CONTENTS
CORPORATE OVERVIEW 01 Vision & Mission 02 About Us 05 Performance Highlights - 2018 06 Year at a glance 08 Awards & Accolades
OUR LEADERSHIP 09 Chairman’s Message 11 Managing Director’s Message 13 Board of Directors 16 Management Team
MANAGEMENT DISCUSSION & ANALYSIS
19 Financial Capital 23 Manufactured Capital 28 Human Capital 07 Social & Relationship Capital 35 Natural Capital
GOVERNANCE & COMPLIANCE 38 Corporate Governance 46 Risk Management 53 Annual Report of the Board of Directors 55 Report of the Audit & Management Committee
FINANCIAL INFORMATION 58 Auditor General’s Reports 64 Statement Of Financial Position 65 Statement Of Comprehensive Income 66 Statement Of Changes In Equity 67 Statement Of Cash Flows 68 Notes To The Financial Statements 92 Detailed Income Statement 93 Five Year Financial Summary Corporate Information
VISION
TO BE MOST EFFICIENT PETROLEUM TERMINAL OPERATOR IN SOUTH ASIA
MISSION
TO REMAIN AS THE MOST EFFICIENT TERMINAL OPERATOR IN THE ISLAND,
MEETING STAKEHOLDERS EXPECTATIONS AND COMMITTED TO MAKE PERCEIVABLE
AND CONTINUAL IMPROVEMENT IN THE LEVEL OF CUSTOMER SATISFACTION,
WHILE PRESERVING THE QUALITY AND ENSURING THE EXACT QUANTITY OF THE
PETROLEUM PRODUCTS BEING DELIVERED TO THE TERMINAL FACILITY
USERS/CUSTOMERS, HONOURING THE HEALTH, ENVIRONMENTAL AND SAFETY
STANDARDS IN FORCE THROUGH DEDICATED PARTICIPATION OF A LOYAL,
CONTENDED AND WELL TRAINED WORKFORCE, GUIDED BY THE FEEDBACK OF THE
CUSTOMERS AND THE GENERAL PUBLIC.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 1 ABOUT US
Ceylon Petroleum Storage Terminals Limited is a Company duly incorporate under the Companies Act No. 17 of 1982 in terms of Section 2 (1) of the conversion of Public Corporation or Government owned business undertaking into Public Companies Act as Common User Facility (CUF) consisting of Oil terminals, Storage Facilities, Pipeline and the Bowser Fleet, more fully described in the Government Gazette extraordinary bearing No. 1310/8 dated 13th October 2003.
We are company engaged in bulk Petroleum Storage and Distribution activities with state-of-the-art infrastructure facilities for management of downstream petroleum product handling in Sri Lanka and continued to consistently enhance our stakeholder value propositions, demonstrating our commitment to support Sri Lanka’s development journey through building a healthy and competitive fuel storage & distribution.
The Company is a subsidiary of Ceylon Petroleum Corporation (CPC) owning 2/3 of share capital and the balance owning by – Lanka Indian Oil Corporation (LIOC). Ceylon Petroleum Storage Terminals Limited benefits from the parent entity’s almost six-decades of experience and expertise to proposition Sri Lanka’s economic development, driving innovation and ensuring environmental sustainability in the energy sector.
We serve around one thousand retail outlets island wide owned by Ceylon Petroleum Corporation and Lanka Indian Oil Company to meet the energy demand of the retail consumers in the country and the large number of bulk consumers in various industrial sectors involved in economic development process. Two main terminals supported by 11 bulk depots which are involved in the storage and distribution Network with around 3000 employees actively participation in various activities of the Company.
Main Terminals
• Kolonnawa Installation & Muthurajawela Terminal
Bulk Depots
• Anuradhapura • Badulla • Kotagala • Kurunegala
• Batticaloa • Galle • Matara • Peradeniya
• Haputale • Kankasanthurai • Sarasavi Uyana
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 2 ANNUAL REPORT - 2018 Kolonnawa Installation handling 12 petroleum products where as Muthurajawela Terminal handles 5 petroleum products. Distribution function of CPSTL undertake deliveries of petroleum products on behalf of two Marketing Companies CPC and LIOC operating two main terminals at Kolonnawa and Muthurajawela while strengthening the distribution of petroleum products island wide, CPSTL is operating 11 outstation bulk depots and one inland railside depot. Replenishment of Products to these locations and Inland Railside Depot are through rail bogies loaded at Kolonnawa Installation and by road using CPSTL and hired road tankers from main terminals. Aviation fuels is stored at Kolonnawa Installation only and transferred to Banadaranayake International Airport (BIA) at Katunayake on daily basis by railway. Rathmalana and other air fields operated by Sri Lanka Air Force get their requirement by road. Low Sulphur Furnace Oil is stored only at Muthurajawela Terminal and is transferred to only customer which is Kerawalapitiya power plant through a dedicated pipeline.
Kolonnawa Installation receives products from Refinery and through imported tankers discharged at Dolphin Pier at Colombo Harbor. Muthurajawela Terminal receives only imported cargo discharged through SPBM located approximately 6 km off Kerawalalpitiya Coast.
Business vertical Positioning
We are storing variety of petroleum products import & Storage of Automotive Fuels refine around 450,000 MT at Kolonnawa, Muthurajawela and island wide depots.
Currently we are distributing 85% of country’s Distribution of Automotive Fuels automotive petroleum products island wide.
The leading distribution channel is road tankers which Road Tankers contribute nearly 66% of the transportation of petroleum products island wide.
The second leading distribution channel is railway Railway Wagon wagon transport which contribute nearly 17% of the transportation of petroleum products island.
The next distribution channel is pipeline transfers which Pipeline is mainly to Kelanitissa & Kerawalapitiya power plants and Refinery at Sapugaskanda.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 3 KKS Bulk Depot
Anuradhapura Bulk Depot
Batticaloa Bulk Depot
Kurunegala Bulk Depot
Muthurajawela Peradeniya Bulk Depot Terminal Sarasavi Uyana Bulk Depot Kolonnawa Installation Kotagala Bulk Depot Badulla Bulk Depot
Haputhale Bulk Depot
Galle Bulk Depot
Matara Bulk Depot
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 4 ANNUAL REPORT - 2018 PERFORMANCE HIGHLIGHTS
2018 2017 2016 STRATEGIC PRIORITY: FINANCIAL GROWTH Revenue LKR Mn 13,130 14,176 12,663 Operating profit LKR Mn 1,405 3,208 2,406 Profit / (Loss) before tax LKR Mn 1,522 3,273 2,330 Profit / (Loss) after tax LKR Mn 254 2,717 1,949 Return on equity % 1% 11% 9% Financial Stability
Total assets LKR Mn 30,322 29,991 28,059 Total liabilities LKR Mn 5,556 4,828 5,208 Shareholders' funds LKR Mn 24,766 25,163 22,851 FINANCIAL CAPITAL Cash and cash equivalent LKR Mn 3,149 1,474 2,455 Shareholder information
Earnings per share LKR 0.26 3.73 2.32 Dividends per share (paid) LKR 0.868 0.54 0.65 Net asset value per share LKR 33 33 30 Economic value added LKR Mn 673 1,394 799 STRATEGIC PRIORITY: OPERATIONAL EXCELLENCE Property, plant and equipment
Terminals & Depots Nos 13 14 14 Capital expenditure LKR 375 833 913 STRATEGIC PRIORITY: INVESTING IN PEOPLE FINANCIAL CAPITAL Total employees Nos 2932 3,045 3,118 Female representation Nos 334 343 351 Payments to employees LKR Mn 6853 5,570 5,782 Employee attrition rate % 6% 1% 1% Investments in training LKR Mn 22 32 30 Total training hours Hours 12609 21,832 26,088 HUMAN CAPITAL Average training hours/employee Hours 7 9 11 Revenue per employee LKR Mn 4.48 4.67 4.06 Net profit (Loss) per employee LKR Mn 0.09 0.9 0.63 Indirect employees (approx.) Nos 63 105 114 Customer touch points Nos 40 40 40
CAPITAL Investment in CSR LKR Mn 2.1 6.1 5.7 No. of beneficiaries (approx.) Nos 8700 8,500 7,000
SOCIAL AND RELATIONSHIP SOCIAL AND RELATIONSHIP Contribution to Government LKR Mn 2579 2,175 1,895 STRATEGIC PRIORITY: SUSTAINABILITY Energy consumption Kwh 3,286,631 2,904,300 2,914,112 Water consumption KL 333 276 270 CAPITAL NATURAL
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 5 YEAR AT A GLANCE
REVENUE SALES VOLUME
13 5,277,925 Bn KL
PROFIT AFTER TAX
197 Revenue (LKR Mn) Profit After Tax (LKR Mn) Mn 20,000 3,000
2,500 15,000 2,000
10,000 1,500
1,000 5,000 ASSET BASE 500 - - 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 30.3 Bn
Sales Volume (kl) Total Assets (LKR Bn)
6,000,000 34 5,000,000 32 4,000,000 30 3,000,000 28 2,000,000
1,000,000 26
- 24 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 6 ANNUAL REPORT - 2018 Asset Turnover (%) Current Ratio (Times)
80% 8.00 60% 6.00
40% 4.00
20% 2.00
0% - 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
Shareholder's Funds(LKR Mn) ROE (%) 12%
30,000 10% 25,000 8% 20,000 6% 15,000 4% 10,000
5,000 2% - 0% 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
Gearing Ratio (Times) NAV Per Share (LKR) 0.60 40.00 0.50
0.40 30.00 0.30 20.00 0.20 10.00 0.10 - 0.00 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 7 AWARDS & GLANCE
Reaffirming our commitment, we have been recognized - Gold Award of Social Dialogue & workplace Cooperation with several prestigious accolades throughout the year. Awards 2018. CPSTL was awarded with Gold award of Social Dialogue & Workplace Cooperation Awards - National Silver award at CNCI Industrial Excellence under large scale service sector 2018 organised by Awards Ceremony. The Company was awarded the Social Dialogue & workplace Corporation Unit, Human Silver Award in the National Level Government Sector Resource Development Division, Department of Labour. at the “ CNCI Achiever Awards 2018” for the Industrial Excellence organised by the Ceylon National Chamber of Industries.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 8 ANNUAL REPORT - 2018 CHAIRMAN’S MESSAGE
“ Total revenue for the year at LKR 13 billion was down by 7% from
2017. Gross profit stood at LKR 5,227
million, a 23% decrease from the
previous year. Net profit at LKR 254
million was down 91% from 2017.
Even though we were experienced a
temporary setback in the year 2018,
Our Company declared the highest
ever dividend paid so far amounting to
LKR 0.80 per share dividend for 2017 and paid in 2018 ”
On behalf of the Board of Directors, I am pleased to present resulting from political strife. The result was that overall to you the Annual Report of Ceylon Petroleum Storage consumers limited their discretionary spending, directly Terminals Limited (CPSTL) for the financial year ended 31st impacting most of the Sri Lankan economy. Further due to December 2018. Our services encountered a challenging the favorable whether condition prevailing in the country operating environment during the financial year under during the year, power generation sector demand has review, which stemmed from developments in the local and dropped by 38% from the previous year. As a result, overall macro operating environment as well as challenges specific volume handled by CPSTL dropped by 3% from the year 2017 to the petroleum sector in the country. amounted to 169 million liters.
OPERATING ENVIRONMENT CPSTL is the key petroleum products handling company Weak domestic demand continued tightening in monetary in the country with core responsibility is the smooth and policy, contractionary fiscal measures, widening of BOP uninterrupted supply of petroleum products to our end trade deficit, and political instability were all seen as user - the consumer. CPSTL has the sole responsibility of the major causes for the drag on growth rate in 2018. Sri ensuring the safety, high quality and availability of these Lanka’s economy was estimated to have grown by a modest products, which are an essential and integral part of the 3.2% during 2018. The rupee depreciated approximately 16% lives of all citizens of our country. against the US$ during 2018, demonstrating a rapid spike in the latter part of the year, relative to a 2% depreciation We are also committed to ensuring delivery of our products reported in the previous year in 2017. to our distributors, the terminal facility users and our customers in accurate quantities. These goals would be While the transportation sector suffered a setback due to impossible to attain without the dedication of our well- fuel oil prices increased, towards the end of 2018 tourism trained workforce. Safeguarding our consumers & our also faced challenges as a result of adverse travel advisories employees, protecting the environment and contributing to
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 9 CHAIRMAN’S MESSAGE (Contd.)
the country’s economy, are the three pillars on which we I could not have steered the CPSTL towards success without build and conduct our business. the ready and invaluable guidance and support extended to me by all my fellow members of the Board. I would like OUR PERFORMANCE to thank every single one of them for their ready support, One of the major challenges faced by our Company during valuable contribution and for standing by me throughout the period under consideration was rising staff remuneration a challenging year 2018 and to thank the CPSTL team for costs 23% from the previous year by Rs. 1.24 billion, which their efforts in facing a challenging year with resilience and tracked above the previous year, reflecting a steep trajectory strength. on the financial result and the gradual decline in the demand of petroleum products. Our margins were impacted by Staff of CPSTL contributed to the Company during headwinds due to above and resulting in a lower financial challenging times with their uncompromising work ethics result. and dedication to work. I wish to thank all of them and record my appreciation of their commitment. Last but not least, I In addition to the political unrest major factors contributed would like to thank our two shareholders, business partners towards the dropping revenue are reduction in the throughput and other stakeholders for their faith in our abilities. We will rate by Rs .0.13 per Liter that had an adverse impact of continue to honour your trust by continuing to forge ahead Rs.700 Mn. on our upward growth trajectory whilst marinating our integrity as a corporate entity through upholding corporate Total revenue for the year at Rs. 13 billion was down by 7% governance standards. from 2017. Gross profit stood at Rs. 5,227 million, a 23% decrease from the previous year. Net profit at Rs. 254 million I take this opportunity to extend my sincere gratitude to the was down 91% from 2017. Even though we were experienced Hon. Minister of Petroleum Resources Development Mr. a temporary setback in the year 2018, our Company declared Kabir Hashim and Hon. Deputy Minister Dr. Anoma Gamage the highest ever dividend paid so far amounting to Rs. 0.80 for the confidence placed in us and the guidance provided. I per share dividend for 2017 and paid in 2018. also take this opportunity to thank my fellow directors, the management and the employees of CPSTL, our business In 2018 we made a number of strategic development moves, partners for their loyalty and patronage. Let us face the which will have a significant impact on the operations of the new challenges in the years ahead and bring with the same CPSTL in the future. sense of unity & spirit of dedications.
Major projects undertaken during the year include 60% completion of 15,000 M3 Tank at Kolonnawa Installation, Upgrading pipe system at Zone - 6, Construction of wagon filling gantry to provide easy and safe working environment for the operators at Zone -03, Installation of Internal Floating Roofs for several tanks in Kolonnawa Installation, Design, Supply and Installation of Internal Floating Roofs for three Tanks at Muthurajawela & Improvement to the product filling G. S. Withanage facility at Muthurajawela Terminal. Chairman
Striving to build social and relationship capital through engagement with communities, we contributed to community growth through several impactful CSR endeavors that spans the various areas.
CPSTL is committed to principles of good governance with proper discharging of accountability under constant review of both internal and external audit functions.
We were awarded the National Silver Award under the category /sector of “Extra Large Services - Government at the CNCI Industrial Excellence Awards Ceremony.
ACKNOWLEDGEMENTS The Board endeavors to ensure that CPSTL is directed effectively, with integrity, and in accordance with sound corporate governance practices.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 10 ANNUAL REPORT - 2018 MANAGING DIRECTOR’S MESSAGE
“Notwithstanding the feeble financial performance of the CPSTL during
the year 2018, we are contented to
report that we have made a significant
contribution to the Government of Sri
Lanka and the economy. During the
course of 2018, CPSTL has contributed
to the Government’s tax revenues,
contributing Rs. 563Mn in direct taxes and
collecting Rs. 2,016Mn in consumption
taxes, amounting to a total pay-out of Rs.
2,579Mn, which represents a 19% YoY increase.”
It is an honour and a privilege to share my thoughts with Inflation decreased from 6.5% in 2017 to 4.3% during the you through the Company’s Annual Report and Financial year due to inflation fluctuated largely in line with the price Statements for the financial year ending 31st December movements of the food category, where food prices declined 2018. I trust that our Report will provide you with an in- mostly during 2018 owing to favourable weather conditions depth understanding of the Company’s stakeholder centric that prevailed during the year. strategies and actions which are based on the principles of compliance, good governance and sustainable growth. I am Sri Lanka’s demand for petroleum is mainly driven by pleased to report that the Company generated revenue for the transportation sector which accounts for over 60% of an amount of LKR 13 billion and profit of 0.197 billion during consumption. Demand for automotive fuels increased by the year, despite multiple challenges in market conditions around 5% during the year with the demand for petrol and that continue to exist in the petroleum products terminaling diesel increasing by 10% and 2% respectively. industry. PERFORMANCE OVERVIEW Economy, Market Volatility and the Pricing Conundrum Sri Despite the challenging industry landscape and the Lanka’s economic growth moderated to 3.2% as favourable Economy & Market Volatility, we achieved commendable weather conditions resulted in upright performance of the petroleum product volume of around 5.27 billion ltrs which agriculture sector with upbeat effects on the industry sector. was a dropped by 3 % from last year. Due to this revenue In spite of the sharp depreciation of the rupee and the also dropped by 7% would impact to the profit for the year. introduction of the pricing formula for domestic petroleum Revenue of Rs. 13.1 billion representing a Year-on-Year (YoY) price adjustments, headline and core inflation remained well decline of 7% was resulted through decreased in Volumes anchored in low single digit levels during the year, supported of our Storage and Distribution of Petroleum Products by proactive monetary policy measures, improved domestic handling. Revenue decline combined with increased in supply conditions, and also due to subdued aggregate remuneration for CPSTL staff in every three-year effective demand conditions.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 11 MANAGING DIRECTOR’S MESSAGE (Contd.)
on 01st January 2018 led to CPSTL Profit Before Tax (PBT), I am confident that our company and our employees have declined by 53% YoY to be recorded at Rs. 1,522Mn for FY what it takes to meet the challenges of the current business 2018. environment together with parent company -CPC and the achieve our vision of being the most efficient Petroleum Despite there were critical factors negatively impacted on Terminal Operator in South Asia., respected for its the performance of the company during the 2018, in the stakeholders. reduction of throughput rate by Rs. 0.13 cents, decreased in short term interest income by 38% from the last year, and IN APPRECIATION the remuneration cost increased by 23% (Rs.1,243 Mn) and Appreciation On behalf of the CPSTL, I wish to thank for the increased in Taxation by 180% (Rs. 851 Mn) due to increase support extended to us by the Chairman, Board of Directors in the Rate of Taxation from 10% in 2017 to 28% in 2018, we and other officials of the Ceylon Petroleum Storage achieved a Net Profit After Tax (NPAT) of Rs. 197Mn. Terminals Limited.
Capital expenditure amounted to LKR 573 million driving I could not have steered the CPSTL towards success without asset growth as we expanded our infrastructure facilities the ready and invaluable guidance and support extended to in CPSTL. We are committed to investing for long term me by all the members of CPSTL I would like to thank every sustainable growth in the company as well as the country, single one them for their ready support, valuable contribution working with parent Ceylon Petroleum Corporation (CPC) and for standing by me throughout a challenging year 2018. and the other partner Lanka Indian Oil Company (LIOC) to develop the country’s growing energy sector. I take this opportunity to thank the Hon. Mr. Kabir Hashim, Minister - Petroleum Resources Development, Hon. Dr. DIVIDENDS TO SHAREHOLDERS Anoma Gamage, Deputy Minister - Petroleum Resources Regardless of feeble financial performance of the year, Development and other officials of the Ministry of Petroleum CPSTL during FY 2018, the Board of Directors resolved to Resources Development. recommend a dividend amounting to Rs. 651Mn translating to a Dividend per Share to Eighty (80) Cents. The dividend I also wish to express my gratitude to Mr. G.S.Withanage our represents an increase of 61% relative to 2017 with a Chairman as well as all the members of senior management Dividend Pay-Out of 330%. for their hard work and unwavering commitment towards the cause of the company together with staff members of CONTRIBUTIONS TO THE GOVERNMENT OF SRI LANKA CPSTL who contributed to the Company’s growth through Notwithstanding the feeble financial performance of the their uncompromising work ethics and dedication to work. CPSTL during the year 2018, we are contented to report that we have made a significant contribution to the Government of Sri Lanka and the economy. During the course of 2018, To all stakeholders, thank you. CPSTL has contributed to the Government’s tax revenues, contributing Rs. 563Mn in direct taxes and collecting Rs. Sincerely, 2,016Mn in consumption taxes, amounting to a total pay-out of Rs. 2,579Mn, which represents a 19% YoY increase.
FUTURE OUTLOOK Outlook 2019 will be an important and exciting year. We will continue our infrastructure development strategy to comprehensive sources of revenue generation and increase efficiency and effectiveness of operations to minimize the cost. M.R.M. Abdeen Managing Director CPSTL remain committed to offer better services to our stakeholders and create facilities that they need. The positive trends viewed in the local economic environment proving that low inflation rate and the increasing economic growth, we expect a more confident business environment in the medium-term.
The Company’s cash reserves are sufficient to support the development and with the strong balance sheet ensures that we are able to expand the storage facilities to cater the increasing demand of the petroleum products.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 12 ANNUAL REPORT - 2018 BOARD OF DIRECTORS
5 6 7 8 3 2 1 4
1 G. S. Withanage he was appointed as the Additional Secretary of Chairman the Ministry of Civil Aviation. Having served in the said position until 2012, Mr. G.S. Withanage was Mr. G. S. Withanage was appointed to the Board promoted to take up duty as the Secretary to the of SriLankan Airlines Limited on 13th November Ministry of Rehabilitation and Prison Reforms. 2018 and subsequently appointed to the Board of Subsequently in 2015, he was appointed as the SriLankan Catering Limited. Secretary to the Ministry of Foreign Employment and carried out duties in the position till he He also serves as the Chairman of Ceylon assumed duties as the Secretary to the Ministry Petroleum Corporation. He is an eminent officer of Transport and Civil Aviation in 2017 until his of the Sri Lanka Administrative Service, who has retirement in 20th December 2018. obtained a B.Sc. Degree in Management from the University of Sri Jayawardenepura. He has While holding the above positions, Mr. Withanage obtained his Master of Business Administration was appointed to lead several delegations of the Degree from the University of Colombo. Sri Lankan government to foreign countries. He has been appointed as the Chairman of the Joining the Sri Lanka Administrative Service in SAARC Regional Multimodal Transport Seminar 1984, Mr. G.S. Withanage started his career as conducted in Colombo in May 2006. In addition, he an Assistant Director in the Ministry of Public has organised the 5th Ministerial Consultation of Administration. Later in 1990 he was appointed Colombo process (Regional Consultative Process to the post of Deputy General Manager in the among labour sending countries) in the 2016 Sri Lanka Sugar Corporation and, subsequently and have earned Sri Lanka the Chairmanship took up the position of Assistant Secretary in the for the second time since 2003. Further, Mr. Ministry of Defence. In 1995, Mr. Withanage was Withanage has been involved in organising the appointed as Assistant Secretary to the Ministry Fourth Ministerial Consultation of the Abu Dhabi of Media, Tourism and Aviation and has been Dialogue, convened in Colombo on 24th January promoted to the position of Senior Assistant 2017, and has secured the chairmanship for Sri Secretary. In 2002 he has been appointed to hold Lanka. the post of Additional Secretary in the Ministry of Transport, Highways and Civil Aviation and in 2004,
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 13 BOARD OF DIRECTORS (Contd.)
2 4 M.R.M. Abdeen Mrs. K D R Olga Managing Director Director
Hailing from Kandy and having attended Trinity Mrs. K.D.R. Olga has wide experience in the Public College during my School career. Proprietary Sector and Public Financial Management. She Planter of Penylan Estate Abdeen Division at has joined the Sri Lanka Accountant’s Service Dolosbage currently serving as Chairman and in 1990. Since then she has been working in Managing Director of Abstaction Pvt Limited different government organizations. Currently which specializes in Software Development and she holds a position of Director, Department of the Proprietor of Reliant Traders Kandy Ball and Public Finance, and General Treasury. Roller Bearings She holds a Bachelor of Science (Business Former Board Director Sri Lanka State Plantation Administration) Special Degree from the Corporation Former Chairmen Litro Gas Terminal University of Sri Jayawardenepura with 1st Class Lanka Pvt Ltd Former Chairmen Janatha Estate Honors. She has passed Chartered Licentiate Development Board examination held by the Institute of Chartered Accountants of Sri Lanka in 1987.
She was appointed as the Board of Directors 3 of the Ceylon Petroleum Storage Terminal Ltd. Mr. Nimal Jayasundara from March 2015. In addition, she is a Director Director of the Land Reforms Commission and Gem and Jewelry Research and Training Institute. She is A financial professional, Mr. Nimal Jayaundera the Chairperson of the Audit and Management counts over 38 years of experience in Ceylon Committee of three institutions above. Petroleum Corporation’s overall finance activities and has acquired extensive knowledge and expertise. His strong experience in different 5 financial and operational capacities will further Pramod Jain strengthen our Board. Senior Vice President (Finance) Mr. Jayasundera is qualified with Licentiate in ICASL and HNDA and also a member of the AAT Pramod Jain has over two decades of varying and an Associate Member of the Finance, Auditing work experience in Indian Oil Corporation Limited, & Development Accountancy (UK). in the fields of finance, taxation & commercial aspects of the oil & gas sector. He has also He is serving as a Director of Ceylon Petroleum handled special assignments such as Internal Storage Terminals Limited since June 2017 and Audit, INDAS implementation, fraud prevention also he has served as a Board Director at Ceylon & internal controls etc. This varied exposure Petroleum Corporation and National Savings has enabled him to correlate financial objectives Bank. Furthermore, he has been serving as the with business objectives in order to achieve the Treasurer of the Sri Lanka-China Society and desired organizational strategies. As Senior Treasurer of the Sri Lanka-Belgium Association. Vice President (Finance), he overlooks the entire financial matters of the Company.
