ANNUAL REPORT 2016/17 KELANI VALLEY PLANTATIONS PLC PLANTATIONS VALLEY KELANI | ANNUAL REPORT 2016/17 REPORT ANNUAL | KVPL’S 25 YEARS OF EXCELLENCE | | KVPL’S 25 YEARS OF EXCELLENCE | | KVPL’S 25 YEARS OF EXCELLENCE | | KVPL’S 25 YEARS OF EXCELLENCE | | KVPL’S 25 YEARS OF EXCELLENCE | KELANI VALLEY PLANTATIONS HAS ALWAYS BEEN INTRICATELY CONNECTED TO THE ROOTS AND NATURE THAT MAKES OUR BUSINESS GROW AND FLOURISH. WITH FORTITUDE, COMMITMENT AND TEAMWORK WE PERSEVERED AND WAS ABLE TO LOOK AT WHAT MAKES US WHO WE ARE. LAUDED AND RECOGNISED IN THE YEAR UNDER REVIEW, OUR TEAM RALLIED TOGETHER AND REMAINED STRONG AS WE WORKED TOGETHER TO LAY THE FOUNDATION THAT WOULD SPRINGBOARD US TO BIGGER AND BETTER THINGS IN THE FUTURE. WE JOURNEYED ON, RELENTLESS, AND WITH A PRESTIGIOUS 25 YEARS IN OUR STEAD, WE WILL CONTINUE TO WORK UNCEASINGLY IN BECOMING THE BEST IN THE INDUSTRY. ANNUAL REPORT 2016/17 | KVPL’S 25 YEARS OF EXCELLENCE | 6 Kelani Valley Plantations PLC Annual Report 2016/17 CONTENTS CORPORATE OVERVIEW GOVERNANCE AND RISK Report Profile 7 GRI Content Index 97 Revenue Distribution Local & Global 8 Corporate Governance 101 Our Land 10 Risk Management 122 Our Spread 11 Annual Report of the Board of Directors Corporate Profile 12 on the Affairs of the Company 135 Milestones 14 Board Of Directors 16 FINANCIAL REPORTS Corporate Management Profiles 18 Financial Calender 139 Statement of Directors’ Responsibilities 140 HIGHLIGHTS FOR 2016/17 Audit Committee Report 141 Highlights 20 Related Party Transactions Review Awards & Accolades 22 Committee Report 143 Chairman’s Message 24 Managing Directors’ and Chief Financial Officers’ Managing Director’s Message 27 Responsibility Statement 144 Independent Auditors’ Report 145 STRATEGY AND FOCUS Statement of Profit or Loss 146 Stakeholder Engagement 30 Statement of Comprehensive Income 147 Materiality Assessment 32 Statement of Financial Position 148 Creating Value for Our Stakeholders 48 Statement of Changes In Equity 150 Statement of Cash Flows 152 BUSINESS REVIEW Notes to the Financial Statements 154 Sector Reviews 50 ANNEXURE CAPITAL MANAGEMENT REPORT Ten Year Summary 212 Financial Capital 57 Investor Information 214 Statement Of Value Addition And Environmental Calculations 216 Distribution - 2016/17 68 Glossary 217 Manufactured Capital 69 Notice of Meeting 222 Intellectual Capital 70 Form of Proxy 223 Human Capital 75 Notes 225 Social Capital 83 Corporate Information 228 Natural Capital 87 | KVPL’S 25 YEARS OF EXCELLENCE | 7 Kelani Valley Plantations PLC Annual Report 2016/17 REPORT PROFILE G4-4,28,31,32 The report illustrates the commitment FORWARD LOOKING STATEMENTS made by Kelani Valley Plantations PLC The report contains, where applicable or to be transparent in the disclosure of helpful; plans for the future. We affirm that all its business activities and being these statements reflect the Company’s integrated annual report, aims to provide position and beliefs as at the time of a balanced view of how value is created writing. However, we recognize that for shareholders and other stakeholders of we operate in a changing environment KVPL. and hence, there are uncertainties or new