Aluminium Company

LANKA ALUMINIUM INDUSTRIES PLC

2011 - 2012ANNUAL REPORTANNUAL REPORTANNUAL REPORT

2011 - 20122011 - 2012

Page

General Information 2

Notice of Meeting 3

Chairman’s Statement 4

Board of Directors 6

Report of the Directors 8

Audit Committee Report 12

Remuneration Committee Report 14

Shareholders Information 15

Independent Auditor’s Report 17

Income Statement 18

Balance Sheet 19

Statement of Changes in Equity 20

Cash Flow Statement 21

Notes to the Financial Statements 22

Segmental Information Group 43

Five Year Summary 44

Form of Proxy 45

Instructions for Completion of Form of Proxy 46


Annual Reports & Accounts 2012

C o n t e n t s

1

BOARD OF DIRECTORS

Mr. Sri Theagarajah Nagendra Mr. Jude Dinal Peiris Mr. Jayantha Mootatamby SwaminathanMr. Ranjeevan SeevaratnamMr. Paras ChandariaMr. Hemaka Devapriya Senarath AmarasuriyaMr. Chandima Lalith Kumar Perera JayasuriyaMr. Dinesh Stephen Weerakkody

SECRETARIESS S P Corporate Services (Private) Limited, 101, Inner Flower Road, Colombo 3.

COMPANY REGISTRATION NUMBER

P Q 187

REGISTERED OFFICE

st1 Floor, Lakshman’s Building,321, Galle Road,Colombo 3.

INTERNET

www.lanka-aluminium.com

BANKERS

NDB BankDFCC Vardhana BankHatton National BankStandard Chartered BankNations Trust Bank

LAWYERS

Messrs Julius & Creasy, 41, Janadhipathi Mawatha, Colombo 1

Prasanna Goonewardene & Co., 26/1, Colonel T. G. Jayawardane Mawatha, Colombo 3.

AUDITORS

KPMG Ford, Rhodes, Thornton & Company, 32 A, Sir Mohamed Macan Marker Mawatha,Colombo 3



General Information

2

Notice is hereby given that the Twenty Sixth Swaminathan who is 71 years of age (having thAnnual General Meeting of Lanka Aluminium reached 70 years of age on 09 January,

Industries PLC will be held at the Auditorium of Sri 2011). The Company has received a special ndLanka Institute of Marketing, 2 Floor, notice from a shareholder to pass the

Lakshman’s Building, 321, Galle Road, Colombo undernoted ord inary resolut ion in th compliance with section 211 of the 03 on 24 September 2012 at 9.30 a.m. and the

Companies Act No.7 of 2007 in relation to his business to be brought before the meeting will be:re-appointment.

AGENDAOrdinary Resolution

1. To consider and adopt the Annual Report of “That the age limit of 70 years referred to in the Board and the Statements of Accounts

st Section 210 of the Companies Act, shall not for the year ended 31 March 2012 with the apply to Mr. Jayantha Mootatamby Report of the Auditors thereon.Swaminathan, who is 71 years of age

th(having reached 70 years of age on 9 2. To declare a First and Final Dividend of January 2011) and accordingly that Mr. Rs.0.50 per share in respect of the financial

s t Jayantha Mootatamby Swaminathan be and year ended 31 March 2012 as is hereby re-appointed a Director of the recommended by the Directors.Company, in terms of Section 211 of the Companies Act No.7 of 2007”. 3. To re-elect as a Director Mr. Paras Chandaria

who retires by rotation in terms of Article 9. To authorize Directors to determine the No.86 of the Articles of Association of the

remuneration of the Auditors, Messrs KPMG, Company.who are deemed to have been re-appointed as Auditors in terms of Section 158 of the 4. To re-elect as a Director Mr. H.D.S. Companies Act No.07 of 2007.Amarasuriya, who retires by roation in terms

of Article 86 of the Articles of Association of 10. To authorise the Directors to determine the Company.

contributions to charities.5. To re-elect as a Director Mr. D.S.

