rock
House Lane, Colombo-15 as security for credit facilities.
The leasehold land and building which was recognised previously as finance lease are accounted as operating lease based on substance
of lease agreement.
The management represents that the previous treatment was in accordance with Accounting Standards prevalent at that time and this
amount will be treated similar to lease prepayment and amortised over the remaining period of the lease.
The lease period of the leasehold land expires on 19 September 2012 and the Board of Directors have taken necessary actions to renew
the lease for a further period of 30 years. (For further details refer Note 29 (e))
58
ANNUAL REPORT 2012
15. Intangible assets
Group
Company
2012 2011 20122011
ERP Software
Cost
111,563
97,679
111,563
97,679
19,471
13,884
19,471
13,884
Balance at the end of the year
131,034
111,563
131,034
111,563
Additions during the year
Amortisation
(20,345)
(9,767)
(20,345)
(9,767)
(12,454)
(10,578)
(12,454)
(10,578)
(32,799)
(20,345)
(32,799)
(20,345)
Carrying amount 98,23591,21898,23591,218
16. Investment in associate companies
Group
2012
Company
2011 01.01.2011 2012
201101.01.2011
Ceylon Agro Industries Limited (CAIL) (16 a)
- 283,512
230,000
7,064 64 Prima Management Services (Private) Limited (PMS) (16 b)
11,172
11,172 290,576 230,064
(a) Ceylon Agro Industries Limited (CAIL)
- 128,451
33
33
33
33128,484128,484
Share of results after tax
128,451
283,512
Disposal of the shares
Group
20122011
- 230,000
53,512
(283,512)
- 283,512
(b.1) Prima Management Services (Private) Limited (PMS)
Group
20122011
7,064 64
Share of results after tax
4,108
7,000
11,172
7,064
ANNUAL REPORT 2012
59
16. Investment in associate companies (Contd.)
(b.2) Summarised financial information of Prima Management Services (Private) Limited
Financial position
20122011
Total assets
44,281 98,204
(10,763)
(77,069)
Net assets
33,518 21,135
Revenue and profits
20122011
Total liabilities
Revenue
Profit
100,007 190,900
14,383 20,940
(c) Share of profit of associate companies
Group’s share of profit after tax
20122011
Ceylon Agro Industries Limited (CAIL)
- Prima Management Services (Private) Limited (PMS)
53,512
4,108
7,000
4,10860,512
(d) Investment in associate companies - unquoted
GroupCompany
No of
Shares shares
Ceylon Agro Industries Limited (CAIL)
Prima Management Services (Private) Limited (PMS)
22,831,718
Holding % 2012
- Net book value as at 31 December
Equity value in investments
01.01.2011
- 283,512
3,33433% 11,172
Share of movement in equity value
2011
7,064
11,172 290,576
-
No of
Holding % 2012 201101.01.2011
230,000 22,831,718
64
3,334
- - 128,451 128,451
33% 33
230,064
-
-
11,172 290,576
230,064
33
33
33 128,484 128,484
-
-
-
33 128,484 128,484
The associate company, Ceylon Agro Industries Limited (CAIL), is a company incorporated in Sri Lanka. It is engaged in the manufacture
of noodles, bakery products and value added poultry products. It is also in the distribution and retail of flour in addition to agricultural
development of maize and forage crops.
The Company has disposed its shareholding of 22,831,718 shares (21.5%) in Ceylon Agro Industries Limited to Prima Limited Singapore
at Rupees Thirty Two (Rs. 32/-) per Share. The total value of the transaction is Rs. 730,614,976/-, which resulted in a capital gain of Rs. 602,165,353/- and Rs.447,104,353/- for the Company and Group respectively.
The Company has invested Rs. 33,334/- in Prima Management Services (Private) Limited (PMS) acquiring 33% stake during 2006.
60
ANNUAL REPORT 2012
17. Investment in subsidiary companies
2012
201101.01.2011
Investment in subsidiary companies - quoted [Note 17(a)]
148,625
148,625
148,625
Investment in subsidiary companies - unquoted [Note 17(b)]
213,000
213,000
213,000
Investment in subsidiary companies - cost
361,625
361,325
361,625
Less - provision for impairment
(10,586)
-
-
351,039361,625361,625
(a) Investment in subsidiary companies - quoted
No of
Company
Group
shares
holding %
holding %
2012
2011
01.01.2011
13,469,980
57.21%
57.21%
-
-
-
Net book value as at 31 December
148,625 148,625
148,625
Market Value as at 31 December
723,338 1,398,184
148,625
(b) Investments in subsidiary companies - unquoted
No of
Company
Group
shares
holding %
holding %
2012
Ceylon Warehouse Complex (Private) Limited
1,500,002
100%
100% 150,000 Ceylon Aquatech (Private) Limited
6,000,000
100%
100%
300,002
100%
100%
Ceylon Livestock & Agrobusiness Services (Private) Limited
Net book value as at 31 December
60,000 2011
01.01.2011
150,000
150,000
60,000
60,000
3,000 3,000
3,000
213,000 213,000
213,000
Provisions have been made for the investment in Ceylon Aquatech (Private) Limited.
(c) Details of the companies incorporated in Sri Lanka, in which the Company held an interest of 50% or more are set out below:
Proportion of ordinary shares held
Name of Company
2012
Ceylon Livestock & Agrobusiness Services
100%
Movement2011 Business
- 100%
Import and sale of poultry equipment
(Private) Limited
and vaccines
100%
- 100%
Provide storage facilities
Ceylon Aquatech (Private) Limited
100%
- 100%
Integrated shrimp business
57.21%
- 57.21%
Hatching and sale of day old chicks and commercial farming
Ceylon Pioneer Poultry Breeders Limited
57.21%
- 57.21%
Renting of farm operation
Millennium Multibreeder Farms (Private) Limited
57.21%
- 57.21%
Operation of modern poultry breeding and hatcheries utilizing advanced technologies.
All the above companies, the financial years of which end on 31 December are audited by KPMG. These Companies were incorporated in
Sri Lanka.
ANNUAL REPORT 2012
61
18. Livestock
Group
Company
2012 2011 20122011
Opening net book value
346,934 355,087
- -
Additions
419,105 352,993
- -
(396,741)
(361,146)
- -
Closing net book value
369,298346,934
- -
19. Amount due from affiliated companies
Group
2012
201101.01.2011
Company
2012
2011 01.01.2011
- -
-
837,611 Ceylon Aquatech (Private) Limited
- -
-
83,726 798,574 1,159,749
93,493
94,304
- -
-
215,106 216,136
216,317
- -
-
51,712 127,981
186,992
Ceylon Livestock and Agrobusiness Services (Private) Limited
- -
-
- -
- 1,188,155 1,236,184 1,657,784
Less - Provision for receivables
- -
-
- -
- 1,004,429 1,041,872 1,463,472
- - 422
(183,726) (194,312) (194,312)
Provisions have been made for receivables from Ceylon Aquatech (Private) Limited and Ceylon Pioneer Poultry Breeders Limited amounting
to Rs. 83,726,000/- and Rs.100,000,000/- respectively.
20. Inventories
Raw materials and consumables
Work in progress
Hatching eggs
Goods in transit
Group
2012
201101.01.2011
Company
2012
2011 01.01.2011
1,649,952 1,355,440 1,060,680 1,527,937 1,267,470
2,847 5,706
4,103
13,624 5,697
4,118
218,227
204,701
337,035 Finished goods
2,847 - 337,035 975,294
5,706
4,103
-
-
218,227
204,701
- Feeds
75,365 33,590
21,003
75,365 33,590
21,003
- Chicken
28,930 13,614
25,378
28,930 13,614
25,378
- Broiler DOC
Out grower stock
Less: provision for slow moving and obsolete items
48 -
4,632
149,684 111,507
104,186
- 149,684 -
-
111,507
104,186
2,257,485 1,743,781 1,428,801 2,121,798 1,650,114 1,334,665
(24,492)
(22,013)
(17,847)
(24,492)
(22,013)
(17,847)
2,232,993 1,721,768 1,410,954 2,097,306 1,628,101 1,316,818
Inventories are on an “agreed to mortgage” condition, against short term bank borrowings from the banks.