He is a member of the Institute of Chartered Accountants of India (ICAI), Institute of Cost and Management Accountants of India (ICMAI) holds a degree of Bachelor of Commerce (Hons) from Delhi University. He has also successfully completed Diploma in Information Systems Audit (DISA) which is a professional certification for Information Technology Audit professionals sponsored by ICAI (Institute of Chartered Accountants of India).
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 14 ANNUAL REPORT - 2018 BOARD OF DIRECTORS (Contd.)
8 During his stint at IOC, he had hands on experience Mr. Shyam Bohra in varied financial fields such as Marketing Finance Director at different levels, Direct & Indirect Taxation, Internal Audit, SAP ERP system etc. Mr. Jain is With over 26 years’ expertise in the Petroleum also a Director of the Ceylon Petroleum Storage Sector, Mr. Bohra has wide experience in various Terminals Limited (CPSTL) and a Member of Audit roles in the Indian Oil Corporation Ltd., India’s Committee of CPSTL. flagship company and a Fortune 500 Global Company, in different departments such as Retail, Institutional Sales, Operation and Logistics. He 6 also has considerable exposure and prior to Mr. Suraj Kumar Patnaik assuming office as Managing Director of Lanka Director IOC PLC, he headed IndianOil’s Retail Department of Maharashtra and Goa State. Mr. Suraj Kumar Patnaik has over 25 years experience in the petroleum sector and is presently A Civil Engineer from the Bangalore University, the Senior Vice President(Operations, Imports & with a Post-Graduate Management Diploma Bunker sales) in Lanka IOC PLC. He had joined from the prestigious ‘National Management the IndianOil Corporation Ltd as a Management Programme’ of Management Development Trainee in 1994 and has since worked in shipping Institute, Gurgaon & Post Graduate in Marketing operations, supply chain management as well as from Rajasthan University, Mr. Bohra has served at different oil terminals of IndianOil. Mr. Patnaik, in many key positions at IndianOil. He has been a during his tenure at Kolkata, had overseen the Divisional Head for three different Sales Divisions Supply & Distribution of petroleum products with long and successful stints at the field level to Nepal, Bhutan and also to the far flung hilly and also worked in Operations Department locations of North-Eastern India. Presently, he is looking after logistics. spearheading the bunker business of Lanka IOC PLC.
An M.B.A by training, Mr. Patnaik is a Fellow in the prestigious Narottam Morarjee Institute of Shipping, Mumbai. As a Director in the Board of CPSTL, Mr. Patnaik brings his immense experience in oil terminal operations and shipping operations to further enrich the Board level decision making.
7 Mr. Prasanna Shamal Senarath Director
Mr. Shamal has studied at Nalanada Collage & holds a Bachelor of Law at University of Colombo.
He has also successfully completed the Diploma in Professional English at Open University & Diploma in Marketing at National Institute of Business Management.
He is the Leader of opposition in the North Western Provincial Council for 3 terms.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 15 MANAGEMENT TEAM
5 9 8 6 11 4 3 2 1 10 7
1 Deputy General Manager (Human Resource & Administration) Mr. P D P Dharmawansa
2 Actg..Deputy General Manager (Finance) Mr. J A U R K Jayalath
3 Actg..Deputy General Manager (Engineering & Support Services) Mr. G M A Bandara
4 Actg..Deputy General Manager (Operations) Mr. M S M Niyas
5 Stores Manager Mrs. S Wickramarachchi
6 Operation Manager (Automobile) Mr. D A J S Dharmapriya
7 Manager (Premises & Engineering Services) Mr. Ajith Wijesuriya
8 Operation Manager (Bulk Movement & Bulk Processing) Mr. T V Sarathchandra
9 Manager (Security) Mr. N Jayawardana
10 Manager (Corporate Affairs) Mrs. S N Gamage
11 Operations Manager (Offshore Operations) Mr. R A P A Ranasinghe
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 16 ANNUAL REPORT - 2018 MANAGEMENT TEAM (Contd.)
19 20 14 21 15 22 17 18 12 16 13
12 Human Resource Manager Mr. K M N A C Perera
13 Manager (Procurement) Mr. R S S Premakumara
14 Manager Distribution Mr. W M T W A Bandara
15 Manager (Training & Human Resource Development) Mr. E A R D Bandara
16 Chief Legal Officer Mr. L W Gunasekara
17 Medical Officer Mrs. R Susiriwardena
18 Snr.Dy. Chief Information Officer Mr. D R F Dias
19 Actg Manager (Investigation) Mr. R M N Jayathilaka
20 Actg Manager (Fire & Safety) Mr. P M C P Dias
21 Actg Manager Internal Audit Mr. K H M Jayasekara
22 Dy. Manager Laboratory Mr. G H N M Chandrasiri
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 17 • E XPANDING ON SUCCES • EXPANDING ON SUCCES • E XPANDING ON SUCCES •
C EYLO N PETRO LEUM STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEUM STO RAGE TERMINALS LIMITED
• E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES •
C EYLO N PETRO LEUM STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEUM STO RAGE TERMINALS LIMITED •
E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES •
C EYLON PETROLEUM STORAGE TERMINALS LIMITED• C EYLON PETROLEUM STORAGE TERMINALS LIMITED
• E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES •
C EYLON PETROLEUM STORAGE TERMINALS LIMITED• C EYLON PETROLEUM STORAGE TERMINALS LIMITED
• E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES •
C EYLO N PETRO LEUM STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEUM STO RAGE TERMINALS LIMITED
• E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
• E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES •
C EYLO N PETRO LEUM STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEUM STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • C EYLO N PETROMANAGEMENTLEU M STO RAGE TERMINALS LIMITED DISCUSSIONS• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED • E XPANDING O N S U CCES &• ANALYSISEXPANDING O N S U C CES • E XPANDING O N S U CCES • C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED •
E XPANDING O N S U CCES • EXPANDING O N S U CCES • E XPANDING O N S U CCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLO N PETRO LEUM STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEUM STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLON PETROLEUM STORAGE TERMINALS LIMITED• C EYLON PETROLEUM STORAGE TERMINALS LIMITED
• E XPANDING ON SUCCES • EXPANDING ON SUCCES • E XPANDING ON SUCCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
• E XPANDING ON SUCCES • EXPANDING ON SUCCES • E XPANDING ON SUCCES •
C EYLO N PETRO LEUM STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEUM STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLON CEYLONPETROLEUM PETROLEUM STORAGE STORAGE TERMINALS TERMINALS LIMITEDLIMITED • C EYLON PETROLEUM STORAGE TERMINALS LIMITED 18 ANNUAL• E XPANDINGREPORT - 2018 O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES • • E XPANDING ON SUCCES • EXPANDING ON SUCCES • E XPANDING ON SUCCES •
C EYLO N PETRO LEUM STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEUM STO RAGE TERMINALS LIMITED
• E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES • C EYLO N PETRO LEUM STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEUM STO RAGE TERMINALS LIMITED • FINANCIAL E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES • C EYLON PETROLEUM STORAGE TERMINALS LIMITED• C EYLON PETROLEUM STORAGE TERMINALS LIMITED CAPITAL • E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES •
C EYLON PETROLEUM STORAGE TERMINALS LIMITED• C EYLON PETROLEUM STORAGE TERMINALS LIMITED
• E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES •
C EYLO N PETRO LEUM STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEUM STO RAGE TERMINALS LIMITED Positive future outlook Cash & Cash supported by the • E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES • Equivalents LKR infrastructure development 3.1 billion and cost efficiency in the C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED processes • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
• E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES •
C EYLO N PETRO LEUM STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEUM STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED Shareholder funds Revenue LKR LKR 24.7 billion 13.1 billion • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • We are pleased to report a favorable performance during the CPSTL’s revenue dropped by 7.4% to Rs. 13.1 billion which year with reported revenue of Rs. 13 billion and profit of 0.197 is a drop by Rs. 1 billion during the year mainly due to loan C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED billion, despite multiple challenges in market conditions interest reimbursement component of throughput income is • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • that continue to exist in the petroleum products terminaling not forming part of revenue with effect from 2018 and also industry. due to significant drop in demand from power generation C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED sector and adoption of cost-effective price mechanism let • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • As a result of increase in hydropower generation during the revision of petroleum products prices 9 times during the year, fuel oil based power generation was year. C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED • slow down and hence sales of petroleum products dropped in power generation sector in 2018. E XPANDING O N S U CCES • EXPANDING O N S U CCES • E XPANDING O N S U CCES • SALES VOLUME (KL Mn)
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED REVENUE & PROFITABILITY • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • Revenue of CPSTL is generated from throughput income and transport income out of which throughput income is the main 7.0 C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED source of income which is recorded 80% of the total revenue in year 2018. 6.0 • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • 5.0 C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED 20% 4.0 • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • 3.0 C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED 80% 2.0 • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • 1.0 C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED - • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • REVENUE COMPOSITION 2014 2015 2016 2017 2018 C EYLO N PETRO LEUM STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEUM STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • Gross profit margin is 40% during 2018 whereas it was 48% in 2017 mainly due to increase in personnel cost and drop C EYLON PETROLEUM STORAGE TERMINALS LIMITED• C EYLON PETROLEUM STORAGE TERMINALS LIMITED in revenue during year 2018 due to reimbursement of loan • E XPANDING ON SUCCES • EXPANDING ON SUCCES • E XPANDING ON SUCCES • interest and bunkering income are not form part of revenue for 2018. Due to the same reasons net profit margin is 20% & C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED Throughtput Revenue 2% during year 2017 and 2018 respectively. • E XPANDING ON SUCCES • EXPANDING ON SUCCES • E XPANDING ON SUCCES • Transport Income C EYLO N PETRO LEUM STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEUM STO RAGE TERMINALS LIMITED
• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLON PETROLEUM STORAGE TERMINALS LIMITED• C EYLON PETROLEUM STORAGE TERMINALS LIMITED CEYLON PETROLEUM STORAGE TERMINALS LIMITED 19 • E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES • ANNUAL REPORT - 2018 FINANCIAL CAPITAL (Contd.)
REVENUE & GP MARGIN TREND (LKR Mn) OPERATING PERFORMANCE Other income increased by 54% amounting to Rs. 246 million increases during the year supported by increase in gain on 60% 20,000 disposal of property, plant and equipments. Administrative expenses increased by 12% upto Rs. 4,527 million supported by increase in personnel cost by 25% compared with the year 15,000 40% before. At operating level, the Company’s operating profit decreased by 56% amounting to Rs. 1,404 million during the year compared to Rs. 3,208 million the year before. 10,000 20% OPERATING PERFORMANCE %
5,000 0%
60% - 2014 2015 2016 2017 2018 40%
Revenue Gross Profit 20% Gross Profit Margin 0%
- PRE TAX PROFIT 2014 2015 2016 2017 2018 Due to settlement of borrowings there’s no finance cost during 2018. Pre tax profit has decreased to Rs. 1,522 million Gross Profit Margin during the year compared to Rs. 3,273 million profits the Operating Profit Margin year before. FINANCIAL POSITION POST AFTER TAX & OCI TOTAL ASSETS Taxation for the year amounted to Rs. 1,324 million increased by 179% with compared to year 2017 because the rates 2% 4% applied for income tax has increased and hence there’s 1% a huge gap between pre & post tax income mainly due to deferred taxation charge. 5%
The Company’s Other Comprehensive Income (OCI) mainly comprised of actuarial loss on defined benefit obligations. 10%
TOTAL ASSET PRE AND POST TAX PROFIT(LKR MN) COMPOSITION
53% 4,000 60%
25%
3,000 40%
Property Plant Trade & other 2,000 20% & Equipment Receivables Intangible Assets Other Finanancial Asstes Other Financial 1,000 0% Assets Cash & cash equivalents Inventories
- The balance sheet is more towards to non- current assets, 2014 2015 2016 2017 2018 which accounted for 57% of the total assets. Profit Before Tax Profit After Tax Strength of the Company’s asset base and equity base reflected by continued assets growth and the total assets expanded by 1.1% to Rs. 30 billion in 2018 primarily due to
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 20 ANNUAL REPORT - 2018 FINANCIAL CAPITAL (Contd.)
increase in cash & cash equivalents, intangible assets and ASSET TURNOVER (%) non current other financial assets. The cash position is stronger mainly due to increase in short term investments 52% at the year end reflecting 113% growth to Rs. 3,149 million with compare to the year before which was Rs. 1,474 million. 50%
48% TOTAL ASSET GROWTH (LKR MN) 46%
44% 40,000 42%
40% 30,000 38%
- 20,000 2014 2015 2016 2017 2018
10,000 EQUITY AND LIABILITIES CPSTL is well capitalised with shareholder’s funds of Rs. - 24.76 billion funding 82% of the company’s assets. The 2014 2015 2016 2017 2018 Company paid off all the borrowings in 2016 and no new borrowings are obtained this year too. CPSTL’s total liability Current Assets Non Current Assets increased to Rs. 5.5 billion form Rs. 4.8 billion in 2017 primarily due to increase in deferred tax liability. The current assets ratio and quick assets ratio both amounts to 6.18 and 5.86 as at the year end.
CURRENT /QUICK ASSET RATIO (TIMES) 7%
8.00 11%
6.00
FUNDING STRUCTURE 4.00
2.00 82% - 2014 2015 2016 2017 2018 Equity Current Ratio Quick Asset Ratio Non Current Liabilities Current Liabilities ASSET TURNOVER RATIO The assets turnover ratio measures the efficiency of Company’s use of its assets to generate sales. The total assets increased by 1.1% in 2018 compared to the previous year and revenue dropped by 7.4% and hence asset turnover ratio is 44% during 2018, whereas it was 49% in 2017.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 21 FINANCIAL CAPITAL (Contd.)
RETURN ON EQUITY Return on equity has decreased to 1% compared to11% of the NET ASSET VALUE PER SHARE (LKR) year before. The drop in 2018 is due to drop in profitability.
RETURN ON EQUITY (%) 40.00
30.00
12% 20.00 10.00 10%
8% 0.00 2014 2015 2016 2017 2018 6%
4% LEVERAGE AND CAPITAL STRUCTURE 85% of assets of the Company are financed through equity 2% capital and balance 18% is financed through long term 0% and short term debts. As depicted in graphs below, the contribution from equity capital has slightly decreased - in 2018 with compared to year 2017 due to distribution of 2014 2015 2016 2017 2018 dividends out of retained earnings in 2018.
CASH FLOW GENERATION Despite the decline in profitability, net cash generated from SOURCES OF FUNDING (LKR MN) operating activities increased to Rs. 2.6 billion in year 2018 compared to Rs. 1.58 billion the year before primarily due to increase in recoveries of trade and other receivables. 35,000 There’s a growth in the net cash inflow amounting to Rs. 2.56 billion compared to net cash outflow of Rs. 870 million in the 30,000 25,163 24,766 year before. 25,000 22,851 21,389 19,982 SHAREHOLDER VALUE CREATION 20,000 15,000 19,982 2018 2017 10,000 5,880 5,208 4,828 5,556 Earnings per share (Rs.) 0.26 3.73 5,000
Net asset value per share (Rs.) 33 34 - 2014 2015 2016 2017 2018
Earnings per share is 0.26 on 2018 whereas it’s 3.73 in 2017 Equity Total Liabilities and net assets value per share decreased from 34 times to 33 times in 2018 GEARING RATIO (TIMES)
EARNING PER SHARE (EPS)
0.60 0.49 4.00 0.50
3.00 0.40
0.27 0.30 2.00 0.23 0.22 0.19 1.00 0.20
- 0.10 2014 2015 2016 2017 2018 - 2014 2015 2016 2017 2018
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 22 ANNUAL REPORT - 2018 MANUFACTURED CAPITAL
Rs.833 million Ongoin expansion of manufactured further investment capital to improvement productivity in Manufactured efficiency of Storage Distributor of Capital petrolem Products Island wide
Process re-engineering and producitivity Adding 25 new Browser improvements in the and new Tank lorry kolonnawa Trailors Muthurajawela
The core business of CPSTL is Storage and Distribution of Oil installation, Kolonnawa stores and distribute around Petroleum products. CPSTL is engaged in a business-to- Three Billion Liters of refined petroleum products annually. business (B2B) service providing operation. Mandate of Around 60% of this volume is imported to the island through CPSTL is to storage and distribute petroleum products of the Colombo Port. The refined products are transported to Oil two marketing companies of CPC and LIOC. Installation, Kolonnawa using an underground pipeline system, from the Dolphin Tanker Berth (DTB) pier at Colombo Port.
STORAGE & DISTRIBUTION RETAIL AND BULK IMPORTERS FACLITY AT OIL INSTALLATION KOLONNAWA COSTOMERS
Ceylon Petroleum Ceylon Petroleum Storage Corporation Terminals Limited
Lanka IOC PLC
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 23 MANUFACTURED CAPITAL (Contd.)
The pipeline system is about 65 years old and consists of 05 Repair to Tank no. 04 – Kolonnawa: pipe lines dedicated for different type of products. However, due to aging, only 02 pipelines are in operational condition at Maintaining the integrity of the storage tanks is a primary present. CPSTL identified the necessity of operating another objective of CPSTL. The condition of the tanks and pipeline as a strategic requirement, to ensure redundancy operational suitability is monitored and assessed by CPSTL of the pipelines as a contingency measure, and to reduce by conducting routine inspections as per petroleum industry tanker unloading time at DTB. In addition, a healthy pipeline standards. Storage tank maintenance are scheduled would reduce the losses due to leakages and minimize the accordingly. Repairs for Tank no 04 is planned as a result of risk of fire along the pipeline route. On the other hand having this identification process. The project is executed to repair an additional pipeline in operational condition ensures the the roof of Tank no 04. The repair works are performed to national energy security of Sri Lanka, given the significant prevent roof corrosion and product contamination due to portion of products handled by the oil installation, Kolonnawa. water leaks from the roof. The product quality assurance and tank integrity is the main goals to be achieved by In order to achieve above mentioned objectives, CPSTL successful completion of the project. The total investment is commenced rehabilitation of the abounded 12 inch diameter Rs. 36,040,500.00 and the 15% of the total work is completed pipeline using in house labor and technology. Total length by the end of financial year 2018. of the pipeline is 5.5 kilometers. The rehabilitation is mainly done using open cut technology. The pipe segments were replaced using brand new pipes. Total investment of Rs. 260 Million is done by CPSTL for procurement of pipes and fittings, hiring of excavation machinery and skilled welders, and conducting Non Destructive Testing and Radiography testing. The cost also includes procuring of micro tunneling service.
The pipeline rehabilitation was indeed a challenging work. The excavation route was crossing highways, railway tracks and even civilian areas where unauthorized dwellers are occupying. The total length of the route is 5.5 kilometers. The route crosses with the northern railway line of Sri Lanka at Orugodawatte, where trains bound to entire northern, central, northwestern and eastern region of the country are traveling. Open cut pipe laying is not an option in this area, since it would disturb entire northern line train operations. CPSTL undertook this demanding task by using micro tunneling technology under the railway tracks. The micro tunneling work was done on May- 2018 with an expenditure of 18 million rupees. CPSTL successfully completed 97.5% of the rehabilitation work during the financial year of 2018, adding a new dimension to the energy landscape of Sri Lanka.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 24 ANNUAL REPORT - 2018 MANUFACTURED CAPITAL (Contd.)
Construction of Filling Gantry at LBD Kurunegala Construction of Wagon Filling Gantry at Zone 03, Kolonnawa Installation Construction of filling gantry at LBD Kurunagala is carried out as a part of the depot renovation program executed by CPSTL delivers around 38 Million liters of JET A-1 aviation CPSTL. The depots are constructed during the colonial fuel through rail tankers to CPC Aviation unit at BIA, period and CPSTL has identified that the infrastructure Katunayaka. The existing aviation fuel rail tanker filing facilities at the depots are required to renovate complying facility at Zone-03 of oil installation, Kolonnawa operates with the latest petroleum industry standards and practices. as an open filling facility without a shelter. The operational Selected depots are renovated under this scheme. In this activities sometimes get interrupted in adverse weather context it is identified that a new filling gantry is required for conditions. In some occasions, around Five (05) rail tanker LBD kurunagala in par with the renovation works to cater the sets are not dispatched for a month, resulting in an increase in demand of fuel. CPSTL successfully completed approximate opportunity cost of Rs. 3.6 Million. It is proposed the Gantry construction within the financial year 2018. to construct a rail tanker filling gantry with a shelter, to milk this opportunity.
In addition, the safety of the gantry fillers during operational activities also can be enhanced by constructing a filling gantry.
In this context, CPSTL invested 28 Million rupees in constructing a new filling gantry at Zone -03 Aviation Filling Facility. 50% of the total construction work was completed by the end of the financial year 2018.
Upgrading Pipe System at Zone – 6
CPSTL has decided to increase the filling capacity of the gantries to cater the annual growth of the demand for fuel in the country. For this purpose filling capacity of the gantries at Zone 07 are decided to be increased by installing new high capacity pumps. The existing pump house does not have the sufficient space to install new pumps. Therefore, CPSTL has decided to construct a new product pump house at zone 06, Kolonnawa Installation.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 25 MANUFACTURED CAPITAL (Contd.)
Procurement, Construction and Commissioning of a 15,000 Infrastructure Development Facilities At Muthurajawela m3 Storage Tank with Internal Floating roof at Kolonnawa Installation. In parallel with the additional capacity introduction project, CPSTL decided to increase fuel filling capacity to cater the The annual average fuel demand of Sri Lanka is increasing increasing demand from 2016 to 2030. The strategy was approximately at a rate of 4-5%. With this growth rate, Sri formulated considering maximum utilization of existing Lanka needs to maintain adequate storage facilities for filling facilities at Muthurajawela Terminal. It is proposed each petroleum products. The benchmark capacity is to to extend the existing gantry structure to accommodate maintain at least a 30 day stock at any given time, at two additional eight (08) loading bays, construct a new pump house and develop related facilities. Total Estimated value of main installation in Kolonnawa & Muthurajawela. Sri Lankan the proposed development is Rs. 550 million. economy is growing at a startling rate during the post-civil war era and, the demand for petrol alone in Sri Lanka has The Muthurajawela Terminal is a semi-automated terminal grown by 90% from that of 2009. No new tank construction and has several advantages in terms of efficiency and has been taken place at Oil installation at Kolonnnawa after productivity when compared with Kolonnawa installation and 1999. Considering all these facts a cabinet decision is made other bulk depots of CPSTL. All the bays of the filling gantry in 2012 to introduce additional 100,000 Metric Tons (MT) is capable of loading 10 compartment road tankers and the storage capacity is to two main installations of CPSTL, to turnaround time of a road tanker is lessor compared to other ensure country’s fuel requirement by maintaining 30 days installations. In addition, the products unloaded at SPBM -02 stock at any given time. are directly transferred to Muthurajawela Terminal without subjected to port charges. Another significant advantage is As the first phase of this massive development program, that the terminal is located at the entrance of Outer Circular CPSTL has decided to construct a 15,000m3 (11,000 MT) Expressway (OCE) which is scheduled to put in to operation by storage tank for Gasoline at Kolonnawa Installation at a cost year 2019. The OCE connects all the expressways originating of Rs. 412 Million, within one and half years of construction from Colombo, enabling Muthurajawela terminal to reach period. The tank type is above ground vertical welded steel any part of the island with minimal operating costs. This storage tank with an Internal Floating Roof. The Welded strategic advantage of geographical positioning is expected Storage Tanks has minimum leakage possibility and Internal to optimize by developing the infrastructure facilities at Floating Roof (IFR) has minimum vaporization loss. The Muthurajawela terminal. product type is Gasoline 92 (Petrol 92) for the proposed tank. The project is well positioned with the vision of CPSTL; “To The project aligns with the vision and mission of CPSTL, Be The Most Efficient Petroleum Terminal Operator In South Asia”. The approval of the CPSTL Board of Directors has and it is a much anticipated development program of been granted for the said project and a Technical Evaluation infrastructure Development of the Common User Facility Committee was appointed for working on the bidding in Sri Lanka for petroleum product storage and distribution process. A Cabinet Appointed Procurement Committee is activities for Ceylon Petroleum Corporation (CPC) and Lanka also established and the procurement process is in progress. Indian Oil Company (LIOC).
The tank is proposed to construct inside the gasoline storage area of the Kolonnawa installation and the source of fund is the internal funds of CPSTL. The Front End Engineering Design (FEED) is done by the Engineering Function of CPSTL and the project is executed as an Engineering, Procuring, and Construction (EPC) contract. Contractor of the project is Endo East (Pvt) Ltd.
The construction works ceremonially inaugurated by the Minister of Petroleum Resources and Development Hon. Arjuna Rantunga on 22nd December 2017.