Weerakkody, who retires at the Annual By Order of the BoardGeneral Meeting in terms of Article 92 of the SSP CORPORATE SERVICES (PRIVATE) LIMITEDArticles of Association of the Company.SECRETARIES

6. To re-appoint, as a Director, Mr. S.T. ColomboNagendra who is 74 years of age (having

thth 16 August 2012reached 70 years of age on 28 September,

2007). The Company has received a special notice from a shareholder to pass the

The member entitled to attend and vote at the undernoted ord inary resolut ion in above mentioned meeting is entitled to appoint a compliance with section 211 of the proxy to attend and vote instead of him/her. Such Companies Act No.7 of 2007 in relation to his proxy need not be a member of the Company.re-appointment.

A Form of Proxy is enclosed.Ordinary Resolution

Note:-“That the age limit of 70 years referred to in The completed Form of Proxy should be Section 210 of the Companies Act, shall deposited at the Registered Office of the not apply to Mr. Sri Theagarajah Nagendra,

stCompany, at 1 Floor, Lakshman's Building, who is 74 years of age (having reached 70 th No. 321, Galle Road, Colombo 3, not later years of age on 28 September, 2007) and

than 48 hours before the time appointed for accordingly that Mr. Sri Theagarajah the holding of the meeting.Nagendra be and is hereby re-appointed a

Director of the Company, in terms of Section 211 of the Companies Act No.7 of 2007”.

7. To re-appoint as a Director Mr.J.M.



Notice of Meeting

3

On behalf of your Board of Directors, I am pleased year end, which nearly tripled our net finance th expenses to Rs.26.2 Million, which in turn reduced to welcome you to the 26 Annual General

profit before tax to Rs.14 Million. An income tax Meeting of Lanka Aluminium Industries PLC, and

reversal helped increase this figure to make a net present to you the Audited Accounts for the st profit after tax for the year of approx. Rs.18 Million, financial year ended 31 March 2012.

which is better than last year.

During the early part of the year under review, the

Your Board of Directors has recommended a first country's economy grew at a high level, whilst

and final dividend of Rs.0.50 per share to be made inflation was kept under control by prudent

from the year's profits. economic policies. The construction sector too

grew at a very high level, mainly due to major

Our subsidiary, Classic Teas (Private) Limited, infrastructure development activities undertaken

which exports bulk and value added teas, also had by the Government, such as port and airport

a difficult year with the unsettled conditions in the development, road construction, power

Middle East and recession in Europe which generation projects and other government

affected sales. The company posted a loss of buildings. Private sector construction activities

Rs.14.6 Million for the year due to the devaluation were limited and most of the major private sector

of the Rupee in January 2012, as the foreign projects were at their planning stages.

currency packing credit loans in respect of orders

unshipped exceeded the value of foreign currency Unfortunately, the demand for aluminium

debtors as at 31.03.2012.extrusions did not increase at a high level, since

most of the ongoing construction activity, such as

The accounting standards required the building of roads, bridges, etc., do not use much of

conversion of foreign debtors and packing credit our products.

loans at the rate of exchange which prevailed as at

31.03.2012.During the year, the lack of expected growth in

demand and increased competitor action

Comark Engineers (Private) Limited performed compounded by high raw material prices, reduced

reasonably well in its second year of operations profit margins and our gross profits margin

making a profit of Rs.12.9 Million.reduced by 2%.

Castalloys, the aluminium casting company also In spite of increased competition, your company's

made a profit of Rs.4 Million for the year.revenue increased by 19% to Rs.793 Million and

profit from operations by 19% to Rs.40.2 Million.

Comark Lanka (Private) Limited also contributed

to the group profits, which was approx. Rs.9.3 Unfortunately, the extended credit facilities and

Million for the year.maintaining high levels of stocks in order to cut

down on lead-times meant we had to increase our

In spite of two consecutive years of mediocre borrowings from the banks. Interest rates also

performance, we are optimistic of the future. increased during this period from approx. 10% at

Private sector projects have finally broken ground the beginning of the year to nearly 16% - 17% as at



Chairman’s Statement

4

with international hotel chains, such as the Your Board's advice and guidance has been

Shangri la, Hyatt, Sheraton, the Welcome Group, invaluable not only in meeting the challenges of a

etc., commencing foundation work. Several difficult year, but also in planning for the future.

multistoried apartment blocks, shopping malls My sincere thanks to them, the Managing Director,

and other buildings are under construction in and the management team, our loyal employees and

around Colombo; while many hotels have started most of all, our customers who had been with us in

construction island-wide and all of these will need spite of increased competition.

aluminium extrusions.