62
ANNUAL REPORT 2012
21. Trade and other receivables
Trade receivables
Less: provision for bad & doubtful debts
Group
2012
593,093 (251,546)
Company
2011 01.01.2011 2012
566,688
588,980
(253,671) (260,391)
579,548 201101.01.2011
554,182
578,763
(241,336) (243,336) (250,040)
341,547 313,017
328,589
338,212 310,846
328,723
6,676 29,736
34,909
5,430 19,908
20,841
Other receivables [Note 21 (a)]
107,438 116,250
112,528
82,006 84,502
74,402
455,661 459,003
476,026
425,648 415,256
423,966
Prepayments
Trade receivables have been pledged as securities for short term bank borrowings. (a) Other receivables
Group
Company
2012
2011 01.01.2011 2012
Deposits and advances
18,885 14,689
Staff loans
Other receivables
14,410
13,674 201101.01.2011
9,492
8,464
579 695
813
107 128
141
87,974 100,866
97,305
68,225 74,882
65,797
107,438 116,250
112,528
82,006 84,502
74,402
22. Cash and cash equivalents
Group
Company
2012
2011 01.01.2011 2012
201101.01.2011
Cash at bank
77,686 70,321
28,094
43,204 45,515
27,449
Cash in hand
3,504 2,806 Short term bank deposits
- 81,190 3,504
19,318
50,000
50
123,825
47,462
- 46,010 2,806
2,780
50,000
-
98,321
30,229
The weighted average effective interest rate on short term bank deposits was Group 8.06% (2011- 3.5%).
For the purposes of the statement of cash flows, the year-end cash and cash equivalents comprise the following:
(a) Net cash and cash equivalents
Group
2011 01.01.2011 2012
Company
2012
Cash and bank balances
81,190 123,825
47,462
Bank overdrafts (Note 25)
(91,470)
(134,159)
(86,475)
(10,280) (10,334) (39,013) (34,730)(22,354)(44,953)
46,010 201101.01.2011
98,321
(80,740) (120,675)
30,229
(75,182)
ANNUAL REPORT 2012
63
23. Trade and other payables
Group
2012
Company
2011 01.01.2011 2012
201101.01.2011
Trade payables
130,601 136,159
140,646
101,871 108,317
101,665
Accrued expenses
118,148 117,618
104,234
85,573 75,455
55,377
532 704
561
532 539
561
Other payables
177,589 190,563
172,601
125,842 155,538
133,888
426,870 445,044
418,042
313,818 339,849
291,491
Dividend payable
24. Amount due to affiliated companies
Group
2012
Company
2011 01.01.2011 2012
201101.01.2011
Non current
Hapiways Management Services Pte Limited
Unearned interest income
167,618 322,598
670,737
167,618 322,598
670,737
34,829 69,657
104,486
34,829 69,657
104,486
202,447 392,255
775,223
202,447 392,255
775,223
Current
Ceylon Agro Industries Limited
57,562 38,558
27,975 57,562 38,558
27,975
Prima Ceylon (Private) Limited
199,801 99,642
245,773 199,801 99,642
245,773
9,937 22,800
13,080 9,937 22,800
13,080
888,609 1,243,105
613,408 888,609 1,243,105
611,830
Prima Management Services (Private) Limited
Colombo Sea Foods Limited
Ceylon Livestock and Agrobusiness (Private) Limited
2,640 - 2,640
- 1,158,549 1,406,745
2,640 2,640 2,640
2,640
16,197 14,343
-
902,876 1,174,746 1,421,088
901,298
- Management has determined the fair value of amount due to Hapiways Management Services Pte Limited (non current) amounting to
Rs. 670,737,000/- by taking into the consideration of market interest rate of 9% on 1 January 2011. This has resulted in an unearned
income amounting to Rs. 104,486,000/- on 1 January 2011 which would be amortised over a 3 year period. 64
ANNUAL REPORT 2012
25. Interest bearing borrowings
Bank overdraft
Group
2012
Company
2011 01.01.2011 2012
201101.01.2011
91,470 134,159
86,475
80,740 120,675
75,182
Bank borrowings
887,000 272,000
360,000
637,000 22,000
360,000
978,470 406,159
446,475
717,740 142,675
435,182
The interest rate exposure of the borrowings of the Group and the Company was as follows:
Group
Company
2012 2011 20122011
Total borrowings:
- at fixed rates
- at floating rates
- -
978,470 - 406,159
717,740 142,675
978,470 406,159
717,740 142,675
Group / Company
2012
Weighted average effective interest rates:
- bank overdrafts
2011
2010
AWPLR+0.50%
AWPLR+0.75% AWPLR+0.75%
- bank borrowings
- fixed
- floating
- 14.70%
-
-
10.50%
9%
Current bank borrowings were obtained to finance the import of raw materials relating to the production of poultry and animal feed.
Security for these borrowings are inventories and receivables and agreement to mortgage for Rs. 495mn over leasehold land & building,
machinery equipment at No.15, Rock House Lane, Colombo-15.
26. DEFERRED TAXATION
26.1 Deferred tax asset
The gross movement on the deferred income tax account is as follows:
Group
Company
2012 2011 20122011
At the beginning of year
13,922 Income statement release / (charge) (Note 11)
53,184 (5,308)
53,184 (5,308)
At the end of year
67,106 13,922 67,106 13,922
19,230
13,922 19,230
Deferred tax has been computed taking into consideration the effective tax rate which is 12%.
ANNUAL REPORT 2012
65
26. DEFERRED TAXATION (Contd.)
26.1 Deferred tax asset (Contd.)
The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within
the same tax jurisdiction, is as follows:
2012
2011
Temporary
Tax effect onTemporary
Tax effect on Difference
Temporary
Difference
Temporary Difference
Difference
(173,174)
(20,781)
(149,425)
(17,930)
Provision for bad and doubtful debt
241,336
28,960
243,336
29,200
Employee benefits
25,940
3,113
22,104 2,652
Tax losses 465,117
55,814
- -
559,219
67,106
116,015 13,922
26.2 Deferred tax liability
The gross movement on the deferred income tax account is as follows:
Group
Company
2012 2011 20122011
At the beginning of the year
122,392
Income statement release (Note 11)
At the end of the year
(1,149)
121,243
129,425
(7,033)
122,392
-
-
-
-
-
-
Ceylon Pioneer Poultry Breeders Limited has been computed deferred taxation by taking into consideration the effective tax rate of 28%.
Ceylon Warehouse Complex (Private) Limited has been computed deferred taxation by taking into consideration the effective tax rate of 10%.
26.2 Deferred tax liability
The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within
the same tax jurisdiction, is as follows:
2012
2011
Temporary
Tax effect onTemporary
Tax effect on Difference
Temporary
Difference
Temporary Difference
Difference
1,295,127 159,356 1,229,131
150,166
Livestock
369,298 44,316
346,933
41,632
(8,766)
(1,038)
(9,575)
(1,136)
Tax losses
Employee benefits (603,989)
(81,391)
(568,912)
(68,270)
1,051,670 121,243 997,577
122,392
66
ANNUAL REPORT 2012
26. DEFERRED TAXATION (Contd.)
26.2 Deferred tax liability (Contd.)
Group
Unrecognised deferred tax asset
Deferred tax asset has not been recognised on tax losses carried forward for following companies because it is not probable that future
taxable profit will be available against which the Company can utilise the benefit there on.
2012
201101.01.2011
Tax losses carried forward 227,689 227,645 227,683
63,751
Tax effect there on @ 28%
63,753 63,741 Ceylon Aquatech (Private) Limited
Tax losses carried forward 8,617 22,791 21,921
Tax effect there on @ 28%
2,413
6,381 6,138
27. Employee benefits
Group
Employee benefits as at 1 January
Company
2012 2011 20122011
31,676 28,052 22,104 19,654
Provisions made during the year
7,988 7,102 7,061 4,895
(4,958)
(3,478)
(3,225)
(2,445)
Benefits paid by the plan
Employee benefits as at 31 December
34,706 31,676 25,940 22,104
The amounts recognised in the balance sheet are as follows:
Present value of unfunded obligations
37,894
Present value of funded obligations
-
Total present value of obligations
37,894
37,270 - 27,422 25,094
-
-
37,270
27,422 25,094
Unrecognised actuarial gains / (losses)
(3,188) (5,594) (1,482)
(2,990)
Recognised liability for defined benefit obligations
34,706 31,676 25,940 22,104
Movement in the present value of the employee benefits
Employee benefits as at 1 January
31,676 28,052
22,104 19,654
Benefits paid by the plan
(4,958)
(3,478)
(3,225)
(2,445)
Current service cost
3,942 3,357
2,957 2,386
Interest cost
4,594 3,616
3,428 2,509
129
676 -
31,676
25,940 22,104
Actuarial loss / (gain) during plan year
Employee benefit obligations at end of the year
(548) 34,706 Expense recognised in income statement
Current service costs
3,942 3,357
2,957 2,386
Interest on obligation
4,594 3,616
3,428 2,509
Actuarial loss / (gain) during plan year
(548)
129
676 -
7,988 7,102
7,061 4,895
ANNUAL REPORT 2012
67
27. Employee benefits (Contd.)
The actuarial valuation was carried out by professionally qualified actuary Mr. Piyal S Gunathilake of P & G Associates for retiring gratuity
for employees as at 31 December 2012.
