Annual Report - 2013

Transcription

Coping
with Challenges,
Overcoming Obstacles
Ceylon Grain Elevators PLC
ANNUAL REPORT 2013
Our corporate philosophy is centred upon the 3H principles of building a Healthy Organisation,
being an Honourable Winner and making an Honest Fortune. This business philosophy is derived
from our Parent Company, Prima Limited of Singapore.
Healthy
Organisation
Honest
Fortune
Developing a sound, effective and efficient
organisation system. Promoting team spirit and
reaching out to create a “PRIMA FAMILY” identity.
Establishing trust, fairness and mutual
benefits with all within our business circle.
Contributing to the well-being of society.
Honourable
Winner
Achieving success through fair
competition. Striving towards
excellence.
Our Vision Our Mission
“To achieve complete poultry integration
synergies, ultimately gaining export
market competitiveness”
To tap and harness business opportunities by expanding
into various vertical integration projects. This will lead to
increase in Agriculture, Aquaculture and Livestock
production, thus encouraging national progress through
nutritious protein-rich food to the people of this Nation.
Our Corporate
Goals
Brief History
In line with our Chairman’s
directives and Prima Group
corporate philosophy, we will
continue to grow steadily in
our primary activities with the
ultimate goal of reaching the
status of an integrated
feed milling business.
Life began for Ceylon Grain Elevators PLC (CGE) way back in December 1982, when the
Government of Sri Lanka and Prima Limited of Singapore inked an agreement
beginning a partnership that has endured three decades of yeoman service to the
poultry industry in the country.
Our future expansion plans
shall be within our
management capability and
financial resources.
They also operate poultry and hatchery breeder farms, commercial poultry and livestock
farms. They also engage in the processing, packaging and retailing of poultry and other
meat products, the import and sale of poultry equipment, veterinary products, produce
aqua feed and provide a state-of-the-art laboratory and consultancy service to
customers and farmers throughout the island.
To establish “PRIMA” and
“FARMERS’ CHOICE” as a brand
name synonymous with the
very best in high quality
products.
Ceylon Grain Elevators PLC subsidiaries are :
To establish high standards of
good corporate governance,
improve transparency and the
standards of accountability to
shareholders.
Today, CGE is the largest operator in the poultry industry of Sri Lanka, establishing six
subsidiary companies operating not only in the field of poultry, but also offering
products and services in diverse fields.
CGE and the companies under its umbrella manufacture and distribute a wide range of
feeds under the "PRIMA" and "FARMERS' CHOICE" brands.
•
•
•
•
•
•
Three Acre Farms PLC
Ceylon Pioneer Poultry Breeders Limited
Ceylon Livestock and Agrobusiness Services (Private) Limited
Ceylon Warehouse Complex (Private) Limited
Ceylon Aquatech (Private) Limited
Millennium Multibreeder Farms (Private) Limited
Ceylon Grain Elevators PLC associate company is:
•
Prima Management services (Private) Limited
Over the years, from our inception, Ceylon Grain Elevators has proven it
has the capacity to meet difficulties face on and counter them effectively.
That is how we have learnt and stayed ahead. In a very competitive market
we have proven that it is possible to be successful. We have even shown
that we have the capacity to do better than our competitor. The reason
being our preparedness and our potential to strive higher and do better.
Contents
Chairman and Chief Executive Officer's Review....................................................... Management Discussion and Analysis.......................................................................... Sustainability Report........................................................................................................... Corporate Governance Review........................................................................................ Audit Committee Report................................................................................................... Remuneration Committee Report.................................................................................. Nomination Committee Report....................................................................................... Board of Directors................................................................................................................ Risk Management Review.................................................................................................. Report of the Directors on the State of Affairs of the Company....................... Statement of the Directors' Responsibility................................................................. Independent Auditors' Report......................................................................................... Statement of Comprehensive Income.......................................................................... Statement of Financial Position...................................................................................... Statement of Changes in Equity..................................................................................... Statement of Cash Flows................................................................................................... Notes to the Financial Statements................................................................................. Five Year Financial Summary........................................................................................... Group Structure..................................................................................................................... Shareholder Information.................................................................................................... Statement of Value Added................................................................................................ Notice of Meeting................................................................................................................. Form of Proxy......................................................................................................................... 2
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CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S REVIEW
Dear Shareholder,
I am pleased to present you the Annual Report and the
Audited Financial Statements of Ceylon Grain Elevators PLC
and its subsidiaries for the financial year ended 31 December
2013. I also take pleasure to invite you to the Annual
General Meeting on 8 May 2014 at the Sri Lanka Foundation
Institute Auditorium, No. 100, Sri Lanka Padanama Mawatha,
Independence Square, Colombo 7 at 10.45 a.m.
The year under review – 2013 – has been as before, a
challenging one. We continue to deliver products of quality.
We have been resilient and learnt to overcome the obstacles
in the three decades of hard work. We are happy to say we
rose to US$ 3,282 during 2013 from US$ 2,923 in 2012. Still,
the positive movement of the drop in inflation and the rise in
per capita income did not contribute adequately to improve
the per capita consumption of chicken meat as projected
during the year. Actual per capita consumption of chicken
meat was 5.9 Kg versus projection of 6.1 Kg for the year under
review. This resulted in over production and caused a glut in
the market.
The Company noted that the introduction of progressive
measures such as the gradual relaxation of exchange control
regulations positively helped towards further development of
the domestic foreign exchange market. During the year under
continue to maintain our market leader position in the feed
review, exchange rates were stable for the first five months
milling and poultry farming operations due to the trust and
and then moved by 5 per cent in the months of June, July
confidence our customers placed in us.
and August but stabilised at the end of the year reflecting an
overall Rupee depreciation of 2.7 per cent approximately. This
Valiant in Overcoming Challenges
In the year 2013, the Company managed to surmount many
challenges that affected the entire industry and stood
steady despite the demanding circumstances. Severe price
helped to reduce the exchange loss of the Group in the year
2013 to a certain extent in comparison with the year 2012.
Pricing Problems for Poultry
competition for feed and processed chicken were the main
A feature we had to contend with was the pricing formula for
challenges that we faced. Glut situation in the market for
whole chicken that was proposed in the year 2013 and year
processed chicken led to a slowdown in feed intake by
2014 budgets. We welcome this as a positive move which
farmers. Raw materials for feed were at a prohibitive cost
will help to protect the growth of the industry as opposed to
due to the unsteady supply, high prices and fluctuation
having a Maximum Retail Price on the product which has not
in exchange rates. However, due to the timely measures
been revised since October 2012. However the feed ingredient
adopted by the Company to enhance efficiency and increase
and the cost of products which were subject to international
productivity while maintaining low overhead costs we were
prices kept escalating. When raw material prices are high,
able to overcome these challenges and record a net profit
due to the Maximum Retail Price of processed chicken the
after tax of Rs. 193 Million. This was achieved despite a drop
Company has no option than to absorb it. When the cost of
in revenue by 7 per cent compared to the previous year.
production is greater than the sale price, it is not sustainable
Local Economy
to the industry. The industry capacity is growing with an
increase in the per capita consumption in mind. The target
While observing the slowdown globally Government Policies
for 2016 is to be self-sufficient in the industry and produce
were being pursued towards promoting exports of both goods
1,226 MT of chicken meat per month. In order to achieve
and services while discouraging non-essential imports aimed
this target the industry players will continue to engage the
at narrowing the trade deficit further. Moreover workers'
Authorities for the effective implementation of the budget
remittances, foreign direct investments, disbursements in
proposals.
relation to foreign funded projects, proceeds of the sovereign
bonds helped to strengthen and improve the gross official
reserves of the country.
Sri Lanka’s economy was projected to grow by 7.5 per cent
during the year. However, it grew by 7.3 per cent in 2013.
The annual average inflation came down from 7.6 per cent
in 2012 to 6.9 per cent in 2013, while the per capita income
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Ceylon Grain Elevators PLC | Annual Report - 2013
Agricultural Advancements and Challenges
The Company made the following observations in the
agricultural sector. This was concerning Maize and Soya Bean
and is important since these two products are vital Raw
Materials for our feed manufacture as they account for more
than 50 per cent of the required composition.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S REVIEW (Contd.)
We are still not self-sufficient in the production of Maize
above. Further, the exchange loss had decreased from
achieving only 80 – 90 per cent of the required quantity. The
Rs. 184 Million in year 2012 to Rs. 35 Million in year 2013.
quality of a high percentage of local maize was not up to
However, interest cost had increased from Rs. 90 Million in
industry standard. The price and quality of the local Maize
year 2012 to Rs. 118 Million in year 2013.
was also not competitive in comparison to the imported
Maize. We also urge the Authorities to take urgent steps in
improving the cultivation of Soya Bean locally. This is still at its
infancy stage. If the Industry is to benefit, the Authorities will
have to look into this urgently as the cultivation of Maize and
Soya Bean locally would be greatly beneficial to the country
as it will help to save the foreign exchange outflow. It will
also assist the industry as it would reduce the dependency on
imports to a greater extent and thereby reduce our exposure
to exchange rate fluctuations.
Our Strengths and Achievements over the year
During the year under review, despite the market conditions
and other challenges faced, our revenue only dropped
marginally. The Group was able to earn a profit despite
the decrease in sales revenue and increase in the cost of
Appointment of Nomination Committee
In year 2013, the Company appointed a Nomination
Committee by taking another step in recognising the
transparency and compliance to Company regulations. To
facilitate the formal procedure in the appointment of new
Directors to the Board, a Nomination Committee made up
of three (3) members was established during the year under
review. This committee will make recommendations to the
Board on all new appointments to the Board. The Nomination
Committee annually assesses Board composition to ascertain
whether the combined knowledge and experience of the
Board matches the strategic demands facing the Company.
The findings of their assessment are taken into account when
new Board appointments are considered.
production.
Envisioning a Dynamic, Vibrant Future
In the year 2013, CGE has expanded its feed mill production
With the Government having undertaken to develop
capacity with the investment in state- of- the- art machinery
infrastructure in a great way, many targets have been set
and also improved the farming capacity by adding more
for the coming year. These include the development of
Environmentally Controlled Broiler Houses.
transport, especially the development of highways which will
The upgrading and investing in modern machinery and
equipment contributed very positively to the enhanced
efficiencies of the farm operations.
Financial Accomplishments
With numerous challenges over the year under review, CGE
save time and ease transportation costs. The improvement
in the tourism industry which will lead to an increase in the
number of tourist arrivals along with the increasing number
of hotels will have a direct impact on the improvement of the
livelihood of the general public. These factors will also help to
expand the markets and demand for chicken.
recorded a revenue of Rs. 11,468 Million, which was 7 per cent
Going further, I am pleased to state that the Company has
less than Rs. 12,375 Million made in 2012 due to the decrease
been investing and incorporating the very latest in modern
in prices caused by the intense competition for chicken meat
technology, high tech equipment to upgrade our facilities.
that came about owing to a glut in the market. This in turn
By doing so, we are confident this would result in a greater
resulted in the drop in feed sales due to the lack of input by
expansion of our production and at the same time ensure
the farmers. However, despite these challenges, we achieved
higher and better product quality with greater yield and an
a profit after tax of Rs. 193 Million as against Rs. 149 Million in
increase in our competitiveness. Our continued investment
2012. This was an increase of 30 per cent over the previous
in the Environmentally Controlled Broiler House project is
year. However, it is important to note that the profit for the
bound to lead to a greater output.
year 2012 included a capital gain of Rs. 447 Million that came
in from the sale of our investment in Ceylon Agro Industries
Dividends
Limited. The Group achieved Rs. 120 Million profit attributable
With the Company gearing up for major capital investment
to equity holders for the year 2013. The main contributory
factor for the above achievement is the improvement in the
efficiency and the productivity of the farms as mentioned
in the year 2014, the Board of Directors believe it would be
prudent to refrain from declaring a dividend for the financial
year ended 31 December 2013. We sincerely trust that our
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CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S REVIEW (Contd.)
shareholders will understand and appreciate our decision
which we believe would help the Company to better its
performance in the coming years.
Acknowledgements
On behalf of our Board of Directors, I would take this
opportunity to thank you for the unwavering trust you
have placed in Ceylon Grain Elevators PLC as our valued
Shareholders. I would also like to place on record my sincere
appreciation to our dedicated employees, growers and
of course our valued customers for their sincere trust and
commitment over the year 2013. I would like to convey to
all our Shareholders and Investors that the Company will
remain faithful and true in its efforts in facing the oncoming
challenges. We will, through unflinching perseverance and
persistence, continue to prevail as a prosperous and profitable
Company in the years ahead.
Cheng Chih Kwong, Primus
Chairman and Chief Executive Officer
Colombo, Sri Lanka
8 April 2014
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Management Discussion and Analysis
Industry Overview
In the year under review the Company faced many challenges.
Both locally and internationally there were many hurdles to
overcome. Globally, the financial crisis continued to prevail
in many countries bringing about a stagnation in the global
economy. This had a direct effect on many industries. The
global agriculture and livestock industries were further
affected by the inclement weather conditions. Consequently,
these adverse global factors also affected the Sri Lankan
poultry industry. Depreciation of the Sri Lankan Rupee and
the unsteady supply of raw material led to an increase in the
price of raw material.
During this period, in order to encourage exports and
discourage the imports of non essential goods and bringing
about financial stability, the Central Bank of Sri Lanka relaxed
exchange control regulations. Going further, they also relaxed
the Credit Policy while maintaining the interest rate at an
affordable level in order to help industries to grow. Under
these conditions the Annual Average Inflation Rate came
down to 6.9% while the Per Capita Income rose to US$ 3,282.
Consequently, the Sri Lankan economy was strengthened
and stabilised and reported a growth of 7.3%.
The Sri Lankan Agriculture Sector grew by nearly 4.7%
and contributed as much as 10.8% to the Gross Domestic
Production (GDP). The livestock industry however, continued
to expand and grew by 6.3% during the year. Contributing
almost 0.8% to the GDP, livestock sector is supported mainly
by cattle, buffalo, poultry , goats, pigs and relatively a small
number of sheep, ducks and other species. With the economy
continuing to grow, an encouraging feature is that chicken
meat and eggs are the most economical source of animal
protein. These two sectors alone contribute almost 70% -72%
of the livestock market. Income tax on Agriculture industry
has been reduced to 10% in the current year from 12% in the
previous year, enabling the industry to perform better.
Segmental Review
Segmental Sales Value
2013
(Rs'000)
2012 Change (Rs'000)%
Feed Milling
9,942,37811,142,915
Broiler Farming and
Processed Chicken
2,991,8652,648,901
12.9
Poultry Breeder and
Commercial Farming
1,643,1491,461,476
12.4
Poultry Equipment
Silo and Warehouse Complex
(10.8)
139,646125,865 10.9
73,680 85,138(13.5)
Feed Milling
Being the largest sector, Feed Milling comprises of the sale of
poultry, shrimp and other types of animal feed. This sector by
itself contributes as much as 67% to the total revenue of the
Group. Sector revenue decreased in the year under review
by 10.8% from Rs. 11,143 Million in 2012 to Rs. 9,942 Million
in the year 2013 mainly due to the drop in input by farmers
caused by a glut in the market for chicken meat. This sector
earned an Earnings Before Interest and Taxes of Rs. 122
Million for the year 2013 whereas it was Rs. 220 Million for the
year 2012. However in the year 2012 Earnings Before Interest
and Taxes included a capital gain of Rs. 602 Million that was
made from the sale of the Company's investment in Ceylon
Agro Industries Limited. In the year 2013, inclement weather
conditions adversely affected the availability of Raw Materials
both globally and locally. Meanwhile the depreciation of the
Sri Lankan Rupee led to an increase in the cost of imported
Raw Materials. Although the local maize, which is a primary
component of the feed is available for 80% to 90% of the local
industry requirement, the quality is not up to the standard
due to the harvesting practices and the lack of proper storage
facilities. The Company contributes to the local Maize industry
by purchasing a significant volume of the annual harvest.
However, we were able to face these challenges by the efficient
formulation of feed, altering the product mix and minimising
the overhead cost. Meanwhile in the current year, the Feed
Mill sector production capacity was enhanced by adding
state-of-the-art machinery.
Despite many challenges due to global as well as local
economic and climatic conditions, the Group was able to earn
an Earnings Before Interest and Taxes of Rs. 339.8 Million
in the year 2013 compared to Rs. 200.2 Million in the year
2012. However, the Group revenue has dropped by 7% during
the year under review. The Company was able to overcome
these hurdles by making timely decisions to improve the
productivity and efficiency while minimising overhead costs.
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Management Discussion and Analysis (Contd.)
2013
2012Change
(Rs'000)
(Rs'000)%
Sales Value
9,942,37811,142,915
(10.8)
Earnings Before Interest
and Taxes
Total Assets
121,623
219,895 (44.7 )
3,512,0193,913,118 (10.3)
Return on Total
Assets Employed (%)
3.5
5.6 (37.5 )
Broiler Farming and Processed Chicken
This is the second largest revenue generating sector and it
contributes 20% of the Group's revenue. It consists of the
sale of live broiler chicken as well as processed chicken meat.
The revenue from processed chicken sales increased by 12.9%
from Rs. 2,649 Million in 2012 to Rs. 2,992 Million in the year
2013. Earnings Before Interest and Taxes had decreased
further in the year under review by 139.3% from a loss of
Rs. 17 Million in the year 2012 to a loss of Rs. 40 Million in the
year 2013 which resulted owing to the intense competition and
excess supply in the market. In the year 2013 the actual per
capita consumption of chicken meat was 5.9 Kg. which was
below the projected per capita consumption of 6.1 Kg. even
though the per capita income had increased to US $3,282 and
the annual average inflation has come down to 6.9%. This created
an excess supply of chicken meat in the market which brought
about intense competition and affected the selling price. Even
though the cost of chicken meat has gone up, there was no
revision to the Maximum Retail Price of Rs. 380/- per Kg. that
had been setup in October 2012. As a result the segment had to
incur a loss continuously. The Company was able to face these
challenges fairly and minimised the loss by changing the sales
mix and by brand marketing strategies to retain the consumers
Poultry Breeder and Commercial Farming
This sector consists of the sale of Day Old Chicks and Broiler
Commercial Farming. The revenue of this segment has
increased by 12.4% from Rs. 1,461 Million in 2012 to Rs. 1,643
Million in 2013. Also Earnings Before Interest and Taxes has
increased by 148.9% from Rs. 78 Million in the year 2012 to
Rs. 195 Million in the year 2013. In the year 2013, by better
farm management, stringent bio security control, upgrading
and improving of the performance of hatchery equipment and
continued investment in Environmentally Controlled Broiler
Houses, improved the efficiency and productivity of the farms
which led to an increase in Earnings Before Interest and Taxes.
Further, the stable prices for the table eggs resulted in a demand
for the Layer Day Old Chicks. Prices for Broiler Day Old Chicks
improved in the third quarter of the year which contributed
positively towards the Earnings Before Interest and Taxes.
During the year in review, the Company took timely measures
and exported the excess Hatchable Eggs and the Parent Day Old
Chicks to regional countries which contributed positively to the
margins.
over competitor activities.
2013
2012Change
(Rs'000)
(Rs'000)%
Sales Value
2,991,8652,648,901
12.9
and Taxes
Total Assets
(39,568)(16,535) 139.3
595,625581,611 2.4
Return on Total
Assets Employed (%)
(6.6)
(2.8)135.7
2013
2012Change
(Rs'000)
(Rs'000)%
Sales Value
1,643,1491,461,476
12.4
and Taxes
Total Assets
194,786 78,241148.9
2,271,5642,256,003
0.7
Return on Total
Assets Employed (%)
6
8.6
3.5145.7
Management Discussion and Analysis (Contd.)
Poultry Equipment
However, the sector did not perform as anticipated which was
The poultry equipment sector is the one which supplies the
due to the drop in feed sales during the year. Revenue for this
industry with modern equipment, vaccines and drugs. This is
sector decreased by 13.5% from Rs. 85 Million in the year 2012
in order to enhance and empower the poultry and hatchery
to Rs. 74 Million in the year 2013. Further, the Earnings Before
industry across the island and to improve its productivity
Interest and Taxes fell by 24.2% from Rs. 54 Million in 2012 to
and performance. In order to do this, CGE makes available
Rs. 41 Million in 2013.
a range of branded products that are specialised for the
Sri Lankan market. By this, the industry as a whole, has grown
and has become better in quality and quantity and in depth.
The Company was therefore able to capture the market and
develop the segment as planned. Revenue from this sector rose
by 10.9% from 126 Million in the year 2012 to 140 Million in the
year 2013. Earnings Before Interest and Taxes for this segment
increased by 32.1% from Rs. 21 Million in the year 2012 to
Rs. 28 Million in the year 2013.
2013
2012Change
(Rs'000)
(Rs'000)%
Sales Value
139,646125,865 10.9
and Taxes
Total Assets
28,08421,257 32.1
76,15058,100 31.1
Return on Total
Assets Employed (%)
36.9 36.60.8
2013
2012Change
(Rs'000)(Rs'000)
Rental Income
%
73,680 85,138(13.5)
and Taxes
Total Assets
40,829 53,874(24.2)
392,497396,970 (1.1)
Return on Total
Assets Employed (%)
10.4
13.6(23.5)
Geared for growth and poised for position with the
Sri Lankan Industry
By incorporating state-of-the-art equipment and expanding
its facilities, CGE intends to stay ahead of the competition.
Challenging times demand choice solutions. Despite global
economic upheavals and uncertainties, CGE intends to make
prudent decisions and make a positive contribution to the
industry and to Sri Lanka as a whole. By competently strategising
our product mix and by envisioning and setting out a proper
Silo and Warehouse Complex
growth plan, CGE is confident of providing an outstanding
By possessing modern art silos and warehouse complex which
innovative market strategies and exceptional distribution
many others in the industry do not have, CGE is able to exert
pipeline, CGE is confident of being a vital player in the industry
considerable flexibility in the purchase and storage of imported
and contributing comprehensively.
and exceptional customer service. Ensuring quality products,
key raw materials in the manufacture of feed. By possessing
its own warehouse complex this has proved to be a distinct
advantage in the purchase of bulk material and thereby enjoys
a better price advantage. Additionally by outsourcing its excess
storage facilities to third party sources, has contributed much to
the Group in bringing in additional revenue.
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SUSTAINABILITY REPORT
Over the past three decades, CGE has blazed a trail in the feed
and poultry industry in Sri Lanka. In doing so it has nurtured and
built up a sustainable business. By the constant improvisation and
modernisation of all our products, processing and marketing we
have risen to the position as a market leader. In every sense we
have revolutionised the poultry industry in Sri Lanka. For this we
have to thank our stakeholders who have consistently stood with
us and encouraged us in our pursuit for perfection. We have also
been privileged to have good business partners and consumers.
They have directed us and helped us set our course and stay
ahead.
We firmly believe in the training and development of our staff.
This has led to a workforce which is equipped and enabled to
perform better. Resultantly the Company benefits with greater
productivity. Over 200 man days were provided investing in
Company time, expertise and funds to train and equip our staff
in all sectors.
Marrying the best of international expertise together with local
know-how, we have been able to create a strong and resilient
brand that has withstood all challenges. Not only that, it has set
the pace as the market innovator in Sri Lanka. We are known by
our brand which has stood for unsurpassable quality. Weathering
all challenges we have continued to forge ahead. Our loyal
customers have preferred our brand and consistently chosen us
above cheaper alternatives.
Our stringent corporate governance procedures, risk management,
transparency and accountability have helped the Company stamp
its superiority. We are consistently striving to improve ourselves
and our services bearing in mind that our products reflect our
values. There is a ceaseless quest to do better and in what we offer.
In all these CGE has been able to create a responsive business
while staying true to its core value.
Human Resources - the cornerstone to our success
The staff at Prima are considered our 'family', with the Company
acting as the parent. Our staff carry out their duties diligently with
the assurance the Company has their best interests at heart. This
has enabled them perform better and reach higher in their personal
lives as well as in their careers. We believe in our employees and do
everything possible to create a collaborative and conducive work
environment. By creating such a job satisfaction the Company has
itself thrived and our consistent productivity is a clear indication
of our work ethic.