Sgd.The government still continues to be the largest

S.T. Nagendrabuilder with several projects such as the Army

ChairmanHospital, Pradeshya Sabas, etc., all having th16 August 2012.started work. We expect all of these to increase

the demand for aluminium extrusions from 2014

onwards. This, we feel, would then reduce the

excess capacity amongst the manufacturers in

the market and increase profitability.

Meantime, we are continuing with our new product

developments and search for ways to improve our

operation and reduce cost.

Classic Teas have ventured into new profitable

markets, which has already improved their

performance and Comark Engineers, Castalloys

as well as Comark Lanka should post similar

results in the coming year.

Considering the above, we are expecting a better

2012/13, providing there are no unexpected

shocks to the economy.

In the longer term, there is no doubt that the

aluminium extrusion industry will perform well,

since almost every modern building especially

high-rise buildings will require aluminium

extrusions.

We are optimistic and wait patiently for the

building construction to reach the stage that

requires aluminium extrusions.



Chairman’s Statement

5

MR. S.T. NAGENDRA – NON - EXECUTIVE University of Colombo. He is also a faculty CHAIRMAN member of the LLM Wales Course conducted by

the Sri Lanka Law College and a Faculty Member Mr. Nagendra was appointed to the Board of of Post Attorneys Diploma program on intellectual Lanka Aluminium Industries PLC in October 1990 property law and the Course Director of Post and currently holds the office of Non-Executive Attorneys Diploma program in Internal Trade Law Chairman. (He held the office of Executive conducted by the Sri Lanka Law College and is

th st over 45 years in practice.Chairman from 16 January 1996 to 31 July 2011).

MR. R. SEEVARATNAM – EXECUTIVE DIRECTORHe was formerly Chairman of the James Finlay

Group, the Employers’ Federation of Ceylon and Appointed on the Board in December 2008. the British Business Association. He has served Former Senior Partner of Messrs KPMG Ford, on the committees of the Planter’s Association of Rhodes, Thornton & Company, Chartered Ceylon and the Ceylon Chamber of Commerce. Accountants. Graduated from the University of He is presently Director of many companies in Sri London, majoring in Botany and Zoology. Fellow Lanka.of the Institute of Chartered Accountants England and Wales and Fellow of the Institute of Chartered MR. J.D. PEIRIS – MANAGING DIRECTORAccountants of Sri Lanka. He is also presently on the Board of several quoted and unquoted Joined Lanka Aluminium in December 1989 as companies.General Manager, was appointed to the board in

1990 and subsequently made Managing Director MR PARAS CHANDARIA – NON - EXECUTIVE in May 1999.DIRECTOR

He is an engineer by profession with a B.Sc Eng. th(Hons) from City University, England and an MBA Appointed to the Board on 15 August 2011.

from the London Business School. He is also the Chairman/Managing Director of the company’s Mr. Paras Chandaria is a graduate from the subsidiaries, the Chairman of Acme Printing & London School of Economics and Political Packaging PLC., and Acme Solutions (Pvt) Science. He has over 18 years international Limited, and is on the Board of several unquoted business experience, having worked in Africa, companies in Sri Lanka. Europe, Americas and Asia.

He plays a significant role for the Comcraft Group MR. J.M. SWAMINATHAN – INDEPENDENT in monitoring and developing the group’s existing NON - EXECUTIVE DIRECTOR business and industrial activities in Asia, Europe

and the Americas. He is based in Singapore. He Appointed to the board of Lanka Aluminium in travels widely and is on the Strategy Committee of June 2002. several leading global businesses.