The liability is not externally funded.
Actuarial assumptions
Principal actuarial assumptions at the reporting date (expressed as weighted averages): 20122011
Discount rate as at 31 December
12%
Expected return on plan assets as at 1 January
Future salary increases
10%
- - 10%
10%
ssumptions regarding future mortality are based on published statistics and mortality tables.
A
The average life expectancy of an individual retiring at age 55
Staff turnover sliding scale by the age of employee retiring from 10% - 1%
The provision for retiring gratuity for the year is based on the actuarial valuation made on 31 December 2012
28. Contingent liabilities
(a) 284/2008 MR
Green Valley Farm has sued CGE claiming Rs. 195,775,306/- as losses resulted from the business affairs, it had with CGE.
Inquiry is going on and the third witness on behalf of petitioner - Green Valley Farms (Pvt) Limited is giving evidence. Next hearing is
due on 23 May 2013.
(b) A 3175 - Dispute between Inter Company Employees Union for 275 terminated Employees Vs CGE & Subsidiaries
Employees of CGE & subsidiary companies went on strike on 20 March 2006 and those who went on strike were terminated. The
dispute was referred to Commissioner of Labour and the reference was gazetted by the Minister dated 26 May 2006 referring the
case for hearing at the Industrial Court.
In industrial court CGE took up a preliminary objection that Composite reference (referring employees of six companies in one
reference) is bad in law as they are separate legal entities and cannot be referred in one dispute. Industrial Court gave its verdict
rejecting the preliminary objection and thereafter Company made an appeal against the interim order in the Court of Appeal (C/A
796/2007). Court of Appeal delivered its judgment on 18 May 2010 rejecting the appeal filed by CGE. Accordingly the case was taken
up for hearing before the Industrial Court.
The 1st Witness on behalf of the Inter Company Employees Union concluded his evidence and the Company is to commence giving
evidence on the next date, 24 April 2013.
(c) A 3174 and A 3179 - Dispute between Inter Company Employees Union for contractors workers Vs Contractors & CGE
Employees who worked under Labour Contractors were also involved in the strike. Labour Contractors were Global Engineering & Supplies, Global Marine Services and Avant Guard Security Services (Pvt) Limited. This case was also referred to Commissioner of
Labour and two references were gazetted by the Minister dated 26 May 2006 referring the case for hearing at the Industrial Court.
(i) A 3174 Dispute between Inter Company Employees Union and CGE & Global Engineering & Supplies - 159 no of employees.
(ii) A 3179 Dispute between Inter Company Employees Union and CGE & Avant Guard Security Services (Pvt) Ltd - 57 no of employees.
68
ANNUAL REPORT 2012
28. Contingent liabilities (Contd.)
The dispute was referred as “Non Offer of employment“. CGE lawyers took up an objection in the Industrial Court that there is no
such dispute called “non offer” of employment under the purview of law. But Industrial Court in its preliminary order rejected the
said objection and thereafter CGE made an Appeal to the Court of Appeal. (Case No 737/2007 & 746/2007 respectively) and Court
of appeal delivered its judgment on 30 May 2012 rejecting the appeals filed by CGE and referring the cases back to Industrial Court
for hearing. Cases to be listed.
29. Commitments
No capital commitments outstanding as at the balance sheet date except the followings
Within
one year
More than
1-5 years
5 years
Total
Company
(a) Hapiways Management Services Pte Limited -
for the management services rendered outside Sri Lanka.
(b) Operating lease commitment -
31,006
124,024
the Ministry of Finance and Planning for the use of
land and buildings at No. 15, Rock house lane, Colombo 15.
15,630
62,520
744,144
899,174
375,120
453,270
94,992
114,782
(c) Sri Lanka Ports Authority -
operating lease rentals for the use of Woodland Warehouse.
3,958
15,832
Group
(d) Ceylon Warehouse Complex (Private) Limited operating
lease rentals to Sri Lanka Ports Authority for the use of land.
12,273
49,092
294,552
355,917
62,867 251,468 1,508,8081,823,143
(e) With respect to (b), (c) and (d) above, the Company has exercised its option provided by the original Agreement and the related Leases
to renew for a further period of 30 years, before the Agreement and the related Leases expired on 19 September 2012. In a letter
dated 18 September 2012, the Government of Sri Lanka has expressed its willingness to consider an extension of the Agreement and
the related Leases subject to mutually acceptable terms and conditions, and to permit the Company to continue to operate under
the existing Agreement and the related Leases pending negotiations to enter into a new Agreement and Leases. The terms and
conditions of the new leases have yet to be finalised at the date of this annual report. The operating lease commitments relating to
these operating lease agreements have been stated based on the current lease rental rates.
(f) The Company is the parent company of Three Acre Farms PLC, Ceylon Warehouse Complex (Private) Limited, Ceylon Aquatech
(Private) Limited, Millennium Multibreeder Farms (Private) Limited and Ceylon Pioneer Poultry Breeders Limited and confirms their
commitment, in present circumstances to continue financial support in the business operations and to meet financial obligations. As
the ultimate parent company of the above Companies, CGE has no intension or inclination of withdrawing their support or reducing
the scale of operations of the above companies in the forth coming 12 months.
(g) The Company has provided a corporate guarantee of Rs. 45,000,000/- to Sampath Bank PLC for a banking facility obtained by Ceylon
Agro industries Limited. The outstanding amount of this banking facility as at 31 December 2012 was Rs. 9,250,000/-.
ANNUAL REPORT 2012
69
30. Stated Capital
In accordance with Section 58 of Companies Act No 07 of 2007, which became effective from 3 May 2007, share capital and share
premium of the Company have been reclassified as stated capital.
Company
20122011
60,000,000 Ordinary shares
600,000
600,000
Share premium
417,996
417,996
Stated capital as at 31 December
1,017,996
1,017,996
31. Non - controlling interestsGroup
20122011
As at the beginning of the year
Share of net profit of subsidiaries
305,507 232,541
15,797 72,966
As at the end of the year
321,304 305,507
32. CASH GENERATED FROM OPERATION Group
Company
2012 2011 20122011
Profit before Tax
122,317 465,900 157,939 169,114
Adjustments:
Depreciation (Note 13)
114,115 108,731 31,403 26,931
Amortisation of leasehold right (Note 14)
16,284 16,294 3,796 3,785
Amortisation of intangible assets (Note 15)
12,454 10,578 12,454 10,578
Amortisation of livestock (Note 18)
396,741 361,146 Reversal of impairment on amount due from affiliated companies (Note 19)
Provision for impairment on investment in affiliated companies (Note 17)
- - Loss on disposal of property, plant and equipment (Note 9)
19,263 - -
- (10,586)
- 10,586 -
170 2,394
2,989 -
Profit on disposal of associate company shares (Note 16)
(447,104)
- (602,165)
-
Dividend income (Note 9)
(12,082)
- (16,132)
-
Exchange loss (Note 10)
184,438 58,360 186,273 58,585
Interest income (Note 9)
(40,349)
(40,263)
(39,538)
(39,786)
Interest expenses (Note 10)
118,894 71,098 84,283 70,200
Reversal of provision for doubtful debts (Note 5)
(2,125)
(4,500)
(2,000)
(4,500)
Share profit on associate [Note 16(c)]
(4,108)
(60,512)
- -
Changes in working capital
21,411 (13,844)
13,098
- Inventories
- Trade and other receivables
(511,225)
(310,814)
(469,205)
(311,283)
- Trade and other payables
(30,222)
(15,821)
(26,176)
21,128
- Amount due from affiliated companies
48,029 421,600
- Amount due to affiliated companies
(432,209)
95,364 (430,355)
111,285
Employee benefits (Note 27)
7,988 7,102 7,061 4,895
(486,864)
787,063 (1,068,007)