The Induction programme at CGE is the initiation of our training
schedule for the benefit of new employees. There are two
specialised programmes which have been put together for the
Executives and the Non-Executives. This enables new recruits to
familiarise themselves with Company procedures and protocols.
It also helps 'break the ice' and enables members of the 'family'
to get to know each other better. It also brings about a seamless
integration of the older senior members of the staff with the new
and helps them find their niche in the 'Prima family'.
The training programme at CGE involves experts from Prima as
well as those from relevant fields in the industry. While customised
workshops are conducted regularly the Company also sends
staff to important seminars conducted elsewhere. These training
programmes include opportunities for promising employees to
receive training at recognised poultry manufacturing companies
overseas. Familiarisation programmes are conducted for employees
in technical areas to be sent abroad to become better acquainted
with the most recent trends in their fields.
At CGE, we believe the Company grows as its employees do. We
also believe that employees grow by recognition. This is a well known and tried catalyst for employee satisfaction. At CGE we
have in place a performance appraisal system which is followed
by the Prima Group, Singapore. This system provides recognition
and a clear pathway for employees to rise to the next level of
their career. The programme as incorporated in the Company
provides a well defined pathway for the development of a second
tier for almost all significant positions. Such a system enables
CGE to function seamlessly and creates job satisfaction for all its
employees.
CGE also operates an Employee Council made up of members
from each department which provides an opportunity for
dialogue between the management and the staff. This underlies
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SUSTAINABILITY REPORT (Contd.)
the fact that employee participation and contribution in decision
making is of vital importance in the running of a Company. CGE
also takes great care in providing a safe and comfortable working
environment for all its employees.
Staff analysis by Age
Age
< 21
21-25
26-35
36-45
46-55
56-60
> 60
Total
No. of Employees
GroupCompany
4
4
4733
13588
15396
13479
1912
2
2
494314
Staff Classification
Category
Senior Managers and above
Managers and Assistant Managers
Senior Executives and Executives
Non-Executives
Total
No. of Employees
GroupCompany
15
14
36
35
53
45
390220
494314
Executive Staff analysis by years of service
Service Years
0-5
5-10
10-15
15-20
20-25
25<
Total
No. of Employees
Group
Company
3834
2222
1715
119
1211
43
10494
Gender Distribution
Gender
Male
Female
Total
No. of Employees
GroupCompany
380272
11442
494314
9
In addition to helping our employees further their careers, CGE
the largest buyer and annually purchases a substantial percentage
also sees to the well being and happiness of its employees. This
of the total Maize harvest, thereby helping the farmers and the
helps to motivate the staff and build good team spirit among all
industry. This has in addition built the confidence and trust of
members. Company staff work with dedication because they have
Maize farmers across Sri Lanka.
a sense of ownership and want 'our Company' to do better. As
in the past, a 'get-together' was organised in the year 2013. This
again helped in boosting staff morale. At this event, the Annual
Service Awards were presented to longstanding staff members for
dedicated service and commitment.
Corporate Social Responsibility
The Company seriously considers it is their duty in providing
for the communities they live and interact with. While the main
beneficiaries are those that live in our close proximity, the
Company conducts CSR initiatives at various locations in order to
integrate and be of benefit to the society they live and work with.
In this endeavor, the Company believes it is their duty to empower
communities around its farming facilities which are located mainly
in rural areas. In such places people face many hardship that city
The Company regularly provides internships for young interns
from the Veterinary Council of Sri Lanka and from leading
universities across the island specially related to agriculture and
livestock. Such training programmes provide opportunities to
develop the skills of these young professionals and ensure their
progress in the livestock industry. It builds their confidence
and helps them meet the challenges in the industry. Recently a
group of students from the Uva Wellassa University following the
Animal Science Degree Programme were given an opportunity
to participate in the industrial training programme at CGE. The
training was well received by the interns. They confidently look
forward to implementing these procedures when they embark on
their professional careers.
Manufacturing Products of Quality and Class
dwellers often take for granted. CGE continuous its initiative by
CGE takes pride in the fact that it is one of the premier companies
providing the means to uplift and empower these communities by
manufacturing products which are available for and consumed
building better roadways and assisting them with other facilities.
by customers at all levels of society. As such they consistently
Another area in which CGE is closely working within the community
is discovering, developing and encouraging talented sports men
and women across the island. The Group sponsored the under-15
Prima Champions Trophy cricket encounter which was organised
strive to keep to the highest industrial standards. CGE is ISO 9001
- 2008 certified and also conforms to international safety and
manufacturing standards such as the Animal Feed Act and has
been awarded the HACCP certification.
by Sri Lanka Cricket. Such championships help to identify and
build talented young cricketers for the next generation. The Group
also contributed towards building an Indoor Volleyball Stadium
for the Davisamara Maha Vidyalaya at Seeduwa in order that this
might encourage these lads.
CGE consistently upholds the quality of its products. In order
to maintain and keep to the highest standards possible, CGE
Since Maize is one of the key raw material components in our feed,
CGE continued to help the Maize farmers and their families. CGE is
10
additionally has all its products regularly checked and certified
by qualified professionals. By doing so we have the confidence
that our products are well above the required industrial standards.
The Making of a Healthy Nation
In order to benefit the industry and the nation, CGE is constantly
involved in uplifting the standards of the poultry and feed
industries of Sri Lanka. Towards this endeavor it provides the
One of the key factors that helped the Company maintain
its position as market leader is its aggressive marketing and
advertising. On the premise 'Prima Chicken - for goodness sake'
we have promoted our products island wide.
industry with quality feed, chicks, processed chicken and poultry
Employing an interactive and unconventional consumer centric
equipment. It has also invested in encouraging partners and
marketing thrust, Prima Chicken was kept at the forefront of the
employers to engage in seminars and symposia where they
consumer's mind. Also, throughout the year there were specific,
would gain much needed technical and up-to-date knowledge.
objective-driven brand awareness activities which served to bring
As a result the industry has thrived and this has helped farmers
the brand closer to our consumers.
improve their yield. CGE also regularly carries out research on
disease prevention, thus helping both farmers and the industry to
protect their livestock from epidemic diseases that are common
across other parts of the world.
Environment Conservation
The Company also introduced more consumer - friendly packages
and products to meet ever changing consumer needs and
necessities.
Farmers and manufacturers were assisted in various ways
throughout the year. The Company intends to do more to assist
Conscious about protecting and preserving the environment, CGE
in developing the industry throughout the island. It also plans to
has taken great measures to increase its environmental sensitivity
improve and diversify its product range in order to meet market
and green friendly aspects.
trends and demands.
We are committed to protecting our environment particularly
in and around our poultry farms and other installations which
operate under the Central Environmental Authority (CEA) Licence.
This stipulates natural standards and enforces compliance by
means of regular inspections. By conforming to stringent waste
management protocols we ensure that our operations have a
minimal effect on the surrounding environment.
We have also set up farm waste management system which is in
operation in all the farms employed by CGE. Farm waste is recycled
into natural fertiliser and is distributed at a very concessionary rate
thereby assisting them in their cultivation. This waste is a highly
valuable organic fertiliser for their cultivation.
Building a Better Brand
11
CORPORATE GOVERNANCE REVIEW
Ceylon Grain Elevators PLC is a modern corporate enterprise that
•
has kept with the times by incorporating modern ethical business
and practices to stay ahead in the most demanding times. We have
adopted a performance driven culture along with a governance
structure that is geared to the times.
Continuous professional development along with the Company
and individual compliance with all rules and regulations
•
Trust, professionalism and integrity in all partnerships and
transactions
Over the past three decades and more the Company has won
The Chairman and the Company emphasise and endorse that
and kept the trust of its shareholders, customers, employees and
there have been no violations of CGE's Code of Conduct in the
other stakeholders by keeping to a well set order of principles
year under review.
and practices. These entail integrity, fairness, transparency
and responsibility at all times. Keeping to its proud history the
Internal Governance Structure
governance structure embodies the Company's core values and
corporate social responsibilities which are in keeping with the
best practices of good corporate governance as laid out by the
Institute of Chartered Accountants of Sri Lanka, the Companies
Act No. 07 of 2007 and the Listing Rules of the Colombo Stock
Exchange.
Chief Executive Officer (CEO), Executive Director and Group
General Manager, two (2) Non-Executive Directors and two
understanding of the business.
Ceylon Grain Elevators PLC function under a well structured
Code of Conduct that maintains the standard for sustainability,
accountability and transparency across its entire operations. This
is set out as follows:
The Internal Governance Structure is so designed that the executive
authority is devolved and designated through the committee
structure. This stipulates that the CEO and the Managers who
function for each section are accountable and responsible for the
day-to-day operations including the functioning of the business
Always act in the best interest of the Company, ensuring
transparency in all matters
•
of the Board of Directors which consists of the Chairman and
(2) Independent Non-Executive Directors who have a proper
Code of Conduct
•
The Internal Governance Structure of the Company is made up
units of the Group. The responsibilities and accountabilities for
each such sector are set in place and agreed in advance. This sees
to it that there is a seamless continuous flow of operations.
Conduct business in an ethical manner and in keeping with
international industry standards
Code of Best Practice on Corporate
Governance
Articles of Association
Management
Committee
Companies
Act No. 07
of 2007
Risk
Management
Board of
Directors
Remuneration
Committee
Audit
Committee
Code of Business Ethics
GRI Guidelines on Sustainability
Internal Governance Structure
12
Nomination
Committee
Internal
Controls
Listing Rules issued
by the CSE
CORPORATE GOVERNANCE REVIEW (Contd.)
The Management Committee is a vital part of the Company's
reported financial statements, dividends, investments and
management structure and is headed by the CEO. It is empowered
business acquisitions. The Board is also responsible for continually
to act on behalf of the Company. The members of this Management
reviewing the re-appraisal and monitoring of the performance
Committee are: the Group General Manager, the General Manager,
of the Group against the set objectives while directing the
the Board of Directors, the Audit Committee and the Senior
Management Committee on specific action points.
Management Committee. These positions and committees are
complemented by strong internal governance procedures and
systems. These are set into motion by the Group business plan.
Such mechanisms set within the governance structure ensure
proper implementation and execution of the Group's Corporate
Governance framework.
The Board of Directors and their Responsibilities
The Board of Directors of CGE are responsible for the followings:
•
Managing the Group efficiently and profitably on behalf of
the shareholders
•
Ensuring that the Group accomplishes its goals
•
Meeting regularly to establish and maintain the Company's
•
• Communication with Shareholders
CGE communicates with its shareholders on a number of issues as
it believes in transparency. The Board is responsible for reporting
statutory and relevant information to shareholders regularly and
in a timely and accurate manner. In order to ensure transparency
at all times, the Board has laid down definite policies in relation
to keeping accurate records of accounts together with the
preparation of financial statements to present a fair and balanced
presentation of the Group. The Board also takes measures to
report statutory and all relevant information with disclosure of
all major transactions to shareholders in a timely and accurate
manner. Meanwhile the Group encourages shareholders to seek
independent advice on matters of investment and divestment.
Quarterly and Annually results are prepared and presented in
direction and position
accordance with the Sri Lanka Accounting Standards, Companies
Providing guidance and direction to ensure that the Group is
Securities and Exchange Commission regulations.
adequately resourced and effectively controlled
Act No. 07 of 2007, Colombo Stock Exchange Policies and the
•
Reviewing the Group's operating and financial performance
• Overseeing Risk Management
•
Ensuring compliance with laws, regulations and ethical
The Board is also responsible to regularly evaluate the risk factors
•
standards
of the Group and current control systems and make policy
Ensuring all stakeholder interests are considered in corporate
The formulation of the risk management process overseen by
decisions
The Board of Directors are also responsible for a number of other
duties which include the supervision of corporate governance
issues. In the current year the Board had sought professional
advice on matters that needed specialised expertise such as
litigation matters from the Company's lawyers. The provision
for the Company's Director's to retire by rotation has also been
recommended by the Board many times. The Board collectively
and the Directors individually act in accordance with the laws of
the Country. Meanwhile the Board takes collective responsibility
for the management, direction and performance of the Group. The
Board's principal roles and functions are listed below:
• Providing Strategic Direction
recommendations on risk factors and improvement of controls.
the Board sees to it that an effective system is implemented for
identifying, evaluating and managing significant risks encountered
by the Group in protecting its assets and processes. This risk
management process is regularly reviewed by the Board on the
basis of the guidelines set by relevant regulatory bodies. The
Management Committee is responsible for the detail, design and
operation of the system of internal controls with regard to risk
management. However, the Board maintains overall responsibility
for managing risks within the Group. CGE has also in place a
well established control framework consisting of clear structures
and accountabilities, well understood policies, procedures
with budgeting and review processes. Each business segment
of the Group has a formal management structure with clear
responsibilities operating within clearly defined policies which
cover the areas of product safety, financial matters, health and
The Board is collectively responsible for establishing the
safety, the environment, human resources, operation matters,
Group's general direction, corporate policies, overall strategic
purchasing and engineering.
objectives and corporate plans, which are communicated to the
Management Committee. The Group has set out a schedule of
issues and decisions which may only be approved by the Board as
monitoring controls.
The Board's approval is required on all matters relevant to overall
strategy, annual budget, business plans, management information,
• Compliance
The Board is further responsible to ensure that the Group is always
operating within the law, regulations and standards as laid down
by the various regulatory bodies in the country. The Board is also
constantly updated with information with regard to compliance
13
and directs the Management Committee with regard to action
formal and transparent procedure. The Board periodically appraises
that need to be taken.
their own performance in order to ensure that their responsibilities
are properly undertaken in fairness to the Company and to the
• Appointments to Board Committees
stakeholders. For the year under consideration an assessment was
The Board of Directors are responsible to appoint members to
the various Board Committees and ensuring that these act in
accordance with the Terms of Reference as provided by the Board.
The Board of Directors in turn appoints Directors to the Audit,
Remuneration and Nomination Committees along with Directors
and Key Senior Management personnel to the management
Committee. Each such Committee acts within its own set of Terms
of Reference. An expanded review of each such Committee's
function is described further in this report.
made with regard to the Board composition and they reached the
conclusion that the knowledge and expertise of the current Board
matches the strategic demands and direction of the Group. A brief
profile of individual members of the Board is carried on page 22
in this report.
Changes to the Board
Board Tenure, Retirement and Re-elections
•The
Board Composition
Directors
are
appointed
and
recommended
for
re-election until their prescribed company retirement age
The Board of Directors comprises of six (6) members. The Group is
•
At all Annual General Meetings one third of the Directors, retire
by rotation on the basis prescribed in Articles of Association
committed to maintaining a structure that is balanced in order that
of the Company and are eligible for re-election. The Directors
a value addition is provided to all stakeholders with an appropriate
who retire are those who have been longest in office since their
mix of Executive, Non-Executive and Independent Non-Executive
appointment or re-election. In addition, any new Director who
Directors. Industrial expertise and business acumen that is brought
has been appointed to the Board during the year is required to
by in by these members enables the Company to make rational,
stand for re-election at the next Annual General Meeting
sound decisions for a sustainable and profitable future for the
Company. The Board comprises of two (2) Executive Directors,
•
The re-election of Directors ensures that the shareholders have
two (2) Non-Executive Directors and two (2) Independent
an opportunity to re-assess the composition of the Board. The
Non-Executive Directors. This composition complies with the
names of the Directors submitted for re-election are provided
Listing Rules of the Colombo Stock Exchange, which requires
to the shareholders in advance to enable them to make an
informed decision concerning their election
a minimum of two or one third of the Board be Independent
Non-Executive Directors. Usually Board appointments follow a
Name of
the Director
Capacity
Board
Share
Holding
Mr. Cheng Chih
Kwong, Primus
Chairman and Chief
Executive Officer
397
Mr. Tan Beng
Chuan
Executive Director
and Group General
Manager
Mr. Cheng Koh
Chuen, Bernard
Position
No of
Meetings held
Other Board Committees - Position
Attendence
Audit
Remuneration
Nomination
Committee
Committee
Committee
Chairman
3
2
-
-
-
Member
3
3
-
-
-
Non-Executive
Director
-
Member
3
3
-
-
-
Mr. Cheng Eng
Loong
Non-Executive
Director
-
Member
3
2
-
-
-
Dr. Wickrema
Sena
Weerasooria
Independent
Non-Executive
Director
-
Member
3
3
Member
Chairman
Chairman
Mr. Sunil
Karunanayake
Independent
Non-Executive
Director
-
Member
3
3
Chairman
Member
Member
14
Member
•
Names of retiring Directors eligible for re-election this year
are given in the Notice of the Annual General Meeting of the
Company
The Chairman of the Board
The Executive Chairman of the Board Mr. Cheng Chih Kwong,
Primus, is entrusted with a number of responsibilities including,
providing leadership to the Board, ensuring Board effectiveness
in its myriad roles, chairing Board meetings and steering it in the
proper direction, taking responsibility for the Board's composition,
facilitating the effective contribution of Non-Executive Directors
and also seeing to it that there is positive relationship between the
Executive and Non-Executive Directors.
It is absolutely necessary to have a balance of power on the
Board. And to ensure this, the roles of Chairman and the Executive
Director have been very clearly defined without any overlap. The
likelihood of combining the roles of Chairman and Chief Executive
Officer (CEO) has been discussed regularly. On the basis of such
discussions and reviews the Board has deemed that combining
the two roles are more appropriate for the Group at present to
meet stakeholder and Company objectives.
Continuous Training and Development
The Group is dedicated to empowering every member of its team
with opportunities to better their individual skills, knowledge and
expertise. This facility is extended to the Board of Directors as well.
Such development programmes available to Board members begin
with a comprehensive induction programme that ensures that
new Board members garner the required knowledge to integrate
well and perform efficiently. This programme which is conducted
over a period of various months, includes presentations from key
members of Senior Management and also visits to the various
operating businesses of the Group. If a Director seek a deeper
understanding on a particular area, further follow-up meetings are
then arranged to make available the required knowledge to the
Board member.
Supply of Information
All members of the Board are continually updated and supplied
with timely, accurate and comprehensive information to enable
them to perform their duties successfully. This therefore enables
Board members to engage in healthy debate and a process of
optimised decision making towards the betterment of the
Company. The Directors are provided access to:
•
Board minutes and reports which are circulated before Board
meetings
• Clarification on any matter contained in the minutes
•
•
•
The advice of experts and professionals if required
Advice and services provided by the Company Secretary
Information wherever necessary to carry out duties and
responsibilities more effectively and efficiently
• Information updates from management on topical matters,
formulation of new regulations and best practices as relevant
to the Group's business
Board Meetings
In accordance with Company principles and practices, the Board
met three (3) times over the past year to review the overall
strategic development of the Group. The Chairman is responsible
to provide leadership to the Board and the conducting of business
at meetings and also to facilitate the effective contribution of
all members. He is also responsible to facilitate the effective
contribution of all members and to implement strategies and
ensure that the Board operates effectively in keeping with the
interests of the shareholders. The Company Secretaries, SSP
Corporate Services, are in turn responsible on behalf of the
Chairman to ensure that all Board meetings are conducted in a
proper manner and that all Directors receive all necessary relevant
information prior to meetings so that the Board could review the
Key Performance Indicators (KPI's). In addition the Company
Secretaries also guide the Board that good governance practices
are considered and implemented. Meanwhile, the Board is brought
up to date on the latest financial position of the Company by the
Group General Manager. Board minutes are taken and kept in order
that all matters are recorded in case the Directors have concerns
about the matters of the Company which cannot be unanimously
resolved. This need however did not arise in the year 2013.
Board Committees
Some functions of the Board have been delegated to Board
Committees which are responsible to monitor, review and enhance
the accountability in certain areas. By doing so they safeguard
the good governance practices of the Group. These Board
Committees are as follows:
•
•
•
•
Management Committee
Audit Committee
Remuneration Committee
Nomination Committee
The above committees carry out their duties and responsibilities in
accordance with the Terms of Reference as set out by the Board.
The proceedings of their meetings are regularly communicated to
the Board.
The Management Committee
Members are selected by the Board. The Management Committee
is responsible for the followings:
•
•
•
Implementing Group strategy
Monitoring business performance
Approve budgets and capital expenditure recommendations
to the Board
•
Ensure efficient management to the Group
The Management Committee has also been vested with the
authority to implement Board decisions. This authority is exercised
within the policy framework as stipulated by the Board.
15
The Management Committee meets once a month to discuss
The Nomination Committee makes recommendations to the Board
and evaluate various topics including segmental performance
on all new Board appointments and annually assesses Board
of the Group, business development plans, financial and
composition to ascertain whether the combined knowledge and
operating budgets and forecasts, capital expenditure proposals,
experience of the Board matches the strategic demands facing the
management issues and Key Performance Indicators (KPI's).
Company. The findings on such assessment are taken into account
The Board constantly reviews reports from the Management
when new Board appointments are considered. The Committee
Committee and also from executives and sectional heads of
consists of three (3) members combining two (2) Non-Executive
key risk areas and makes decisions pertaining to the segmental
Directors and the Chairman and Chief Executive Officer which is in
performance. The Management Committee has the right to run
compliance with the Corporate Governance Principles established
the business of the Group as they deem fit to meet the demand
by Securities and Exchange Commission of Sri Lanka (SEC) and
of the customers of the Group and the strategic and financial
Institute of Chartered Accountants of Sri Lanka (Code Reference
targets that have been set by the Board in addition to the required
A.7.1, A.7.2 and Schedule A). The detailed report of this Committee
corporate guidelines. Such a deregulated structure is necessary
appears on page 21 of this report.
to ensure that fast decisions are made and implemented, speedy
innovation at a rate as demanded by the customer while providing
products and services to consumers catering to their specific
needs.
The Group always maintains sufficient financial resources along
with a diversified business model and a range of allied businesses.
• The Audit Committee
The Audit Committee is responsible to assist the Board in
accomplishing its oversight responsibilities in the financial
reporting process. The Audit Committee consists of two (2)
Independent Non-Executive Directors one of whom is appointed
by the Board and is the Chairman of the Committee. The detailed
report of this Committee appears on page 19 of this report.
• The Remuneration Committee
This Committee is responsible to the Board to determine the
remuneration policy for the Executive Directors and Senior
Managers. This Remuneration Committee comprises of two
(2) Independent Non-Executive Directors, one of whom is the
Chairman of the Committee who is appointed by the Board. The
detailed report by the Remuneration Committee appears on page
20 of this report.
• The Nomination Committee
In the year 2013, the Company had appointed a Nomination
Committee to facilitate a formal and transparent procedure in
appointment of new Directors to the Board.
16
Going Concern
The Board of Directors on the recommendations of the Audit
Committee is satisfied that the Group has sufficient resources to
continue in preparation for the foreseeable future. For this reason,
they will continue to adopt the going concern basis in preparing
accounts.
CSE Rule Number and
Subject
Compliance
Status
Corporate Governance Principle
Remarks
7.10.1 (a)
Non-Executive Directors
Two or one third of the total number of Directors
Compliant
shall be Non-Executive Directors, whichever is
Corporate
Governance - Page 14
higher.
7.10.2 (a)
Independent Directors
Two or one third of Non-Executive Directors
Compliant
whichever is higher shall be Independent.
Corporate
Governance - Page 14
7.10.2 (b)
Independent Directors
Each Non-Executive Director should submit a
Compliant
Non-Executive Directors have
declaration of independence / non-independence in
submitted declaration during
the prescribed format.
the year 2013
7.10.3 (a)
Disclosure relating to
Names of Independent Directors should be
Directors
disclosed in the Annual Report.
Compliant
Board of
Directors - Page 22
7.10.3 (b)
The basis for the Board to determine a Director is
Compliant
Specified criterias are met by
Directors
Independent, if criteria specified for Independent is
Independent
not met.
Non-Executive Directors
7.10.3 (c)
A brief resume of each Director should be included
Directors
in the Annual Report including the area of expertise.
