Annual Report 2019/20
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“Better living through Carbon” Leading edge Activated Carbon Technology for every industry and purpose Our Vision “To be the leading global brand for Activated Carbon in Sri Lanka and the Region, renowned for technical excellence, customer centricity, innovation and sustainable business practices” H A Y C ARB P L C Annual Report 2019/20 Haycarb PLC 400, Deans Road, Colombo 10, Sri Lanka Phone: +94 11 262 7000, +94 11 267 7364 (Finance) Fax: +94 11 269 9630 E-mail: [email protected] HAYCARB PLC www.haycarb.com Annual Report 2019/20 Contents 02 - 04 JOINT STATEMENT FROM THE CHAIRMAN AND THE MANAGING DIRECTOR 05 - 36 GOVERNANCE AND COMPLIANCE 06 Board of Directors 09 Management Team 11 Corporate Governance 29 Annual Report of the Board of Directors on the Affairs of the Company 32 Statement of Directors’ Responsibility 33 Related Party Transactions Review Committee Report 34 Audit Committee Report 36 Remuneration Committee Report 37 - 107 FINANCIAL STATEMENTS 38 Independent Auditors’ Report 42 Income Statement 43 Statement of Comprehensive Income 44 Statement of Financial Position 46 Statement of Changes in Equity 48 Statement of Cash Flows 50 Notes to the Financial Statements 108 Statement of Group Value Added 109 Investor Information 112 Ten Year Financial Review 114 Group Profile 116 Glossary 117 Notice of Meeting Enclosed Form of Proxy Inner Back Cover Corporate Information Joint Statement from the Chairman and the Managing Director “The Company remains confident that its business model built on strong and enduring relationships and a strong manufacturing and supply base, places it in a strategic position to continue the growth of the business in the backdrop of emphasis placed on environment sustainability and personal protection globally.” We are pleased to present the Annual Report and the Financial duly conscious of the still unfolding impact of the COVID-19 Statements of the year ended 31st March 2020 of Haycarb PLC. pandemic in all our global markets and the supply chain, as countries face contraction of economic growth forecasts and It is noteworthy that the Company surpassed a key milestone, further predictions of a possible second wave across the globe. reporting profit before tax of over Rs. 2 billion. The Group turnover increased by 9% to Rs. 22,822 million whilst Activated Carbon Operation profit before and after tax was recorded at Rs. 2,175 million and Rs. 1,766 million respectively. The consolidated earnings per share The activated carbon turnover increased to Rs. 19,276 million (EPS) and net asset value per share (NAV) increased to Rs. 52.46 while the profit before tax improved to Rs. 1,923 million. This and Rs. 313.71 respectively. noteworthy improvement in results was made possible due to successful execution of strategies to expand and enhance the business. DIVIDENDS The technical, production and marketing teams worked cohesively to increase the value added product portfolio – respirator, Taking into consideration the performance for the year and premium gold, point of use, energy storage, impregnated and future prospects of the Company, the Board recommended and pelletised carbons are some of the product segments that recorded paid three interim dividends of Rs. 3/- per share on 17th October significant growth. It is with pleasure that we note the twofold 2019, Rs. 3/- per share on 23rd January 2020 and Rs. 9/- per share sales increase of the EDLC (super-capacitor carbons) product on 26th May 2020, totalling Rs. 15/- per share. range, which showcases Haycarb’s technical and manufacturing capability at the premium end of the applications. MANAGEMENT DISCUSSION AND ANALYSIS The healthy bottom line of the year is also the result of increase in sales volume by 13% compared to the previous year which was made possible due to robust demand for activated carbon assisted COVID-19 – Impact and Response by strong marketing and sales efforts globally, supported by a well-managed manufacturing operation that was able to ramp up The unprecedented disruptions caused by curfews and capacity and a strong supply chain network that ensured supply lockdowns due to COVID-19 since mid-March impacted all of raw material to all manufacturing locations. operations globally and demanded a swift response, to ensure the continuity of the business and protection of stakeholders. We note that the manufacturing facility in Palu, Central Sulawesi, Indonesia, recorded a full year of production following its Haycarb’s global manufacturing footprint greatly supported the re-commissioning in March 2019, after the disruption caused Company’s risk mitigation in this scenario. The manufacturing by the earthquake and tsunami of September 2018. operations were re-opened as fast as possible, working