558,024
Cash generated from operations
66
- - 70
ANNUAL REPORT 2012
33. Financial Instruments
33.1 Financial Instruments - Statement of Financial Position
GroupCompany
As at
Financial Assets
2012
2011 01.01.2011 2012
201101.01.2011
Notes
21
19
-
-
Current tax receivables
39,835
34,434
Total loans and receivables
495,496
493,437
455,661
459,003
476,026
425,648
415,256
423,966
- 1,004,429 1,041,872 1,463,472
34,322
7,469
2,017
1,906
510,348 1,437,546 1,459,145 1,889,344
22 81,190123,825 47,462 46,01098,32130,229
576,686 617,262 557,810 1,483,5561,557,4661,919,573
Group
As at
Financial Liabilities
2012
2011
01.01.2011
887,000
272,000
2012
Company
2011
01.01.2011
Notes
Other financial liabilities
Amount due to affiliated companies - non current 24
Amount due to affiliated companies - current
24
23
Total other financial liabilities
Bank overdraft
25
25
202,447
392,255
1,158,549
1,406,745
426,870
445,044
2,674,866
360,000
637,000
22,000
775,223
202,447
360,000
392,255
775,223
902,876 1,174,746 1,421,088
901,298
418,042
291,491
313,818
339,849
2,516,044 2,456,141 2,328,011 2,175,192 2,328,012
91,470
134,159
86,475
80,740
120,675
75,182
2,766,336 2,650,203 2,542,616 2,408,7512,295,8672,403,194
33.2 Financial Instruments - Statement of Comprehensive Income
Group
Company
2012 2011 20122011
Gain / income
Amount due to affiliated companies - unearned income
34,829
34,829
34,829
34,829
5,520
5,434
4,709
4,957
40,34940,26339,53839,786
Losses / expenses
Other financial liabilities
Interest on amount due to affiliated companies
29,034
60,366
29,034
60,366
89,860
10,732
55,249
9,834
118,89471,09884,28370,200
ANNUAL REPORT 2012
71
33. Financial Instruments (Contd.)
33.3 Credit risk
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting
date was;
Group
Note
2012
Company
2011 01.01.2011 2012
19
-
-
21
707,207
712,674
201101.01.2011
- 1,188,155 1,236,184 1,657,784
736,417
666,984
658,592
674,006
Current tax receivables
39,835
34,434
34,322
7,469
2,017
1,906
81,190
123,825
47,462
46,010
98,321
30,229
22
828,232 870,933 818,201 1,908,6181,995,1142,363,925
33.4 Impairment losses
The aging of trade and other receivables at the reporting date was;
Group
Gross Impairment
GrossImpairment
2012
2011
Not past due
116,810
Past due 0 - 365 days
More than one year
2012
Gross Impairment
201101.01.2011 01.01.2011
-
149,197
-
200,333
-
155,985
-
159,410
-
390,064
251,546
407,492
253,671
416,808
260,391
707,207
251,546712,674 253,671 736,417 260,391
Company
Gross Impairment
GrossImpairment
2012
2011
Not past due
90,132
More than one year
2012
160,199
-
Gross Impairment
201101.01.2011 01.01.2011
-
107,621
-
108,005
-
196,998
-
153,814
-
159,410
-
379,854
241,336
397,157
243,336
406,591
250,040
666,984
241,336658,592 243,336 674,006 250,040
The movements in the allowance for impairment in respect of loans and receivables during the year was as follows;
GroupCompany
2012 2011 20122011
Balance as at 1 January
253,671
Impairment loss recognised / (reversed)
Balance as at 31 December
(2,125)
251,546
260,391
(6,720)
253,671
243,336
(2,000)
241,336
250,040
(6,704)
243,336
Based on historic default rates, the Group believe that, apart from the above, no impairment allowance is necessary in respect of trade
receivables not past dues or past due more than 365 days, which includes the amount owed by the Group’s most significant customer,
relates to customers that have a good payment record with the Group.
72
ANNUAL REPORT 2012
33.4 Impairment losses (Contd.)
The aging of amount due from affiliated companies at the reporting date was;
Company
Gross Impairment
GrossImpairment
2012
2011
2012
Gross Impairment
201101.01.2011 01.01.2011
Not past due
-
-
-
-
-
-
51,712
-
127,981
-
187,414
-
More than one year 1,136,443
183,726 1,108,203
194,312 1,470,370
194,312
183,7261,236,184
194,312 1,657,784
194,312
1,188,155
Based on historic default rates, the Group / Company believe that, apart from the above, no impairment allowance is necessary in respect
of amount due from affiliated companies not past dues or past due more than 365 days.
The movements in the allowance for impairment in respect of amount due from affiliated companies during the year was as follows;
GroupCompany
2012 2011 20122011
Balance as at 1 January
-
-
194,312
Impairment loss recognised
-
-
(10,586)
194,312
-
Balance as at 31 December --
183,726194,312
33.5 Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of
netting agreements. The Group early applied the exemption in SLFRS I that allows an entity not to provide comparative information for
periods ending before 31 December 2011 inrespect of the liquidity disclosures below.
Group
Carrying Contractual 6 months
amount cash flows
or less
6-12
1-2
2-5
More than
months
years
years
5 years
Non-derivative financial liabilities
Amount due to affiliated companies - non current 202,447
(182,704)
-
-
Bank loans
887,000
(887,000)
(887,000)
-
-
-
-
426,870
(426,870)
(426,870)
-
-
-
-
-
-
-
-
-
-
Bank overdraft
1,158,549 (1,158,549)
91,470
(91,470)
-
-
(974,536) (184,013)
(91,470)
-
(182,704)
2,766,336(2,746,593)(2,379,876) (184,013) (182,704)- -
ANNUAL REPORT 2012
73
33.5 Liquidity risk (Contd.)
Company
Carrying Contractual 6 months
amount cash flows
or less
6-12
1-2
2-5
More than
months
years
years
5 years
Non-derivative financial liabilities
Amount due to affiliated companies - non current 202,447
(182,704)
-
-
Bank Loans
637,000
(637,000)
(637,000)
-
-
-
-
313,818
(313,818)
(313,818)
-
-
-
-
-
-
-
-
-
-
Bank overdraft
1,174,746 (1,174,746)
80,740
(80,740)
-
-
(182,704)
(990,733) (184,013)
(80,740)
-
2,408,751(2,389,008)(2,022,291) (184,013) (182,704)- -
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amount.
33.6 Currency risk
Exposure to currency risk
The Group’s exposure to foreign currency risk was as follows based on notional amounts;
Group
2012
USD SGDEUR
Trade payables
460,447
-
Amount due to affiliated companies 8,424,922
-
Total exposure
-
8,885,369
Company
84,595
SGD EUR
343,245 (22,080) 39,050
- 13,742,956 508,152
USD SGD EUR
378,879
-56,543
- 10,651,068 2,493,263
-
84,595 14,086,201 486,072 39,050 11,029,947 2,493,263 56,543
2012 201101.01.2011
USD SGDEUR
Trade payables
201101.01.2011
USD
283,151
SGD EUR
361,967
-
Amount due to affiliated companies 8,424,922
-
- 13,742,956 508,152
Total exposure
-
41,804 14,026,107 486,072
8,786,889
41,804
USD
(22,080) (2,570)
USD SGD EUR
256,675
-20,863
- 10,636,847 2,493,263
-
(2,570)10,893,522 2,493,26320,863
The following significant exchange rates applied during the year:
Average Rate 2012
2011 Reporting date spot Rate
2012
2011
01.01.2011
USD 128.40 110.83 127.16113.90110.95
EUR 165.77 154.69 168.13147.42147.56
SGD102.05 87.57104.0187.5786.14
74
ANNUAL REPORT 2012
33.7 Interest rate risk
At the reporting date the interest rate profile of the Group’s interest bearing financial instruments was;
Carrying amount
Group
Company
2012 2011 20122011
Fixed rate instruments
Financial assets -
-
-
-
Financial liabilities -
-
-
-
---Variable rate instruments
Financial assets ---Financial liabilities
(887,000)
(272,000)
(637,000)
(22,000)
(887,000)(272,000)(637,000)(22,000)
34. Related party transactions
34.1 Key management personnel information
Key management personnel include all the members of the Board of Directors of the Company having authority and responsibility for
planning, directing and controlling the activities of the Company as well as the subsidiaries, directly or indirectly. Compensation paid to /
on behalf of key management personnel of the companies are as follows:
GroupCompany
2012 2011 20122011
Short-term employee benefits
Post employment benefits
480
- 480
-
360
- 360
-
480480360360
ANNUAL REPORT 2012
75
34. Related party transactions (Contd.)
34.1 Key management personnel information (Contd.)
Mr. Cheng Chih Kwong, Primus, Mr. Cheng Chih Cheng, Robert (resigned w.e.f. 31 July 2012), Mr. Tan Beng Chuan, Mr. Cheng Chih Hui,
Peter (resigned w.e.f. 31 July 2012), Dr. Wickrema Sena Weerasooria, Mr. Cheng Koh Chuen, Bernard (appointed w.e.f. 1 August 2012),
Mr. Cheng Eng Loon (appointed w.e.f. 1 August 2012) and Mr. Sunil Karunanayaka the directors of the Company are also directors of the
following companies as set out below and with transaction in note number 34.2 have been carried out.