Compliant
Board of Directors - Page 22
Compliant
No new appointments were
7.10.3 (d)
Forthwith provide a brief resume of new Directors
Directors
appointed to the Board with details specified in
made during the year 2013
7.10.3(a), (b) and (c) to the Exchange.
7.10.4 (a-h)
Determination of
Requirements for meeting criteria of ‘Independent’.
Compliant
Independence
The Board has determined the
Independent of each
Non-Executive Directors during
the year 2013
7.10.5
A Listed Company shall have a Remuneration
Compliant
Committee.
Report - Page 20
7.10.5 (a)
Composition of
The Committee shall consist of Non-Executive
Remuneration
Directors, a majority of whom shall be independent.
Compliant
Report - Page 20
Committee
7.10.5 (b)
Functions of Remuneration
The Remuneration Committee shall recommend the
Committee
remuneration of the Chief Executive Officer and
Compliant
Report - Page 20
Executive Directors.
17
CSE Rule Number and
Subject
7.10.5 (c)
Disclosure in the Annual
Report relating to
7.10.6
Audit Committee
7.10.6 (a)
Composition of Audit
Committee
7.10.6 (b)
Functions of Audit
Committee
7.10.6 (c)
Disclosure in
Annual Report relating to
Audit Committee
18
Corporate Governance Principle
Compliance
Status
Remarks
The Annual Report should set out:
a. Names of Directors comprising the Remuneration
Committee.
Compliant
Report - Page 20
b. Statement of Remuneration Policy.
Compliant
Report - Page 20
c. Aggregated remuneration paid to Executive and
Non-Executive Directors.
Compliant
Note 33.1 - Page 73
A Listed Company shall have an Audit Committee.
Compliant
Audit Committee Report Page 19
The Committee shall comprise of Non-Executive
Directors, the majority of whom shall be
independent. The Chairman of the Committee
should be a Member of a recognised professional
accounting body.
Compliant
a. Overseeing of the preparation, presentation and
adequacy of disclosures in the financial statements
of a Listed Entity, in accordance with Sri Lanka
Accounting Standards.
Compliant
b. Overseeing of the Entity’s compliance with
financial reporting requirements, information
requirements of the Companies Act and other
relevant financial reporting related regulations and
requirements.
Compliant
c. Overseeing the processes to ensure that the
Entity’s internal controls and risk management
are adequate, to meet the requirements of the Sri
Lanka Auditing Standards.
Compliant
d. Assessment of the independence and
performance of the Entity’s external auditors.
Compliant
e. To make recommendations to the Board
pertaining to appointment, re-appointment and
removal of external auditors and to approve the
remuneration and terms of engagement of the
external auditors.
Compliant
a. Names of Directors comprising the Audit
Committee.
Compliant
b. The Audit Committee shall make a determination
of the independence of the Auditors and disclose
the basis for such determination.
Compliant
c. The Annual Report shall contains a Report of
the Audit Committee setting out of the manner of
compliance with their functions.
Compliant
AUDIT COMMITTEE REPORT
The Audit Committee Report is an overview of the myriad tasks
and responsibilities of the Audit Committee whose authorities are
approved and adopted by the Board.
The Audit Committee of CGE is responsible for maintaining a
healthy relationship with the Group's external auditors. The other
tasks that the Audit Committee is responsible for overseeing
the review of the Group's internal financial resources, controls
and audit processes. The Committee also assists the Board in
ensuring that the financial and non-financial information supplied
to shareholders is a fair assessment of the Company's position.
The Audit Committee consists of two (2) members as stipulated
by the guidelines set out by the Colombo Stock Exchange. Both
members are Independent Non-Executive Directors who are
appointed by the Board amongst the Directors of the Company.
Further, the Committee Chairman Mr. Sunil Karunanayake is a
member of the Institute of Chartered Accountants of Sri Lanka,
while the Company's Internal Auditor acts as the Secretary to the
Audit Committee.
The Committee conducts meetings whenever necessary and
needed and has met a total of three (3) times in the year 2013.
By doing so, it has also kept in line with the requirement that it
meets at least once a year. Upon invitation, such meetings are also
attended by the Executive Director and Group General Manager of
the Company, the Acting General Manager and the Senior Finance
Manager. During the year the Audit Committee had received
many such reports and conducted discussion with the Group's
management and auditors.
Name
Capacity
No. of
meetings
held
No. of
meetings
attended
Mr. Sunil
Karunanayake
Chairman /
Independent
Non-Executive
Director
3
3
Dr. Wickrema Sena
Weerasooria
Member /
Independent
Non-Executive
Director
3
3
Mr. Darshana
De Silva
Secretary /
Group
Internal Auditor
3
3
The Audit Committee has been engaged in many activities during
the year including :
•
Approving the auditors' Terms of Engagement including
their remuneration, while in discussion with the auditors
and assessed their independence and objectivity and
recommended their re-appointment for the coming year at
the Annual General Meeting
The Committee also reviewed the following areas:
•
Financial statements published in the name of the Board
and the quality and accessibility of the related accounting
policies, practices and financial reporting disclosures.
•
Scope of the work of the Group's finance department and
reports from it.
•
Effectiveness of the system for internal control, risk
management and compliance with financial services,
legislation and regulation.
•
Results of the external audit.
•
Report from the internal and external auditors on audit
planning and their findings on the accounting and internal
control systems.
Sunil Karunanayake
Chairman, Audit Committee
19
REMUNERATION COMMITTEE REPORT
The Remuneration Committee report is a review of the
responsibilities and operations of the Remuneration Committee
of CGE.
This Committee is responsible for a number of important activities
including the recommendations of the remuneration policy for
Executive Directors and Key Management Personnel to the Board
of Directors. Whilst the Committee fulfills the requirements as
laid out by the Listing Rules of the Colombo Stock Exchange, the
term ‘remuneration’ in this context refers to cash and all non-cash
benefits that are received in consideration of employment with
CGE, excluding statutory entitlements such as the Employees
Provident Fund and the Employees Trust Fund.
Members of the Remuneration Committee are chosen and
appointed from among the Company’s Directors by the Board.
While the Committee is responsible directly to the Board
of Directors, it consists of two (2) members, both of whom
are Independent Non-Executive Directors as required by the
guidelines as set out by the Colombo Stock Exchange.
Meetings of the Remuneration Committee were held when
necessary and a total of three (3) meetings were conducted in the
year 2013. This was in line with the stipulations laid out that the
Remuneration Committee meets at least once a year to discuss
matters in relation to the remuneration policies relevant to the
Committee. During such meetings, the Committee has invited
the Company’s Executive Director and Group General Manager
and the Acting General Manager with the aim of gathering more
information on which Committee could act.
Name
No. of
meetings
held
No. of
meetings
attended
Dr. Wickrema Sena Chairman /
Weerasooria
Independent
Non-Executive
Director
3
3
Mr. Sunil
Karunanayake
Member /
Independent
Non-Executive
Director
3
3
Mr. M.C.M.
De Costa
Secretary / AGM
(Personnel,
Security and
General Affairs)
3
3
20
Capacity
The inclusive remuneration policies utilised by the Group intend
to:
•
Provide alignment between remuneration and the Company’s
business objectives in order that the Company could attract
and retain Key Management Personnel of a high caliber.
•
Motivate and reward Key Management Personnel to achieve
challenging performance goals.
•
Ensure that executive rewards are in line with Shareholder
value.
•
Recognise both individual and corporate achievements and
thereby add value to the Company.
In the year 2013 the Remuneration Committee had reviewed the
incentive provisions for Key Management Personnel and were
satisfied that the existing framework was satisfactory. The total
sum that was paid as Directors Remunerations in the year under
review is set out in Note 33.1 to the financial statements.
Dr. Wickrema Sena Weerasooria
Chairman, Remuneration Committee
Nomination Committee Report
Nomination Committee keeps the Board composition under
review and facilitates a formal and transparent procedures in all
new appointments to the Board.
In the year 2013, a Nomination Committee has been appointed by
the Company to perform a range of responsibilities such as:
•
Provide advice and recommendations to the Board or the
Chairman on any new appointments to the Board.
•
Evaluate the competencies including the skills, knowledge
and experience of the Board in any recommendation to the
Board.
•
Review the structure, size and the composition of the Board.
•
Evaluate the performance of members of the Board
whether they are adequately carrying out their duties and
responsibilities.
The Nomination Committee consists of three (3) members
including two (2) Non-Executive Directors and the Chairman and
Chief Executive Officer of the Company. The Chairman of the
Nomination Committee is a Non-Executive Director as required by
the Code of Best Practice on Corporate Governance issued jointly
by the Securities and Exchange Commission of Sri Lanka and the
Institute of Chartered Accountants of Sri Lanka.
In the year under review the Committee met one occasion in
order to discharge their responsibilities in matching the combined
knowledge and experience of the Board to strategic demands of
the Company.
Name
Capacity
No. of
meetings
held
No. of
meetings
attended
Dr. Wickrema Sena
Weerasooria
Chairman /
Independent
Non-Executive
Director
1
1
Mr. Cheng Chih
Kwong, Primus
Member /
Chairman and
Chief Executive
Officer
1
1
Mr. Sunil
Karunanayake
Member /
Independent
Non-Executive
Director
1
1
Mr. M. C. M. De
Costa
Secretary / AGM
(Personnel,
Security and
General Affairs)
1
1
Chairman, Nomination Committee
21
BOARD OF DIRECTORS
Mr. Cheng Chih Kwong, Primus
Mr. Sunil Karunanayake
Independent Non-Executive Director
Mr. Cheng Chih Kwong, Primus is the Chairman and Chief
Executive Officer of the Prima Group and its subsidiary
companies. He is a Certified Practicing Accountant (CPA) Australia and also holds a Diploma in Business Studies.
Mr. Sunil Karunanayake has been a Director of the Company
since 2009. He holds fellowship of the Institute of Chartered
Accountants of Sri Lanka and Chartered Institute of
Management Accountants (UK) and a MBA from the Post
Graduate Institute of Management of the University of
Sri Jayawardenapura. He has also obtained a Diploma in
Commercial Arbitration from the Institute of Commercial Law
and Practice.
Mr. Cheng Chih Kwong, Primus is the Patron of Yuhua Citizens’
Consultative Committee and has served as the former Patron of
the Ulu Pandan Community Centre Building Fund Committee
and as the Vice Chairman (General Affairs Committee),
Singapore Chinese Chamber of Commerce and Industry (19992001).
Mr. Tan Beng Chuan
Executive Director and Group General Manager
Mr. Tan Beng Chuan has been a Director of the Company and
its subsidiary companies since 2003. He also serves as Director
of Three Acre Farms PLC and its subsidiaries, Ceylon Agro
Industries Limited and Prima Ceylon Machinery (Pvt) Ltd. He is
the Group General Manager of Prima Group of Companies, Sri
Lanka since 2003. He holds a B.Sc. Hon in Chemical Engineering
from University of Surrey, UK and a MBA in Management &
Marketing from University of Warwick, UK. He is an Executive
Committee Member of Sri Lanka Singapore Business Council
and Sri Lanka Canada Business Council of Ceylon Chamber of
Commerce. He is also the President Mentor and Past President
of Singapore (Sri Lanka) Club.
Mr. Cheng Koh Chuen, Bernard
Non-Executive Director
Mr. Cheng Koh Chuen, Bernard has been a Director of the
Company with effect from 1 August 2012. He also serves as an
Executive Director of Prima Group.
He holds a Bachelor of Science in Business Administration and
also a MBA from the University of Southern California.
Mr. Cheng Eng Loong
Mr. Cheng Eng Loong has been a Director of the Company with
effect from 1 August 2012.
He holds a Bachelor of Science degree majoring in Biochemistry
and Chemistry from the National University of Singapore.
22
Mr. Sunil Karunanayake was formerly a Director / Secretary
of Brooke Bond Ceylon Limited and Commercial Controller
of Unilever Ceylon Limited - Tea Division. Currently he serves
as the Chief Financial Consultant at Associated Newspapers
of Ceylon Limited. In addition, he also serves two other listed
companies in the capacity of Non - Executive Director.
Independent Non-Executive Director
Dr. Wickrema Sena Weerasooria has been a Director of
the Company since 2009. He holds LLB (Hons.) and Ph.D
(London). He is an Attorney-at-law Supreme Court of Sri
Lanka, a Barrister and Solicitor - Supreme Court of Victoria.
Dr. Wickrema Sena Weerasooria is a well known lawyer and
legal academic. He was the formerly Secretary of the Ministry
of Plan Implementation, Sri Lanka’s High Commissioner
to Australia, Consultant to the Central Bank and a former
Associate Professor of Law Monash University, Australia. He
is currently a Senior Consultant to the Post Graduate Institute
of Management (PIM).
RISK MANAGEMENT REVIEW
The Risk Management review intends to show an in-depth view
of the risk management systems, procedures and protocols that
operate throughout the Group. This review also provides assurance
that all undertakings of the Group constantly work towards its
betterment. It also ensures that there is better understanding and
an efficient mitigation of the various risk factors that may affect
the Group.
CGE quotes the core area of Risk Management as the organised
application of management policies, procedures and practices
for the establishment of relevant context, identification, analysis,
mitigation, monitoring and thereby the communication of all
possible types of risks. The Group's Risk Management framework
is efficiently incorporated in the planning process. The planning
process meanwhile focuses on the efficient achievement of
objectives by means of the mitigation of relevant and related risks.
By means of a dynamic process risks are identified and evaluated
at appropriate levels of the organisation. This on-going process
is regularly reviewed by the Management Committee as part of
the Group's Organisational and Operational approach to Risk
Management.
The Group's Risk Management schedule ensures there is a
comprehensive identification and understanding of the type of
risks CGE is exposed to. This facilitates the design of and carrying
out of an effective plan to prevent losses and to minimise it in case
such a loss does occur. Such timely recognition and appropriate
handling of these operational threats is incorporated into the
Group's Risk Management process.
Risk Factor
There is substantial strategic control of operational risks which
require the efficient management and these are made possible
through the policies and procedures which are covered by the
Group's system of internal controls. This in turn is made up of the
system of financial controls which operate throughout the Group
as well as processes and systems which focuses on monitoring
and reporting matters related to the continued effectiveness of
the system of internal controls. The Risk Management process
at CGE provides a close and structured approach to indentifying
risks. Therefore having a proper understanding of all possible risks,
permits the Group to measure, priorities and take appropriate
action to minimise losses. Risk Management also provides the
Group with other benefits such as saving the loss of valuable time,
assets, income, property, people and protecting the reputation
and public image of the Organisation and also preventing or
reducing legal liabilities and increasing the stability of operations.
CGE continues to place great emphasis on the importance of
effective and positive Risk Management which is considered as
an essential and integral part of good management practice.
Therefore it becomes an intimate part of its business planning and
continuity. Having this in mind, Risk Management has become a
matter of concern for individuals across the Organisation. CGE
maintains a Risk Management structure with efficient planning
systems, reporting systems and review processes which provide
a strong basis for the integration of Risk Management into the
Group's entire management process.
The principal risks associated with the Group's activities and their
mitigation strategies are as follows:
Risk Mitigating Strategies
Exchange Rate Risk
This type of risk arises from foreign currency transactions
where negative changes in exchange rates may arise. The
Group regularly imports a large percentage of raw materials
and hence has a substantial amount of outstanding in foreign
currency denominations. In the event of a decline of the
Sri Lankan Rupee against such foreign currencies, there is
an increase in raw material prices which in turn affect sales
margins and increases the debt burden in rupee terms.
The Group as a policy follows this procedure: changes on the
international prices of raw materials are passed on to the selling
prices of the Group's products in the local market. This in effect
provides a natural hedge against changes in global prices and
fluctuation in the value of the rupee. A substantial fall in the rupee
against the US dollar could have a negative impact on the Group's
operations and finances, although the Group has the facility of
increasing the selling prices of its products such adjustments may
require time depending on the severity of the fall of the currency
and the Government price controls that are in effect at that time.
The Group also makes use of effective treasury operation strategies
such as forward bookings, swaps etc. to negate unfavorable effects
of current fluctuations.
23
RISK MANAGEMENT REVIEW (Contd.)
Risk Factor
Credit Risk
Credit Risk is the risk of financial losses that could arise owing
to the unwillingness or the inability of counter parties to meet
their financial obligations in time and in full.
The Group encourages customers to purchase goods for cash
by providing discounts for such purchases. This has paid great
benefits and has been extremely successful.
Additionally thorough credit checks are carried out on potential
customers before granting them sales on credit. The Group's
Financial and Sales Divisions closely monitor all credit sales to
ensure that repayment is made on due dates and future sales are
made on outstanding value.
Another feature is that the Group regularly reviews the security
for the Out Grower Scheme. The Group only accepts high quality
collaterals as Security for the Out Grower Scheme. Further, the
Group also ensures that the Out Grower Farmers receive a fair and
sustainable Rearing Fee with good extension services to increase
their productivity since a fair Out Grower Scheme is also important.
Human Capital and Labour Risk
The Group's Human Capital and Labour Risk pertains to the
loss of talented employees and undergoing an unpleasant
environment owing to strained labour relations.
The Group incorporates a series of strategies to motivate, develop
and retain human capital.
CGE has progressive provision for a comprehensive career
development programme for its staff. This focuses on helping
employees discover and achieve their optimum potential and in this
manner improve their job performance and gain job satisfaction.
CGE strongly emphasises the training and development of staff
with career development in mind. And as such providing them
with the required know-how and appropriate skills to achieve their
personal development.
CGE has laid clear guidelines for career development providing
performance based career advancement opportunities.
At all times CGE aims to maintain a healthy relationship with
all its employees through regular dialogue and discussion. The
Group also ensures that there is compliance with all regulatory
requirements concerning benefits applicable to employees.
Finally, CGE provides attractive financial and performance based
incentives that are in line with or above industry standards. Another
feature is that the Group provides an attractive living facility and
conducive environment at its farms.
Information Technology Risk
IT Risk is that associated with computer security hardware,
software and the failing of other information technology
systems and consequently causing a disruption to the
business operations of the Group.
24
Throughout the entire organisation a well thought out and
completely secure Information Technology security infrastructure
has been implemented. This security structure includes recovery
strategies, data back-ups store at off-site locations, regular
updating of virus scanners and firewalls, maintenance of spare
servers and other critical ICT components, along with regular IT
audits to ensure compliance relevant to security infrastructure.
Risk Factor
Risks of Outbreaks of Disease
The outbreaks of communicable animal diseases could result
in significant losses to the flock of poultry within a very short
period of time. Over the past few years the chances of the
Avian Influenza being passed on to human beings has caused
some serious concerns among the public about consuming
poultry products.
The Management of CGE avails the services of the staff in providing
training to the farmers and out growers with regard to identifying
and controlling disease outbreaks. The Company also offers other
necessary services such as veterinary aid to ensure the general
health of the animals. Such series have proved to be invaluable to
both farmer and the Group in monitoring the development of the
birds and mitigating the risk of disease.
CGE regularly reviews the Bio Security practices and policies
to ensure that the Company policies are on par with industry
standards. The Management is also careful to ensure that
environmental safety standards and sustainability practices are
adhered to when starting a new farm.
The Company always strives to use the most updated vaccines and
medicines that are most effective in disease control which helps
in preventing disease outbreaks. CGE also continually reviews and
improves farm management practices especially in areas such as
administration of vaccines and medicaments etc.
Yet another strategy which the Company adheres to in risk
mitigating is ensuring proper housing. This takes into consideration
animal welfare and minimised stress to the birds. The Company
feed formulation strategies focus on building the health status of
birds with the aim of better hygiene and providing wholesome
poultry products to consumers.
Regulatory and Compliance Risk
Regulatory Risk is associated with the changes in Government
policies, laws, regulations and statutes. Compliance Risk
refers to a Company being able to comply with all the
laws, regulations and statutes applicable to a country. Both
Regulatory and Compliance Risk factors could affect the
business activities of a Group.
CGE always keeps itself updated on all the changes to the
regulatory framework and ensures that the Company is always
in compliance with all such requirements. The Group works in
a collaborative manner with trade associations, the All Island
Poultry Association as well as other trade chambers who are a
part of advising and assisting regulatory bodies on developing and
adjusting regulations. CGE also maintains cordial relationships with
such regulatory bodies.
Risk of Market Demand for DOCs
This refers to the risk of destroy DOCs owing to a drop in
demand in the market. As DOCs cannot be kept for more
than a day, there is always a risk of destroying chicks when
there is no demand for DOCs.
The Company always strives to ensure that there is no unnecessary
culling of DOCs owing to decreased demand by keeping abreast
of market trends. By predicting market demand ahead, CGE is
able to minimise the risk of destroying DOCs. In the event that an
unforeseen drop in demand occurs, measures that are necessary
will be taken by the Management to ensure continued quality and
adherence to Company policies and product regulations.
Risk in Quality of the Product
Risk in the quality of the Product owing to the inferior
condition of the machinery or equipment at the Poultry
Processing Plant.
CGE constantly upgrade the plant's underperforming equipment
and machinery with modern versions while replacing poultry
equipment and machinery with new technology.
25
Risk Factor
Competitive Risk
Competitive Risk is the kind of risk that comes about when
customers purchase competitive or alternative products due
to variants in the product offering. The Group recognises the
importance of sustaining mutually beneficial relationships
with its customers, poultry farmers, dealers and out-growers.
Providing customers as and when they require it, is the
cornerstone of customer of satisfaction. Should the Group
fail to do so, they run the risk of losing market share and
consequently incurring financial losses.
The Group and its individual companies always take innovative
measures to mitigate Competitive Risks. CGE is engaged in a
continuous dialogue with its customers and prospects to keep
abreast of changing trends, needs and purchasing behavior of the
market. By closely monitoring customers, CGE is in a position to realign its product offering to match customer needs and wants, while
being sensitive to current customer requirements.
The Company makes sure that the right competitive strategies
are practiced in order that CGE might keep ahead. To ensure this
CGE captures customer feedback on future needs, follows social
and cultural trends that influence customer demand and focuses
on building customer loyalty to ensure the continuation of repeat
purchasing trends. Indicators such as product return data, customer
complain indices, the number of interactions between the Group
and the customers, the churn rate among the top 20% of its
customers and revenue growth factors among targeted customer
groups are regularly measured in order to gauge the progress in
managing these risks effectively. Customer satisfaction in terms of
products and services is also monitored carefully through initiatives
to establish customer satisfaction as the Group's No. 1 priority and to
use customer feedback as a catalyst for improvement.
The key management personnel of the Group to work closely with the
farmers and the Out Growers. This is to ensure that the birds are of
the highest quality possible. This entails activities such as providing
technical knowledge, guiding them in setting farm infrastructure, in
keeping with the latest rearing techniques.
In addition CGE has placed the industry's best quality standard
process and ensures through its quality assurance systems, that
a consistent high quality level is maintained in all products and
services marketed by the Group.
Risk of Environmental Issues
The Risk of Environment Issues relate to environmental
matters that can be raised by housing and settlements in farm
neighbourhoods.
The Management of the Group provide for the equipment for the
disposal of solid waste. CGE also provides information on good
management practices on environment protection to the farm staff
such as ensuring that poultry litter is not disposed off in an open
environment. The Company advices that all waste matter should be
packed and stored in a sheltered space in order that it is not wet
by rain water until such time as the waste is appropriately removed
from the farm premises. The Company also provides comprehensive
information on steps that should be taken to keep such poultry
litter dry at all times along with awareness of cleanliness of good
housekeeping practices that should always be practiced.
Risk of Major Breakdown
This refers to the risk of a major breakdown of the Poultry
Processing Plant.
26
The Company continually maintains a buffer stock of a minimum of
one week's market demand.
Risk Factor
Procurement and Supply Chain Risk
This risk refers to the availability of quality raw material of
sufficient quantity, at the required time and at the correct
price. Any shortfall in supply could stall the Group's ability to
fulfill customer demands which in turn would reflect negatively
on the bottom line.
These risks include but are not limited to the enforcement of
a new CESS while the RM shipments are in transit, the local
maize being of insufficient quantity and quality, along with
restrictions on imported maize and substitutes, restrictions
on the import of drugs and vaccines, receiving contaminated
cargo, export restrictions on feed RM from India and key DOC
importation countries being affected with Avian Influenza and
other diseases.