LLB (Ceylon), LLM Phil (Colombo), Attorney-at- In addition to his business commitments he Law, is the Precedent Partner of Messrs Julius & spends time on CSR projects, in particular a Creasy and he was a member of the company Law project to promote education for girls in remote Advisory Commission, a member of the rural areas in India.intellectual Property Law Commission. He is a member of the Council of Legal Education and a M R . H E M A K A A M A R A S U R I Y A – Faculty Member of the Faculty of Law of the INDEPENDENT NON - EXECUTIVE DIRECTORUniversity of Colombo and has served as a

thmember of the Legal Cluster of the National Appointed to the Board on 15 August 2011. Economic Commission. He is also a member of Hemaka Amarasuriya is currently the Chairman of the Law Commission of Sri Lanka. He is a visiting the Singer Group of Companies in Sri Lanka and lecturer and an examiner at the Faculty of Law the Chairman of NDB Bank, Vice President of



Board of Directors

6

Retail Holdings Ltd., U.S.A., and a former Senior pro-actively and innovatively in economic, trade, Vice President of Singer Asia Limited. He is a labour and cultural matters in both bilateral and Fellow of the Institute of Chartered Accountants of multilateral contexts. From 2005- 2009 Mr. Sri Lanka and of the Chartered Institute of Weerakkody was a Council Member and 2008-09 Management Accountants, U.K. He also holds a Chairman Employer Relations, CIMA Sri Lanka Honorary Fellowship from the Chartered Institute Division. He is a Graduate in Business of Marketing, U.K. and a Diploma in Marketing Administration, an Associate of the Chartered Strategy from the University of New York. Institute of Management Accountants United

Kingdom, a Fellow of the Certified Management He is on the Directorate of other listed companies Accountants of Sri Lanka, Professional Member such as, C.W. Mackie PLC, ACL Cables and non- of the Singapore Human Resource Institute and listed companies such as Bata Shoe Co. Ceylon has obtained a MBA from the University of and Equill Limited. Leicester, England. Mr Weerakkody has received

extensive Leadership, HR, and Management MR C. L. K. P. JAYASURIYA - INDEPENDENT training in the UK, USA, France, Japan, NON - EXECUTIVE DIRECTOR Singapore and India. He has been on the Sri

Lankan Board of GlaxoSmithKline Sri Lanka since Was appointed as an Independent Non-Executive 2000 and is Chairman of Cornucopia Lanka Ltd

th and Director/Advisor of Cornucopia Bangalore, Director to the Board, with effect from 26 August, India. He serves and had served in a number of 2011. He is presently the Executive Chairman government and private sector boards. He is also and Managing Director of Finlays Colombo PLC,a Board member of the International Chamber of Commerce Sri Lanka Chapter and a Vice He is a Fellow of the Chartered Institute of President of Sri Lanka Tennis. Dinesh has Management Accountants, UK (FCMA) and a publ ished widely on HR, Leadership, Fellow of the Chartered Association of Certified Management, International Relations and Accountants, UK (FCCA).development issues, has been involved in large-scale research projects in the USA and has He is the Chairman of the Mercantile Service presented many papers at national and Provident Society, immediate past Chairman of international level. He is a recipient of two national the Employers’ Federation of Ceylon, a Director of awards.the Employees Trust Fund Board, a member of

the Board of the Chartered Institute of Management Accountants – Sri Lanka Division, and a Member of the Board of the Sri Lanka Accounting and Auditing Standards Monitoring Board. He is a Committee Member of the Ceylon Chamber of Commerce. He is also an Independent Non-Executive Director of Central Finance Company PLC.