Name of the related party
Name of the director
Nature of transaction
Subsidiary
CGE sells feeds to TAF. Also company
purchases broiler DOC and culled birds (Resigned w.e.f. 31 July 2012)
from TAF.
Mr. Tan Beng Chuan
Mr. Sunil Karunanayaka
No inter-company transactions has been recorded during the year.
Subsidiary
Mr. Tan Beng Chuan
Ceylon Aquatech (Private) Limited
No inter-company transactions has been Subsidiary
Mr. Tan Beng Chuan
recorded during the year.
Ceylon Livestock and Agrobusiness Mr. Cheng Chih Kwong, Primus
Services (Private) Limited Mr. Tan Beng Chuan
Subsidiary
CLAS supplies veterinary drugs, medicine
and poultry equipments to the Company’s outgrower farms.
Also company sells drugs and vaccines to CLAS.
Ceylon Warehouse Complex (Private) Limited CWCL provides storage facilities to the Company.
Mr. Tan Beng Chuan
Subsidiary
Millennium Multibreeder Farms
(Private) Limited
Mr. Tan Beng Chuan
CGE sells feeds to MMFL. Also company purchases broiler DOC and culled birds from
Subsidiary
MMFL.
PMS provide ICT solutions and services
Associate Company
to the Company.
Group Company
The CGE purchases Brand Pallet and Wheat
pollard from PCL.
Mr. Tan Beng Chuan
Hapiways Management Services
Pte Limited
The Company purchase of all kind of imported
raw materials, feed additives, spare parts and Group Company
Mr. Cheng Chih Hui, Peter other significant imports from HMS.
Group Company
Mr. Tan Beng Chuan
The Company is hiring the poultry processing
plant, rendering plant and storage facilitation
from CAI. Also company sells process chicken
to CAI.
76
ANNUAL REPORT 2012
34.2 Related party transactions
The Group has a related party relationship with its subsidiaries, associates and related group companies as disclosed in Note 34.1.
Companies within the Group engage in trading transactions. The following transactions were carried out with related parties during the
year ended 31 December 2012.
(a) Sales of goods and services
Group
Company
2012 2011 20122011
Sales of goods:
- -
520,657 479,153
- -
194,553 147,485
- -
41,926 30,210
3,350 4,081
3,350 4,081
63,651 18,843
63,651 18,843
67,001 22,924
824,137 679,772
Sale of services:
105 609
105 609
- -
2,100 2,100
- -
5,700 5,700
- -
4,814 4,200
- -
74 Prima Ceylon (Private) Limited
105
576
105 576
210 1,185
12,898 13,185
(b) Purchases of goods and services
Group
Company
2012 2011 20122011
Purchases of goods:
- -
334,492
346,786
- -
32,904
29,652
- -
166,181
125,296
6,371,701 5,587,909
6,348,498
5,567,848
4,085 18,168
4,085
18,168
473,144 441,596
473,144
441,596
-
3,085
27,588 3,085
6,848,930 6,050,758
7,386,892
6,532,431
Purchases of services:
- Hapiways Management Services Pte Limited
30,740 Ceylon Agro Industries Limited
263,224 Prima Ceylon (Private) Limited
8,460 Prima Management Services (Private) Limited
31,009 Ceylon Aquatech (Private) Limited
- 333,433 -
26,600
236,026
6,690
56,468
-
325,784
72,427
30,740
263,224
8,460
31,009 - 405,860 51,448
26,600
236,026
6,690
56,468
3,070
380,302
ANNUAL REPORT 2012
77
(c) The receivables from related companies and payables to related companies on sale / purchase of goods / services are set out in Note
19 and 24 respectively. These receivables and payables are unsecured, interest free and have no fixed repayment terms.
(d) The subsidiary companies use some facilities of the Company free of charge and part of the accounting and administrative functions
of the subsidiary companies are also performed by the Company for which no charges are made.
35. Events occurring after reporting date
There are no events which require adjustment to, or disclosure in the financial statements except for the following:
The Directors propose for payment a First and Final Dividend of Rs. 0.14 per share for the year ended 31 December 2012 on 2 April
2013.
36. Comparative information
Comparative figures have been reclassified wherever necessary to conform to the current year’s presentation.
37. Directors’ responsibility
The Board of Directors are responsible for the preparation and fair presentation of these financial statements.
38. Explanation of transition to SLFRS/LKAS
As stated in note 2.1, these are the Company’s first financial statements prepared in accordance with SLFRS/LKASs.
The accounting policies set out in note 3 have been applied in preparing the financial statements for the year ended 31 December 2012,
the comparative information presented in these financial statements for the year ended 31 December 2011 and in the preparation of an
opening SLFRS statement of financial position as at 1 January 2011 (the date of transition).
In preparing its opening SLFRS statement of financial position, the Company has adjusted amounts reported previously in financial
statements prepared in accordance with Sri Lankan Accounting Standards (previous GAAP). An explanation of how the transition from
previous GAAP to SLFRS has affected the Company’s financial position, financial performance and cash flows is set out in the following
tables and the notes that accompany the tables.
78
ANNUAL REPORT 2012
38. Explanation of transition to SLFRS/LKAS (Contd.)
Reconciliation of comprehensive income for the year ended 31 December 2011
Group
Notes
Effect of
As per SLAS
As per
transition to SLFRS / LKAS
Company
Effect of
As per SLAS
As per
transition to SLFRS / LKAS
SLFRS
SLFRS
Revenue
10,479,840
Cost of sales
(9,666,042)
12,272 (9,653,770)
(9,734,636)
813,798 12,272 826,070
518,022 38.3
Gross profit
Other operating losses
Other income
(38,951)
38.1
24,220 - 10,479,840 - 31,270 (38,951)
55,490
10,252,658 - 3,953 3,953 10,252,658
(9,730,683)
521,975
-
-
-
36,034 31,769 67,803
Selling and distribution expenses
(120,432)
- (120,432)
(117,583)
- (117,583)
Administrative expenses
(187,331)
- (187,331)
(174,296)
- (174,296)
Operating profit
491,304 43,542 534,846 262,177
35,722 297,899
38.2
(63,658)
(65,800)
(129,458)
(63,462)
(65,323)
(128,785)
Share of profit of associate
60,512 Profit before tax
488,158 38.5
60,512 -
(22,258)
465,900 198,715
(32,939)
(13,576)
(46,515)
455,219 (35,834)
-
455,219 Taxation
Profit after tax
-
-
(35,834)
-
-
(29,601)
169,114
(9,104)
(23,435)
(32,539)
419,385 189,611 (53,036)
136,575
-
-
419,385 189,611 -
(53,036)
136,575
Attributable to:
Equity holders of the parent
387,815 (41,396)
346,419 189,611 (53,036)
136,575
67,404 5,562 72,966 -
-
-
455,219 (35,834)
419,385 189,611 (53,036)
136,575
ANNUAL REPORT 2012
79
Reconciliation of equity - Group
As at 31.12.2011