CGE's procurement strategies operate on the basis that careful and
correct procurement policies will result in good quality end products.
The Group always strives to address Procurement and Supply Chain
Risk by having multiple sources (both locally and internationally) for
all Raw materials. CGE also fosters the development of long term
relationships with its suppliers to gain influence and thereby enters
into contractual agreements with them.
In case a new CESS is imposed, the Company will minimise the
quantities of orders and raw material bulk vessels. The Company
also maintains appropriate inventory levels sufficient for 2 - 3
months and will turn to the closest substitute in case of a shortage
of drugs or vaccines. CGE takes very strict measures in keeping with
its Quality Management Systems to handle contaminated cargo
and will take adequate steps to permit the relevant authorities to
take adequate steps to permit the import of Genetically Modified
Foods or promote the cultivation of Soya in Sri Lanka in the case
of a shortage of feed RM. The Group keeps track of multiple DOC
sources it will also develop new suppliers in case the key suppliers
are unable to deliver their products on time for any reason.
27
REPORT OF THE DIRECTORS ON THE STATE OF
AFFAIRS OF THE COMPANY
The Board of Directors is pleased to present their Report and the
Audited Financial Statements of the Company for the year ended
31 December 2013. The details set out herein provide pertinent
information required by the Companies Act, No. 07 of 2007,
the Colombo Stock Exchange Listing Rules and are guided by
recommended best accounting practices.
1.
Principal Activities
The main business of the Group is feed milling, commercial
broiler farming, poultry processing and distribution,
breeder farming operations, buying and selling of poultry
equipment and provision of silo and warehouse facilities
and transshipment.
2.
Review of Performance for the year ended
31 December 2013 and Future Developments
A review of the Company's performance during the year,
with comments on financial results for the year ended
31 December 2013 and future developments is contained in
the Chairman and Chief Executive Officer's Review (page
2 to 4) and Management Discussion and Analysis (pages 5
to 7). These reports, together with the financial statements
reflect the state of affairs of the Company.
3.
Financial Statements
The financial statements of the Company are given in pages
33 to 76.
4.
Independent Auditors' Report
The Independent Auditors' Report on the financial statements
is given on page 32.
5.
Accounting Policies
The accounting policies adopted in preparation of financial
statements are given on pages 37 to 46. There were no
material changes in the Accounting Policies adopted, except
for the changing accounting policy as explained in note 37.
6.
Interest Register
The Company maintains an Interest Register and the
particulars of those Directors who were directly or indirectly
interested in a contract of the Company are stated therein.
7.
Directors' Interest
None of the Directors had a direct or indirect interest in
any contracts or proposed contracts with the Company
other than as disclosed in the Note 33 to the financial
statements.
8.
Directors Remuneration and Other Benefits
Directors' remuneration in respect of the Company for
the financial year ended 31 December 2013 is given in
Note 33 to the financial statements.
28
9.
Corporate Donations
Donations made by the Company amounted
Rs. Nil (2012 - Rs. Nil). No donations were made for political purposes.
to
10.Directorate
The names of the Directors who held office as at
31 December 2013 are given below.
Mr. Cheng Chih Kwong, Primus - Chairman and Chief
Executive Officer
Mr. Tan Beng Chuan
- Executive Director and
Group General Manager
Mr. Cheng Eng Loong - Non-Executive Director
- Non-Executive Director
Dr. Wickrema Sena Weerasooria - Independent
- Independent
Non - Executive Director
In accordance with the provisions of Article 87 of the Articles
of Association of the Company, Mr. Sunil Karunanayake
retires by rotation and being eligible offers himself for reelection.
A Resolution for the re-appointment of Dr. Wickrema Sena
Weerasooria, who was 70 years of age on 17 July 2009 will
be proposed at the Annual General Meeting in terms of
Section 211 of the Companies Act No. 07 of 2007. A Special
notice has been given of this intention.
11. Directors' Shareholdings
As at
31.12.2013
Mr. Cheng Chih Kwong, Primus Mr. Tan Beng Chuan Mr. Cheng Eng Loong
As at
31.12.2012
397397
NilNil
NilNil
NilNil
NilNil
NilNil
12. Auditors
The
financial
statements
for
the
year
ended
31 December 2013 have been audited by Messrs KPMG,
Chartered Accountants, who express their willingness
to continue in office. In accordance with the Companies
Act No.07 of 2007, a resolution relating to their
re-appointment and authorising the Directors to determine
their remuneration will be proposed at the forthcoming
Annual General Meeting.
AFFAIRS OF THE COMPANY (Contd.)
The Auditors Messrs KPMG were paid Rs 2,930,000/- (2012 Rs. 2,765,000/-) as audit fees by the Company. As far as the
Directors are aware, the Auditors do not have any relationship
(other than that of an Auditor) with the Company other than
those disclosed above.
22. Employment Policies
The Auditors also do not have any interest in the Company.
13. Group Turnover
Group Turnover amounted to Rs. 11,468 Million (2012 Rs. 12,375 Million).
14. Dividends
The Directors do not recommend the payment of a dividend
for the financial year ended 31 December 2013.
The Company identifies Human Resources as one of the
most important factors bequeathing the survival and
growth of the Company in the current competitive business
environment. While appreciating and valuing the service of
our employees, a greater effort is being made to hire the
best talent from external sources, to bolster weak areas and
continue to maintain the highest standards prevalent in the
industry. Human Resource Head Count is considered as a
key indicator and recruitment is based on annual manpower
planning. The Company provides equal opportunities.
Greater emphasis is given to the areas of training,
professional development and ethical business practices.
All rewards and career opportunities are based on merit and
on performance.
15. Investments
23. Taxation
Details of investments held by the Company are disclosed in
Note 15 and 16 to the financial statements.
The tax position of the Company is given in Note 10 to the
financial statements.
16. Intangible Assets
24. Share Information
An analysis of the intangible assets of the Company,
additions and impairments during the year and
amortisation charged during the year are set out in
Information relating to earnings, dividend, net assets and
market price per share is given on page 77. Information
on share trading is given on page 77.
25. Disclosure as per CSE Rule No.8.7 (i) (5)
17. Property, Plant and Equipment
An analysis of the property, plant and equipment of the
Company, additions and disposals made during the year and
depreciation charged during the year are set out in Note 12
to the financial statements.
18. Capital Commitments
Capital expenditure contracted for as at 31 December 2013
for which no provision has been made in the accounts are
set out in Note 28 to the financial statements.
19. Stated Capital
The issued and fully paid up stated capital of the
Company is Rs. 1,017,996,000/- divided into 60,000,000
ordinary shares. There was no change in the stated capital of
the Company during the year.
20. Reserves
Total reserves as at 31 December 2013 amounted to
Rs. 1,005 million (2012 - Rs. 1,037 Million). The movement of
reserves is shown in the statement of changes in equity on
page 35.
21. Events after the Reporting Period
2013
Rs. Cts.
Market price per share as at
31 December
Highest / lowest share price
(Loss) / earnings per share
Dividend per share
Net assets per share
2012
Rs. Cts.
35.50
59.50
6 0.90/31.00110.00/36.00
(0.39)3.44
-0.14
33.71
34.25
26. Shareholding
The number of registered shareholders of the Company as at
31 December 2013 was 4,999. The distribution and analysis
of shareholdings are given on page 79.
27. Major Shareholders
The twenty largest shareholders of the Company as at
31 December 2013, together with an analysis are given on
page 79.
28. Statutory Payments
The Directors to the best of their knowledge and belief
are satisfied that all statutory payments in relation to the
Government and the employees have been made on time.
No significant events have occurred after the reporting
period other than those disclosed in Note 34 to the financial
statements.
29
AFFAIRS OF THE COMPANY (Contd.)
29. Environment, Health and Safety
Company
policy
continues
to
ensure
that
all
Environmental, Health and Safety regulations are
strictly adhered to, minimising any adverse effects to
the environment. Recycling of waste is carried out where
ever possible. Employees are provided with all personal
protective equipment as Health and well being which are our
prime concerns. Fire fighting and safety systems are in place
to safeguard the Company interest. Plans are in progress to
introduce emission free machinery for in-house operations to
eliminate air pollution.
30. Corporate Governance / Internal Control
The Corporate Governance and Internal Control Policies of
the Company are given on pages 12 to 18.
31. Contingent Liabilities
Contingent Liabilities as at 31 December 2013 are set out in
32. Annual General Meeting
The 31st Annual General Meeting of the Company will be
held on 8 May 2014 at the Sri Lanka Foundation Institute
Auditorium, No. 100, Sri Lanka Padanama Mawatha,
Independence Square, Colombo 7 at 10.45 a.m.
By Order of the Board of
(Sgd.)(Sgd.)
Tan Beng Chuan
Chairman and
Executive Director and
Chief Executive Officer
(Sgd.)
S S P Corporate Services (Private) Limited
Secretaries
Colombo, Sri Lanka
8 April 2014
30
STATEMENT OF THE DIRECTORS' RESPONSIBILITY
The responsibility of the Directors in relation to the financial
statements of the Company and the Group is set out in the
following statement. The responsibility of the auditors, in relation
to the financial statements, is set out in their report appearing on
page 32.
The Companies Act No. 07 of 2007 requires the Directors to
prepare financial statements for each financial year which give a
true and fair view of the status of affairs of the Company and the
Group and of the profit or loss for that year.
In preparing these financial statements the Directors are required
to:
•
Select suitable accounting policies and then apply them
consistently;
•
Make judgments and estimates that are reasonable and
prudent;
•
State whatever applicable accounting standards have been
followed, subject to any material departures and explained in
the financial statements; and
•
Prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Group will
continue in business.
Compliance Statement
The Directors are of the view that they have discharged their
responsibilities as set out in this statement. They also confirm that
to the best of their knowledge, all statutory payments payable by
the Company and its subsidiaries as at the reporting date have
been paid or where relevant, provided for.
(Sgd.)
(Sgd.)
Tan Beng Chuan
Colombo, Sri Lanka
8 April 2014
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and the Group and to ensure
that the financial statements comply with the Companies Act.
The Directors are also responsible for taking such steps as they
deem reasonable or required in order to safeguard the assets of
the Company and the Group and in this regard to give proper
consideration to the establishment of appropriate internal control
systems with a view to prevent and detect fraud and other
irregularities.
The Directors are required to prepare the financial statements
to provide the auditors with every opportunity to take whatever
steps and undertake whatever inspections they may consider to
be appropriate to enable them to express their audit opinion.
31
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF CEYLON GRAIN ELEVATORS PLC
Report on the Financial Statements
We have audited the accompanying financial statements of
Ceylon Grain Elevators PLC (the “Company”) and the consolidated
financial statements of the Company and its subsidiaries (the
“Group”), which comprise the statement of financial position as
at 31 December 2013, the statements of comprehensive income,
changes in equity and cash flows for the year then ended, and
notes, comprising a summary of significant accounting policies
and other explanatory information set out on pages 33 to 76 of
this annual report.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair
presentation of these financial statements in accordance with
Sri Lanka Accounting Standards. This responsibility includes:
designing, implementing and maintaining internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due
to fraud or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in
the circumstances.
Scope of Audit and Basis of Opinion
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in
accordance with Sri Lanka Auditing Standards. Those standards
require that we plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material
misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting policies used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation.
32
We have obtained all the information and explanations which
to the best of our knowledge and belief were necessary for the
purposes of our audit. We therefore believe that our audit provides
a reasonable basis for our opinion.
Opinion
Company
In our opinion, so far as appears from our examination, the
Company maintained proper accounting records for the year
ended 31 December 2013 and the financial statements give a true
and fair view of the financial position of the Company as at 31
December 2013, and of its financial performance and its cash flows
for the year then ended in accordance with Sri Lanka Accounting
Standards.
Group
In our opinion, the consolidated financial statements give a true
and fair view of the financial position of the Company and its
subsidiaries dealt with thereby as at 31 December 2013 and of its
financial performance and its cash flows for the year then ended in
accordance with Sri Lanka Accounting Standards.
Report on Other Legal and Regulatory Requirements
These financial statements also comply with the requirements of
Section 153(2) to 153(7) of the Companies Act No. 07 of 2007.
Chartered Accountants
Colombo, Sri Lanka
8 April 2014
STATEMENT OF COMPREHENSIVE INCOME
All amounts in Sri Lankan Rupees thousands
For the year ended 31 December
GROUPCOMPANY
2013
20122013
2012
NOTES
Restated
Restated
Revenue
4
Cost of sales
11,468,10012,375,045 11,403,28412,370,881
(10,708,544)(11,990,817) (10,958,494)(12,165,414)
Gross profit
759,556384,228 444,790205,467
Other income
8
40,381525,013
74,498693,296
Selling and distribution expenses
(138,378)(129,120) (134,896)(126,030)
Administrative expenses
(252,090)(359,128) (230,248)(343,562)
Operating profit
5
409,469420,993 154,144429,171
Net finance expenses
9
(168,614)(303,332) (145,299)(270,556)
Share of profit of associate
3,2184,108
-
-
Profit before tax
244,073121,769
8,845158,615
Taxation
10
(51,558)27,688 (32,085)47,624
Profit / (loss) for the year
192,515 149,457
(23,240)206,239
Other comprehensive income
Actuarial (loss) / gain arising from defined benefit obligation
Total comprehensive income / (expenses) for the year
(732)3,704
(635)2,744
191,783 153,161
(23,875)208,983
119,956 134,155
(23,240)206,239
Profit / (loss) attributable to :
Equity holders of the parent
Non-controlling interest
72,55915,302
-
-
192,515 149,457 (23,240)206,239
Total comprehensive income / (expenses) attributable to :
Equity holders of the parent
Basic earnings / (loss) per share (Rs.)
11
119,442 137,461
72,34115,700
191,783
153,161
(23,875)208,983
-
-
(23,875)208,983
2.00 2.24(0.39) 3.44
The notes on pages 37 to 76 form an integral part of these consolidated financial statements.
Figures in brackets indicate deductions.
33
STATEMENT OF FINANCIAL POSITION
As at 31 December
GROUPCOMPANY
201320122013
2012
NOTESRestated
Restated
ASSETS
Non-current assets
Property, plant and equipment
Leasehold right over land and buildings
Intangible assets
Investment in associate company
Investment in subsidiary companies
Livestock
Deferred tax assets
Total non-current assets
12
2,229,1012,065,195 438,100 283,192
13
472,991489,535 110,227114,262
14
85,13198,235 85,13198,235
15
14,39011,172
33
33
16
-
- 353,730351,039
17
414,660369,298
-
25
53,42367,802 53,42367,802
3,269,6963,101,237 1,040,644 914,563
Current assets
Inventories
19
1,896,1922,232,993 1,781,3862,097,306
Trade and other receivables
20
476,179455,661 445,346425,648
Amount due from affiliated companies
18
-
- 796,9661,004,429
Current tax receivable
41,49339,835 7,469 7,469
Cash and cash equivalents
21
44,02381,190 35,83346,010
Total current assets
2,457,8872,809,679 3,067,0003,580,862
Total assets
5,727,5835,910,916 4,107,6444,495,425
EQUITY
Stated capital
29
1,017,9961,017,996 1,017,9961,017,996
Retained earnings
1,754,0101,642,968 1,004,6671,036,942
Total equity attributable to equity holders
of the parent
2,772,0062,660,964 2,022,6632,054,938
30
393,009320,668
-
Total equity
3,165,0152,981,632 2,022,6632,054,938
LIABILITIES
Non-current liabilities
Deferred tax liabilities
25
119,853121,072
-
Employee benefits
26
48,13941,876 36,97531,736
Amount due to affiliated companies
23
-202,447
-202,447
Interest bearing borrowings
24 46,500
-46,500
Total non-current liabilities
214,492365,395 83,475234,183
Current liabilities
Trade and other payables
22
497,483426,870 367,148313,818
23
950,4161,158,549 997,8301,174,746
24
900,177978,470 636,528717,740
Total current liabilities
2,348,0762,563,889 2,001,5062,206,304
Total liabilities
2,562,5682,929,284 2,084,9812,440,487
Total equity and liabilities
5,727,5835,910,916 4,107,6444,495,425
These financial statements have been prepared in compliance with the requirements of the Companies Act No. 07 of 2007.
(Sgd.) K.A.R.S. Perera
General Manager
These financial statements were approved by the Board of Directors on 8 April 2014.
(Sgd.) Cheng Chih Kwong, Primus
34
(Sgd.) Tan Beng Chuan
STATEMENT OF CHANGES IN EQUITY
GROUP
Balance as at 1 January 2012
LKAS 19 - Transitional effect
Restated balance as at 1 January 2012
Total
Attributable to equity holders of the parentNon-
Stated
Retained
Totalcontrollingequity
capitalearnings interest
1,017,9961,514,0492,532,045 305,507 2,837,552
- (8,542)(8,542) (539) (9,081)
1,017,9961,505,5072,523,503 304,968 2,828,471
Profit for the year
-
Actuarial gain arising from defined benefit obligation
-3,3063,306 398 3,704
134,155134,155 15,302 149,457
Restated balance as at 31 December 2012
1,017,9961,642,9682,660,964 320,668 2,981,632
1,017,9961,642,9682,660,964 320,668 2,981,632
Profit for the year
-119,956119,956 72,559 192,515
Actuarial loss arising from defined benefit obligation
- (514)(514)(218) (732)
Transactions with owners
Dividend paid
- (8,400)(8,400)
Balance as at 31 December 2013
- (8,400)
1,017,9961,754,0102,772,006 393,009 3,165,015
COMPANY StatedRetained Total
capitalearnings equity
1,017,996 836,069 1,854,065
LKAS 19 - Transitional effect
- (8,110)(8,110)
Restated balance as at 1 January 2012
1,017,996 827,959 1,845,955
Profit for the period
-206,239 206,239
Other comprehensive income for the period
-2,744 2,744
Restated balance as at 31 December 2012
1,017,9961,036,942 2,054,938
1,017,9961,036,942 2,054,938
Loss for the year
- (23,240)(23,240)
Actuarial loss arising from defined benefit obligation
- (635)(635)
Transactions with owners
Dividend paid
- (8,400)(8,400)
Balance as at 31 December 2013
1,017,9961,004,667 2,022,663
35
STATEMENT OF CASH FLOWS
GROUPCOMPANY
201320122013
2012
NOTESRestated
Restated
Operating activities
Cash generated from / (used in) operations
Exchange loss
31
895,123 (486,864)
353,517(1,068,007)
(35,178)(184,438)
(34,739)(186,273)
Interest received
Interest paid
Employee benefits paid
2,8795,520 2,5204,709
(118,351)(89,860) (95,475)(55,249)
26 (3,398)(4,958) (2,158)(3,225)
Tax paid
(23,611)(14,218)
Net cash generated from / (used in) operating activities 717,464 (774,818)
-
(5,005)
223,665(1,313,050)
Investing activities
Purchase of property, plant and equipment
12 (316,406)(163,676) (199,700) (40,413)
Purchase of leasehold assets
13
-(1,228)
-(1,228)
Purchase of intangible assets
14
-(19,471)
-(19,471)
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of leasehold right over land and buildings
2,70420,654
Proceeds from disposal of associate shares
-730,616
Proceeds from dividend income
-12,082
Purchase of livestock
2,254
38
71 -71 -
17 (400,807)(419,105)
-730,616
6,64516,132
-
-
Net cash (used in) / generated from investing activities (714,438)159,872 (190,730)685,674
Financing activities
Dividend paid
(8,400)
-(8,400)
-
Net borrowings
(40,500)615,000
(40,500)615,000
Net cash (used in) / generated from financing activities
(48,900)615,000
(48,900)615,000
(Decrease) / increase in cash and cash equivalents
(45,874)
(15,965)(12,376)
54
Movements in cash and cash equivalents
At the beginning of the year
(10,280)(10,334) (34,730)(22,354)
(Decrease) / increase in cash and cash equivalents
(45,874)
Cash and cash equivalents as at 31 December
(56,154)(10,280) (50,695)(34,730)
21 (a)
54
36
(15,965)(12,376)
NOTES TO THE FINANCIAL STATEMENTS
1. Reporting entity
2. Basis of preparation
1.1. General
2.1. Statement of compliance
Ceylon Grain Elevators PLC (the 'Company') is a "Quoted
Public Company" with limited liability, incorporated and
domiciled in Sri Lanka. The address of the Company's
registered office is No.15, Rock House Lane, Colombo - 15,
Sri Lanka. The consolidated financial statements of the
Company as at and for the year ended 31 December 2013
comprise the Company and its subsidiaries and the Group's
interest in associate, listed below.
Subsidiaries
The financial statements of the Company and those
consolidated with such comprise the statement of financial
position, statement of comprehensive income, statement
of changes in equity and statement of cash flows together
with the accounting policies and notes to the financial
statements. The consolidated financial statements have
been prepared in accordance with Sri Lanka Accounting
Standards (SLFRS) as issued by the Institute of Chartered
Accountants of Sri Lanka (CA Sri Lanka) and the
requirements of the Companies Act No. 07 of 2007.
2.2. Approval of financial statements by Directors
The consolidated financial statements were authorised for
issue by the Board of Directors on 8 April 2014.
2.3. Basis of measurement
The consolidated financial statements have been prepared
on the historical cost basis except the valuation of
retirement benefit obligation which is disclosed in Note 26
to the financial statements.
2.4. Functional and presentation currency
The consolidated financial statements are presented in Sri
Lankan Rupees, which is the Company’s functional currency,
rounded to the nearest thousand, unless otherwise stated.
2.5. Use of estimates and judgments
The preparation of the consolidated financial statements in
conformity with Sri Lanka Accounting Standards (SLFRS)
requires management to make judgments, estimates and
assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised
and in any future periods affected.
Information about assumptions and estimation uncertainties
critical judgments in applying accounting policies that have
the most significant effect on the amounts recognised in
the consolidated financial statements is included in the
following notes:
•
•
•
•
•
•
Associate
•
Ceylon Grain Elevators PLC (CGE) was incorporated in 1982,
when the government of Sri Lanka and Prima Limited of
Singapore signed an agreement. The Company was listed
in the Colombo Stock Exchange on 27 January 1992 in the
Food and Beverage Sector. Prima Limited, Singapore, holds
45.45% of the issued share capital of the Company.
Prima Management Services (Private) Limited
1.2. Principal activities and nature of the operation
The main business of the Group is feed milling, commercial
broiler farming, poultry processing and distribution, poultry
breeder farming operations, manufacture and sale of
aquatic feed, buying and selling of poultry equipment and
provision of silo and warehouse facilities.
1.3. Number of employees
The average numbers of employees of the Group and
company for the year are as follows.
Group
Full time
Part time
494 (2012 - 484)
772 (2012 - 760)
Company
Full time
Part time
314 (2012 - 304)
132 (2012 - 129)
37
NOTES TO THE FINANCIAL STATEMENTS (Contd.)
•
•
•
•
•
•
•
- lease hold right classification
- classification of investment
property
Note 3.9
- key assumptions used in
discounted cash flow projections
Note 3.5
- intangible assets
Note 3.14
- deferred taxation
Note 3.10.3
- measurement of defined benefit
obligations and
Notes 3.11 and 3.19- provisions and contingencies.
issue of debt or equity securities, that the Group incurs in
connection with a business combination are expensed as
incurred.
Note 3.4.2
Note 3.6
2.6. Materiality and aggregation
Each material class of similar items is presented separately
in the financial statements. Items of a dissimilar nature
or function are presented separately unless they are
immaterial.
3.1.2. Non-controlling interest
The total profit and loss for the year of the Company
and its subsidiaries included in consolidation are shown
in the consolidated statement of comprehensive income
with the proportion of profit and loss after taxation
pertaining to minority shareholders of subsidiaries being
deducted as 'Non-controlling interest'. All assets and
liabilities of the Company and of its subsidiaries included
in consolidation are shown in the consolidated statement
of financial position. The interest of minority shareholders
of subsidiaries in the fair value of net assets of the Group
are indicated separately in the consolidated statement
of financial position under the heading 'Non-controlling
interest'.
