Elpitiya Plantations Plc Annual Report 2012/13 1 2 Elpitiya Plantations Plc Annual Report 2012/13 Contents
Financial Highlights 02
Chairman’s Statement 03
Managing Director’s Review 05
Board of Directors 08
Annual Report of the Board of Directors 10
Audit Committee Report 12
Report of the Remuneration Committee 12
Corporate Governance 13
Corporate Sustainability Report 18
Risk Management 25
Management Team 29
Statement of Directors’ Responsibilities 30
Auditors’ Report 31
Income Statement 32
Statements of Comprehensive Income 33
Statements of Financial Position 34
Statements of Changes in Equity 35
Statements of Cash Flows 36
Notes to the Financial Statements 37
Value Added Statement 90
Information on Estates 91
Ten Year Summary 92
Shareholder & Investor Information 93
Definitions 95
Financial Calendar 96
Corporate Information 97
Notice of Meeting 98
Attached - Form of Proxy and Instructions as to Completion
Elpitiya Plantations Plc Annual Report 2012/13 1 Financial Highlights
2013 2012 % Year ended 31st March Rs.000’ Rs.000’ Increase/ (Decrease)
Turnover 2,833,456 2,512,971 13%
Gross profit 638,012 326,933 95%
Profit before tax 495,594 148,201 234%
Income tax expense (44,182) 1,883 (2446%)
Profit after tax 451,411 150,084 201%
Non-current assets 4,043,195 3,894,822 4%
Current assets 602,248 449,446 34%
Share holder’s funds 2,441,454 1,990,042 23%
Capital expenditures 257,337 299,739 (14%)
Earning per share 6.20 2.06 135%
Dividend per share 0.50 - 100%
Dividend payout ratio 8% - 100%
Net assets per share 33.51 27.31 21%
Stated capital 694,236 694,236 -
Net assets 2,441,454 1,990,042 23%
Return on equity 18.49 7.54 145%
2 Elpitiya Plantations Plc Annual Report 2012/13 Chairman’s Statement
Overall Results from all stake holders. Therefore its important that there The year under review was a phenomenal year for Elpitiya is a shift from the old traditional thinking to new Plantations PLC, as the highest ever profit of Rs. 507 Mn. industries and Sectors which provide growth not only to before management fees was recorded. This was all the the Plantations but also to the Country as a whole. more commendable as all 3 major plantation crops namely Tea, Rubber and Palm Oil recorded profits with Global warming is a major phenomena that Plantations Palm Oil leading the way. It was also heartening to see and Agriculture will have to face. Whilst the challenges some of the Tea Estates recording profits after previous are relatively still unknown, we believe that there will be years losses with New Peacock Estate recording its best several opportunities that will emerge from these new ever performance. It must be placed on record that whilst macro environmental developments . Whilst we are well New Peacock Estate recorded its highest ever yield of up to the challenge we will also be well placed to exploit 2790 Kgs/ha with a good profit, the Company also these opportunities. However its important that the other recorded the 2nd highest yield for Tea of 1703 Kgs/ha. Stake Holders too lend their support to the Industry and All in all it was a good year for productivity. the plantation Companies to develop some of these areas. Company Strategies The company embarked on a strategy of diversifying its Future Strategies resource base several years ago, and I am pleased to state Our partnership with the Chinese Company opens up that this strategy has now started giving us the results new opportunities for marketing specialty Teas in that was expected. Palm Oil was hardly cultivated in international markets and this will be one of our key Elpitiya Plantations PLC. However in the last several strategies in collaboration with our Chinese partner. years there was a shift from Tea and Rubber in the low There is also more attractive hydro power sites that we country to Palm Oil including the setting up of a joint plan to develop, whilst there are also opportunities to venture Palm Oil mill which has delivered good results to examine alternate energy projects such as solar and the company. We have also consolidated the Tea and green energy on the estates. We have the capacity to Rubber Plantations, by diversifying un productive areas venture into these new areas, which will receive our focus for forestry and consolidating the Rubber Plantations. in the future. We are also examining the eco tourist Hydro power resources have been developed and we see potential on our estates with support from some of our the benefits gradually pouring in. Further the strategy of partners as we feel that this is an area that has been value addition has also paved the way for a joint venture hither to unexploited in the company. with a Chinese Company, Dianhong International Limited , who has set up a joint venture in one of our Estates to Stakeholder Relations process Speciality Tea for the International Markets . This We would be failing in our duty if we do not continue to is a major boost to the company’s future. record our appreciation to the government for the support given to our company by continuing the fertilizer Industry Perspective subsidy and which has without doubt contributed to the The Plantation Industry has always been very challenging records yields. We are also thankful to several other and will continue to be so in the years to come. However initiatives of the government through the Ministry of we are confident that we will be able to overcome these Plantation Industries and related Ministries that has challenges and exploit these opportunities with assistance helped us in building the infrastructure on estates and support from all our Stake Holders. There is ample particularly the road net work on the estates. The opportunities to diversify Estate lands to other high value Plantation Human Development Trust also continues to lucrative crops such as Horticulture and fruit and play a supporting role in consolidating the plantations vegetables. However this requires a change in mindset social development activities.
Elpitiya Plantations Plc Annual Report 2012/13 3 Chairman’s Statement (contd.)
We as a company continues to support and expand our challenges that Plantations are faced with. Whilst responsibilities as a good corporate citizen where all sustainability has been an inbuilt strategy in our business aspects of social development including education, child model, we have no doubt that we will be able to face the care development, water and sanitation, sports and future with confidence and commitment. recreation and housing has received our priority attention. Our grateful thanks to the Merrill J. Fernando Appreciation Charitable Foundation for the continuous assistance in My sincere thanks goes out as always to the workers and supporting our social development activity. staff of every Estate for their unstinted support, co-operation and commitment. I value the cordial We also record our special thanks to the French Donor relations we have always maintained. The Plantations Organization - Fondation Abbe’ Pierre’ and the NGOs - Executives on the Estates have been our mainstay and International Institute of Development Training & PADEM continue to work with dedication and commitment. We for the construction of 20 houses on Meddecombra owe this year’s remarkable performance to their Estate. We sincerely appreciate their generosity. enthusiasm, hard work and great leadership on the Estates. I am aware of the many challenges they face and Future Challenges I sincerely thank them for their loyalty and commitment. Cost of production particularly of Tea, continues to be I also take this opportunity to thank the Managing the key concern facing the Tea industry. The new wage Director, Chief Executive Officer, Deputy Chief Executive structure that was negotiated effective 1st April 2013 has Officer and the Senior Management, Executives and Staff raised the cost of production of Tea far higher than our at the head office for guiding and supporting the international competitors, placing the viability of the Tea Plantations to reach their objectives. I am fully aware of Estates at risk. A small shift in tea prices will plunge the the role played by the CEO, his team and the head office tea industry to large losses. Investment in future Tea whose unwavering commitment has brought this replanting which is already yielding low returns, is bound company to what it is today. to be under further pressure in future financial years as plantations will tend to shy away from investment into Before I conclude, I sincerely appreciate the understanding tea replanting due to the negative returns. Channeling of and support of our share holders and Board of Directors funds for investments in Tea replanting will decline including the independent non-executive Directors and further, placing much uncertainty on the future of the the board member representing the government for their Tea Industry unless there is a sharp rise in international insight and advice given to me in the discharge of my tea prices. The lease given by the government to the duties as the Chairman of the company. Their contribution plantation companies is also almost at its half way mark, has been invaluable. and it is recommended and preferable if the government Thanking you. gives the Plantation Companies assurances regarding future owner ship or setting down the policy criteria for continuity after the 53 years period. Plantations require large investments where returns are long term and therefore the environment must be developed to J.M.S. Brito encourage investments into the plantations and add value Chairman to the asset base by giving assurances for future continuity. Further environmental sustainability 29th August 2013 associated with global warming is bound to add significantly to the cost of operations in order tobe compliant and conform to all the environmental
4 Elpitiya Plantations Plc Annual Report 2012/13 Managing Director’s Review
Overview The investment into palm oil has continued to show The season under review was a historic year for Elpitiya consistent results both on the estates and also in the Plantations PLC. Historic in that the highest ever profit of joint venture palm oil mill. We continue to expand our Rs. 507 million before management fees was recorded investments into this area which we feel will have a good and also that record levels of productivity of Tea lands potential in the future. were realized both for the Company as well as on several estates. There were several other achievements for the The rubber estates although made a small profit were Company to be proud of other than the financial results hampered by a globally depressed rubber market with and productivity. Another significant step in this financial demand declining in China, India and other countries. year was the setting up of a Joint Venture with a large tea The future of rubber therefore will be very challenging manufacturer in China, the Dianhong Group who invested unless there is a significant price movement. with Elpitiya Plantations PLC to process high-end speciality tea for the international markets. Plantation matters Cost of production of tea will be a major challenge for the This partnership has given this company access to the future as the recent wage increase which came into effect international markets through the Dianhong network. in April 2013 has increased the cost of production This season also saw significant profit being achieved significantly. Unless there is a sharp increase in through the diversification efforts of the company which international tea prices the performance of tea estates was put into action several years ago. We are pleased to particularly in the upcountry in the next few years will be place on record that these decisions have yielded of major concern. The global surplus that is being significant benefits to the company thus not relying witnessed in the tea markets will not help this cause and entirely on one crop or resource. therefore the tea estates particularly in the upcountry will not have an easy time to remain viable against We are also pleased to place on record the large forestry spiraling costs not only of wages but of energy and other reserves that has been grown and which has added inputs. Rubber and palm oil will also face these cost significant value to the balance sheet of the company. pressures though not to the same degree due to less This is bound to bring in greater value in the future. labour utilization.
Estate performances The future of tea replanting and investments in tea at It is important to record with appreciation the field level appears to be getting more and more unviable performance of New Peacock estate under the leadership with each successive wage increase. The breakeven point of Mr. Senarath Pahathkumbura where the estate recorded for tea estates in terms of productivity to remain viable a tea yield of 2790 kgs/ha whilst Nayapana estate in the has reached alarming proportions and is nowhere near same cluster recorded a yield of 1831 kgs/ha. Sheen the actual levels recorded on most estates. This will place Estate too recorded the highest ever yield of 1743 kgs./ha. much pressure on future tea replanting not only in this These were all record yields whilst New Peacock also company but in the entire tea industry. Whilst we have achieved its highest ever profit in the history of the estate. highlighted this phenomenon at different forums unfortunately none of the stakeholders appear to have a Another estate worthy of mention has been the consistent rational solution to this issue. This will put the entire tea performance of Talgaswela estate under the leadership of industry at risk unless a model is worked out in Mr Geeth Kumara which continued to record significant collaboration with other stakeholders including the Tea profits and also a commendable yield for tea. Talgaswela Research Institute to find a solution to make this estate also recorded a significant profit from the palm oil investment viable. that has been cultivated in the last several years.
Elpitiya Plantations Plc Annual Report 2012/13 5 Managing Director’s Review (contd.)
Stakeholder relations Employee development Our plantations have received the support and co- Training and development has received top priority in the operation from all our stakeholders without whose company and we continue to focus on improving the skill contribution we would not have been able to achieve levels of all categories of employees. Continuous training these results. We acknowledge our sincere thanks to the is provided using both in-house and external specialists. Ministry of Plantation Industries and all the related Social development is also one of our major initiatives in Government Ministries including the Ministry of order to improve and maintain the quality of life of our Infrastructure Development who have continuously plantation workers, their families and staff. Our strategy assisted our estates. The Plantation Human Development is to continue to focus on education, childcare Trust continues to be a great help in collaborating and development, medical facilities, healthcare and nutrition supporting the social development activities on the and housing. estates. We are also thankful to the Sri Lanka Tea Board and all the research institutes and other Government The Merril J. Fernando charitable foundation has agencies who have assisted the plantations from time to continued to support these activities for the last several time in solving various issues. We must also place on years and we sincerely thank them for their commitment. record, our sincere thanks to the Plantation Management This year we are also grateful to the French donor Monitoring Division (PMMD) of the Ministry of Plantation Organization – Foundation ABBE-PIERRE and the NGOs – Industries for the tremendous help they have been to International Institute of Development Training & PADEM Elpitiya Plantations. for the construction of 20 houses on Meddecombra estate which is a model of worker housing. We are extremely We are also thankful to the Government for the very grateful to them for this laudable gesture and sincerely competitive interest rate regime that is now available to look forward to working with them in the future. plantations companies helping us to reduce our interest cost on the estates. In addition the continuation of the Challenges and opportunities fertilizer subsidy which has no doubt been a major There are several macro-economic and micro challenges contributor to achieving high levels of productivity on that the plantations industry will face in the next few the estates is highly appreciated. This has been a laudable years. Most notable amongst them will be the impact of initiative by the Government and we hope that the issue global warming and climate change on our estates and of making tea replanting viable too will receive the the country as a whole. We are already seeing a phenomena attention of the Government to ensure the sustainability of unprecedented weather and temperature changes of the tea industry. which is having its toll on production and also several other negative effects such as unusual pests and diseases. Joint Ventures and Diversification Whilst we recognize these negative effects, we also realize AEN Palm Oil Processing (Pvt) Ltd the palm oil mill that these changes also open out positive opportunities company, continues to perform extremely well and we for the company. Alternate energy, use of organic thank the CEO and his management team for their fertilizers and organic matter, and new industries are achievements. We will also successfully add a further 900 some of the strategies that are planned in the future. The KW to national grid during the next financial year by the creation of larger extents of forestry is also another area successful completion of the Dunsinane cottage mini of opportunity planned in the company. Hydro Power project. Unfortunately we have scaled down the operations of the Elpitiya Lifestyle Solutions joint We also want to embark on other areas of diversification venture and also the Harrow Ceylon Choice project. Both including tourism, fruit and vegetable cultivation and operations have been un viable. We are however other related crops including expansion of commercial examining various options for the Elpitiya Lifestyle forestry which will require the support and understanding Solutions partnership.
6 Elpitiya Plantations Plc Annual Report 2012/13 Managing Director’s Review (contd.) of all our stakeholders. Some of these initiatives will be spending their valuable time reviewing performances and much more sustainable than some of the traditional challenging our team from time to time. crops and therefore we sincerely urge the support of all stakeholders to develop these areas to the benefit of all I must also thank all the estate workers and the staff concerned. whose tremendous support and co-operation has been one of the key factors to our success. I thank them for From a marketing standpoint we see a shift in demand being very supportive all these years. from the traditional markets for tea in the Middle East and CIS countries to China and the USA particularly for Finally my sincere thanks to the CEO, Mr. Tony niche marketing opportunities. With the US economy Goonewardena whose untiring leadership has been a gathering momentum it is important that the right tremendous asset to the company. I also wish to thank climate is created to attract investments into Plantations the Deputy CEO and the Executives and staff at the head from the developed world including China in order to office whose unwavering commitment and guidance to take Plantations to a higher level. the estates has been of great assistance.
For all this to happen, the policymakers need to create a My appreciation and thanks will not be complete without conducive environment for overseas investments into the placing on record my sincere thanks to all the plantations plantations sector. The current 53 year lease is a executives which includes the General Managers, constraint in encouraging foreign investments to Plantations Managers and Assistant Managers to whom plantations and therefore we sincerely request the we largely owe this performance. They have faced many government to develop a mechanism to address this issue challenges and issues in the discharge of the duties and as we are confident that we could attract good investors have always stood firm and faced every challenge with into plantations no sooner stability is given to the leases. unwavering commitment. We have built a strong team in the company which has been our real strength and I Conclusion reiterate my sincere thanks to all of them. I thank all our customers who have purchased our products through the years and who continue to place their trust and confidence on our estates. We are also grateful to all the produce brokers who have supported us. There are several other stakeholders who have helped R.M. Fernando us in numerous ways and we sincerely thank all of them Managing Director too. 29th August 2013 The Chairman Mr Brito and the Board of Directors have helped me and my team in several ways, most of all in supporting our initiatives and decisions through the years, and without their confidence in our team, this performance would not have been possible.
I must also thank Mr. Lalit N De S Wijeyeratne, the Independent Director who resigned and whose contribution particularly on the financial aspects was invaluable. My thanks are also due to Mr. Devan de Mel and Mr Sardha Sosa from the Management Committee for
Elpitiya Plantations Plc Annual Report 2012/13 7 Board of Directors
Mr J M S Brito Mr Malik J Fernando Mr Brito was appointed to the Board of Elpitiya Plantations Mr Malik J Fernando was appointed as a Director to the PLC on December 1, 2002 and as Chairman on April 28, Board of Elpitiya Plantations PLC in August 01, 1997. 2003. Mr Brito has a LLB (University of London) and MBA (London City Business School) degrees and is a Fellow of He is the Director Operations of the MJF Group, which both institutes of Chartered Accountants of Sri Lanka and comprises several tea growing and tea packing/exporting England and Wales. Together with this multi disciplined companies, supplying the ‘Dilmah Tea’ brand around the knowledge, he also brings with him a wealth of 35 years world. of international experience working with a number of international organizations. Presently Mr Brito is the Mr Fernando holds a Bachelor of Science Degree in Deputy Chairman and Managing Director of Aitken Management from Babson College, USA. Spence PLC, the Chairman of DFCC Bank, DFCC Vardhana Bank. He is a former Chairman of Sri Lankan Airlines & Mr. Merrill J Fernando The Employers’ Federation of Ceylon. He is a former Mr. Merrill J Fernando was appointed as a Director to the Director of Sri Lanka Insurance Corporation. Board of Elpitiya Plantations PLC in August 01, 1997.
Dr Rohan M Fernando He is the Chairman of MJF Holdings Limited and one of Dr R M Fernando was appointed to the Board of Elpitiya Sri Lanka’s first tea tasters in the then British-dominated Plantations PLC on August 01, 1997 and as Managing trade. He is the founder of “DILMAH TEA” brand name Director on May 14, 2004. Dr R M Fernando, who heads which re-launched, redefined and re-established the the Plantations and Business Development in Aitken quality of Ceylon tea. DILMAH is now, a much respected Spence PLC, holds a PhD and a MBA from the University global name, renowned for its quality and the philosophy of Colombo and is also a Chartered Marketer and a Fellow of caring and sharing behind the brand. of the Chartered Institute of Marketing (CIM), UK. Mr. Fernando incorporated the MJF Charitable Foundation, He has extensive experience in the plantation industry a low profile charity which works to create better conditions both in the public and private sectors and played a key for plantation workers’ underprivileged children, elders role in the plantations privatization programme. and society’s victims.
He also leads the CSR and Sustainability Initiatives of the Dr Anura Ekanayake Group. He was awarded the Brand Leadership Award at Dr Anura Ekanayake was appointed as a Director to the the Asia Brand Congress 2008, held in Mumbai in Board of Elpitiya Plantations PLC on January 09, 2009. He September 2008. was the Chairman of the Ceylon Chamber of Commerce during the period August 2009 to July 2011 and the He is the Honorary President of CIM, Sri Lanka region and immediate past Chairman of the Industrial Association of Chairman of United Nations Global Compact Network, Sri Lanka. He started his professional career in the public Ceylon. He also serves on the Advisory Committee of the sector and served in a number of senior Sri Lankan Sri Lanka Business at Biodiversity Platform of the Ceylon Government positions before moving to the private Chamber of Commerce. sector. He has held several key positions in the Plantation Sector, first serving as the Director of Planning atthe Ministry of Plantation Industries and thereafter as Director General (Development) of the Ministry of Public Administration, Home Affairs and Plantation Industries.
8 Elpitiya Plantations Plc Annual Report 2012/13 Board of Directors (contd.)
He served on the Boards of J.E.D.B. and S.L.S.P.C. prior to Mr A L W Goonewardena their privatization and thereafter served on the Boards of Mr A L W Goonewardena has 37 years experience in public all 23 RPCs for several years. During this period he also and private sector plantation management. He started served as a member of the Tea Research Board as well as his career in plantations as an Estate Assistant Manager, the Board of the Post Graduate Institute of Agriculture of held the positions of Manager, Visiting Agent, General University of Peradeniya. During his public sector tenure, Manager, Deputy Chief Executive Officer, Chief Executive he also held a number of international positions including Officer and rose to the position of Director of Elpitiya that of the Chairman of international Natural Rubber Plantations PLC. He is presently a Director of Aitken Organization based in Kuala Lumpur, Malaysia. He holds Spence Plantation Managements PLC, Tea Country Homes a PhD in Economics from Australia National University (Pvt) Ltd, Water Villas (Pvt) Ltd., and the Managing where he conducted research on ‘Economics of human Director/ CEO of Elpitiya Dianhong Jin Ya Tea Company capital’. He has widely published in Sri Lanka and abroad (Pvt) Ltd. on economics, human capital, agriculture and environment related areas. His current professional interests are supporting businesses on organizational transformation including culture change and coaching young professionals to realize their full potential.
Mr Sarath Carlyle Ratwatte Mr Sarath Ratwatte was appointed as a Director to the Board of Elpitiya Plantations PLC on April 10, 2013. Fellow of the Chartered Institute of Management Accountants, UK and has 30 years work experience in the fields of financial and treasury management, project evaluation and development, investments, financing and risk management and joint ventures. Mr Ratwatte has worked in several multinational organizations and conglomerates in Sri Lanka and overseas. Prior to 2009, he has worked at Aitken Spence Group of Companies for a period of 20 years in many capacities including that of Group Treasurer / Director – Aitken Spence Corporate Finance (Pvt) Ltd., Director – Ace Power Embilipitiya (Pvt) Ltd and Director – Aitken Spence (Garments) Ltd. He also serves on the board of directors of HNB Assurance Plc.
Elpitiya Plantations Plc Annual Report 2012/13 9 Annual Report of the Board of Directors
The Directors are pleased to submit their Report together Shareholder Information with the Audited Financial Statements for the year ended Information relating to earnings, net assets, market price 31st March 2013. per share is given in the financial highlights and the shareholder and the investor information on pages 2 and Principal Activities of the Company 92 of the Annual Report. The principal activities of the Company are cultivation, Corporate Governance manufacture and sale of black Tea, Rubber, Palm Oil and The Company’s corporate governance practices are set other crops. out on pages 13 to 17.
Review of Performance Major Shareholders The Chairman’s and the Managing Director’s reviews The 20 largest shareholders of the Company as at 31st contain detailed accounts of the year’s operations and March 2013 are given in the share information pages 93 developments of the Group. and 94 together with an analysis of the shareholding.
Changes in Accounting Policies Directors A summary of changes in the significant Accounting The names of the Directors of the Company are on Pages Policies is set out in the Financial Statements on pages 38 8, 9 and 97. to 56. Dr. S A B Ekanayake retires by rotation in terms of Article Profit/Loss 92 of the Articles of Association of the Company, and The net profit/ (loss) of the Company for the year is Rs. offers himself re-election at the forthcoming Annual 451,411,291/- and the Group’s net profit/ (loss) for the General Meeting. year is Rs. 433,803,422/- . The Group’s profit attributable to the equity shareholders of the parent company for the Mr. S C Ratwatte retires in terms of Article 98 of the year is Rs. 434,026,934/-. Articles of Association of the Company, and offers himself for election at the forthcoming Annual General Taxation Meeting. A detailed statement of the income tax rates applicable is set out on page 69. Mr. A L W Goonewardena retires in terms of Article 98 of the Articles of Association of the Company, and offers Dividend himself for election at the forthcoming Annual General The Directors recommended a First and Final Dividend of Meeting. 50 cents per share for the year ended 31st March 2013. Mr. Merrill J Fernando attained the age of 70 years on May The Directors are confident that the Company would 6, 2000 and in accordance with Section 210(2) of the meet the requirement of the Solvency test under Section Companies Act No.7 of 2007, he vacates office at the 56(2) of the Companies Act No.7 of 2007 immediately forthcoming Annual General Meeting. In terms of Section after the payment of the First and Final Dividend is made. 211 of the Companies Act No. 7 of 2007, a shareholder has given notice of an Ordinary Resolution to the Capital & Reserves Company that the age limit of Mr. Merrill J Fernando in As at 31st March 2013 the stated capital of the Company terms of Section 210(1) of the said Companies Act No. 7 was Rs.694, 236,120/-. The Company’s reserves as at 31st of 2007, shall not apply to Mr. Merrill J Fernando who has March 2013 were Rs. 1,747,218,325/- whereas the total attained the age of 83 and that he be re-elected as a Group’s reserves as at 31st March 2013 were Rs. Director at the Annual General Meeting. 1,826,138,122/-. The movement in these reserves is shown in the Statement of Changes in Equity – Group on page 35.
10 Elpitiya Plantations Plc Annual Report 2012/13 Annual Report of the Board of Directors (contd.)
Directors’ Interest in Contracts Auditors The Directors have disclosed their interest in contracts of The accounts for the year have been audited by Messrs. the Company at meetings of the Directors. The details of Ernst & Young who offer themselves for which are set out in the notes to the financial statements re-appointment. (Pages 88 and 89) The audit fee payable by the Company to the Auditors Interest Register Messrs. Ernst & Young was Rs. 1,700,000/- . In addition to The Interest Register is maintained as per the requirements the above, Rs. 137,872 was payable by the Company for of the Companies Act No. 7 of 2007 and is available for permitted audit related and non audit related services inspection. including tax advisory services.
Directors’ Remuneration and Fees Messrs. Ernst & Young the auditors of the Company are A sum of Rs 1,125,000 was paid as Directors’ also the auditors of subsidiaries and joint ventures of the Remuneration and Fees during the financial year 31st Group. The amount payable by the Group to Messrs. Ernst March 2013. & Young as audit fees was Rs. 2,097,000. while a further Rs. 185,561 was payable for permitted audit and non Directors’ shareholdings audit related services including tax advisory services. None of the Directors hold shares in the Company As far as the Directors are aware, the auditors do not have Post Balance Sheet Events any relationship with the Company that would have an The post Balance Sheet events have been disclosed in impact on their independence. Note 31 to the Accounts.
Corporate Donations By Order of the Board During the year under review corporate donations made by the Company is nil.
Annual General Meeting Mr. J. M. S. BRITO DR. R. M. FERNANDO Mr. R. E. V. Casie Chetty The Twenty First Annual General Meeting of your CHAIRMAN MANAGING DIRECTOR DIRECTOR Company will be held on 26th September 2013 at AITKEN SPENCE 3.00p.m. CORPORATE FINANCE Public Holding (PVT) LTD., The percentage of shares held by the public as at 31st Secretaries March 2013 was 16.93% (March 31, 2012 –16.93%) COLOMBO 29th August 2013
Elpitiya Plantations Plc Annual Report 2012/13 11 Audit Committee Report
Composition of Audit Committee Compliance The Audit Committee (AC) comprises 2 Independent Non The Committee reviewed the implementation of the new Sri Executive Directors – Dr. Anura Ekanayake (Chairman) and Lanka Accounting Standards, which converged with the Mr S C Ratwatte and Mr Malik Fernando, Non Executive International Financial Reporting Standards and the resulting Director. The Chief Internal Auditor of Aitken Spence PLC effect on the Financial Statements for the year ended 31st (AS) and Mr. A M Ranatunga, Assistant Manager Internal March 2013 and the statement of financial position as at 1st Audit Plantations carries out regular internal audits on the April 2011 as required by the Sri Lanka Financial Reporting estates and also attends the meetings by invitation. Further Standards – first time adoption. the Managing Director (MD), the Chief Executive Officer (CEO) and the General Manager (GM - Finance) are also present at The Committee also ensures the adoption of effective internal meetings. In addition, the estate General Managers and the controls, and compliance with the prevailing laws of the estate Managers whose audit reports are reviewed and country based on guidelines provided by the respective discussed are also present at the meetings. regulatory authorities in all aspects and in the preparation of financial statements. Activities For the year concerned, the committee met three times and External Audit reports from several estates arising from both field and The Committee has assessed the performance of the external factory operations including financial reports were reviewed auditors M/s Ernst & Young and is of the opinion that the and discussed. Having reviewed the audit reports of several external auditors do not have any relationship with the estates, the Committee recommended several controls, risk Company that would have an impact on their independence. mitigation strategies and internal monitoring mechanisms to mitigate frauds, discrepancies and other financial risks and issues that could occur on the estates and in the Company. In addition, the Audit Committee also reviewed the financial Dr. Anura Ekanayake statements for the year and approved the accounts for Chairman signature. Audit Committee 29th August 2013
Report of the Remuneration Committee
The Remuneration Committee (RC) comprises Mr. Malik The remuneration policy adopted also takes into Fernando, Non Executive Director as Chairman and two Non consideration, the cost of living and inflation and the basic Executive Independent Directors, Dr. Anura Ekanayake and needs of the employees particularly in the lower income Mr S C Ratwatte as members who form the committee. The groups. The performance of the Company and affordability Non Executive Independent Directors are independent of together with economic conditions that prevail were also management and are able to exercise independent judgment considered in recommending increases in remuneration. in the decisions of the committee, as they do not have any business or other relationships with the Company or its The RC having deliberated the performance of all employees employees. The Managing Director (MD) of Elpitiya Plantations in the Company, approved revisions of individual PLC (EPP) attends the meeting by invitation. The RC met once remuneration packages based on individual performance, during the year under review prior to considering salary industry norms and the contribution of the individuals in increases. the performance of the Company.