Effect of
Notes
As per SLAS
As at 01.01.2011
As per
transition to SLFRS/LKAS
Effect of
As per SLAS
As per
SLFRS SLFRS
ASSETS
Non-current assets
38.3
2,051,871 504,591 3,681 - 2,055,552 1,781,450 504,591 520,885 214,868 - 1,996,318
520,885
Intangible assets
91,218 - 91,218 87,912 - 87,912
290,576 - 290,576 230,064 - 230,064
- -
- 355,087
Livestock
Deferred tax assets
38.5
- 346,934 - - - 346,934 16,918 (2,996)
13,922 3,302,108 685 3,302,793 - 355,087 - 2,975,398 19,230 19,230
234,098 3,209,496
Current assets
Inventories
38.6
1,503,541 218,227 1,721,768 1,206,253 204,701 1,410,954
38.7
432,331 26,672 459,003 452,327 23,699 476,026
34,434 34,322 Current tax receivable
34,434 - - - - 34,322
123,825 123,825 47,462 Total current assets
2,094,131 244,899 2,339,030 1,740,364 228,400 1,968,764
47,462
Total assets
5,396,239 245,584 5,641,823 4,715,762 462,498
5,178,260
EQUITY
Stated capital
1,017,996 -
1,017,996 1,017,996 -
1,017,996
Share Premium of subsidiaries
38.9
213,133 (213,133)
- 213,133 (213,133)
-
Revaluation reserve
38.3
349,347 (349,347)
- 231,142 (231,142)
- Retained earnings
38.9
982,626 531,423 1,514,049 654,811 572,819 1,227,630
Total equity
2,563,102 (31,057)
2,532,045 2,117,082 128,544 2,245,626
325,345 (19,838)
305,507
178,062 54,479 232,541
Total equity
2,888,447 (50,895)
2,837,552
2,295,144 183,023 2,478,167
96,350 26,042 122,392 78,350 51,075 129,425
LIABILITIES
Deffered tax liabilities
Employee benefits
38.5
31,676 31,676 28,052 38.10
775,223 (382,968)
392,255 1,065,944 (290,721)
775,223
903,249 (356,926)
546,323 1,172,346 (239,646)
932,700
38.8
418,372 26,672 445,044 394,343 23,699 418,042
Amount due to affiliated companies 38.10
780,012 626,733 1,406,745 407,454 495,422 406,159 446,475 Amount due to affiliated companies
- - 28,052
Current liabilities
406,159 - - 902,876
446,475
1,604,543 653,405 2,257,948 1,248,272 519,121 1,767,393
Total liabilities
2,507,792 296,479 2,804,271 2,420,618 279,475 2,700,093
5,396,239 245,584 5,641,823
4,715,762 462,498 5,178,260
80
ANNUAL REPORT 2012
Reconciliation of equity - Company
As at 31.12.2011
Notes
As per SLAS
Effect of
As at 01.01.2011
As per
Effect of
As per SLAS
As per
SLFRS SLFRS ASSETS
Non-current assets
Property,plant and equipment
38.3 245,269 29,121 274,390 202,521 43,560 246,081
116,830 - 116,830 120,615 - Intangible assets
91,218 - 91,218 87,912 - 87,912
128,484 - 128,484 128,484 - 128,484
361,625 - 361,625 361,625 - 361,625
Deferred tax assets
38.5 16,918 (2,996)
38.4 903,679 (903,679)
1,864,023 (877,554)
13,922 - - 19,230 120,615
19,230
1,339,622 (1,339,622)
- 986,469 2,240,779 (1,276,832)
963,947
Current assets
Inventories
38.6 1,409,874 218,227 1,628,101 1,112,117 204,701 1,316,818
38.7 388,584 26,672 415,256 400,267 23,699 423,966
38.4 1,041,872 1,041,872 1,463,472 1,463,472
- - Current tax receivable
2,017 - 2,017 1,906 - Cash and cash equivalents
98,321 - 98,321 30,229 - Total current assets
1,898,796 3,185,567 1,544,519 1,286,771 1,691,872 1,906 30,229
3,236,391
Total assets
3,762,819 409,217 4,172,036 3,785,298 415,040 4,200,338
EQUITY
Stated capital
1,017,996 - Revaluation reserve
38.3 46,766 (46,766)
Retained earnings
38.9
664,866 171,203 1,729,628 124,437 Total equity
1,017,996 - 1,017,996 - 1,017,996
37,579 (37,579)
836,069 535,255 224,239 759,494
- 1,854,065
1,590,830 186,660 1,777,490
20 (20)
LIABILITIES
Deferred tax liabilities
Employee benefits
Amount due to affiliated companies
38.5 -
-
- - - - 22,104 22,104 19,654 38.10 775,223 (382,968)
392,255 1,065,944 (290,721)
775,223
19,654
797,327 (382,968)
414,359 1,085,618 (290,741)
794,877
Current liabilities
38.8 313,177 26,672 339,849 267,792 23,699 291,491
Amount due to affiliated companies 38.10 780,012 641,076 1,421,088 405,876 495,422 901,298
142,675 435,182 Interest bearing borrowings
142,675 - - 435,182
1,235,864 667,748 1,903,612 1,108,850 519,121 1,627,971
Total liabilities
2,033,191 284,780 2,317,971 2,194,468 228,380 2,422,848
3,762,819 409,217 4,172,036 3,785,298 415,040 4,200,338
ANNUAL REPORT 2012
81
38.1. Other income - for the year ended 31.12.2011
GroupCompany
Other income - as per SLAS
24,220
36,034
Adjustment for loss from disposal of property, plant and equipments
(8,993)
(8,017)
Amortization of unearned interest income (non current related party payables)
34,829
34,829
Reclassification of interest income
5,434
4,957
Other income - as per SLFRS/LKAS
55,490
67,803
38.2. Finance expenses - for the year ended 31.12.2011
Group
Company
Finance expenses - as per SLAS
63,658
63,462
Reclassification of interest income
5,434
4,957
Interest expense on non current related party payables
Finance expenses - as per SLFRS/LKAS
60,366
60,366
129,458
128,785
38.3. Deemed cost exemption
The Group / Company elected to measures items of property, plant and equipment at the date of transition to SLFRS at its fair value and
use that fair value as its deemed cost at that date as per the exception given in SLFRS 1. The revaluation reserve of Rs. 353,580,000/- and
Rs. 74,605,000/- of the Group and Company at 1 January 2011 and 31 December 2011 was reclassified to retained earnings. Group Company
31.12.2011 01.01.2011 31.12.201101.01.2011
Property, plant and equipment - as per SLAS
2,051,871 1,781,450
245,269 202,521
Reversal of revaluation as at 31 December 2011
(214,466)
-
(10,375)
- Revaluation as at 1 January 2011
214,868
214,868
43,560
43,560
Adjustment for depreciation
12,272 -
3,953
- Adjustment for disposal
(8,993)
-
(8,017)
Property, plant and equipment - as per SLFRS/LKAS (deemed cost)
2,055,552 1,996,318
274,390 246,081
GroupCompany
31.12.2011 01.01.2011 31.12.201101.01.2011
Revaluation reserve - as per SLAS Reversal of revaluation as at 31 December 2011
Reversal of deferred tax on revaluation as at 31 December 2011
349,347
(123,100)
231,142
-
46,766
(10,376)
4,895 -
1,189 140,900
140,900
43,560
37,579
- - Revaluation as at 1 January 2011
43,560
Deferred tax on revaluation as at 1 January 2011
(18,462)
(18,462)
(6,534)
(6,534)
Transfer to retained earnings
(353,580)
(353,580)
(74,605)
(74,605)
Revaluation reserve - as per SLFRS/LKAS
-
-
-
- 82
ANNUAL REPORT 2012
38.4. Amount due from affiliated companies
Management has decided to settle part of amount due from / (to) affiliated companies by setting off each other as explained below.
Further, management has decided to reclassify non - current amount due from affiliated companies based on their payment pattern
and settlement plan (on demand).