Changes in the Group's interest in a subsidiary that do not
result in a loss of control are accounted for as transactions
with owners in their capacity as owners. Adjustments
to non-controlling interest is based on a proportionate
amount of the net assets of the subsidiary. No adjustments
are made to goodwill and no gain or loss is recognised in
profit or loss.
3.1.3. Subsidiaries
Subsidiaries are entities controlled by the Group. The
financial statements of subsidiaries are included in the
consolidated financial statements from the date, that
control commences, until the date that control ceases.
3.1.4. Loss of control
On the loss of control, the Group derecognises the assets
and liabilities of the subsidiary, any non-controlling
interests and the other components of equity related to
the subsidiary. Any surplus or deficit arising on the loss of
control is recognised in profit or loss.
3.1.5. Investments in associates
Associates are those entities in which the Group has
significant influence, but not control or joint control, over
the financial and operating policies. Significant influence is
presumed to exist when the Group holds between 20% and
50% of the voting power of another entity.
Investments in associates are accounted for under the
equity method and are recognised initially at cost. The
cost of the investment includes transaction costs. The
consolidated financial statements include the Group's
share of the profit or loss and other comprehensive income
3. Significant Accounting Policies
The accounting policies set out below have been applied
consistently to all periods presented in these financial
statements except for the change in accounting policy as
explained in Note 37.
3.1. Basis of consolidation
3.1.1. Business combinations
Business combinations are accounted for using the
acquisition method as at the acquisition date - i.e. when
control is transferred to the Group. Control is the power to
govern the financial and operating policies of an entity so
as to obtain benefits from its activities. In assessing control,
the Group also takes into consideration potential voting
rights that are currently exercisable.
The Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests
in the acquiree; plus
•
if the business combination is achieved in stages, the fair
value of the pre-existing equity interest in the acquiree;
less
• the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is
recognised immediately in profit or loss.
The consideration transferred does not include amounts
related to the settlement of pre-existing relationships
such amounts are generally recognised in profit or loss.
Transactions costs, other than those associated with the
38
of equity-accounted investees, after adjustments to align
the accounting policies with those of the Group, from the
date that significant influence commences until the date
that significant influence or joint control ceases.
When the Group's share of losses exceeds its interest in
an equity-accounted investee, the carrying amount of the
investment, including any long-term interests that form
part thereof, is reduced to zero and the recognition of
further losses is discontinued except to the extent that the
Group has an obligation or has made payments on behalf
of the investee.
The Group derecognises a financial asset when the
contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the contractual
cash flows in a transaction in which substantially all the
risks and rewards of ownership of the financial asset are
transferred. Any interest in such transferred financial assets
that is created or retained by the Group is recognised as a
separate asset or liability.
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when and
only when the Group has a legal right to offset the amounts
and intends either to settle them on a net basis or to realise
the asset and settle the liability simultaneously.
The Group classifies non-derivative financial assets into the
following categories: financial assets at fair value through
profit or loss, held-to-maturity financial assets, loans and
receivables and available for sale financial assets.
Financial assets at fair value through profit or loss
A financial asset is classified as at fair value through profit or
loss if it is classified as held-for-trading or is designated as
such on initial recognition. Financial assets are designated
as at fair value through profit or loss if the Group manages
such investments and makes purchase and sale decisions
based on their fair value in accordance with the Group’s
documented risk management or investment strategy.
Attributable transaction costs are recognised in profit or
loss as incurred financial assets at fair value through profit
or loss are measured at fair value and changes therein, which
takes into account any dividend income, are recognised in
profit or loss.
Held-to-maturity financial assets
Non-monetary assets and liabilities that are measured
at fair value in a foreign currency are retranslated to the
functional currency at the exchange rate at the date that
the fair value was determined. Non-monetary items that
are measured based on historical cost in a foreign currency
are translated using the exchange rate at the date of the
transaction.
If the Group has the positive intent and ability to hold
debt securities to maturity, then such financial assets are
classified as held-to-maturity. Held-to-maturity financial
assets are recognised initially at fair value plus any directly
attributable transaction costs. Subsequent to initial
recognition, held-to-maturity financial assets are measured
at amortised cost using the effective interest method, less
any impairment losses.
Loans and receivables
3.3. Financial instruments
3.3.1. Non-derivative financial assets
The Group initially recognises loans and receivables on
the date that they originated. All other financial assets
(including assets designated as at fair value through profit
or loss) are recognised initially on the trade date, which is
the date that the Group becomes a party to the contractual
provisions of the instrument.
Loans and receivables are financial assets with fixed or
determinable payments that are not quoted in an active
market. Such assets are recognised initially at fair value
plus any directly attributable transaction costs. Subsequent
to initial recognition, loans and receivables are measured at
amortised cost using the effective interest method, less any
impairment losses.
3.1.6. Transactions eliminated on consolidation
Intra-group balances and transactions and any unrealised
income and expenses arising from intra group transactions,
are eliminated in preparing the consolidated financial
statements. Unrealised gains arising from transactions
with equity accounted investees are eliminated against
the investment to the extent of the Group's interest in the
investee. Unrealised losses are eliminated in the same way
as unrealised gains, but only to the extent that there is no
evidence of impairment.
3.2. Foreign currency
Transactions in foreign currencies are translated to the
respective functional currencies of Group entities at
exchange rates at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies
at the reporting date are retranslated to the functional
currency at the exchange rate at that date. The foreign
currency gain or loss on monetary items is the difference
between amortised cost in the functional currency at the
beginning of the year adjusted for effective interest and
payments during the year and the amortised cost in foreign
currency translated at the exchange rate at the end of the
year.
39
Loans and receivables comprise cash and cash equivalents,
current tax receivables, amount due from affiliated
companies and trade and other receivables.
Cash and cash equivalents comprise cash balances and call
deposits with maturities of three months or less from the
acquisition date that are subject to an insignificant risk of
changes in their fair value and are used by the Group in the
management of its short-term commitments.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative
financial assets that are designated as available-for- sale or
are not classified in any of the above categories of financial
assets. Available-for-sale financial assets are recognised
initially at fair value plus any directly attributable transaction
costs.
Subsequent to initial recognition, they are measured at fair
value and changes therein, other than impairment losses
and foreign currency differences on available- for-sale debt
instruments, are recognised in other comprehensive income
and presented in the fair value reserve in equity. When an
investment is derecognised, the gain or loss accumulated in
equity is reclassified to profit or loss.
3.3.2. Non-derivative financial liabilities
The Group initially recognises debt securities issued and
subordinated liabilities on the date that they are originated.
All other financial liabilities are recognised initially on the
trade date, which is the date that the Group becomes a
party to the contractual provisions of the instrument.
40
The Group derecognises a financial liability when its
contractual obligations are discharged, cancelled or expire.
The Group classifies non-derivative financial liabilities
into the other financial liabilities category. Such financial
liabilities are recognised initially at fair value less any
directly attributable transaction costs. Subsequent to
initial recognition, these financial liabilities are measured at
amortised cost using the effective interest method.
Other financial liabilities comprise loans and borrowings,
debt securities issued, bank overdrafts, amount due to
affiliated companies and trade and other payables. Bank
overdrafts that are repayable on demand and form an
integral part of the Group's cash management are included
as a component of cash and cash equivalents for the
statement of cash flows.
3.3.3. Stated capital
Ordinary shares
Ordinary shares are classified as equity. As per the
Companies Act No. 07 of 2007, section 58 (1), stated capital
in relation to a Company means the total of all amounts
received by the Company or due and payable to the
Company in respect of the issue of shares and in respect of
call in arrears.
3.4. Property, plant and equipment
Property, plant and equipment are tangible items that
are held for use in the production or supply of goods or
services, for rental to others, or for administrative purposes
and are expected to be used during more than one period.
3.4.1. Recognition and measurement
Items of property, plant and equipment are measured at
cost less accumulated depreciation and accumulated
impairment losses.
Cost includes expenditure that is directly attributable to
the acquisition of the asset. The cost of self-constructed
assets include the cost of materials and direct labour, any
other costs directly attributable to bringing the asset to
a working condition for its intended use and the cost of
dismantling and removing the items and restoring the site
on which they are located and capitalised borrowing cost.
Purchased software that is integral to the functionality
of the related equipment is capitalised as part of that
equipment.
When parts of an item of property, plant and equipment
have different useful lives, they are accounted for as
separate items (major components) of property, plant and
equipment.
3.4.2. Recognition and measurement
Gains and losses on disposal of an item of property, plant
and equipment are determined by comparing the proceeds
from disposal with the carrying amount of property, plant
and equipment and are recognised net within 'other
income / other expenses' in profit or loss.
3.4.3. Subsequent costs
The cost of replacing a part of an item of property, plant
and equipment is recognised in the carrying amount of
the item if it is probable that the future economic benefits
embodied within the part will flow to the Group and its
cost can be measured reliably. The carrying amount of the
replaced part is derecognised. The costs of the day-to-day
servicing of property, plant and equipment are recognised
in profit or loss as incurred.
3.4.4. Derecognition
3.4.6. Capital work-in-progress
The carrying amount of an item of property, plant and
equipment is derecognised on disposal or when no future
economic benefits are expected from its use or disposal.
The gain or loss arising from derecognition of an item of
property, plant and equipment is included in profit or loss
when the item is derecognised. When replacement costs are
recognised in the carrying amount of an item of property,
plant and equipment, the remaining carrying amount of
the replaced part is derecognised. Major inspection costs
are capitalised. At each such capitalisation, the remaining
carrying amount of the previous cost of inspections is
derecognised.
Capital expenses incurred during the year which are not
completed as at the reporting date are shown as capital
work-in-progress, while the capital assets which have been
completed during the year and put to use are transferred to
property, plant and equipment.
3.4.7. Leased assets
Leases in terms of which the Group assumes substantially
all the risks and rewards of ownership are classified as
finance leases. Upon initial recognition the leased assets are
measured at an amount equal to the lower of its fair value
and the present value of the minimum lease payments.
Subsequent to initial recognition, the asset is accounted for
in accordance with the accounting policy applicable to that
asset.
Other leases are operating leases and any prepayments
are recognised in the consolidated statement of financial
position as lease hold rights. The leasehold rights under
operating leases are charged to the income statement on a
straight-line basis over the period of the lease.
When an operating lease is terminated before the lease
period has expired, any payment required to be made to
the lessor by way of penalty is recognised as an expense in
the period in which termination takes place.
The cost of improvements to or on leased property is
capitalised and depreciated over the unexpired period of
the lease or the estimated useful lives of improvements,
whichever is shorter.
3.5. Intangible assets
3.4.5. Depreciation
Depreciation is based on the cost or other amount
substituted for cost, less its residual value. Significant
components of individual assets are assessed and if a
component has a useful life that is different from the
remainder of that asset, that component is depreciated
separately.
Depreciation is recognised in the statement of
comprehensive income on a straight-line basis over the
estimated useful lives of each part of an item of property,
plant and equipment. Leased assets are depreciated over
the shorter of the lease term and their useful lives unless it
is reasonably certain that the Group will obtain ownership
by the end of the lease term. No depreciation is provided
on assets under construction.
The estimated useful lives for
comparative years are as follows:
the
current
and
Freehold building
20 - 50 years
Plant and machinery
16 2/3 years
Electrical and factory equipment 2 - 5 - 10 - 20 years
Farm equipment
5 - 20 years
Furniture and fittings and office equipment 10 years
Motor vehicles
5 - 10 years
3.5.1. Other intangible assets
Other intangible assets that are acquired by the Group and
have finite useful lives are measured at cost less accumulated
amortisation and any accumulated impairment losses.
3.5.2. Subsequent expenditure
Land is not depreciated as it is deemed to have indefinite
life. Depreciation of an asset begins when it is available
for use and ceases at the earlier of the date that the asset
is classified as held-for-sale and the date that the asset
is derecognised. Depreciation methods, useful lives and
residual values are reviewed at each reporting date and
adjusted if appropriate.
Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure,
including expenditure on internally generated goodwill and
brands, are recognised in profit or loss as incurred.
Where the carrying amount of an asset is greater than
its estimated recoverable amount, it is written down
immediately to its recoverable amount.
3.5.3. Amortisation
Amortisation is recognised in profit or loss on a straightline basis over the estimated useful lives of intangible
assets, other than goodwill, from the date that they are
available for use.
41
The estimated useful lives for the current and comparative
years are as follows:
Computer software
Amortisation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
3.6. Investment property
Bearer biological assets are those other than consumable
biological assets. Bearer biological assets are not
agricultural produce but, rather, are self-regenerating.
As per the ruling issued by the Institute of Chartered
Accountants of Sri Lanka on 2 March 2012, preparers can
choose to measure bearer biological assets either at cost
(using LKAS 16 - Property, Plant and Equipment) or at fair
value under LKAS 41 - Agriculture.
Investment property is property held either to earn rental
income or for capital appreciation or for both, but not for
sale in the ordinary course of business, use in the production
or supply of goods or services or for administrative
purposes. Investment property is initially measured at cost
and subsequently carried at cost less any accumulated
depreciation and any accumulated impairment loss.
Company has identified parent and grandparent livestock
as bearer biological assets. The growing birds are valued at
directly attributable cost incurred up to the commencement
of laying period. The laying birds are valued at cost less
subsequent amortisations. The amortisation is made on
straight line basis over the laying period after making due
allowances for carcass value.
Cost includes expenditure that is directly attributable to
the acquisition of the investment property. The cost of
self-constructed investment property includes the cost
of materials and direct labour, any other costs directly
attributable to bringing the investment property to a
working condition for their intended use and capitalised
borrowing costs.
3.8.Inventories
Inventories are measured at the lower of cost and net
realisable value after making due allowances for obsolete
and slow moving items.
Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs
necessary to make the sale.
The cost incurred in bringing inventories to its present
location and conditions are accounted as follows.
Compounded feed
Cost is calculated using the weighted average cost formula
and the cost of finished goods and work in progress
comprises raw materials, direct labour, other direct costs
and related production overheads, but excludes interest
expenses.
Poultry equipment, drugs, vaccines and sundry
inventories
Poultry equipment, drugs, vaccines and sundry inventories
are valued at actual cost on weighted average basis after
making due allowance for obsolete and slow moving items.
Out grower stock
Out grower stock represents the Company’s birds reared at
outside farms and are valued at directly attributable cost.
3.9.Impairment
3.9.1. Non-derivative financial assets
A financial asset not classified as at fair value through
profit or loss, including an interest in an equity- accounted
investee, is assessed at each reporting date to determine
10 years
Any gain or loss on disposal of an investment property
(calculated as the difference between the net proceeds
from disposal and the carrying amount of the item) is
recognised in profit or loss.
3.7. Biological asset
A biological asset is a living animal or plant. Biological
assets consist of parent and grandparent livestock, used to
breed day old commercial chicks, hatching eggs and broiler
birds. Parent and grandparent birds include the growing
birds and the laying birds.
Consumable biological assets are those that are to be
harvested as agricultural produce or sold as biological
assets. Hatching eggs and broiler birds have been identified
as consumable biological assets.
42
Agricultural produce harvested from an entity's biological
assets are measured at its fair value less costs to sell at
the point of harvest. In management's opinion, the fair
value of the consumable biological assets is substantially
represented by formation cost, mainly due to the shorter
life cycle of the birds and the fact that a significant share
of the profits arise from the manufacturing process (i.e.
as broiler whole chicken, broiler portions and further
processing meat) and not from the live birds. Accordingly,
the cost of consumable biological assets approximates its
fair value.
whether there is objective evidence that it is impaired. A
financial asset is impaired if there is objective evidence of
impairment as a result of one or more events that occurred
after the initial recognition of the asset and that loss
event(s) had an impact on the estimated future cash flows
of that asset that can be estimated reliably.
Objective evidence; that financial assets are impaired
includes default or delinquency by a debtor, restructuring of
an amount due to the Group on terms that the Group would
not consider otherwise, indications that a debtor or issuer
will enter bankruptcy, adverse changes in the payment
status of borrowers or issuers, economic conditions that
correlate with defaults or the disappearance of an active
market for a security. In addition, for an investment in an
equity security, a significant or prolonged decline in its fair
value below its cost is objective evidence of impairment.
Financial assets measured at amortised cost
The Group considers evidence of impairment for financial
assets measured at amortised cost (loans and receivables
and held-to-maturity financial assets) at both a specific
asset and collective level. All individually significant assets
are assessed for specific impairment. Those found not to be
specifically impaired are, then collectively assessed for any
impairment that has been incurred but not yet identified.
Assets that are not individually significant are, collectively
assessed for impairment by grouping together assets with
similar risk characteristics.
In assessing collective impairment, the Group uses
historical trends of the probability of default, the timing
of recoveries and the amount of loss incurred, adjusted for
management's judgment as to whether current economic
and credit conditions are such that the actual losses are
likely to be greater or lesser than suggested by historical
trends.
An impairment loss in respect of a financial asset measured
at amortised cost is calculated as the difference between
its carrying amount and the present value of the estimated
future cash flows discounted at the asset's original
effective interest rate. Losses are recognised in profit or
loss and reflected in an allowance account against loans
and receivables or held-to-maturity investment securities.
Interest on the impaired asset continues to be recognised.
When an event occurring after the impairment is recognised
and causes the amount of impairment loss to decrease, the
decrease in impairment loss is reversed through profit or
loss.
Available-for-sale financial assets
Impairment losses on available-for-sale financial assets are
recognised by reclassifying the losses accumulated in the
fair value reserve in equity to profit or loss. The cumulative
loss that is reclassified from equity to profit or loss is the
difference between the acquisition cost, net of any principal
repayment and amortisation and the current fair value, less
any impairment loss recognised previously in profit or loss.
Changes in cumulative impairment losses attributable to
application of the effective interest method are reflected
as a component of interest income. If, in a subsequent
period, the fair value of an impaired available-for-sale
debt security increases and the increase can be related
objectively to an event occurring after the impairment loss
was recognised, then the impairment loss is reversed, with
the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an
impaired available-for-sale equity security is recognised in
other comprehensive income.
An impairment loss in respect of an equity-accounted
investee is measured by comparing the recoverable amount
of the investment with its carrying amount. An impairment
loss is recognised in profit or loss. An impairment loss is
reversed if there has been a favourable change in the
estimates used to determine the recoverable amount.
3.9.2. Non-financial assets
The carrying amounts of the Group's non-financial
assets, other than biological assets, investment property,
inventories and deferred tax assets, are reviewed at each
reporting date to determine whether there is any indication
of impairment. If any such indication exists, then the asset's
recoverable amount is estimated. Goodwill and indefinitelife intangible assets are tested annually for impairment. An
impairment loss is recognised if the carrying amount of an
asset or cash generating unit (CGU) exceeds its recoverable
amount.
The recoverable amount of an asset or CGU is the greater
of its value in use and its fair value less costs to sell. In
assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time
value of money and the risks specific to the asset or CGU.
For impairment testing, assets are grouped together into
the smallest group of assets that generates cash inflows
from continuing use that are largely independent of the
cash inflows of other assets or CGUs.
Impairment losses are recognised in profit or loss.
Impairment losses recognised in respect of CGUs are
allocated first to reduce the carrying amount of any
goodwill allocated to the CGU (group of CGUs) and then to
reduce the carrying amounts of the other assets in the CGU
(group of CGUs) on a pro rata basis.
43
An impairment loss in respect of goodwill is not reversed.
For other assets, an impairment loss is reversed only to the
extent that the asset's carrying amount does not exceed
the carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had
been recognised.
3.10. Employee benefits
3.10.1. Short-term employee benefits
Short-term employee benefit obligations are measured
on an undiscounted basis and are expensed as the related
service is provided. A liability is recognised for the amount
expected to be paid under short-term cash bonus or
profit-sharing plans if the Group has a present legal or
constructive obligation to pay this amount as a result of
past service provided by the employee and the obligation
can be estimated reliably.
3.10.2. Defined contribution plan
A defined contribution plan is a post-employment benefit
plan under which an entity pays fixed contributions into a
separate entity and has no legal or constructive obligation
to pay further amounts. Obligations for contributions to
defined contribution plans are recognised as an employee
benefit expense in profit or loss in the periods during
which related services are rendered by employees. Prepaid
contributions are recognised as an asset to the extent that
a cash refund or a reduction in future payments is available.
(a) Employees' Provident Fund
The Group and employees contribute 12% and 8%
respectively on the salary of each employee to the
Employees’ Provident Fund.
(b) Employees' Trust Fund
The Group contributes 3% of the salary of each
employee to the Employees’ Trust Fund. The total
amount recognised as an expense to the Group for
contribution to ETF is disclosed in the notes to financial
statements.
3.10.3. Defined benefit plan - gratuity
A defined benefit plan is a post employment benefit plan
other than a defined contribution plan. The Group's net
obligation in respect of defined benefit plans is calculated
separately for each plan by estimating the amount of
future benefit that employees have earned in return
for their service in the current and prior periods. That
benefit is discounted to determine its present value. Any
unrecognised past service costs and the fair value of any
plan assets are deducted.
44
The calculation is performed annually by a qualified
actuary using the Projected Unit Credit (PUC) method as
recommended by LKAS 19 - 'Employee Benefits'. When the
calculation results in a benefit to the Group, the recognised
asset is limited to the total of any unrecognised past service
costs and the present value of economic benefits available
in the form of any future refunds from the plan or reductions
in future contributions to the plan. In order to calculate
the present value of economic benefits, consideration is
given to any minimum funding requirements that apply to
any plan in the Group. An economic benefit is available to
the Group if it is realisable during the life of the plan, or
on settlement of the plan liabilities. When the benefits of
a plan are improved, the portion of the increased benefit
related to past service by employees is recognised in profit
or loss on a straight-line basis over the average period until
the benefits become vested. To the extent that the benefits
vest immediately, the expense is recognised immediately in
profit or loss.
The assumptions based on which the results of actuarial
valuation was determined, are included in Note 26 to the
financial statements.
The Company recognises all actuarial gains and losses
arising from defined benefit plan immediately in other
comprehensive income and all expenses related to defined
benefit plan in employee benefit expense in profit or loss.
The Company recognises gains and losses on the
curtailment or settlement of a defined benefit plan when
the curtailment or settlement occurs. The gain or loss
on curtailment or settlement comprises any resulting
change in the fair value of plan assets, any change in the
present value of the defined benefit obligation, any related
actuarial gains and losses and past service cost that had
not previously been recognised. However, according to
the Payment of Gratuity Act No.12 of 1983, the liability
for the gratuity payment to an employee arises only on
the completion of 5 years of continued service with the
Company.
3.11.Provisions
A provision is recognised if, as a result of a past event,
the Group has a present legal or constructive obligation
that can be estimated reliably; and it is probable that an
outflow, of economic benefits will be required to settle the
obligation.
3.12. Revenue recognition
Sale of goods
Revenue from the sale of goods in the course of ordinary
activities is measured at the fair value of the consideration
received or receivable, net of returns, trade discounts and
volume rebates. Revenue is recognised when persuasive
evidence exists, usually in the form of an executed sales
agreement, that the significant risks and rewards of
ownership have been transferred to the customer, recovery
of the consideration is probable, the associated costs and
possible return of goods can be estimated reliably, there
is no continuing management involvement with the goods,
and the amount of revenue can be measured reliably. If it is
probable that discounts will be granted and the amount can
be measured reliably, then the discount is recognised as a
reduction of revenue as the sales are recognised. Revenue
excludes value added taxes or other sales taxes.
Rental income
Rental income received or receivable in the course of
ordinary activities is recognised as revenue in the statement
of comprehensive income on a straight-line basis over the
terms of the lease. Lease incentives granted are recognised
as an integral part of the total rental income.
Rental income from investment property is recognised as
other income in profit or loss on a straight-line basis over
the terms of the lease.
Dividend income
Dividend income is recognised in profit or loss on the date
that the Group’s right to receive payment is established.
Other income
Gains / losses on the disposal of investments held by the
Group have been accounted for as other income in the
statement of comprehensive income.