The policy that was adopted for remuneration of employees was based on competitive remuneration structures of other plantation companies, and also with the objective of retaining professional and managerial talent and encouraging and Mr. Malik J Fernando motivating good performers to perform at a higher level. The Chairman Company has a formal performance appraisal system and Remuneration Committee regular evaluations are carried out to evaluate each 29th August 2013 employee’s performance.
12 Elpitiya Plantations Plc Annual Report 2012/13 Corporate Governance
Corporate governance refers to the way in which companies are governed and to what purpose. It is concerned with practices and procedures for trying to ensure that a company is run in such a way that it achieves its objectives. This could be to maximise the wealth of its owners (the shareholders), subject to various guidelines and constraints and with regard to the other groups with an interest in what the company does. Guidelines and constraints include behaving in an ethical way and in compliance with laws and regulations. From a shareholder’s perspective, corporate governance can be defined as a process for monitoring and control to ensure that management runs the company in the interests of the shareholders.
The processes adopted by a Corporate to optimize profits without compromising on principles and standards thus ensuring that the Corporate’s objectives are achieved by adhering to such principles and practices, is good Corporate Governance.
Hence, the Company has adopted the principles and best practices suggested jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka and by the relevant regulatory bodies including the Colombo Stock Exchange to achieve its objectives and to ensure accountability to the shareholders and other stakeholders of the Company.
The Company’s compliance with the Code of Best Practices on Corporate Governance is given below;
A. DIRECTORS
1. The Board of Directors Composition and Attendance at Board Meetings
The Board as at 31st March 2013 comprised of seven Directors; Two Executive Directors including the Chairman, and Managing Director and five other Non-Executive Directors. These Directors are named on page 97 and their profiles appear on pages 8 and 9 of this Report. Details of Directors’ shareholdings in the Company are given on page 11of this Report.
The Board meetings are held quarterly to review the business performance of the Company.
In addition to attending meetings, the Directors take decisions via circular resolutions. The attendance at the Board Meetings held during the year under review are as follows:
Directors Dates of the Board Meetings 20.06.2012 12.09.2012 22.11.2012 01.03.2013 Mr. J M S Brito 3 3 3 3 Dr. R M Fernando 3 3 3 3 Mr. Malik J Fernando 3* 3 3 3* Mr. Merrill J Fernando Excused Excused Excused Excused Dr. S A B Ekanayake 3 3 3 3 Mr. L N de S Wijeyeratne 3 3 3 Resigned Mr. M P D U K Mapa Pathirana Excused Excused Excused Excused Mr. D V H De Mel Excused 3 3 3 Mr. S C Ratwatte Appointed as a Director on 10.04.2013 Mr. A L W Goonewardena Appointed as a Director on 22.05.2013
3*Alternate Director attended
The Directors communicate with one another regularly to discuss relevant business issues and to familiarize themselves with business opportunities, challenges, risks and controls that need to be instituted.
Elpitiya Plantations Plc Annual Report 2012/13 13 Corporate Governance (contd.)
Responsibilities of the Board of Directors l The Board is responsible for: s Maximizing shareholder value s Formulating, communicating, implementing and monitoring the business goals, objectives, strategies and policies of the Company. s Ensuring adherence to appropriate accounting policies and practices s Setting priorities and communicating values and ethical standards for management s Ensuring proper risk management and audit systems covering all aspects of the business are in place and are implemented. s Ensuring due compliance with applicable laws of the country and institute best practices on ethical, legal, health, environmental and safety standards for the Company. s Reviewing and approving the Operational and Financial Budgets and monitoring performance against the Budgets. s Reviewing and approving major investments and business proposals recommended by the Management Committee s Approving the annual and interim Financial Statements and recommending dividends for approval by the shareholders. l The Board is responsible ultimately, for the Company’s financial performance. l The Directors obtain independent professional advice, whenever required at the Company’s expense in discharging their duties
2. Chairman and Managing Director The functions of the Chairman and the Managing Director are distinct and separate which ensures the balance of power and authority within the Company.
3. The Chairman’s Role The Chairman conducts all Board Meetings and ensures;
l The effective discharge of the Board’s functions, l The effective participation by the individual Directors to make their contribution on matters under consideration prior to taking decisions, l The balance between the Executive and Non-Executive Directors is maintained and views considered and ascertained, l The Board is in complete control of the Company’s affairs and alert to its obligations to all shareholders and stakeholders.
4. Board Balance The balance of Executive and Non-Executive Directors on the Board ensures that decision making is transparent and not dominated by any individual or small group.
The Board comprises of four Non-Executive Directors out of a total of seven of whom two are independent Non-Executive Directors. Their profiles reflect their caliber and the weight their views carry in Board deliberations. The Non-Executive Directors do not get involved in the day to day management and are free from any relationship that can interfere with the affairs of the Company.
5. Financial Acumen The Chairman is a fellow member of the Institute of Chartered Accountants of London and Wales and has a Degree in Law and a Maters Degree in Business Administration. The Board also includes another fellow member of Chartered Institute of Management Accountants, UK. Hence, the Board possesses the necessary knowledge and competence to provide guidance on matters of finance.
6. Company Secretaries All Directors have access to the Secretaries to the Company who ensure Board Procedures are followed, applicable rules and regulations are complied with and appropriate facilities are available for the proper conduct of Meetings.
14 Elpitiya Plantations Plc Annual Report 2012/13 Corporate Governance (contd.)
7. Supply of information Directors are furnished with monthly reports of performance and are given appropriate information and board papers well in advance of Board Meetings to study the matters that would be discussed. This enables Board Members to actively participate at Board Meetings. The Chairman ensures that all Directors are adequately briefed on issues arising at Meetings.
8. Appointment and Re-election of Directors A formal and transparent procedure is adopted for the appointment of Directors to the Board. Upon the appointment of a Director, the Company discloses same to the Colombo Stock Exchange together with a brief resume of such Director containing details with regard to his expertise.
The Directors are elected by the shareholders of the Company in terms of the Articles of Association. The Articles of Association of the Company empower the Board of Directors to either fill a casual vacancy to the directorate or appoint additional Directors. Directors so appointed hold office until the next Annual General Meeting at which they are eligible for election.
The Articles require one-third of the Directors in office to retire at each Annual General Meeting. The Directors to retire each year are those who have been longest in office since their re-appointment. Retiring Directors are eligible for re- election by the shareholders.
The Managing Director and the Director appointed by the Secretary to the Treasury do not retire by rotation.
B. DIRECTORS’ REMUNERATION Remuneration Committee
The composition of the Remuneration Committee satisfies the requirements laid down in the Listing Rules of the Colombo Stock Exchange. The Remuneration Committee consists of :
Mr Malik J Fernando (Chairman) - Non Executive Director Dr Anura Ekanayake - Independent Non Executive Director Mr S C Ratwatte - Independent Non Executive Director
The Remuneration Committee is entrusted with the responsibility of formulating and reviewing the remuneration packages of Executive Directors and Executive employees.
Disclosure of Remuneration The report of the Remuneration Committee is given on Page 12 of this Annual Report. The total of the Directors’ Remuneration is under Note 9 to the Financial Statement.
C. RELATIONS WITH SHAREHOLDERS The Board encourages the active participation of all the shareholders at the Annual General Meeting.
Shareholders are free to communicate with the Company whenever it is considered necessary. Such communication can be either with the Chairman or with the Managing Director or the Chief Executive Officer or the Secretaries of the Company depending on the matters being addressed.
1. Constructive use of the Annual General Meeting The Board considers the Annual General Meeting as an opportunity to communicate with shareholders, and encourages their participation. The Board is willing to answer questions raised by the shareholders at the General Meetings of the Company and maintains an appropriate dialogue with them.
2. Major Transactions There were no transactions during the year under review which was within the definition of ‘Major Transactions’ in terms of the Companies Act.
Elpitiya Plantations Plc Annual Report 2012/13 15 Corporate Governance (contd.)
D. ACCOUNTABILITY AND AUDIT 1. Financial Reporting The Board of Directors confirms that the Financial Statements of the Company have been prepared in a meaningful manner and are in accordance with the Sri Lanka Accounting Standards and the Companies Act. No. 07 of 2007. The Company has duly complied with all the requirements prescribed by the regulatory authorities including the Colombo Stock Exchange and the Registrar of Companies.
The Annual Report includes descriptive, non-financial content through which an attempt is made to provide stakeholders with information to assist them to make more informed decisions.
The Statement of Directors’ Responsibilities in relation to the Financial Statements is set out on Page 30.
2. Audit Committee The Audit Committee is a sub committee of the Board of Directors of Elpitiya Plantations PLC. The Committee comprises of three Non-Executive Directors and headed by an Independent Non-Executive Director. The names of the members of the Audit Committee are as follows:
Dr Anura Ekanayake (Chairman) - Independent Non-Executive Director Mr S C Ratwatte - Independent Non-Executive Director Mr Malik J Fernando - Non-Executive Director
The Audit Committee is entrusted with the responsibility of monitoring and evaluating the internal control functions, evaluating the performance of the External Auditors and makes it’s recommendations to the Board on the re-appointment or removal of the External Auditors which is subject to the approval of the shareholders at the Annual General Meeting.
The Audit Committee is also entrusted with the responsibility of monitoring and guiding the Internal Audit function and reviewing the effectiveness of the internal controls.
The Audit Committee Report appears on Page 12 of this report.
3. Internal Control The Company has set out effective systems of control including Financial, Operational and Compliance.
The Company’s Internal Audit Team mainly focuses on transaction assurances, positive assurances, internal controls, routine checks, special reviews and evaluations. The team also assists the Management in evaluating various Operational Risks and ensures that the systems and controls are in place.
The Board of Directors is assured by the Internal Audit Team of the adequacy of the internal controls, compliance with the code of Business Ethics and other applicable corporate policies.
The Board is fully conscious that any internal control system contains inherent limitations and no system of internal controls could provide absolute assurance against the occurrence of material errors, poor judgement in decision making, human errors, losses, frauds or irregularities. The Board has taken appropriate action to minimize such situations.
E. OTHER 1. Organization The Board has put in place an organizational structure with formally defined lines of responsibility, reporting and appropriate limits of authority. There are established procedures for planning and investment, risk management and for information and reporting systems to monitor the Company’s businesses.
16 Elpitiya Plantations Plc Annual Report 2012/13 Corporate Governance (contd.)
2. Management Committee The Management Committee meets monthly to evaluate the strategic plans, actual performance, and corrective actions with a view to achieve the desired goals. The Committee also periodically reviews the Company’s various Policies involving agriculture, manufacture, personnel, remuneration, asset management, and other controls. The decisions of the Management Committee meetings are communicated to the Estate Management through the Cluster General Managers at the monthly Cluster Meetings with the Managers.
3. Managing Agent Aitken Spence Plantation Managements PLC (ASPM) has been appointed as the Managing Agent, since the acquisition of the Company in August 1997. ASPM also owns the controlling interest of the Company.
The Board of ASPM has clear objectives in advising the Board of the Company, on strategic and operational decisions as the Managing Agents of the Company. The Board of ASPM also meets at least four times a year to review the performance of the Company.
Elpitiya Plantations Plc Annual Report 2012/13 17 Corporate Sustainability Report
New Peacock Estate, Pussellawa
The Road Map to Sustainability at Elpitiya Plantations PLC (EPP) Sustainability is turning up to be deeply rooted in the business strategy at Elpitiya Plantations PLC. We take into account and strive to maintain the balance between economic success, sound social responsibility, and environmentally friendly solutions in our short and long-term decision making and business planning. Throughout its existence, EPP has considered its employees as the most valuable asset. The company has consistently increased the quality of life, while serving our employees and the environment.
EPP is committed to conserve the environment and significant amount of endeavors have been initiated and some of them are already in process at every estate to develop environmentally sustainable methods and to adhere to environmental friendly technologies in terms of agriculture and cultivation. Such initiatives that have taken place are, emission and effluent management, solid waste management, forestry management, optimum use of available resources, enhance energy efficiency and generation of renewable energy.
Renewable Energy Projects & Energy Conservation Initiatives We have launched many operations to up lift the renewable energy generation, energy conservation and energy efficiency at EPP enhancing Green Energy Generation and utilization of the industry and the country. As a result, we have saved approximately over 1,000 GJ during the last year. We are currently operating two mini hydro power plants (MHPP) with a capacity of 560 kW in (SMHPP) the Sheen estate Pundaluoya and Dunsinane mini hydro power plant with a capacity of 2.7 MW to the national grid. The anticipated carbon emission reduction from the mini hydro power plant
at Sheen estate is estimated at 1,170 tons of CO2 (Carbon dioxide). EPP, by now in process of implementing four new MHPP namely Dunsinane Cottage MHPP of 900 kW which is under construction, Upper Sheen MHPP with a capacity of 400 kW, Upper Dunsinane MHPP with a capacity of 600 kW and Harrow MHPP with 350 kW in Capacity.
18 Elpitiya Plantations Plc Annual Report 2012/13 Corporate Sustainability Report (Contd.)
The significant energy conserving & cost reduction initiatives that have taken place over the last years are as follows.
Energy saving activity Description Saving Installation of wood fired hot water Approximately Rs.9 million It is expected to save over 500 m3 of generator at Fernlands Tea Factory. investment & anticipated annual fuel wood per annum. saving of approx: Rs. 4 million.
Installation of wood fired steam Investment of over Rs. 8 million & Approx: 400,000 liters of HFO, i.e. boiler at Dunsinane Tea factory. expected annual saving of Rs. 12 105,670 gallons (57,600 GJ) replaced million. by approx: 5,800 m3 of fuel wood annually.
Installation of capacitor banks Nearly Rs. 4.8 million invested & it is Anticipated saving of over 3000 kVA systems in All factories including expected to save more than Rs. 4.2 units annually. ELS (Elpitiya LifeStyle Solutions (Pvt) million per year. Ltd).
Obtaining separate electricity Assumed 1-2 % electricity saving It is monitored that over 40,000 – distribution lines from CEB for from the factory consumption with 50,000 kWh saved annually. estate staff bungalows. the close monitoring.
Installation of energy efficient FRP Investment of approx: Rs. 6.7 million Approx: 300,000 kWh units saving withering fans in all the factories. & annual saving of over Rs. 6 million. per annum.
Environment Conservation Today there is a far greater awareness of the importance of effluent management for both environmental protection perspective and the company’s marketability. With continuous research and a far better understanding of effluent management, we have recognized the importance of having an effluent treatment plant at Bentota and Elpitiya rubber factories. As a result we are in progress of constructing effluent treatment plants at both factories with the intention of preserving the environment with a minimal harm. Apart from Bentota and Elpitiya rubber factories, Talgaswella tea factory has also put up new waste water containment tanks at the factory premises.
Elpitiya Estate – New effluent treatment plant
Elpitiya Plantations Plc Annual Report 2012/13 19 Corporate Sustainability Report (Contd.)
Talgaswella Estate – New waste segregation unit
Talgaswella Estate – Tea factory waste water channeling pits & drains
Fernlands Estate- Solid waste segregation “Jeewakotu”
20 Elpitiya Plantations Plc Annual Report 2012/13 Corporate Sustainability Report (Contd.)
Fernlands Estate – CFL bulbs & Tube lights (florescent lights) collection center.
The tea factories of the EPP do not produce any effluents or waste water and always encourage to use biological methods to control tea tortrix such as collecting of egg masses and moth traps instead of spraying.
To address soil pollution caused by chemical fertilizers, estates use compost as the preferred choice of fertiliser where ever possible. The Plantation team is in the process of replacing inorganic fertilizer with organic fertilizer to minimise the impact to the soil, by moving into site specific fertilizing, which provide only the required nutrients without excess chemicals. Compost pits are also maintained in the estates for this purpose with the long term goal of replacing one round of artificial fertiliser with compost/ organic fertiliser.
There were no reported incidents of significant hazardous effects which have adversely affected human health, land, vegetation, water bodies or ground water during the year. No incident of violation of stipulated environmental laws and regulations have been reported.
The plantation also grow leguminous cover crops in order to improve soil properties, reduce soil erosion and to control the growth of weeds which would otherwise require chemical / weedicide. EPP works with their communities to reduce solid waste generation and also to harvest rain water with the intention of improve moisture content in the micro environment.
EPP has a continuous Forestry Management programme which has helped to preserve and improve the bio diversity in the plantation and enhance their environmental value at large. Currently over 700hect of forest has been planted by the Company.
Dunsinane Estate – Forestry block
Elpitiya Plantations Plc Annual Report 2012/13 21 Corporate Sustainability Report (Contd.)
Conducting an awareness programme for Talgaswella factory Educating the Up Country estate management staff and employees factory employees on “How to practices environmental friendly waste management operations”
Corporate Social Responsibilities. (CSR) During the year 2012/13 all the estates engaged in a number of rural community development projects to enhance the livelihood and living standards of our people. Some of them are construction of new housing schemes, sanitation and water schemes for the estate workers, cultural and religious activities, organizing recreation activities, providing free medical facilities for our estate community including children and pregnant mothers and donation of school uniforms, stationary and sanitary facilities for the estate children.
Estate Worker Housing Co-op Societies & its Retail Sales Outlets (Co-op Shops) Estate worker Housing Co-operative Societies are established in our estates to cater to the various needs of our worker population. These EWH Co-op Societies are registered in the Department of Co-operatives and run by a team of Officers according to the laws of the Co-op Department. Following are few key areas where the workers are offered financial assistance from the EWH Co-op.
l Granting of Spot Loans on low interest rates to purchase books for school children, Marriages, Funerals etc.
l Granting of fixed term loans and housing loans.
l Execution of special projects such as making of concrete fencing posts/cement bricks etc.
Sales Out-lets (Co-op Shop) Sales out-lets are managed from the funds obtained from the EWH Co-op Societies. Consumable items are purchased at whole sale price from the open market and issued to the workers by keeping a marginal profit. These items are issued on credit and the dues are recovered from their wages every month. This has immensely benefited the workers as the workers are prohibited from buying their requirements at exorbitant rates from outside sources.
22 Elpitiya Plantations Plc Annual Report 2012/13 Corporate Sustainability Report (Contd.)
Elders Home We have already planned to conduct a new CSR project especially targeting the elders representing up country cluster 01 & 02 estates viz., Dunsinane, Sheen, Fernlands and Meddecomra, New Peacock and Nayapane estates this year. It is proposed to construct an elder’s home for the senior citizens who have reached the age of 65. By doing so, we believe to impress our workforce that we do care about the final phase of their lives too. We expect to make available elders home facilities for 40 elders (20 Females & 20 Males).
Our Human Resource
At Elpitiya Plantations PLC, we have made available frequent opportunities for continuous learning and skill development and have created the perception among the employees where they appreciate the balance between work life and family life. We continue with our mission on valuing and recognizing the involvement of individuals from different backgrounds, race and cultures who create this work place. These individuals are from up, mid and low country regions and from different ethnic backgrounds and age groups, cultures, and educational level, who contribute towards the success of the Company. We always ensure to recruit the best that can make the most of their potential for the company and develop their own careers to optimum levels.
The Company continues its efforts towards improving the competence and skill levels of our employees in both the head office and estates. During the year under review, workshops, seminars, awareness programmes and overall training programmes were conducted. Some of the noteworthy programmes conducted during the year, such as seminars on Transformational Leadership, Plantation Accounting & Financial Management training programme, Industrial Services and Training programme, led to high concentration of the employees and the sessions were comprehensive and equipped our employees with high quality knowledge and skills.
Health & Welfare One of the key objectives at EPP is employee health, safety & Welfare. We strive to prevent work related injuries, illnesses and deaths. With the objective of improving health and safety and a better working environment, we carried out various programmes some of which are as follows. l Blood donation programmes, Eye clinics, well women clinics, antenatal & immunization clinics were organized with the assistance of Family Planning Association and Ministry of Health.
Elpitiya Plantations Plc Annual Report 2012/13 23 Corporate Sustainability Report (Contd.)
l Teen pregnancy, HIV, Dengue & Malaria awareness programmes were conducted at all estates with the effective participation of our employees.
l Upgrading sanitary facilities, sponsoring for cataract surgeries, providing meals for pregnant mothers and children in our crèches, fire drills & empowering the crèche committee are some of the momentous activities practiced at our estates.
l Organising of staff & workers annual trips, celebration of Christmas, Vesak, New Year, Children’s and Women’s day celebrations etc.
Infrastructure & Community Development
l Meddecombra eatate 20 units of New Housing scheme was completed on 08th December 2012 and the keys were handed over to the beneficiaries.
l Elpitiya estate has undertaken a new housing project at an approximate cost of Rs 12.5, mn. The constructions are in progress and 25 anticipated number of families will be benefited.
24 Elpitiya Plantations Plc Annual Report 2012/13 Risk Management
Risk can be defined as the probable occurrence of an undesirable event that could hinder the achievement of the company’s objectives. Unforeseen consequences can arise from any form of business or operational activity. Therefore risk management should be a central part of any organization’s strategic management process.
Risk Management is the process of analyzing exposure to risks by identifying vulnerabilities and their probability of outcome in order to determine how to best handle such exposure. It also looks at implementing various policies, procedures and practices that work to identify, analyze, evaluate and monitor risks, followed by applications and solutions to minimize the probability of occurrence and / or the impact of the identified risks. The Elpitiya Plantations PLC is of the view that a disciplined approach to risk management is important in ensuring that the company only accepts risks that are adequately compensated for when pursuing its strategic objectives. Our goal is to optimize the trade off between risk and reward.
Risk Management Framework
Risk Identification Assessing the Risk
Strategic
Operational Risk
Financial
Mitigating the Risk Monitoring Risk and Reporting
Risk identification Risk Assessment Risk Management 1. Strategic risk 1.1 Business Risk
Risks that derive from the Risk of formulating and Board of directors decisions that the board takes implementing continuously obtain and about the products or services fundamental corporate evaluate all the information that the organization supplies. strategies which is defective on how the business is They include risks associated or inappropriate to the performing and relevant with developing and marketing company’s business. aspects of the economical, those products or services, technological environments. economic risks affecting product sales and costs, and risks arising from changes.
Elpitiya Plantations Plc Annual Report 2012/13 25 Risk Management (Contd.)
1.2 Non-business risk
Risks that do not derive from the Inappropriate capital All corporate planning products or services supplied. investments financing strategies, such as For example, risks associated decisions would dilute the acquisitions, business with the long-term sources earnings available to diversifications, going into of finance used. share holders. markets, capital investments, are strongly evaluated by the board of directors with reference to the financial viability and long term objectives set by the company.
2. Operational Risk 2.1 Risk of adverse climatic change
Adverse whether conditions may Lower yield from harvesting The Company adopts best affect the productivity of crops. areas and lower quality of the agricultural practices, harvested products which will planting of selected cultivars affect the product price and in order to mitigate loss of profitability of the company. crop due to unfavorable climatic changes. In addition, various research programs on soil & foliar analysis for fertilizer recommendations, shade-planting, fuel wood planting, pest & disease control, etc. are carried out together with the Tea and Rubber Research Institutes.
2.2 Product quality risk
Risk of inability to maintain Lower quality products will Nayapane, New Peacock , consistency in quality of the reduce the bargaining power Dunsinane Tea Factories product which causes low of the company and will cause located in Up & Mid Country prices and poor demand. demand losses. Regions and Deviturai, Talgaswella Tea Factories located in Low Country Region have obtained ISO 22000 Food Safety Certification. The Marketing Division is in close contact with all Estate Managers ensuring that product quality is maintained at the highest levels on a
26 Elpitiya Plantations Plc Annual Report 2012/13 Risk Management (Contd.)
consistent basis and maintains a regular dialogue with the buyers and brokers
The HR Division is providing on going training to all sectors such as Field Workers, Factory Workers and Executives on the aspects of the quality and adopting TQM procedures.
2.3 Human capital and labour risk
Risks arising from the inability to As the industry is highly A Collective Agreement attract, motivate and retain labour intensive and has been signed between skilled and experienced staff. unionized low productivity, the Trade Unions and the work stoppages, go slows, Employer’s Federation of strikes, etc. would adversely Ceylon of which our Company affect the overall performance is a member. This ensures of the Company industrial peace between the Management and Trade Unions.
Effective training and motivation programs, incentive schemes, close evaluation of employee performance are carried out to retain skilled human capital within the company.
2.4 Risk of assets misappropriation
Risk of being stealing or misuse Company’s assets can be Establishment and of company’s assets. used for purposes other than maintenance of strong the purposes for which those and effective internal are intended to be used. control system to safeguard company’s assets and share holder’s funds.
Elpitiya Plantations Plc Annual Report 2012/13 27 Risk Management (Contd.)
2.5 Compliance risk
Risk of non-compliance with Non-compliance with Close relationship with the laws and other regulations laws and regulations would regulatory authorities established in respective lead to cease the operations, and in-house legal industries. loss of reputation, consultants and strong impose of fines and penalties. evaluation of dealing with elements of external environment.
3. Financial Risk 3.1 Liquidity risk
Liquidity risk arises where the Insufficient liquidity levels Finance division of the company is unable to meet its debts would cause interruptions to Company strives to when they fall due. company’s day to day ensure sufficient funds operations and would affect are available to meet the the reputation of the Company. debt commitments and working capital requirements. Adequate short term financing options have been arranged with the banks.
3.2 Interest rate risk
Risk arises from actual interest Higher interest rates would Maximum utilization of rate fluctuations or deviations affect the profits available concessionary loans facilities from the expected interest rates. for share holders, and will available to plantations increase risk associated with companies. their investments. Maintain balanced loan portfolio which ensure an adequate mixing of variable and fixed rates and loans with different maturity periods.
28 Elpitiya Plantations Plc Annual Report 2012/13 Management Team
Head Office
Left to right – Mr M D Jayashantha (Manager – Ceylon Choice Operation), Mr A Segarajasingam (General Manager – Marketing), Mr B Bulumulle (Chief Executive Officer), Mr A L W Goonewardena (Director), Mr L D N G Nanayakkara (Manager – HR/Legal), Mr P S Dissanayake (General Manager – Engineering & Projects) & Mr Ruwan Nissanka (General Manager – Finance).
Estates
UC - Cluster 1 Up Country (UC) UC - Cluster 2
Left to right – Mr H Wickremasinghe - Senior Manager, Fernlands Left to right – Mr K R Mathavan – Manager, Nayapane Estate Estate, Mr M I Izzadeen – General Manager – Cluster I – Up Country, Mr & Mr S K S B Pahathkumpura, R K Gunasekera – Senior Manager, Meddecombra Estate and Mr L L J General Manager – Cluster II – Up Country Ediriweera – Manager, Sheen Estate Low Country (LC)
Left to right – Mr D T Fernando - Actg. Manager, Ketandola Estate, Mr W R S Weerasinghe - Actg. Manager, Bentota Estate, Mr R S Patabandi - Deputy Manager In Charge, Gulugahakande Estate, Mr A G Geethkumara - General Manager, Low Country, Mr K G M A K Wijeratne – Manager, Deviturai Estate, Mr R R Vanderputt – Manager, Elpitiya Estate & Mr U L Karunanayake – Manager, Lelwella Estate.