The scheduled construction period is 18 months and during the financial year 2018, a considerable amount of work is completed. Almost all the civil works was completed. 86 CPSTL invited for the bids through International Competitive nos. of concrete piles were driven and the raft foundation Bidding. The evaluation process is in the final stage as at the end of the financial year 2018. and sand filling for the tank bottom was completed. Rs. 170 million was disbursed for the completion of the civil With the implementation with this project CPSTL will gain construction works and the project progress at the end of the competitive advantage of reaching any part of the island financial year 2018 is 40%. with the quickest delivery time.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 26 ANNUAL REPORT - 2018 MANUFACTURED CAPITAL (Contd.)
Design, Supply And Installation of Internal Floating Roofs designed to regulate gas venting, and allow explosive gases For Tanks No. 6,7 And 8 At Muthurajawela Terminal. to vent into the atmosphere in a safe way. Installed inside the fixed roof storage tanks, they are also an economically Keeping in line with the organizational vision and mission, profitable option. IFR covers a major part of the liquid CPSTL continuously strive on improving the efficiency of surface and through an effective seal the emission reduction terminal operations. Losses due to evaporation is one of can be up to 98%. the significant issues encountered by CPSTL in petroleum product handling operations. Evaporation is not only an Three (03) fixed dome roof, welded steel, vertical petrol economic loss, but also an environmental pollution. CPSTL storage tanks of Muthurajawela Terminal, are selected for being a responsible corporate citizen, the management focus installation of IFRs to reduce evaporation losses. The total has been improved in this regard to mitigate evaporation investment on fixing IFRs is Rs. 54.4 Million and almost 70% losses. of the work has been completed by the end of financial year 2018. CPSTL believes by implementing this project, not only Installation of Internal Floating Roofs (IFR) is a method to minimize the wastage of petroleum products, but also recommended by American Petroleum Institution (API), to to contribute and exhibit our goodwill to save our precious reduce the evaporation on fixed dome roof tanks. IFRs are environment of this beautiful island.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 27 HUMAN CAPITAL
Employee engagements Compensation, rewards & & benefits recognition
BROAD RANGE OF BENEFITS & AMOUNT PAID AS TO WELFARE INITIATIVES EMPLOYEES LKR 6.4 BN
RECRUITMENT & RETENTION Training &
EQUAL OPPORTUNITY Development EMPLOYER 12,609 TRAINING HOURS
Being a Company that prides in providing uninterrupted Our approach to People Management service islandwide , CPSTL understands the crucial role that “ human resource” play in realizing the company’s objectives. Human resource is a major component of earning potential, EMPLOYEE BY CATAGORY & GRADE productivity and long term sustainability and a great asset of CPSTL and is an equal opportunity employer ensures that no discriminatory practices are taken place in any way. Total
CPSTL creates value for its employees primarily by providing a great place to work as part of highly motivated teams C Grade alongside people who are inspired to excel governance structures, policy frameworks, systems & processes have been put in place to support employees productivity goals B Grade and how the Company creates value for employees.
The company serves the whole country not only by storage A Grade and distribution of fuel but also provides opportunities to join our work force by covering all ethnic groups and as a result - providing equal opportunity for all citizens of the country, 0 500 1000 1500 2000 2500 3000 irrespective of their ages, gender & religion. The Company has taken several steps for better management of human Male Female capital. CPSTL’s team of 2932 employees is the drive behind our strategic plan, living our corporate values. We at CPSTL, BUILDING OUR TEAM believe that employees are our internal customers and Our human resource base plays a central role in maintaining strive to develop and nurture long standing relationships. competitiveness and sustaining revenue and growth of the Our employee proposition is underpinned on attractive Company. Therefore, human resource management is a key remuneration schemes, opportunities for training and strategic concern for CPSTL. During the year, we focused on career development and ensuring a conductive, injury free following areas to strengthen our team. environment to all workers.
• The recruitment of the suitable employees with the Human resource governance in CPSTL: relevant skills and competencies The Company’s HR Policy frameworks are broadly aligned • Retaining our talent pool to that of its parent (CPC) and have been revised where ever • Training and development to strengthen the team relevant to reflect labour laws. The governance framework • Establishing a performance oriented culture in place promotes clear segregation of duties, judicious empowerment and clearly defined governance structures.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 28 ANNUAL REPORT - 2018 HUMAN CAPITAL (Contd.)
Our talent pool: 3% 3% Our people comprise 2932 employees who are diverse in terms of skills and industry experience. Given the extensive 4% 1% geographical distribution of our distribution network, employees are recruited from all the areas of the country. Female representation is relatively low, particularly in the 4% non-executive grades, but female representation is 27% in executive grades.
RECRUITMENT AND RETENTION 6% We are an equal opportunity employer and do not discriminate REGIONAL DISTRIBUTION on gender, age or ethnicity in recruitments, promotions and OF EMPLOYEES other benefits. We do not engage persons below the age of 18 in employment and do not tolerate any form of forced or compulsory labour practices. Ensuring continuous growth 8% 72% of the Company, CPSTL seeks to recruit new talents and to do promotions based on performances.
As a subsidiary of the key petroleum service provider in Sri Lanka, CPSTL offers its employees a unique opportunity to North Central Northen sharpen skills and develop attitudes in a conductive work Uva Central environment. This has enabled CPSTL to position itself as Eastern Noarth Western a preferred employer, attracting the industry’s best talent. All the recruitments and promotions are based on CPSTL’s Southern Western recruitment and promotional schemes.
EMPLOYEE ENGAGEMENTS AND BENEFITS The Company follows a policy of transparency in pay structures, ensuring that there is no difference in the pay scales within the same grade category, regardless of gender. Moreover, employees of CPSTL enjoy broad range of benefits and welfare initiatives including,
Employee benefits to Description Benefits to permanent cadre probationers
LEAVE - Annual leave 14 days - Casual leave 7 working days Yes - Medical leave 21 working days - Maternity leave - 84 working days - Half pay for 84 days - No pay leave for 84 days - Accident leave Employee accident while on duty Employee who work on 4 Saturdays of the month can obtain 2 days of leave - Lieu leave and overtime - Special leave During special incident (Election , Curfew etc) - Duty leave On special instances for official duties - No pay leave For foreign studies, training , workshops etc Increment Evaluate employee duties, attendance and behavior Yes Meal allowances, travelling allowances, Terminal allowances, Attendance incentive, Shift allowances, Annual leave incentive, Cost of living Allowances Yes allowances, Professional allowances, Weekend allowances, Official telephone benefit etc
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 29 HUMAN CAPITAL (Contd.)
Employee benefits to Description Benefits to permanent cadre probationers Bonus Medical bonus, Annual Bonus Yes LOANS 10 months salary, simply concessionary interest rate, recoverable in 60 - Distress loan No months Purchasing land or houses or house construction. Simply concessionary - Housing loan rate , recoverable in 300 months or balance service period of the employee No whichever is lower For repairing houses, simply concessionary interest rate, recoverable in - House repair loan 120 monthly installments To purchase furniture. Simply concessionary interest rate. Recoverable in - Home facilities loan 60 monthly installments. 03 months salary. Simply concessionary interest rates, recoverable in 60 - Thrift society loan monthly installments. Applicable only for executives. Simply concessionary interest rate. - Car loan Recoverable in 60 monthly installments. - Motor cycle loan Simply concessionary interest rate, recoverable in 60 monthly installments. - Three wheeler loan Simply concessionary interest rate, recoverable in 60 monthly installments. ADVANCES - Festival advance Interest free. Recoverable in 10 months - New year advance Interest free. Recoverable in 10 months - School book advance Interest free. Recoverable in 10 months Presentation of awards Depends on the service period of employees Every employee is entitled to a 3 days / 2 nights stay with family at any - CPSTL / CPC circuit bunglow - Participation in CPSTL sports club events
Welfare related benefits - Annual picnic - Blood donation campaign - Co-operative shop at CPSTL premises - Cafeteria is maintained at CPSTL premises In house medical officer at CPSTL and also provide free medicine & - reimbursement of medical expenses
Medical benefits - Medical insurance for hospitalization - Reimbursement of lab testing - Reimbursement of special testing ( CT scan, MRI etc) Death benefit Death compensation Death donation including death of employees, and immediate family - Thrift society benefits members - Gratuity is granted as same as statutory gratuity Retirement provision Statutory gratuity Other facilities Providing uniforms for special duties, Meals for night duty employees
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 30 ANNUAL REPORT - 2018 HUMAN CAPITAL (Contd.)
TRAINING AND DEVELOPMENT PROGRAMME PARTICIPANTS HOURS The company encourages a learning environment by stimulating integrated Basic Lean Awareness Programme 61 122 thinking, personal mastery, mental Capacity Development Programme 117 702 models, shared vision and team Classification of Waste 76 228 learning. The company facilitates Delighting your customer 129 774 training opportunities to employees by continuously examining the training Employee Development Programme 56 336 needs. Simultaneously, the employees English 33 1980 are encouraged and motivated to point FIDIC Documents 19 342 out to the areas where they require training to enhance their overall First Aid Programme for Firemen 27 162 performance. Induction Programme 9 162 Internal Disciplinary Inquiries 92 552 Training and Human Resource leadership & Supervisory Skills Development 58 348 Development Function of CSPTL consistently monitoring training Legal Aspect for Office Mamagement 70 420 needs of all the employees. We Mechanism/ Functions of Pumps 1 51 306 support our employees in sharpening Mindfulness for Improve Service Excellence 369 2214 skills and competencies through Music Therapy 61 183 routine training programs. In addition to internally conducted training Office Aids & Office Assistants Development Programme 43 258 programs opportunities are given to Personal Grooming, Business Social Ethics 39 234 employees to attend external training Positive Thinking & Proactive Behavior 341 682 programs. During the year under review, the Company has conducted Present Performance Evaluation System 27 81 several training programs to develop Productivity Development Programme 41 123 technical knowledge, soft skills, Scrutinizing Procurement Related Documents 43 258 leadership skills, stress management Skill Upgrading for Fitters Programme-NVQ 25 1500 translating to training hours 12,609 for 1,769 participants. A summary of the Strategic Planning 27 162 training activities carried out during Welders 16 480 the year are given side. Total 1769 12609
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 31 HUMAN CAPITAL (Contd.)
The Company’s approach towards talent development During the year under review 219 employees were felicitated embodies a mutual responsibility of management and for successfully completing particular number of service employees in continuously working towards the following periods as follows objectives.
• To ensure qualified, enthusiastic and reliable work SERVICE PERIOD NO. OF EMPLOYEES force • To ensure quality work environment and resources 20 Years 116 for all employees 25 Years 33 • To guarantee that CPSTL is perceived as a desirable place to work for ambitious professionals and a place 30 Years 46 for providing further expert development 35 years 23 • To promote corporation and mutual trust among employees 40 Years 1 • To promote opportunities for employees for professional development to further increase their qualification and to broaden their spectrum EMPLOYEE EVENTS • To guarantee equality in the work place • Poson Bethi Gee & Poson Dansela COMPENSATION, REWARDS AND RECOGNITION CPSTL is granting wide range of benefits including Poson Bethi Gee and Milk coffee dansela were conducted compensation for injuries while on duty and during travel at CPSTL premises on Poson poya day with the fullest to or from duty, felicitation of employees those who have cooperation of employees of CPSTL. completed particular period of services, etc. The Company is always keen on career development of employees and motivates them for higher education by granting financial assistance to follow MBA and other postgraduate studies. In order to retain professionals within the organization, CPSTL reimburse annual professional body subscriptions and reimburse fees of conferences held by professional bodies by encouraging employees to participate and get continuous professional development.
The Company is encouraging children of employees by granting scholarships for higher education. During the year under review 144 scholarships were granted for undergraduates in different fields.
NO OF SCHOLERSHIP GRANTED
Bio Science 2 Biological 6 Commerce 6 Agriculture 6 Arts 52 Dental 2 Management 23 Tourism and Hospitality 1 Physics 8 Nursing 1 Law 6 Science 10 Medicine 6 Inofrmation systems 1 Engineering 14
- 10 20 30 40 50 60 No. Of Scholerships Granted
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 32 ANNUAL REPORT - 2018 HUMAN CAPITAL (Contd.)
• Blood Donation Campaign
Annual blood donation campaign was conducted successfully in year 2018 as well for the 38th consecutive year with full and active participation of the employees of the Company.
• Gold Coins Awarding Ceremony
A gold coins award ceremony for felicitating employees who have successfully completed 25 years of service in the Company was held in association with Ceylon petroleum Corporation. 33 employees of CPSTL were felicitated in 2018.
• Workshop On Productivity Development Through Positive Thinking
A workshop on Productivity development through positive thinking was conducted by the Secretary to Ministry of Petroleum Resources Development to managerial level employees of CPSTL, Ceylon Petroleum Corporation and Ministry with the aim of uplifting productivity in work and life.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 33 HUMAN CAPITAL (Contd.)
• Buddhist Sermons
Buddhist Association of CPSTL conducts Buddhist Sermons on Poya days in office premises and invites all the employees to participate.
• Mindfulness For Improving Service Excellence Through Productivity
Mind Therapeutic inward and outward training programme was conducted through Sri Lanka Foundation with participation of 100 employees of CPSTL . It helped to develop personal grooming, relieve stressful situations through mindfulness, create a value based personality with Smart work etc of our employees.
• Workers Motivational Program
A workers motivational program with music called “Kandula” was organised by the Arts Society of CPSTL for employees of all the grades. This was conducted by Brother Charles Thomas.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 34 ANNUAL REPORT - 2018 NATURAL CAPITAL
Proper discharge Focusing on more of waste effluents energy efficient systems
Handling of ecologically Precautions for sustainable petroleum environmental risk on products transportation of petroleum products
Natural Inputs Managing Output
Energy Value Creation Emissions Water Effluents Process Materials Waste
Natural Capital is a critical input to our value creation CPSTL has taken several initiatives to increase energy process and all our sectors continue to demonstrate strong efficiency. commitment towards ensuring that our impact on the environment is minimal. New developments and improvements such as constructions and/or extensions of Pump Houses, Filling Gantries and Tank Scarcity of resources and climate change have emerged as Farms and the machineries required for such installations critical global issues which could threaten the sustainability are custom designed by Engineering Function to operate in of organisations around the world. At CPSTL we strive to the maximum efficiency operating point as per the design grow our business sustainably through maximising energy standards. Thus, Energy efficiency is achieved by the design and water efficiency, minimising waste and reducing itself by the in-house engineering team. our carbon footprint. Robust mechanisms are in place to measure environmental indicators such as energy WATER consumption, energy intensity and quality of and quantity of The Company’s operations are not water intensive and our effluents and waste. During the year, there were no fines or water usage is primarily from daily usage by employees and penalties imposed on the Company for noncompliance with maintenance activities. Our water requirements are fulfilled environmental regulations or laws. primarily from the municipality lines. The Company’s total water consumption is given below. ENERGY Our key sources of energy are electricity, diesel and furnace Unit of Consumption in Consumption Source oil. Energy is consumed mainly in two terminals ( Kolonnawa measurement 2018 in 2017 and Muthurajawela) which are mainly energy intensive, off Municipal shore unit and the island wide depots. The Company’s energy KL 333 275 water supply consumption during the year by source is given below.
MATERIALS Unit of Consumption in Consumption Energy source As Sri Lanka does not produce fossil fuels, the primary raw Measurement 2018 in 2017 material is petroleum based fuels which are sourced entirely Purchased from international parties. Kwh 3,286,631 2,904,300 electricity Diesel KL 4,457 4,897
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 35 NATURAL CAPITAL (Contd.)
EMISSIONS, WASTE & EFFLUENTS TRANSPORTATION OF PRODUCTS Since all petroleum products are volatile there is a Transportation of petroleum products pose environmental potential in ambient air pollution due to petroleum products risk due to oil spills/ leakages/ accidents that contaminate vaporization. Therefore, ambient air quality measurements both land and water resources. The following safety were taken to confirm the breathing air quality within CPSTL measures are adopted by the Company in ensuring that the premises. According to the results all the results were below transportation crew is well trained to handle unplanned the maximum limit imposed by the standards. events. We conduct ongoing training programmes and demonstrations for transportation crew on Standard and Traces of petroleum products may present on storm water. Emergency response methods in event of a spills / leakages. This is mainly due to accidental spillage of products during Our initiatives include; filling operations to road tankers and rail wagons and during pump priming operations. In addition, sea water which is - Preventing any oil leaks at the Buoy/ jetty during used for line flushing may also contain traces of petroleum discharge of cargo from tankers. Both the receiving products. CPSTL adopt a methodology using an interceptor and tanker unloading hoses were pressure tested tank system to discharge this oily water. The Oily water before the receipt of cargo to ensure that there are no goes via interceptors located in the tank farm covering all damages in pipelines. the product tanks. Oil is separated from water by gravity - In the event of any oil spillages, oil dispersant chemicals difference at the interceptor. Separated oil is collected by and oil absorbent cabs (Oil skimmers) were made gully bowser periodically and the oil free water passes to a available as ensures to mitigate minor oil spills. facultative pond for further settling. The quality of water is tested routinely. - Third party insurance for any public liabilities, product liabilities and pollution liabilities. Sludge generated at tank cleaning is another semi-liquid waste for CPSTL. The sludge is sold to outside customers time to time according to the cleaning schedule and the amount of sludge collected. Waste Engine oil collected in the garage is also sold to outside customers via tender procedure. In addition during the year following improvements were done for preserving the environment.
• As per a contingency requirement a non-absorbent oil boom was purchased under the HSE Unit. The boom is to be used in accidental oil leakages to increase the efficiency of spilled oil recovery. • A biogas generator was purchased to convert organic waste generated at the canteen and convert it to energy thro metabolic activity of bacteria.
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Corporate Governance at CPSTL is designed to create Declaration by the Board sound and effective corporate culture which strengthens On behalf of the Board, I wish to confirm that the Board and Management accountability, transparency, Board of Directors of CPSTL is firmly committed to fairness in all transactions and helps to build public trust observing the application of Corporate Governance of the organization. The purpose of corporate governance Principals across the Company and that the is to facilitate effective, entrepreneurial and prudent Corporate Governance Report provides fair account management that can deliver the long-term success of a of Corporate Governance Practices within the Company. In broader sense it also encompasses; Company. • How the vision, mission, objectives and strategy are Accordingly, I declare that Board of Directors and designed and communicated all personnel have acted in compliance with the • How well the values are complied with applicable regulatory and statutory requirements. • How risks are managed • How transparency is promoted • How to manage operations in sustainable way • How future leaders are encouraged and developed • How corpora culture is promoted to enhance G. S. Withanage stakeholder values Chairman As the main facilitator of storage and distribution of Petroleum Products in Sri Lanka, the organization assures to practice the principals of corporate governance in compliance with legislations, regulations and codes set out by regulatory bodies of the country and it adheres with the internal policies & guidelines set out by the company.
CORPORATE GOVERNANCE FRAMEWORK 1. Compliance 2. Internal Governance structure 3. Assurance & Control
ASSURANCE & CONTROL INTERNAL GOVERANCE COMPLIANCE STRUCTURE
EXTERNAL REQUIREMENTS
Companies Act No.7 of 2007
Code of Best Practices on Corporate EXTERNAL ANNUAL GENERAL Governance issued by Institute of AUDTIORS MEETING (AGM) Charted Accountants of Sri Lanka
Public Enterprises Guidelines for good Governance issued by Department of Public Enterprises, Ministry of Finance in 2003. BOARD OF DIRECTORS Inland Revenue Act No.24 of 2017
INTERNAL REQUIREMENTS
Article of Association INTERNAL CHAIRMAN/MANAGING AUDIT DIRECTOR Board Approved Policies
Company Regulations
Code of business conduct
INTERNAL AUDIT STOCK REVIEW INFORMATION PROCUMENT Risk Management Policy CONTROLS COMMITTEE COMMITTEE TECHNOLOGY COMMITTEE STEERING COMMITTEE
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 38 ANNUAL REPORT - 2018 CORPORATE GOVERNANCE (Contd.)
01. COMPLIANCE of the Company. The purpose of governance is to create Corporate Governance practices of Company adheres to long-term sustainable shareholder value through the requirements of following frameworks of legislation, effective and prudent management. codes & voluntary practices. Board Responsibilities • Code of Best Practices on Corporate Governance Key responsibilities of the Board are as follows; issued by Institute of Charted Accountants of Sri Lanka • Providing direction and guidance in the formulation of strategies which are aimed at promoting the long- • Public Enterprises Guidelines for good Governance term success of the organization. issued by Department of Public Enterprises, Ministry of Finance in 2003. • Providing strategic guidance and evaluating, reviewing and approving corporate strategy and the • Companies Act No.7 of 2007 performance objectives for the Company. • Inland Revenue Act No.10 of 2006 • Reviewing and approving annual plans and long- • Article of Association of the Company term business plans. • Board Approved Policies • Monitoring systems of governance and compliance. • Company Regulations • Approving and monitoring financial and other • Code of business conduct reporting practices adopted by the Company. • Risk Management Policy • Reviewing and approving major acquisitions, disposals and capital expenditure. 02. INTERNAL GOVERNANCE STRUCTURE • Determining any changes to the discretions/ authorities delegated from the Board to the THE BOARD OF DIRECTORS executive levels. The Board is committed to maintaining the highest • Overseeing systems of internal control and risk standards of corporate governance across all activities management procedures.
◊ BOARD COMPOSITION
The composition of the Board of Directors as at 31 December 2018, was as follow;
DATE OF APPOINTMENT DATE OF RESIGNED NAME OF THE DIRECTOR POSITION TO THE BOARD FROM THE BOARD
1 Mr.Anuj Jain 14th October 2015 16th August 2018 NED 2 Mrs.K.D.R.Olga 14th October 2015 NED 3 Mr.Shyam Bohra 14th October 2015 NED 4 Mr.Randhir Singhe 01st June 2016 30th May 2018 NED 5 Mr.Dammika Ranathunga 01st June 2017 Chairman (ED) 6 Mr. Sanjeewa Wijerathne 01st June 2017 Managing Director (ED) 7 Mr.Nimal Jayasundara 01st June 2017 ED 8 Mr.U.N.Gunawardena 01st June 2017 NED 9 Mr. Suresh Patnaik 30th May 2018 NED 10 Mr. Pramod Jain 16th August 2018 NED
NED Non-Executive Director ED Executive Director
The profiles of each Director as at 31st December 2018 on pages 53 to 54 of the Annual Report demonstrate a wealth of experience and sufficient caliber to provide independent judgement on issues of strategy, performance, resources and business practices which is vital to the Company.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 39 CORPORATE GOVERNANCE (Contd.)
◊ BOARD COMPOSITION AND BOARD BALANCE ◊ BOARD MEETINGS AND ATTENDANCE
The Board of the CPSTL is the highest decision-making Regular Board Meetings are held monthly, while special authority and it comprises of eight Directors out of Board Meetings are convened as and when required. which three are Executive Directors and five are Non Senior Managers also attend meetings on invitations. Executive Directors. The Board Meetings are conducted on a formal agenda and Directors are provided with relevant comprehensive DIRECTOR NO OF DIRECTORS background information by corporate Management Executive Directors (ED) prior to meetings. There were 11 Board Meetings during the year 2018. Non-Executive Directors (NED) The attendance of Directors at these meetings is set out in the table below; ◊ APPOINTMENT OF DIRECTORS BOARD MEETING NAME OF THE DIRECTOR Directors are appointed to the board through an Annual ATTENDANCE General Meeting subject to the terms of Article of association. In considering candidates for Directorship, 1 Mr.Anuj Jain 07/11 the Board will take into account all factors it considers 2 Mrs.K.D.R.Olga 11/11 appropriate, including, among other things, breadth of experience, understanding of business and financial 3 Mr.Shyam Bohra 11/11 issues, ability to exercise sound judgment, diversity, 4 Mr.Randhir Singhe 05/11 leadership, and achievements and experience in matters affecting business and industry. 5 Mr.Dammika Ranathunga 08/11 6 Mr. Sanjeewa Wijerathne 10/11 ◊ DIVISION OF RESPONSIBILITIES 7 Mr.Nimal Jayasundara 11/11 The roles of the Chairman and the Managing Director are 8 Mr.U.N.Gunawardena 10/11 separate since 01st June 2017 with a clear distinction of responsibilities between them, which ensures the 9 Mr. Suresh Patnaik 05/11 balance of accountability and authority between the running of the Board, and the executive responsibility 10 Mr. Pramod Jain 06/11 for the running of the businesses. * Mr. Randhir Singhe resigned from the directorship and The role of the Chairman, Mr. G. S. Withanage, is Mr. Suresh Patnaik appointed as Director with effect to provide leadership to the Board, for the efficient from 30th May 2018. organization and conduct of the Board’s function, and to ensure the integrity and effectiveness of the relationship * Mr. Anuj Jain resigned from the directorship and Mr. between the Non-Executive and Executive Director(s). Pramod Jain appointed as Director with effect from 16th August 2018. The role of the Managing Director, Mr. Sanjeewa Wijerathne, is to manages day today affairs of the ◊ DELEGATION OF AUTHORITY AND COMMITTEES organization based on Strategic direction, policy formation and procedure approved by the Board of Other than the matters reserved for the Board, the Directors from time to time. Board has delegated authority to its Committees and management. Operations of CPSTL can be divided into sub categories namely, Operations in Kollonawa installation, Operations The Board is supported by the following Committees in Muthurajawela Terminal, Oil Facility Office at Port of which have been delegated with certain specific Colombo and Operations in Lanka Bulk Depots in island responsibilities; wide. Muthurajawela Terminal Operations headed by Terminal Manager (Muthurajawela). Operation Manager a) Audit Committee (Offshore Operations) is the head of Oil Facility Office at The Audit Committee is appointed by the Board of Port of Colombo and Lanka Bulk Depots are headed by Directors of the Company and reports directly to the Depots’ Superintends under the supervision of Deputy Board. The Audit Committee functions within the General manager (Operations). overall governance process established by the Board of Directors of the Company and assists the Board in effectively discharging its responsibilities.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 40 ANNUAL REPORT - 2018 CORPORATE GOVERNANCE (Contd.)