Gains / losses on the disposal of property, plant and
equipment determined by reference to the carrying amount
and related expenses, have been accounted for as other
income in the statement of comprehensive income.
Finance income
Finance income comprises interest income on funds
invested (including available-for-sale financial assets),
gains on the disposal of available-for-sale financial assets
and fair value gains on financial assets at fair value through
profit or loss. Interest income is recognised as it accrues in
profit or loss, using the effective interest method.
3.13.Expenses
Operating lease payments
Where the Company has the use of assets under operating
leases, payments made under the leases are recognised in
the statement of comprehensive income on a straight-line
basis over the term of the lease. Lease incentives received
are recognised in the statement of comprehensive income
as an integral part of the total lease expense over the
term of the lease. Contingent rentals are charged to the
statement of comprehensive income in the accounting
period in which they are incurred.
Finance cost
Finance costs comprise interest expense on borrowings,
unwinding of the discount on provisions and losses on
disposal of available-for-sale financial assets, fair value
losses on financial assets at fair value through profit or
loss and impairment losses recognised on financial assets
(other than trade receivables).
Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset
are recognised in profit or loss using the effective interest
method.
Foreign currency gains and losses on financial assets and
financial liabilities are reported on a net basis as either
finance income or finance cost depending on whether
foreign currency movements are in a net gain or net loss
position.
3.14. Taxation
Income tax expense comprises current and deferred tax.
Income tax is recognised in the statement of comprehensive
income except to the extent that it relates to items
recognised directly in equity, in which case it is recognised
in equity.
Current tax
Current tax is the expected tax payable on the taxable
income for the year, using tax rates enacted at the reporting
date and any adjustment to tax payable in respect of
previous years.
Deferred tax
Deferred tax is recognised using the statement of
financial position liability method, providing for temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following temporary
differences are not provided for goodwill not deductible for
tax purposes, the initial recognition of assets or liabilities
that affect neither accounting nor taxable profit, nor
differences relating to investments in subsidiaries to the
extent that they will probably not reverse in the foreseeable
future. The amount of deferred tax provided is based on
the expected manner of realisation or settlement of the
45
carrying amount of assets and liabilities, using tax rates
enacted or substantively enacted at the reporting date.
The
principal
temporary
differences
arise
3.17.Events after the reporting period
All material post reporting period events have been considered
from
and where appropriate adjustments or disclosures have
depreciation on property, plant and equipment, tax losses
carried forward, impairment of livestock trade and other
been made in respective notes to the financial statements.
receivables and provisions for defined benefit obligations.
3.18.Comparative figures
Deferred tax assets relating to the carry forward of unused
Where
tax losses are recognised to the extent that it is probable
that future taxable profit will be available against which the
necessary,
the
comparative
figures
have been
reclassified to conform to the current year’s presentation.
unused tax losses can be utilised.
3.19.Commitments and contingencies
A deferred tax asset is recognised only to the extent that
Contingencies are possible assets or obligations that arise
it is probable that future taxable profits will be available
from a past event and would be confirmed only on the
against which the asset can be utilised. Deferred tax assets
occurrence or non-occurrence of uncertain future events,
are reviewed at reporting date and are reduced to the
which are beyond the Company’s control. Contingent
extent that it is no longer probable that the related tax
liabilities are disclosed in Note 27 to the financial statements.
benefit will be realised.
Commitments are disclosed in Note 28 to the financial
statements.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
3.20. New standards and interpretations not yet adopted
A number of new standards, amendments to standards
assets and they relate to income taxes levied by the same
tax authority on the same taxable entity, or on different tax
entities, but they intend to settle current tax liabilities and
and interpretations are not yet effective for the year ended
assets on a net basis or their tax assets and liabilities will be
31 December 2013 and have not been applied in preparing
realised simultaneously.
these financial statements.
Additional income taxes that arise from the distribution of
pay the related dividend is recognised.
3.15. Segment reporting
A segment is a distinguishable component of the Group
that is engaged either in providing products or services
(business segment), or in providing products and services
within a particular economic environment (geographical
segment), which is subject to risks and rewards that are
SLFRS 10 - Consolidated Financial Statements
SLFRS 11 - Joint Arrangements
SLFRS 12 - Disclosure of Interests in other Entities
SLFRS 13 - Fair Value Measurement; and
SLFRS 09 - "Financial Instruments" which will be effective
from 1 January 2015.
different from those of other segments.
3.16. Earnings / (loss) per share
The Group presents
basic
earnings / (loss) per share
(EPS) data for its ordinary shares. Basic EPS is calculated
by dividing the profit or loss attributable to ordinary
shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period.
46
These include following standards which will be effective
from 1 January 2014;
dividends are recognised at the same time as the liability to
The Company is currently in the process of evaluating the
potential effect of these standards on its financial statements
and the impacts of the adoption of these standards have not
been quantified as at the reporting date.
For the year ended 31 December 2013
04. SEGMENT INFORMATION
(a) Business segments
Feed milling
Broiler Poultry
Shrimp
Poultry
farming and breeder and
farming
equipment
processed commercial
chickenfarming
Silo and
Elimination / Consolidated
warehouse adjustment complex Sales to outsiders
7,703,211
2,991,865
725,758-
40,654
6,612-
11,468,100
Inter segmental sales
2,239,167
Total revenue
9,942,378
Segment results
-
917,391
2,991,865
1,643,149
-
119,199 (39,553)209,429
-98,99267,068
(3,322,618)
139,646
(2,384) 28,084
-
73,680 (3,322,618)11,468,100
40,829
13,484 369,088
(145,299)-
(23,067)-
(248)- -
(168,614)
Other income / (expenses)
74,512(14)
(14,028)40
-
-
(20,129)
40,381
------
3,218
3,218
Profit / (loss) before tax
48,412(39,567)
172,334 (2,344)27,836 40,829 (3,427)
244,073
Taxation
(29,305)(2,780)(2,765) (295)(9,065)(7,348)
19,107 (42,347)169,569
(2,639) 18,771
33,481
-(51,558)
(3,427)192,515
Actuarial (loss) / gain arising from defined
benefit obligation
(635)
-(509)
-
- 412
-(732)
Total comprehensive
income / (expenses) for the year
18,472 (42,347)169,060
(2,639) 18,771
Feed milling
Broiler Poultry
Shrimp
Poultry
farming
equipment
chickenfarming
33,893
(3,427)191,783
Silo and
warehouse adjustment complex Sales to outsiders
8,964,844
2,648,901
710,473
-38,11612,711
Inter segmental sales
2,178,071
-87,74972,427
(3,089,250)
Total revenue
11,142,915
-
751,003
2,648,901
1,461,476
-
125,865
-
12,375,045
-
85,138 (3,089,250)12,375,045
Segment results
(247,477) (16,648) 73,548
Net finance (expenses) / income
(270,556)-
(32,850)-74 - -
(303,332)
Other income / (expenses)
Profit / (loss) before tax
Taxation
(2,364) 21,257
693,183113
3,865753
54,976
12,688(104,020)
-
(1,102)
(171,799)
525,013
------
4,108
4,108
175,150 (16,535) 44,563
47,624
(1,611) 21,331
53,874(155,003)121,769
-(8,802)1,409(7,145)(5,398)
222,774(16,535)35,761
-27,688
(202)14,186 48,476
(155,003)
149,457
Actuarial gain arising from defined
benefit obligation 2,744-
929--
31-
3,704
Total comprehensive
income / (expenses) for the year
225,518 (16,535) 36,690
(202) 14,186
48,507(155,003)153,161
47
04. SEGMENT INFORMATION (Contd.)
(b) Business segments (Contd.)
As at 31 December 2013
Feed milling
Broiler Poultry
Shrimp
Poultry
farming
equipment
chickenfarming
Silo and
warehouse adjustment complex Segment assets
392,497 (353,730)5,713,193
Associate
Inter segment assets
2,715,020
595,625 2,271,564
63,481
28,736
33-----
14,357
14,390
796,966---
47,414-
(844,380)-
Total assets
3,512,019
Segment liabilities
2,037,567-
461,225
183
8,547
55,046-
2,562,568
Inter segment liabilities
Total liabilities
Capital expenditure
595,625 2,271,564
63,481
76,150
392,497(1,183,753)5,727,583
47,414-
891,881
86,417-
5,085
(1,030,797)2,084,981
- 1,353,106
86,600
8,547
60,131(1,030,797)2,562,568
199,700-
116,706----
316,406
Depreciation / amortisation
46,790-
93,019
1,431-
13,469-
154,709
Impairment of intangible assets
13,104------
13,104
Feed milling
Broiler Poultry
Shrimp
Poultry
farming
equipment
chickenfarming
Segment assets
Associate
Silo and
warehouse adjustment complex 2,908,656581,611
2,256,003 64,944 41,903396,970(351,039)
5,899,048
33-----
11,139
11,172
Inter segment assets
1,004,429---
16,197-
(1,020,626)-
Total assets
3,913,118
Segment liabilities
2,424,290-
453,888
1,698
7,724
41,684-
2,929,284
Inter segment liabilities
Total liabilities
581,611 2,256,003
16,197
2,440,487
64,944
-
1,052,71783,726
- 1,506,605
85,424
58,100
396,970(1,360,526)5,910,220
-51,712
(1,204,352)
7,724
-
93,396(1,204,352)2,929,284
Capital expenditure
59,884-
122,440--
823-
183,147
Depreciation / amortisation
35,199-
80,143
1,540-
13,517-
130,399
Impairment of intangible assets
12,454------
12,454
48
04. SEGMENT INFORMATION (Contd.)
(c) Business segments (Contd.)
The Group is organised into six main business segments:
• Feed milling - manufacture and sale of poultry feed, aqua feed and other animal feed.
• Broiler farming and processed chicken - operation of broiler farming, processing and distribution of chicken.
• Poultry breeder and commercial farming - operation of grandparent, parent poultry breeder farms and hatcheries.
• Shrimp farming - integrated shrimp operation.
• Poultry equipment - import and sale of poultry equipment, drugs and vaccine.
• Silo and warehouse complex - operation of ultra modern silo and warehouse complex.
Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, receivables and operating cash
and exclude investments in subsidiaries. Segment liabilities comprise current and non-current liabilities. Capital expenditure
comprises additions to property, plant and equipment.
(d) Sales are made up as follows:
GROUPCOMPANY
2013
20122013
2012
Feed milling
11,032,30412,603,808 11,032,30412,603,808
Process chicken
3,412,2493,000,068 3,412,2493,000,068
Poultry breeder farming
1,415,9611,329,029
Parent birds
-
-
-
Commercial broiler farming
427,983249,884
-
-
Poultry equipment
144,639130,615
-
-
-
-
Silo warehouse complex
34,05029,050
-
84,20697,301
16,551,39217,439,755 14,444,55315,603,876
Elimination / adjustment
(3,322,618)(3,089,250) (1,485,035)(1,420,935)
13,228,77414,350,505 12,959,51814,182,941
Sales taxes [ Note 4 . (e) ]
(1,760,674)(1,975,460) (1,556,234)(1,812,060)
11,468,10012,375,045 11,403,28412,370,881
(e) Sales taxes
GROUPCOMPANY
2013
20122013
2012
Nation Building Tax
221,804262,763 220,015259,754
Value Added Tax
1,538,8701,712,697 1,336,2201,552,306
1,760,6741,975,460 1,556,2351,812,060
49
5.
Operating profit
The following items have been charged / (credited) in arriving at operating profit:
GROUPCOMPANY
2013
20122013
2012
Restated
Restated
Directors’ emoluments
2,160 4801,080 360
Auditors’ remuneration - Audit service
4,8884,615 2,9302,765
- Other service
288892 145836
Legal fees
Depreciation on property, plant and equipment (Note 12)
3,02422,617 2,98022,538
138,455114,115 43,045 31,403
Amortisation of leasehold right over land and buildings (Note 13)
16,25416,284 3,745 3,796
Amortisation of intangible assets (Note 14)
13,10412,454 13,10412,454
Amortisation of livestock (Note 17)
Provision / (reversal) for doubtful debts
Settlement of custom case
Operating lease rentals - property
Staff expenses (Note 7)
6.
355,445396,741
-
-
6,953(2,125) 6,974(2,000)
-115,000
-115,000
33,00031,139 21,00017,983
600,390573,160 412,039396,369
Temporary cessation of operation
On 1 November 2004 the Directors temporarily ceased the operation of breeding, hatching and growing of prawns and sea
cucumber of Ceylon Aquatech (Private) Limited, a subsidiary of the Company.
The Management of the Company is of the view that the commercial operations of the Chilaw Farm could be recommenced.
The assets and liabilities as at the reporting date of the division were as follows:
As at 31 December
2013
2012
63,39264,844
Total assets
63,48164,944
Total liabilities
86,60085,424
Net assets
50
(23,119)(20,480)
7.
Staff expenses
GROUPCOMPANY
2013
20122013
2012
Restated
Restated
Salaries and wages
Social security cost
Defined contribution plan
Employee benefits (Note 26)
565,732539,677 383,388370,098
129113 113557
25,60024,834 21,77619,329
8,9298,536 6,7626,385
600,390573,160 412,039396,369
Average monthly number of persons employed by the Company and Group during the year:
- Full time
- Part time
494484 314304
772760 132129
1,2661,244 446 433
Part time employees include contracted labourers hired from third parties and those who work on shift basis.
8.
Other income
GROUPCOMPANY
2013
20122013
2012
Sundry income
Interest income
Amortisation of amount due to affiliated companies - unearned income
14,23326,241 30,21635,631
2,8795,520 2,5204,709
34,82934,829 34,82934,829
Dividend income
-12,082
Gain on disposal of associate company shares
(Loss) / profit on disposal of property, plant and equipment
-447,104
(11,341)(19,263)
Loss on disposal of leasehold right over land and buildings
9.
-602,165
507
(170)
(219) -(219) -
Reversal of impairment provision on property, plant and equipment 6,64516,132
-18,500
40,381525,013
-
-
74,498693,296
GROUPCOMPANY
2013
20122013
2012
Foreign exchange transaction losses
Interest expense on amount due to affiliated companies - non-current
Interest expense on bank borrowings
35,178184,438 34,739186,273
15,08529,034 15,08529,034
118,35189,860 95,47555,249
168,614303,332 145,299270,556
51
10.Taxation
GROUPCOMPANY
2013
20122013
2012
Current tax
Under / (over) provision
Deemed dividend tax
14,66221,041
6,531(1,751)
-6,193
501 1,334
-
-
-5,006
Deferred tax charge / (release) (Note 25)
13,160 (53,955)
ESC write off
17,205
784 17,205(1,190)
51,558 (27,688) 32,085(47,624)
14,379(52,774)
Company
Under an agreement dated 12 February 2004, entered into by the Company and the Board of Investment of Sri Lanka (BOI), the
Company was entitled to an additional tax holiday of 3 years and a further additional tax exemption period of 5 years commencing
from 17 December 2005 on profit and income earned by the Company from transshipment and bulk cargo operations and the
operations of the feed milling and the animal husbandry project. This exemption period was over by 17 December 2010 and the
Company is liable to pay 10% as income tax on profits and income earned for the year ended 31 December 2013.
The Company is liable to pay 28% as income tax on interest income earned by the Company. The tax losses carried forward as
at 31 December 2013 amounted to Rs. 517,792,213/- (2012 - Rs. 464,116,199/-).
Group
Three Acre Farms PLC is liable to pay income tax on profits and income earned at 10%. The tax losses available to carry forward
as at 31 December 2013 amounted to Rs. 520,094,336/- (2012- Rs. 537,466,559/-).
Ceylon Livestock and Agrobusiness Services (Private) Limited is liable to pay income tax at 28% on the profits and income
earned by the company.
Ceylon Pioneer Poultry Breeders Limited is liable to pay income tax at 28% on the profits and income earned by the company.
The tax losses available to carry forward as at 31 December 2013 amounted to Rs. 227,646,905/- (2012 - Rs. 227,688,736/-).
Millennium Multibreeder Farms (Private) Limited is liable to pay income tax at 10% on the profits and income earned by the
company. The tax losses available to carry forward as at 31 December 2013 amounted to Rs. 100,109,067/- (2012 - Rs. 115,362,127/-).
Ceylon Aquatech (Private) Limited is liable to pay income tax at 28% on the profits and income earned by the company. However,
the tax losses available to carry forward as of 31 December 2013 amounted to Rs. 18,585,521/- (2012 - Rs. 18,607,005/-).
Ceylon Warehouse Complex (Private) Limited is exempt from income tax on trading profits for a period of seven years reckoned
from the year in which the company commences to make profits in relation to its transactions or any year of assessment not
later than five years from the date of its commercial operations, whichever is the earlier. The company commenced commercial
operations on 1 October 2000. Hence the tax holiday commenced from 1 April 2004. The tax holiday had expired on 31 March
2011 and the company is liable for income tax on the profits and income earned by the company at the rate of 10%.
52
10.Taxation (Contd.)
Reconciliation of effective tax rate
The tax on the results of the Group’s operations and the Company’s profit before tax differs from the theoretical amount that
would arise using the basic tax rate as follows:
GROUPCOMPANY
2013
20122013
2012
Profit before tax
244,073121,769
8,845158,615
(3,218)(4,108)
-
-
240,855117,661
Add: disallowable expenses
658,858629,107 125,796117,803
Deduct: allowable expenses
Deduct: income not subject to tax
Profit / (loss) from trade and business
Add: interest income
Deduct: tax loss claimed
Taxable income
(823,360) (132,994)
8,845158,615
(189,280)(123,903)
- (442,570)
76,353
171,204
-(617,631)
(54,639)(465,116)
2,7734,771 2,7514,764
(33,652)(42,138)
(963)
-
45,474133,837
1,788
4,764
Income tax using the domestic corporate tax rate
at 10%
5,0603,405
at 12%
-8,710
at 28%
9,6028,926
Current tax
Under / (over) provision
Deferred tax charge / (release) Deemed dividend tax
14,66221,041
13,160 (53,955)
51,558 (27,688)
-
-
5011,334
-
-
14,379(52,774)
-6,193
17,205
-
501 1,334
6,531(1,751)
ESC write off
-
-5,006
784 17,205(1,190)
32,085(47,624)
Further information about deferred tax is presented in Note 25.
11.
Basic earnings / (loss) per share
asic earnings / (loss) per share is calculated by dividing the net profit / (loss) attributable to ordinary shareholders by the
B
weighted average number of shares outstanding during the year.
GROUPCOMPANY
2013
20122013
2012
Net profit / (loss) attributable to ordinary shareholders
Weighted average number of ordinary shares (thousands) Basic earnings / (loss) per share (Rs.)
119,956 134,155
(23,240)206,239
60,00060,000 60,00060,000
2.00 2.24(0.39) 3.44
53
12.
(a) Group
As at
01.01.2013
Additions /
WIP transfer
Disposals/
write off
As at
31.12.2013
Cost
Land
346,659
Building
-
-346,659
1,092,121
42,574
Plant and machinery, electrical and farm equipment
991,448
250,474
Furniture and fittings and office equipment
141,505
8,804
(9,491)140,818
Motor vehicles
132,845
26,146
(2,773)156,218
Capital work-in-progress
(1,372)1,240,550
22,352(11,592)
2,726,930
As at
01.01.2013
(12,300)1,122,395
316,406
Charge for
the year
- 10,760
(25,936)3,017,400
Disposals/
write off
As at
31.12.2013
Depreciation
Building
Motor vehicles
48,767 26,728
501,880
90,444
85,373
9,061
(697)74,798
(1,368)585,885
(9,308)90,197
20,644 17,293
(518)37,419
661,735 138,455 (11,891)788,299
As at
As at
01.01.201331.12.2013
Carrying amount
Land
346,659346,659
Building
Motor vehicles
1,043,3541,047,597
489,568654,665
51,06150,621
112,201118,799
22,35210,760
2,065,1952,229,101
Property, plant and equipment includes fully depreciated assets, the cost of which as at 31 December 2013 amounted to
Rs.415,573,118/- (2012 - Rs. 407,472,042/-).
54
12.
Property, plant and equipment (Contd.)
(b) Company
As at
01.01.2013
Additions /
WIP transfer
Disposals/
write off
As at
31.12.2013
Cost
Land
40,314
-
-40,314
Building
29,820 1,334
-31,154
258,130 185,316
(1,316)442,130
132,479
(9,491)131,731
Motor vehicles
74,378
8,743
21
(1,873)72,526
2,5014,286
537,622 199,700
As at
01.01.2013
Charge for
the year
-6,787
(12,680)724,642
Disposals/
write off
As at
31.12.2013
Depreciation
Building
Motor vehicles
1,158 617
158,501
81,541
24,381
9,045
-1,775
(1,312)181,570
(9,308)81,278
13,230 9,002
(313)21,919
254,430 43,045 (10,933)286,542
As at
As at
01.01.201331.12.2013
Carrying amount
Land
40,31440,314
Building
28,66229,379
99,629260,560
50,93850,453
Motor vehicles
61,14850,607
2,5016,787
283,192438,100
Property, plant and equipment include fully depreciated assets, the cost of which as at 31 December 2013 amounted to
Rs.156,652,047/- (2012 - Rs. 154,265,637/-).
55
13.
Leasehold right over land and buildings
GROUPCOMPANY
2013
20122013
2012
Balance at the beginning of the year
Additions during the year
Disposal during the year
Amortisation for the year
Balance at the end of the year
489,535504,591 114,262116,830
-1,228
-1,228
(290) -(290) (16,254)(16,284) (3,745) (3,796)
472,991489,535 110,227114,262
The Company has an agreement to mortgage for Rs. 495 million over leasehold land and building, plant, machinery and
equipment at No.15, Rock House Lane, Colombo-15 as security for credit facilities.
The leasehold land and building which was recognised previously as finance lease are accounted as operating lease based on
substance of lease agreement.
The management represents that the previous treatment was in accordance with Accounting Standards prevalent at that time
and this amount will be treated similar to lease prepayment and amortised over the remaining period of the lease.
The lease period of the leasehold land expired on 19 September 2012 and the Board of Directors have taken necessary action to
renew the lease for a further period of 30 years.
14.
Intangible assets
GROUPCOMPANY
2013
20122013
2012
ERP software
Cost
131,034111,563 131,034111,563
-19,471
-19,471
131,034131,034 131,034131,034
Amortisation
Amortisation for the year
(32,799) (20,345)
(13,104) (12,454)
(45,903) (32,799)
Carrying amount
15.
(32,799)(20,345)
(13,104)(12,454)
(45,903)(32,799)
85,13198,235 85,13198,235
GROUPCOMPANY
2013
20122013
2012
56
14,39011,172
14,39011,172
33
33
33
33
15.
Investment in associate company (Contd.)
(a) Prima Management Services (Private) Limited
GROUP
2013
2012
11,1727,064
Share of profits after tax
3,2184,108
14,39011,172
(b) Summarised financial information of Prima Management Services (Private) Limited
2013
2012
Statement of financial position
Total assets
66,72944,281
Total liabilities
(23,557)(10,763)
Net assets
43,17233,518
Statement of comprehensive income
Revenue
97,922100,007
Profit
9,60514,383
(c) Share of profit of associate company
2013
Prima Management Services (Private) Limited 3,2184,108
3,2184,108
2012
(d) Investment in associate company - unquoted
Group
No. of
Holding % 2013
2012
No. of
sharesshares
3,33433%
14,390
11,172
3,33433%
3333
Net book value as at 31 December
Share of movement in equity value
Company
Holding % 2013
2012
14,390
11,1723333
-----
Equity value in investments
14,390
11,1723333
The Company has invested Rs. 33,334/- in Prima Management Services (Private) Limited acquiring 33% stake during 2006.
57
16.