31.12.201101.01.2011
Amount due from Three Acre Farms PLC
Balance - as per SLAS 675,800
964,318
Transfer of amount due from CPPBL to TAF on 1 January 2011
131,688
131,688
Transfer of amount due from MMF to TAF on 1 January 2011
63,743
63,743
Transfer of amount due from CPPBL to TAF on 31 December 2011
2,285 -
Transfer of amount due from MMF to TAF on 31 December 2011
(74,942)
-
Balance - as per SLFRS/LKAS
798,574
1,159,749
Amount due from Ceylon Pioneer Poultry Breeders Limited
348,005
Transfer of amount due from CPPBL to TAF on 1 January 2011
(131,688)
(131,688)
Transfer of amount due from CPPBL to TAF on 31 December 2011
(2,285)
216,136
216,317
Amount due from Millennium Multibreeder Farms (Private) Limited
Balance - as per SLAS (11,199)
63,743
Transfer of amount due from MMF to TAF on 1 January 2011
(63,743)
(63,743)
Transfer of amount due from MMF to TAF on 31 December 2011
74,942
-
-
-
Amount due from Ceylon Aquatech (Private) Limited
93,493
94,304
Amount due from Ceylon Warehouse Complex (Private) Limited
127,981
186,992
Amount due from Ceylon Livestock & Agrobusiness Services (Private) Limited
-
422
1,236,184
1,657,784
Provision for impairment
Balance - as per SLAS (318,162)
Reversal of provision for impairment in Three Acre Farms PLC
123,850
(194,312)
(318,162)
123,850
(194,312)
As at
Amount due from affiliated companies - as per SLFRS/LKAS
1,041,872 1,463,472
ANNUAL REPORT 2012
83
38.5. Recognition and measurement of deferred tax asset and liabilities
Deferred tax asset
Group Company
31.12.2011 01.01.2011 31.12.201101.01.2011
Balance - as per SLAS
16,918
(20)
16,918
(20)
Revaluation as at 1 January 2011
(6,534)
(6,534)
(6,534)
(6,534)
1,189
-
1,189
- Correction of error in computation
25,784
25,784
25,784
25,784
Reversal of deferred tax to the period as per SLAS
(18,127)
-
(18,127)
Deferred tax release for the period
(5,308)
-
(5,308)
Deferred tax liability
Revaluation as at 1 January 2011
13,922
19,230
78,350
18,462
(15,193)
Correction of error in computation
Reversal of deferred tax for the period as per SLAS
38.6. Recognition and measurement of inventories
19,230
Group Company
31.12.2011 01.01.2011 31.12.201101.01.2011
96,350
13,922
-
- 18,462
-
- -
-
- 32,613
(2,808)
32,613
-
-
-
- -
(7,032)
-
-
-
122,392
129,425
-
-
Group Company
31.12.2011 01.01.2011 31.12.201101.01.2011
1,503,541
1,206,253
1,409,874
1,112,117
Recognition of goods in transit according to terms of the agreement
218,227 204,701
218,227
204,701
1,721,768
1,410,954
1,628,101
1,316,818
38.7. Trade and other receivables
Group Company
31.12.2011 01.01.2011 31.12.201101.01.2011
432,331 452,327
388,584
400,267
Reclassification of debit balances under payables
26,672
23,699
26,672
23,699
459,003 476,026
415,256
423,966
38.8. Trade and other payables
Group Company
31.12.2011 01.01.2011 31.12.201101.01.2011
418,372
394,343
313,177
267,792
Reclassification of debit balances under payables
26,672
23,699
26,672
23,699
445,044
418,042
339,849
291,491
84
ANNUAL REPORT 2012
38.9. The above changes increased / (decreased) retained earnings as follows:
Group Company
31.12.2011 01.01.2011 31.12.201101.01.2011
982,626
654,811
664,866
535,255
Transfer of revaluation reserve (Note 38.3)
353,580
353,580
74,605
74,605
Reversal of provision for impairment (Note 38.4)
-
-
123,850
123,850
Transfer of negative goodwill (balance stated as share premium)
213,133
213,133
-
- Adjustments to deferred taxation (Note 38.5)
545
6,106
25,784
25,784
Adjustments for depreciation - property, plant and equipment (Note 38.3)
12,272
-
3,953
- Adjustment to cost of disposal
(8,993)
-
(8,017)
Amortization of unearned interest income
34,829
-
34,829
- Interest expense on non current related party payables
(60,366)
-
(60,366)
Reversal of deferred tax for the period as per SLAS
(11,852)
-
(18,127)
(1,725)
-
(5,308)
1,514,049
1,227,630
836,069
759,494
38.10. Recognition and measurement of amount due to affiliated companies
Non current liability
Group Company
31.12.2011 01.01.2011 31.12.201101.01.2011
Amount due to Hapiways Management Services Pte Limited
1,065,944
775,223 1,065,944
Reclassification as current liability
(382,968)
(290,721)
(382,968)
(290,721)
392,255
775,223
392,255
775,223
Current liability
Group Company
31.12.2011 01.01.2011 31.12.201101.01.2011
Amount due to Hapiways Management Services Pte Limited
117,986
616,372
116,408
Reclassification as current liability
408,506 290,721 408,506
290,721
Recognition of goods in transit according to terms of the agreement
218,227 204,701 218,227
204,701
1,243,105 613,408
1,243,105
611,830
38,558 27,975 38,558
27,975
99,642 245,773
99,642
245,773
22,800 13,080 22,800
13,080
Colombo Sea Foods Limited
2,640 2,640
2,640 2,640
-
14,343 -
902,876 1,421,088
901,298
Ceylon Livestock & Agrobusiness Services (Private) Limited
- 1,406,745 CEYLON GRAIN ELEVATORS PLC
ANNUAL REPORT 2012
85
Five Year Financial Summary
For the years ended 31 December
2012 201120102009
2008
GROUP
OPERATING RESULTS FOR THE PERIOD
Group revenue
Operating profit
Share of results of associate
Profit / (loss) before taxation
Taxation
12,375,045 10,479,8408,009,4096,899,3167,209,585
421,541
534,846
592,078
152,430
36,946
(303,332)
(129,458)
(29,063)
(120,735)
(217,972)
4,108
60,512
42,409
24,042
34,787
122,317
465,900
605,424
55,737
(146,239)
(46,515)
(32,525)
(3,965)
20,804
150,383
419,385
572,899
51,772
(125,435)
Non - controlling interest
(15,797)
(72,966)
(98,027)
82,098
72,840
Profit attributable to the Company
134,586 346,419474,872133,870(52,595)
Profit from ordinary activities
28,066 BALANCE SHEET
Stated capital
1,017,996 1,017,9961,017,9961,017,9961,017,996
Retained earnings
1,648,635
1,514,049
1,227,630
624,214
319,269
321,304
305,507
232,541
80,035
46,958
Non - current liabilities
358,396
546,323
932,700
1,176,668
1,198,142
3,346,331 3,383,875
3,410,867
2,898,913
2,582,365
Intangible assets
Property, plant and equipment and investments
Investment in an associate company
Livestock
Non current receivables
Current assets
Current liabilities
98,235
91,218
87,912
850
2,652
2,621,836
2,574,065
2,536,433
2,403,485
2,134,921
11,172
290,576
230,064
187,655
163,613
369,298 346,934355,087224,287228,434
-
-
-
-
-
2,809,679 2,339,0301,968,7642,037,1342,395,332
(2,563,889)
(2,257,948)
(1,767,393)
(1,954,498) (2,342,587)
3,346,331 3,383,8753,410,8672,898,9132,582,365
COMPANY
RATIOS AND OTHER INFORMATION
Earnings /(loss) per share (Rs)
3.43
2.28
3.66
2.35
(1.91)
Market price per share (Rs)
59.50
105.50
74.70
14.25
6.50
Price earnings ratio
17.35
46.27 20.41
6.06
(3.40)
Net dividend pay out (Rs 000)
-
-
60,000
-
-
Bonus issue (Ratio)
-
-
-
-
-
Rights issue (Ratio)
-
-
-
-
-
Rights price (Rs)
-
-
-
-
-
Debt / equity ratio
0.35
0.08 0.24 0.55
0.67
Interest cover (No of times)
2.26
18.59
5.43
2.38
0.16
34.33
30.90 29.62 22.85
20.50
1.62
1.67 1.99
0.96
0.94
70,039,800 103,961,000
Net assets per share (Rs)
Current ratio (No of times)
11,519,900
5,303,700
US $ Exchange rate - average
Shares traded
10,884,718
128.40
110.83
113.42
115.20
108.60
US $ Exchange rate - year end
127.16
113.90
110.95
114.38
113.00
86
ANNUAL REPORT 2012
Group Structure
ANNUAL REPORT 2012
87
SHAREHOLDER INFORMATION
1. ANALYSIS OF SHAREHOLDERS ACCORDING TO THE NUMBER OF SHARES AS AT 31 DECEMBER 2012
RESIDENT
Shareholdings
Number of Number of
shareholders
share
NON RESIDENT
Percentage Number of Number of
%
shareholders
share
TOTAL
Percentage Number of Number of
%
shareholders
share
Percentage
%
1 TO 1,000
3,903
1,289,248
2.15
36
15,740
0.03
3,939
1,304,988
2.18
1001 TO 10,000
1,204
3,942,964
6.57
34
144,425
0.24
1,238
4,087,389
6.81
156
4,201,793
7
5
278,570
0.46
161
4,480,363
7.46
17
4,008,032
6.68
0
0
0
17
4,008,032
6.68
1
5,350,549
8.92
4
40,768,679
67.95
5
46,119,228
76.87
5,281
18,792,586
31.32
79
41,207,414
68.68
5,360
60,000,000
100
10,001 TO 100,000
100,001 TO 1,000,000
Over 1,000,000
Categories of Shareholders
No of Shareholders
Individual
5,111 Institutional
No of Shares
8,554,736 249 51,445,264
5,360 60,000,000
2. LIST OF 20 MAJOR SHAREHOLDERS BASED ON THEIR SHAREHOLDING
No.