CPSTL Audit Committee consists of 02 members who ◊ COMPANY SECRETARIES are Non-Executive Directors appointed by the Board of Directors. The composition and functions carried out by Accounting Systems Secretarial Services (Private) the Audit Committee are presented on page 55 to 56 of Limited acts as Secretaries to the Board, guiding the the annual report. Board on discharging its duties and responsibilities and promoting best practices in corporate governance. All b) Stock Review Committee Directors have access to the Company Secretary. The Stock review committee is held weekly with the Company Secretary coordinates scheduling of Board participation of CPSTL staff and representatives of meetings and other Sub –Committee meetings, keeping CPC and LIOC. The stock position is reviewed and the minutes and other relevant records. requirement for the next three months is preplanned. The Quantity to be imported, is identified after 03. ASSURANCE AND CONTROL considering the forecasted demand in the country, the refinery production capabilities and the tank storage ◊ FINANCIAL REPORTING capacity. Regular close monitoring enables the Corporation to ensure uninterrupted supply of fuel in The Board of Directors is responsible for true and fair the country. view presentation of financial statements. The financial statements are prepared in accordance with Sri Lanka c) Information Technology Steering Committee Accounting Standards (SLAS) prefixed both SLFRS and It is the administrative body that reviews, monitors and LKAS and Audit Committee has reviewed and discussed prioritizes major IT projects in line with strategic goals of the financial reports prior to publication with the the organization. The committee comprises of members management and external auditors including the extent from CPSTL, CPC, LIOC and participate in key decision- of complicate with Sri Lanka Accounting Standards, the making process for the benefit of all stakeholders appropriateness and changes in accounting policies and and contribute positively to the development and material judgmental matters. maintenance of common IT Hub at CPSTL. ◊ TRANSPARENCY & COMPLIANCE d) Departmental Procurement Committee The Company follows the guidelines issued by the The Board is responsible to maintain transparency National Procurement Agency for the purchase of in all its transactions and to ensure strict compliance products, goods, work and services, through TEC with laws and regulations while preserving the ethical (Technical Evaluation Committee) and DPC (Department standards, labour and human rights and Company of Procurement Committee) functions, in order to policies. ensure the transparency of Procurement function, minimize supply delays and to obtain financially the • The internal controls system of the Company is most advantages and qualitatively best services and designed in accordance with the provisions of the supplies to the Company. Ceylon Petroleum Corporation Act No. 28 of 1961 and Finance Act No. 38 of 1971. The committee is headed by Chairman/Managing • In compliance with Finance Act.38 of 1971, the Director of CPSTL and comprises of Deputy General Auditor General carries out the External Audit of the Manager- Operations and representative from the organization and financial statements are published Ministry of Petroleum Recourses Development. annually and tabled in Parliament. • To ensure accountability, the organization adheres to ◊ BOARD ACCESS TO INFORMATION AND RESOURCES new Sri Lankan Accounting Standards (SLFRS/LKAS) and other relevant regulations. Directors have unrestricted access to management and organisation information, as well as the resources ◊ INTERNAL CONTROLS required to carry out their duties and responsibilities effectively. Executive Management makes presentations The Board ensures a sound and effective internal control on matters including business performance against system is properly established and maintained to provide operating plans, strategy, financial management, reasonable assurance regarding the achievement of costing, asset management, risk management, effectiveness and efficiency of operations, reliability of compliance and regulatory changes. Access to financial reporting and compliance with applicable laws independent professional advice and information, is and regulations as well as Risk Management. It confirms available to Directors at the Company’s expense where the integrity of financial and accounting information, it is considered necessary. meet operational and profitability targets and transmit
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 41 CORPORATE GOVERNANCE (Contd.)
management policies throughout the organization. • To ensure all accounting information is properly It is crucial to state that any internal control system recorded in SAP as well as primary records are can ensure only a reasonable assurance and not accurately maintained and relevant statistics and absolute assurance that errors and irregularities will control data are properly designed to ensure efficient be presented or detected within a reasonable period of management. time. • To ensure that the financial accounting statements reveal a true and fair view of the status of the The Internal Audit Function ensures the organization organization. is efficiently operating within the established internal • To assess the efficiency of systems of internal control control system of CPSTL. in operation. • To adapt the system based approach to review and ◊ INTERNAL AUDIT appraise; • the design and operation of all systems and procedures Internal audits are conducted by the Internal Audit which are intended to control a department’s operation Division which is independent of management. The including those used by Management to measure the objective of an internal audit is to keep stringent extent to which programs and other operations run control over all the activities of an organization. The by the department are successful in achievement of management needs assurance of the authenticity of the policy objectives. financial records and the efficiency of the operations • the degree of compliance with legislation and other of the organization. An internal audit helps establish requirements laid down and management plans, both. It ensures the proper internal control system is procedures and policies. maintained within the organization in line with the laid • the acquisition, disposal and safeguarding of assets down procedures, rules and regulations. and interest from losses, including those arising from fraud, malpractice and irregularity. The scope of Internal Audit Division is as follows; • the arrangements for the economic and efficient use of resources and avoid waste. • To ensure that all business transactions are properly • the adequacy, reliability and integrity of the authorized before execution, in accordance with information being provided for decision making existing rules and regulations. and for accountability, and the extent to which this information is used.
Compliance with the Code of Best Practice on Corporate Governance issued by the Institute of Chartered Accountants of Sri Lanka in 2017.
CODE REQUIREMENT DISCLOSURE COMPLIANCE REFERENCE A Directors A.1 The Board A1.1 Regular Board meetings, at least once in every quarter and Governance & Compliance Yes supply of information -Board Meetings A1.2 The Board is to provide entrepreneurial leadership by Governance & Compliance Yes undertaking responsibilities for; -Board Responsibilities • Strategy formulation & implementation • Skills and succession of the key management personnel • Integrity of information, internal controls, business continuity and risk management • Compliance with laws, regulations and ethical standards • Consideration of all stakeholder interests in decision making • Sustainable business development • Adopting appropriate accounting policies and compliance with financial regulations
A1.3 The Board collectively and the Directors individually must Governance & Compliance Yes act in accordance with the laws of the country and obtain -Compliance independent professional advice where necessary
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 42 ANNUAL REPORT - 2018 CORPORATE GOVERNANCE (Contd.)
CODE REQUIREMENT DISCLOSURE COMPLIANCE REFERENCE A1.4 All Directors should have access to the advice and services Governance & Compliance Yes of the Company Secretary -Company Secretaries A1.5 All Directors should bring independent judgement to bear Equal opportunity is Yes on issues of strategy, performance, resources and business available for Directors conduct to express their views independently on matters relating to the Board. A1.6 Every Director should dedicate adequate time and effort to Governance & Compliance Yes matters of the Board and the Company -Board Meetings and Attendance A.2 Chairman & Chief Executive Officer A.2.1 Justification of combining roles of Chairman and CEO in one Not Applicable Not person Applicable A.3 Chairman’s role A.3.1 The Chairman should conduct board proceedings in a proper Yes manner and ensure, • The effective participation and contribution of the Directors • A balance of power between Executive and Non-Executive Directors • The views of Directors on issues under consideration are ascertained • The Board is in complete control of the Company’s affairs and alerts to its obligations to all stakeholders
A.4 Availability of financial acumen A.4.1 The Board should ensure the availability within it of those Our Leadership-Board of Yes with sufficient financial acumen and knowledge to offer Directors guidance on matters of finance A.5 Board Balance A.5.1 At least 2 members or one third of the Board, whichever is Governance & Compliance Yes higher should be NEDs as at the conclusion of immediately – Board Composition and preceding AGM. Any change to this ratio should be rectified Board Balance within 90 days. A.6 Supply of information A.6.1 The management should provide the Board with appropriate Governance & Compliance – Yes and timely information Board access to Information and resources A.6.2 The minutes, agenda and papers required for a meeting Governance & Compliance – Yes should be provided to the Directors at least seven days Board access to Information before the meeting and resources A.7 Appointments to the Board A.7.1 There should be a formal and transparent procedure for the Governance & Compliance – Yes appointment of new Directors to the Board. Appointment of Directors Chairman and members should be disclosed in the Annual Board Composition Report
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 43 CORPORATE GOVERNANCE (Contd.)
CODE REQUIREMENT DISCLOSURE COMPLIANCE REFERENCE B Directors Remuneration B.1 Establish process for developing policy on executive and Yes director remuneration. B.2 Level & Make Up of Remuneration Yes B.3 Disclosure of aggregate Board remuneration paid Financial Information- Yes Detailed Income Statement C Relations with Shareholders C.1 Constructive use of Annual General Meeting (AGM) and Yes conduct of general meetings C.2 Communication with shareholders Company has proper Yes channel with other two shareholders in order to disseminate timely information C.3 Directors should disclose to shareholders all proposed Yes material transactions including related party transactions D Accountability & Audit D.1 Financial Reporting Yes D1.1.1 The board should present an Annual Report including Yes financial statements that is true and fair in accordance with relevant laws and regulations. D.1.2 The Board should present the interim, other price sensitive Yes reports and reports to regulators D1.3 Financial reporting Annual Report of the Board Yes - Statement on board responsibilities of Directors - Statement on internal control Audit and Management Committee Report D1.4 The Annual Report should contain a Report from Directors Governance & Compliance – Yes declaring, Annual Report of the Board • The Company has not engaged in any unlawful activities of Directors • All material interests of Directors in contracts involving the company • The equitable treatment of shareholders • The business is a going concern • The review of internal controls and risk management
D.1.5 The Annual Report should contain a Statement of Directors’ Governance & Compliance – Yes Responsibility Annual Report of the Board of Directors D.1.6 The Annual Report should contain a “Management Management Discussion and Yes Discussion and Analysis” Analysis D.1.7 Serious loss of capital Not Applicable Not Applicable D.1.8 The Board should adequately and accurately disclose the Financial Information-Note Yes related party transactions in the Annual Report. 20: Related Party Disclosure
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 44 ANNUAL REPORT - 2018 CORPORATE GOVERNANCE (Contd.)
CODE REQUIREMENT DISCLOSURE COMPLIANCE REFERENCE D.2 Risk Management and Internal Control D.2.1 The Directors should, at least annually, conduct a review of Governance & Compliance- Yes the risks facing the Company and the effectiveness of the Report of the Audit & system of internal controls Management Committee D.2.2 The directors should describe the risk facing the company Governance & Compliance- Yes and explain how they are being managed or mitigated. Risk Management D.2.3 Companies should have an internal audit function Governance & Compliance- Yes Assurance & Controls: Internal Audit D.2.4/ D.2.5 The Board should maintain a sound system of internal Governance & Compliance- Yes controls and require Audit Committee to carry out reviews Assurance & Controls: of the process and effectiveness of risk management and Internal Controls, Internal internal controls and document to the Board Audit, Report of the Audit & Management Committee D.3 Audit Committee D.3.1 The Audit Committee should be comprised of a minimum of Governance & Compliance- Yes two independent NEDs or exclusively of NEDs, a majority of Report of the Audit & whom should be independent Management Committee D.3.2 The Audit Committee should have a written term of Governance & Compliance- Yes reference, dealing clearly with its authority and duties Report of the Audit & Management Committee D.3.3 The Audit Committee should keep under review the scope Governance & Compliance- Yes and results of the audit and its effectiveness, and the Report of the Audit & independence and objectivity of the auditors Management Committee D.3.4 The Annual Report should include the names of the Audit Governance & Compliance- Yes Committee members, number of meetings held and Report of the Audit & attendance of each directors, scope of work, the basis for the Management Committee determination of the independence of the external auditors and a report of the Audit Committee setting out the manner of compliance with the above requirements during the specified period.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 45 RISK MANAGEMENT
CPSTL firmly believes that sound Risk Management practices Risk Management is a strategic priority are critical for long term growth. The Company’s objective within the Company and considered essential is to add maximum sustainable value to all activities of the for delivering value for the business. CPSTL organization considering the potential upside and downside of all those factors that can adversely affect the operations continues to build Risk Management as a going concern. Risk Management is a continuous and capabilities and proper System of Internal developing process which plays a pivotal role in the corporate Controls to help the company deliver the strategy and its implementation. growth plans in a controlled environment. Risk Management strategy is an integral part of corporate governance, management decisions and business processes in the Company. Integrated Risk Management is essential to the effective functioning of operations from top to bottom. Inculcating Risk Management initiatives into business planning and the decision-making process would provide an effectual integration between planning, reporting, auditing and managing information systems.
The business risks of the Company are affected by a number of factors, not all of which are within the Company’s control. The externally driven challenges, together with general business risk exposures such as corporate reputation, security, environment, health and safety issues, product quality and information technology are constantly reviewed as part of Company’s Risk Management process.
RISK GOVERNANCE The Board has ultimate responsibility for providing strategic guidance and managing risks. They have put in place a Risk Governance Structure to facilitate timely identification of risks with clear accountability for the same. The Board of Directors, Audit Committee and Internal Audit Department lead the Risk Management process by guiding and supporting the managers and the employees in the Company.
BOARD OF DIRECTORS
BOD is responsible for setting the risk appetite, communicating risk strategy and approving policies for effective management of risks.
AUDIT COMMITTEE
The Committee reviews the adequacy of Internal Controls by evaluating the reports provided by Internal Audit Department and asses the independence and performance of external auditors. The Committee also reviews the risks reported by each department and approves the actions to be taken by the Company so as to manage and mitigate the impacts arising from such risks.
FUNCTIONAL HEADS INTERNAL AND EXTERNAL AUDITS
Functional heads are primarily responsible for The role of Internal Audit is to provide independent managing risk within each of their department and for assurance that an organization’s Risk Management, ensuring that appropriate risk mitigation programs are Governance and Internal Control Processes are in place and that they are compliant with the company’s operating effectively. risk management standards & Internal Controls System. External Auditors are responsible for auditing the Company’s financial statements and providing reasonable assurance on fair and true representation of the Company’s financial position and performance.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 46 ANNUAL REPORT - 2018 RISK MANAGEMENT (Contd.)
RISK MANAGEMENT PROCESS 03. MONITORING AND REVIEW Risk Management is a continuous process and integrated in Risk monitoring is the ongoing or continuous process to the performance review and decision-making processes which identifies any necessary adjustments to Risk of the Company. The purpose of Risk Management is to Management strategies in placed. identify potential problems before they occur, so that risk- handling activities may be planned and invoked as needed or 04. COMMUNICATION AND CONSULTATION project to mitigate adverse impacts on achieving objectives. Communication and consultation are not a distinct Risk Management process consists of four steps: stage in the management of risk, but runs through the whole process. An organization should ensure 01. RISK ASSESSMENT that everybody within its staff, according to their role, A systematic process of identifying, analyzing and knows the organization’s risk strategy, risk priorities evaluating current, future and potential risks from and related accountabilities. Board responsibilities, internal and external environment to the business. among other things, include ensuring sound internal information and communication processes, and taking 02. RISK TREATMENT/RISK MITIGATION responsibility for external dissemination on Risk Risk treatment is an action that is taken to manage a Management and Internal Control. risk. That is whether the Company will avoid, transfer, reduce or accept the risk, which is depending on the nature and the evaluation of the risk.
ESTABLISHING THE CONTEXT
RISK IDENTIFICATION
MONITORING COMMUNICATION & & RISK ANALYSIS REVIEW CONSULTAIONS
RISK EVALUATION
RISK TREATMENT
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 47 RISK MANAGEMENT (Contd.)
COMPANY APPROACH TO RISK MANAGEMENT The Company adopts a two lines of defense model as summarised below to identify, manage and mitigate risk properly.
1st LINE OF DEFENCE FUNCTIONAL HEADS Functional Heads are responsible for identifying, measuring, monitoring, reporting and managing risks relevant to their functions. Company has designed a comprehensive System of Internal Controls which covers all policies and procedures enabling the sectional heads to detect, manage and prevent the risks associated.
2nd LINE OF DEFENCE INTERNAL AUDIT & EXTERNAL AUDIT Internal Audits provides an independent assessment of the adequacy and effectiveness of the overall Risk Management, internal control framework and reporting independently to the Audit Committee. External Auditors are independent body and their responsibility is to auditing the Company’s financial statements and providing reasonable assurance.
Overview of Key Risks Affecting the Company
RISK KEY DRIVERS MITIGATION STRATEGIES
NATURAL HAZARDS & UNCERTAINTIES
Our operations may be affected by • Interruptions from floods, • Insurance covers are obtained natural disasters and other events landslides severe storms against certain risks identified. beyond our control. • Acts of terrors. • Employees are adequately trained in order to minimize any harmful effect of such events to human life as well as to the business. • Since the Company is a nerve center of the economy, high security measures and controls are implemented.
OPERATIONAL RISK
Operational related hazards may • Unionized labour strikes may • Strengthening relationships affect to Company. cause unwanted disruptions. with trade unions and using • Unexpected leakages / this as a platform to resolve damages to pipe lines may grievances before they escalate cause operational delay. into risk threats. • Disruptions in supply • Regular servicing and infrastructure or logistics. maintenance of pipelines in • Accidents order to minimize leakages / • Large scale fires damages. • Employees are adequately trained in order to minimize any harmful effect. • CPSTL has dedicated In- House Fire Unit.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 48 ANNUAL REPORT - 2018 RISK MANAGEMENT (Contd.)
RISK KEY DRIVERS MITIGATION STRATEGIES
COMPETITOR RISK
Competition from other terminaling • We face competition from • Enhance the bowser fleets. companies that are able to supply other terminaling companies • The expansion of an existing our customers with comparable (CPC & LIOC) who are the two terminals such as by increasing storage capacity at a lower price shareholders of the CPSTL. storage capacity or otherwise. could adversely affect our financial • Higher service standards condition and results of operations. are maintained by recruiting, training and coaching employees with right caliber. • To be ahead with our competitors, we focus continuously on innovation through research and development to cater to the changing customer preferences by applying new technologies.
LEGAL RISK
Our operations are subject to legal • Legal requirement on • CPSTL has sophisticated and Sri Lanka laws and regulations product quality specifications laboratory for any kind of relating to product quality or blending requirements petroleum fuel tests and specifications, and we could be including vapor pressure, followed Stringent quality subject to damages based on claims Sulphur content, ethanol control mechanisms and brought against us by our dealers content and biodiesel content. compliance with regulatory and as a result of the failure of products • Violations of product quality certification. we distribute to meet certain quality laws attributable to our specifications. operations could subject us to significant fines and penalties as well as negative publicity. • Off-specification (Substandard) product distributed for public use, could result in poor engine performance or even engine damage which could result in liability claims regarding damages and negative publicity.
HEALTH, SAFETY & ENVIRONMENTAL RISK
We may incur significant costs • The operational activities • CPSTL has dedicated In House and liabilities in complying with are coming under high risk Fire Unit, First Aid Training, environmental, health and safety category since the flammability Fire Drills, Safety Training and laws and regulations, which are of the key products handling Awareness programs. Fire complex and frequently changing. by the Company. The small safety equipment are constantly mistake can ignite a large- checked and ensure that are scale fire which will cause to in peak condition. i.e. Servicing cripple the Company operations and testing of fire siren as well as the economy of the regularly, oiling and testing country. office equipment, drenchers • Storage, handling and and horses are done regularly. transportation of petroleum • CPSTL is periodically dispose products may cause to the Sludge oil with proper emission and discharge of tendering process and ensure harmful materials & gases into that waste would not damage the environment the environment.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 49 RISK MANAGEMENT (Contd.)
RISK KEY DRIVERS MITIGATION STRATEGIES
HEALTH, SAFETY & ENVIRONMENTAL RISK ( Cont..)
• our business is inherently • Wastewater discharging system subject to accidental spills, is regulated to retain the leakages, discharges or other quality of wastewater within the releases of petroleum or required hazardous incidents into the standard. environment and neighboring • Proper garbage separation areas, for which we may and dispose system is incur substantial liabilities to implemented. investigate and remediate. • Employed Well trained staff • Failure to comply with for handling pipeline / offshore applicable environmental, leakages. health, and safety laws and regulations may result in the assessment of sanctions, including administrative, civil or criminal penalties, permit revocations, and injunctions limiting or prohibiting some or all of our operations.
CYBER RISK
We utilize technology systems to • Impact of cyber incidents via a • Fully operationalized Disaster operate our assets and manage our targeted attack from hackers, Recovery Management Centre businesses. A cyber-attack or other collateral damage as a result of (DRMC). security breach of our information a non-targeted attack, insider • Implementation of network technology systems could result attack, an accidental cyber protection technology to in a breach of critical operational incident or any combination of manage network perimeter or financial controls and lead to these. defense, data loss, cyber- a disruption of our operations, spoofing, distributed denial of commercial activities or financial service attack, mobile devices processes. and monitor suspicious cyber activities together with regular testing and verification of controls. • Backup server & recovery server
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 50 ANNUAL REPORT - 2018 RISK MANAGEMENT (Contd.)
RISK KEY DRIVERS MITIGATION STRATEGIES
EMPLOYEE RETENTION
Our future success depends • Maintaining employee upon the continued service of our motivation through strong executive officers and other key employee value proposition personnel. If we lose the services of which features employee one or more of our executive officers recognitions, appraisals and or key employees, our business, promotions. operating results and financial • Continued investment in condition could be harmed. training and development and structured training program covering all employees. • Opportunities for career progression
ECONOMIC RISK
Our financial results depend on • Implication of pricing formula • Investments in short term the demand for the light refined to crude oil will cause to and long-term financial products, heavy refined products, change fuel prices constantly instruments are in place in crude oil and other related services according to the price per order to face uncertain financial that we perform at our terminals. barrel in global market crises arising through adverse General economic downturns could economic factors. mainly result in lower demand for these products for a sustained period of time. It will affect to significant reduction in storage usage in our terminals, which would reduce our cash flow and our ability to make distributions to our two shareholders.
RISK OF STOCKS, PROPERTY AND EQUIPMENT
Due to the flammable nature f • Insurance obtained from storing products any inadequate/ reputed companies registered ambiguity in insurance cover may under IBSL. result in dishonor of insurance • CPSTL has taken adequate claims by the insurance companies. insurance policies like Fire & Commercial Insurance, Hull policy (Offshore pipeline), Product insurance, vehicle insurance, Storage Tanks & equipment etc.
EMPLOYEE RELATIONS
Around 99% of our employees are • Open door policy for employees unionized as we recognized the right to discuss areas of concern. to freedom of association. • Regular structured dialogue with union representatives to identify areas of concerns.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 51 RISK MANAGEMENT (Contd.)
RISK KEY DRIVERS MITIGATION STRATEGIES
NON AVAILABILITY / LIMITED AVAILABILITY OF CONTRACTORS FOR SPECIFIC WORKS RELATED TO OIL TERMINALING INDUSTRY
Impact the speed of execution of • Local parties being developed works and higher cost of work by entrusting them with jobs. • Enabled participation of foreign capable parties as Consortium partners with the local parties.
LOCAL COMMUNITY RELATIONS
• High level of community Empowering and Contributing engagement and nurturing towards the Socio- economic meaningful relationships with progress of the Communities we our Communities. operate in is crucial for the image of • Investment in ongoing the Company. community development projects.
TRAINING & DEVELOPMENT
Training & Development is a key • Structured training programs in aspect at all levels to drive employee place for employees. productivity, safety and enhance the • Training needs identified based tacit knowledge of our employees. on the performances.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 52 ANNUAL REPORT - 2018 ANNUAL REPORT OF THE BOARD OF DIRECTORS
The Board of Directors have pleasure in presenting the bearing No. 1310-8 dated 13th October 2003 and the right Annual Report for the year ended 31st December 2018 on the to use and/or leasehold rights enjoyed by Ceylon Petroleum affairs of the Company prepared in terms of the provisions of Corporation pertaining to the installations at Kolonnawa and the Companies Act No. 7 of 2007. Muthurajawella, bulk depots island wide and the related facilities, oil facilities at Colombo Port, and the ownership These were approved by the Directors on 22nd February and/or the functions and/or the rights of Ceylon Petroleum 2019. Corporation pertaining to pipelines from Single Point Buoy Mooring to Muthurajawela installation, Colombo Port to PRINCIPAL ACTIVITY Kolonnamwa installation and their branches upto the customer’s battery limits, Galle Harbour to Magalle bulk The principal activity of the Company is the Common User depot, and internal pipelines within the installations and bulk Facility (CUF) established to facilitate the petroleum storage depots referred above. & distribution activities in Sri Lanka and to owned and operate the storage and distribution infrastructure of Ceylon REVIEW OF OPERATIONS AND FINANCIAL HIGHLIGHTS Petroleum Corporation (CPC) consisting of Oil Terminals, Storage Facilities, Pipelines and the Bowser Fleet, more The operation has shown revenue of Rs.13,130,224,803 with fully described in the Government Gazette extraordinary a Net Profit of Rs. 197,317,904.