Investment in subsidiary companies
2013
2012
Investment in subsidiary companies - quoted [Note 16 (a)]
148,625148,625
Investment in subsidiary companies - unquoted [Note 16 (b)]
213,000213,000
Investment in subsidiary companies - cost
361,625361,625
Provision for impairment
(7,895)(10,586)
353,730351,039
(a) Investment in subsidiary companies - quoted
No. of
shares
Company
holding %
Group 2013
holding %
13,469,98057.21% 57.21%
Market value as at 31 December
2012
148,625148,625
497,042723,338
(b) Investments in subsidiary companies - unquoted
No. of
Company
shares
Group holding %
1,500,002 100%
100%
6,000,000100%
100%
Ceylon Livestock and Agrobusiness Services
(Private) Limited
300,002100%
100%
2013
2012
holding %
150,000150,000
60,000 60,000
3,000 3,000
213,000213,000
Provisions have been made for the investment in Ceylon Aquatech (Private) Limited.
(c) Details of the companies incorporated in Sri Lanka, in which the Company held an interest of 50% or more
are set out below:
Name of Company
Proportion of ordinary shares held
2013
Movement 2012
Business
Ceylon Livestock and Agrobusiness
Services (Private) Limited
100% -100%
Import and sale of poultry
equipment, drugs and vaccines
100% -100%
Provide storage facilities
100% -100%
Integrated shrimp business
57.21% -57.21%
Hatching and sale of day old
chicks and commercial broiler
farming
57.21% -57.21%
Renting of farm operation
57.21% -57.21%
Operation of modern poultry
breeding and hatcheries utilising
advanced technologies
All the above companies, the financial years of which end on 31 December are audited by KPMG. These Companies were
incorporated in Sri Lanka.
58
17.Livestock
GROUPCOMPANY
2013
20122013
2012
Net book value at the beginning of the year
369,298346,934
-
-
400,807419,105
-
-
Amortisation for the year (Note 5)
Net book value at the end of the year
18.
(355,445)(396,741)
414,660369,298
-
-
-
-
GROUPCOMPANY
2013
20122013
2012
-
- 677,828837,611
-
- 86,41783,726
-
- 214,054215,106
-
-
-
-
983,3831,188,155
Less : provision for receivables
-
-
(186,417)(183,726)
-
-
796,9661,004,429
5,08451,712
Provisions have been made for receivables from Ceylon Aquatech (Private) Limited and Ceylon Pioneer Poultry Breeders Limited
amounting to Rs. 86,417,000/- and Rs. 100,000,000/- respectively.
19.Inventories
GROUPCOMPANY
2013
20122013
2012
Raw materials and consumables
1,560,4811,649,952 1,450,6021,527,937
Work in progress
-2,847
-2,847
Hatching eggs
-13,624
-
Goods in transit
64,867337,035
-
64,867337,035
Finished goods
- Feed
85,71675,365 85,71675,365
- Chicken
82,97428,930 82,97428,930
- Broiler DOC
Out grower stock
4,92748
- -
125,945149,684 125,945149,684
1,924,9102,257,485 1,810,1042,121,798
Less : provision for slow moving and obsolete items
(28,718)(24,492) (28,718)(24,492)
1,896,1922,232,993 1,781,3862,097,306
Inventories are on an 'agreed to mortgage' condition, against short term bank borrowings from the bank.
59
20. Trade and other receivables
GROUPCOMPANY
2013
20122013
2012
Trade receivables
Less : provision for doubtful debts
Prepayments
Other receivables [Note 20 (a)]
579,363593,093 564,745579,548
(258,499)(251,546) (248,310)(241,336)
320,864341,547 316,435338,212
9,4286,676 8,4585,430
145,887107,438 120,453 82,006
476,179455,661 445,346425,648
Trade receivables have been pledged as securities for short term bank borrowings.
(a) Trade and other receivables
GROUPCOMPANY
2013
20122013
2012
Deposits and advances
Staff loans
Other receivables
21.
38,91718,885 27,48913,674
105579 105107
106,86587,974 92,85968,225
145,887107,438 120,453 82,006
GROUPCOMPANY
2013
20122013
2012
Cash at bank
Cash in hand
41,32777,686 33,66743,204
2,6963,504 2,1662,806
44,02381,190 35,83346,010
The Group's weighted average effective interest rate on short term bank deposits was 7.81% (2012 - 8.06%).
For the purposes of the statement of cash flows, the year end cash and cash equivalents at the end of the year comprise the
following:
(a) Net cash and cash equivalents
GROUPCOMPANY
2013
20122013
2012
Cash and bank balances
Bank overdrafts (Note 24)
60
44,02381,190 35,83346,010
(100,177)(91,470) (86,528)(80,740)
(56,154)(10,280) (50,695)(34,730)
22. Trade and other payables
GROUPCOMPANY
2013
20122013
2012
Trade payables
151,968130,601 137,287117,538
Accrued expenses
184,825118,148 131,587 85,573
Dividend payable
561532 561532
Other payables [ Note 22 (a) ]
160,129177,589
497,483426,870 367,148313,818
97,713110,175
(a) Other payables
GROUPCOMPANY
2013
20122013
2012
Deposits and advances
61,86549,211 53,47539,870
Government taxes
33,04380,130
Other payables
65,22148,248 35,11819,619
160,129177,589
9,12050,686
97,713110,175
23. Amount due to affiliated companies
GROUPCOMPANY
2013
20122013
2012
Non-current
Hapiways Management Services Pte Limited
-167,618
-167,618
Unearned interest income
-34,829
-34,829
-202,447
-202,447
Current
Ceylon Agro Industries Limited
57,97057,562 57,97057,562
Prima Ceylon (Private) Limited
219,996199,801 219,996199,801
Colombo Sea Foods Limited
8,3929,937 8,3929,937
661,418888,609 661,418888,609
2,6402,640 2,6402,640
-
- 47,41416,197
950,4161,158,549
997,8301,174,746
61
24. Interest bearing borrowings
GROUPCOMPANY
2013
20122013
2012
Non-current
Bank borrowings
Current
Bank overdraft
Bank borrowings
46,500
46,500
-46,500
-46,500
-
100,17791,470 86,52880,740
800,000887,000 550,000637,000
900,177978,470 636,528717,740
The interest rate exposure of the borrowings of the Group and the Company was as follows:
GROUPCOMPANY
2013
20122013
2012
Total borrowings:
- at fixed rates
- at floating rates
--946,677978,470 683,028717,740
946,677978,470 683,028717,740
GROUP/COMPANY
2013
2012
Weighted average effective interest rates:
- bank overdraft
- bank borrowings
- fixed
- floating
AWPLR+0.50%
AWPLR+0.50%
-10.25%14.70%
Bank borrowings were obtained to finance the import of raw materials relating to the production of poultry and animal feed.
Security for these borrowings are inventories and receivables and agreement to mortgage for Rs. 495 million over leasehold
land and buildings, plant machinery and equipment at No. 15, Rock House Lane, Colombo 15.
25. Deferred Taxation
25.1 Deferred tax assets
The gross movement in the deferred tax account is as follows:
GROUPCOMPANY
2013
20122013
2012
Restated
Restated
Deferred tax (charge) / release (Note 10)
At the end of the year
67,80215,028 67,80215,028
(14,379)52,774 (14,379)52,774
53,42367,802 53,42367,802
Deferred tax has been computed by applying the effective income tax rate at 10% in the year 2013 (2012 - effective income tax
rate at 12%).
62
25. Deferred taxation (Contd.)
25.1. Deferred tax assets (Contd.)
The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances
within the same tax jurisdiction, is as follows:
2013
2012
Temporary Tax effect on Temporary Tax effect on
differencetemporary differencetemporary
differencedifference
Provision for doubtful debts
Defined benefit obligation
Tax losses
(268,852)(26,885) (173,174)(20,781)
248,310
24,831
243,336
28,960
36,9753,69831,7363,809
517,793
51,779
465,117
55,814
534,226
53,423
567,015
67,802
25.2 Deferred tax liabilities
The gross movement on the deferred tax account is as follows:
GROUPCOMPANY
2013
20122013
2012
Restated
Deferred tax release (Note 10)
121,072122,253
(1,219)(1,181)
119,853121,072
-
-
-
-
Group
Ceylon Pioneer Poultry Breeders Limited has been computed deferred taxation by applying the effective income tax rate at
28%.
Ceylon Warehouse Complex (Private) Limited has been computed deferred taxation by applying the effective income tax rate
at 10%.
The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances
within the same tax jurisdiction, is as follows:
2013
2012
Temporary Tax effect on Temporary Tax effect on
differencetemporary differencetemporary
differencedifference
Livestock
Tax losses
1,317,902 141,5231,295,127 159,356
414,66041,466 369,29844,316
(11,164)(1,116) (10,140)(1,209)
(620,204)(62,020) (603,989)(81,391)
1,101,194119,8531,050,296121,072
63
25. Deferred taxation (Contd.)
25.2. Deferred tax liabilities (Contd.)
Unrecognised deferred tax asset
Deferred tax asset has not been recognised on tax losses carried forward for following companies, since it is not probable that
future taxable profit will be available against which the Company can utilise the benefit there on.
2013
2012
Tax losses carried forward
Tax effect there on at 28%
227,647227,689
63,74163,753
Tax losses carried forward
Tax effect there on at 28%
18,58618,607
5,2045,210
26. Employee benefits
GROUPCOMPANY
Defined benefit obligation2013
201220132012
Restated Restated
Defined benefit obligation as at 1 January
Provisions made during the year
41,87642,002 31,73631,320
9,6614,832 7,3973,641
Benefits paid by the plan
(3,398)(4,958) (2,158)(3,225)
Defined benefit obligation as at 31 December
48,13941,876 36,97531,736
The amounts recognised in the statement of financial
position are as follows:
Present value of unfunded obligations
48,13941,876 36,97531,736
Recognised liability for defined benefit obligations
48,13941,876 36,97531,736
Movement in the present value of the defined benefit obligation
Defined benefits as at 1 January
41,87642,002 31,73631,320
Benefits paid by the plan
(3,398)(4,958) (2,158)(3,225)
Current service cost
4,7414,337 3,5883,254
Interest on obligation
4,1884,199 3,1743,131
Actuarial loss / (gain) during the year
Defined benefit obligation at the end of the year
732(3,704)
635(2,744)
48,13941,876 36,97531,736
Expense recognised in the statement of comprehensive income
Current service cost
4,7414,337 3,5883,254
Interest on obligation
4,1884,199 3,1743,131
8,9298,536 6,7626,385
Expense recognised in the statement of other comprehensive income
Actuarial loss / (gain) during the year
732(3,704)
635(2,744)
732(3,704)
635(2,744)
64
26. Employee benefits (Contd.)
he actuarial valuation was carried out by a professionally qualified actuary Mr. Piyal S Gunathilake of P & G Associates for
T
retiring gratuity for employees as at 31 December 2013.
The liability is not externally funded.
Actuarial assumptions
Principal actuarial assumptions at the reporting date (expressed as weighted averages):
20132012
Discount rate
Future salary increases
10%10%
10%10%
ssumptions regarding future mortality are based on published statistics and mortality tables.
A
The average life expectancy of an individual retiring at age 55
Staff turnover sliding scale by the age of employee retiring from 10% - 1%
The provision for retiring gratuity for the year is based on the actuarial valuation made on 31 December 2013
27.Contingent liabilities
(a) 284/2008 MR
Green Valley Farm has sued CGE claiming Rs. 195,775,306/- as losses resulting from the business affairs, it had with CGE.
The trial is over and matter is now called for correction of proceedings on 30 April 2014 before the final judgment.
(b) A 3175 - Dispute between Inter Company Employees Union for 275 terminated employees Vs CGE and Subsidiaries
Employees of CGE and subsidiary companies went on strike on 20 March 2006 and those who went on strike were
terminated. The dispute was referred to the Commissioner of Labour and the reference was gazetted by the Minister dated
26 May 2006 referring the case for hearing at the Industrial Court.
At the Industrial Court CGE took up a preliminary objection that composite reference (referring to employees of six
companies in one reference) is bad in law as they are separate legal entities and cannot be referred to in one dispute. The
Industrial Court gave its verdict rejecting the preliminary objection and thereafter the Company made an appeal against
the interim order in the Court of Appeal (C/A 796/2007). Court of Appeal delivered its judgement on 18 May 2010 rejecting
the appeal filed by CGE. Accordingly the case was taken up for hearing before the Industrial Court.
The evidence of the first witness of the CGE is pending and the matter has been fixed for hearing on 29 April 2014.
(c) A 3174 and A3179 - Dispute between Inter Company Employees Union for contractors workers Vs Contractors and CGE
Employees who worked under Labour Contractors were also involved in the strike. Labour Contractors were Global
Engineering & Supplies, Global Marine Services and Avant Guard Security Services (Private) Limited.
This case was also referred to Commissioner of Labour and two references were gazetted by the Minister dated 26 May
2006 referring the case for hearing at the Industrial Court.
(I ) A 3174 - Dispute between Inter Company Employees Union and CGE and Global Engineering & Supplies - 159 number
of employees.
(ii) A 3179 - Dispute between Inter Company Employees Union and CGE and Avant Guard Security Services (Private)
Limited - 57 number of employees.
65
27.Contingent liabilities (Contd.)
The dispute was referred as 'non offer of employment'. CGE lawyers took up an objection in the Industrial Court that
there is no such dispute called 'non offer of employment' under the purview of law. But Industrial Court in its preliminary
order rejected the said objection and thereafter CGE referred to the Court of Appeal (Case No 737/2007 and 746/2007
respectively). Court of appeal delivered its judgement by rejecting the appeal filed by CGE and referring the cases back
to the industrial court for hearing.
(1) A 3174 - The matter came up on 17 January 2014 for the first time and the next hearing will be on 30 April 2014.
(2) A 3179 - The matter came up on 9 January 2014 for the first time and the next hearing will be on 9 May 2014.
28.Commitments
No capital commitments outstanding as at the reporting date except the followings:
Within
one year
More than
1-5 years
More than
5 years
Total
Company
(a) (b) (c) Hapiways Management Services Pte Limited for the management services rendered outside Sri Lanka.
Operating Lease commitment the Ministry of Finance and Planning for the use of
land and buildings at No. 15, Rock House Lane, Colombo - 15.
Sri Lanka Ports Authority operating lease rentals for the use of Woodland Warehouse.
31,380125,520 753,120910,020
16,071 64,285 369,639449,995
15,087 60,346 362,078437,511
Group
(d) Ceylon Warehouse Complex (Private) Limited operating
lease rentals to Sri Lanka Ports Authority for the use of land.
12,000 48,000 288,000355,917
74,538 298,151 1,772,8372,153,443
(e) With respect to (b), (c) and (d) above , the Company has exercised its option provided by the original Agreement and
the related leases to be renewed for a further period of 30 years, before the Agreement and the related leases expired
on 19 September 2012. In a letter dated 18 September 2012, the Government of Sri Lanka has expressed its willingness to
consider an extension of the Agreement and the related leases subject to mutually acceptable terms and conditions and
to permit the Company to continue to operate under the existing Agreement and the related leases pending negotiations
to enter into a new Agreement and leases. The terms and conditions of the new leases have yet to be finalised at the date
of this annual report. The operating lease commitments relating to these operating lease agreements have been stated
based on the current lease rental rates.
(f)
The Company is the parent company of Three Acre Farms PLC, Ceylon Aquatech (Private) Limited and Ceylon Pioneer
Poultry Breeders Limited and confirms their commitment, in present circumstances to continue financial support in the
business operations of and to meet financial obligations. As the ultimate Parent Company of the above Companies, CGE
has no intention or inclination of withdrawing their support or reducing the scale of operations of the above companies in
the forthcoming 12 months.
(g) The Company has provided a corporate guarantee of Rs. 45,000,000/- to Sampath Bank PLC for a banking facility
obtained by Ceylon Agro Industries Limited which expired on 27 January 2014.
(h) The Company has provided a corporate guarantee of Rs. 250,000,000/- to Hatton National Bank PLC for a banking facility
obtained by its subsidiary company, Three Acre Farms PLC.
66
29. Stated Capital
COMPANY
2013
2012
60,000,000 ordinary shares
Share premium
600,000600,000
417,996417,996
1,017,9961,017,996
30. Non - controlling interest
GROUP
2013
2012
Restated
Share of net profit of subsidiaries
Share of other comprehensive income of subsidiaries
31.
320,668304,968
72,55915,302
(218)398
393,009320,668
Cash generated from operations
GROUPCOMPANY
2013
20122013
2012
Restated
Restated
Profit before tax
Adjustments :
Depreciation (Note 12)
Amortisation of leasehold right over land and buildings (Note 13)
Amortisation of intangible assets (Note 14)
Amortisation of livestock (Note 17)
Loss on disposal of leasehold right over land and buildings
Loss / (profit) on disposal of property, plant and equipment
Provision / (reversal) of impairment on amount due from
affiliated companies
(Reversal) / provision for impairment on investment in
subsidiary companies
Profit on disposal of associate company shares
Dividend income
Exchange loss
Interest income
Interest expense
Provision / (reversal) for doubtful debts (Note 5)
Share of profit of associate Changes in working capital
- trade and other receivables
- inventories
- trade and other payables
- amount due from affiliated companies
- amount due to affiliated companies
Employee benefits (Note 26)
Cash generated from / (used in) operations
244,073121,769
8,845158,615
138,455114,115 43,045 31,403
16,25416,284 3,745 3,796
13,10412,454 13,10412,454
355,445396,741
-
219 -219 11,34119,263
(507) 170
-
-
2,691(10,586)
-
- (2,691)10,586
-(447,104)
-(602,165)
- (12,082) (6,645)(16,132)
35,178184,438 34,739186,273
(37,707)(40,349) (37,348)(39,538)
133,436118,894 110,560 84,283
6,953(2,125) 6,974(2,000)
(3,218)(4,108)
-
(44,676)
66 (43,877)(13,844)
336,801(511,225) 315,920(469,205)
71,373(30,222) 52,829(26,176)
-
- 204,77248,029
(390,837)(432,209) (359,620)(430,355)
8,9298,536 6,7626,385
895,123 (486,864) 353,517(1,068,007)
67
32. Financial instruments
The Group has an exposure to the following risks arising from financial instruments;
Credit risk
Liquidity risk
Market risk
The Group’s Board of Directors have overall responsibility for the establishment and oversight of the Group’s risk management
framework, developing and monitoring the Group’s risk management policies and report regularly to the Board of Directors on
its activities.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk
limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to
reflect changes in the market conditions and the Group’s activities. The Group, through its training and management standards
and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their
roles and obligations.
The Board of Directors of Ceylon Grain Elevators PLC, oversee how management monitors compliance with the Company’s risk
management policies and procedures and review the adequacy of the risk management framework in relation to the risks faced
by the Group.
32.1 Financial instruments - Statement of Financial Position
GROUPCOMPANY
Financial assets
2013
20
18
Current tax receivables
21
20122013
2012
476,179455,661 445,346425,648
-
- 796,9661,004,429
41,49339,835 7,469 7,469
517,672 495,496 1,249,7811,437,546
44,02381,190 35,83346,010
561,695 576,686 1,285,6141,483,556
GROUPCOMPANY
Financial liabilities
2013
20122013
2012
Other financial liabilities
Interest bearing borrowings - non-current
24
Interest bearing borrowings - current
24
Amount due to affiliated companies - non-current
23
Amount due to affiliated companies - current
23
950,4161,158,549
22
497,483426,870 367,148313,818
Bank overdraft
24
68
46,500
-46,500
-
800,000887,000 550,000637,000
-202,447
-202,447
997,8301,174,746
2,294,3992,674,866 1,961,4782,328,011
100,17791,470 86,52880,740
2,394,5762,766,336 2,048,0062,408,751
32. Financial instruments (Contd.)
32.2 Financial instruments - Statement of Comprehensive Income
20132012
Gain /
Losses /
income expenses
Gain /
Losses /
incomeexpenses
GROUP
Amount due to affiliated companies - unearned income
34,82915,085 34,82929,034
2,879118,351
5,520 89,860
37,708133,436
40,349118,894
COMPANY
Other financial liabilities
Amount due to affiliated companies - non-current
34,82915,085 34,82929,034
2,52095,475
37,349110,560
4,70955,249
39,538 84,283
32.3 Credit risk
Credit risk 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 arises principally from the Group’s receivables from customers, placements with banking institutions
and in government securities.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the
reporting date was:
GROUPCOMPANY
2013
20122013
2012
18
20
Current tax receivables
21
-
-
983,3831,188,155
734,678707,207 693,656666,984
41,49339,835
7,469 7,469
44,02381,190 35,83346,010
820,194 828,232 1,720,3411,908,618
69
32. Financial Instruments (Contd.)
32.4 Impairment losses
The aging of trade and other receivables at the reporting date was:
2013
2012
GROUP
GrossImpairment Gross Impairment
Not past due
Past due 0 - 30 days
More than 365 days
127,120
-116,810
135,558
-162,536
63,532
-37,797
408,468258,499 390,064251,546
734,678258,499 707,207251,546
2013
2012
COMPANY
Not past due
More than 365 days
97,650
-90,132
134,311
-162,536
63,265
-34,462
398,430248,310 379,854241,336
693,656248,310 666,984241,336
The movement in the allowance for impairment in respect of loans and receivables during the year was as follows.
GROUPCOMPANY
2013
20122013
2012
Balance as at 1 January
Impairment loss recognised / (reversed)
Balance as at 31 December
251,546253,671 241,336243,336
6,953(2,125) 6,974(2,000)
258,499251,546 248,310241,336
Based on historic default rates, the Group believes that, apart from the above, no impairment allowance is necessary in respect
of trade receivables not past dues or past dues more than 365 days, which includes the amount owed by the Group's most
significant customers and customers that have a good payment record with the Group.
The aging of amount due from affiliated companies at the reporting date was:
2013
2012
COMPANY
Not past due
More than 365 days
-- -983,383 186,4171,188,155 183,726
-- -983,383 186,4171,188,155 183,726
The movement in the allowance for impairment in respect of amount due from affiliated companies during the year was as follows:
GROUPCOMPANY
2013
20122013
2012
Balance as at 1 January
Impairment loss recognised / (reversed)
Balance as at 31 December
70
-
-
-
- 183,726194,312
-
2,691(10,586)
- 186,417183,726
32.5 Liquidity risk
The followings are the contractual maturities of financial liabilities, including estimated interest payments and excluding the
impact of netting agreements.
GROUP
Carrying
amount
Contractual
cash flows
Non-derivative financial liabilities
Bank Loans
Bank overdraft
846,500(846,500)
(775,000)(25,000)(46,500)
-
497,483
(497,483)
(497,483)---
950,416 (950,416)(766,690)(183,726)
-
-
100,177
(100,177)
(100,177)---
2,394,576 (2,394,576)(2,139,350) (208,726) (46,500)
-
-
COMPANY
Carrying
amount
Bank Loans
Bank overdraft
596,500(596,500)
(525,000)(25,000)(46,500)
-
367,148
(367,148)
(367,148)---
997,830 (997,830)(814,104)(183,726)
-
-
86,528
(86,528)
(86,528)---
2,048,006 (2,048,006)(1,792,780) (208,726) (46,500)
-
-
GROUP
Carrying
amount
Contractual
cash flows
Contractual
cash flows
6 months
or less
6 months
or less
6 months
or less
6 - 12
months
6 - 12
months
6 - 12
months
1 - 2
years
1 - 2
years
1 - 2
years
2 - 5
Years
2 - 5
Years
2 - 5
Years
More than
5 years
More than
5 years
More than
5 years
Amount due to affiliated companies - non-current 202,447(182,704)
-
-(182,704)
-
Bank Loans
887,000
(887,000)
(887,000)---
426,870
(426,870)
(426,870)---
Amount due to affiliated companies - current 1,158,549(1,158,549)(974,536)(184,013)
-
-
Bank overdraft
91,470
(91,470)
(91,470)---
2,766,336(2,746,593)
(2,379,876)(184,013)(182,704)
-
COMPANY
Carrying
amount
Contractual
cash flows
6 months
or less
6 - 12
months
1 - 2
years
2 - 5
Years
More than
5 years
Amount due to affiliated companies - non-current 202,447(182,704)
-
-(182,704)
-
Bank Loans
637,000
(637,000)
(637,000)---
313,818
(313,818)
(313,818)---
Amount due to affiliated companies - current 1,174,746(1,174,746)(990,733)(184,013)
-
-
Bank overdraft
80,740
(80,740)
(80,740)---
2,408,751(2,389,008)
(2,022,291)(184,013)(182,704)
-
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly
different amount.