Elpitiya Plantations Plc Annual Report 2012/13 29 Statement of Directors’ Responsibilities
The Companies Act No. 7 of 2007 requires the Directors The Directors have taken reasonable steps to safeguard of the Company to be responsible for the preparation the assets of the Company. The Directors have instituted and presentation of the financial statements to the appropriate systems of internal controls in order to shareholders in accordance with the relevant provisions prevent and detect fraud and other irregularities. of the Companies Act No.7 of 2007. The Directors have provided the Auditors with every The Directors confirm that the financial statements of opportunity to carry out any reviews and tests that they the Company for the year ended 31st March 2013 consider appropriate and necessary for the performance incorporated in this report have been prepared in of their responsibilities. accordance with the Companies Act. No. 7 of 2007, the Sri Lanka Accounting and Auditing Standards Act No. 15 The Directors confirm to the best of their knowledge of 1995 and the Listing Rules of the Colombo Stock that all taxes, levies and financial obligations of the Exchange. Company have been either duly paid or adequately provided for in the financial statements. In the preparation of the financial statements, the Directors have selected the appropriate accounting policies and have applied them accordingly. Any material By Order of the Board, departures from accounting policies have been disclosed and explained in the financial statements.
The Directors have adopted the going concern basis in R. E. V. Casie Chetty preparing the financial statements. The Directors having Director considered the Company’s business plans, and a review AITKEN SPENCE CORPORATE FINANCE (PVT) LTD. of its current and future operations, are of the view that Secretaries the Company has adequate resources to continue in operation. Colombo The Directors accept the responsibility to ensure that 29th August 2013 the Company maintains adequate accurate records which reflect the true financial position of The Company.
30 Elpitiya Plantations Plc Annual Report 2012/13 Auditors’ Report
INDEPENDENT AUDITORS’ REPORT as well as evaluating the overall financial statement presentation. TO THE SHAREHOLDERS OF ELPITIYA PLANTATIONS PLC We have obtained all the information and explanations Report on the Financial Statements which to the best of our knowledge and belief were necessary We have audited the accompanying Financial Statements of for the purpose of our audit. We therefore believe that our Elpitiya Plantations PLC and the consolidated Financial audit provides a reasonable basis for our opinion. Statements of the Company and its subsidiaries which comprise the Statements of Financial Position as at March Opinion 31, 2013 and the Income Statements, Statements of Comprehensive Income, Statements of Changes in Equity Company and Statements of Cash Flow for the year then ended, and a In our opinion, so far as appears from our examination, the summary of significant Accounting Policies and other Company maintained proper accounting records for the explanatory notes. year ended March 31, 2013, and the financial statements give a true and fair view of the Company’s financial position Management’s Responsibility for the Financial Statements as at March 31, 2013 and its financial performance and cash Management is responsible for the preparation and fair flows for the year then ended in accordance with Sri Lanka presentation of these financial statements in accordance Accounting Standards. with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and maintaining internal Group control relevant to the preparation and fair presentation of Financial Statements that are free from material In our opinion, the consolidated financial statements give a misstatements, whether due to fraud or error; selecting and true and fair view of the financial position as at March 31, applying appropriate accounting policies; and making 2013 and the financial performance and cash flows for the accounting estimates that are reasonable in the year then ended, in accordance with Sri Lanka Accounting circumstances. Standards of the Company and its subsidiaries dealt with thereby, so far as concerns the shareholders of the Company. Scope of Audit and Basis of Opinion Our responsibility is to express an opinion on these financial Report on Other Legal and Regulatory Requirements statements based on our audit. We conducted our audit in These financial statements also comply with the accordance with Sri Lanka Auditing Standards. Those requirements of Section 151(2) and 153 (2) to 153 (7) of the standards require that we plan and perform the audit to Companies Act No. 07 of 2007. obtain reasonable assurance whether the financial statements are free from material misstatements.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting 28 May 2013 policies used and significant estimates made by management, Colombo
Elpitiya Plantations Plc Annual Report 2012/13 31 Income Statements Year Ended 31st March 2013
Group Company 2013 2012 2013 2012 Notes Rs. Rs. Rs. Rs.
Revenue 6 2,833,456,187 2,512,971,592 2,833,456,187 2,512,971,592 Cost of Sales (2,195,444,330) (2,186,038,302) (2,195,444,330) (2,186,038,302) Gross Profit 638,011,857 326,933,290 638,011,857 326,933,290 Gains on Fair Value of Biological Assets 14.2 32,859,733 25,303,620 32,859,733 25,303,620 Other Income and Gains 7 103,058,234 70,663,823 193,975,847 106,623,231 Administrative Expenses (160,412,290) (152,792,489) (157,803,932) (148,913,193) Management Fee and Workers Profit Share (72,457,562) (24,076,744) (72,457,562) (24,076,744) Finance Cost 8 (138,992,366) (137,676,535) (138,992,366) (137,669,464) Share of Profit from Joint Venture 15.1 98,167,716 83,630,327 - - Profit Before Taxation 9 500,235,322 191,985,292 495,593,577 148,200,740 Income Tax Expense 10 (66,431,900) (7,291,458) (44,182,286) 1,882,810 Net Profit/(Loss) for the Year 433,803,422 184,693,834 451,411,291 150,083,550
Attributable to: Equity Holders of the Parent 434,026,934 184,886,011 451,411,291 150,083,550 Non-Controlling Interest (223,512) (192,177) - - Profit for the Year 433,803,422 184,693,834 451,411,291 150,083,550
Earnings Per Share Basic Earnings Per Share 11.1 5.96 2.54 6.20 2.06
Dividend Per Share 11.2 - 0.36 - 0.36
Figures in brackets indicate deductions.
Notes to the Financial Statements from pages 37 to 89 form an integral part of these Financial Statements.
32 Elpitiya Plantations Plc Annual Report 2012/13 Statements of Comprehensive Income Year Ended 31st March 2013
Group Company 2013 2012 2013 2012 Rs. Rs. Rs. Rs.
Profit for the Year 433,803,422 184,693,834 451,411,291 150,083,550 Other Comprehensive Income
Other Comprehensive Income for the Year, Net of Tax - - - - Total Comprehensive Income for the Year, Net of Tax 433,803,422 184,693,834 451,411,291 150,083,550
Attributable to: Equity Holders of the Parent 434,026,934 184,886,011 451,411,291 150,083,550 Non-controlling Interest (223,512) (192,177) - - Profit for the Year 433,803,422 184,693,834 451,411,291 150,083,550
Figures in brackets indicate deductions. Notes to the Financial Statements from pages 37 to 89 form an integral part of these Financial Statements.
Elpitiya Plantations Plc Annual Report 2012/13 33 Statements of Financial Position As at 31st March 2013
Group Company As at As at Notes 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs. Assets Non-Current Assets Leasehold Property, Plant & Equipment 12 341,191,084 362,005,063 382,819,042 341,191,084 362,005,063 382,819,042 Freehold Property, Plant & Equipment 13 594,274,728 485,566,368 478,184,484 434,390,966 463,629,690 473,181,186 Bearer Biological Assets 14.1 2,321,316,792 2,149,170,560 1,947,847,141 2,321,316,792 2,149,170,560 1,947,847,141 Consumable Biological Assets 14.2 885,837,168 879,557,572 846,881,613 885,837,168 879,557,572 846,881,613 Long Term Investments (Unquoted) 15 121,273,565 136,273,065 97,776,414 60,458,810 40,458,800 29,658,800 Total Non-Current Assets 4,263,893,337 4,012,572,628 3,753,508,694 4,043,194,820 3,894,821,685 3,680,387,782
Current Assets Inventories 16 301,898,193 236,219,338 259,460,503 301,898,193 236,219,338 259,460,503 Trade and other Receivables 17 159,819,888 137,256,242 148,135,778 159,819,888 105,937,086 148,135,778 Amounts due from Related Companies 18 4,923,887 1,721,811 6,877,480 60,377,196 27,413,296 21,047,308 Esc Recoverable 5,251,925 10,146,136 3,700,926 5,251,925 10,146,136 3,700,927 Cash and Cash Equivalents 19.1 75,105,590 69,729,664 69,842,686 74,900,597 69,729,664 69,842,686 Total Current Assets 546,999,483 455,073,191 488,017,373 602,247,800 449,445,520 502,187,202 Total Assets 4,810,892,820 4,467,645,819 4,241,526,067 4,645,442,620 4,344,267,205 4,182,574,984
Equity and Liabilities Equity Stated Capital 20 694,236,120 694,236,120 694,236,120 694,236,120 694,236,120 694,236,120 Timber Reserve 747,128,480 714,268,747 688,965,127 747,128,480 714,268,747 688,965,127 Accumulated Profits 1,079,009,642 677,842,441 544,491,965 1,000,089,845 581,538,287 482,990,272 Total Equity Attributable to Equity Holders of the Parent 2,520,374,242 2,086,347,308 1,927,693,212 2,441,454,445 1,990,043,154 1,866,191,519 Non-Controlling Interest (3,081,259) (2,857,747) (2,665,570) - - - Total Equity 2,517,292,983 2,083,489,561 1,925,027,642 2,441,454,445 1,990,043,154 1,866,191,519
Non-Current Liabilities and Deferred Income Interest-Bearing Borrowings 21 475,107,276 590,682,716 831,279,460 385,660,614 561,430,537 831,279,460 Retirement Benefit Obligations 24 573,471,988 554,799,813 464,154,667 573,471,988 554,799,813 464,154,667 Deferred Income 22 183,138,539 195,782,240 206,711,663 183,138,539 195,782,240 206,711,663 Deferred Tax Liability 23 42,873,006 11,000,793 12,883,603 42,873,006 11,000,793 12,883,603 Liability To Make Lease Payment 25 181,703,550 184,614,238 187,412,977 181,703,550 184,614,238 187,412,977 Total Non-Current Liabilities 1,456,294,359 1,536,879,800 1,702,442,370 1,366,847,697 1,507,627,621 1,702,442,370
Current Liabilities Interest-Bearing Borrowings - Including Overdraft 21 545,406,656 623,152,760 308,304,543 545,406,656 622,621,652 308,304,543 Liability To Make Lease Payment Within One Year 25 2,910,688 2,798,739 2,691,095 2,910,688 2,798,739 2,691,095 Trade and other Payables 26 266,558,378 200,399,386 278,541,650 266,393,378 200,250,466 278,426,690 Amounts Due to Related Parties 27 22,429,756 20,925,573 24,518,767 22,429,756 20,925,573 24,518,767 Total Current Liabilities 837,305,478 847,276,458 614,056,055 837,140,478 846,596,430 613,941,095 Total Liabilities 2,293,599,837 2,384,156,258 2,316,498,425 2,203,988,175 2,354,224,051 2,316,383,465 Total Equity and Liabilities 4,810,892,820 4,467,645,819 4,241,526,067 4,645,442,620 4,344,267,205 4,182,574,984
These Financial Statements are in compliance with the requirements of the Companies Act No. 07 of 2007.
………………………. Chief Financial Officer
The Board of Directors is responsible for the preparation and presentation of these Financial Statements. Signed for and on behalf of the Board by.
DIRECTOR MANAGING AGENT
1 1
2 2
Notes to the Financial Statements from pages 37 to 89 form an integral part of these Financial Statements.
28 May, 2013 Colombo
34 Elpitiya Plantations Plc Annual Report 2012/13 Statements of Changes In Equity Year Ended 31st March 2013
Attributable to equity holders of the Parent Group Stated Timber Retained Total Non-controlling Total Capital Reserve Earnings interest Equity Rs. Rs. Rs. Rs. Rs. Rs.
Balance as at 01 April 2011 694,236,120 688,965,127 544,491,965 1,927,693,212 (2,665,570) 1,925,027,642
Profit for the Year - - 184,886,011 184,886,011 (192,177) 184,693,834
Timber Reserve - 25,303,620 (25,303,620) - - -
Dividends - - (26,231,915) (26,231,915) - (26,231,915)
Balance as at 31 March 2012 694,236,120 714,268,747 677,842,441 2,086,347,308 (2,857,747) 2,083,489,561
Profit for the Year - - 434,026,934 434,026,934 (223,512) 433,803,422
Timber Reserve - 32,859,733 (32,859,733) - - - Balance as at 31 March 2013 694,236,120 747,128,480 1,079,009,642 2,520,374,242 (3,081,259) 2,517,292,983
Company Stated Timber Retained Total Capital Reserve Earnings Equity Rs. Rs. Rs. Rs.
Balance as at 01 April 2011 694,236,120 688,965,127 482,990,272 1,866,191,519
Profit for the Year - - 150,083,550 150,083,550
Timber Reserve - 25,303,620 (25,303,620) -
Dividends - - (26,231,915) (26,231,915)
Balance as at 31 March 2012 694,236,120 714,268,747 581,538,287 1,990,043,154
Profit for the Year - - 451,411,291 451,411,291
Timber Reserve - 32,859,733 (32,859,733) -
Balance as at 31 March 2013 694,236,120 747,128,480 1,000,089,845 2,441,454,445
Figures in brackets indicate deductions.
Notes to the Financial Statements from pages 37 to 89 form an integral part of these Financial Statements.
Elpitiya Plantations Plc Annual Report 2012/13 35 Statements of Cash Flows Year Ended 31st March 2013
Group Company 2013 2012 2013 2012 Notes Rs. Rs. Rs. Rs.
Cash Flows from Operating Activities Profit Before Tax 500,235,322 191,985,292 495,593,577 148,200,740
Adjustments for; Depreciation/ Amortization 131,061,390 120,771,827 131,061,390 120,771,827 Provision for Defined Benefit Plans 24 74,622,975 156,894,944 74,622,975 156,894,944 Share of Profit of Joint Venture (86,020,059) (78,451,549) - - Amortization of Grants 7 (11,699,484) (11,678,799) (11,699,484) (11,678,799) Finance Cost 8 138,992,366 137,676,535 138,992,366 137,669,464 Gain on Biological Assets - Timber 14.2 (32,859,733) (25,303,620) (32,859,733) (25,303,620) Deferred Income from Sub Lease (2,850,786) (2,794,170) (2,850,786) (2,794,170) Cost of Timber Sold 14.2 30,762,434 - 30,762,434 - Provision for Doubtful Debtors 1,500,000 7,500,000 1,500,000 7,500,000 Operating Profit Before Working Capital Changes 743,744,425 496,600,460 825,122,739 531,260,387
(Increase)/Decrease in Inventories 16 (65,678,855) 23,241,165 (65,678,855) 23,241,165 (Increase)/Decrease in Trade and other Receivables 17 (21,063,646) 9,879,536 (52,382,802) 41,198,692 (Increase)/Decrease in Amounts Due from Related Companies 18 (4,702,076) (1,344,331) (34,463,900) (12,865,988) Increase/(Decrease) in Trade and other Payables 26 75,852,275 (53,727,212) 75,836,195 (53,705,103) Increase/(Decrease) in Amount Due to Related Companies 27 1,504,183 (3,537,295) 1,504,183 (3,593,194) Cash Generated from Operating Activities 729,656,306 471,112,323 749,937,561 525,535,959
Cash Received from as Sublease of Land 1,516,518 2,311,106 1,516,518 2,311,106 Finance Cost Paid (122,828,238) (108,648,242) (122,828,238) (108,641,171) Retirement Benefit Obligations Paid 24 (55,950,800) (66,249,798) (55,950,800) (66,249,798) Tax Paid (19,563,516) (11,623,818) (7,415,859) (6,445,210) Grants Received 22.1 390,051 1,232,439 390,051 1,232,439 Net Cash Flow from Operating Activities 533,220,321 288,134,010 565,649,232 347,743,325
Cash Flows from Investing Activities Field Development Expenditure 14 (242,257,882) (265,533,017) (242,257,882) (265,533,017) Purchase of Property, Plant and Equipment (153,026,418) (29,489,103) (15,079,334) (12,555,723) Dividend Received 90,917,613 35,959,408 - - Investment in Shares (10) - (20,000,010) (10,800,000) Net Cash Used in Investing Activities (304,366,697) (259,062,712) (277,337,226) (288,888,740) Net Cash Inflow before Financing Activities 228,853,624 29,071,298 288,312,006 58,854,585
Cash Flows from Financing Activities Payment of Government Lease Rentals (26,406,717) (51,604,611) (26,406,717) (51,604,611) Proceeds from Loan 195,194,483 49,252,179 135,000,000 20,000,000 Settlement of Loan (355,428,353) (185,612,754) (355,428,353) (185,612,754) Dividend Paid - (26,231,915) - (26,231,915) Other Lease Rentals Paid (12,902,673) (13,504,081) (12,902,673) (13,504,081) Net Cash Used in Financing Activities (199,543,260) (227,701,182) (259,737,743) (256,953,361) Net Increase/(Decrease) in Cash and Cash Equivalents 29,310,364 (198,629,884) 28,574,263 (198,098,776) Cash and Cash Equivalents at the Beginning of the Year A (167,398,056) 31,231,828 (166,866,948) 31,231,828 Cash and Bank Balance Transferred Due to Amalgamation Cash and Cash Equivalents at the end of the Year B (138,087,692) (167,398,056) (138,292,685) (166,866,948)
Note: A Cash and Cash Equivalents at the Beginning of the Year Cash and Bank Balances 69,729,664 69,842,686 69,729,664 69,842,686 Bank Overdrafts (Note 21) (237,127,720) (38,610,858) (236,596,612) (38,610,858) (167,398,056) 31,231,828 (166,866,948) 31,231,828 Note: B Cash and Cash Equivalents at the end of the Year Cash and Bank Balances 75,105,590 69,729,664 74,900,597 69,729,664 Bank Overdrafts (Note 21) (213,193,282) (237,127,720) (213,193,282) (236,596,612) Cash and Cash Equivalents (138,087,692) (167,398,056) (138,292,685) (166,866,948)
Figures in brackets indicate deductions. Notes to the Financial Statements from pages 37 to 89 form an integral part of these Financial Statements.
36 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
1. REPORTING ENTITY
1.1 Domicile and Legal Form Elpitiya Plantations PLC was incorporated on 22 June 1992 under the Companies Act. No. 17 of 1982. (The Company was re-registered under the Companies Act No. 07 of 2007) in terms of the provisions of the Conversion of Public Corporation and Government Owned Business Undertakings into Public Companies under Public Companies Act No. 23 of 1987.
The registered office of the Company is located at No. 315, Vauxhall Street, Colombo 02, and Plantations are situated in the planting districts of Nuwara Eliya and Galle.
The Consolidated Financial Statements of Elpitiya Plantations PLC as at and for the year ended 31 March 2013 comprise the Company and its Subsidiaries namely, EPP Hydro Power Company (Pvt) Ltd., Tea Country Homes (Pvt) Ltd. and Water Villas (Pvt) Ltd. and Joint Venture Companies of Elpitiya Lifestyle Solutions (Pvt) Ltd, AEN Palm Oil Processing (Pvt) Ltd and Elpitiya Dian Hong Jin Ya Company (Pvt) Ltd (together referred to as the ‘Group’).
The Financial Statements of the Company and the Group comprise the Income Statement, Statement of Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows together with Accounting Policies and Notes to the Financial Statements.
The Financial Statements of all companies in the Group are prepared for a common financial year, which ends on 31 March.
All companies in the Group are limited liability companies incorporated and domiciled in Sri Lanka.
The ordinary shares of the Company are listed on the Colombo Stock Exchange of Sri Lanka.
1.2 Principal Activities and Nature of Operations During the year, the principal activities of the Company were cultivation, manufacture and sale of Black Tea, Rubber, Oil Palm and other crops.
1.3 Parent Enterprise The Company’s parent undertaking is Aitken Spence Plantation Managements Limited.
1.4 Date of Authorization for issue The Financial Statements of Elpitiya Plantations PLC for the year ended 31 March 2013 were authorized for issue in accordance with a resolution of the Board of Directors on 28 May 2013.
2. BASIS OF PREPARATION
2.1 Statement of Compliance The Financial Statements have been prepared in accordance with Sri Lanka Accounting and Auditing Standards Act. No. 15 of 1995 which requires compliance with Sri Lanka Accounting Standards promulgated by The Institute of Chartered Accountants of Sri Lanka (ICASL), and with the requirements of the Companies Act. No. 07 of 2007.
Elpitiya Plantations Plc Annual Report 2012/13 37 Notes to the Financial Statements Year Ended 31st March 2013
For all periods up to and including the year ended 31 March 2012, the Group prepared its Financial Statements in accordance with Sri Lanka Accounting Standards (SLAS). These Financial Statements for the year ended 31 March 2013 are the first set of Financial Statements the Group has prepared in accordance with SLFRS. Refer Note 5.3 for explanations on how the Group adopted SLFRS.
2.2 Basis of Measurement These Financial Statements have been prepared in accordance with the historical cost convention other than consumable biological assets, right to use of land and financial instruments that have been measured at fair value where appropriate specific policies are explained in the succeeding notes.
No adjustments have been made for inflationary factors in the Financial Statements.
2.3 Functional and Presentation Currency The Financial Statements are presented in Sri Lankan Rupees (Rs.) which is the Group’s functional and presentation currency. All financial information presented in Sri Lankan Rupees has been given to the nearest rupee, unless stated otherwise.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Accounting Policies except the policies given under Note 3.1.set out below are consistent with those used in the previous year. Accounting Policies of subsidiaries and Joint Ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.
Comparative information has, where necessary been reclassified to conform with the current year’s presentation. The Directors have made an assessment of the Group’s ability to continue as a going concern in the foreseeable future, and they do not foresee a need for liquidation or cessation of trading.
3.1 Changes to the Accounting Policies & Estimates LKAS 16 - Property, Plant & Equipment
Nature of the Change The Group revisited the useful lives and residual values of plant & machinery, motor vehicles, equipments and civil constructions and others. Electronic machineries are segregated from Plant & Machinery, as a separate class of asset, and reduced its useful life to 10 years as those assets are having distinguishable useful life due to technical obsolescence. The useful lives of rest of the Plant & Machineries are increased to 20 years. Motor Vehicles segregated to two classes i.e., supervisory and utility. The useful life of the utility vehicles increased to 10 years while the useful life of supervisory vehicles increased to 8 years. Tools are segregated from Equipments and the depreciation rate increased from 12.5% to 25%. The depreciation rate of Computers and Other Equipments increased from 12.5% to 20%. The depreciation rate of Civil Constructions and others increased from 2.5% to 5%.
Reasons for Change The Group is using a material value of fully depreciated assets in commercial operations. This indicates objective evidence that those estimates were in error in terms of LKAS 8. The Plant & Machinery, Motor Vehicles and Equipments are identified as the class of assets which contributes to a major part offully depreciated assets. The depreciation rate of Civil construction assets on hydro power project increased to be in line with the SPPA agreement period. The allocation of depreciation and carrying value of the assets expected to be reliably stated in the Financial Statements, without over estimation through changing the depreciation policy.
38 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
Impact to the Financial Statements The transitional provisions allowed retrospective application for changes estimation in terms of SLFRS I. The carrying value of Freehold Property, Plant & Equipment has increased by Rs 15,115,108 in 2012 (Rs 13,241,417 in 2011).
Amortisation Period of Machinery The amortization period of the machinery taken over from JEDB /SLSPC has been increased to 20 years in conformity with the provisions of LKAS 17, in consistent with the depreciation policy for similar assets, as calculated in terms of LKAS 16. However the impact for year 2012 is nil (2011 - nil) as the machinery was fully amortized by year 2007.
3.2 Basis of Consolidation The Consolidated Financial Statements (referred to as the ‘Group’) comprise the Financial Statements of the Company and its Subsidiaries and Joint Venture Companies.
The Financial Statements of the subsidiaries and Joint Ventures are prepared for the same reporting period.
Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance. A change in the ownership interest of a subsidiary, without a loss of control, it accounted for as an equity transaction. If the Group losses control over a subsidiary, it –
• Derecognises the assets (including goodwill) and liabilities of the subsidiary • Derecognises the carrying amount of any non-controlling interest • Derecognises the cumulative transaction differences recorded in equity. • Recognises the fair value of consideration received • Recognises the fair value of any investment retained • Recognises any surplus or deficit in profit or loss • Reclassify the parent’s share of components previously recognized in other comprehensive income to profit or loss or retained earnings, as appropriate
3.2.1. Business Combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. After contingent consideration to be transferred by the acquirer will be recognized at fair value at the
Elpitiya Plantations Plc Annual Report 2012/13 39 Notes to the Financial Statements Year Ended 31st March 2013
acquisition date. Subsequent changes in the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with LKAS 39 either in profit or loss or as a change to other comprehensive income.
3.2.2. Subsidiaries Subsidiaries are those entities controlled by the Group Control exists when the Group has the power, directly or indirectly to govern the financial and operating policies of an entity so as to obtain benefits fromits activities which is evident when the Group controls the composition of the Board of Directors of the entity or holds more than 50% of the of the issued shares of the entity or 50% of the voting rights of the entity or entitled to receive more than half of every dividend from shares carrying unlimited right to participate in distribution of profits or capital.
The Financial Statement of subsidiaries are included in the Consolidated Financial Statements from the date on which control effectively commences, until the date that control effectively ceases. Subsidiaries are disclosed in Note 15 to the Financial Statements.
3.2.3. Transaction with Non-Controlling Interest The profit or loss and net assets of a subsidiary attributable to equity interests that are not owned by the Parent, directly or indirectly through Subsidiaries, is disclosed separately under the heading ‘Non-Controlling Interest”.
The Group applies a policy of treating transactions with non-controlling interests as transactions with parties external to the Group.
3.2.4. Investment in Joint Ventures The Group have interest in joint ventures which are jointly controlled entities. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest. The Group recognises its interest in the joint venture using the equity method.
Under the equity method, the investment in the joint venture is carried in the Statement of Financial Position at cost plus post acquisition changes in the group’s share of net assets of the associate. Goodwill relating to a joint venture is included in the carrying amount of the investment and is not amortised. The income statement reflects the share of the results of operations of the joint venture. Where there has been a change recognised directly in the equity of the joint venture, the Group recognises its share of any changes and discloses this, when applicable, in the statement of changes in equity. Profits and losses resulting from transactions between the Group and the joint venture are eliminated to the extent of the interest in the joint venture.
The reporting dates of the joint venture and the group are identical and the joint venture’s accounting policies conform to those used by the group for like transactions and events in similar circumstances
3.2.5. Associates Associates are those entities in which the Group has significant influence, but no control over financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of the entity. Associates are accounted for using the equity method and are initially recognized at cost. When the Group’s share of losses exceeds its investment in an equity accounted investee,
40 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
the carrying amount of that interest is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has incurred obligations or has made payments on behalf of the investee.
Upon loss of significant influence over the associate, the Group measures and recognizes any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognized in profit or loss. However as at the Financial Statement date Group does not have any investment in Associate Companies.
3.2.6. Transactions Eliminated on Consolidation Intra-group balances, transactions and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the Consolidated Financial Statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.
3.2.7. Profits and Losses The total profits and losses for the period of the Company and its subsidiaries included in consolidation are shown in the Consolidated Income Statement, with the proportion of the profit or loss after taxation applicable to non-controlling interest of the subsidiaries being separately mentioned as ‘Non-Controlling Interest/(Loss)’.
3.2.8. Assets and Liabilities All assets and liabilities of the Company and its subsidiaries are included in the Consolidated Statement of Financial Position. The proportionate interest of non-controlling interest in the net assets employed by the Group, is disclosed separately in the Consolidated Statement of Financial Position as ‘Non-Controlling’ Interest.
3.2.9. Foreign Currency Transaction Transaction in foreign currencies are translated into the respective functional currencies of Group entities at exchange rates applicable on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate ruling at that date. Foreign currency differences arising on retranslation are recognized in Income Statement. Non- monetary assets and liabilities which are carried in terms of historical cost in the foreign currency are retranslated at the exchange rate that prevailed at the date of the transaction.
3.3. Assets and Bases of Their Valuation Assets classified as current assets in the Statement of Financial Position are cash and bank balances and those which are expected to be realized in cash during the normal operating cycle of the Company’s business or within one year from the reporting date whichever is shorter. Assets other than current assets are those which the Company intends to hold beyond a period of one year from the date of Statement of Financial Position.