Particulars 2018 2017 LKR LKR
Turnover 13,130,224,803 14,176,146,910 Earnings Before Taxation 1,522,230,109 3,273,309,403 Profit / (Loss) After Tax (PAT) 197,317,904 2,799,571,815
STATED CAPITAL • Mr Shyam Bohra The Stated Capital of the Company as at 31st December 2018, • Mr Ranaweera Arachchiralalage Nimal Jayasundara is Rs. 7,500,000,000/=. The distribution of shareholdings is as • Mr Herath Mudiyanselage Sanjeewa Lushantha Wijeratne follows. • Mr Suraj Kumar Patnaik • Mr Pramod Jain Ordinary shares Ceylon Petroleum Corporation 500,000,000 REMUNERATION OF DIRECTORS Lanka IOC Limited 250,000,000 Remuneration received by the Directors is set out in detailed Income Statement to the Financial Statements. PROPERTY PLANT & EQUIPMENT The movements in property, plant and equipment during the INTEREST REGISTER year are set out in Note 10 to the Financial Statement. Company maintains an Interest Register in terms with provisions of Companies Act No. 07 of 2007. All Directors DIVIDEND have made declarations as provided for in Section 192 (2) of Directors recommended and paid an interim dividend of the Companies Act No.07 of 2007. The related entries were Rs.0.30 per share for the year ended 31st December 2018. made in the Interest Register during the year under review.
CORPORATE DONATIONS STATUTORY PAYMENTS During the year the Company made donations & sponsorship To the best of their knowledge and belief, the Directors payments amounting to Rs 2,160,750. are satisfied that all statutory payments in relation to the Government and to the Employees have been settled to date DIRECTORS AS AT 31 DECEMBER 2018 or are provided for in the books of the company. The Board of Directors of Ceylon Petroleum Storage Terminals Limited as at 31st December 2018 were as follows; GOING CONCERN The Directors are confident that the company has adequate • Mr Dammika Ranatunga resources to continue business operations. Accordingly, the • Mr Uditha Niroshana Gunawardena Directors consider that it is appropriate to adopt the going • Mrs Kakulthotuwage Dona Rosemary Olga concern basis in preparing the Financial Statements.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 53 ANNUAL REPORT OF THE BOARD OF DIRECTORS (Contd.)
POST BALANCE SHEET EVENTS There are no significant events that have occurred after the balance sheet date which would have any material effect on the Company that require adjustments to be decided by the Board of Directors other than those disclosed in note 30 to the financial statements.
AUDITORS In terms of the 19th Amendment to the constitution, Company is required to appoint Auditor General or his nominee as Auditors of the Company.
Audit for the financial year ended 31st December 2018 was carried out by National Audit Office. The fees paid to auditors are disclosed in detailed income statement to the Financial Statements.
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 or its Group Companies. They confirm that they are independent in accordance with the Code of Ethics of the Institute of Chartered Accountants of Sri Lanka.
For and on behalf of the Board of Directors
G S Withanage Chairman
K D R Olga Director
By Order of the Board,
Accounting Systems Secretarial Services (Private) Limited Secretaries to the Company
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 54 ANNUAL REPORT - 2018 AUDIT AND MANAGEMENT COMMITTEE REPORT
COMPOSITION reviews the risks the Company is exposed to and approves The Audit & Management Committee of consists of 03 the actions to be taken by the Company so as to manage and members, who are Non – Executive Directors appointed by mitigate the impact arising from such risks. the Board of Directors. INTERNAL AUDITS • Mrs. K.D.R. Olga - The Chairperson The Committee reviews the accounting system and the (Representative from the Ministry) scope & coverage of the internal audit process to assess the • Mr. Anuj Jain - Member effectiveness of financial controls that have been designed (Representative from LIOC upto 14/06/2018) to provide reasonable assurance to the Directors that assets • Mr. Pramod Jain - Member are safeguarded and that the financial reporting system can (Representative from LIOC from 16/08/2018) be relied upon in preparation and presentation of Financial Statements. The Internal Audit function has been established • Mr. Nimal Jayasundara - Member within the Company. Follow-up reviews are scheduled (2018/01/01 – 2018/05/30) periodically to ascertain that audit recommendations are
being acted upon. The Risk Based Internal Audit was a The Audit Charter of the Committee has been prepared by newly introduced approach during 2018 in order to broaden covering scope of responsibilities, authorities and specific the scope of internal audit. The Risk Rating provides duties stipulated in the Circular PED/55 and other relevant the management a greater attention on such issues for circulars issued by the Treasury Department in relation to immediate remedial actions. The scope of the Internal Audit conducting Audit and Management Committees at Public is governed by the approved Internal Audit Charter. Commercial Enterprises. STATUTORY AUDITS TASKS OF AUDIT & MANAGEMENT COMMITTEE The Committee also deliberates with the Statutory Auditors, The Committee reviews the financial reporting system National Audit Office of Sri Lanka to review the nature, adopted by the Company in preparation, presentation and approach and scope of audit in accordance with the National adequacy of disclosures in the annual financial statements Audit Act 2018. Actions taken by the Management in response to ensure reliability of the processes, consistency of to the issues raised as well as the effectiveness of internal the accounting policies & methods adopted and their controls in place are also discussed. compliance with the Sri Lanka Accounting Standards. The Committee also reviews the Company’s compliance with MEETINGS financial reporting requirements, information requirements of the Companies Act and other relevant financial reporting During the year under review, twelve (12) Audit & related regulations and requirements. The Committee also Management Committee meetings have been conducted to reviews the adequacy of the internal controls and assesses perform the tasks entrusted to them as noted above. the independence & performance of the external auditors. The Committee recommends the financial statements to the The members who have taken part in the committee Board for its approval and issuance. The Committee also meetings during the year are noted below.
SERIAL DATE STRENGTH OF NO OF MEMBERS NAMES OF THE MEMBERS NO. THE COMMITTEE PARTICIPATED
01 15.01.2018 03 03 Mrs. K.D.R. Olga I Mrs. Anuj Jain I Mr. Nimal Jayasundara 02 09.02.2018 03 02 Mrs. K.D.R. Olga I Mr. Nimal Jayasundara 03 14.02.2018 03 03 Mrs. K.D.R. Olga I Mr. Anuj Jain I Mr. Nimal Jayasundara 04 22.02.2018 03 03 Mrs. K.D.R. Olga I Mr. Anuj Jain I Mr. Nimal Jayasundara 05 27.02.2018 03 02 Mrs. K.D.R. Olga I Mr. Nimal Jayasundara 06 02.03.2018 03 03 Mrs. K.D.R. Olga I Mr. Anuj Jain I Mr. Nimal Jayasundara 07 07.03.2018 03 03 Mrs. K.D.R. Olga I Mr. Anuj Jain I Mr. Nimal Jayasundara 08 14.05.2018 03 03 Mrs. K.D.R. Olga I Mr. Anuj Jain I Mr. Nimal Jayasundara 09 14.06.2018 02 02 Mrs. K.D.R. Olga I Mr. Anuj Jain 10 16.08.2018 02 02 Mrs. K.D.R. Olga I Mr. Pramod Jain 11 19.09.2018 02 02 Mrs. K.D.R. Olga I Mr. Pramod Jain 12 12.10.2018 02 02 Mrs. K.D.R. Olga I Mr. Pramod Jain
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 55 • E XPANDING ON SUCCES • EXPANDING ON SUCCES • E XPANDING ON SUCCES •
C EYLO N PETRO LEUM STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEUM STO RAGE TERMINALS LIMITED
• E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES • AUDIT AND MANAGEMENT C EYLO N PETRO LEUM STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEUM STO RAGE TERMINALS LIMITED • E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES • COMMITTEE REPORT (Contd.) C EYLON PETROLEUM STORAGE TERMINALS LIMITED• C EYLON PETROLEUM STORAGE TERMINALS LIMITED
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ROLE OF THE AUDIT & MANAGEMENT COMMITTEE CONCLUSION C EYLON PETROLEUM STORAGE TERMINALS LIMITED• C EYLON PETROLEUM STORAGE TERMINALS LIMITED The Financial Statements are prepared in accordance with The Audit & Management Committee has made several • E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES • decisions and recommendations on strategic issues for Sri Lanka Accounting Standards (SLFRS/LKAS) issued by submitting to the Board of Directors for workable actions. the Institute of Chartered Accountants of Sri Lanka (ICASL). C EYLO N PETRO LEUM STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEUM STO RAGE TERMINALS LIMITED The financial statements are prepared under the historical • E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES • • Review the adequacy of internal control system with the cost convention. The Audit committee is satisfied that the management, Auditor General and Internal Auditors. Company’s accounting policies and internal controls provide C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED reasonable assurance that the affairs of the Company • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • • Overseeing the financial reporting process to are managed in accordance with its policies and that the ensure the preparation and fair presentation of the Company’s assets are properly accounted for and adequately C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED financial statements by ensuring the transparency, safeguarded. understandability and reliability of financial statements. • E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES • C EYLO N PETRO LEUM STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEUM STO RAGE TERMINALS LIMITED • Identifying causes and effects for the losses incurred and detailed analysis and studies were carried out to • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • propose or recommend immediate suitable actions for K D R Olga C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED turning around the loss making units. Chairperson Audit & Management Committee • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • • Review of the Annual Internal Audit Program, significant C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED audit findings and action plan. • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • • Identification of risks and the remedial actions for C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED mitigating the risk to acceptable level, by ensuring the risk management process is comprehensive and • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • ongoing. C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
• Creating an organization wide commitment to strong • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • and effective internal controls, emanating from the tone at the top. C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • • Reviewing corporate policies relating to compliance with laws and regulations, ethics, conflicts of interest C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED • and the investigation of misconduct or fraud. E XPANDING O N S U CCES • EXPANDING O N S U CCES • E XPANDING O N S U CCES •
• Continually communicating with the Senior Management C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED regarding status, progress and new developments as • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • well as problematic areas. C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
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CEYLON PETROLEUM STORAGE TERMINALS LIMITED C EYLON PETROLEUM STORAGE TERMINALS LIMITED• C EYLON PETROLEUM STORAGE TERMINALS LIMITED 56 ANNUAL REPORT - 2018 • E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING O N SUCCES • • E XPANDING ON SUCCES • EXPANDING ON SUCCES • E XPANDING ON SUCCES •
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• E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES • C EYLO N PETRO LEU M STO RAGE TERMINALSFINANCIAL LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED • E XPANDING O N S U CCES • EXPANDING O N S U C CES • E XPANDING O N S U CCES •
C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED • E XPANDING O N S U CCESINFORMATION• EXPANDING O N S U C CES • E XPANDING O N S U CCES • C EYLO N PETRO LEU M STO RAGE TERMINALS LIMITED• C EYL O N PETRO LEU M STO RAGE TERMINALS LIMITED
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C EYLON PETROLEUM STORAGE TERMINALS LIMITED• CCEYLONEYLON PETROLEUM PETROLEUM STORAGE STORAGE TERMINALS TERMINALS LIMITED LIMITED 57 • E XPANDING O N SUCCES • EXPANDING O N SUCCES • E XPANDING ANNUALO N SUCCES REPORT -• 2018 AUDITOR GENERAL’S REPORTS
Chairman Ceylon Petroleum Storage Terminals Limited
Report of the Auditor General on the Financial Statements and Other Legal and Regulatory Requirements of the Ceylon Petroleum Storage Terminals Limited for the year ended 31 December 2018 in terms of Section 12 of the National Audit Act. No. 19 of 2018.
1. Financial Statements
1.1 Disclaimer of Opinion
The audit of the financial statements of the Ceylon Petroleum Storage Terminals Limited (“Company”) for the year ended 31 December 2018 comprising the statement of financial position as at 31 December 2018 and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, was carried out under my direction in pursuance of provisions in Article 154 (1) of the Constitution of the Democratic Socialist Republic of Sri Lanka read in conjunction with provisions of the National Audit Act No. 19 of 2018. My report to Parliament in pursuance of provisions in Article 154 (6) of the Constitution will be table in due course.
I do not express an opinion on the accompanying financial statements of the Company. Because of the significance of the matters discussed in the Basis for Disclaimer of Opinion section of my report, I have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.
1.2 Basis for Disclaimer of Opinion
(a) Provision for impairment of trade receivable totalling of Rs. 174.7 million relating 19 parties for longer period had been reversed and charged to the profit and Loss account for the year under review. However, audit was unable to ensure whether any assessment had been done to evaluate the recoverability of them before such reversal. Therefore, the existence and the accuracy of these trade receivable balances could not be assured in audit through any other collaborative evidences.
(b) The Inventory
The accuracy of the valuation and completeness of inventory items valued at Rs. 657 million shown in the Statement of Financial Position as at the end of the year under review could not be relied upon in audit due to following reasons.
(i) It was observed that, more than 2500 types of inventory items with huge quantity had been included to the enterprise Resource Planning (ERP) system i.e. SAP of the Company without being entered the value of such inventory items to the system.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 58 ANNUAL REPORT - 2018 AUDITOR GENERAL’S REPORTS (Contd.)
(ii) According to the practice of the Company, a provision for slow inventory items had been made for the entire inventory items for over 03 years at the end of each year from its inception. According to the records of the Company, even though slow moving items over 03 years valued at Rs. 230.2 million were observed at the end of the year under review only Rs. 15.6 million had been provided. Further audit was unable to ensure that proper technical evaluation had been carried out before such reduction of provision by Rs. 214.6 million.
(c) Inter Company Balances
The accuracy, valuation and existence of the Inter Company Balances between the Company and the Ceylon Petroleum Corporation (CPC) and Lanka Indian Oil Company (LIOC) were not assured in audit due to following reasons.
(i) A receivable amount of Rs. 1,173 million from CPC had been written off from their accounts to eliminate the loan interest components of throughput charges of 13 cents per litre considering the settlement of Exim Bank Loan. However, no any impairment provision had been made in this regard by the Company.
(ii) A difference of Rs. 2,475.8 million including the amount shown in the (i) above was observed between the amounts shown as receivable from the CPC in the financial statements of the Company and the corresponding amount shown as payable in the financial statements of the CPC at the end of the year under review.
(iii) According to the balance confirmation received form the LIOC, the amount payable to the Company was Rs. 351.5 million, whereas according to the financial statements of the Company the corresponding amount was shown as Rs. 406.59 million. Therefore, an un-reconciled difference of Rs. 55.1 million was observed between those two balances.
(d) A difference nof Rs. 199.8 million was observed between total of Income Tax Payable. Value Added Tax (VAT) payable, Withholding Tax Payable, Pay as you earn (PAYE) Payable and Economic Service Charge (ESC) Payable Appeared in th financial statements of the Company and the corresponding amounts shown in the records maintained by the Department of Inland Revenue as at the end of the year under review.
(e) The recoverability of overpaid PAYE tax and input VAT amounting to Rs. 6.8 million and Rs. 8.06 million respectively was in doubt since these were unrecovered from the year 2008 and 2010 respectively. However, no provision had been made in this regards even as at the end of the year under review.
(f) The reliability of payable balance of Withholding Tax (WHAT) and output VAT amounting to Rs. 19.1 million and Rs. 13.9 million respectively was also in doubt since these were continuously carried forwarded year by year in the financial statements for longer period without being settled.
(g) Fully depreciated assets approximately costing Rs. 5,195 million are being continuously used by the Company without reassessing the useful economic lifetime of those assets and accounted them an terms of Section 51 of LKAS 16. Further , the Company had not re-valued its assets since the inception of the Company and a proper revaluation policy was not established for this purpose. Hence, the non-current assets shown in the financial statement shad not reflected the fiar value of such assets.
(h) A sum of Rs. 32.6 million which had been transferred to the expenses (Repair and Maintenance) account from Capital work in progress account (WIP) recognizing it as recurrent expense in the year 2017 was reversed in the year under review. However,a proper basis had not been observed for such reversal. As a result, the net profit and the expenses in the year under review had overstated and understated by similar amount respectively.
(i) Several Transport Charges and Vessel Charges had been accounted on cash basis which contrary to section 27 and 28 of the LKAS 01 by the Company.
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(j) No any provision had been made in the financial statements of the year under review by the Company for total estimated loss of over Rs. 150 million incurred due to two major fuel leakages which were reported at the Muthurajawela SPBM on 08 September 2018 and at the Kolonnawa Installation on 12 October 2018.
1.3 Responsibilities of Management and Those Charged with Governance of the Financial Statements.
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards and or such internal control as management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
As per Section 16(1) of the National Audit Act No. 19 of 2018, the Company is required to maintain proper books and records of all its income, expenditure, assets and liabilities, to enable annual and periodic financial statement s to be prepared of the Company.
1.4 Auditor’s Responsibilities for the Audit of the Financial Statements
My responsibility is to conduct an audit of the Company’s financial statements in accordance with Sri Lanka Auditing Standards and to issue an auditor’s report. However because of the matters described in the Basis for Disclaimer of Opinion section, I was not able to obtain sufficient appropriate audit evidences to provide a basis for an audit opinion on these financial statements.
2. Report on Other Legal and Regulatory Requirements
National Audit Act No. 19 of 2018 and Companies Act, No. 7 of 2007 include specific provisions for following requirements.
• I have not obtained alll the information and explanation that considered necessary for the purpose of audit and I was unable to determine whether proper accounting records have been kept by the Company as per the requirement of section 163 (1) (d) of the Companies Act, No. 7 of 2007 and section 12 (a) of the National Audit Act, No. 19 of 2018.
• Except for the effect of the matters described in the Basis for Disclaimer of Opinion, the financial statements of the Company comply with the requirement of section 151 of the Companies Act, No. 07 of 2007.
• The financial statements presented is consistent with the preceding year as per the requirement of section 6 (1) (d) (iii) of the National Audit Act, No. 19 of 2018.
* The financial statement presented includes all the recommendations made by me in the previous year as per the requirement of section 6 (1) (d) (iv) of the National Audit Act, No. 19 of 2018 ex ept for the matters described in the paragraphs 1.2.b.i, 1.2.c.ii, 1.2d, 1.2e, 1.2F and 1.2.g. of this report.
Based on th procedures performed and evidence obtained were limited to matters that are material, nothing has come to my attention;
• to state that any member of the governing body of the Company has any direct or indirect interest in any contract entered into by the Company which are out of the normal cause of business as per the requirement of section 12 (d) of the National Audit Act, No. 19 of 2018.
• to state that the Company has not complied with any applicable written law, general and special directions issued by the governing body of the Company as per the requirement of section 12 (f) of the National Audit Act, No. 19 of 2018 except for ;
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 60 ANNUAL REPORT - 2018 AUDITOR GENERAL’S REPORTS (Contd.)
Referenc o Laws/Direction Description
(a) Public Enterprises Circular No. PED/12 of 2 June 2003 - Guidelines for Good Governance.
i. Guideline 4.2.2 Procurements of material, especially Non - current assets purchased during the month and Statement on Human Resources including cadre positions, new recruitments had not been tabled at each monthly board meeting.
ii. Guieline 4.3 Minutes of Board meeting shad not been forwarded to the Secretary to the line Ministry within 10 days after confirmation of such meetings.
iii. Guideline 5.1.1. The Company should prepare a Corporate plan for 3 years and update it annually as a rolling plan. The copies of plan approved by the Board together with the updated Annual Budget should be forwarded to the line Ministry, Department of Public Enterprises, General Treasury and the Auditor General 15 days before the commencement of financial year. However, the Company had not complied with that requirement.
iv. Guideline 5.2.2 (b) Approval of the Ministry and the concurrence of the Department of Public Enterprises, General Treasury had not been obtained for the capital expenditure exceeds Rs. 10 million and motor vehicles acquired.
v. Guideline 5.2.4 and 5.2.5 The draft Budget had not been placed before the Board of Directors for approval three months before the commencement of the financial year.
Further, Copies of the finally updated Budget approved by the Board had not been forwarded to the line Ministry, the Department of Public Enterprises, General Treasury and Auditors General as specified by Guideline 5.2.5.
vi. Guideline 9.2 The Company does not have an organization Chart registered with the Department of Public Enterprises, General Treasury with an approved cadre,. In the event of creation of a new cadre, or instances where there is excess cadre, the Company had not taken action in consultation with the Department of Public Enterprises, General Treasury.
vii. Guideline 9.3 The Company does not have schemes of recruitment and promotion(SORAP) approved by the Board and the Ministry with the concurrence of the Department of Public enterprise, General Treasury.
Viii. Guideline 9.10 As per the Section any recruitment on contract, casual or otherwise should have the approval of the Secretary to the Treasury. Such approval had not been obtained by the Company for the appointment of contract employees. There were 50 contract basis employees at the end of the year under review.
(b) Government Procurement A tender procedure had not been followed when selecting outside Guidelines - 2006 transporters (Bowsers) and the Board approval had not been obtained.
(c) Department of Public Enterprises The Company had borne the Pay As You Earn (PAYE) tax of its employees Circular No. FP/06/35/02/01 of amounting ot Rs. 207.8 million without deducting it from their personal 04 November 2013 and No. PED emoluments for the year under review. 03/2016 of 29 April 2016
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(d) Finance Circular No. 124 of 24 Covering up duties of a vacant post should be limited to a period of 03 October 1997 of the Ministry of months. However, 07 officers had been assumed for cover up duties of the Finance and Planning vacant posts more than 03 months.
(e) Resources of the Institution given to Other Government Institutions
In contrary to the instructions of the Circulars, particularly, the Public Enterprises Circular No. PED/12 of 02 June 2003 on Public Enterprise Guidelines for Good Governance, the Letters Nos. CSA/PI/40 of 04 January 2006 and CS/1/17/1 of 14 May 2010 issued by His Excellency the President, and the Public Enterprises Circular No. 21 of 08 January 2004, the Company had released 04 persons and a vehicle to other institutions and incurred a sum of Rs. 1.91 million on payment of remuneration and other allowances on behalf of released employees and payment of fuel and maintenance expenses for released vehicles during the year 2018.
• to state that the Company has not performed according to its powers, functions and duties as per the requirement of section 12 (g) of the National Audit Act. No. 19 of 2018 except for;
(a) Non availability of a formal monitoring process over terms and conditions of the Settlement Agreement
According to the Section 03 of the Settlement agreement dated 05 January 2007 between the Government of Sri Lanka and Lanka IOC PLC, it was restricted to deliver petroleum products by LIOC from its China Bay installation to a maximum 5 per cent of the Country’s throughput of petroleum products and Ceylon Petroleum Corporation (CPC) to a maximum 5 per cent excluding deliveries from Sapugaskanda Refinery. However, a regular process is not available to monitor the compliance of above conditions. As a result, there is a possibility of losing throughput income to the Company.
(b) Delay in revising pricing formula due to expiry of Shareholders Agreement and Share Sale Purchase Agreement for Common User Facility
It was noted that Shareholders Agreement and Share Sale Purchase Agreement for the common user facility between Ceylon Petroleum Corporation, Lanka Indian Oil Company PLC nd Ceylon Petroleum Storage Terminals Limited was expired on 31 December 2008. However, neither an extension been obtained, nor a new agrement was entered. Therefore, the pricing formula used for the purpose of determining the throughput charges, transport income including slab recoveries had not been revised since 2011.
(c) Two major fuel leakages
The following observations are made
(i) According to the information available with audit, approximately 196,000 litre of Petrol had been leaked when transferring fuel between two tanks at the Kolonnawa Installation on 12 October 2018. It was not observed tht the prompt actions had been taken by the responsible officers to minimise the spread of leakages even dedicated officers had been assigned with required facilities. Further, action ad not been taken to recover the loss from insurance or recover from the responsible parties.
(ii) A leakage of 344.222 metri tons of low Sulphur Furnance Oil (LSFO) belong to the CPC had been occurred at the Muthurajawela SPBM on 08 September 2018. A considerable delay was observed to apply for claiming the loss of leakage from insurance or recover from responsible parties.
* to state that the resources of the Company had not been procured and utilized economically, efficiently and effectively within the time frames and in compliance with the applicable laws as per the requirement of section 12 (h) of the National Audit Act. No. 19 of 2018.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 62 ANNUAL REPORT - 2018 AUDITOR GENERAL’S REPORTS (Contd.)
03. Other Audit Observations
(a) It was noted that the Company currently uses only two pipe lines to transfer each finished petroleum products from the Colombo Port to the Kolonnawa petroleum installation ie:one pipe line is used for the transfer of Black Oil and another Pipeline is used to transfer white oil. This pipe lines have been using for about 50 years. Depending on a single pipe line for each product may result for interruption to the fuel distribution, if any major repairs occur.
(b) Out of the approved cadre of 3,248 of the Company, 1,263 post or 38.9 per cent were in vacant as at 31 December 2018. Out of the that 62 posts oe 22.5 per cent were in senior staff level including Deputy General Manager Operation, Deputy General Manager Supplier, Chief Information Officer, Manager Information, Senior Deputy Manager Distribution and Senior Deputy Engineer, Manager (Fire & Safety) etc. However, it was observed that 944 persons had been recruited out of approved cadre.
(c) Long outstanding payable balances
Outstanding balance of transport charges amounted to Rs. 31.2 million relating to 511 vendors (872 instances) and outstanding balance of other Creditors amounted to Rs. 302.1 million were observed over the period ranging one year to five years without taking favourable action to settle.
(d) Non-availability of written Agreements
Having a proper agreement between parties who provide any support services to an organization for smooth running of the business and minimizing the cost is needed. However, an agreement or even a Memorandum of understanding (MOU) has not been entered with CPC and LIOC. As a result, the procedure and roles and responsibilities of each party could not be properly determined.