developments that could cause In addition, given KVPL’s alignment with actual results or actions to differ from intentionally accepted best practices, those stated in these forward-looking including the Rain Forest Alliance (RA) statements. Therefore forward- looking certification, the Ethical Tea Partnership statements should not be interpreted as (ETP), the Forest Stewardship Council a guarantee of results or of the course of (FSC) certification, ISO standards and other action that will be taken. sustainability compliance parameters. ASSURANCE SCOPE AND BOUNDARY All information, data and statistics The scope of this report is limited to contained herein have been thoroughly the business activities of KVPL and its reviewed by the Management and the subsidiaries for the financial year ended Board Directors of KVPL, to confirm the 31 March 2017 and also include balanced accuracy and completeness of information and objective disclosures about the and verify the adherence to group policies. Company’s financial performance, risks and opportunities and future prospects. These Further, we have also obtained an are benchmarked against KVPL’s short, independent assurance from Ernest & medium and long-term strategic goals, Young , to validate the transparency of our which are also detailed in this report. financial statement. This assurance also serves to enhance the credibility of this REPORTING FRAMEWORK integrated report for 2016/17. In the interest of greater transparency of the reporting process, we have strived FEEDBACK AND QUERIES to align ourselves with the International Any feedback and queries regarding this Integrated Reporting Council (IIRC) report should be directed to; framework as much as possible. The Progress made in this regard is illustrated Johann Rodrigo in the Capital Management Report on General Manager – Tea Marketing & pages 57 through 96 of this report. While Corporate Affairs the IIRC framework facilitates mainly qualitative data, for greater clarity, the Kelani Valley Plantations PLC report also references the Global Reporting Address : No. 400, Deans Road, Initiatives (GRI), G4: “In accordance – Core” Colombo 10, Sri Lanka. reporting guidelines, which provides a Telephone : +94112627000 quantitative assessment of our progress on Mail ID : [email protected] key sustainability indicators. | KVPL’S 25 YEARS OF EXCELLENCE | 8 Kelani Valley Plantations PLC Annual Report 2016/17 REVENUE DISTRIBUTION LOCAL & GLOBAL G4-6 Russian Federation North America 2.35% 0.53% Europe 7.74% Asia 23.88% Middle East 20.28% Sri Lanka 48.10% Africa 0.09% South America 0.11% Australia 0.93% RS. 3.4 BILLION Export Revenue from Mabroc Teas (Pvt) Ltd. | KVPL’S 25 YEARS OF EXCELLENCE | 9 Kelani Valley Plantations PLC Annual Report 2016/17 NORTH AMERICA 0.53% CANADA 0.05% AfRICA 0.09% UNITED STATES 0.48% NIGERIA 0.09% ASIA 23.88% SOUTH AMERICA 0.11% CHINA 11.86% CHILE 0.11% HONG KONG 0.03% JAPAN 6.30% KAZAKHSTAN 0.15% EUROPE 3.74% DEMOCRATIC PEOPLE’S CZECH REPUBLIC 0.01% REPUBLIC OF KOREA 0.15% FRANCE 0.36% MALAYSIA 0.01% GEORGIA 0.86% MALDIVES 0.001% GERMANY 0.63% TAIWAN 4.05% LATVIA 0.11% VIETNAM 0.58% NETHERLANDS 0.19% THAILAND 