3.3.1. Property, Plant and Equipment
3.3.1.1. Recognition and Measurement Items of Property, Plant & Equipment are measured at cost (or at fair value in the case of land), less accumulated depreciation and accumulated impairment losses, if any.
Elpitiya Plantations Plc Annual Report 2012/13 41 Notes to the Financial Statements Year Ended 31st March 2013
3.3.1.2. Owned Assets The cost of Property, Plant & Equipment includes expenditures that are directly attributable to the acquisition of the asset. Such costs includes the cost of replacing part of the Property, Plant & Equipment and borrowing costs for long-term construction projects if the recognition criteria are met. The cost of self-constructed assets includes the cost of materials and direct labour, any other cost directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalized as a part of that equipment.
When significant parts of Property, Plant & Equipment are required to be replaced at intervals, the entity recognizes such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is preformed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised as an expense when incurred. The present value of the expected cost for the decommissioning of the asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
Capital work in progress is transferred to the respective asset accounts at the time, the asset is ready for utilization or at the time the asset is commissioned.
3.3.1.3. Leased Assets Assets obtained under the finance lease, which effectively transfer to the Group substantially, all risks and benefits incidental to ownership of the leased assets, are treated as if they have been purchased outright and are capitalized at their cash price. Assets acquired by way of a finance lease are measured at an amount equal to the lower of their fair value and the present value of minimum lease payments at the inception, less accumulated depreciation and accumulated impairment losses.
Assets held under the finance lease are amortised over the shorter of the lease period or the useful lives of equivalent assets, unless ownership is not transferred at the end of the lease period. The principal/capital elements payable to the lessor are shown as liability/obligation. The lease rentals are treated consisting of capital and interest elements. The capital element in the rental that is applied to reduce the outstanding obligation and interest element is charged against profit in proportion to the reducing capital element outstanding.
The cost of improvements to or on leased property is capitalized, disclosed as improvements to leasehold property and depreciated over the unexpired period of the lease, or the estimated useful lives of the improvements, whichever is shorter.
3.3.1.4. Subsequent Cost The cost of replacing part of an item of Property, Plant & Equipment is recognized in the carrying amount of the item, if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition policy given below. The costs of the day-to-day servicing of Property, Plant & Equipment are recognized in profit or loss as incurred.
3.3.1.5. Derecognition An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the
42 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year the asset is derecognised.
3.3.1.6. Land Improvement Cost Permanent land improvement costs are those costs incurred in making major infrastructure development and building new access roads on leasehold lands.
These costs have been capitalized and amortised over the remaining lease period. Permanent impairments to land development costs are charged to the Income Statement in full or reduced to the net carrying amounts of such assets in the year of occurrence after ascertaining the loss.
3.3.1.7. Biological Assets
Immature and Mature Plantations The cost of land preparation, rehabilitation, new planting, replanting, crop diversification, inter planting and fertilizing, etc. incurred between the time of planting and harvesting (when the planted area attains maturity) are classified as immature plantations. These immature plantations are shown at direct costs plus attributable overheads. The expenditure incurred on bearer biological assets (Tea, Rubber, Oil Palm) which comes into bearing during the year, is transferred to mature plantations. Expenditure incurred on consumable biological assets is recorded at cost at initial recognition and thereafter at fair value at the end of each reporting period.
Permanent impairments to Biological Assets are charged to the Income Statement in full and reduced to the net carrying amounts of such asset in the year of occurrence after ascertaining the loss.
3.3.1.8. Infilling Cost on Bearer Biological Assets The land development costs incurred in the form of infilling have been capitalized where infilling results in an increase in the economic life of the relevant field beyond its previously assessed standard of performance. Infilling costs so capitalized are depreciated over the newly assessed remaining economic useful life of the relevant nature plantation or the unexpired lease period, whichever is lower.
Infilling costs that are not capitalized have been charged to the Income Statement in the year in which they are incurred.
3.3.1.9. Borrowing Cost Borrowing costs that are directly attributable to acquisition, construction or production of a qualifying asset, which takes a substantial period of time to get ready for its intended use or sale, are capitalized as a part of the asset.
Borrowing costs that are not capitalized are recognized as expenses in the period in which they are incurred and charged to the Income Statement.
The amounts of the borrowing costs which are eligible for capitalization are determined in accordance with LKAS 23 – ‘Borrowing Costs’.
Borrowing costs incurred to meet expenses relating to immature plantations have been capitalized as a part of the cost of the relevant immature plantation. The capitalization will cease when the crops are ready for commercial harvest.
The amount so capitalized and the capitalization rates are disclosed in the Notes to the Financial Statements.
Elpitiya Plantations Plc Annual Report 2012/13 43 Notes to the Financial Statements Year Ended 31st March 2013
3.3.1.10 Depreciation and Amortisation
(a) Depreciation Depreciation is recognized in Income Statement on a straight-line basis over the estimated useful economic lives of each part of an item of Property, Plant & Equipment. Assets held under finance leases are depreciated over the shorter of the lease term and the useful lives of equivalent owned assets unless it is reasonably certain that the Group will have ownership by the end of the lease term. Lease period of land acquired from JEDB/SLSPC will be expired in year 2045. The estimated useful lives for the current and comparative periods are as follows:
No. of Years Rate (%) Building 40 2.50 Electronic Machinery 10 10.00 Plant & Other Machinery 20 5.00 Motor Vehicles – Supervisory and Motorbikes 8 12.50 Motor Vehicles – Others 10 10.00 Equipment – Tools 4 25.00 Equipment – Computer & Others 5 20.00 Furniture & Fittings 10 10.00 Water Sanitation 20 5.00 Hydro Power Asset (Civil Construction & Others) 20 5.00
Mature Plantations (Replanting and New Planting)
No. of Years Rate (%) Mature Plantations – Tea 33 1/3 3.00 Rubber 20 5.00 Oil Palm 20 5.00 Coconut 50 2.00 Cinnamon 20 5.00
Depreciation of an asset begins when it is available for use and ceases at the earlier of the date on which the asset classified as held for sale or is derecognized.
Depreciation methods, useful lives and residual values are reassessed at the reporting date and adjusted prospectively, if appropriate. Mature plantations are depreciated over their useful lives or unexpired lease period, whichever is lower.
No depreciation is provided for immature plantations.
(b) Amortisation The leasehold rights of assets taken over from JEDB/SLSPC are amortised in equal amounts over the shorter of the remaining lease periods and the useful lives as follows:
44 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
No. of Years Rate (%) Bare land 53 1.89 Mature Plantations 30 3.33 Buildings 25 4.00 Machinery 20 5.00 Improvements to Land / Other Vested Assets / Unimproved Lands 53 1.89
3.3.1.11 Non-Current Assets Held for Sale and Discontinued Operations Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition.
In the consolidated statement of comprehensive income of the reporting period ,and of the comparable period of the previous year, income and expenses from discontinued operations are reported separately from income and expenses from continuing operations.
Property, Plant & Equipment and intangible assets once classified as held for sale are not depreciated or amortised.
3.3.2 Investment Property Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value which reflects market conditions at the reporting date. Gains or loses arising from changes in the fair values of investment properties are included in the Income Statement in the period in which they arise. Fair values are evaluated annually, by an accredited external, independent valuer.
Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in the Income Statement in the period of derecognition.
Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change. If owner occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change. However, there are no investment properties as at 31 March 2013 (2012 – Nil).
3.3.3. Biological Assets Biological assets are classified as mature biological assets and immature biological assets. Mature biological assets are those that have attained harvestable specifications or are able to sustain regular harvests. Immature biological assets are those that have not yet attained harvestable specifications. Tea, rubber, oil palm, other plantations and nurseries are classified as biological assets.
Biological assets are further classified as bearer biological assets and consumable biological assets. Bearer biological assets includes tea , rubber , oil palm and other trees, those that are not intended to be sold or
Elpitiya Plantations Plc Annual Report 2012/13 45 Notes to the Financial Statements Year Ended 31st March 2013
harvested, however used to grow for harvesting agricultural produce from such biological assets. Consumable biological assets includes managed timber those that are to be harvested as agricultural produce or sold as biological assets.
The entity recognize the biological assets when, and only when, the entity controls the assets as a result of past event, it is probable that future economics benefits associated with the assets will flow to the entity and the fair value or cost of the assets can be measured reliably.
The bearer biological assets are measured at cost less accumulated depreciation and accumulated impairment losses, if any, in terms of LKAS 16 – Property, Plant & Equipment as per the ruling issued by ICASL.
The managed timber is measured on initial recognition and at the end of each reporting period at its fair value less cost to sell in terms of LKAS 41. The cost is treated as approximation to fair value of young plants as the impact on biological transformation of such plants to price during the period is immaterial. The fair value of timber trees are measured using DCF method taking into consideration the current market prices of timber, applied to expected timber content of a tree at the maturity by an independent professional valuer. All other assumptions and sensitivity analysis are given in Note 14.
The Main Variables in DCF Model Concern
Variable Comment
Currency valuation Rs.
Timber Content Estimate based on physical verification of girth, height and considering the growth of each spices in different geographical regions.
Factor all the prevailing statutory regulations enforced against harvesting of timber coupled with forestry plan of the Group.
Economic useful life Estimated based on the normal life span of each species by factoring the forestry plan of the Group
Selling price Estimated based on prevailing Sri Lankan market prices. Factor all the conditions to be fulfilled in bringing the trees into saleable condition.
Discount rate Future cash flows are discounted at 13%
Nursery cost includes the cost of direct materials, direct labour and an appropriate proportion of directly attributable overheads, less provision for overgrown plants.
46 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
The gain or loss arising on initial recognition of biological assets at fair value less cost to sell and from a change in fair value less cost to sell or biological assets are included in profit or loss for the period in which it arises.
3.3.4 Intangible Assets Intangible asset is an identifiable non-monetary asset without physical substance held for use inthe production or supply of goods or services, for rental or for administrative purpose.
Intangible asset is recognized if it is probable that future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably in accordance with LKAS 38 on ‘Intangible Assets’.
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses. If any, internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in the Income Statement in the year in which the expenditure is incurred.
Intangible assets with finite lives are amortised over their useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired .Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash generating unit level. The amortization period and method of intangible assets with a finite and indefinite useful life are reviewed annually.
3.3.4.1. Goodwill Goodwill arising on the acquisition represents the excess of the cost of the identifiable assets and liabilities of the acquired entity at the date of acquisition. Negative goodwill arising on an acquisition represents the excess of the Group’s interest in the fair value of the assets and liabilities acquired over the cost of acquisition. Negative goodwill is recognized immediately in the Income Statement.
Goodwill arising on an acquisition of a non-controlling interest in a subsidiary represents the excess of the cost of the additional investment over the carrying amount of the interest in the net assets, acquired at the date of exchange.
Goodwill is tested annually for impairment and is measured at cost, less accumulated impairment losses. In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment.
Research and Development Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding is recognized in profit or loss when incurred.
Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalized includes the cost of materials, direct labour and overhead costs that are directly
Elpitiya Plantations Plc Annual Report 2012/13 47 Notes to the Financial Statements Year Ended 31st March 2013
attributable to preparing the asset for its intended use. Other development expenditure is recognized in profit or loss when incurred.
Capitalised development expenditure is measured as cost, less accumulated amortization and accumulated impairment losses.
3.3.5 Financial Instruments
3.3.5.1 Financial Assets Financial assets within the scope of LKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held –to-maturity investments, available for sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets at initial recognition.
All financial assets are recognized initially at fair value plus, in the case of assets not at fair value through profit or loss, directly attributable transaction costs.
The Group’s financial assets include cash and short term deposits, trade and other receivables and loans and other receivables.
3.3.5.1.1 Financial Assets at Fair Value through Profit or Loss Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term.
Financial assets at fair value through profit and loss are carried in the Statement of Financial Position at fair value with changes in fair value recognized in finance income or finance expense in the Income Statement.
The Group has not designated any financial assets upon initial recognition at fair value through profit or loss.
3.3.5.1.2 Loans and Receivables Loans and receivables are non-derivate financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement such financial assets are subsequently measured at amortised cost using the Effective Interest Rate method (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisaton is included in finance income in the Income Statement. The losses arising from impairment are recognized in the Income Statement in finance costs.
Loans and receivables comprise of trade receivables, amounts due from related parties, deposits, advances and other receivables and cash and cash equivalent.
3.3.5.1.3 Held-to-Maturity Investments Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Group has the positive intention and ability to hold them to maturity. After initial measurement, held-to-maturity investments are measured at amortised cost using the effective interest
48 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
method, less impairment. The EIR amortization is included in finance income in the Income Statement. The losses arising from impairment are recognized in the Income Statement in finance costs.
The Group does not have held-to-maturity investments in year 2013 (2012 – Nil).
3.3.5.1.4 Available-for-Sale Financial Investments Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the above categories of the financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses are recognized in other comprehensive income and presented in the fair value reserve in equity. Interest income on available-for-sale debt securities is calculated using the effective interest rate method and is recognized in profit or loss. When an investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or loss.
The Group does not have available –for- sale investments in year 2013 (2012 – Nil).
3.3.5.2 Impairment of Financial Assets The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired and if such has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flow.
3.3.5.3 Financial Liabilities
Initial Recognition and Measurement Financial liabilities within the scope of LKAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognized initially at fair value and ,in the case of loans and borrowings, carried at amortised cost. This includes directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables, bank overdraft, loans and other borrowings.
3.3.5.3.1 Financial Liabilities at Fair Value through Profit or Loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. Gains or losses on liabilities held for trading are recognized in the Income Statement.
The Group has not designated any financial liabilities upon initial recognition at fair value through profit or loss.
3.3.5.3.2 Loans and Borrowings After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognized in the Income Statement when the liabilities are derecognized as well as through the effective interest rate method (EIR) amortization process.
Other financial liabilities comprise interest bearing loans and borrowings, trade payables, other payables and amounts due to related parties.
Elpitiya Plantations Plc Annual Report 2012/13 49 Notes to the Financial Statements Year Ended 31st March 2013
3.3.5.4 Offsetting of Financial Instruments Financial assets and financial liabilities are offset if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.
The fair value of the financial instruments is determined in terms of LKAS 39. The Company derecognizes a financial liability when its contractual obligations are discharged cancelled or expired.
3.3.6 Financial Risk Management Objectives and Policies The Group’s principal financial liabilities comprise loans and borrowings, trade and other payables, and financial guarantee contracts. The main purpose of these financial liabilities is to finance theGroup’s operations and to provide guarantees to support its operations. The Group has loan and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations. Accordingly the Group has exposure to namely Credit Risk, Liquidity Risk, Currency Risk and Interest Rate Risk from its use of financial instruments.
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk.
3.3.6.1 Credit Risk This is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arise principally from the Group’s receivable from customers.
3.3.6.2 Liquidity Risk Liquidity risk arises when the Group is unable to meets its financial obligations due to insufficient cash flow situations. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
3.3.6.3 Currency Risk The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional currency of the Group. The currency in which these transactions primarily denominated is in USD.
3.3.6.4 Interest Rate Risk Interest Rate Risk is the potential for losses that may arise due to adverse movement of interest rates, mainly on floating interest rates. The Group manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. The Group has not engaged in any interest rate swap agreements.
3.3.7 Investments
3.3.7.1 Short-Term Investments Short-term investments are measured at the lower of cost and market value on an aggregate portfolio basis, with any resultant gain or loss recognized in profit or loss.
50 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
3.3.7.2 Long-Term Investments Quoted and unquoted investments in shares held on long-term basis are measured at cost, less impairment losses. In the Parent Company’s Financial Statements, investments in subsidiaries and joint venture companies are carried at cost, less impairment losses.
Provision for impairment is made when the Directors are of the view that there has been a decline other than temporary in the value of the investment.
3.3.8 Inventories Finish Goods Manufactured from Agricultural Produce of Biological Assets These are valued at the lower of cost and estimated net realizable value, after making due allowance for obsolete and slow moving items. Net realizable value is the estimated selling price at which stocks can be sold in the ordinary course of business after allowing for cost of realization and/or cost of conversion from their existing state to saleable condition.
Input Materials, Spares and Consumables At actual cost on weighted average basis.
Agricultural Produce Harvested from Biological Assets Agricultural produce harvested from its biological assets are measured at their fair value less cost to sell at the point of harvest. The finished and semi-finished inventories from agriculture produce are valued by adding the cost of conversion to the fair value of the agricultural produce.
3.3.9 Trade and Other Receivables Trade and other receivables are stated at their estimated realizable amounts inclusive of provisions for bad and doubtful debts.
3.3.10 Cash and Cash Equivalents Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand form and integral part of the Group’s cash management and are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows.
3.3.11 Impairment of Assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, recoverable amounts are estimated at each reporting date or more frequently, if events or changes in circumstances indicate that they might be impaired.
3.3.11.1 Calculation of Recoverable Amount The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. A cash generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups.
Elpitiya Plantations Plc Annual Report 2012/13 51 Notes to the Financial Statements Year Ended 31st March 2013
3.3.11.2 Impairment / Reversal of Impairment An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are re-recognized in profit or loss. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the group of other assets in the unit on pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortization, if no impairment loss had been recognized.
3.4. Liabilities and Provisions Liabilities classified as current liabilities on the Statement of Financial Position are those which fall due for payment on demand or within one year from the Statement of Financial Position date. Non-current liabilities are those balances that fall due for payment after one year from the Statement of Financial Position date. All known liabilities have been accounted for in preparing these Financial Statements. Provisions and liabilities are recognized when the Company has a legal or constructive obligation as a result of past events and it is probable that an outflow of economic benefits will be required to settle the obligation.
3.4.1 Employees’ Benefits
(a) Defined Contribution Plans – Employees’ Provident Fund and Employees’ Trust Fund A defined contribution plan is a post-employment benefit plan under which an entity paysfixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to Provident and Trust Funds covering all employees are recognized as an expense in profit and loss in the periods during which services are rendered by employees.
The Company contributes 12% on consolidated salary of the employees to Ceylon Planters’ Provident Society (CPPS) / Estate Staff Provident Society (ESPS) / Employees’ Provident Fund (EPF)
All the employees of the Company are members of the Employees Trust Fund to which the Company contributes 3% on the consolidated salary of such employees.
(b) Defined Benefit Plan A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The liabilities recognized in the Financial Statement in respect of defined benefit plan is the present value of the defined benefit obligation at the reporting date. The defined benefit obligation is calculated annually using the Projected Unit Credit Actuarial Cost method. The present value of the defined benefit obligation is determined by discounting the estimated future cash flows using the interest rates that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized as income and expense in the period in which they arise. Past service costs are recognized immediately in Income Statement.
52 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
The provision has been made for retirement gratuities from the first year of service for all employees, in conformity with LKAS 19 – ‘Employees Benefits’. However, under the Payment of Gratuity Act. No. 12 of 1983, the liability to an employee arises only on completion of 5 years of continued service.
The liability is not externally funded.
The key assumptions used in determining the retirement benefit obligations are given in Note 24.
3.4.2 Trade and Other Payables Trade and other payables are stated at their costs
3.4.3 Capital Commitments and Contingencies Capital commitments and contingent liabilities of the Group have been disclosed in the respective Notes to the Financial Statements.
3.4.4 Events Occurring after the Balance Sheet Date All material Post Balance Sheen events have been considered where appropriate, either adjustments have been made or adequately disclosed in the Financial Statements.
3.4.5 Earnings per Share The Group presents basic Earnings per Share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number or ordinary shares outstanding during the period.
3.4.6 Deferred Income
3.4.6.1 Grants and Subsidies Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognized as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal amounts over the expected useful life of the related asset.
Where the Group receives non-monetary grants, the asset and the grant are recorded gross at nominal amounts and released to the Income Statement over the expected useful life and pattern of consumption of the benefit of the underlying asset by equal annual installments. Where loans of similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as additional Government grant.
3.5 Income Statement For the purpose of presentation of Income Statement, the function of expenses method is adopted as it represents fairly the elements of the Group’s performance.
3.5.1. Revenue Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured
Elpitiya Plantations Plc Annual Report 2012/13 53 Notes to the Financial Statements Year Ended 31st March 2013
the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.
(a) Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods. Revenue is recorded at invoice value net of brokerage, sale expenses and other levies related to revenue.
(b) Gains and losses on disposal of an item of Property, Plant & Equipment are determined by comparing the net sales proceeds with the carrying amounts of Property, Plant & Equipment and are recognized within other operating income in the Income Statements.
(c) Interest income is recognized on accrual basis.
(d) Dividend income is recognised in the Income Statement on the date the entity’s right to receive payment is established.
(e) Rental income arising from operating leases on investment properties is accounted for on a straight line basis over the lease terms
3.5.2. Expenses All expenditure incurred in the running of the business and in maintaining the Property, Plant & Equipment in a state of efficiency is charged to revenue in arriving at the profit/(loss) for the year.
3.5.2.1 Financing Income and Expenses Finance income comprises interest income on funds invested, and gains on translation of foreign currency. Interest income is recognized in the Statement of Income as it accrues.
Finance expenses comprise interest payable on borrowing and losses on translation of foreign currency. The interest expense component of finance lease payment is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
3.5.2.2 Income Tax Expense Income tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, when it is recognized in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date and any adjustments to tax payable in respect of previous years.
Deferred tax is recognized using the Balance Sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or
54 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
substantively enacted by the reporting date. Differed tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity.
A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Tax withheld on dividend income from subsidiaries is recognized as an expense in the Consolidated Income Statement at the same time as the liability to pay the related dividend is recognized.
3.6 Statement of Cash Flow The Statement of Cash Flow has been prepared using the indirect method. Interest paid is classified as operating cash flows, interest and dividends received are classified as investing cash flows while dividends paid and Government grants received are classified as financing cash flows, for the purpose of presenting the Cash Flow Statement.
3.7 Segment Reporting Segmental information is provided for the different business segments of the Group. Business segmentation has been determined based on the nature of goods provided by the Group after considering the risk and rewards of each type of product.
Since the individual segments are located close to each other and operate in the same industrial environment, the need for geographical segmentation has no material impact.
The activities of the segments are described on Note 06 in the Notes to the Financial Statements. The Group transfers products from one industry segment for use in another Inter-segment transfers are based on fair market prices.
Revenue and expenses directly attributable to each segment are allocated to the respective segments. Revenue and expenses not directly attributable to a segment are allocated on the basis of their resource utilization, wherever possible.
Assets and liabilities directly attributable to each segment are allocated to the respective segments. Assets and liabilities, which are not directly attributable to a segment, are allocated on a reasonable basis wherever possible.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one accounting period.
4. USE OF ESTIMATES AND JUDGMENTS The preparation of Financial Statements in conformity with SLFRS requires management to make judgments, estimates and assumptions that influence the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Judgments and estimates are based on historical experience and other factors, including expectations that are believed to be reasonable under the circumstance. Hence, actual experience and results may differ from these judgments and estimates.
Elpitiya Plantations Plc Annual Report 2012/13 55 Notes to the Financial Statements Year Ended 31st March 2013
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period and any future periods affected.
Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the Financial Statements is included in the following notes.
4.1 Income Taxes The Group recognizes liabilities for anticipated tax based on estimates or taxable income. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.
4.2 Retirement Benefit Obligations The present value of the retirement benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Key assumptions used in determining the retirement benefit obligations are given in Note 24. Any changes in these assumptions will impact the carrying amount of retirement benefit obligations.
4.3 Biological Assets The fair value of managed timber depends on different financial and non-financial assumptions. The growth of the trees is determined by various biological factors that are highly unpredictable. Any change to the assumptions will impact the fair value of biological assets. Key assumptions and sensitivity analysis of the biological assets are given in Note 14.
5 FIRST-TIME ADOPTION OF SLFRS These Financial Statements for the year ended 31 March 2013 are the first the Group has prepared in accordance with SLFRS. For periods up to and including the year ended 31 March 2012, the Group prepared its Financial Statements in accordance with Sri Lanka Accounting Standards (SLAS).
Accordingly, the Group has prepared Financial Statements which comply with SLFRS applicable for periods ending on or after 31 March 2013, together with the comparative period data as at and for the year ended 31 March 2012 as described in the accounting policies. In preparing these Financial Statements the Group’s opening Statement of Financial Position was prepared as at 1 April 2011, the Group’s date of transition to SLFRS. This note explains the principal adjustments made by the Group in restarting its SLASs Statement of Financial Position as at 1 April 2011 and its previously published SLASs Financial Statements as at and for the year ended 31 March 2012.
5.1 Exemptions Applied SLFRS 1 First-Time Adoption of Sri Lanka Financial Reporting Standards allows first time adopters certain exemptions from the retrospective application of certain SLFRS.
The Group has adopted the following exemptions:
56 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013 l Business Combination SLFRS 3 Business Combination has not been applied to acquisitions of subsidiaries, which are considered businesses for SLFRS, or of interests in associates and joint ventures that occurred before 1 April 2011. Use of this exemption means that the carrying amounts of assets and liabilities as per SLAS, which are required to be recognized under SLFRS, is their deemed cost at the date of the acquisition. After the date of the acquisition, measurement is in accordance with SLFRS. Assets and liabilities that do not qualify for recognition under SLFRS are excluded from the opening SLFRS statement of financial position. The Group did not recognize or exclude any previously recognized amounts as a result of SLFRS recognition requirements.
SLFRS 1 also requires that the carrying amount of goodwill as per SLAS must be used in the opening SLFRS statement of financial position (apart from adjustments for goodwill impairment and recognition or derecognition of intangible assets). No goodwill to be recognized as at 1 April 2011. l Fair Value or Revaluation as Deemed Cost Freehold Property, Plant & Equipment were carried in the statements of financial position prepared in accordance with the SLAS, using the cost model except Right to use of Land. The Group has elected use the fair value of Land as deemed cost. l Cumulative Translation Difference Cumulative currency translation differences for all foreign operations are deemed to be nil as at 1 April 2011. However, there were no foreign operations of the Group. l Employee Benefits Employee benefit was carried at the Statement of Financial Position prepared in accordance with the SLAS. The Group has not elected to use the corridor approach to recognize the employee benefit. l Estimates The estimates at 1 April 2011 and at 31 March 2012 are consistent with those made for the same dates in accordance with SLAS (after adjustments to reflect any differences in accounting policies) apart from the following items where application of SLAS did not require estimation.
- Defined Benefit Obligations - Biological assets managed timber - Available –for-sale Financial Assets – unquoted equity shares.
The estimates used by the Group to present these amounts in accordance with SLFRS reflect conditions at 1 April 2011, the date of transition to SLFRS and as of 31 March 2012 except following.
Freehold Property, Plant & Equipment – Useful Life and Residual Value The Group is using a material value of fully depreciated assets in commercial operations. This indicates objective evidence that those estimates were in error. The plant & machinery and motor vehicles are identified as the class of assets which contributes to a major part of fully depreciated assets. The Group revisited the useful lives and residual values of those classes of assets and adjusted retrospectively. Details of the changes and financial effect are given in Changes to the Accounting Policies and Estimates in Note 3.1 and Explanation to the transition to SLFRS in Note 5.3
Elpitiya Plantations Plc Annual Report 2012/13 57 Notes to the Financial Statements Year Ended 31st March 2013
5.2 Standards Issued But Not Yet Effective Standards issued but not yet effective up to the date of issuance of the Group’s Financial Statements are listed below. The listing of standards and interpretations issued are those that the Group reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. The Group intends to adopt these standards when they become effective.
l SLFRS 9 – Financial Instruments: Classification and Measurement SLFRS 9 replaces LKAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in LKAS 39. The standard is effective for annual periods beginning on or after 1 January 2015. The adoption of the first phase of SLFRS 9 will have an effect on the classification and measurement of the Group’s financial assets, but will potentially have no impact on classification and measurements of financial liabilities. The Group will quantify the effect in conjunction with the other phases, when issued to present a comprehensive picture.
l SLFRS 10 – Consolidated Financial Statements SLFRS 10 replaces the portion of LKAS 27 Consolidated and Separate Financial Statements that addresses the accounting for Consolidated Financial Statements. It also includes the issues raised in Standing Interpretations Committee – SIC – 12 Consolidation. Special Purpose Entities.
SLFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by SLFRS 10 will require management to exercise significant judgment to determine which entities are controlled and therefore, are required to be consolidated by a parent, compared with the requirements that were in LKAS 27. This standard becomes effective for annual periods beginning on or after 1 January 2014.
l SLFRS 11 – Joint Arrangements SLFRS 11 replaces LKAS 31 Interest in Joint Ventures and SIC 13 Jointly Controlled Entities Non Monetary Contributions by Ventures. SLFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. The group has already recorded the joint venture investments on equity method .Hence no impact on this new standard .
l SLFRS 12 – Disclosure of Interests in Other Entities SLFRS 12 includes all of the disclosures that were previously in LAKS 27 related to Consolidated Financial Statements, as well as all of the disclosures that were previously included in LKAS 31 and LKAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required. This standard becomes effective for annual periods beginning on or after 1 January 2014.
l SLFRS 13 – Fair Value Measurement SLFRS 13 establishes a single source of guidance under SLFRS for all fair value measurements SLFRS 13 does not state when an entity is required to use fair value but rather provides guidance on how to measure fair value under SLFRS when fair value is required or permitted. The Group is currently assessing the impact that this standard will have on the financial position and performance. This standard becomes effective for annual periods beginning on or after 1 January 2014.
58 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
5.3 Explanations to the transition to SLFRS
Reconciliation of total Comprehensive Income for the year ended 31 March 2012 Company SLFRS/LKAS SLAS 2012 Remeasurements 2012 Notes Rs. Rs. Rs.
Revenue A 2,512,971,592 86,115,393 2,426,856,199 Cost of sales B (2,186,038,302) (38,519,258) (2,147,519,044) Gross profit 326,933,290 47,596,135 279,337,155 Gains on fair value of biological assets G 25,303,620 25,303,620 - Other income & Gains C 106,623,231 35,959,408 70,663,823 Administration Expenses D (148,913,193) 16,765,137 (165,678,330) Management Fee & Workers Profit Share (24,076,744) - (24,076,744) Finance Cost (137,669,464) - (137,669,464) Share of Profit/ (Loss) of Joint Venture C - (78,451,549) 78,451,549 Profit before tax 148,200,740 47,172,751 101,027,989 Income Tax Expenses 1,882,810 5,878,300 (3,995,490) Net Profit for the year 150,083,550 53,051,051 97,032,499
Note SLFRS Remeasurement adjustments are only applicable to parent Company. Therefore no SLFRS adjustments to Group reported amounts.
Elpitiya Plantations Plc Annual Report 2012/13 59 Notes to the Financial Statements Year Ended 31st March 2013
5.3 Explanations to the transition to SLFRS (Contd.)
Reconciliation of Equity as at 31 March 2012 Company SLFRS/LKAS SLAS As At As At 31 March 2012 Remeasurements 31 March 2012 Notes Rs. Rs. Rs. ASSETS Non-Current Assets Leasehold Property, Plant and Equipment 362,005,063 - 362,005,063 Freehold Property, Plant and Equipment E 463,629,690 15,115,108 448,514,582 Bearer Biological Assets G 2,149,170,560 (165,288,825) 2,314,459,385 Consumable Biological Assets G 879,557,572 879,557,572 - Long Term Investments ( Unquoted) C 40,458,800 (106,614,295) 147,073,095 Amounts due from Related Parties D - (29,937,386) 29,937,386 Total Non-Current Assets 3,894,821,685 592,832,174 3,301,989,511
Current Assets Inventories H 236,219,338 (21,286,542) 257,505,880 Trade and Other Receivables D 105,937,086 (6,000,000) 111,937,086 Amounts due from Related Companies D 27,413,296 1,413,297 25,999,999 ESC Recoverable 10,146,136 - 10,146,136 Cash and Bank Balances 69,729,664 - 69,729,664 Total Current Assets 449,445,520 (25,873,245) 475,318,765 Total Assets 4,344,267,205 566,958,929 3,777,308,276
EQUITY AND LIABILITIES Equity Stated Capital 694,236,120 - 694,236,120 Timber Reserves G 714,268,747 714,268,747 - Accumulated Profits J 581,538,287 (158,310,611) 739,848,898 Total equity attributable to equity holders of the company 1,990,043,154 555,958,136 1,434,085,018 Non-Controlling Interest - - - Total Equity 1,990,043,154 555,958,136 1,434,085,018
Non-Current Liabilities Interest-bearing Loans & Borrowings 561,430,537 - 561,430,537 Retirement Benefit Obligations 554,799,813 - 554,799,813 Deferred Income 195,782,240 - 195,782,240 Deferred Tax Liability I 11,000,793 11,000,793 - Liability to Make Lease Payment 184,614,238 - 184,614,238 Total Non-Current Liabilities 1,507,627,621 11,000,793 1,496,626,828
Current Liabilities Interest-Bearing Borrowings - Including Overdraft 622,621,652 - 622,621,652 Liability to Make Lease Payment within One Year 2,798,739 - 2,798,739 Trade and Other Payables 200,250,466 - 200,250,466 Amounts due to Related Parties 20,925,573 - 20,925,573 Total Current Liabilities 846,596,430 - 846,596,430 Total Liabilities 2,354,224,051 11,000,793 2,343,223,258 Total Equity and Liabilities 4,344,267,205 566,958,929 3,777,308,276
60 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
5.3 Explanations to the transition to SLFRS (Contd.)
Reconciliation of Equity as at 01 April 2011 (Date of transition to SLFRS/LKAS) Company SLFRS/LKAS SLAS As At As At 1 April 2011 Remeasurements 1 April 2011 Notes Rs. Rs. Rs. ASSETS Non-Current Assets Leasehold Property, Plant and Equipment 382,819,042 - 382,819,042 Freehold Property, Plant and Equipment E 473,181,186 13,241,417 459,939,769 Bearer Biological Assets G 1,947,847,141 (157,916,486) 2,105,763,627 Consumable Biological Assets G 846,881,613 846,881,613 - Long Term Investment - ( Unquoted) C 29,658,800 (68,117,644) 97,776,444 Amounts due from Related Companies D - (40,000,000) 40,000,000 Total Non-Current Assets 3,680,387,782 594,088,900 3,086,298,882
Current Assets Inventories H 259,460,503 (67,008,986) 326,469,489 Trade and Other Receivables D 148,135,778 (6,000,000) 154,135,778 Amounts due from Related Parties D 21,047,309 (5,289,226) 26,336,535 ESC Receivables 3,700,926 - 3,700,926 Cash and Cash Equivalents 69,842,686 - 69,842,686 Total Current Assets 502,187,202 (78,298,212) 580,485,414 Total Assets 4,182,574,984 515,790,688 3,666,784,296
EQUITY AND LIABILITIES Equity Stated Capital 694,236,120 - 694,236,120 Timber Reserves G 688,965,127 688,965,127 - Accumulated Profits J 482,990,272 (186,058,042) 669,048,314 Total Equity Attributable to Equity Holders of the Company 1,866,191,519 502,907,085 1,363,284,434 Non-Controlling Interest - - - Total Equity 1,866,191,519 502,907,085 1,363,284,434
Non-Current Liabilities Interest-Bearing Loans & Borrowings 831,279,460 - 831,279,460 Retirement Benefit Obligations 464,154,667 - 464,154,667 Deferred Income 206,711,663 - 206,711,663 Deferred Tax Liability I 12,883,603 12,883,603 - Liability to Make Lease Payment 187,412,977 - 187,412,977 Total Non-Current Liabilities 1,702,442,370 12,883,603 1,689,558,767
Current Liabilities Interest-Bearing Borrowings - Including Overdraft 308,304,543 - 308,304,543 Liability to Make Lease Payment within One Year 2,691,095 - 2,691,095 Trade and Other Payables 278,426,690 - 278,426,690 Amounts due to Related Parties 24,518,767 - 24,518,767 Total Current Liabilities 613,941,095 - 613,941,095 Total Liabilities 2,316,383,465 12,883,603 2,303,499,862 Total Equity and Liabilities 4,182,574,984 515,790,688 3,666,784,296
Elpitiya Plantations Plc Annual Report 2012/13 61 Notes to the Financial Statements Year Ended 31st March 2013
5.3 Explanations to the transition to SLFRS (Contd.) Notes to the reconciliation of equity as at 1 April 2011, 31 March 2012 and total comprehensive income (“CI”) for the year ended 31 March 2012
A Revenue
1 Revenue recognition on Produce stock Profit & Loss of the perennial crop has been recognized in the financial period of harvesting in terms of SLAS 32. Thus the unsold stocks were treated as a part of revenue. The scope of revenue recognition was changed to LKAS 18. Accordingly, the revenue is recognized based on the date of auction where the recognition criterias are met and therefore the quantity which is sold at auction is treated as the sales.
The turnover in the Statement of Comprehensive Income for the year ended 31 March 2012 was increased by Rs. 86,115,393/=.
CI for year ended 31 March 2012 Nature of SLFRS adjustment Rs
Removal of closing stock at NRV which was part of the revenue (187,820,758) Removal of cost of the last year’s stock 273,936,151 Total 86,115,393
B Cost of sales
1 Matching of cost of sales with the revenue Recognition of the cost of sales has been changed simultaneous to the changes to the revenue recognition. Thus, cost of sales consists with the costs that are directly attributable to goods sold. Cost of opening stocks and the closing stocks were adjusted to the cost of production in arriving this. Further, the measurement of unsold tea and rubber stocks have been changed, in terms of LKAS 2 and LKAS 41.
2 Changes of useful lives and residual values of property, plant & equipment The depreciation for the year has been changed as a result of changes in useful lives and residual values. As a result, cost of sales for year ended 31 March 2012 has been decreased by Rs. 1,873,691/=.
CI for year ended 31 March 2012 Nature of SLFRS adjustment Rs
Opening stock - Identifying the stocks at cost or NRV which ever is lower 206,927,165 Closing stock - Identifying the stocks at cost or NRV which ever is lower (166,534,216) Effect on depreciation for the year by restatement of depreciation method (1,873,691) Total 38,519,258
C Investment in AEN Palm Oil Processing (Pvt) Ltd (Joint Venture Company) Water Villas (Pvt) Ltd and Tea Country Homes (Pvt) Ltd are subsidiaries of Elpitiya Plantations PLC from the inception of those Companies, but Elpitiya Plantations PLC (EPL) has not prepared consolidated Financial statements due to the fact that there are no commercial operations of those Subsidiaries. However, EPL has another subsidiary Company named EPP Hydro Power (Pvt) Ltd on which EPL has substantial investment. Therefore, management of the Company decided to prepare Consolidated Financial Statements including all subsidiaries. Hence Joint Venture Profit share of AEN Palm Oil Processing (Pvt) Ltd previously recorded under Elpitiya Plantations PLC’s(EPL) books now recorded in the Consolidated Financial Statements as details given below.
62 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
5.3 Explanations to the transition to SLFRS (Contd.) Notes to the reconciliation of equity as at 1 April 2011, 31 March 2012 and total comprehensive income (“CI”) for the year ended 31 March 2012
Net Assets as At CI For year Ended Nature of Adjustment 31 March 2012 1 April 2011 31 March 2012
Removal of Profit Share (169,134,813) (90,683,264) (78,451,549) Accounting of Dividend received in Income Statement 62,520,518 22,565,620 39,954,898 (106,614,295) (68,117,644) -
D Provisions and Impairment Losses
1 Amount Receivables from Elpitiya Lifestyle Solutions (Pvt) Ltd (ELS) as interest free loans and current account balances were adjusted including provision / impairment losses and details are as follows.
Net Assets as At CI For year Ended Nature of Adjustment 31 March 2012 1 April 2011 31 March 2012
Impairment of Loan (29,937,386) (40,000,000) 10,062,614 Current Account Provision / Adjustment 1,413,297 (5,289,226) 6,702,523 (28,524,089) (45,289,226) 16,765,137
2 Provision for doubtful debtors Trade and other receivables amounting Rs. 6,000,000 has been provided as doubtful debtors.
Net Assets as At CI For year Ended Nature of Adjustment 31 March 2012 1 April 2011 31 March 2012
Provision for doubtful debtors (6,000,000) (6,000,000) - (6,000,000) (6,000,000) -
E Tangible Assets other than Immature/Mature Plantations
1 Changes to the estimation of new useful lives and residual values The high value of fully depreciated assets those are being used in commercial operations provided an objective evidence of estimation error in allocation of depreciation. Hence, the management reviewed the useful lives and residual values of all classes of the assets and identified that Plant & Machinery, Vehicles and equipment are mainly contributing to the deficiency.
Accordingly, the Electronic Machineries were segregated from Plant & Machinery, as a separate class of asset, and reduced its useful life into 10 years as those assets are having distinguishable useful life due to technical obsolesces. The useful lives of rest of the plant & machineries were increased to 20 years. The motor vehicles segregated to two classes i.e. utility and supervisory. The useful life of the utility vehicles increased to 10 years while the useful life of supervisory vehicles were increased to 08 years. The Tools were segregated from Equipment, as a separate class of asset, and reduced its useful life into 04 years. The useful life of the rest of equipment were reduced to 05 years.
Further management has reassessed the useful life of Civil Constructions and reduced its useful life into 20 years.
The changes were retrospectively adjusted to the Financial Statements in terms of transitional provision in SLFRS 1.
As a result, the net assets of opening Statement of Financial Position increased by Rs. 13,241,417 and 31 March 2012 increased by Rs.15,115,108. The depreciation in CI for year ended 31 March 2012 has been decreased by Rs. 1,873,691.
Elpitiya Plantations Plc Annual Report 2012/13 63 Notes to the Financial Statements Year Ended 31st March 2013
5.3 Explanations to the transition to SLFRS (Contd.) Notes to the reconciliation of equity as at 1 April 2011, 31 March 2012 and total comprehensive income (“CI”) for the year ended 31 March 2012
Net Assets as At CI For year Ended Nature of SLFRS adjustment 31 March 2012 1 April 2011 31 March 2012
Accumulated Depreciation as per SLAS 351,584,009 306,589,729 44,994,280 Accumulated Depreciation as per SLFRS 336,468,901 293,348,312 43,120,589 Total 15,115,108 13,241,417 1,873,691
F Immature & Mature Plantations Tea, rubber and other plantations were measured at cost less depreciation and amortization or impairment if any, under SLAS. The requirement of recognition the biological assets at its fair value under LKAS 41 has not been effected due to ruling issued on 02 March 2012, by The Institute of Chartered Accountants of Sri Lanka. According, the Company has elected to measure the bearer biological assets i.e. tea, rubber & oil palm using LKAS 16 - Property Plant & Equipment and continued the cost model of recording them. This measurement does not effect on the net assets in the Statement of Financial Position as at 1 April 2011, 31 March 2012 and Comprehensive Income for year ended 31 March 2012.
G Biological Assets - Timber Plantations LKAS 41 is only applicable for managed agricultural activity thus the fair value of managed trees was ascertained by professionally qualified valuers. As a result, the net assets of opening Statement of Financial position increased by Rs. 688,965,127 and 31 March 2012 increased by Rs. 714,268,747. The CI for the year ended 31 March 2012 has been increased by Rs.25,303,620 due to the gain on fair value of biological assets. Net assets as at CI for year ended Nature of Adjustment 31 March 2012 01 April 20111 31 March 2012
Cost of managed Timber Plantations 165,288,825 157,916,486 - Gain or (loss) of fair value of managed trees 714,268,747 688,965,127 25,303,620 Total 879,557,572 846,881,613 25,303,620
H Inventory
Changes in Classification of Nursery Stocks The tea, rubber and other nurseries were classified as Inventory under SLAS. Since the living plants scoped under the definition of biological assets in terms of LKAS 41, those nurseries were classified as biological assets. However, those are presented under inventory as previously. This classification does not effect on the net assets in the Statement of Financial Position as at 01 April 2011, 31 March 2012 and CI for year ended 31 March 2012.
Produce stock The produce stock of biological assets i.e. tea & rubber were valued at estimated selling price or since realized price interms of SLAS 32. With the conversion to the new accounting standards, the agricultural products that are the result of processing after harvest from biological assets i.e tea and rubber are required to carried at the lower of cost and estimated net realizable value in accordance with LKAS.
As a result, the net assets of opening Statement of Financial Position decreased by Rs. 67,008,986 and 31 March 2012 decreased by Rs. 21,286,542. Net assets as at 31 March 2012 01 April 2011 Nature of SLFRS adjustment Rs Rs
Valuation of tea and rubber stock at lower of cost or NRV (21,286,542) (67,008,986) Total (21,286,542) (67,008,986)
64 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
5.3 Explanations to the transition to SLFRS (Contd.) Notes to the reconciliation of equity as at 1 April 2011, 31 March 2012 and total comprehensive income (“CI”) for the year ended 31 March 2012
I Deferred tax liability
The deferred tax Liability has been recognised to the books of Elpitiya Plantations PLC, details are as follows.
Net assets as at CI for year ended Nature of SLFRS adjustment 31 March 2012 01 April 2011 31 March 2012
Recognizion of Deferred Tax Liability (11,000,793) (12,883,603) 1,882,810 Total (11,000,793) (12,883,603) 1,882,810
J Retained Earnings The changes up to 1 April 2011 due to SLFRS conversion adjusted though retained earnings. Retained earnings decreased by Rs.186,058,042 and Rs 158,310,611 as at 1 April 2011 and 31 March 2012 respectively.
Net assets as at 31 March 2012 01 April 2011 Nature of SLFRS adjustment Rs. Rs.
Effect on depreciation for the year by restatement of depreciation policy 15,115,108 13,241,417 Valuation of tea and rubber stock at lower of cost or NRV (21,286,542) (67,008,986) Deferred tax effect (11,000,793) (12,883,603) Provision for Elpitiya Lifestyle (Pvt) Ltd (28,524,089) (45,289,226) Provision for Doubtfull Receivables (6,000,000) (6,000,000) Removal of profit share of AEN Palm Oil Processing (Pvt) Ltd (169,134,813) (90,683,264) Addition of the Dividend received from AEN Palm Oil Processing (Pvt) Ltd 62,520,518 22,565,620 Total (158,310,611) (186,058,042)
Elpitiya Plantations Plc Annual Report 2012/13 65 Notes to the Financial Statements Year Ended 31st March 2013
6 REVENUE Group Company 2013 2012 2013 2012 Rs. Rs. Rs. Rs. 6. 1 Industry Segment Revenue Tea 2,174,098,272 1,737,471,929 2,174,098,272 1,737,471,929 Rubber 333,557,032 473,239,267 333,557,032 473,239,267 Oil Palm 322,161,486 263,868,658 322,161,486 263,868,658 Others 3,639,398 38,391,738 3,639,398 38,391,738 Total 2,833,456,187 2,512,971,592 2,833,456,187 2,512,971,592
6.2.a Segment Analysis - Segment Result - Company Tea Rubber Oil Palm Others Total 2012/2013 2011/2012 2012/2013 2011/2012 2012/2013 2011/2012 2012/2013 2011/2012 2012/2013 2011/2012 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Revenue 2,174,098,272 1,737,471,929 333,557,032 473,239,267 322,161,486 263,868,658 3,639,398 38,391,738 2,833,456,187 2,512,971,592 Operating Expenses Revenue Expenditure (1,708,674,734) (1,661,889,358) (188,135,098) (187,750,518) (92,238,662) (57,744,728) (826,487) 1,624,880 (1,989,874,981) (1,905,759,724) Depreciation/Amortisation (76,143,177) (72,067,270) (30,097,853) (28,107,399) (23,823,055) (22,212,141) (882,287) (930,234) (130,946,372) (123,317,044) Other non Cash Expenses-Gratuity (43,353,962) (91,729,326) (17,136,941) (35,775,918) (13,564,233) (28,272,261) (567,840) (1,184,029) (74,622,976) (156,961,534) Segmental Results 345,926,398 (88,214,025) 98,187,140 221,605,433 192,535,535 155,639,529 1,362,784 37,902,354 638,011,857 326,933,290
Gain on fair value of biological assets 32,859,733 25,303,620 Other Income 193,975,847 106,623,231 Administrative Expenses (157,803,932) (148,913,193) Management Fees (72,457,562) (24,076,744) Profit from Operating Activities 634,585,943 285,870,203
Finance Cost (138,992,366) (137,669,464) Income Tax (44,182,286) 1,882,810 Net Profit for the year 451,411,291 150,083,550
6.2.b Segment Assets
Non Current Assets Cost 2,937,598,687 2,789,670,625 1,161,173,148 1,089,783,223 919,091,859 861,378,853 38,475,953 36,072,420 5,056,339,647 4,776,905,121 Accumulated Amortisation/ Depreciation (652,962,200) (586,124,657) (258,102,707) (228,551,854) (204,293,474) (180,610,915) (8,552,338) (7,563,949) (1,123,910,719) (1,002,851,375) 2,284,636,488 2,203,545,968 903,070,442 861,231,368 714,798,384 680,767,939 29,923,615 28,508,471 3,932,428,928 3,774,053,746 Current Assets 266,104,777 201,141,303 26,574,095 28,926,177 8,848,881 5,904,576 370,441 247,281 301,898,194 236,219,337 2,550,741,264 2,404,687,271 929,644,536 890,157,546 723,647,265 686,672,515 30,294,055 28,755,752 4,234,327,122 4,010,273,083 Unallocated Non Current Assets Cost 143,372,104 143,372,104 Accumulated Depreciation/Amortisation (32,606,211) (22,604,165) 110,765,893 120,767,939 Current Assets 300,349,605 213,226,182 411,115,498 333,994,121 Total Non Current Assets 4,043,194,820 3,894,821,685 Total Current Assets 602,247,799 449,445,520
Total Assets 4,645,442,620 4,344,267,205
6.2.c Segment Liabilities
Non Current Liabilities 333,171,954 324,228,564 131,696,112 126,454,373 104,240,117 99,931,778 4,363,805 4,185,098 573,471,988 554,799,813 333,171,954 324,228,564 131,696,112 126,454,373 104,240,117 99,931,778 4,363,805 4,185,098 573,471,988 554,799,813
Current Liabilities 486,356,325 494,756,375 192,246,786 192,962,971 152,167,190 152,490,836 6,370,180 6,386,248 837,140,481 846,596,430
Unallocated Non Current Liabilities 793,375,709 952,827,808 Total Non Current Liabilities 1,366,847,697 1,507,627,621
Capital & Reserves 2,441,454,442 1,990,043,154 Total Equity and Liabilities 4,645,442,620 4,344,267,205
6.2.d Segment Capital Expenditure Cost 32,923,400 30,833,428 93,743,314 119,643,484 109,733,707 97,226,006 20,936,794 41,766,214 257,337,216 289,469,132
66 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
6.3. REVENUE - GROUP 2012/2013 2011/2012 Sale of Produce Rs. Rs.
Tea 2,174,098,272 1,737,471,929 Rubber 333,557,032 473,239,267 Oil Palm 322,161,486 263,868,658 Others 3,639,398 38,391,737 2,833,456,187 2,512,971,592 6.3.a . Segment Analysis - Segment Result - Group Tea Rubber Oil Palm Others Total 2012/2013 2011/2012 2012/2013 2011/2012 2012/2013 2011/2012 2012/2013 2011/2012 2012/2013 2011/2012 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Revenue 2,174,098,272 1,737,471,929 333,557,032 473,239,267 322,161,486 263,868,658 3,639,398 38,391,737 2,833,456,187 2,512,971,591 Operating Expenses Revenue Expenditure (1,708,674,734) (1,661,889,358) (188,135,098) (187,750,518) (92,238,662) (57,744,728) (826,487) 1,624,880 (1,989,874,981) (1,905,759,724) Depreciation/Amortisation (76,143,177) (72,067,270) (30,097,853) (28,107,399) (23,823,055) (22,212,141) (882,287) (930,234) (130,946,372) (123,317,044) Other non Cash Expenses-Gratuity (43,353,962) (91,729,326) (17,136,941) (35,775,918) (13,564,233) (28,272,261) (567,840) (1,184,029) (74,622,976) (156,961,533) Segmental Results 345,926,398 (88,214,025) 98,187,140 221,605,433 192,535,535 155,639,529 1,362,784 37,902,353 638,011,857 326,933,290
Gain on fair value of biological assets 32,859,733 25,303,620 Other Income 103,058,234 70,663,823 Administrative Expenses (160,412,290) (152,792,489) Management Fees (72,457,562) (24,076,744) Profit from Operating Activities 541,059,972 246,031,500
Finance Cost (138,992,366) (137,676,535) Income Tax (66,431,900) (7,291,458) Share of Joint Venture Profit 98,167,716 83,630,327 Net Profit for the year 433,803,422 184,693,834
6.3.b Segment Assets - Group Non Current Assets
Cost 2,937,598,687 2,789,670,625 1,161,173,148 1,089,783,223 919,091,859 861,378,853 38,475,953 36,072,420 5,056,339,647 4,776,905,121 Accumulated Amortisation/ Depreciation (652,962,200) (586,124,657) (258,102,707) (228,551,854 (204,293,474) (180,610,915) (8,552,338) (7,563,949) (1,123,910,719) (1,002,851,375) 2,284,636,488 2,203,545,968 903,070,442 861,231,368 714,798,384 680,767,939 29,923,615 28,508,471 3,932,428,928 3,774,053,746 Current Assets 266,104,777 201,141,303 26,574,095 28,926,177 8,848,881 5,904,576 370,441 247,281 301,898,194 236,219,337 2,550,741,264 2,404,687,271 929,644,536 890,157,546 723,647,265 686,672,515 30,294,055 28,755,752 4,234,327,122 4,010,273,083 Unallocated
Non Current Assets Cost 143,372,104 143,372,104 Accumulated Depreciation/Amortisation (32,606,211) (22,604,165) 110,765,893 120,767,939 Current Assets 305,478,487 213,226,182 416,244,380 333,994,121 Total Non Current Assets 4,263,893,337 4,012,572,628 Total Current Assets 546,999,483 455,073,191
Total Assets 4,810,892,820 4,467,645,819
6.3.c Segment Liabilities - Group
Non Current Liabilities 333,171,954 324,228,564 131,696,112 126,454,373 104,240,117 99,931,778 4,363,805 4,185,098 573,471,988 554,799,813 333,171,954 324,228,564 131,696,112 126,454,373 104,240,117 99,931,778 4,363,805 4,185,098 573,471,988 554,799,813
Total Current Liabilities 486,452,186 495,153,789 192,284,677 193,117,969 152,197,182 152,613,323 6,371,433 6,391,377 837,305,478 847,276,458
Unallocated Non Current Liabilities 882,822,371 982,079,987 Total Non Current Liabilities 1,456,294,359 1,536,879,800
Capital & Reserves 2,517,292,983 2,083,489,561 Total Equity and Liabilities 4,810,892,820 4,467,645,819
Elpitiya Plantations Plc Annual Report 2012/13 67 Notes to the Financial Statements Year Ended 31st March 2013
7. OTHER INCOME Group Company 2013 2012 2013 2012 Rs Rs Rs Rs
Profit from Refuse Tea Project 30,547,414 22,479,105 30,547,414 22,479,105 Profit on Hydro Power Project - Sheen MHP 24,841,048 24,312,076 24,841,048 24,312,076 Amortisation of Capital Grants 11,699,484 11,678,799 11,699,484 11,678,799 Income from Sub Lease 9,957,463 3,582,654 9,957,463 3,582,654 Interest Income 257,218 25,031 257,218 25,031 Sundry Income from Ceylon Choice Operations 398,954 2,426,005 398,954 2,426,005 Sale of Trees 18,024,034 - 18,024,034 - Others 7,332,619 5,966,105 7,332,619 5,966,105 Exchange Gain - 194,048 - 194,048 Dividend Income - - 90,917,613 35,959,408 103,058,234 70,663,823 193,975,847 106,623,231
8. FINANCE COST Group Company 2013 2012 2013 2012 Rs Rs Rs Rs
Overdraft Interest 28,426,629 12,664,254 28,426,629 12,657,183 Term Loan Interest 146,195,077 125,949,530 146,195,077 125,949,530 Interest on Government Lease 7,511,261 7,618,905 7,511,261 7,618,905 Variable Lease Rental 19,596,244 21,409,388 19,596,244 21,409,388 Lease Interest 3,841,815 5,618,407 3,841,815 5,618,407 Exchange Loss 1,524,488 - 1,524,488 - 207,095,514 173,260,484 207,095,514 173,253,413 Amount Capitalised (68,103,148) (35,583,949) (68,103,148) (35,583,949) 138,992,366 137,676,535 138,992,366 137,669,464
9. PROFIT BEFORE TAXATION IS STATED AFTER CHARGING Group Company 2013 2012 2013 2012 Rs Rs Rs Rs
Auditors fees 2,097,000 1,833,000 1,700,000 1,474,000 Depreciation/Amotrisation 131,061,390 120,771,827 131,061,390 120,771,827 Define Benefit Plan Cost 74,622,975 156,894,944 74,622,975 156,894,944 Defined Contributions Plan Cost-EPF & ETF 135,006,629 116,243,462 135,006,629 116,243,462 Others-Staff Cost (Including Estates Employees) 1,176,833,603 1,040,954,409 1,176,833,603 1,040,954,409 Director fees 1,125,000 720,000 1,125,000 720,000 Donations - 30,000 - 30,000
68 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
10. TAX EXPENS Group Company (A) Income Statement 2013 2012 2013 2012 Rs Rs Rs Rs
(I) Current Tax Expense Income taxes on current year’s profit Company 12,310,072 - 12,310,072 - Joint Ventures 22,249,614 9,174,268 - - Total 34,559,686 9,174,268 12,310,072 -
(II) Deferred Tax Expense Originating and reversal of temporary difference Company 31,872,214 (1,882,810) 31,872,214 (1,882,810) Joint Ventures - - - - Total 31,872,214 (1,882,810) 31,872,214 (1,882,810) Tax expense 66,431,900 7,291,458 44,182,286 (1,882,810)
The Company is liable for income tax at the rate of 28% on its profit from manufacture & at the rate of 10% agriculture. The carried forward tax loss of the Company as at 31 March 2013, amounts to Rs.1,285,402,826/- (provisional) (2011/2012 - Rs.1,374,469,840/-).