(e) Non-availability of written procedure manual
It was observed that a written procedure manual is not available showing the controls that are in place to prevent and detect internal control weaknesses or any possible errors and irregularities that could occur. ‘I”t is important and beneficial to the Company to keep a track record of controls in place for each process of the Company to ensure that the management prescribed/designed process is operating without exceptions. Further, once a procedure manual is designed it should be periodically evaluated at reasonable intervals to ensure its relevance.
W.P.C. Wickramaratne Auditor General
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 63 STATEMENT OF FINANCIAL POSITION As at 31 December 2018
Note 2018 2017 LKR LKR
Non Current Assets Property, Plant and Equipment 10 16,046,854,744 16,754,748,458 Intangible Assets 11 127,341,560 277,797 Other Financial Assets 14.1 1,138,830,704 444,255,366 17,313,027,008 17,199,281,621
Current Assets Inventories 12 657,620,365 407,496,049 Trade and Other Receivables 13 7,679,235,133 9,071,571,994 Other Financial Assets 14.2 1,523,439,398 1,838,973,439 Cash and Cash Equivalents 15 3,148,644,883 1,474,120,011 13,008,939,779 12,792,161,492 Total Assets 30,321,966,787 29,991,443,112
EQUITY AND LIABILITIES Capital and Reserves Stated Capital 16 7,500,000,000 7,500,000,000 Capital Reserves 16.1 979,000,000 979,000,000 Retained Earnings 16,287,261,312 16,684,197,985 Total Equity 24,766,261,312 25,163,197,985
Non Current Liabilities Defined Benefit Obligation 17 1,451,971,373 1,473,989,898 Deferred Tax Liabilities 8.1 1,997,626,173 1,017,152,375 3,449,597,546 2,491,142,273
Current Liabilities Trade and Other Payables 18 1,815,024,740 1,845,584,533 Income Tax Payable 291,083,189 491,518,321 Total Liabilities 2,106,107,929 2,337,102,854 Total Equity and Liabilities 30,321,966,787 29,991,443,112
I certify, these Financial Statements are in compliance with the requirements of the Companies Act No. 07 of 2007.
Finance Manager
The Board of Directors are responsible for the preparation and presentation of these Financial Statements. Signed for and on behalf of the Board by,
Director Chairman
The accounting policies and notes on pages 68 through 91 form an integral part of the Financial Statements.
22nd February 2019 Colombo
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 64 ANNUAL REPORT - 2018 STATEMENT OF COMPREHENSIVE INCOME As at 31 December 2018
Note 2018 2017 LKR LKR
Revenue 3 13,130,224,803 14,176,146,910
Direct Expenses (7,903,351,446) (7,400,983,212)
Gross Profit 5,226,873,357 6,775,163,698
Other Operating Income 4 704,333,113 457,796,444
Administrative Expenses (4,526,853,560) (4,025,018,806)
Operating Profit 1,404,352,910 3,207,941,336
Finance Income 5.1 117,877,199 189,440,805
Finance Cost 5.2 - (124,072,738)
Profit Before Tax 6 1,522,230,109 3,273,309,403
Income Tax Expense 7.1 (1,324,912,205) (473,737,588)
Profit for the Year 197,317,904 2,799,571,815
Other Comprehensive Income not to be Reclassified to Profit or Loss in Subsequent Periods
Actuarial gain/loss on Defined Benefit Obligations 17 75,079,946 (94,946,584)
Tax on Other Comprehensive Income 8.1 (18,334,523) 12,760,821
Other Comprehensive Income for the Year, Net of Tax 56,745,423 (82,185,763)
Total Comprehensive Income for the Year, Net of Tax 254,063,327 2,717,386,052
Earnings Per Share 9.2 0.26 3.73
The accounting policies and notes on pages 68 through 91 form an integral part of the Financial Statements.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 65 STATEMENT OF CHANGES IN EQUITY As at 31 December 2018
Stated Capital Capital Reserve Retained Earnings Total LKR LKR LKR LKR
Balance As at 1 January 2017 7,500,000,000 979,000,000 14,371,811,934 22,850,811,934
Profit for the Year - - 2,799,571,815 2,799,571,815
Other Comprehensive Income - - (82,185,763) (82,185,763)
Total Comprehensive Income - - 2,717,386,052 2,717,386,052
Dividends Paid - - (405,000,000) (405,000,000)
Balance As at 31 December 2017 7,500,000,000 979,000,000 16,684,197,985 25,163,197,985
Profit for the Year - - 197,317,904 197,317,904
Other Comprehensive Income - - 56,745,423 56,745,423
Total Comprehensive Income - - 254,063,327 254,063,327
Dividends Paid - - (651,000,000) (651,000,000)
Balance As at 31 December 2018 7,500,000,000 979,000,000 16,287,261,312 24,766,261,312
The accounting policies and notes on pages 68 through 91 form an integral part of the Financial Statements.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 66 ANNUAL REPORT - 2018 STATEMENT OF CASH FLOWS As at 31 December 2018
Note 2018 2017 LKR LKR
Cash Flows From/(Used in) Operating Activities
Profit before Income Tax Expense 1,522,230,109 3,273,309,403
Adjustments for Finance Income 5.1 (117,877,199) (189,440,805) Finance Expenses 5.2 - 124,072,738 Allowance for impairment of staff loans - (2,304,574) Allowance for impairment of Inventory & other trade receivable (301,901,998) 9,792,534 Loss/ (Profit) on disposal of Property, Plant and Equipment 4 (26,421,610) (3,594,938) Provision for Defined Benefit Plans 226,725,802 242,188,768 Depreciation 10.2 953,409,624 878,355,612 Amortisation of Intangible Asset 11.2 2,478,236 7,331,222 Operating Profit/(Loss) before Working Capital Changes 2,258,642,964 4,339,709,960
(Increase)/ Decrease in Inventories (122,887,774) (4,640,443) Increase / (Decrease) in Trade and Other Receivables 1,567,002,316 (3,050,103,575) (Increase)/ Decrease in Other Financial Assets (379,041,297) 80,969,132 (Increase) / Decrease in Trade and Other Payables (30,559,793) 534,551,035
Cash Generated From/(Used in) Operations 3,293,156,416 1,900,486,109
Income Tax Paid (563,208,064) (105,115,999) Finance Expenses Paid 5.2 - (124,072,738) Defined Benefit Paid 17 (173,664,381) (97,216,256)
Net Cash Flows From/(Used in) Operating Activities 2,556,283,971 1,574,081,117
Cash Flows from Investing Activities
Acquisition of Property, Plant and Equipment 10.1 (375,230,766) (833,289,951) Proceeds from Property, Plant and Equipment 26,594,468 3,636,025 Finance Income 5.1 117,877,199 189,440,805 Net Cash Flows From/(Used in) Investing Activities (230,759,099) (640,213,121)
Cash Flows From Financing Activities Repayments of borrowings - (1,398,850,854) Dividends Paid (651,000,000) (405,000,000) Net Cash Flows From/(Used in) Financing Activities (651,000,000) (1,803,850,854)
Net Increase / (Decrease) in Cash and Cash Equivalents 1,674,524,872 (869,982,860)
Cash and Cash Equivalents at the Beginning of the Year 15 1,474,120,011 2,344,102,871
Cash and Cash Equivalents at the End of the Year 15 3,148,644,883 1,474,120,011
The accounting policies and notes on pages 68 through 91 form an integral part of the Financial Statements.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 67 NOTES TO THE FINANCIAL STATEMENTS As at 31 December 2018 1. CORPORATE INFORMATION 2.2 Functional and Presentation Currency 1.1 General The Financial Statements are presented in Sri Lanka Ceylon Petroleum Storage Terminals Limited Rupees, which is the Company’s functional and (“Company”) is a limited liability Company incorporated presentation currency. on 8th October 2003 under the Companies Act No.07 of 2007 and the company is domiciled in Sri Lanka. The 2.3 Comparative Information registered office of the Company is located at Ceylon The accounting policies have been consistently applied Petroleum Storage Terminals Limited, oil installation, by the Company and, are consistent with those used in Kolonnawa. the previous year. Previous year’s figures and phrases have been rearranged whenever necessary to conform 1.2 Principal Activities and Nature of Operations to the current presentation. During the year, the principal activities of the Company were storage and distribution of petroleum products. 2.4 SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS 1.3 Parent Entity and Ultimate Controlling Party The preparation of Financial Statements of the In the opinion of the Directors, the Company’s ultimate Company in conformity with Sri Lanka Accounting parent undertaking is Ceylon Petroleum Corporation, Standards, requires the management to make which is incorporated in Sri Lanka. judgments, estimates and assumptions that affect the application of accounting policies and the reported 1.4 Date of Authorization for Issue amounts of assets, liabilities, income and expenses. The Financial Statements of Ceylon Petroleum Storage Uncertainty about these assumptions and estimates Terminals Limited for the year ended 31 December could result in outcomes that require a material 2018 was authorized for issue in accordance with a adjustment to the carrying amount of assets or resolution of the Board of Directors on xxx February liabilities affected in future periods. 2019. Estimates and assumptions are reviewed on an 2. BASIS OF PREPARATION ongoing basis. Revisions to accounting estimates 2.1 Statement of Compliance are recognized in the period in which the estimate is The Financial Statements of the Company, which revised and in any future periods affected. comprise the Statement of Financial Position, Statement of Comprehensive Income, Statement of The most significant areas of estimation, uncertainty Changes in Equity, Statement of Cash Flows and Notes and critical judgments in applying accounting policies to the Financial Statements have been prepared and that have most significant effect on the amounts presented in accordance with Sri Lanka Accounting recognized in the Financial Statements of the Company Standards (SLFRSs and LKASs) laid down by the are as follows: Institute of Chartered Accountants of Sri Lanka and in compliance with the requirements of the Companies (a) Employee Benefit Liability Act No 7 of 2007. The cost as well as the present value of defined benefit plans - gratuity is determined using 2.1.1 Basis of Measurement Actuarial Valuations. The Actuarial Valuation The Financial Statements of the Company have been involves making assumptions about discount prepared on the historical cost basis, except for the rates, future salary increases and other important following items in the Statement of Financial Position: related data. Due to the long term nature of employee benefits, such estimates are subject • The liability for Defined Benefit Obligations are to significant uncertainty. Further details of actuarially valued and recognized at the present assumptions together with an analysis of their value sensitivity as carried out by the management in relation to the above key assumptions and the 2.1.2 Going Concern results of the sensitivity analysis are given in Note The Directors have made an assessment of the 17.2 & 17.4. Company’s ability to continue as a going concern and are satisfied that it has the resources to continue in (b) Impairment of Trade Receivables business for the foreseeable future. Furthermore, The Company assesses at the date of statement Board is not aware of any material uncertainties of financial position whether there is objective that may cast significant doubt upon the Company’s evidence that trade receivables have been ability to continue as a going concern and they do impaired. Impairment loss is calculated based not intend either to liquidate or to cease operations on a review of the current status of existing of the Company. Therefore, the Financial Statements receivables and historical collections experience. continue to be prepared on the going concern basis. Such provisions are adjusted periodically to reflect the actual are anticipated impairments. The
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 68 ANNUAL REPORT - 2018 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
impairment loss on trade and other receivables is Terminal Charge disclosed in Note 2.5.11 and 13. Consists of the operating costs recovered from the marketing companies as per the common (c) Income Tax and Deferred Tax user agreement signed between Ceylon The Company is subject to income taxes. Significant Petroleum Corporation, Lanka IOC and Treasury judgment is required in determining the provision department in year of 2003, subsequently revised for income taxes. There are many transactions in year of 2011. Which is recognized at the Point and calculations for which the ultimate tax of transferring the petroleum products owned by determination is uncertain. The entity recognizes them. Terminal charge is measured at per litre of liabilities for anticipated tax issues based on petroleum products sold. estimates of whether additional taxes will be due. Where the final tax outcome of these matters is Operation Margin different from the amounts that were initially Operation margin is recognized based on the pre- recorded, such differences will impact the current determined rate in the pricing formulae. Operation and deferred income tax assets and liabilities in margin is measured at per litre of petroleum the period in which such determination is made. products sold. Further information is disclosed in Note 07 and 08. Transport Income 2.5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Recover of the transport cost incurred on railway 2.5.1 Foreign Currency Translation wagons, pipelines and bowser dealers. Income is The Financial Statements are presented in Sri recognized on the basis of volume of litres and Lankan Rupees, which is the Company’s functional distance travelled. and presentation currency. Transactions in foreign currencies are initially recorded at the functional Loan interest currency rate ruling at the date of the transaction. Loan interest is recognized on the pre-determined Monetary assets and liabilities denominated in foreign rate in the pricing formulae calculated on recovery currencies are retranslated at the functional currency of loan interest paid by the company. Loan interest rate of exchange ruling at the reporting date. All income is measured at per litre of petroleum differences are taken to statement of comprehensive products sold. income. Non monetary items that are measured in terms of historical cost in a foreign currency are b) Finance income translated using the exchange rates as at the dates of Finance income is recognized as interest accrues, the initial transactions. Non monetary items measured using the effective interest method. at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was c) Others determined. Other income is recognized on an accrual basis.
2.5.2 Revenue Recognition Net Gains and losses of a revenue nature Revenue is recognized to the extent that it is probable arising from the disposal of Property, Plant that the economic benefits will flow to the Company and Equipment and other non-current assets and the revenue can be reliably measured. Revenue including investments have been accounted for is measured at the fair value of the consideration in the income statement, having deducted from received or receivable net of trade discounts, returns, proceeds on disposal, the carrying amount of the rebates and sales taxes (value added taxes and Nation assets and related selling expenses. Building Tax). Gains and losses arising from incidental activities The Company recognizes revenue when the amount to main revenue generating activities and those of revenue can be reliably measured, it is probable arising from a group of similar transactions which that future economic benefits will flow to the entity are not material, are aggregated, reported and and specific criteria have been met for each of the presented on a net basis Company’s activities as described below. The amount of revenue is not considered to be reliably measurable 2.5.3 Expenditure Recognition until all contingencies relating to the sale have been All expenditure incurred in the running of the business resolved. and in maintaining the Property, Plant and Equipment in a state of efficiency has been charged to the a) Rendering of Services Statement of comprehensive income for the period. Revenue from rendering of services is recognised in the accounting period in which the services are 2.5.4 Taxation rendered or performed. The tax expense for the period comprises current and deferred tax. Tax is recognised in the profit for the year, except to the extent that it relates to items
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 69 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
recognised in other comprehensive income or directly Sales Tax (Value Added Tax and Nations Building Tax) in equity. In this case, the tax is also recognised in Revenues, expenses and assets are recognized net other comprehensive income or directly in equity, of the amount of sales tax except where the sales respectively. tax incurred on a purchase of assets or service is not recoverable from the taxation authorities in which Current Taxes case the sales tax is recognized as a part of the cost Current Income Tax assets and liabilities for the of the asset or part of the expense items as applicable current and prior periods are measured at the and receivable and payable that are stated with the amount expected to be recovered from or paid to the amount of sales tax included. The amount of sales taxation authorities. The tax rates and tax laws used tax recoverable and payable in respect of taxation to compute the amount are those that are enacted or authorities is included as a part of receivables and substantively enacted by the reporting date. payables in the Statement of Financial Position.
The Provision for Income Tax is based on the elements 2.5.5 Financial Instruments - Initial Recognition and of income and expenditure as reported in the Financial Subsequent Measurement Statements and computed in accordance with the 2.5.5.1Financial Assets provisions of the relevant tax legislation. The company’s financial assets include cash and short-term deposits, trade and other receivables, and Current income tax relating to items recognized amount due from related parties. directly in equity is recognized in equity and not in the statement of comprehensive income. Initial Recognition and Measurement Financial assets within the scope of LKAS 39 are Deferred Taxation classified as financial assets at fair value through Deferred income tax is provided, using the liability profit or loss, loans and receivables, held-to-maturity method, on temporary differences at the reporting investments, available-for-sale financial assets, or as date between the tax bases of assets and liabilities derivatives and their carrying amounts for financial reporting purposes. Designated as hedging instruments in an effective hedge, as appropriate. The Company determines Deferred income tax liabilities are recognized for the classification of its financial assets at initial all taxable temporary differences except where the recognition. deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that All financial assets are recognised initially at fair value is not a business combination and, at the time of the plus, in the case of assets not at fair value through transaction, affects neither the accounting profit nor profit or loss, directly attributable transaction costs. taxable profit or loss. Purchases or sales of financial assets that require Deferred income tax assets are recognized for all delivery of assets within a time frame established by deductible temporary differences, carry-forward of regulation or convention in the marketplace (regular unused tax assets and unused tax losses, to the extent way trades) are recognised on the trade date, i.e., the that it is probable that taxable profit will be available date that the Company commits to purchase or sell against which the deductible temporary differences, the asset. and the carry-forward of unused tax assets and unused tax losses can be utilized except where the deferred Subsequent Measurement income tax asset relating to the deductible temporary The subsequent measurement of financial assets difference arises from the initial recognition of an depends on their classification as follows: asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects a) Loans and Receivables neither the accounting profit nor taxable profit or loss. Loans and receivables are non-derivative financial assets with fixed or determinable payments The carrying amount of deferred income tax assets that are not quoted in an active market. After is reviewed at each reporting date and reduced to initial measurement, such financial assets are the extent that it is no longer probable that sufficient subsequently measured at amortised cost using taxable profit will be available to allow all or part of the the effective interest rate method (EIR), less deferred income tax asset to be utilized. impairment. Amortised cost is calculated by Deferred income tax assets and liabilities are taking into account any discount or premium on measured at the tax rates that are expected to apply acquisition and fees or costs that are an integral to the year when the asset is realized or the liability part of the EIR. The EIR amortisation is included is settled, based on tax rates (and tax laws) that have in finance income in the income statement. The been enacted or substantively enacted at the reporting losses arising from impairment are recognised in date. the income statement in finance costs.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 70 ANNUAL REPORT - 2018 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
De-recognition Financial Assets carried at Amortised Cost A financial asset (or, where applicable a part of a For financial assets carried at amortised cost, the financial asset or part of a Company of similar financial Company first assesses whether objective evidence assets) is derecognised when: of impairment exists individually for financial assets that are individually significant, or collectively for • The rights to receive cash flows from the asset financial assets that are not individually significant. have expired. If the Company determines that no objective evidence • The Company has transferred its rights to receive of impairment exists for an individually assessed cash flows from the asset or has assumed an financial asset, whether significant or not, it includes obligation to pay the received cash flows in full the asset in a Company of financial assets with similar without material delay to a third party under a credit risk characteristics and collectively assesses ‘pass-through’ arrangement; and either (a) the them for impairment. Asset that are individually Company has transferred substantially all the assessed for impairment and for which an impairment risks and rewards of the asset, or (b) the Company loss is, or continues to be, recognised are not included has neither transferred nor retained substantially in a collective assessment of impairment. all the risks and rewards of the asset, but has transferred control of the asset. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured When the Company has transferred its rights to receive as the difference between the assets carrying amount cash flows from an asset or has entered into a pass- and the present value of estimated future cash flows through arrangement, and has neither transferred (excluding future expected credit losses that have not nor retained substantially all of the risks and rewards yet been incurred). The present values of the estimated of the asset nor transferred control of it, the asset is future cash flows are discounted at the financial recognised to the extent of the Company’s continuing asset’s original effective interest rate. If a loan has a involvement in it. variable interest rate, the discount rate for measuring any impairment loss is the current effective interest In that case, the Company also recognises an rate. associated liability. The transferred asset and the associated liability are measured on a basis that The carrying amount of the asset is reduced through reflects the rights and obligations that the Company the use of an allowance account and the amount of the has retained. loss is recognised in the income statement. Interest income continues to be accrued on the reduced Continuing involvement that takes the form of a carrying amount and is accrued using the rate of guarantee over the transferred asset is measured at interest used to discount the future cash flows for the lower of the original carrying amount of the asset the purpose of measuring the impairment loss. The and the maximum amount of consideration that the interest income is recorded as part of finance income Company could be required to repay. in the income statement. Loans together with the associated allowance are written off when there is no Impairment of Financial Assets realistic prospect of future recovery and all collateral The Company assesses at each reporting date has been realised or has been transferred to the whether there is any objective evidence that a financial Company. If, in a subsequent year, the amount of the asset or a Company of financial assets is impaired. A estimated impairment loss increases or decreases financial asset or a Company of financial assets is because of an event occurring after the impairment deemed to be impaired if, and only if, there is objective was recognised, the previously recognised impairment evidence of impairment as a result of one or more loss is increased or reduced by adjusting the allowance events that has occurred after the initial recognition account. If a future write-off is later recovered, the of the asset (an incurred ‘loss event’) and that loss recovery is credited to finance costs in the income event has an impact on the estimated future cash statement flows of the financial asset or the Company of financial assets that can be reliably estimated. Evidence of 2.5.5.2 Financial Liabilities impairment may include indications that the debtors The Company’s financial liabilities include trade and or a Company of debtors is experiencing significant other payables, due to related parties, bank overdrafts financial difficulty, default or delinquency in interest and interest bearing loans and borrowings. or principal payments, the probability that they will enter bankruptcy or other financial reorganisation Initial Recognition and Measurement and where observable data indicate that there is a Financial liabilities within the scope of LKAS 39 are measurable decrease in the estimated future cash classified as financial liabilities at fair value through flows, such as changes in arrears or economic profit or loss, loans and borrowings, or as derivatives conditions that correlate with defaults. designated as hedging instruments in an effective hedge, as appropriate. The Company determines
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 71 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
the classification of its financial liabilities at initial The fair value of an asset or a liability is measured recognition. using the assumptions that market participants would use when pricing the asset or liability, assuming All financial liabilities are recognised initially at fair that market participants act in their economic best value and, in the case of loans and borrowings, carried interest. at amortised cost. This includes directly attributable transaction costs. Any difference between initial A fair value measurement of a non-financial asset fair value and the nominal amount is included as takes into account a market participant’s ability to component of operating lease income and recognised generate economic benefits by using the asset in its on a straight line basis over the applicable time period. highest and best use or by selling it to another market Subsequent Measurement participant that would use the asset in its highest and best use. The measurement of financial liabilities depends on their classification as follows: The Company uses valuation techniques that are appropriate in the circumstances and for which a) Loans and Borrowings sufficient data are available to measure fair value, After initial recognition, interest bearing loans maximising the use of relevant observable inputs and and borrowings are subsequently measured at minimising the use of unobservable inputs. amortised cost using the effective interest rate method. Gains and losses are recognised in All assets and liabilities for which fair value is the income statement when the liabilities are measured or disclosed in the financial statements are derecognised as well as through the effective categorized within the fair value hierarchy, described interest rate method (EIR) amortisation process. as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Amortised cost is calculated by taking into account any discount or premium on acquisition and fees • Level 1 - Quoted (unadjusted) market prices in or costs those are an integral part of the EIR. The active markets for identical assets or liabilities EIR amortisation is included in finance costs in the • Level 2 - Valuation techniques for which the lowest income statement. level input that is significant to the fair value measurement is directly or indirectly observable De-recognition • Level 3 - Valuation techniques for which the A financial liability is de-recognised when the lowest level input that is significant to the fair obligation under the liability is discharged or value measurement is unobservable for the cancelled or expires. When an existing financial purpose of fair value disclosures, the company liability is replaced by another from the same has determined classes of assets and liabilities on lender on substantially different terms, or the the basis of the nature, characteristics and risks of terms of an existing liability are substantially the asset or liability and the level of the fair value modified, such an exchange or modification is hierarchy as explained above. treated as a de-recognition of the original liability and the recognition of a new liability, and the 2.5.7 Inventories difference in the respective carrying amounts is Inventories are valued at the lower of cost and net recognised in the income statement. realizable value, after making due allowances for obsolete and slow moving items. Net realizable value 2.5.6 Fair Value Measurement is the price at which inventories can be sold in the Fair value is the price that would be received to sell ordinary course of business less the estimated cost of an asset or paid to transfer a liability in an orderly completion and the estimated cost necessary to make transaction between market participants at the the sale. measurement date. The fair value measurement is based on the presumption that the transaction to sell The cost incurred in bringing inventories to its present the asset or transfer the liability takes place either: location and conditions are accounted using the following cost formula: • In the principal market for the asset or liability Or Consumables, Motor Spares & - At purchase cost on • In the absence of a principal market, in the most General hardware for repairing weighted average advantageous market for the asset or liability basis
The principal or the most advantageous market must Finished Goods - At Actual Purchase be accessible by the Company. cost
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 72 ANNUAL REPORT - 2018 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
2.5.8 Property Plant and Equipment impairment. Assets that are subject to amortisation Property, Plant and Equipment are stated at are reviewed for impairment whenever events or cost, excluding the costs of day to day servicing, changes in circumstances indicate that the carrying less accumulated depreciation and accumulated amount may not be recoverable. An impairment loss impairment in value. Such costs include the cost of is recognised for the amount by which the asset’s replacing part of the property, plant and equipment carrying amount exceeds its recoverable amount. when that cost is incurred, if the recognition criteria The recoverable amount is the higher of an asset’s are met. fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped Capital work in progress represents all amounts paid at the lowest levels for which there are separately on work undertaken, and still in an unfinished state as identifiable cash flows (cash generating units). at the end of the year. 2.5.12 Provisions Land is not depreciated as it is deemed to have an Provisions are recognized when the Company has a indefinite life. Depreciation is calculated on the present obligation (legal or constructive) as a result straight line method to allocate the cost of each asset, of a past event, where it is probable that an outflow to their residual values over their estimated useful of resources embodying economic benefits will lives commencing from date of availability for use. On be required to settle the obligation and a reliable disposal of assets, depreciation ceases on the date estimate can be made of the amount of the obligation. that the asset is de-recognized. When the Company expects some or all of a provision to be reimbursed, the reimbursement is recognized as The asset’s residual values, useful lives and method of a separate asset but only when the reimbursement is depreciation are reviewed, and adjusted if appropriate, virtually certain. The expense relating to any provision at least at each financial year end. is presented in the income statement net of any reimbursement. If the effect of the time value of money An asset’s carrying amount is written down is material, provisions are determined by discounting immediately to its recoverable amount if its carrying the expected future cash flows at a pre-tax rate that amount is greater than its estimated recoverable reflects current market assessments of the time value amount. of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in Gains and losses on disposals are determined by the provision due to the passage of time is recognized comparing proceeds with carrying amount and are as an interest expense. included in the Income Statement. 2.6 Employee Benefits 2.5.9 Intangible assets a) Defined Benefit Obligations - Gratuity a) ERP System and Licenses fees for ERP The company measures the value of the promised License fees represent costs pertaining to the retirement benefits of gratuity obligation which licensing of software applications purchased. is a defined plan with the advice of the actuary License fees are carried at cost less accumulated every financial year using the “Project Unit amortisation. Amortisation is calculated using Credit Method”. Actuarial gains and losses are the straight-line method to allocate the cost of recognized in other comprehensive income (OCI) licenses over their estimated useful lives of 5 in the period in which it arises. The liability is not years. funded.