0.57% SPAIN 0.13% INDIA 0.10% SWITZERLAND 0.02% PAKISTAN 0.07% UKRAINE 0.12% UNITED KINGDOM 1.29% AUSTRALIA 0.93% MIDDLE EAST 20.28% AZERBAIJAN 0.13% RUSSIAN FEDERATION 2.35% ISLAMIC REPUBLIC OF IRAN 0.48% SAUDI ARABIA 3.73% UNITED ARAB EMIRATES 4.12% TURKEY 11.15% SRI LANKA 48.10% LEBANON 0.08% SYRIAN ARAB REPUBLIC 0.59% RS. 122 MILLION from Rubber Export Sales. | KVPL’S 25 YEARS OF EXCELLENCE | 10 Kelani Valley Plantations PLC Annual Report 2016/17 OUR LAND G4-10 Estate Extent (Ha) No. of Elevation Crop Factories (ft) Tea Ruber Tea Rubber Other Total Kgs’000 Kgs’000 1) Pedro 544 - 124 668 1 6,237 474 - 2) Nuwaraeliya 186 - 61 247 1 5,999 308 - 3) Glassaugh 162 - 66 228 1 5,074 185 - 4) Uda Radella 166 - 59 225 1 5,328 166 - 5) Edinburgh 148 - 31 179 1 5,075 142 - 6) Oliphant 232 - 132 364 1 6,440 123 - 7) Ingestre 480 - 282 762 1 4,723 540 - 8) Fordyce 231 - 172 403 1 4,599 240 - 9) Annfield 223 - 152 375 1 4,297 274 - 10) Tillyrie 166 - 168 334 1 4,264 174 - 11) Invery 126 - 180 306 1 4,310 180 - 12) Robgill 182 - 118 300 1 4,500 186 - 13) Battalgalla 141 - 120 261 1 4,300 166 - 14) Blinkbonnie 50 - 18 68 1 4,500 38 - 15) Halgolle 241 - 955 1,196 1 3,478 277 - 16) Ederapolla 19 435 213 667 1 338 17 273 17) Kitulgala 45 - 537 582 - 1,003 50 - 18) Kalupahana 70 158 284 512 - 1,500 56 92 19) Kelani 27 225 97 349 1 300 28 135 20) Dewalakande - 539 178 717 2 502 - 329 21) Panawatte 14 722 294 1,030 1 1,000 12 419 22) Urumiwella 6 522 194 722 1 800 9 321 23) Kiriporuwa 23 398 166 587 2 805 20 204 24) Lavant - 431 138 569 1 800 - 255 25) Ganapalla - 373 117 490 - 1,000 - 172 26) We Oya / Polatagama 25 747 215 987 - 1,000 16 578 Total 3,507 4,550 5,071 13,128 24 - 3,681 2,778 Distribution of Land TOTAL HECTARES MANAGED 27% 38% 13,128 Ha Tea 3,507 Ha - 27% 35% Rubber 4,550 Ha - 35% Tea Other 5,071 Ha - 38% Rubber Other | KVPL’S 25 YEARS OF EXCELLENCE | 11 Kelani Valley Plantations PLC Annual Report 2016/17 OUR SPREAD MATURE 6,555 Ha Tea 3,314 Ha Rubber 2,613 Ha Other 628 Ha IMMATURE 2,359 Ha Tea 193 Ha Rubber 1,937 Ha Other 229 Ha | KVPL’S 25 YEARS OF EXCELLENCE | 12 Kelani Valley Plantations PLC Annual Report 2016/17 CORPORATE PROFILE G4-2,4 Kelani Valley Plantations PLC (KVPL) is Since its inception, the Company has among the top rated plantation Companies continued to strategically diversify into in Sri Lanka with core business operations other related businesses. Venturing into in the manufacture of bulk Tea and Rubber. the mini hydro segment, Kalupahana Celebrating its 25 year of operations in power company (Pvt) Ltd., was established 2017, KVPL was established in 1992 and in 2003, in partnership with Eco-power subsequently listed on the main board of (Pvt) Ltd. Kelani Valley Instant Tea (Pvt) Ltd the Colombo Stock exchange in 1996. The was set up in 2007, followed by investing Company owns and manages 26 estates in Hayleys Global Beverages (Pvt) Ltd., in covering over 13,000 hectares of both 2013. Meanwhile, Mabroc Teas (Pvt) Ltd., tea and rubber plantations, cultivated on was acquired in the year 2010 as part of lands leased from the government of Sri the strategy to pursue direct marketing Lanka on a 53 year lease agreement.