Group Company (B) Reconciliation of Accounting Profit to Income Tax Expense 2013 2012 2013 2012 For the year ended 31st March, Rs Rs Rs Rs
Accounting Profit/(Loss) Before Tax 500,235,322 191,985,292 495,593,577 148,200,740 Aggregate Disallowed items 274,377,203 328,577,751 274,119,984 328,577,751 Aggregate Allowed items (520,135,341) (502,730,953) (515,493,596) (502,730,953) Tax Exempt Income - (47,172,751) - (47,172,751) Business Profit/(Loss) 254,477,184 (29,340,661) 254,219,965 (73,125,213) Interest Income - - 257,219 - Tax Loss Bought Forward & Utilized (89,067,014) - (89,067,014) -
Total Assessable Income/Taxable Income 165,410,170 (29,340,661) 165,410,170 (73,125,213)
Income Tax @ 10% 16,541,017 - 16,541,017 -
Provided in the Accounts 17,000,000 - 17,000,000 - Last Year Under/(Over) Provision (4,689,928) - (4,689,928) - 12,310,072 - 12,310,072 -
Elpitiya Plantations Plc Annual Report 2012/13 69 Notes to the Financial Statements Year Ended 31st March 2013
11. EARNINGS PER SHARE AND DIVIDEND PER SHARE
11.1 Earnings per Share
Basic earnings per Share The computation of the basic earnings per share is based on profit attributable to ordinary shareholders for the year divided by weighted average number of ordinary shares outstanding during the year and calculated as follows
Group Company 2013 2012 2013 2012 For the year ended 31st March, Rs Rs Rs Rs
(A) Amount used as the Numerator Profit attributable to ordinary shareholders (Rs.) 434,026,934 184,886,011 451,411,291 150,083,550
(B) Amount used as the Denominator Weighted average number of ordinary shares 72,866,430 72,866,430 72,866,430 72,866,430 Basic earnings per share (Rs. ) 5.96 2.54 6.20 2.06
11.2 Dividend per Share Group Company 2013 2012 2013 2012 For the year ended 31st March Rs Rs Rs Rs
First & final proposed dividend - 26,231,915 - 26,231,915 Number of ordinary shares 72,866,430 72,866,430 72,866,430 72,866,430 Dividend per share (Rs.) - 0.36 - 0.36
12. LEASEHOLD PROPERTY, PLANT & EQUIPMENT
Group Company As at As at As at 31st March, 2013 2012 1 April 2011 2013 2012 1 April 2011 Notes Rs. Rs. Rs. Rs. Rs. Rs.
Right-to-use of land 12.1 169,653,676 174,920,100 180,186,524 169,653,676 174,920,100 180,186,524 Immovable leased bearer biological assets 12.2.1 154,364,457 166,942,497 179,520,537 154,364,457 166,942,497 179,520,537 Immovable Leased assets (other than right-to-use land and bearer biological assets) 12.2.2 17,172,951 20,142,466 23,111,981 17,172,951 20,142,466 23,111,981 341,191,084 362,005,063 382,819,042 341,191,084 362,005,063 382,819,042
12.1 Right-to-use of Land “Right-To-Use of Land on Lease” as above was previously titled “Leasehold Right to Bare Land”. The change is in order to comply with Statement of Recommended Practice (SoRP) issued by the Institute of Chartered Accountants of Sri Lanka dated 19 December 2012. Such leases have been executed for all estates for a period of 53 years.
This right-to-use land is amortized over the remaining lease term or useful life of the right whichever is shorter and is disclosed under non-current assets. The Statement of Recommended Practice (SoRP) for right-to-use of land does not permit further revaluation of right-to-use land. The values taken into the Statement of Financial Position as at 18 June 1992 and amortization of the right to use of land up to 31 March 2013 are as follows.
70 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
Group Company As at As at As at 31st March, 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.
Capitalised Value As at 1 April 279,120,479 279,120,479 279,120,479 279,120,479 279,120,479 279,120,479 As at 31 March 279,120,479 279,120,479 279,120,479 279,120,479 279,120,479 279,120,479
Amortisation As at 1 April 104,200,379 98,933,955 93,667,531 104,200,379 98,933,955 93,667,531 Amortisation for the year 5,266,424 5,266,424 5,266,424 5,266,424 5,266,424 5,266,424 As at 31 March 109,466,803 104,200,379 98,933,955 109,466,803 104,200,379 98,933,955
Carrying amount 169,653,676 174,920,100 180,186,524 169,653,676 174,920,100 180,186,524
12.2 Immovable Estate Assets on Finance Lease Other Than Right to Use of Land In terms of the ruling of the UITF of the Institute of Chartered Accountants of Sri Lanka prevailed at the time of privatisation of plantation estates, all immovable assets in these estates under finance leases have been taken into the books of the Company retroactive to 22nd June 1992. For this purpose, the Board decided at its meeting on 8th March, 1995, that these assets be restated at their book values as they appear in the books of the JEDB/SLSPC, on the day immediately preceding the date of formation of the Company. These assets are taken into the Statement of Financial Position as at 22nd June, 1992 and amortisation of immovable leased assets to 31 March 2013 are as follows.
12.2.1 Immovable Leased Bearer Biological Assets
Group Company Immature Mature Immature Mature Plantations Plantations Total Plantations Plantations Total
Revaluation as at 22.06.1992 283,368,199 95,362,391 378,730,590 283,368,199 95,362,391 378,730,590
Transferred to Mature Plantations (283,368,199) 283,368,199 - (283,368,199) 283,368,199 -
Acquired by government 2002/2003 - (1,389,400) (1,389,400) - (1,389,400) (1,389,400)
Balance as at 31.03.2013 - 377,341,190 377,341,190 - 377,341,190 377,341,190
Accumulated amortization as at 01.04.2012 - 210,398,693 210,398,693 - 210,398,693 210,398,693
Amortization during the year - 12,578,040 12,578,040 - 12,578,040 12,578,040
Accumulated amortization as at 31.03.2013 - 222,976,733 222,976,733 - 222,976,733 222,976,733
Written down value as at 31.03.2013 - 154,364,457 154,364,457 - 154,364,457 154,364,457
Written down value as at 31.03.2012 - 166,942,497 166,942,497 - 166,942,497 166,942,497
Written down value as at 01.04.2011 - 179,520,537 179,520,537 - 179,520,537 179,520,537
Elpitiya Plantations Plc Annual Report 2012/13 71 Notes to the Financial Statements Year Ended 31st March 2013
12.2.2 Immovable Leased Assets (Other than right to use of land and Bearer biological assets)
Group Improvements Other Vested Unimproved Buildings Plant & Total to Land Assets Lands Machinery
Revaluation as at 22.06.1992 4,214,618 4,028,217 1,564,267 73,002,143 47,785,047 130,594,292
Acquired by government 2002/2003 - - - (3,390,250) - (3,390,250)
Balance as at 31.03.2013 4,214,618 4,028,217 1,564,267 69,611,893 47,785,047 127,204,042
Accumulated amortization as at 01.04.2012 1,958,061 1,505,652 450,098 55,362,718 47,785,047 107,061,576
Amortization during the year 79,521 76,004 29,514 2,784,476 - 2,969,515
Accumulated amortization as at 31.03.2013 2,037,582 1,581,656 479,612 58,147,194 47,785,047 110,031,091
Written down value as at 31.03.2013 2,177,036 2,446,561 1,084,655 11,464,699 - 17,172,951
Written down value as at 31.03.2012 2,256,557 2,522,565 1,114,169 14,249,175 - 20,142,466
Written down value as at 01.04.2011 2,336,078 2,598,569 1,143,683 17,033,651 - 23,111,981
Company Improvements Other Vested Unimproved Buildings Plant & Total to Land Assets Lands Machinery
Revaluation as at 22.06.1992 4,214,618 4,028,217 1,564,267 73,002,143 47,785,047 130,594,292
Acquired by government 2002/2003 - - - (3,390,250) - (3,390,250)
Balance as at 31.03.2013 4,214,618 4,028,217 1,564,267 69,611,893 47,785,047 127,204,042
ccumulated amortization as at 01.04.2012 1,958,061 1,505,652 450,098 55,362,718 47,785,047 107,061,576
Amortization during the year 79,521 76,004 29,514 2,784,476 - 2,969,515
Accumulated amortization as at 31.03.2013 2,037,582 1,581,656 479,612 58,147,194 47,785,047 110,031,091
Written down value as at 31.03.2013 2,177,036 2,446,561 1,084,655 11,464,699 - 17,172,951
Written down value as at 31.03.2012 2,256,557 2,522,565 1,114,169 14,249,175 - 20,142,466
Written down value as at 01.04.2011 2,336,078 2,598,569 1,143,683 17,033,651 - 23,111,981
72 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
13. FREEHOLD PROPERTY, PLANT & EQUIPMENT - GROUP
Cost Balance as at Additions for Disposals Balance as at Balance as at Balance as at 01/04/2012 the year during the year 31/03/2013 31/03/2012 01 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.
Buildings 19,974,422 - - 19,974,422 19,974,422 19,974,422 Motor Vehicles 64,404,873 529,000 - 64,933,873 64,404,873 62,161,516 Plant & Machinery 149,913,572 8,864,283 - 158,777,855 149,913,572 140,094,430 Furniture & Fittings 10,860,817 261,546 - 11,122,363 10,860,817 10,823,969 Equipment 53,372,640 2,465,862 - 55,838,502 53,372,640 52,609,673 Water Sanitation 232,787,601 2,606,044 - 235,393,645 232,787,601 232,457,132 531,313,925 14,726,735 - 546,040,660 531,313,925 518,121,142
Assets on Sheen Mini Hydro Project
Plant & Machinery 57,744,429 - - 57,744,429 57,744,429 57,744,429 Equipment 4,147,454 - - 4,147,454 4,147,454 4,147,454 Motor Vehicles 99,889 - - 99,889 99,889 99,889 Civil Constructions & Other 81,380,332 - - 81,380,332 81,380,332 81,380,332 143,372,104 - - 143,372,104 143,372,104 143,372,104
Assets Acquired on Finance Lease
Plant & Machinery 51,173,154 - - 51,173,154 51,173,154 30,159,784 Motor Vehicles 73,280,594 - - 73,280,594 73,280,594 73,280,594 124,453,748 - - 124,453,748 124,453,748 103,440,378 799,139,777 14,726,735 - 813,866,512 799,139,777 764,933,624
Accumulated Depreciation Balance as at Charge for depreciation Balance as at Balance as at Balance as at 01/04/2012 the Year on disposal 31/03/2013 31/03/2012 01 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.
Buildings 4,986,547 503,530 - 5,490,077 4,986,547 4,483,017 Motor Vehicles 59,470,225 1,122,337 - 60,592,562 59,470,225 58,410,522 Plant & Machinery 88,740,090 8,070,782 - 96,810,872 88,740,090 81,404,182 Furniture & Fittings 7,153,795 613,986 - 7,767,781 7,153,795 6,562,757 Equipment 46,347,427 5,004,940 - 51,352,367 46,347,427 41,145,300 Water Sanitation 68,306,403 11,734,257 - 80,040,660 68,306,403 56,624,859 275,004,487 27,049,832 - 302,054,319 275,004,487 248,630,637
Assets on Sheen Mini Hydro Project
Plant & Machinery 9,781,186 2,877,434 - 12,658,620 9,781,186 6,903,752 Equipment 2,799,430 822,155 - 3,621,585 2,799,430 1,977,275 Motor Vehicles 37,456 12,485 - 49,941 37,456 24,971 Civil Constructions & Other 12,207,049 4,069,016 - 16,276,065 12,207,049 8,138,033 24,825,121 7,781,090 - 32,606,211 24,825,121 17,044,031 Assets Acquired on Finance Lease
Plant & Machinery 12,851,523 5,825,000 - 18,676,523 12,851,523 8,282,885 Motor Vehicles 23,787,770 3,662,137 - 27,449,907 23,787,770 19,390,759 36,639,293 9,487,137 - 46,126,430 36,639,293 27,673,644 336,468,901 44,318,059 - 380,786,960 336,468,901 293,348,312
Written Down Value 462,670,876 - - 433,079,552 462,670,876 471,585,312
Capital Work in Progress Balance as at Additions for Balance as at Balance as at Balance as at 01/04/2012 the year Transfers 31/03/2013 31/03/2012 01 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.
Capital Work - in - Progress 22,895,492 139,055,165 (755,481) 161,195,176 22,895,492 6,599,172 22,895,492 139,055,165 (755,481) 161,195,176 22,895,492 6,599,172 Total Carrying Value 485,566,368 109,463,841 (755,481) 594,274,728 485,566,368 478,184,484
Elpitiya Plantations Plc Annual Report 2012/13 73 Notes to the Financial Statements Year Ended 31st March 2013
13. FREEHOLD PROPERTY, PLANT & EQUIPMENT - COMPANY
Cost Balance as at Additions for Disposals Balance as at Balance as at Balance as at 01/04/2012 the year during the year 31/03/2013 31/03/2012 01 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.
Buildings 19,974,422 - - 19,974,422 19,974,422 19,974,422 Motor Vehicles 64,404,873 529,000 - 64,933,873 64,404,873 62,161,516 Plant & Machinery 149,913,572 8,864,283 - 158,777,855 149,913,572 140,094,430 Furniture & Fittings 10,860,817 261,546 - 11,122,363 10,860,817 10,823,969 Equipment 53,372,640 2,465,862 - 55,838,502 53,372,640 52,609,673 Water Sanitation 232,787,601 2,606,044 - 235,393,645 232,787,601 232,457,132 531,313,925 14,726,735 - 546,040,660 531,313,925 518,121,142
Assets on Sheen Mini Hydro Project
Plant & Machinery 57,744,429 - - 57,744,429 57,744,429 57,744,429 Equipment 4,147,454 - - 4,147,454 4,147,454 4,147,454 Motor Vehicles 99,889 - - 99,889 99,889 99,889 Civil Constructions & Other 81,380,332 - - 81,380,332 81,380,332 81,380,332 143,372,104 - - 143,372,104 143,372,104 143,372,104
Assets Acquired on Finance Lease
Plant & Machinery 51,173,154 - - 51,173,154 51,173,154 30,159,784 Motor Vehicles 73,280,594 - - 73,280,594 73,280,594 73,280,594 124,453,748 - - 124,453,748 124,453,748 103,440,378 799,139,777 14,726,735 - 813,866,512 799,139,777 764,933,624
Accumulated Depreciation Balance as at Charge for depreciation Balance as at Balance as at Balance as at 01/04/2012 the Year on disposal 31/03/2013 31/03/2012 01 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.
Buildings 4,986,547 503,530 - 5,490,077 4,986,547 4,483,017 Motor Vehicles 59,470,225 1,122,337 - 60,592,562 59,470,225 58,410,522 Plant & Machinery 88,740,090 8,070,782 - 96,810,872 88,740,090 81,404,182 Furniture & Fittings 7,153,795 613,986 - 7,767,781 7,153,795 6,562,757 Equipment 46,347,427 5,004,940 - 51,352,367 46,347,427 41,145,300 Water Sanitation 68,306,403 11,734,257 - 80,040,660 68,306,403 56,624,859 275,004,487 27,049,832 - 302,054,319 275,004,487 248,630,637
Assets on Sheen Mini Hydro Project
Plant & Machinery 9,781,186 2,877,434 - 12,658,620 9,781,186 6,903,752 Equipment 2,799,430 822,155 - 3,621,585 2,799,430 1,977,275 Motor Vehicles 37,456 12,485 - 49,941 37,456 24,971 Civil Constructions & Other 12,207,049 4,069,016 - 16,276,065 12,207,049 8,138,033 24,825,121 7,781,090 - 32,606,211 24,825,121 17,044,031 Assets Acquired on Finance Lease
Plant & Machinery 12,851,523 5,825,000 - 18,676,523 12,851,523 8,282,885 Motor Vehicles 23,787,770 3,662,137 - 27,449,907 23,787,770 19,390,759 36,639,293 9,487,137 - 46,126,430 36,639,293 27,673,644 336,468,901 44,318,059 - 380,786,960 336,468,901 293,348,312
Written Down Value 462,670,876 - - 433,079,552 462,670,876 471,585,312
Capital Work in Progress Balance as at Additions for Balance as at Balance as at Balance as at 01/04/2012 the year Transfers 31/03/2013 31/03/2012 01 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.
Capital Work - in - Progress 958,814 1,108,081 (755,481) 1,311,414 950,814 1,595,874 958,814 1,108,081 (755,481) 1,311,414 950,814 1,595,874 Total Carrying Value 463,629,690 1,108,081 (755,481) 434,390,966 463,629,690 473,181,186
74 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
14 BIOLOGICAL ASSETS 14.1 IMPROVEMENTS TO LEASEHOLD PROPERTY (BEARER BIOLOGICAL ASSETS)
Immature Plantations Mature Plantations Cost Tea Rubber Oil Palm Other Total Tea Rubber Oil Palm Other Total Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
As at 1st April 150,065,511 462,030,434 211,673,890 8,503,263 832,273,098 664,090,955 512,494,267 364,827,055 42,811,171 1,584,223,448 Additions during the year 32,923,400 93,743,315 109,733,707 1,675,164 238,075,586 - - - - - Transfers (from)/to (48,798,453) (82,050,300) (2,806,739) (24,108) (133,679,600) 48,798,453 82,050,300 2,806,739 24,108 133,679,600 As at 31st March 134,190,458 473,723,449 318,600,858 10,154,319 936,669,084 712,889,408 594,544,567 367,633,794 42,835,279 1,717,903,048
Depreciation As at 1st April - - - - - 112,232,803 81,357,649 73,507,031 228,504 267,325,987 Charge for the year - - - - - 19,922,729 25,624,713 18,241,353 2,140,558 65,929,353 As at 31st March - - - - - 132,155,532 106,982,362 91,748,384 2,369,062 333,255,340 Carrying amount 134,190,458 473,723,449 318,600,858 10,154,319 936,669,084 580,733,876 487,562,205 275,885,410 40,466,217 1,384,647,708
Group Company As at As at Cost 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs
As at 1st April 2,416,496,546 2,158,335,875 1,982,635,079 2,416,496,546 2,158,335,875 1,982,635,079 Additions during the year 238,075,586 258,160,678 175,700,796 238,075,586 258,160,678 175,700,79 Transfers (from)/to ------As at 31st March 2,654,572,132 2,416,496,553 2,158,335,875 2,654,572,132 2,416,496,553 2,158,335,875
Depreciation As at 1st April 267,325,987 210,488,734 169,458,890 267,325,987 210,488,734 169,458,890 Charge for the year 65,929,353 56,837,259 41,029,844 65,929,353 56,837,259 41,029,844 As at 31st March 333,255,340 267,325,993 210,488,734 333,255,340 267,325,993 210,488,734 Carrying amount 2,321,316,792 2,149,170,560 1,947,847,141 2,321,316,792 2,149,170,560 1,947,847,141
These are investments in Mature/Immature Plantations since the formation of the Company. The assets (including plantation assets) taken over by way of estate leases are set out in Note 12 to the Financial Statements. Further investments in Immature Plantations taken over by way of leases are shown in this note. When such Plantations become mature, the additional investments since taken over to bring them to maturity are transferred from Immature to Mature.
The requirement of recognition of bearer biological assets at its fair value less cost to sell under LKAS 41 was superseded by the ruling issued on 02 March 2012, by The Institute of Chartered Accountants of Sri Lanka. Accordingly, the Company has elected to measure the bearer biological assets at cost using LKAS 16 – Property Plant & Equipment.
During the year Company has capitalised Borrowing Cost amounting to Rs 68,103,148. (2012-Rs 35,583,949).
14.2 BIOLOGICAL ASSETS - TIMBER PLANTATION Group Company As at As at Consumable Biological Assets 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.
As at 1 April 879,557,572 846,881,613 157,916,486 879,557,572 846,881,613 157,916,486 Increase due to development 4,182,297 7,372,339 - 4,182,297 7,372,339 - Decrease due to harvest (30,762,434) - - (30,762,434) - - Gain/(loss) arising from changes in fair value less cost to sell 32,859,733 25,303,620 688,965,127 32,859,733 25,303,620 688,965,127 As at 31 March 885,837,168 879,557,572 846,881,613 885,837,168 879,557,572 846,881,613
Managed trees include commercial timber plantations cultivated on estates. The cost of immature trees is treated as approximate fair value particularly on the ground of little biological transformation has taken place and impact of the biological transformation on price is not material. The fair value of managed trees was ascertained since the LKAS 41 is only applicable for managed agricultural activities in terms of the ruling issued by The Institute of Chartered Accountants of Sri Lanka. The valuation was carried by Mr K.T.D.Tissera, chartered valuers, using Discounted Cash Flow (DCF) methods. In ascertaining the fair value of timber, physical verification was carried covering all the estates.
Elpitiya Plantations Plc Annual Report 2012/13 75 Notes to the Financial Statements Year Ended 31st March 2013
- - 10 10 10 Rs. As at 29,658,770 29,658,770 29,658,800 1 April 2011
- 10 10 10 10 Rs. 2012 10,800,010 10,800,010 29,658,770 29,658,770 40,458,800
10 10 10 10 10 10 Rs. 2013 Company 30,800,010 30,800,010 60,458,810 60,458,810 29,658,770 29,658,770
- - - - Rs. As at 97,776,414 97,776,414 97,776,414 1 April 2011
- - - - Rs. Group 2012 136,273,065 136,273,065 136,273,065
- - - -
Rs. 2013
121,273,565 Rs. 121,273,565 121,273,565 14%
- 50% 50% 100% As at 33.33%
858,560,728 858,560,728 858,560,728 1 April 2011
- % Holding 50% 50%
2012 100% 33.33% Rs. 13%
50% 50% 50% 2013 100% 885,837,168 885,837,168 885,837,168 33.33%
Rs. 12% 924,260,706 924,260,706 924,260,706 924,260,706
Joint Venture Subsidiary Subsidiary Subsidiary Joint Venture
Relationship
The current Price of the species of the timber per cubic foot taken as per the price list of State Timber Corporation. Timber as per the price of State The current list taken Price of the of the species timber per cubic foot When considering the market price of the estimated output of costs. standing and administrative , transportation harvesting Timber, average value of the market price was taken after deducting costs of - 13% Discount Rate periodTime of maturity at 20 years. estimated March, As at 31 Total - nil). There The are carryingno the commitments or (2012 for development amount of as biological pledged securitiesassets liabilities 2013 are year for nil for acquisition of bilogical assets. INVESTMENTS Timber Managed Investments Unquoted The valuations, as presented in the external valuation models based on net present values, take into account the long term exploitation of the timber plantations. plantations. timber the of exploitation term long the account into take values, present net on based models valuation externalthe in presented as valuations, The Because of the inherent uncertainty withassociated the valuation at fair value of the biological assets due theto volatility of the variables, their carrying value may differ from their realisable value. Hence, the sensitivityown assumptions. his 41 against used in the of the LKAS financial impact challenge reasonably the assumptions analysis regarding discount rate variations are included in this note allows every investor to The biological of assets EPL are mainly in cultivated leased lands. When measuring the value fair of the biological it assets was assumed that these concessions the account into taken value fair the of calculation the in included future in realized to expects content Timber normalcircumstances. at renewed be will and can of the the of the lease. expiration timber plants and not date age valuationas follows. are used for assumptions Key 1. 2. 3. 4. CONSUMABLE BIOLOGICAL ASSETS - MANAGED TREES Continued BIOLOGICAL ASSETS - MANAGED CONSUMABLE Sensitivity Analysis Sensitivity Analysis Sensitivity variation discount rate that show trees timber for made Simulations applied. rate discount the of changes to sensitive very are Position Financial of Statement the appearingin as Values value present of biological assets: on the net effect has the following discount rate future a rise 1% of the by or decrease estimated Company
Carrying amount Elpitiya Dian Hong Ging Ya Tea Company (Pvt) Ltd Company Tea Elpitiya Dian Hong Ging Ya EPP Hydro Power (Pvt) Ltd Power EPP Hydro Water Villas (Pvt) Ltd Villas Water Tea Country Homes (Pvt) Ltd Tea AEN Palm Oil Processing (Pvt) Ltd Oil Processing AEN Palm March, As at 31
15.
14.3 14.3.1
76 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
15.1 Investment in Joint Venture Group Company (Unquoted Investment) As at As at AEN Palm Oil Processing (Pvt) Ltd 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.
Number of Shares 2,996,012 2,996,012 2,996,012 2,996,012 2,996,012 2,996,012 Value of the Investment 121,273,565 136,273,065 97,776,414 29,658,770 29,658,770 29,658,770
Summarised Information of Joint Venture 2013 2012 2011 Rs. Rs. Rs.
Revenue 1,540,874,136 1,289,682,014 883,754,931 Profit Before Tax 294,503,149 250,890,981 104,012,519 Group’s Share of Profit Before Tax 98,167,716 83,630,327 34,670,840 Total Assets 412,186,748 528,567,043 389,514,768 Total Liabilities 110,028,868 127,382,550 103,820,228
15.2 Company’s investment in Elpitiya Lifestyle Solutions (Pvt) Ltd recorded at Zero value due to losses of that Company.
16. INVENTORIES Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.
Biological Assets - Nurseries 20,378,052 18,857,947 15,387,382 20,378,052 18,857,947 15,387,382 Biological Assets - Harvested Crop 253,216,501 184,580,496 222,368,559 253,216,501 184,580,496 222,368,559 Spares & Consumables 28,303,640 32,780,895 21,704,562 28,303,640 32,780,895 21,704,562 301,898,193 236,219,338 259,460,503 301,898,193 236,219,338 259,460,503
17. TRADE AND OTHER RECEIVABLES Group Company As at As at As at 31 March 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.