2.5.10 Cash and Cash Equivalents Recognition of Actuarial Gains and Losses Cash and cash equivalents are defined as cash in Actuarial gains and losses are recognized in Other hand, demand deposits and short term highly liquid Comprehensive Income in the year in which they investments, readily convertible to known amounts arise. of cash and subject to insignificant risk of changes in value. b) Defined Contribution Plans The Company also operates a defined contribution For the purpose of cash flow statement, cash and cash plan. The contribution payable to a defined equivalents consist of cash in hand and deposits in contribution plan is in proportion to the services banks net of outstanding bank overdrafts. Investments rendered to the Company by the employees and with original maturities of three months or less are is recorded as an expense under ‘Personnel also treated as cash equivalents. expenses’. Unpaid contributions are recorded as a liability. 2.5.11 Impairment of non-financial assets Assets that have an indefinite useful life are not The Company contributes to the following Schemes: subject to amortisation and are tested annually for
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 73 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
Employees’ Provident Fund to recognise most leases on their balance sheets as The Company and employees contribute 15% and lease liabilities, with the corresponding right-off - 10 % respectively of the employee’s monthly gross use assets. Lessees must apply a single model for salary (excluding overtime) to the Employee’s all recognised leases, but will have the option not Provident Fund to recognise ‘short-term’ leases and leases of ‘low- value’ assets. Generally, the profit or loss recognition Employees’ Trust Fund pattern for recognised leases will be similar to The Company contributes 3% of the employee’s today’s finance lease accounting, with interest and monthly gross salary excluding overtime to depreciation expense recognised separately in the the Employees’ Trust Fund maintained by the statement of profit or loss. Employees Trust Fund Board. SLFRS 16 is effective for annual periods beginning on c) Medical Benefit Scheme or after 1 January 2019. Early application is permitted, The medical benefit scheme for CPSTL employees but not before an entity applies IFRS 15. A lessee is managed by Janashakthi General Insurance can choose to apply the standard using either a full Limited. The Cost of the Insurance by the company retrospective or a modified retrospective approach. is recognized as an expense during the year. The standard’s transition provisions permit certain reliefs. 2.7 EFFECT OF SRI LANKA ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE Management is yet to quantify the possible impact Certain new accounting standards and amendments from SLFRS 16. / improvements to existing standards have been published, that are not mandatory for 31 March 2017 Amendments to LKAS 7 Statement of Cash Flows reporting periods. None of those have been early In September 2016, the Institute of Chartered adopted by the Company. Accountant of Sri Lanka issued amendments to LKAS 7 Statement of Cash Flows with the intention to improve SLFRS 9 Financial Instruments disclosures of financing activities and help users to In December 2014, the Institute of Chartered better understand the reporting entities’ liquidity Accountant of Sri Lanka issued the final version positions. Under the new requirements, entities will of SLFRS 9 Financial Instruments which reflects need to disclose changes in their financial liabilities as all phases of the financial instruments project and a result of financing activities such as changes from replaces LKRS 39 Financial Instruments, Recognition cash flows and non-cash items (e.g., gains and losses and Measurement. The standard introduces new due to foreign currency movements). The amendment requirements for classification and measurement is effective from 1 January 2017. of impairment, and hedge accounting. SLFRS 9 is effective for annual periods beginning on or after Amendments to IAS 12 Income Taxes 1 January 2018, with early application permitted. In September 2016, through issuing amendments to Retrospective application is required. But comparative LKAS 12, the Institute of Chartered Accountant of Sri information is not compulsory. The Company does not Lanka clarified the accounting treatment of deferred anticipate that adopting the amendments would have tax assets of debt instruments measured at fair value an impact on its financial statements. for accounting, but measured at cost for tax purposes. The amendment is effective from 1 January 2017. SLFRS 15 Revenue from Contracts with Customers The Company does not anticipate that adopting the The objective of this Standard is to establish the amendments would have an impact on its financial principles that an entity shall apply to report useful statements. information to users of financial statements about the nature, amount, timing and uncertainty of revenue and 2.7.1 Expiry Of Share Holders Agreement And Share Sale cash flows arising from a contract with a customer. SLFRS 15 will become effective on 01 January 2018 Purchase Agreement- Common User Facilities and the Company does not anticipate that adopting Shareholders agreement and share sale purchase the amendments come under purview of the Company agreement- common user facilities between Ceylon as the Company were storage and distribution of Petroleum Corporation, Lanka Indian Oil Company petroleum products. PLC and Ceylon Petroleum Storage Terminals Limited had expired on 31 December 2008.The renewal or SLFRS 16- Leases extension of the sais agreement has not been finalized The Institute of Chartered Accountant of Sri Lanka and the income and expenses stated in the agreement issued the new standard for accounting for leases - have been accounted in these financial statements SLFRS 16 Leases in January 2016. The new standard after considering the terms of the said agreement and does not significantly change the accounting for any subsequent changes which have been approved by leases for lessors. However, it does require lessees the Directors of the company.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 74 ANNUAL REPORT - 2018 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
2018 2017 LKR LKR
3. REVENUE 3.1 Throughput Revenue Terminal Income 7,219,578,282 7,306,421,290 Operation Margin 3,233,860,313 3,264,482,431 Loan Interest Reimbursable - 708,163,767
10,453,438,595 11,279,067,487 Rendering of Services Transport Income 2,676,786,208 2,663,173,275 Bunkering Operation - 233,906,148 2,676,786,208 2,897,079,423 Total Revenue 13,130,224,803 14,176,146,910
4 OTHER OPERATING INCOME Interest on Staff Loans and Others 579,450,678 352,767,469 Gain on disposal of Property, Plant and Equipment 26,421,610 3,594,938 Rental Income 9,885,375 9,451,537 Discharging Charges 1,350,000 1,050,000 Laboratory Testing charges 53,680,584 51,377,845 Training to Private Bowsers driver/porter 4,818,444 7,232,797 Scrap sales 8,391,795 7,964,028 Servicing Fire extinguishers 1,948,343 7,050,482 Clalibration Charges 8,105,578 7,435,089 Sundry Income 4,122,299 5,725,684 Circuit Bungalows Income 820,184 840,425 Non-refundable Tender Deposits 5,338,223 3,306,150 704,333,113 457,796,444
5. FINANCE INCOME AND EXPENSES 5.1 Finance Income Interest on REPO Investments 40,576,962 164,547,193 Interest on Deposits 77,300,237 24,893,612 117,877,199 189,440,805
5.2 Finance Cost Bank Loan Interest - 124,072,738 - 124,072,738
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 75 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
2018 2017 LKR LKR
6. PROFIT BEFORE TAX Stated after Charging /Crediting Included in Direct Expenses Personal Cost 2,954,073,137 2,403,087,576 Depreciation Charge for the year 820,253,095 755,314,575
Included in Administrative Expenses Directors’ Emoluments 8,539,121 7,479,373 Fees for Directors 2,893,207 2,305,000 Personal Cost 3,491,632,362 2,783,783,740 Defined Benefit Obligation : Charge for the year 226,725,802 242,188,768 Audit Fee - Current year 1,943,223 1,800,000 Depreciation Charge for the year 131,147,766 123,041,041 Amortisation Charge for the year 4,486,998 7,331,222 Allowances for Impairment in Trade and Other Receivables (174,665,455) (2,705,842) Provision for Inventory (127,236,542) 10,193,802
7. TAX EXPENSES The major components of income tax expense for the years ended 31 December 2018 and 31 December 2017 are as follows :
7.1 Income Statement Current Income Tax: Current Tax Expense 333,928,430 472,786,727 Under/(Over) Provision of Current Taxes in respect of Prior Year 28,844,501 (23,205,120) Deferred Tax: Deferred Taxation Charge/ (Credit) (Note 8) 962,139,274 24,155,981 Income Tax Expense / (Credit) Reported in the Income Statement 1,324,912,205 473,737,588
7.2 Reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rate for the Years Ended 31 December 2018 and 31 December 2017 are as follows :
Accounting Profit Before Tax 1,522,230,109 3,273,309,403 Aggregate Disallowed Items 1,457,934,083 1,325,643,704 Aggregate Allowable Items (1,979,521,282) (1,783,288,276) 1,000,642,910 2,815,664,831
Interest Income 305,279,691 542,208,274 Total Statutory Income 1,305,922,601 3,357,873,104
Less: Carried Forward Tax Losses Utilized - (232,124,899) Taxable Profit 1,305,922,601 3,125,748,205
Income Tax for Taxable Profit 333,928,430 472,786,727 Current Income Tax Expense 333,928,430 472,786,727
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 76 ANNUAL REPORT - 2018 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
Statement of Statement of Other Financial Position Comprehensive Income Comprehensive Income
2018 2017 2018 2017 2018 2017 LKR LKR LKR LKR LKR LKR
Deferred Tax Liabilities Capital Allowances for Tax Purposes 2,355,880,566 1,258,921,406 1,096,959,160 12,841,117 - - Intangible Assets 1,997,748 37,336 1,960,412 (1,005,100) - - 2,357,878,314 1,258,958,742 Deferred Tax Assets Inventories 3,829,479 19,208,216 15,378,737 (1,024,963) - - Provisions 1,851,253 24,493,908 22,642,655 844,541 - - Defined Benefit Plans 354,571,409 198,104,242 (174,801,690) (16,275,721) 18,334,523 (12,760,821) Effect from Tax Losses - - - 28,776,108 - - 360,252,141 241,806,367 Deferred Income Tax - Income Net Deferred Tax Liability / (Assets) 1,997,626,173 1,017,152,375 962,139,274 24,155,981 18,334,523 (12,760,821)
8.2 Deferred tax has been calculated using effective tax rate @ 24.42%. The rate has been increased from 13.44% to 24.42% due to multiple tax rates applied different levels of taxable income, resulting Rs. 980,473,797/- increased in deferred tax liability as at 31st December 2018.
9. EARNINGS PER SHARE
9.1 Earnings Per Share is calculated by dividing the net profit for the period attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year. The weighted average number of ordinary shares outstanding during the period and the previous period are adjusted for events that have changed the number of ordinary shares outstanding, without a corresponding change in the resources such as a bonus issue.
9.2 The following reflects the income and share data used in the Earnings Per Share computation.
2018 2017 LKR LKR
Amounts Used as the Numerator Net Profit Attributable to Ordinary Shareholders for Basic Earnings Per Share 197,317,904 2,799,571,815
Number of Ordinary Shares Used as Denominator: Weighted Average Number of Ordinary Shares in Issue 750,000,000 750,000,000 Applicable to Basic Earnings Per Share
Earnings Per Share 0.26 3.73
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 77 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
Balance as at Additions Disposals Balance as at At Cost 01.01.2018 31.12.2018 LKR LKR LKR LKR
10. PROPERTY, PLANT AND EQUIPMENT 10.1 Gross Carrying Amounts Freehold land 4,497,001,663 - 4,497,001,663 Freehold building 1,683,131,781 1,680,000 1,684,811,781 Storage tank 6,541,878,129 487,829 6,542,365,958 Motor vehicles 1,752,841,309 131,980,646 (47,185,538) 1,837,636,417 Pipelines 7,443,077,165 4,029,382 7,447,106,547 Furniture, fittings & equipment 2,192,778,730 67,778,317 (103,990) 2,260,453,057 Computers 171,586,351 124,003,753 295,590,104 Single/Dual point mooring buoy 2,800,409,453 2,800,409,453 Pumps & gantries 1,454,497,750 188,134 1,454,685,884 Total Cost of Depreciable Assets 28,537,202,331 330,148,061 (47,289,528) 28,820,060,864
Capital Work In Progress 719,973,606 242,880,832 (327,340,127) 635,514,312
29,257,175,937 573,028,893 (374,629,655) 29,455,575,176
Balance as at Charge for the Disposals Balance as at At Cost 01.01.2018 year 31.12.2018 LKR LKR LKR LKR
10.2 Depreciation Freehold building 582,686,459 48,794,336 631,480,795 Storage tank 2,433,045,074 154,469,755 2,587,514,829 Motor vehicles 1,192,414,995 143,562,331 (47,087,716) 1,288,889,610 Pipelines 2,927,988,888 278,019,291 3,206,008,179 Furniture, fittings & equipment 1,857,903,096 75,366,362 (28,954) 1,933,240,503 Computers 155,062,435 8,995,831 164,058,266 Single/Dual point mooring buoy 2,316,017,571 160,547,288 2,476,564,859 Pumps & gantries 1,037,308,962 83,654,430 1,120,963,392 12,502,427,480 953,409,624 (47,116,670) 13,408,720,433
2018 2017 LKR LKR
10.3 Net Book Value Freehold land 4,497,001,663 4,497,001,663 Freehold building 1,053,330,986 1,100,445,323 Storage tank 3,954,851,130 4,108,833,054 Motor vehicles 548,746,807 560,426,315 Pipelines 4,241,098,368 4,515,088,277 Furniture, fittings & equipment 327,212,554 334,875,634 Computers 131,531,838 16,523,916 Single/Dual point mooring buoy 323,844,594 484,391,882 Pumps & gantries 333,722,492 417,188,788 Capital Work In Progress 635,514,312 719,973,606 Total Carrying Value of Property, Plant & Equipment 16,046,854,744 16,754,748,458
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 78 ANNUAL REPORT - 2018 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
10.4 During the financial year, the Company acquired Property, Plant and Equipment to the aggregate value of Rs. 573,028,893/- (2017 - Rs.1,433,088,423/-). Cash payments amounting to Rs. 375,230,766/- (2017 - Rs.833,289,951/-) were made during the year for purchase of Property, Plant and Equipment. The difference is mainly due to capitalization of work in progress to main assets.
2018 2017
10.5 The Useful Lives Of the Assets are Estimated as Follows: Freehold Building 35 Years 35 Years Storage Tanks 40 Years 40 Years Bulk Tanks 30 Years 30 Years Pipelines 30 Years 30 Years Pumps 20 Years 20 Years Vehicles - New Acquisitions 5 Years 5 Years - Vested Items Over Remaining Useful life time Gantries 15 Years 15 Years Equipments - Electronic 5 Years 5 Years - Other 10 Years 10 Years Furniture & Fittings - Hard 5 Years 5 Years - Other Muthurajawela other assets - Dual point mooring buoy 10 Years 10 Years - PLEM 10 Years 10 Years - Pipelines 20 Years 20 Years Computers 04 Years 04 Years
ERP SAP ERP Automation Total At Cost System License System of offshore Pipeline LKR LKR LKR LKR
11. INTANGIBLE ASSETS 11.1 Gross Carrying Amounts As at 01.01.2018 412,496,596 9,380,250 37,793,560 459,670,406 Additions 129,541,999 - - 129,541,999 Disposals - - - - As at 31.12.2018 542,038,595 9,380,250 37,793,560 589,212,405
11.2 Amortisation As at 01.01.2018 412,218,799 9,380,250 37,793,560 459,392,609 Charge for the year 2,478,236 2,478,236 As at 31.12.2018 414,697,035 9,380,250 37,793,560 461,870,845
11.3 Net Book Value as at 31.12.2017 277,797 - - 277,797
11.4 Net Book Value as at 31.12.2018 127,341,561 - - 127,341,560
11.5 During the financial year, the Company acquired Intangible Assets for Disaster Recovery Site (Disaster Recovery & Management Centre) to the aggregate value of Rs. 129,541,999/- (2017 -Nil). Intangibe assets includes fully depreciated assets having a gross carrying amount of Rs. 459,670,406/- (2017 - Rs.458,147,945/-).
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 79 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
2018 2017 LKR LKR
12. INVENTORIES General Hardware for Repairing 301,864,715 264,478,701 Motor Spare parts 282,030,574 252,902,000 Consumables 80,505,712 26,217,367 Finished Goods Lanka Petrol LP-95 788,088 788,088 Lanka Petrol LP-92 1,442,844 670,644 Lanka Auto Diesel-LAD 6,670,165 5,357,523 673,302,098 550,414,323 Provision for Slow- Moving Inventory (15,681,733) (142,918,275) 657,620,365 407,496,049
13. TRADE AND OTHER RECEIVABLES Trade Receivables - Related Parties (Note 13.1) 6,088,960,136 7,961,856,307 Other Receivables 240,174,077 138,556,599 (-)Impairment of Other Receivables - (10,554,767) 240,174,077 128,001,832 Deposits ,Advances and Prepayments (Note 13.3) 1,350,100,920 981,713,854 7,679,235,133 9,071,571,994
13.1 Trade Receivables- Related Parties Relationship
Ceylon Petroleum Corporation Parent Entity 5,682,366,384 7,650,563,688 ( -)Impairment of Trade Receivables - (163,620,550) Ceylon Petroleum Corporation net of Impairment (Note 13.2) 5,682,366,384 7,486,943,138 Lanka IOC PLC Other Major Share Holder 406,593,752 475,403,307 ( -)Impairment of Trade Receivables - (490,138) Lanka IOC PLC net of Impairment (Note 13.2) 406,593,752 474,913,169 6,088,960,136 7,961,856,307
13.2 As at 31 December 2018, the age analysis of trade receivables is set out below.
Total 0-30 31-90 91-180 181-365 More than Days Days days days 365 days
Ceylon Petroleum Corporation 5,682,366,384 319,188,940 2,144,736,569 445,040,896 1,668,471,598 1,104,928,381 5,682,366,384 319,188,940 2,144,736,569 445,040,896 1,668,471,598 1,104,928,381
Lanka IOC PLC 406,593,752 66,448,087 39,043,391 277,048 141,141,182 159,684,044 406,593,752 66,448,087 39,043,391 277,048 141,141,182 159,684,044
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 80 ANNUAL REPORT - 2018 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
2018 2017 LKR LKR
13.3 Deposits ,Advances and Prepayments Deposits ,Prepayments and Advances 486,080,333 284,078,659 Prepaid Staff Benefits 864,020,587 697,635,195 1,350,100,920 981,713,854
14. OTHER FINANCIAL ASSETS Loans to Company Officers Motor Vehicle Loans 252,826,764 151,814,305 Housing Loans 1,040,078,373 947,387,223 Distress Loans 1,169,491,290 802,702,830 Other Loans 207,454,562 388,905,335 2,669,850,989 2,290,809,692 (-) Allowance for Impairment (7,580,887) (7,580,887) 2,662,270,102 2,283,228,805
14.1 Non Current Financial Assets Motor Vehicle Loans 202,261,412 69,282,439 Housing Loans 944,150,179 382,553,813 (-) Allowance for Impairment (7,580,887) (7,580,887) 1,138,830,704 444,255,366
14.2 Current Financial Assets Motor Vehicle Loans 50,565,353 82,531,866 Housing Loans 95,928,193 564,833,409 Distress Loans 1,169,491,290 802,702,830 Other Loans 207,454,562 388,905,335 1,523,439,398 1,838,973,439
15. CASH AND CASH EQUIVALENTS Favourable Cash & Cash Equivalent balances Cash and Bank Balances 8,999,507 10,792,295 Short Term Investments 3,139,645,376 1,463,327,716 Total Cash and Cash Equivalents For the Purpose of Cash Flow Statement 3,148,644,883 1,474,120,011
2018 2017 Number LKR Number LKR
Fully Paid Ordinary Shares 750,000,000 7,500,000,000 750,000,000 7,500,000,000
16.1 Capital Reserve At the time of incorporation and the transfer of assets from Ceylon Petroleum Corporation ,a capital reserve of Rs. 979,000,000 was created as a part of capitalization process.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 81 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
2018 2017 LKR LKR
17. DEFINED BENEFIT OBLIGATION Balance as at 01 January 1,473,989,898 1,234,070,802 Current Service Cost 78,442,419 84,227,706 Interest Cost 148,283,384 157,961,063 Actuarial (Gain) / Loss (75,079,946) 94,946,584 Benefits Paid (173,664,381) (97,216,256) Balance as at 31 December 1,451,971,373 1,473,989,898
17.1 Actuarial valuation of Retirement Benefit Obligation as at 31 December 2018 was carried out by Messrs Actuarial and Management Consultants (Pvt) Ltd ,a firm of professional actuaries using “Projected Unit Credit Method” as recom- mended by LKAS 19 - ‘Employee Benefits’.
17.2 Principle Actuarial Assumptions Principle Actuarial Financial Assumptions underlying the valuation are as follows:
Discount Rate 11.86% 10.06% Salary Incremental Rate 30% once in 3 Years 30% once in 3 Years Staff Turnover 1% 1%
17.3 Maturity Profile of the Defined Benefit Obligation Plan Less than 1 Year 144,030,529 135,772,494 Between 1-2 years 116,730,421 184,401,731 Between 2-5 years 359,844,649 369,163,186 Beyond 5 years 831,365,774 784,652,488 1,451,971,373 1,473,989,898
The average durations of of the Defined benefit Obligation Plan at the end of the reporting period is 6.98 years for ex- ecutive staff and 7.59 years for non executive staff.The average remaining working life of executive staff is 11.6 years and 12.2 years for non executive staff.
17.4 Sensitivity of Assumptions Employed in Actuarial Valuation The following table demonstrates the sensitivity to a reasonable possible changes in the key assumptions employed with all other variables held constant in the defined benefit liability measurement, in respect of year 2018.
Sensitivity Level Discount Rate Future Salary Increment Rates Increase Decrease Increase Decrease 1% -1% 1% -1% Impact on Defined Benefit Obligation (1,359,185,673) 1,556,522,785 1,477,739,696 (1,426,816,961)
2018 2017 LKR LKR
18 Trade Payables-Related Parties (18.1) 428,986,429 324,602,303 - Others 262,148,463 338,819,812 Other Payables 906,549,349 994,983,819 Sundry Creditors Including Accrued Expenses 217,340,499 187,178,599 1,815,024,740 1,845,584,533
18.1 Trade Payables- Related Parties Ceylon Petroleum Corporation Parent Entity 428,986,429 324,602,303 428,986,429 324,602,303
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 82 ANNUAL REPORT - 2018 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
Parent Entity Other Major S/H Total Ceylon Petroleum Corporation Lanka IOC PLC
Nature of Transaction 2018 2017 2018 2017 2018 2017 LKR LKR LKR LKR LKR LKR
19. RELATED PARTY DISCLOSURES Receivable/(Payable) as at 01 January 7,162,340,835 4,430,383,074 474,913,169 265,672,423 7,637,254,004 4,696,055,496 Service for oil storage & distribution 14,424,511,997 15,410,198,148 956,507,600 1,371,131,517 15,381,019,597 16,781,329,665 Own use fuel consumption (413,226,947) (466,219,356) - - (413,226,947) (466,219,356) Interest payments ------Other Expenses (3,665,803) (1,257,769) - - (3,665,803) (1,257,769) (Receipt)/Payment for Services (15,916,580,127) (12,210,763,261) (1,024,827,016) (1,161,890,771) (16,941,407,144) (13,372,654,032) Amounts Receivable/(Payable) as at 31 December 5,253,379,955 7,162,340,835 406,593,752 474,913,169 5,659,973,707 7,637,254,004
The amounts receivables from or payable to related parties as at 31 December are disclosed under notes 13.2 and 18.1 in the financial statements.
19.1 Transactions with Key Management Personnel of the Company “The Key Management Personnel are the members of the Board of Directors, of the company.Payments made to Key Management Personnel during the year were as follows:
2018 2017 LKR LKR
Fees for Directors 2,893,207 2,305,000 Directors Emoluments 8,539,121 7,479,373 11,432,328 9,784,373
19.2 Transactions with the Government of Sri Lanka and its Related Entities
Since the Government of Sri Lanka directly controls the Parent entity, the Company has considered the Government owned company of Sri Lanka and other government related entities which are controlled, jointly controlled or significantly influenced by the Government of Sri Lanka as Related Parties according to LKAS 24, “Related Party Disclosures”.