71
32.6 Currency risk
Foreign currency risk is the risk that the fair value of future cash flow of a financial instrument of fluctuating due to changes in
foreign exchange rate.
Exposure to currency risk
The Group's exposure to foreign currency risk was as follows based on notional amounts:
GROUP
20132012
USD SGDEUR USD SGDEUR
Trade payables
405,815-
91,791
598,986-
84,595
5,058,724--
8,424,922-
5,464,539-
91,791
9,023,908-
84,595
COMPANY
20132012
USD SGD EURUSD SGDEUR
Trade payables
286,291
- 46,994361,967
- 41,804
5,058,724--
8,424,922-
5,345,015
-46,994
8,786,889
-41,804
The following significant exchange rates applied during the year:
Average rate
2013
USD
EUR
SGD
Reporting date spot rate
20122013
2012
129.40128.40 130.75127.16
174.13165.77 180.45168.13
103.20102.05 103.26104.01
32.7 Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates affecting to the Company's
income or the value of its holding of financial instruments. The objective of market risk management is to manage and control
market risk exposures within acceptable parameters, while optimising the return.
32.8 Interest rate risk
At the reporting date the interest rate profile of the Group's interest bearing financial instruments were:
GROUPCOMPANY
Carrying amount2013
Fixed rate instruments
Financial assets
Variable rate instruments
Financial assets
72
20122013
2012
-- --- --- --
-- -(846,500)(887,000) (596,500)(637,000)
(846,500)(887,000) (596,500)(637,000)
33.
Related party transactions
33.1 Key management personnel information
Key management personnel include all the members of the Board of Directors of the Company having authority and responsibility for
planning, directing and controlling the activities of the Company as well as the subsidiaries, directly or indirectly. Compensation paid
to key management personnel on behalf of the companies are as follows:
GROUPCOMPANY
2013
Short-term employee benefits
Post employment benefits
2,160 4801,080 360
-- -2,160 4801,080 360
2012
2013
2012
Mr. Cheng Chih Kwong, Primus, Mr. Tan Beng Chuan, Dr. Wickrema Sena Weerasooria, Mr. Cheng Koh Chuen, Bernard, and
Mr. Sunil Karunanayake, the directors of the Company are also the directors of the following companies as set out below and
with transactions in note 33.2 have been carried out.
Name of the related party
Name of the director
Nature of transaction
Subsidiary
Mr. Cheng Chih Kwong, Primus CGE sells feeds to TAF. Also company
purchases broiler DOC and culled birds from
Mr. Tan Beng Chuan
Mr. Cheng Koh Chuen, Bernard TAF.
Subsidiary
Mr. Tan Beng Chuan
No inter-company transactions have been
recorded during the year.
Subsidiary
Mr. Tan Beng Chuan
No inter-company transactions have been
recorded during the year.
Ceylon Livestock and Agrobusiness
Services (Private) Limited
Subsidiary
Mr. Tan Beng Chuan
CLAS supplies veterinary drugs, medicine
and poultry equipment to the Company’s
outgrower farms.
Also company sells drugs and vaccines to
CLAS.
Ceylon Warehouse Complex
(Private) Limited
Subsidiary
Mr. Tan Beng Chuan
CWCL provides storage facilities to the
Company.
Millennium Multibreeder Farms
(Private) Limited
Subsidiary
Mr. Tan Beng Chuan
CGE sells feeds to MMFL. Also company
purchases broiler DOC and culled birds from
MMFL.
Prima Management Services (Private)
Limited
Associate Company
PMS provides ICT solutions and services to
the Company.
Group Company
Mr. Tan Beng Chuan
CGE purchases Brand Pallet and Wheat
pollard from PCL
Group Company
CGE purchases of all kind of imported raw
materials, feed additives, spare parts and
other significant imports from HMS.
Group Company
Mr. Tan Beng Chuan
The Company is purchasing local maize
and hiring the poultry processing plant,
rendering plant and storage facilitation
from CAI. Also company sells processed
chicken to CAI.
73
33.
Related party transactions (Contd.)
33.2 Related party transactions
The Group has a related party relationship with its subsidiaries, associates and related group companies as disclosed in Note 33.1.
Companies within the Group engage in trading transactions. The following transactions were carried out with related parties
during the year ended 31 December 2013.
(a) Sale of goods and services
GROUPCOMPANY
2013
20122013
2012
Sale of goods:
-
- 502,684520,657
-
- 171,965194,553
-
- 33,55941,926
3,9083,350 3,9083,350
66,70963,651 66,70963,651
70,617 67,001 778,825824,137
Sale of services:
-
- 4,9664,814
- - 71774
-
- 5,7005,700
139105 139105
318105 318105
-
- 2,1002,100
457 210 13,94012,898
(b) Purchase of goods and services
GROUPCOMPANY
2013
Purchase of goods:
Purchase of services:
74
2012
2013
2012
-
- 383,132347,572
-
- 159,773166,181
-
- 39,82532,904
433,402473,144 433,402473,144
142,06327,588 142,06327,588
5,133,2236,371,701 5,133,2236,398,498
-4,085
-4,085
5,708,6886,876,518 6,291,4187,449,972
12,7148,460 12,7148,460
297,517263,224 297,517263,224
31,07330,740 31,07330,740
34,50531,009 34,50531,009
-
- 67,06872,427
375,809333,433 442,877405,860
33.
Related party transactions (Contd.)
33.2 Related party transactions (Contd.)
(c) The receivables from related companies and payables to related companies on sale / purchase of goods /services are
set out in note 18 and 23 respectively. These receivables and payables are unsecured, interest free and have no fixed
repayment terms.
(d)
The subsidiary companies use some facilities of the Company free of charge and part of the accounting and administrative
functions of the subsidiary companies are also performed by the Company for which no charges are made.
34. Events after the reporting period
There are no events after the reporting period which require adjustment to, or disclosure in the financial statements.
35. Comparative information
There are no events which require adjustment to, or disclosure in the financial statements except for the following;
The Group previously presented the net profit or loss arising from commercial broiler farm operations carried out by the Three
Acre Farms PLC which is a subsidiary of the Company as other operating profit or loss in the Group Statement of Comprehensive
Income by considering this operation as other operational activity. For the fair presentation of financial performance of the
Group operations, revenue and expenses were classified and presented based on the nature of transactions in the current
reporting period and comparative figures have been reclassified accordingly as follows :
Cost of sales
Other operating profit
Other income
Administrative expenses
GROUP
As previously
reported
Reclassification (12,046,490)
Reclassified
56,221(11,990,269)
75,487(75,487) 505,132
(358,513)
19,881525,013
(615)(359,128)
36. Directors' responsibility
The Board of Directors are responsible for the preparation and fair presentation of these financial statements.
75
37.
Prior year adjustments
LKAS 19 - Employee Benefits (Bound Volume 2013) disallows the use of corridor method but allows immediate recognition
of actuarial gain or loss derived from defined benefit obligations through Other Comprehensive Income. The Group adopted
the corridor method in previous years. In compliance with LKAS 19 - Employee Benefits (Bound Volume 2013), with effect
from 1 January 2013 the Group changed its accounting policy to recognise actuarial gain or loss immediately through Other
Comprehensive Income. Accordingly comparative figures for the year ended 31 December 2012 have been restated by following
amounts:
(a) Statement of comprehensive income for the year ended 31 December 2012
As previously
reported reclassified
GROUP
Cost of sales
Taxation
Adjustments
Restated
(11,990,269)
(548)(11,990,817)
28,066 (378)27,688
-3,704 3,704
2,778
COMPANY
Cost of sales
Taxation
(12,166,090)
676(12,165,414)
48,034 (410)47,624
-2,744 2,744
2,744
(b) Statement of financial position as at 31 December 2012
GROUPCOMPANY
previously
Prior year Restated
reported adjustment
previously
Prior year
Restated
reportedadjustment
Non-current assets
Deferred tax assets
67,106
69667,80267,106
696 67,802
67,106
69667,80267,106
696 67,802
Equity
Stated capital
1,017,996
Retained earnings
1,648,635(5,666)
1,642,969
1,042,042(5,100)
1,036,942
-1,017,9961,017,996
- 1,017,996
Total equity attributable to equity holders of the parent 2,666,631(5,666)
2,660,965
2,060,038(5,100)
2,054,938
Total equity
321,304
(637)
320,667-- 2,987,935(6,303)
2,981,632
2,060,038(5,100)
2,054,938
34,706 7,17041,87625,940 5,796 31,736
Deferred tax liabilities
121,243
(171)
121,072-- -
155,9496,999
162,948
25,9405,79631,736
The effect of this application has been accounted for retrospectively. Since the adjustment to statement of financial position
as at 1 January 2012 is immaterial, three statements of financial position have not been presented.
76
Five Year Financial Summary
GROUP
2013
20122011 20102009
OPERATING RESULTS FOR THE PERIOD
Revenue
Operating profit
Profit before tax
11,468,10012,375,04510,479,840 8,009,409 6,899,316
409,469420,993534,846592,078152,430
(168,614)(303,332)(129,458) (29,063)(120,735)
3,218 4,10860,51242,40924,042
244,073121,769465,900605,424 55,737
Taxation
(51,558) 27,688 (46,515)(32,525) (3,965)
Profit from ordinary activities
192,515149,457419,385572,899 51,772
(72,559)(15,302)(72,966)(98,027) 82,098
Profit attributable to the Company
119,956134,155346,419474,872133,870
FINANCIAL POSITION
Stated capital
1,017,9961,017,9961,017,9961,017,9961,017,996
Retained earnings
1,754,0101,642,9681,514,0491,227,630 624,214
393,009320,668305,507232,541 80,035
214,492365,395546,323932,700
1,176,668
Intangible assets
Property, plant and equipment and investments
Livestock
Non-current receivables
Current assets
Current liabilities
3,379,5073,347,0273,383,8753,410,8672,898,913
85,13198,23591,21887,912
850
2,755,5152,622,5322,574,0652,536,4332,403,485
14,390 11,172290,576230,064187,655
414,660369,298346,934355,087224,287
----2,457,8872,809,6792,339,0301,968,7642,037,134
(2,348,076)(2,563,889)(2,257,948)(1,767,393)(1,954,498)
3,379,5073,347,0273,383,8753,410,8672,898,913
COMPANY
RATIOS AND OTHER INFORMATION
Basic (loss) / earnings per share (Rs.)
Market price per share (Rs.)
Price earnings ratio (No. of times)
Net dividend pay out (Rs. 000)
Debt / equity ratio
Interest cover (No. of times)
Net assets per share (Rs.)
Current ratio (No. of times)
Shares traded
(0.39)3.442.283.662.35
35.50 59.50105.50 74.70 14.25
(94.62)17.2946.2720.41 6.06
8,400--
60,0000.310.350.080.240.55
0.86 3.6818.59 5.43 2.38
33.7134.2530.9029.6222.85
1.531.621.671.990.96
10,487,311 10,884,718 70,039,800103,961,000 11,519,900
US $ Exchange rate (average)
129.40128.40110.83113.42115.20
US $ Exchange rate (year end spot)
130.75127.16113.90110.95114.38
77
GROUP STRUCTURE
100%
Ceylon Warehouse
Complex
(Private) Limited
Activities
Integrated poultry activities including feed milling,
broiler farming, processing and distribution of chicken.
CGE
57.21%
Activities
Provide storage facilities.
Activities
Three Acre
Farms PLC
Poultry breeder
farms, hatcheries
and commercial
broiler farms.
Activities
Ceylon
Pioneer Poultry
Breeders Limited
Renting of farm
operation.
Activities
Millennium
Multibreeder
Farms
(Private) Limited
Poultry breeder
farming and hatchery
(Application of
advance
poultry technologies).
100%
Ceylon Aquatech
(Private) Limited
Activities
Integrated shrimp operation including feed milling,
breeding, processing and culture of shrimp.
100%
Ceylon Livestock and
Agrobusiness Services
(Private) Limited
Activities
Import and sale of poultry equipment, drugs and vaccines.
33%
Prima Management Services
(Private) Limited
78
Activities
ICT solution and services.
SHAREHOLDER INFORMATION
1. ANALYSIS OF SHAREHOLDERS ACCORDING TO THE NUMBER OF SHARES AS AT 31 DECEMBER 2013
RESIDENT
Shareholdings
NON RESIDENT
TOTAL
Number of
shareholders
Number of
shares
Percentage
Number of
shareholders
Number of
shares
Percentage
Number of
shareholders
1 - 1,000
3,699
1,166,203
1.94
30
12,939
0.02
3,729
1,179,142
1.96
1,001 - 10,000
1,065
3,460,156
5.77
31
137,134
0.23
1,096
3,597,290
6.00
148
4,088,931
6.81
3
171,070
0.29
151
4,260,001
7.10
18
4,844,339
8.07
-
-
-
18
4,844,339
8.07
1
5,350,549
8.92
4
40,768,679
67.95
5
46,119,228
76.87
4,931 18,910,178
31.51
68
41,089,822
68.49
4,999
60,000,000
100
10,001 - 100,000
100,001 - 1,000,000
Over 1,000,000
Categories of shareholders
No. of shareholders
Individual
Number of
shares
Percentage
No. of ordinary shares
4,7788,008,273
Institutional
22151,991,727
4,99960,000,000
2. LIST OF 20 MAJOR SHAREHOLDERS BASED ON THEIR SHAREHOLDING
No. Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Number of Shares Percentage
Number of Shares Percentage
Prima Limited, Singapore
27,270,800 45.4527,270,800 45.45
Japfa Holding Pte Ltd, Singapore
6,052,82910.09
- Employees Provident Fund
5,350,5498.92 5,350,549 8.92
Supra Limited, Hong Kong
5,179,7978.63 5,179,797 8.63
Eka Limited, Singapore
2,265,2533.78 2,265,253 3.78
Laugfs Gas Limited
1,000,0001.67 1,000,000 1.67
Amana Bank Limited
865,2971.44 447,500 0.75
Timex Garments (Private) Limited
400,0000.67 200,000 0.33
Quantum Capital (Private) Limited
289,7330.48 289,733 0.48
Confifi Capital (Private) Limited
245,4770.41 246,877 0.41
Sampath Bank PLC / Capital Trust Holdings Private Limited
217,7480.36 185,242 0.31
Pan Asia Banking Corporation PLC / Mr. V.P.K.A. Palpita
213,0740.36
- Employees Trust Fund Board
203,1260.34 203,126 0.34
Waldock Mackenzie Limited / Hi-Line Trading (Private) Limited198,485 0.33
282,865
0.47
Mr. T.L.M. Imtiaz
172,5960.29 202,085 0.34
Mr. V.P.K.A. Palpita
169,7350.28
- Mr. H.D. De Alwis
147,2000.25 147,200 0.25
Mrs. L. Bandaranayake
130,0000.22 130,000 0.22
Mr. M.V. Theagarajah/Mrs. L. Theagarajah
126,9000.21 126,900 0.21
Venture Partners Private Limited
125,4280.21 115,000 0.19
Total
50,624,027 84.3943,642,927 72.75
The percentage of shares held by public 2013 - 44.46%
The percentage of shares held by public 2012 - 44.46%
79
STATEMENT OF VALUE ADDED
Consolidated Value Added Statement
In Rs. '000
2013
Revenue
20122011 2010 2009
11,468,10012,375,04510,479,840 8,009,409 6,899,316
Adjustment for other income
40,381
525,01355,49014,81040,869
11,508,48112,900,05810,535,330 8,024,219 6,940,185
Less: Cost of materials and services purchased
from external sources
8,814,1529,996,9647,893,4325,585,8854,975,571
Value Added
2,694,3292,903,0942,641,8982,438,3341,964,614
Distributed as follows:
In Rs. '000
To employees as remuneration
To the government as taxes
2013
600,390
1,760,674
% 2012 % 2011 % 2010 %2009
22.28
573,160 19.74 533,996
20.21
485,888
65.35 1,975,460 68.051,628,114 61.63 1,365,973
19.93
%
441,239
22.46
56.02 1,101,860
56.09
To the providers of capital
as interest on loans
118,351 4.39 89,8603.10 10,732 0.41 53,517 2.19 94,689 4.82
as minority interest
(72,341) (2.68) (15,700)(0.54) (72,966) (2.76) (98,027) (4.02)
To shareholders as dividends
-
-
-
-60,000 2.27
-
-
82,098
4.18
-
Retained within the business
as depreciation and amortisation
167,813
6.23 142,853 4.92135,603 5.13 156,111 6.40 110,858
5.64
as reserves
119,442
4.43 137,461 4.73346,419 13.11 474,872 19.48 133,870
6.81
80
2,694,329 100.00 2,903,094 100.00 2,641,898 100 .00 2,438,334 100.00 1,964,614 100.00
NOTICE OF MEETING
NOTICE IS HEREBY GIVEN that the 31st Annual General Meeting of the Company will be held on Thursday, 8 May
2014 at the Sri Lanka Foundation Institute Auditorium, No. 100, Sri Lanka Padanama Mawatha, Independence Square,
Colombo 7 at 10.45 a.m. and the business to be brought before the Meeting will be:
1. To receive and consider the Report of the Board of Directors on the State of Affairs of the Company and the
Statement of Accounts for the year ended 31 December 2013, with the Report of the Auditors thereon.
2. To re-elect Mr. Sunil Karunanayake a Director who retires by rotation at the Annual General Meeting in terms of
Article 87 of the Articles of Association of the Company.
3. To re-appoint Dr. Wickrema Sena Weerasooria, who retires having attained the age of 70 years on 17 July 2009,
and the Company has received special notice to pass the under noted ordinary resolution in compliance with
Section 211 of the Companies Act No. 07 of 2007 in relation to his re-appointment.
Ordinary Resolution:
“That Dr. Wickrema Sena Weerasooria, a retiring Director, who has attained the age of 70 years on 17 July 2009
be and is hereby re-appointed a Director of the Company, in terms of Section 211 of the Companies Act No. 07
of 2007 and it is hereby declared that the age limit of 70 years referred to in Section 210 of the Companies Act,
shall not apply to the re-appointment of the said Director.”
4. To re-appoint Messrs KPMG, Chartered Accountants as Auditors and to authorise the Directors to determine
their remuneration.
5. To authorise the Directors to determine contributions to charities and other purposes.
By order of the Board
S S P CORPORATE SERVICES (PRIVATE) LIMITED
Secretaries
Colombo, Sri Lanka
8 April 2014
Note:
(a) A member entitled to attend and vote at the above mentioned meeting is entitled to appoint a Proxy to
attend and vote instead of him / her. Such Proxy need not be a member of the Company.
(b) A Form of Proxy is annexed to this notice.
(c) The completed Form of Proxy should be deposited at the Registered Office of the Company, No. 15, Rock
House Lane, Colombo 15 not later than 48 hours before the time appointed for the holding of the meeting.
81
NOTES
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82
FORM OF PROXY
I/We………………………………….………………………………………..…….....................………............................................................................................................
(NIC No.……………………..............………................……………) of………………...………………………………………………………….....................................................
being a member/s of Ceylon Grain Elevators PLC, hereby appoint ………….………………..…..........……………………………………………………...
(NIC No.……..…………………….............................……………..) of ……………………………………....……...................………..or failing him
Mr. CHENG CHIH KWONG, PRIMUS
Mr. TAN BENG CHUAN
Mr. CHENG ENG LOONG
Mr. CHENG KOH CHUEN, BERNARD Dr. WICKREMA SENA WEERASOORIA
Mr. SUNIL KARUNANAYAKE
of Singapore or failing him
of Colombo or failing him
of Colombo or failing him
as my/our Proxy to represent me/us and vote on my/our behalf at the Annual General Meeting of the Company to
be held on 8 May 2014, and at any adjournment thereof and at every poll which may be taken in consequence of the
aforesaid meeting and to VOTE as indicated below:
FOR
AGAINST
1. To receive and consider the Report of the Board of Directors on the
State of Affairs of the Company and the Statement of Accounts for
the year ended 31 December 2013, with the Report of the Auditors
thereon.
2. To re-elect Mr. Sunil Karunanayake a Director who retires by rotation
at the Annual General Meeting in terms of Article 87 of the Articles of
Association.
3. To re-appoint Dr. Wickrema Sena Weerasooria, who retires having
attained the age of 70 years on 17 July 2009, a Director by passing the
ordinary resolution set out in the notice.
4 To re-appoint Messrs KPMG, Chartered Accountants as Auditors and
to authorise the Directors to determine their remuneration.
5. To authorise the Directors to determine Contributions to charities.
As witness my/our hand/this ……………….day of ………………………… Two Thousand and Fourteen.
Signature: …………………………….
Note : Please delete the inappropriate words.
1. Instructions for completion of proxy are noted on the next page.
2. A proxy need not be a member of the Company.
3. Please mark 'X' in appropriate cages, to indicate your instructions as to voting.
83
FORM OF PROXY (Contd.)
INSTRUCTIONS TO COMPLETION OF FORM OF PROXY
1.
Kindly perfect the Form of Proxy by filling in legibly your full name and
address, your instructions as to voting, by signing in the space provided
and filling in the date of signature.
2. Please indicate with a 'X' in the cages provided how your proxy is to
vote on the Resolutions. If no indication is given the Proxy in his/her
discretion may vote as he / she thinks fit.
3. The completed Form of Proxy should be deposited at the Registered
Office of the Company at No. 15, Rock House Lane, Colombo 15, at least
48 hours before the time appointed for holding of the Meeting.
4. If the form of proxy is signed by an attorney, the relative power
of attorney should accompany the completed form of proxy for
registration, if such power of attorney has not already been registered
with the Company.
Note:
If the shareholder is a Company or body corporate, Section 138 of the Companies Act No.07 of 2007 applies to
Corporate Shareholders of Ceylon Grain Elevators PLC. Section 138 provides for representation of Companies at
meetings of other Companies. A Corporation, whether a Company within the meaning of this act or not, maywhere it is a member of another Corporation, being a Company within the meaning of this Act, by resolution
of its Directors or other governing body authorise such person as it thinks fit to act as its representative at any
meeting of the Company. A person authorised as aforesaid shall be entitled to exercise the same power on behalf
of the Corporation which it represents as that Corporation could exercise if it were an individual shareholder.
84
Corporate Information
Company Name
Lawyers
Varners Lanka Law office
D. L. & F. De Saram
Company Registration No.
PQ 161
Auditors
KPMG, Colombo, Sri Lanka.
Registered Office
No.15, Rock House Lane, Colombo 15, Sri Lanka.
Company Secretary
Tel : 2522556 or 8 / 2523580 /2526378 to 2526383
S S P Corporate Services (Private) Limited.
Fax : +(94) (11) 2524163
No. 101, Inner Flower Road, Colombo 3.
E-mail : info.cge@prima.com.lk
Name of Directors
Subsidiary Companies
-
Chairman and
Chief Executive Officer
Mr. Tan Beng Chuan
-
Executive Director and
-
Mr. Cheng Eng Loong
-
Dr. Wickrema Sena Weerasooria -
Independent
Associate Company
-
Independent
Management
Bankers
Mr. K. A. R. S. Perera
-
General Manager
Hatton National Bank PLC
Mr. Chng Sun Tick
-
AGM (Farms)
Nations Trust Bank PLC
Mr. Ang Kian Huat
-
AGM (Farms)
National Development Bank PLC
Mr. M. C. M. De Costa
-
Sampath Bank PLC
AGM (Personnel, Security and
General Affairs)
Union Bank of Colombo PLC
Mr. Neil Jayaweera
-
AGM (Processing)
Bank of Ceylon
Mr. Lalith Abeywardena
-
AGM (Sales)
Commercial Bank of Ceylon PLC
Mr. Sumith Peiris
-
AGM (Material Management)
Axis Bank Limited
Mr. Jeff Li Zhen Jie
-
AGM (Technical)
DFCC Vardhana Bank PLC
Designed and Printed by Ceylon Printers PLC

Annual Report - 2013

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