very closely with government agencies whilst observing the highest While the charcoal availability and stability of prices in Sri Lanka standards of health, safety and hygiene practices. and Indonesia, enabled these facilities overall to operate at competitive and profitable levels, the Thailand operations We also successfully managed the supply chain of coconut continued to face higher cost of raw materials during the greater shell based charcoal our key raw material, in every country that part of the year under review. While the charcoal availability we operate, through large buffer stocks, swift pricing support and improved resulting in prices to come down gradually from Q3, finances provided to suppliers to ensure their disruptions were safety inventory maintained at a higher average cost will impact managed without an impact to Haycarb operations. the bottom line for some time. However, the year under review witnessed a significant increase in regeneration volumes, making While we are confident of the demand for purification solutions a noteworthy addition to the bottom line and cash flow of that are backed by emphasis placed on environmental Thailand operations. sustainability, standards and regulations globally, we are 02 HAYCARB PLC – Annual Report 2019/20 Joint Statement from the Chairman and the Managing Director Increasing the manufacturing capacity will be a major driver shop floor mentoring sessions. Working with social distancing of the growth plan for the activated carbon segment and will be and added hygiene and safety protocols to minimise the impact augmented with focused investments to enhance the capacity to of COVID-19 pandemic introduced a new set of challenges manufacture value added activated carbon. The Company will that were overcome with guidelines and practices successfully continue to invest in research and development to acquire the implemented with the direction of health and regulatory capability to manufacture new value added products, re-engineer authorities. In an uncertain and challenging environment, the processes and acquire new technologies. manufacturing teams are poised to continue the journey of manufacturing excellence to retain its leading position for Along with its technological capability, the unique strength of quality, consistency and timely deliveries. Haycarb as a manufacturer of coconut shell based activated carbon lies in its extensive raw material procurement network spread across all the major coconut producing countries in Environmental Engineering the region. This ensures stability of supplies and competitive pricing in its end product offering. Unfortunately the imposition The environmental engineering arm Puritas Group, recorded of lockdowns as a counter measure to restrict the spread of a revenue of Rs. 3,546 million and a profit before tax of COVID-19 in the last two weeks of the financial year, disrupted Rs. 240 million during the year under review. Puritas’ main supplies, while the buffer stock of raw material in hand business segment, the design and installation of water and ensured our ability to face the challenge with limited wastewater systems continued to face challenges due to the impact to manufacturing capacity utilisation. uncertainties in the regional markets. In spite of these challenges the Company secured significant water and Nurturing our relationships in charcoal and coconut shell supply wastewater treatment projects in Sri Lanka and in the region. networks in Sri Lanka, Thailand, Indonesia, India, and Philippines is an ingrained value of Haycarb’s sustainable business model. During the year the Company was awarded and executed Our long-term outlook for this industry led to the formation a number of projects in the Water Supply and Sanitation of Haycarb’s environment friendly charcoaling technologies. Improvement Projects (WASSIP) across Sri Lanka, an initiative We provided technical and financial assistance to suppliers funded by the World Bank and coordinated by the Government in the Haritha Angara initiative (the environment friendly of Sri Lanka. The Company also secured projects under the closed charcoaling pits) in Sri Lanka since 2015. Haritha Angara Climate Resilient Integrated Water Management Project initiative has now converted nearly 75% of all pit charcoaling (CRIWMP) funded by the United Nations Development Fund. in the island to this environment friendly model. In Thailand, However, the COVID-19 lockdowns and the resultant short to Carbokarn invested in the vertical charcoaling facility that is medium-term impact on tourism and spending, power is expected capable of supplying 30-40%of raw material requirement of the to adversely affect projects that were to be secured from business factories located in Thailand. The Company plans to support segments