Name
Number of Shares
Percentage
Number of Shares
Percentage
1
Prima Limited, Singapore
27,270,800
45.45
27,270,800 45.45
2
Japfa Comfeed International Pte Ltd, Singapore
6,052,829
10.09
6,052,829 10.09
3
Employees Provident Fund
5,350,549
8.92
5,214,100 8.69
4
Supra Limited, Hong Kong
5,179,797
8.63
5,179,797 8.63
5
Eka Limited, Singapore
2,265,253
3.78
2,265,253 3.78
6
Laugfs Gas Limited
1,000,000
1.67
1,000,000 1.67
7
Amana Bank Limited
447,500
0.75
8
Quantum Capital (Private) Limited
289,733
0.48
434,600 0.72 9
Waldock Mackenzie Limited / Hi-Line Trading (Pvt) Ltd
282,865
0.47
213,000 0.36
246,877
0.41
10 Confifi Capital (Pvt) Limited
- - -
- 11 Employees Trust Fund Board
203,126
0.34
203,126 0.34
12 Mr. T.L.M. Imtiaz
202,085
0.34
208,800 0.35
13 Timex Garments (Pvt) Ltd
200,000
0.33
200,000 0.33
14 Sampath Bank PLC / Capital Trust Holdings Private Limited
185,242
0.31
- -
15 Mr. H.D. De Alwis
147,200
0.25
147,200 0.25
16 Mrs. L. Bandaranayake
130,000
0.22
150,000 0.25
17 Mr. M.V. Theagarajah/Mrs. L Theagarajah
126,900
0.21
- -
18 Pan Asia Banking Corporation PLC / Mr. R.E. Rambukwelle
122,700
0.20
- -
19 Venture Partners Private Limited
115,000
0.19
- -
20 Union Assuarance PLC / Account No.05 104,267
0.17
-
-
48,539,505
80.90
(Unit-Linked Life Insurance Fund-Equity Tracker Fund)
Total
The Percentage of shares held by public 2012 - 44.46%
The Percentage of shares held by public 2011 - 44.46%
49,922,723 83.21 88
ANNUAL REPORT 2012
STATEMENT OF VALUE ADDED
Consolidated Value Added Statement
In Rs. 000
2012 201120102009
2008
Revenue
12,375,045 10,479,8408,009,4096,899,3167,209,585
Adjustment for other income
505,132
55,490
14,810
40,869
32,107
12,880,178 10,535,3308,024,2196,940,1857,241,692
Less: Cost of materials and services purchased
from external sources
9,979,385
7,893,432
5,585,885
4,975,571
5,327,251
Value Added
2,900,793 2,641,8982,438,3341,964,6141,914,441
Distributed as follows:
In Rs. 000
To employees as remuneration
To the government as taxes
2012%2011%2010%
2009%
2008
%
573,831
19.78 533,996
20.21
485,888
1,975,460 68.10 1,628,114
61.63
1,365,973
19.93
441,239
56.02 1,101,860
22.46
389,730
20.36
56.09 1,265,154
66.08
To the providers of capital
as Interest on loans
89,860
3.09 10,732
0.41
53,517
2.19
94,689
4.82
136,600
7.14
as Minority Interest
(15,797)
(0.54)
(72,966)
(2.76)
(98,027)
(4.02)
82,098
4.18
72,840
3.80
- 60,000 2.27
To Shareholders as Dividends
- -
-
-
-
-
-
Retained within the business
as Depreciation & Amortization
142,853
4.92 135,603
5.13
156,111
6.40
110,858
5.64
102,712
as Reserves
134,586
4.64 346,419
13.11
474,872
19.48
133,870
6.81
(52,595) (2.75)
2,900,793
100.00 2,641,898 100 .00 2,438,334 100.00 1,964,614 100.00 1,914,441
5.37
100.00
ANNUAL REPORT 2012
89
Notice of Meeting
NOTICE IS HEREBY GIVEN that the 30th Annual General Meeting of the Company will be held on Tuesday, 14 May 2013 at the Institute of
Chartered Accountants of Sri Lanaka Auditorium, 30A, Malalasekara Mawatha, Colombo 07 at 11.00 a.m. and the business to be brought
before the Meeting will be:
1. To receive and consider the Report of the Board of Directors on the State of Affairs of the Company and the Statement of Accounts for
the year ended 31 December 2012, with the Report of the Auditors thereon.
2. To declare a First and Final Dividend of Rs. 0.14 per share in respect of the financial year ended 31 December 2012 as recommended
by the directors.
3. To re-elect Mr. Cheng Eng Loong a Director who retires at the Annual General Meeting in terms of Article 95 of the Articles of
Association of the Company.
4. To re-elect Mr. Cheng Koh Chuen, Bernard a Director who retires at the Annual General Meeting in terms of Article 95 of the Articles
of Association of the Company.
5. To re-appoint Dr. Wickrema Sena Weerasooria, who retires having attained the age of 70 years on 17 July 2009, and the Company has
received special notice to pass the under noted ordinary resolution in compliance with Section 211 of the Companies Act No. 07 of
2007 in relation to his re-appointment.
Ordinary Resolution:
“That Dr. Wickrema Sena Weerasooria, a retiring Director, who has attained the age of 70 years on 17 July 2009 be and is hereby reappointed a Director of the Company, in terms of Section 211 of the Companies Act No. 07 of 2007 and it is hereby declared that the
age limit of 70 years referred to in Section 210 of the Companies Act, shall not apply to the re-appointment of the said Director.”
6. To re-appoint Messrs KPMG, Chartered Accountants as Auditors and to authorise the Directors to determine their remuneration.
7. To authorise the Directors to determine contributions to charities and other purposes.
BY ORDER OF THE BOARD
S S P CORPORATE SERVICES (PRIVATE) LIMITED
SECRETARIES
Colombo 03
2 April 2013
Note:(a) A member entitled to attend and vote at the above mentioned meeting is entitled to appoint a Proxy to attend and vote instead of
him/her. Such Proxy need not be a member of the Company.
(b) A Form of Proxy is annexed to this notice.
(c) The completed Form of Proxy should be deposited at the Registered Office of the Company, No. 15, Rock House Lane, Colombo 15 not
later than 48 hours before the time appointed for the holding of the meeting.
90
ANNUAL REPORT 2012
ANNUAL REPORT 2012
91
92
ANNUAL REPORT 2012
Form of Proxy
INSTRUCTIONS TO COMPLETION OF FORM OF PROXY
1. Kindly perfect the Form of Proxy by filling in legibly your full name
and address, your instructions as to voting, by signing in the space
provided and filling in the date of signature.
2. Please indicate with a ‘X’ in the cages provided how your proxy is to
vote on the Resolutions. If no indication is given the Proxy in his/her
discretion may vote as he/she thinks fit.
3. The completed Form of Proxy should be deposited at the Registered
Office of the Company at No. 15, Rock House Lane, Colombo 15, at
least 48 hours before the time appointed for holding of the Meeting.
4. If the form of proxy is signed by an attorney, the relative power
of attorney should accompany the completed form of proxy for
registration, if such power of attorney has not already been registered
with the Company.
Note:
If the shareholder is a Company or body corporate, Section 138 of the
Companies Act No. 07 of 2007 applies to Corporate Shareholders of
Ceylon Grain Elevators PLC. Section 138 provides for representation of
Companies at meetings of other Companies. A Corporation, whether a
Company within the meaning of this act or not, may-where it is a member
of another Corporation, being a Company within the meaning of this Act,
by resolution of its Directors or other governing body authorise such
person as it thinks fit to act as its representative at any meeting of the
Company. A person authorised as aforesaid shall be entitled to exercise
the same power on behalf of the Corporation which it represent as that
Corporation could exercise if it were an individual shareholder.
Corporate Information
Company Name
Company Registration No. PQ 161
Registered Office
No. 15, Rock House Lane, Colombo 15, Sri Lanka.
Tel : 2522556 or 8/2523580/2526378 to 2526383
Fax : +(94) (11) 2524163
E-mail : [email protected]
Subsidiary Companies
Ceylon Livestock & Agrobusiness Services (Pvt) Limited
Ceylon Warehouse Complex (Pvt) Limited
Ceylon Aquatech (Pvt) Limited
Millennium Multibreeder Farms (Pvt) Limited
Associate Company
Prima Management Services (Pvt) Limited
Bankers
Hatton National Bank PLC
Nations Trust Bank PLC
National Development Bank PLC
Sampath Bank PLC
Union Bank of Colombo PLC
Bank of Ceylon
Commercial Bank of Ceylon PLC
Axis Bank Limited
Lawyers
Varners Lanka Law Office
D. L. & F. De Saram
H. E. Nevil Joseph
Auditors
KPMG, Colombo, Sri Lanka
Company Secretary
S S P Corporate Services (Pvt) Limited
No. 101 Inner Flower Road, Colombo 3.
Name of Directors
Mr. Tan Beng Chuan
- Chairman &
Chief Executive Officer
- Executive Director &
- Non Executive Director
Mr. Cheng Eng Loong
- Non Executive Director
Dr. Wickrema Sena Weerasooria - Independent
- Independent
Management
Mr. K. A. R. S. Perera
Mr. Chng Sun Tick
Mr. Ang Kian Huat
Mr. M. C. M. De Costa
-
Mr. Neil Jayaweera
Mr. Lalith Abeywardena
Mr. Sumith Peiris
Mr. Jeff Li Zhen Jie
-
AGM (Farms)
AGM (Farms)
AGM (Personnel, Security
& General Affairs)
AGM (Processing)
AGM (Sales)
AGM (Material Management)
AGM (Technical)

Ceylon Grain Elevators Annual Report 2012

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