Produce Debtors 77,626,914 67,324,954 80,658,710 77,626,914 67,324,954 80,658,710 Advance and Prepayments 23,976,571 39,141,494 18,546,931 23,976,571 7,822,338 18,546,931 Employee Related Debtors 15,476,471 13,287,009 21,497,595 15,476,471 13,287,009 21,497,595 Other Debtors 49,835,692 26,098,545 31,978,653 49,835,692 26,098,545 31,978,653 VAT Recoverable - - 3,049,649 - - 3,049,649
166,915,648 145,852,002 155,731,538 166,915,648 114,532,846 155,731,538 Provision for bad and doubtful debts (7,095,760) (8,595,760) (7,595,760) (7,095,760) (8,595,760) (7,595,760) 159,819,888 137,256,242 148,135,778 159,819,888 105,937,086 148,135,778
Elpitiya Plantations Plc Annual Report 2012/13 77 Notes to the Financial Statements Year Ended 31st March 2013 ------Rs. As at 70,910 70,910 637,597 637,597 168,006 168,006 225,562 3,850,112 3,850,112 4,906,312 4,906,312 7,803,986 7,803,986 5,413,444 5,413,444 4,684,996 17,381,212 17,381,212 45,142,137 45,142,137 21,047,308 21,047,308 40,000,000 (6,805,603) (17,289,226) 1 April 2011 (40,000,000)
- - - - Rs. 2012 70,910 70,910 637,597 637,597 237,562 237,562 168,006 168,006 3,958,192 3,958,192 5,680,757 5,680,757 27,413,296 27,413,296 17,289,226 17,289,226 16,052,576 16,052,576 13,913,299 13,913,299 58,008,125 58,008,125 40,000,000 (17,289,226) (13,305,603) (40,000,000) Company
- - - - Rs. 2013 70,910 70,910 637,597 637,597 168,006 168,006 249,563 249,563 5,974,501 5,974,501 4,095,392 60,377,196 60,377,196 18,603,374 18,603,374 17,289,226 17,289,226 92,472,025 92,472,025 40,000,000 45,383,456 (17,289,226) (14,805,603) (40,000,000)
------Rs. 40 As at 70,910 70,910 225,562 6,877,480 6,877,480 7,803,986 7,803,986 4,684,996 17,381,212 17,381,212 30,166,706 30,166,706 40,000,000 (6,000,000) (17,289,226) 1 April 2011 (40,000,000)
------Rs. 40 2012 Group 70,910 70,910 237,562 237,562 1,721,811 1,721,811 31,511,037 31,511,037 17,289,226 17,289,226 13,913,299 13,913,299 40,000,000 (17,289,226) (12,500,000) (40,000,000)
------Rs. 40 2013 70,910 70,910 249,563 249,563 4,923,887 4,923,887 36,213,113 36,213,113 18,603,374 18,603,374 17,289,226 17,289,226 40,000,000 (17,289,226) (14,000,000) (40,000,000)
18.1 Note
Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Company Parent Joint Venture Company Related Joint Venture Joint Venture Joint Venture
Relationship Company Related
AMOUNTS DUE FROM RELATED COMPANIES RELATED AMOUNTS DUE FROM Less: Loan Impairment Elpitiya Lifestyle Solutions (Pvt) Ltd. - 40 Mn Loan Elpitiya Lifestyle Less: Impairment of interest free Loan to ELS Loan to free Less: Impairment of interest Total Tea Country Homes (Pvt) Ltd. Tea Meddecombra Power Company (Pvt) Ltd. Company Power Meddecombra (Pvt) Ltd. Power EPP Hydro New Peacock Cottages (Pvt)Ltd. Peacock Cottages New (Pvt) Ltd. Villas Water Aitken Spense Plantation Managements Ltd Managements Spense Plantation Aitken Elpitiya Lifestyle Solutions (Pvt) Ltd. - Current account Elpitiya Lifestyle (Pvt) Ltd. Company Dunsinane Power Elpitiya Lifestyle Solutions (Pvt) Ltd. - Loan Elpitiya Lifestyle Solutions (Pvt) Ltd. - 40 Mn Loan Elpitiya Lifestyle (Pvt ) Ltd. Oil Processing AEN Palm Elpitiya Tea Farmers (Pvt) Ltd. Farmers Elpitiya Tea As at 31 March March As at 31 18.
: Provision for doubtful receivables for : Provision 18.1
78 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
19. CASH AND CASH EQUIVALENTS Group Company As at As at As at 31 March 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.
19.1 Favorable balances Cash at bank 75,105,590 69,729,664 69,842,686 74,900,597 69,729,664 69,842,686 Total 75,105,590 69,729,664 69,842,686 74,900,597 69,729,664 69,842,686
19.2 Unfavorable balances Bank overdraft 213,193,282 237,127,720 38,610,858 213,193,282 236,596,612 38,610,858 Total 213,193,282 237,127,720 38,610,858 213,193,282 236,596,612 38,610,858
The securities pledged have been disclosed in Note 28 to the financial statements.
20. STATED CAPITAL Group As at As at 31 March 2013 2012 1 April 2011 Rs. Rs. Rs. Issued & fully paid-ordinary shares Beginning of the year 72,866,430 72,866,430 36,433,215 Share Sub Division During the Year - - 36,433,215 Ordinary Shares Including Two golden shares held by the Treasury which has Special rights 72,866,430 72,866,430 72,866,430
Value of Issued and fully paid shares Ordinary shares Including one golden shares held by the Treasury which has Special rights 694,236,120 694,236,120 694,236,120 694,236,120 694,236,120 694,236,120
Company As at As at 31 March 2013 2012 1 April 2011 Rs. Rs. Rs. Issued & fully paid-ordinary shares Beginning of the year 72,866,430 72,866,430 36,433,215 Share Sub Division During the Year - - 36,433,215 Ordinary Shares Including Two golden shares held by the Treasury which has Special rights 72,866,430 72,866,430 72,866,430
Value of Issued and fully paid shares Ordinary shares Including one golden shares held by the Treasury which has Special rights 694,236,120 694,236,120 694,236,120 694,236,120 694,236,120 694,236,120
Elpitiya Plantations Plc Annual Report 2012/13 79 Notes to the Financial Statements Year Ended 31st March 2013
- - - Rs. Rs. Total Total Total As at As at 38,610,858 38,610,858 19,946,470 19,946,470 75,826,000 75,826,000 75,000,000 75,000,000 1 April 2011 1 April 2011 105,812,619 105,812,619 567,500,000 567,500,000 256,888,056 1,139,584,003 1,139,584,003 1,139,584,003 1,139,584,003 1,139,584,003
- Rs. Rs. 2012 2012 Total Total Total 67,690,142 67,690,142 29,252,179 29,252,179 32,041,656 32,041,656 75,000,000 75,000,000 75,000,000 461,900,000 461,900,000 236,596,612 236,596,612 235,823,779 235,823,779 1,213,304,368 1,184,052,189 1,184,052,189 1,184,052,189 1,184,052,189
2011 2011
------Rs. Rs. after after after 05 years 05 years 9,437,704 Repayable Repayable Repayable Repayable 9,437,704 9,437,704 9,437,704 9,437,704 9,437,704 9,437,704
- - - - 561,430,537 561,430,537 Rs. Rs. Repayable Repayable Repayable Repayable 29,252,179 29,252,179 22,361,196 22,361,196 29,870,390 29,870,390 581,245,012 551,992,833 551,992,833 173,661,247 173,661,247 326,100,000 326,100,000 551,992,833 551,992,833 than 05 years than 05 years after 1 year Less 1 year after Less 1 year after
590,682,716
2012 2012
- Rs. Rs. 1 year 1 year within within 531,108 531,108 Repayable Repayable 9,680,460 52,724,828 52,724,828 75,000,000 75,000,000 37,819,752 37,819,752 75,000,000 75,000,000 623,152,760 622,621,652 622,621,652 236,596,612 236,596,612 622,621,652 622,621,652 135,800,000 135,800,000
- - Rs. Rs. 2013 2013 Total Total Total 89,446,662 29,870,342 29,870,342 22,888,444 931,067,270 931,067,270 212,515,202 212,515,202 127,000,000 127,000,000 213,193,282 213,193,282 931,067,270 931,067,270 325,600,000 1,020,513,932
------Rs. Rs. after after after after 05 years 05 years Repayable Repayable Repayable Repayable
- - - - Rs. Rs. 7,841,133 7,841,133 Repayable Repayable Repayable Repayable 14,753,140 14,753,140 475,107,276 89,446,662 385,660,614 385,660,614 385,660,614 385,660,614 153,666,341 153,666,341 209,400,000 than 05 years than 05 years after 1 year Less 1 year after Less 1 year after
475,107,276
2013 2013
385,660,614
- - - Rs. Rs. 1 year 1 year within within Repayable Repayable 8,135,304 8,135,304 58,848,861 58,848,861 22,029,209 545,406,656 127,000,000 127,000,000 213,193,282 213,193,282 116,200,000 116,200,000 545,406,656 545,406,656 545,406,656 545,406,656
21.1 Note
Long Term Loans Long Term (ADB Loans through DFCC) Term Loans Term Short Term Loans Short Term Tea Securitising Loan Tea Finance leases Finance Guaranteed Redeemable Debentures Debentures Redeemable Guaranteed Bank Overdraft Bank Overdraft
Bank Overdraft-(EPP Hydro Power (Pvt) Ltd) Power Hydro Bank Overdraft-(EPP Long Term Loan- DFCC (EPP Hydro Power (Pvt) Ltd) Power Loan- DFCC (EPP Hydro Long Term Company Group INTEREST BEARING LOANS AND BORROWINGS LOANS BEARING INTEREST INTEREST BEARING LOANS AND BORROWING LOANS BEARING INTEREST Interest Bearing Loans and Borrowings (Company) Interest 1 21.1.
21.1.2 21.1.3 21.1.4 21.1.5 21.1.6
21.1 21.
80 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
instalment of Rs 1.2 Mn. Plus Interest of Rs 1.2 instalment Repayment Terms of Terms 48 monthly installment of 48 monthly installment 60monthly installement of 60monthly installement Rs 1,562,500/- commencing from commencing from Rs 1,562,500/- Payable within 03 monthsPayable 120 equal monthly installments equal monthly installments 120 Rs 166,000 Rs 166,000 September 2011. 2011. September Payable within 03 monthsPayable commencing from 30.90.2003 commencing from 83 equal Monthly installments 83 equal Monthly installments Payable within 12 months within 12 Payable 120 equal monthly installments equal monthly installments 120 commencing from September 2011 September commencing from 13.12.2004 commencing from 83 equal Monthly installments 83 equal Monthly installments 96 equal monthly installments 96 equal monthly installments commencing from September 2011 September commencing from 13.04.2005 commencing from 17 monthly installment of monthly installment 17 84 equal monthly installments 84 equal monthly installments Rs 1.4 Mn. Each and final Rs 1.4 13.04.2004 commencing from 84 equal monthly installments 84 equal monthly installments 13.04.2004 commencing from 78 equal monthly installments equal monthly installments 78 20.12.2006 commencing from
(I) (II) (X) (II) (X) (II) (II) (V) (IX) (III) (IV) (VI) (VII) (VIII) Rate of Rate Interest
Rs. Rs. Total Total Total Total As At As At 94,392 826,000 208,333 1,944,453 1,944,453 4,333,322 27,097,478 27,097,478 38,762,574 38,762,574 37,705,389 37,705,389 66,554,734 66,554,734 75,000,000 75,000,000 75,000,000 75,000,000 75,826,000 75,826,000 90,700,000 20,300,000 1 April 2011 1 April 2011 105,812,619 105,812,619 256,888,056
- - - - Rs. Rs. Total Total Total Total As At As At 1,011,081 1,011,081 2,333,318 2,333,318 31.03.2012 31.03.2012 4,000,000 22,914,474 22,914,474 67,690,142 67,690,142 16,113,950 16,113,950 27,650,637 27,650,637 84,947,997 84,947,997 60,978,764 60,978,764 75,000,000 75,000,000 75,000,000 75,000,000 83,563,700 235,823,779 235,823,779
- - - - Rs. Rs. Total Total Total Total As At As At 77,709 77,709 333,314 333,314 7,066,374 7,066,374 5,130,374 5,130,374 31.03.2013 31.03.2013 52,000,000 51,475,580 51,475,580 17,595,885 17,595,885 70,549,414 70,549,414 90,156,894 90,156,894 29,870,342 29,870,342 75,000,000 75,000,000 127,000,000 127,000,000 212,515,202 212,515,202
------Rs. Rs. 2013 2013 Repayable Repayable Repayable Repayable 05 years after 05 years after
------Rs. Rs. - 2013 2013 300,000 7,541,133 7,541,133 7,841,133 7,841,133 Repayable Repayable Repayable Repayable 57,535,138 57,535,138 54,158,807 54,158,807 41,972,396 41,972,396 153,666,341 153,666,341 than 05 years than 05 years after 1 year Less 1 year after after 1 year Less 1 year after
- - - - Rs. Rs. 2013 2013 1 year 1 year within within 77,709 77,709 333,314 333,314 7,066,374 7,066,374 Repayable Repayable 4,830,374 4,830,374 9,503,184 9,503,184 13,014,276 13,014,276 10,054,752 10,054,752 58,848,861 58,848,861 35,998,087 35,998,087 75,000,000 75,000,000 52,000,000 22,029,209 127,000,000 127,000,000
Long Term Loans Long Term Loans Term Loans Short Term
NTB Loan ADB Loans (Through DFCC) ADB Loans (Through friendsH.N.B-(E Loan) HNB Money Market Loan Market HNB Money Loan - 1 Marketing Development Temporary Loan Temporary Development Marketing Seylan Bank Seylan NDB Loan Loan - 2 NDB (0920500305) Loan - 3 HNB - 40045642 Loan - 6 Loan - 7 (DFCC Wardana) INTEREST BEARING LOANS AND BORROWINGS LOANS BEARING INTEREST
21.1.1 21.1.2 21.1.3
21.
Elpitiya Plantations Plc Annual Report 2012/13 81 Notes to the Financial Statements Year Ended 31st March 2013
Repayment Terms of Terms 42 monthly installments 48 monthly installments monthly installments 72 monthly installments 72
(XI) (XII) (XIII) (XIV) Rate of Rate Interest
Rs. Total Total As At 27,149,965 27,149,965 19,946,470 19,946,470 (7,203,495) 19,400,000 19,400,000 45,500,000 1 April 2011 567,500,000 567,500,000 148,000,000 148,000,000 106,400,000 106,400,000 248,200,000 248,200,000
- Rs. Total Total As At 31.03.2012 (9,051,192) 41,092,848 41,092,848 32,041,656 32,041,656 78,200,000 78,200,000 29,500,000 131,000,000 131,000,000 461,900,000 461,900,000 223,200,000
- - Rs. Total Total As At 31.03.2013 28,190,175 28,190,175 (5,301,731) 36,000,000 22,888,444 106,000,000 106,000,000 183,600,000 183,600,000 325,600,000
------Rs. 2013 AWPLR + 2.25% per annum. AWPLR AWPLR +1.75% per annum. +1.75% AWPLR AWPLR + 1.95% per annum. + 1.95% AWPLR AWPLR + 1.5% per annum. + 1.5% AWPLR Short term money market rate. rate. market Short money term Short term money market rate. rate. market Short money term AWPLR-0.2% per annum. AWPLR-0.2% Repayable Repayable 05 years after (XIV) (XIII) (XII) (XI) (X) (IX)
(VIII)
- - - Rs. 2013 Repayable Repayable 17,519,337 17,519,337 14,753,140 14,753,140 (2,766,197) 75,000,000 75,000,000 134,400,000 134,400,000 209,400,000 than 05 years after 1 year Less 1 year after
- - Rs. 2013 1 year within Repayable 8,135,304 8,135,304 10,670,838 10,670,838 31,000,000 31,000,000 36,000,000 49,200,000 (2,535,534) 116,200,000 116,200,000
Short term money market rate. (Revised every 3 months) every (Revised rate. market Short money term 16.44% per annum. 16.44% AWDR+ 5% per annum. AWDR+ AWPLR + 3% (reviewed monthly) + 3% (reviewed AWPLR payments. on timely 9% per annum. 4% reduction AWDR+ payments. on timely per annum. 4% reduction 16% payments. on timely per annum. 4% reduction 15.55% (VII) (VI) (V) (IV) (III) (II)
(I)
Tea Securitising Loans Tea Leases Finance (Rs.75,000,000/-) Debentures Redeemable Guaranteed The above balance represents 03 Guaranteed Redeemable Debenture, for the value of Rs. 25,000,000/- each Debenture, for at the Fund. Redeemable par value of Rs. 25,000,000/- Trust each Plantations balance represents 03 (principalGuaranteed to sum) payable The above The of rate will interest be per 13.08% annum is payable semi-annually on or 30 before June December and until 31 the said debenture shall been have redeemed on 04 Debentures December 2012. the during Debentures agreement. has settled the Company year. in the invested debenture the conditions stated to adhere to ordinary fails if Company shares to be converted shall mandatorily AND BORROWINGS LOANS BEARING INTEREST National Development Bank Development National National Development Bank Development National Gross LiabilityGross National Development Bank Development National Less: Finance charges allocated to future periods future to allocated charges Less: Finance National Development Bank Development National Net liability Net State Bank of India-through NDB State
21. 21.1.4 21.1.5 21.1.6
82 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
22. DEFERRED INCOME Grants and Subsidies Group Company As at As at As at 31March 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.
22.1 Deferred Grants & and Subsidies 135,195,900 146,505,333 156,951,693 135,195,900 146,505,333 156,951,693 22.2 Sub Lease Income 47,942,639 49,276,907 49,759,970 47,942,639 49,276,907 49,759,970 183,138,539 195,782,240 206,711,663 183,138,539 195,782,240 206,711,663
22.1 Deferred Grants and Subsidies At the beginning of the year 146,505,333 156,951,693 128,301,074 146,505,333 156,951,693 128,301,074 Add: Grants received for the year 390,051 1,232,439 38,854,140 390,051 1,232,439 38,854,140 Less: Amortisation for the year (11,699,484) (11,678,799) (10,203,521) (11,699,484) (11,678,799) (10,203,521) At the end of the year 135,195,900 146,505,333 156,951,693 135,195,900 146,505,333 156,951,693
The company has received funding from the Plantation Housing and Social Wefare Trust and Asian Development Bank for the development of workers facilities such as re-roofing of lines, latrines, Water supply and sanitation etc. The amount spent are included under the relevant classification of Property , Plant & Equipment and the grant component is reflected under Deferred Grants and Subsidies. Further this includes the C.T.C Machinery subsidy which represents the funds received from Sri Lanka Tea Board in relation to C.T.C project.
22.2 Sub Lease Income Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.
At the beginning of the year 49,276,907 49,759,971 58,215,852 49,276,907 49,759,971 58,215,852 Add: Cash received for the year 1,516,518 2,311,106 1,292,901 1,516,518 2,311,106 1,292,901 Less: Amortisation for the year (2,850,786) (2,794,170) (9,748,782) (2,850,786) (2,794,170) (9,748,782) At the end of the year 47,942,639 49,276,907 49,759,970 47,942,639 49,276,907 49,759,970
23. DEFERRED TAX LIABILITY Group As at 31 March, 2013 2012 1 April 2011 Temporary Tax Effect Temporary Tax Effect Temporary Tax Effect Difference Difference Difference Rs Rs Rs Rs Rs Rs
As at 1 April (1,176,748,209) (11,000,793) (1,103,172,460) (12,883,603) - - Amount originating during the year (267,446,433) (31,872,214) (73,575,749) 1,882,810 (1,103,172,460) (12,883,603) As at 31 March (1,444,194,642) (42,873,006) (1,176,748,209) (11,000,793) (1,103,172,460) (12,883,603)
Temporary difference of Property, Plant and Equipment (175,106,086) (27,596,719) (155,480,419) (24,503,715) (136,157,003) (21,458,343) Immature/mature Plantations (2,321,316,791) (232,131,679) (2,149,170,560) (214,917,056) (1,947,847,141) (194,784,714) Temporary difference of biological asset (885,837,168) (88,583,717) (879,557,572) (87,955,757) (846,881,613) (84,688,161) Temporary difference Trade & other receivebles 7,095,760 1,118,292 7,595,760 1,197,092 7,595,760 1,197,092 Temporary difference Amount due from Related Companies 72,094,829 11,362,145 70,594,829 11,125,745 64,094,829 10,101,345 Temporary difference of retirement benefit obligation 573,471,988 90,379,186 554,799,913 87,436,450 464,154,667 73,150,776 Carried forward tax losses 1,285,402,826 202,579,486 1,374,469,840 216,616,448 1,291,868,041 203,598,402 On acquisition of subsidiary ------As at 31 March (1,444,194,642) (42,873,006) (1,176,748,209) (11,000,793) (1,103,172,460) (12,883,603)
Elpitiya Plantations Plc Annual Report 2012/13 83 Notes to the Financial Statements Year Ended 31st March 2013
23. DEFERRED TAX LIABILITY Company As at 31 March, 2013 2012 1 April 2011 Temporary Tax Effect Temporary Tax Effect Temporary Tax Effect Difference Difference Difference Rs Rs Rs Rs Rs Rs
As at 1 April (1,176,748,209) (11,000,793) (1,103,172,460) (12,883,603) - - Amount originating during the year (267,446,433) (31,872,214) (73,575,749) 1,882,810 (1,103,172,460) (12,883,603) As at 31 March (1,444,194,642) (42,873,006) (1,176,748,209) (11,000,793) (1,103,172,460) (12,883,603)
Temporary difference of Property, Plant and Equipment (175,106,086) (27,596,719) (155,480,419) (24,503,715) (136,157,003) (21,458,343) Immature/mature Plantations (2,321,316,791) (232,131,679) (2,149,170,560) (214,917,056) (1,947,847,141) (194,784,714) Temporary difference of biological asset (885,837,168) (88,583,717) (879,557,572) (87,955,757) (846,881,613) (84,688,161) Temporary difference Trade & other receivebles 7,095,760 1,118,292 7,595,760 1,197,092 7,595,760 1,197,092 Temporary difference Amount due from Related Companies 72,094,829 11,362,145 70,594,829 11,125,745 64,094,829 10,101,345 Temporary difference of retirement benefit obligation 573,471,988 90,379,186 554,799,913 87,436,450 464,154,667 73,150,776 Carried forward tax losses 1,285,402,826 202,579,486 1,374,469,840 216,616,448 1,291,868,041 203,598,402 On acquisition of subsidiary ------As at 31 March (1,444,194,642) (42,873,006) (1,176,748,209) (11,000,793) (1,103,172,460) (12,883,603)
The effective tax rate used to calculate deferred tax liability for all the Temporary Differences other than Biological Asset as at 31 Mrach, 2013 is 15.76% (2012-15.76%) for the company.
The effective tax rate used to calculate deferred tax liability for Biological Asset as at 31 March 2013 is 10% (2012-10%) for the company.
24. RETIREMENT BENEFIT OBLIGATIONS Group Company As at As at As at 31 March 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.
Movement in the Retirement Benefit Obligations As at 1 April 554,799,813 464,154,667 448,410,122 554,799,813 464,154,667 448,410,122 Current service cost 26,046,800 23,512,102 22,973,660 26,046,800 23,512,102 22,973,660 Interest cost 66,797,360 57,270,659 54,209,134 66,797,360 57,270,659 54,209,134 Actuarial loss/(Gain) (18,221,185) 76,112,183 1,285,735 (18,221,185) 76,112,183 1,285,735 74,622,975 156,894,944 78,468,529 74,622,975 156,894,944 78,468,529 629,422,788 621,049,611 526,878,651 629,422,788 621,049,611 526,878,651 Benefit paid by the plan (55,950,800) (66,249,798) (62,723,984) (55,950,800) (66,249,798) (62,723,984) As at 31 March 573,471,988 554,799,813 464,154,667 573,471,988 554,799,813 464,154,667
LKAS 19 requires the use of actuarial techniques to make a reliable estimate of the amount of retirement benefit that employees have earned in return for their service in the current and prior periods and discount that benefit using the Projected Unit Credit Method in order to determine the present value of the retirement benefit obligation and the current service cost. This require an entity to determine how much benefit is attributable to the current and prior periods and to make estimates about demographic variables and financial variables that will influence the cost of the benefit.
84 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
According to the actuarial valuation report issued by the actuarial valuer as at 31 March 2013 the actuarial present value of promised retirement benefits amounted to Rs. 573,471,988/=. If the company had provided for gratuity on the basis of 14 days wages & half months salary for each completed year of service, the liability would have been Rs. 535,875,019/=. Hence, there is a contingent asset of Rs.37,596,969/= , which would crystallise only if the company ceases to be a going concern.
The key assumptions used by Messers Piyal S Gunethilake & Associate include the following.
(i) Rate of Interest 12.25%
(ii) Rate of Salary Increase Workers 18% (every two years) Staff 10% (per annum)
(iii) Retirement Age Workers 60 years Staff 60 years
(iv) Daily Wage Rate Tea Rs. 380/- Rubber Rs. 380/-
Sensitivity Analysis Values appearing in the financial statements are very sensitive to the changes of financial and non-financial assumptions used. The sensitivity was carried for both the rate of wage increment and discount rate as key contributors to the entire obligation. Simulations made for retirement benefit obligation show that a rise or decrease by 1% of the rate of wage and discount rate has the following effect on the retirement benefit obligation:
Wage/Salary Increase Rate Rs. Rs. Rs. As at 31 March 2013 Mn Mn Mn
Rate of wage increment in every two years 8% 9% 10%
Retirement benefit obligation 544.20 573.50 606.00 544.20 573.50 606.00
Discount Rate Rs Rs Rs As at 31 March 2013 Mn Mn Mn
Rate of Discount 11.25% 12.25% 13.25%
Retirement benefit obligation 607.90 573.50 543.10 607.90 573.50 543.10
Elpitiya Plantations Plc Annual Report 2012/13 85 Notes to the Financial Statements Year Ended 31st March 2013
25. LIABILITY TO MAKE LEASE PAYMENT Group Company As at As at As at 31 March, 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs. Repayable after 5 Years Gross Liability 281,562,594 291,872,594 302,182,594 281,562,594 291,872,594 302,182,594 Less: Finance Cost allocated to future periods (112,713,581) (119,618,488) (126,654,359) (112,713,581) (119,618,488) (126,654,359) Net Liability 168,849,013 172,254,106 175,528,235 168,849,013 172,254,106 175,528,235
Repayable after 1 Year less than 5 Years Gross Liability 41,240,000 41,240,000 41,240,000 41,240,000 41,240,000 41,240,000 Less: Finance Cost allocated to future periods (28,385,463) (28,879,868) (29,355,258) (28,385,463) (28,879,868) (29,355,258) Net Liability 12,854,537 12,360,132 11,884,742 12,854,537 12,360,132 11,884,742
Repayable after 1 Year 181,703,550 184,614,238 187,412,977 181,703,550 184,614,238 187,412,977
Repayable within 1 Year Gross Liability 10,310,000 10,310,000 10,310,000 10,310,000 10,310,000 10,310,000 Less: Finance Cost allocated to future periods (7,399,312) (7,511,261) (7,618,905) (7,399,312) (7,511,261) (7,618,905) Net Liability 2,910,688 2,798,739 2,691,095 2,910,688 2,798,739 2,691,095
Total 184,614,238 187,412,977 190,104,072 184,614,238 187,412,977 190,104,072
26. TRADE AND OTHER PAYABLES Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Rs. Rs. Rs. Rs. Rs. Rs.
Trade Creditors 48,008,090 36,057,191 80,050,421 48,008,090 36,057,191 80,050,421 Employee Related Creditors 102,739,966 92,700,467 93,168,097 102,739,966 92,700,467 93,168,097 Other Creditors 115,810,322 71,641,728 105,323,132 115,645,322 71,492,808 105,208,172
As at 31 March 266,558,378 200,399,386 278,541,650 266,393,378 200,250,466 278,426,690
27. AMOUNTS DUE TO RELATED COMPANIES Group Company As at As at 2013 2012 1 April 2011 2013 2012 1 April 2011 Relationship Rs. Rs. Rs. Rs. Rs. Rs. Aitken Spence Plantation Managements Ltd. - Current Account Parent Company 8,566,728 6,172,602 22,084,413 8,566,728 6,172,602 22,084,413 Aitken Spence PLC (Other Expenditure) Related Company 4,371,309 1,859,777 2,434,354 4,371,309 1,859,777 2,434,354 AEN Palm Oil Processing (Pvt ) Ltd. Joint Venture 9,491,719 12,893,194 - 9,491,719 12,893,194 - 22,429,756 20,925,573 24,518,767 22,429,756 20,925,573 24,518,767
86 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
28. SECURITIES PLEDGED Following assets have been pledged as security for liabilities.
Name of Bank Loan Security Nature of Liability Carrying Amount Pledged Facility 2013 2012 Rs. Rs. Rs. Bank of Ceylon 75,000,000 Primary mortgage over estate produce consisting of Tea, Rubber, Overdraft 50,653,012 52,225,052 Oilpalm, Coffee, Coconuts, Clove & Paddy on estate. Primary floating mortgage bond for Rs. 25 Mn. over stock of estate produce consisting of Tea, Rubber, Oil Palm and Coconut stored at Dunsinane, Sheen, Fernlands and Medecombra Estates
at Pundaluoya.