The Company enters into transactions, arrangements and agreements with the Government of Sri Lanka and its other related entities and the results of significant transaction have been reported in follows,
Nature of the transactions 2018 2017 LKR LKR
People’s Bank Cash at Bank 2,760,767 3,991,769 People’s Bank Short term Deposits 356,681,639 684,357,495 Bank of Ceylon Balance at Bank 285,848 471,658 Bank of Ceylon Short term Deposits 2,782,963,736 778,970,220
Further, transaction as detailed below, relating to the ordinary course of business, are entered into with the Government of Sri Lanka and its related entities: Maintaining bank accounts and entering in to Banking transactions with Bank of Ceylon and Peoples Bank Payments of statutory rates and taxes. Payment for utilities mainly comprising of telephone, electricity and water. Payment for employment retirement benefit EPF and ETF to Central Bank of Sri Lanka.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 83 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018 20. COMMITMENTS AND CONTINGENCIES 20.1 CONTINGENCIES
Pending Litigations (a) As per the Company lawyers outcome of following cases cannot be reasonably ascertained as at the reporting date. Accordingly, a provision has not been made in this financial statements for such pending litigations.The Company is a respondent or an applicant of following pending legal cases as at reporting date. Although there can be no assurance based on the information currently available, the management believe that the ultimate resolution of this legal procedures would not likely to have a material adverse effect on the results of operations, financial position or liquidity of the Company. Accordingly, no provision for any liability has been made in these financial statements in this regard. Pending Supreme Court cases as at 31st December 2018
Location Of Maximum Possible claim Outcome Case No Description of court case court ( up to December 2018) SC FR 275/14 Colombo Seeking a Promotion to Declaration of infringement of Fundamental Rights Grade B-1. of the Petitioner and compensation is determined by the Court. SC FR 234/15 Colombo Seeking a Promotion to Declaration of infringement of Fundamental Rights Grade A-1. of the Petitioner and compensation is determined by the Court. SC FR 431/16 Colombo Seeking a Promotion to Declaration of infringement of Fundamental Rights Grade A-5. of the Petitioner and compensation is determined by the Court. SC FR 68/16 Colombo To get issue a suitable Declaration of infringement of Fundamental Rights amount of shares not of the Petitioners, compensation is determined by exceeding 10% or distribute the Court and to issue a suitable amount of shares an equivalent sum of money not exceeding 10% or distribute an equivalent sum amongst the employees. of money amongst the employees. SC FR 24/17 Colombo Seeking a Promotion to Declaration of infringement of Fundamental Rights Grade A-5. of the Petitioner and compensation is determined by the Court. SC FR 244/17 Colombo Seeking a Promotion to Declaration of infringement of Fundamental Rights Grade B-1. of the Petitioner, to promote to the Grade B-1 Management Asst.(Audit) or to quash the Interview held and compensation determined by the Court. SC FR Colombo Seeking a Promotion to Declaration of infringement of Fundamental Rights 322/17 Grade A-7. of the Petitioner, to promote to the Grade A-7 Health Safety & Environment Executive, to declare the Pending Court of Appeal cases as at 31st December 2018 appointment made null and void and compensation is determined by the Court. Pending Court of Appeal cases as at 31st December 2018
Location Of Maximum Possible claim Outcome Case No Description of court case court ( up to December 2018) Writ 142/13 Colombo Filed by 17 employees of Total payments for all the applicants could be CPSTL claiming promotions amounted to Rs.13,936,944/-. which were recommended by PVC. Writ 56/16 Colombo Appeal filed by an ex- Compensation is determined by the Court. employee, to stay the proceedings at Magistrate’s Court to eject him from the office quarters.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 84 ANNUAL REPORT - 2018 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018 Pending District Court cases as at 31st December 2018
Location Of Maximum Possible claim Outcome Case No Description of court case court ( up to December 2018) 26195/M Anuradhapura Filed against CPSTL Rs.10,000,000/- plus Legal Interest ,liability is vested claiming damages arising with Sri Lanka Insurance Corporation (SLIC). from an accident. 11736/M Matara Filed against CPSTL Rs.1,500,000/- plus legal interest claiming damages arising liability is vested with SLIC. from an accident. 11838/M Matara Filed against CPSTL Rs.1,500,000/- plus legal interest claiming damages arising liability is vested with SLIC. from an accident. 11903/M Matara Filed against CPSTL Rs.2,000,000/- plus Legal interest , liability is vested claiming damages arising with SLIC. from an accident. DMR/00353/13 Kandy Filed against CPSTL Rs.5,000,000/- plus legal interest. claiming damages arising from an accident. DMR/ 981/15 Kandy Filed against CPSTL Rs.113,914/- plus legal interest.liability is vested claiming damages arising with SLIC. from an accident DMR/ 1509/12 Colombo Filed against CPSTL Rs.21,000,000/- plus legal interest, liability is vested claiming damages arising with SLIC. from an accident. DMR/00062/13 Colombo Filed against CPSTL Rs.1,500,000/- plus legal interest , Liability is vested claiming damages arising with Union Assurance PLC. from an accident. DMR/00578/16 Colombo Filed against CPSTL Rs.6,000,000/- plus legal interest ,Liability is vested claiming damages arising with SLIC. from an accident. 241/L Minuwangoda To quash some Deeds. To declare the Land mortgaged to CPSTL as a constructive trust and compensation determined by the court. 3168/M Attanagalla Filed against CPSTL Rs. 2,500,000/- plus legal interest liability is vested claiming damages arising with Allianz Insurance Lanka Limited. Insurance from an accident Company agreed to pay upto Rs.1,000,000/- if it decided over Rs. 1,000,000/- company has to bear up. (CPSTL has taken third party property claim only upto Rs. 1,000,000/-) 7132/M Gampaha Filed against CPSTL MEPA claims Rs. 118,315,875/- + legal charges claiming environment from CPSTL for enviroment pollution caused to damage for social Muthurajawela lagoon due to oil leakage in 2015 disturbances
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 85 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018 Pending Magistrate Court cases as at 31st December 2018
Location Of Maximum Possible claim Outcome Case No Description of court case court ( up to December 2018) 33660/ 14 Maligakanda Filed by Dept. of Labour for No monitory involvement non implementation of an Arbitration Award. 2868/16 Maligakanda Filed by CPSTL to eject a No monitory involvement dismissed employee from the quarters. B/29/17 Eravur Filed by Eravur Police Case is filed by Sri Lanka Police against our two Station for theft of fuel from employees CPSTL's role is giving evidence. No running tank of the Bowser monitory involvement. by driver & porter. 90535/5/18 Colombo Delay of sending ETF Claim of surcharge amount of Rs. 10,933,094.07 allocation of workers to from CPSTL. Central Bank 90542/5/18 Colombo Delay of sending ETF Claim of surcharge amount of Rs. 483,252.88 from allocation of workers to CPSTL. Central Bank
Pending Labour Tribunal cases as at 31st December 2018
Location Of Name of the Maximum Possible claim Outcome Case No Description of court case court applicant ( up to December 2018) 2/600/ 15 Colombo Filed by a dismissed R Reinstatement with back wages employee (w.e.f. 19.05.2011) Heiyanthuduwa (Rs.50,000 x 91 months) Rs.4,550,000/-. seeking reinstatement with back wages. 22/01/2016 Colombo Filed by an employee S G Ekanayake Reinstatement with back wages , who is on constructive Gratuity & compensations determined dismissal(w.e.f..22.04.2016) by the court. seeking reinstatement with Rs.67,676/- x 32 months back wages. =Rs.2,165,632/-. 1/AD/44/12 Battaramulla Filed by a dismissed L.G.Gamini "Reinstatement with back wages employee (w.e.f. 10.05.2012) Rs.68,518 x 79 months seeking reinstatement with Rs.5,412,922/-. back wages. 1/AD/ 31/14 Colombo Filed by a dismissed S J Fernando Reinstatement with back wages employee(w.e.f.22.11.2013) Rs.27,390 x 61 months Rs.1,670,790/-. seeking reinstatement with back wages. 2/AD/ Battaramulla Filed by a dismissed M A S D Reinstatement with back wages 3596/12 employee Munasingha Rs.80,524 x 91 months Rs.7,327,684/-. (w.e.f. 19.05.2011) Rs.5,395,108.00 seeking reinstatement with back wages.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 86 ANNUAL REPORT - 2018 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018 Pending Labour Court cases as at 31st December 2018
Location Of Maximum Possible claim Outcome Case No Description of court case court ( up to December 2018) A /3439 Colombo 2 applicants. One employee Back wages has to be calculated subject to salary retired.Seeking for differences. promotions & back wages. CC/C/IR/700/17 Colombo Seeking for reinstatement Back wages Rs.81,130.00/-. CC/C/IR 556/ 17 Colombo Seeking for promotion Back wages has to be calculated subject to salary to Distribution Assistant differences. (Invoice) or Snr. Executive (Administration) CC/C/IR505/ 17 Colombo To quash to the interview No monitory involvement held for the post of Distribution Assistant (Operation & Transport) CC/C/IR 36/18 Colombo Seeking for promotion to Back wages has to be paid if ordered Filling Forman Grade B -1 CC/LT/C/10/18 Colombo To grant withheld two No monitory involvement increments SB/07/331/2016 Badulla Seeking for promotions & Back wages has to be calculated subject to salary OT arrears differences.
(b) Income tax assessments relating to year of assessment 2012/2013 The company has received an income tax assessment for the periods 2012/2013 against the amount claimed as a qualifying payment under section 34 (2) (S).
As per the assessment the amount payable was Rs.76,679,589/-. The Company has made an appeal against the assessment mentioned above which is pending for further review.
(c) Lease of 09 No’s Bulk Depots lands from Sri Lanka Railways for five years. The present contract has already been lapsed on 31.12.2013 and company has received new valuation report from Sri Lanka Railway amounting to Rs. 44,400,000/- for next five year period from 01.01.2014 to 31.12.2018 and a new lease contract has to be entered into with effect from 01.01.2014.
20.2 CAPITAL COMMITMENTS The following capital commitments have been approved by the board of directors as at 31st December 2018.
Outstanding LC Payments as at 31st December 2018
LC No Amount (Rs.) Description of Purchase 42007180001148 Rs.55,527,029(Euro 266,375) Purchase of Brand New Fire Vehicle 42007180002557 Rs. 8,137,366 (Euro 38,270) Purchase of 15 Nos. 3" Top Loading Arms 42004180002845 Rs. 5,861,300 (JPY 3,587,000) Purchase of 01 Nos.Fork Lift
Bank Guarantees as at 31st December 2018 LC No Amount (Rs.) Description of Purchase 43501140002346 280,000/- M/S Equipment Traders (Pvt) Ltd 43501160003110 120,000/- M/S Daynacom Engineering (Pvt) Ltd 43501120007655 182,000/- M/S Daynacom Engineering (Pvt) Ltd 43501120007628 270,000/- M/S Daynacom Engineering (Pvt) Ltd
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 87 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
The projects which are mentioned below are contract value worth More than Rs 2,000,000. Projects approved by Board but not completed as at 31st December 2018
Description Contract Value Paid As At Work Done As Payable (LKR) 31-12-2018 At 31-12-2018 Amount (LKR) (LKR) (LKR)
15000 M3 Tank at Kolonnawa 450,000,000 207,540,957 207,540,957 242,459,043 Pipeline Rehabilitation Project 260,000,000 231,040,224 358,057,036 28,959,776 Renovation of the Investigation / BMBP Function 7,700,000 2,250,773 2,143,594 5,449,227 Amalgamation of two office - Kurunagala 8,500,000 1,971,137 1,971,137 6,528,863 * Design, Supply And Installation of Internal Floating 70,000,000 4,896,793 4,896,793 65,103,207 Roofs For Tanks No. 6,7 And 8 At Muthurajawela * Repair to tank no. 04 - Kolonnawa 36,040,500 4,238,450 4,238,450 31,802,050 Construction of filling gantry at LBD Kurunegala 17,360,000 15,350,505 15,855,971 2,009,495 * Upgrading pipe sysytem at Zone - 6 180,000,000 4,204,642 4,204,642 175,795,358 * Construction of filling gantry at Zone -03 30,000,000 735,223 735,223 29,264,777 Embarkment Protection in Zone 1-4 30,793,545 15,923,157 22,237,494 14,870,388 LV PDBS Kolonnawa 6,000,000 3,990,809 3,990,808 2,009,191 Yard improvement infront of Eng. Function 6,260,000 1,975,015 1,975,015 4,284,985 Improvements to Interior of Main Administration Building 18,020,000 841,415 1,524,691 17,178,585 Total Value of the projects 1,302,674,045 500,794,474 7,490,515 801,879,571
* Amounts paid include advances. *The projects which are mentioned below are contract value worth More than Rs 10,000,000. Projects awarded but not started As At 31-12-2018
Project Name or Description Contract Value (LKR) 01 no Fire vehicle 90,000,000 Installation of internal floating roofs for tank no. 17,22,23 in Kolonnawa Installation 52,357,743 02 nos. Diesel engine driven fire pumps for Kolonnawa (capacity 10,000 1/m @ 8 bar) 30,000,000 Portable Fire pump- 5 nos. 23,000,000 Proposed ware house for disposal yard of stores function 21,940,000 Supply of 15 nos. Loading arms 18,000,000 Modifications to boundary wall at LBD -Kurunagala 17,920,000 Development of driver pool and rest room 15,780,000 Consultancy services for architectural concept and modifications to existing transport office building 15,291,120 Construction of a 350m3 capacity fire water tank at LBD Batticaloa 15,000,000 Refurbishment of auditorium and office of human resource development function 13,635,500 Modification to front security building at CPSTL Kolonnawa 11,517,313 Old administration building external renovation 10,000,000 Projects approved by Board and awarded As At 31-12-2018 334,441,676
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 88 ANNUAL REPORT - 2018 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018 Projects approved by Board and not awarded As At 31-12-2018
Project Name or Description Contract Value (LKR) Construction of a 5000 m3 & 2 nos. 15000 m3 storage tank at Kolonnawa 1,232,082,312 Construction of 02 nos. 7000 m3 & 15000 m3 storage tank at Kolonnawa 1,120,191,858 Construction of 02 nos. 7000 m3 & 15000 m3 storage tank at Kolonnawa 988,844,693 Improvement to the product filling facility at Muthurajawela Terminal 550,000,000 Dry Docking of SPBM - Muthurajawela (cost of spares, service & docking) 288,000,000 State of art petroleum laboratary at CPSTL (Kolonnawa) 175,000,000 Repairs to tank No.46 148,014,607 01 no Fire vehicle 70,000,000 Development of oil Separation & recovery 52,700,000 Installation of CCTV camera system 50,000,000 Repairs to tank No.03 40,112,975 Supply of 15 nos. Bulk meters 37,500,000 Refurbishment of new administration building 33,250,000 03 Nos. Diesel engine driven fire pumps for Kotagala, Peradeniya, Batticaloa (capacity 4,500 1/m @ 7 bar ) 30,000,000 Renovation of boundary wall (stage 2) at oil installation Kolonnawa 15,000,000 Internal floating roofs (ifr) for gasoline storage tanks at LBD Magalle (tank No. 4) and LBD Kurunagala 13,000,000 (tank no.4) Improvement to the outdoor illumination system at Kolonnawa - phase I, supply and installation of lighting 10,000,000 towers along the railway tracks 25kva sound proof genera- circuit Bungalows 10,000,000 Projects approved by Board and not awarded As At 31-12-2018 4,863,696,445
21. ASSETS PLEDGED No assets have been pledged as at the reporting date.
22. EVENTS OCCURRING AFTER THE REPORTING PERIOD There have been no material events occurred after the reporting date that require adjustments to or disclosure in the Financial Statements.
23. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Company is exposed to market risk,interest rate risk, foreign currency risk, credit risk and liquidity risk. The Company’s management oversees the management of these risks. The Company’s Board of Directors is supported by an Audit Committee that advises on financial risks and the appropriate financial risk governance framework for the Company.
The Audit Committee provides guidance to the Company’s Board of Directors that the Company’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with Company policies and Company risk appetite.
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 89 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
23.1 Market Risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices.
Market risk comprise of the two types of risk: 1. Interest rate risk 2. Foreign Currency risk
The objective of market risk management is to manage and control market risk exposures within acceptable parameters,while optimizing the return.
23.1.1 Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long term debt obligations with floating rates.
Interest rates sensitivity The following table demonstrates the sensitivity to a reasonably possible changes in interest rates, with all other variables held constant, of the company’s profit before tax ( (through the impact on floating rate Long term borrowings)
Increase / (Decrease) in basis points Effect on Profit Before Tax LKR LKR 2018 2017
(+)100 basis points - (1,240,727) (-)100 basis points - 1,240,727
The assumed spread of basis points for interest rate sensitivity analysis is based on the currently observable market environment changes to base rates such as LIBOR
23.1.2 Foreign currency risk
Foreign currency risk is the risk that the fair value monitory assets and liabilities including derivatives financial instruments existing as at 31 December 2018 will fluctuate because of changes in foreign exchange rates.
The following table demonstrates the sensitivity to a reasonably possible change in the US dollar exchange rate with all other variables held constant.The impact of the Company’s profit before tax is due to changes in the fair value monitory assets.The company’s exposure to foreign currency changes for all other currencies is not material.
Average Year End Change in Value Exchange USD Rate Before Tax Effect on Profit Rate (LKR)
2018 Cash and Cash Equivalents -Cash in Hand(USD) 6 182.71 +/- 1% +/-0.6 Cash and Cash Equivalents -Fixed Deposit (USD) 1,712,423 182.71 +/- 1% +/- 17,124
2017 Cash and Cash Equivalents -Cash in Hand(USD) 68 151.91 +/- 1% +/-0.68 Cash and Cash Equivalents -Fixed Deposit (USD) 1,518,939 151.91 +/- 1% +/- 15,189
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 90 ANNUAL REPORT - 2018 NOTES TO THE FINANCIAL STATEMENTS (Contd.)
As at 31 December 2018
23.2 Credit risk Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and financial institutions.
Trade receivables Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and control relating to customer credit risk management.
The following policies are implemented within the company in order to manage credit risk related to receivables: • Outstanding customer receivables are regularly monitored with regular trade debtor review meetings.
23.3 Liquidity risk The Company monitors its risk to a shortage of funds by forecasting its operational cash requirements on an annual basis and project cash flow requirements as per the project implementation period. The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans. The Company assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. Access to sources of funding is sufficiently available and financing for current operations is already secured.
The table below summarises the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments:
Less than 1 year Total LKR LKR
Trade and Other Payables 1,815,024,740 1,815,024,740 1,815,024,740 1,815,024,740
23.4 Capital Risk Management The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, capital is monitored on the basis of the gearing ratio.
2018 2017 LKR LKR
Total equity 24,766,261,312 25,163,197,985 Total capital 24,766,261,312 25,163,197,985 Gearing ratio 0.00% 0.00%
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 91 DETAILED INCOME STATEMENT As at 31 December 2018
2018 2017 Statement LKR LKR
Revenue 13,130,224,803 14,176,146,910 Direct Expenses I (7,903,351,446) (7,400,983,212) Gross Profit 5,226,873,357 6,775,163,699 Other Operating Income 704,333,113 457,796,444 Administrative Expenses II (4,526,853,560) (4,025,018,806) Operating Profit 1,404,352,910 3,207,941,337
STATEMENT I DIRECT EXPENSES Outside transport cost 3,065,373,578 2,839,017,582 Bunkering Expenses - 214,238,221 Direct personnel cost 2,954,073,137 2,403,087,576 Insurance 73,198,773 56,728,431 Own Use Fuel Expense 467,566,531 445,094,854 Depreciation -storage tanks, pipelines, gantries and pumps 516,143,476 516,827,222 Depreciation -motor vehicles 143,562,331 77,940,065 Depreciation- SPBM 160,547,288 160,547,288 Vehicle maintenance 142,702,615 132,840,557 Storage maintenance 6,283,019 48,589,408 Property maintenance 181,199,509 320,003,682 Rail track maintenance - 11,293,065 Consignment Seals 12,575,782 30,279,274 Cleaning & Sanitary Expenses 40,579,103 9,684,458 Water 5,604,529 4,556,749 Electricity 116,459,025 115,623,216 Vessel charges 9,919,697 8,208,946 Shipping, clearing and transport 1,726,710 1,921,233 Advertising and Promotional Expenses 5,836,343 4,501,385 7,903,351,446 7,400,983,212 STATEMENT II ADMINISTRATIVE EXPENSES Directors’ fees 2,893,207 2,305,000 Chairman’s and MD’s salaries 8,539,121 7,479,373 Personnel cost 3,491,632,362 2,783,783,740 Gratuity 226,725,802 242,188,768 Prepaid staff benefit on staff loan 401,933,561 289,734,563 Staff welfare 261,351,823 233,030,245 Medical 79,287,237 82,018,533 Office requisites 21,434,501 19,683,156 Communication expenses 23,464,790 18,348,660 Rent and rates 31,122,706 21,961,948 Depreciation of buildings, furniture and fittings, equ ipment and computers 131,147,766 123,041,041 Amortization of intangible assets 4,486,998 7,331,222 Travelling, subsistence, batta and taxi fare 37,123,640 38,074,929 Auditors’ remuneration 1,943,223 1,800,000 Electricity 18,470,818 18,338,256 Water 21,026,333 17,095,407 Allowance/(Reversal) for impairment of staff loans - (2,304,574) Allowance/(Reversal) for impairment of receivables (174,665,455) (401,268) Legal fees 5,577,336 4,469,835 Professional fees 31,629,153 31,553,135 Charity & donations 2,160,750 6,114,277 Staff training 22,084,729 31,864,792 License and registration 5,243,500 5,873,442 Stamp duty 98,700 9,200 Sundry expenses 2,966,056 33,202,913 Exchange (Gain) or Loss (6,634,890) (4,934,650) Commission and Bank Charges 3,046,335 3,163,061 Allowance/(Reversal) of inventory provision (127,236,542) 10,193,802 4,526,853,560 4,025,018,806
CEYLON PETROLEUM STORAGE TERMINALS LIMITED 92 ANNUAL REPORT - 2018 FIVE YEAR FINANCIAL SUMMARY
2014 2015 2016 2017 2018
Operating Results
Revenue LKR MN 14,998 11,687 12,663 14,176 13,130 Gross Profit LKR MN 4,881 5,272 5,995 6,775 5,227 Operating Profit LKR MN 2,160 1,917 2,406 3,208 1,405 Profit Before Tax LKR MN 2,188 1,716 2,330 3,273 1,522 Income Tax LKR MN (279) (342) (591) (474) 1,325 Profit After Tax LKR MN 1,909 1,374 1,739 2,800 197 Dividends LKR MN - - 488 405 651
Capital Employed
Stated Capital LKR MN 7,500 7,500 7,500 7,500 7,500 Retained Earnings LKR MN 11,503 12,910 14,372 16,684 16,287 Capita Reserve LKR MN 979 979 979 979 979 Shareholders' Funds LKR MN 19,982 21,389 22,851 25,163 24,766 Non Current Liabilities LKR MN 4,008 3,393 3,151 2,491 3,450 Current Liabilities LKR MN 5,694 2,487 2,057 2,337 2,106 Total Liabilities LKR MN 9,702 5,880 5,208 4,828 5,556
Assets Employed
Non Current Assets LKR MN 17,336 17,095 17,249 17,199 17,313 Current Assets LKR MN 12,347 10,175 10,810 12,792 13,009 Total Assets LKR MN 29,683 27,270 28,059 29,991 30,322
Key Ratios
Gross Profit Margin % 33% 45% 47% 48% 40% Operating Profit Margin % 14% 16% 19% 23% 11% Net Profit Margin % 13% 12% 14% 20% 2% Return On Capital Employed(ROCE) % 9% 8% 9% 12% 5% Return On Equity(ROE) % 10% 6% 8% 11% 1% Asset Turnover % 52% 41% 46% 49% 44% Current Ratio Times 2.17 4.09 5.25 5.47 6.18 Quick Asset Ratio Times 2.10 3.96 5.05 5.30 6.18 Gearing ratio (Debt to Equity) Times 0.49 0.27 0.23 0.19 0.22 Net Asset Value Per Share LKR 26.64 28.52 30.47 33.55 33.02
CEYLON PETROLEUM STORAGE TERMINALS LIMITED ANNUAL REPORT - 2018 93 NOTES
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CEYLON PETROLEUM STORAGE TERMINALS LIMITED 94 ANNUAL REPORT - 2018 CORPORATE INFORMATION
NAME OF THE COMPANY Ceylon Petroleum Storage Terminals Limited
COMPANY REGISTRATION NUMBER PB 1221
LEGAL FORM Incorporate under the Companies Act No. 17 of 1982 in terms of Section 2 (1) of the conversion of Public Corporation or Government owned business undertaking into Public Companies Act
REGISTERED OFFICE Oil Installation, Kolonnawa Wellampitiya, Sri Lanka Telephone: 011 - 2694482 011 - 2691643 011 - 2532122 Fax: 011 - 2547827 E-mail: [email protected] Website: www.cpstl.lk
TAX PAYER IDENTIFICATION No. :134011157
VAT REGISTRATION No. :134011157 -7000
BOARD OF DIRECTORS Mr. G. S. Withanage Mr. M.R.M. Abdeen Mr. Nimal Jayasundara Mrs. K. D. R. Olga Mr. Shyam Bohra Mr. Pramod Jain Mr. Prasanna Shamal Senarath Mr. Randhir Singh
PARENT COMPANY Ceylon Petroleum Corporation
AUDITORS The Auditor General
SECRETARIES Accounting Systems Secretarial Services (Private) Limited No.11, Castle Lane, Colombo 04
BANKERS Bank of Ceylon People's Bank Ceylon Petroleum Storage Terminals Limited Kolonnawa, Wellampitiya, Sri Lanka Tel : 011 - 2572307 Website : www.cpstl.lk