Hatton National Bank 50,000,000 Primary floating mortgage bond for Rs. 10 Mn. over leasehold Overdraft 14,461,633 14,910,457 property at “Talgaswella Estate” in Galle. Corporate Guarantee of Aitken Spence Plantation Managements Ltd.
Hatton National Bank 10,000,000 Primary floating mortagage bond for Rs. 25 Mn. over lease hold E-Friends Loan 14,461,633 14,910,457 property “Gallinda Estate” at Mapagala, Galle.
Hatton National Bank 75,000,000 Primary floating mortgage bond for Rs. 75 Mn. over Money Market Loan 11,253,501 11,602,759 leasehold property at “Fernlands Estate” & “Harrow Estate” Pundaluoya,Nuwara Eliya.
Seylan Bank 90,700,000 Primary mortgage over leasehold rights to the land and Buildings Term Loan 25,602,404 26,396,987 of Elpitiya and Bentota Estates.
DFCC Bank 158,481,886 Primary mortgage over leasehold rights to the land and buildings Term Loan 35,286,145 36,382,410 of Nayapane, Deviturai & Newpeacock estates.
DFCC Bank 124,014,728 Further mortgage over leasehold rights to the land and the Term Loan 35,286,145 36,382,410 buildings of Nayapane, Deviturai & Newpeacock estates.
DFCC Bank 47,000,000 Secondary mortgage over the leasehold rights of Sheen estate Term Loan 10,896,049 11,234,213 together with building & machinery situated at Kadorapitiya.
DFCC Bank 18,000,000 Secondary mortgage over the leasehold rights of Sheen estate Term Loan 10,896,049 11,234,213 together with buildings & machinery situated at Kadorapitiya.
NDB 80,000,000 Primary Mortgage over lealehold rights of Lelwela Estate. Tea Securitising Loan 5,078,594 5,236,210 Corporate Guarantee of Aitken Spence Plantation Managements
Ltd.
NDB 150,000,000 Primary Mortgage over lealehold rights of Ketandola Estate, Tea Securitising Loan 17,708,408 18,280,476 Lelwala Estate & Gulugahakanda Estate. Further mortgage over future Tea receivables. Further Mortgage over leasehold rights of Lelwela Estate.
State Bank of India 250,000,000 Primary Mortgage over lealehold rights of Dunsinane Estate & Tea Securitising Loan 33,084,282 34,111,068 Meddacombra Estate.
NDB 115,000,000 Securitising of future Tea Sales. Tea Securitising Loan Securitising of future Tea Sales
NDB 100,000,000 Securitising of future Tea Sales. Short TermLoan Securitising of future Tea Sales
DFCC Bank 117,000,000 Primary mortgage over Share Of EPP Hydro Power Company (Pvt) Term Loan - - Ltd Held by Elpitiya Plantation PLC Primary mortgage over all project documents granted in favour of company. Primary mortgage over leasehold rights of the project land and immovable project assests inclusive of a hydro power plant.
Elpitiya Plantations Plc Annual Report 2012/13 87 Notes to the Financial Statements Year Ended 31st March 2013
29. CAPITAL COMMITMENTS 2013 2012 Followings are the capital commitments as at the balance sheet date. Rs. (Mn ) Rs. (Mn )
Approved by Board & Contracted for - -
Approved by Board & not Contracted for 270.58 270.00
30. CONTINGENCIES Contingent liabilities that may result, depending on the timing of the taxability of certain fair value adjustment amount to approximately Rs 3,285,973/=.
31. POST BALANCE SHEET EVENTS Subsequent to the balance sheet date, The Employers’ Federation of Ceylon signed a Plantation Workers Wage Collective Agreement with Trade Unions increasing the daily wage rate and attendance incentive to Rs.450/= and Rs.140/= respectively with effect 01 April 2013.
32. RELATED PARTY DISCLOSURES The details of the significant related party disclosures are as follows.
32.1 Transactions with the Parent and Related entities.
Company Relationship Nature of Charged/(Credited) Transaction 2013 2012 Rs. Rs.
Aitken Spence Plantation Parent Company Management Fees 56,000,000 22,400,000 Managements Ltd. Executive Staff Salaries & Expenses 21,844,805 19,400,083
Aitken Spence PLC Group Company Services & Sundries 4,569,539 4,451,720
Tea Country Homes (Pvt) Ltd. Group Company Professional & Secretarial Charges 278,624 267,313
Water Villas (Pvt) Ltd. Subsidiary Company Professional & Secretarial Charges 122,080 108,080
88 Elpitiya Plantations Plc Annual Report 2012/13 Notes to the Financial Statements Year Ended 31st March 2013
32.2 RELATED PARTY DISCLOSURES (CONT.)
Company Relationship Nature of Charged/(Credited) Transaction 2013 2012 Rs. Rs.
AEN Palm Oil Processing (Pvt) Ltd. Joint Venture Company Expenditure Incurred 552,000 555,360
Elpitiya Lifestyle Solutions (Pvt) Ltd. Joint Venture Company Expenditure Incurred 4,949,650 6,109,310
EPP Hydro Power (Pvt) Ltd Subsidiary Company Professional Fees & Secretarial Charges 311,200 2,236,197
Expenditure Incurred 16,269,090 8,126,066
Aitken Spence Technologies (Pvt) Ltd Related Company Expenditure Incurred 6,857,141 3,428,571
HNB Bank Related Company Loan Repayment 6,000,004 18,800,004
Finance Lease Repayment 5,537,411 4,463,698
DFCC Vardhana Related Company Loan Repayment 10,983,552 10,983,552
DFCC Bank Related Company ADB Loans Repayment 26,136,224 27,138,949
Lanka Commodity Brokers (Ltd) Related Company Tea Sales 158,136,155 102,347,713
32.3 Transactions with the Key Management Personnel of the Company and parent There are no transactions with the key management personnel of the company and its parent other than those disclosed in Note 9.
32.4 Other Related Party Transactions Guarantees given by Aitken Spence Plantation Managements Ltd on behalf of the company.
* Corporate Guarantee of Rs.7.467 Mn. for DFCC Loan 23338/C/002 30966
* Corporate Guarantee of Rs.175 Mn. for Bank of Ceylon Overdraft Facility.
* Corporate Guarantee of Rs.50 Mn. for HNB Permanent Overdraft Facility.
* Corporate Guarantee of Rs.75 Mn. for debentures
* Corporate Guarantee of Rs.80 Mn. for NDB Loan.
33. RELATED PARTY TRANSACTIONS There are no related party transactions other than those disclosed in Notes 15, 18, 27, 28 & 32 to the Financial Statements.
Elpitiya Plantations Plc Annual Report 2012/13 89 Value Added Statement
Figures in Rs.000’ Year ended As a Year ended As a 31.03.13 % 31.03.12 % Value Added
Turnover 2,833,456 2,512,972
Other Income 193,976 106,623 3,027,432 100 2,619,595 100 Purchase of goods and Services (1,445,539) (48) (1,203,956) (46) Total Value Added 1,581,893 52 1,415,639 54
Distributed as follows
as remuneration 1,311,840 82.93 1,157,198 81.74
To Government, as lease rental 27,107 1.71 29,028 2.05
To Lenders, as Interest on short & long term borrowings 111,885 7.07 108,641 7.67
Retained for re-investment and 131,061 8.29 120,772 8.53 future growth Depreciation 131,061 8.29 120,772 8.53 Reserves - - - - 1,581,893 100 1,415,639 100
90 Elpitiya Plantations Plc Annual Report 2012/13 nformation on states I Year Ended 31st March 2013 E
Cultivated Area (ha.) Total Annual Production Factory Details No. of Area Kg’000 Crop Workers Estate Tea Rubber Oil Palm Others Total (ha.) Tea Rubber OilPalm Manfd. NUWARAELIYA DISTRICT
Dunsinane 578.00 - - 51.75 629.75 790.00 1,026 - - Tea 942
Sheen 303.00 - - 88.25 391.25 503.75 629 - - Tea 641
Fernlands 380.99 - - 42.00 422.99 484.25 750 - - Tea 692
Meddecombra 474.50 - - 269.54 744.04 890.00 836 - - Tea 912
KANDY DISTRICT
New Peacock 289.49 - - 171.29 460.78 535.73 982 - - Tea 541
Nayapane 270.15 - - 195.75 465.90 576.50 541 - - Tea 463
GALLE DISTRICT
Devitura 90.75 250.46 227.41 70.63 639.25 896.22 274 130 2,479 Tea 536 Rubber
Talgaswella 43.68 217.15 499.55 14.99 775.37 1,033.85 237 141 5,207 Tea 441 Rubber
Gulugahakande 51.62 68.15 61.68 7.28 188.73 418.18 66 34 600 - 193
Lelwala 47.46 66.83 33.96 1.00 149.25 240.35 134 20 - Tea 206
Ketandola 60.35 108.21 111.48 18.51 298.55 832.69 59 30 554 Tea 179
Bentota - 353.14 58.19 33.83 445.16 684.06 4 253 5 Rubber 287
Elpitiya - 346.10 217.18 4.24 567.52 952.44 3 265 1,783 Rubber 361
2,589.99 1,410.04 1,209.45 969.06 6,178.54 8,838.02 5,541 873 10,628 6,394
2012/2013 2011/2012
Tea Rubber Oil Palm Tea Rubber Oil Palm
Total Crop (Kg.000’s) 5,541 873 10,628 4,952 919 10,274
Total NSA (Rs/Kg) 388.52 410.89 30.31 313.36 488.19 25.69
Y P H 1,703 867 13,597 1,560 899 13,090
Employment Strength Workers Clerical & Technical Executives Total
2012 6,457 374 81 6,912 2013 6,394 366 87 6,847
Elpitiya Plantations Plc Annual Report 2012/13 91 Ten Year Summary
Company
Year ended 31st March 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 Rs.’ 000 TRADING RESULTS Revenue 2,833,456 2,512,971 2,601,501 2,215,126 1,556,182 1,883,109 1,281,922 1,046,338 1,214,280 1,022,891 Other income 193,976 106,623 99,056 81,098 53,795 44,757 35,718 30,681 31,101 78,264 Gross profit 638,012 326,933 594,432 241,211 89,528 362,925 199,722 93,149 163,512 70,719 Finance cost (138,992) (137,669) (144,584) (144,075) (114,548) (120,717) (107,420) (80,009) (56,360) (55,536) Profit/(loss) before tax 495,594 148,201 384,233 63,817 (61,705) 166,317 11,286 (29,284) 52,534 31,128 Income tax (expense)/income (44,182) 1,883 (20,729) - - 3,919 (3,391) (8,327) - - Profit/(loss) after tax 451,411 150,084 363,504 63,817 (61,705) 170,237 7,895 (37,610) 52,534 31,128
BALANCE SHEET Funds Employed Stated Capital * 694,236 694,236 694,236 694,236 350,000 350,000 249,587 249,587 249,587 249,587 Share Premium ------100,413 100,413 100,413 100,413 Timber reserve 747,128 714,268 688,965 ------Retained profits/(loss) 1,000,090 581,538 482,990 323,761 259,944 321,649 151,412 (25,501) 12,110 (40,424) Negative Goodwill ------169,017 183,102 197,187 Total equity 2,441,454 1,990,042 1,866,191 1,017,997 609,944 671,649 501,412 493,517 545,212 506,763
Non-Current Liabilities Redeemable Debentures - - 75,000 75,000 75,000 75,000 - - - - Interest Bearing Borrowings 385,661 561,431 831,279 878,672 415,789 394,491 254,478 326,363 368,747 383,173 Retirement Benefit Obligations 573,472 554,800 464,155 448,410 326,728 305,449 264,845 230,658 243,149 240,858 Deferred Income 183,139 195,782 206,712 186,517 149,176 138,306 116,943 93,758 91,661 87,205 Deferred Tax Liability 42,873 11,001 12,884 ------Net Liability to Lesser 181,704 184,614 187,413 190,104 192,692 195,180 197,570 199,872 202,084 204,211 Total non-current liabilities 1,366,849 1,507,628 1,777,442 1,778,703 1,159,384 1,108,426 833,836 850,651 905,641 915,447
Assets Employed Non-Current Assets 4,043,195 3,894,822 3,680,388 2,910,616 2,699,843 2,485,862 2,318,057 2,231,841 2,120,496 1,951,754 Current Assets 602,248 449,446 502,187 774,102 271,273 416,094 314,884 219,897 233,766 224,927 Current Liabilities (837,140) (846,596) (613,941) (888,019) (1,201,788) (1,121,882) (1,297,693) (1,107,571) (903,410) (754,471) 3,808,303 3,497,672 3,568,634 2,796,700 1,769,328 1,780,074 1,335,248 1,344,168 1,450,853 1,422,210
Key Indicators EPS (Basic) 6.20 2.06 4.99 1.23 (1.24) 3.41 0.16 (0.75) 1.05 0.62 Dividend Per Share 0.50 - 0.36 0.25 ------Dividend Payout Ratio 8% - 7% 20% ------Net Assets Per Share 33.51 27.31 26.41 13.97 12.22 13.46 10.04 9.89 10.92 10.15 Market Price Per Share 17.20 18.50 33.50 34.00 39.00 80.50 34.50 30.00 9.75 12.00 Price Earnings Ratio 3 7 7 28 (32) 24 218 (40) 9 19 Current Ratio 0.72 0.53 0.82 0.87 0.23 0.37 0.24 0.20 0.26 0.30 Equity to Total Assets 52.56 45.81 44.62 27.63 20.53 23.14 19.04 20.13 23.16 23.28 Return on Shareholder’s Funds 18.49 7.54 19.48 6.27 (10.12) 25.35 1.57 (7.62) 9.64 6.14
* Up to 31 March 2007 stated capital were named as share capital.
92 Elpitiya Plantations Plc Annual Report 2012/13 Shareholder & Investor Information
SHAREHOLDING BREAKDOWN AS AT 31 - MARCH - 2013
Category No. of Shareholders No. of Shares % 1 - 1,000 10,576 3,535,583 4.85
1,001 - 10,000 541 1,866,382 2.56
10,001 - 100,000 83 2,217,246 3.05
100,001 - 1,000,000 9 2,398,202 3.29
Over 1,000,000 Shares 4 62,849,017 86.25
11,213 72,866,430 100.00
SUMMARY OF SHAREHOLDINGS AS AT 31 - MARCH - 2013
Category No. of Shares No. of % Shareholders Residents 70,856,359 11,201 97.24% Non Residents 2,010,071 12 2.76% Individuals 8,541,982 11,143 11.72% Institutions 64,324,448 70 88.28%
SHARES TRADED DURING THE YEAR April 1, 2012 to March 31, 2013
Number of share transactions 2,793 Number of shares 1,827,142 Total Value 28,905,364 Highest Price Traded (Rs) 19.7
Lowest Price Traded (Rs) 16.8
Value of Share as at the end of financial year (Rs) 17.2
Public Holding: Excludes:
* Parent, subsidiary or associate companies * Subsidiaries or associates of the parent company * Directors, CEO, their spouses & children under 18 & their nominees * Co. in which a director’s holding exceeds 50% of the equity or where the Director controls the composition of the Board * Shareholders whose holding exceeds 10% of the issued capital Total no of shares 72,866,430 Less: Holding by the parent co (ASPM) 44,917,354 (61.64%) Less: Shareholder exceeding 10% (S to T) 15,613,092 (21.43%) Public holding 12,335,984 (16.93%)
Elpitiya Plantations Plc Annual Report 2012/13 93 Shareholder & Investor Information (contd.)
20 Major ShareHolders Holding as at 31st March 2013
Name of the Shareholder Shareholding %
1 Aitken Spence Plantation Managements Ltd 44,917,354 61.64 2 Secretary To The Treasury 15,613,092 21.43 3 Eastern Ocean Investments Ltd 1,221,071 1.68 4 Mr. Kandegedara Semasinghe Navaratne Chandrasekera Wanninayake Mudiyanselage Bandara Chandrasekera 1,097,500 1.51 5 Seylan Bank Plc/Mr.Duleep Nissanka Daluwatte 445,000 0.61 6 Amina Investments Limited 400,000 0.55 7 Mr. Udeshi Morarji Meghji 332,000 0.46 8 Tranz Dominion,L.L.C. 310,000 0.43 9 Seylan Bank Plc/Mr.S.N.C.W.M.Bandara Chandrasekera Kandegedara 263,900 0.36 10 Commercial Bank Of Ceylon Plc/A.F.Munas & N.M.Munas 211,900 0.29 11 Waldock Mackenzie Ltd/Hi-Line Trading (Pvt) Ltd 183,200 0.25 12 Mr. Vignarajah Kangasu Chelvadurai 151,000 0.21 13 Carlines Holdings (Private) Limited 101,202 0.14 14 Singalanka Standard Chemicals Plc 100,000 0.14 15 Mr. Dayananda Panamulla Arachchige Miss P.A. Kalyani Panamulla Arachchige 100,000 0.14 Miss P A A L Renuka 16 Mr. Imtiaz Tambi Lebbe Mohamed 82,053 0.11 17 Mr Wijesekera Mahavidanalage Anthony Upali 65,000 0.09 18 Mr Senaweera Kankanamge Sunil Dharmabandu 61,700 0.08 19 Commercial Bank Of Ceylon Plc / Sinali Capital (Private0 Limited) 60,000 0.08 20 Mrs Cooray Pamela Christine 59,600 0.08 Total No. Of Shares 65,775,572 90.28
Golden Shareholder
The Golden Share has been allotted to the Secretary to the Treasury for and on behalf of the State of Democratic Socialist Republic of Sri Lanka. The rights attached to the Golden Share are set out in the Articles of Association which are as follows:
1) The Golden Share shall only be held by the Secretary to the Treasury in his official capacity
2) The Golden Shareholder ’s prior written concurrence is required
(a) to amend the definition of the words Golden Share or Golden Shareholder and the Articles setting out specific rights attached to such share (b) to sub-lease, cede or assign the rights in part or all of the lands assigned to the Company
3) The Golden Shareholder is entitled to
(a) call upon the Directors once in every three months if desired to meet with him or his nominees to discuss matters of the Company of interest to the State (b) inspect the books of accounts of the Company either by himself or by his nominees with due notice (c) receive within 60 days of the end of every quarter, a quarterly report relating to the performance of the Company (d) receive within 90 days from the end of each financial year, information relating to the Company ina pre-specified format.
94 Elpitiya Plantations Plc Annual Report 2012/13 Definitions
FINANCIAL TERMS UITF Urgent Issues Tasks Force of The Institute of Chartered Accounting policies Accountants of Sri Lanka. Specific principles, bases, conventions, rules and practices adopted by an enterprise in preparing and presenting financial Working capital statements. Capital required to finance the day - to -day operations (current assets minus current liabilities). Borrowings All interest bearing liabilities. NON - FINANCIAL TERMS
Capital employed COP Total assets less interest free liabilities and provisions. The Cost of Production. This generally refers to the Cost of producing a Kilo of produce. (Tea / Rubber / Oil Palm). Cash equivalents Liquid investments with original maturities of three months or Crop less. The total produce harvested over a given period of time (usually during a financial year). Contingent Liabilities Conditions or situations at the Balance Sheet date, the financial Extent in bearing effect of which are to be determined by future events which may The extent of land from which crop is being harvested. Also see or may not occur. “Immature Plantation”.
Current ratio Field Current assets divided by current liabilities. An unit extent of land. Estates are divided in to fields in order to facilitate management.. Earnings Per Share Profits attributable to ordinary shareholders divided by the Immature plantation number of ordinary shares in issue. The extent of plantation that is under development and is not being harvested. Effective Tax Rate Income tax expenses divided by profit from ordinary activities Infilling before tax. A method of field development whereby planting of individual plants is done in order to increase the yield of a given field, whilst Equity allowing the field to be harvested. Shareholders’ funds, i.e. share capital and reserves. Mature plantation Net Assets Per Share The extent of plantation from which crop is being harvested. Shareholders’ funds divided by the number of ordinary shares. Also see “Extent in Bearing”.
Price Earnings Ratio NSA Market price of a share divided by earnings per share. The Net Sales Average. This is the average sale price obtained (over a period of time) after deducting Brokerage fees and cost of Related parties Gratis teas. Parties who could control or significantly influence the financial and operating policies of the business. Replanting A method of field development where an entire unit of land is Return on Shareholder’s Funds taken out of “bearing” and developed by way of uprooting the Attributable profits to the shareholders divided by shareholders existing trees, bushes and replanting with new trees / bushes. funds. Yield Segment The average crop per unit extent of land over a given period of Constituent business units grouped in terms of nature and time (usually kgs.per hectare per year). similarity of operations. LKAS/ SLFRS SLAS Sri Lanka Accounting Standards.( New) Sri Lanka Accounting Standards.
Elpitiya Plantations Plc Annual Report 2012/13 95 Financial Calendar 2012/2013
September 25, 2012 - 20th Annual General Meeting
November 26, 2012 - Interim Financial Statement for the 6 months ended September 30, 2012.
February 13, 2013 - Interim Financial Statement for the 9 months ended December 31, 2012.
May 31, 2013 Interim Financial Statement for the year ended March 31, 2013.
- Accounts for the year ended March 31, 2013
September 26, 2013 - 21st Annual General Meeting
96 Elpitiya Plantations Plc Annual Report 2012/13 Corporate Information
NAME ELPITIYA PLANTATIONS PLC
LEGAL FORM A Public Quoted Company with Limited Liability, incorporated in Sri Lanka on 22nd June 1992.
COMPANY REGISTRATION NO PQ 171
REGISTERED OFFICE 315, Vauxhall Street, Colombo 2,
BUSINESS ADDRESS No. 305, Vauxhall Street, Colombo 2.
DIRECTORS Mr. J M S Brito Chairman Dr. R M Fernando Managing Director Mr. Merrill J Fernando Mr. Malik J Fernando Mr. D C Fernando Alternate Director to Mr. Merrill J Fernando Ms. Minette D A Perera Alternate Director to Mr. Malik J Fernando Dr. S A B Ekanayake Mr. L N de S Wijeyeratne (Resigned w.e.f.08.01.2013) Mr. M P D U K Mapa Pathirana (Resigned w.e.f. 01.04.2013) Mr. S C Ratwatte (Appointed w.e.f. 10.04.2013) Mr. D V H de Mel (Resigned w.e.f.01.05.2013) Mr. A L W Goonewardena (Appointed w.e.f. 22.05.2013)
CHIEF EXECUTIVE OFFICER Mr. B Bulumulla
GENERAL MANAGER – FINANCE Mr. J A R Nissanka
CHIEF ACCOUNTANT Mr. D M R P L Dissanayake
SENIOR ACCOUNTANT Mr. B M Kularatne
MANAGING AGENT Aitken Spence Plantation Managements PLC
SECRETARIES Aitken Spence Corporate Finance (Pvt) Ltd.
AUDITORS Messrs. Ernst & Young 201, De Saram Place, Colombo 10.
LAWYERS Julius & Creasy Attorneys – at – Law
BANKERS Bank of Ceylon – Corporate Branch National Development Bank – Nawam Mawatha Branch Hatton National Bank PLC – Punchikawatta Branch Seylan Bank PLC – Millennium Corporate
GROUP COMPANIES Tea Country Homes (Private) Limited Water Villas (Private) Limited E P P Hydro Power Company (Private) Limited
JOINT VENTURE COMPANIES Elpitiya Lifestyle Solutions (Private) Limited A E N Palm Oil Processing (Private) Limited Elpitiya Dianhong Jin Ya Tea Company (Private) Limited
REGISTRARS SSP Corporate Services (Pvt) Ltd., 101, Inner Flower Road, Colombo 3.
Elpitiya Plantations Plc Annual Report 2012/13 97 Notice of Meeting
Notice is hereby given that the Twenty First Annual General Meeting of Elpitiya Plantations PLC will be held at
the Institute of Chartered Accountants of Sri Lanka, 30A, Malalasekera Mawatha, Colombo 7, at 3.00 p.m. on Thursday,
26th September 2013, for the following purposes :-
l To receive and consider the Annual Report of the Board of Directors together with the Financial Statements of the Company and the Report of the Auditors’ thereon for the year ended 31st March 2013.
l To declare a Dividend as recommended by the Directors
l To re-elect Dr. S A B Ekanayake who retires in terms of Article 92 of the Articles of Association, as a Director.
l To re-elect Mr Merrill J Fernando who is over 70 years, as a Director by passing the following resolution: “That the age limit stipulated in Section 210 of the Companies Act No. 7 of 2007 shall not apply to Mr. Merrill J Fernando who has attained the age of 83and that he be re-elected a Director of the Company.”
l To elect Mr. S C Ratwatte who retires in terms of Article 98 of the Articles of Association, as a Director.
l To elect Mr. A L W Goonewardena who retires in terms of Article 98 of the Articles of Association, as a Director.
l To re-appoint the retiring Auditors, Messrs. Ernst & Young., and authorise the Directors to determine their
remuneration.
BY ORDER OF THE BOARD
R. E. V. Casie Chetty Director AITKEN SPENCE CORPORATE FINANCE (PVT) LTD. Secretaries
29th August 2013 Colombo
Note:
1. A member entitled to attend and vote at the meeting is entitled to appoint a Proxy to attend, speak and vote in his/her stead and a Form of Proxy is enclosed for this purpose. A Proxy need not be a member of the Company.
2. The completed Form of Proxy must be deposited at the Office of the Registrars, SSP Corporate Services (Pvt) Ltd., No. 101, Inner Flower Road, Colombo 3, not less than forty-eight hours before the time fixed for the meeting.
3. Any member or proxy holder attending the meeting is kindly requested to bring this report.
98 Elpitiya Plantations Plc Annual Report 2012/13 Form of Proxy
I/We …...... of …...... being a member/members of Elpitiya Plantations PLC hereby appoint ……………………………………………………………………….……………………………...... ………… of .…………………………………………...... ……………………………………………..………..…… (whom failing)
Joseph Michael Suresh Brito of Colombo (whom failing)
Rohan Marshall Fernando of Colombo (whom failing)
Merrill Joseph Fernando of Colombo (whom failing)
Malik Joseph Fernando (whom failing)
Sumith Anura Bandara Ekanayake of Colombo (whom failing)
Sarath Carlyle Ratwatte of Colombo (whom failing)
Anthony Linton Wijewickrema Goonewardena of Colombo .
as my/our Proxy to represent me/us, to speak and to vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held on the 26th September 2013, and at any adjournment thereof and at every poll which may be taken in consequence thereof.
Signed this….……………………………..day of September Two Thousand Twelve.
...... Signature
Note : Instructions as to completion are noted on the reverse hereof.
Elpitiya Plantations Plc Annual Report 2012/13 Instructions as to Completion
Kindly perfect the form of proxy by filling in legibly your full name and address,
signing in the space provided and filling in the date of signature.
If the proxy form is signed by an Attorney, the relative power of attorney should also accompany the proxy form for registration, if such power of attorney has not already
been registered with the Company.
In the case of a Company/Corporation, the proxy must be under its Common Seal (if
required), which should be affixed and attested in the manner prescribed by its
Articles of Association.
The completed form of proxy should be deposited at the Office of the Registrars, SSP
Corporate Services (Pvt) Ltd No. 101, Inner Flower Road, Colombo 3 before 3.00 p.m. on 24th September 2013, being 48 hours before the time appointed for the holding of
the meeting. Elpitiya Plantations Plc Annual Report 2012/13 101 102 Elpitiya Plantations Plc Annual Report 2012/13