MR. DINESH WEERAKKODY – INDEPENDENT NON - EXECUTIVE DIRECTOR

Dinesh Weerakkody is currently Chairman of Commercial Bank Plc. He is a former Chairman/ CEO of the Employees' Trust Fund Board of Sri Lanka and a Director of DFCC Bank Plc . He was also Advisor to the Prime Minister of Sri Lanka from 2002-2004. Mr. Weerakkody has served in many Cabinet Sub Committees and national level committees on Economic Affairs, International Affairs and Labour Management. During his public sector career Mr. Weerakkody engaged



Board of Directors

7

The Board of Directors is pleased to present their 7. Directors' Interest

Report and the Audited Financial Statements of None of the directors had a direct or indirect st interest in any contracts or proposed the Company for the year ended 31 March 2012.

contracts with the Company other than as The details set out herein provide pertinent

disclosed in Note 26 related party information required by the Companies Act, No.7

transactions to the financial statements.of 2007, the Listing Rules of the Colombo Stock

Exchange and are guided by recommended best

8. Directors Remuneration and Other accounting practices.

Benefits

Directors remuneration in respect of the 1. Review of the yearstThe Chairman's Statement at page 4 & 5 Company for the financial year ended 31

reviews the affairs of the Company for the March 2012 is given in Note 7 to the financial st statements.financial year ended 31 March 2012.

9. Corporate Donations2. Principal Activity

Donations made by the Company amounted The principal activity of the Company is the

to Rs. 1,029,175 (2011 – Rs. 388,770). No manufacture and sale of aluminium

donations were made for political purposes.extrusions.

10. Directors 3. Financial StatementsstThe financial statements of the Company are The Directors of the Company as at 31

given on pages 18 to 42 March 2012.

Mr. S.T. Nagendra - Non Executive Chairman4. Auditor's ReportMr. J.D. Peiris - Managing DirectorThe Auditor's report on the financial Mr. J.M. Swaminathan - Independent Non-Executive statements is given on page 17

Director

Mr. R. Seevaratnam - Executive Director5. Accounting Policies

Mr. Paras Chandaria - Non Executive DirectorThe accounting policies adopted in

Mr. H.D.S. Amarasuriya - Independent Non-Executivepreparation of Financial Statements and the Director

other explanatory notes are given on pages Mr. C.L.K.P. Jayasuriya - Independent Non-Exectuve

22 to 42 There were no material changes in Director

Mr. D.S. Weerakkody - Independent Non-Exectuvethe Accounting Policies adopted.Director

In terms of Article 86 of the Articles of 6. Interest RegisterAssociation of the Company, Messrs. Paras The Company maintains an Interest Register Chandaria and H.D.S. Amarasuriya retire by and the particulars of those directors who rotation at the Annual General Meeting and being were directly or indirectly interested in a eligible offer themselves for re-election.contract of the Company are stated therein.



Report of the Directors

8

REPORT OF THE DIRECTORS ON THE STATE AFFAIRS OF THE COMPANY

In terms of Article 92 of the Articles of 12. Directors ShareholdingstAssociation of the Company Mr. D.S. The Directors of the Company as at 31

Weerakkody retires and being eligible offers March 2012 do not hold ordinary shares of

himself for re-election. the Company.

A resolution for the re-appointment of Mr. 13. Auditors

S.T. Nagendra, who is 74 years of age will The financial statements for the year ended stbe proposed at the Annual General Meeting 31 March 2012 have been audited by

in terms of Section 211 of the Companies Act Messrs KPMG, Chartered Accountants, who

No.7 of 2007. A special notice has been express their willingness to continue in office.

received from a shareholder informing of her In accordance with the Companies Act No.07

intention to move such a resolution. of 2007, a resolution relating to their re-

appointment and authorising the Directors to

A resolution for the re-appointment of Mr. determine their remuneration will be

J.M. Swaminathan, who is 71 years of proposed at the forthcoming Annual General

age will be proposed at the Annual General Meeting.

Meeting in terms of Section 211 of the

Companies Act No.7 of 2007. A special The fees paid to the Auditors are disclosed in

notice has been received from a shareholder Note 7.

informing of her intention to move such a

resolution. As far as the Directors are aware, the

Auditors do not have any relationship (other

11. Board Sub-Committees than that of an Auditor) with the Company

other than those disclosed above. The

The following Board Sub-Committees are Auditors also do not have any interest in the

functional. Company.

Audit Committee 14. Dividends

Mr. H.D.S. Amarasuriya - Chairman/Independent The directors propose for payment a First

Director and Final Dividend of Rs.0.50 per share for stMr. C.L.K.P. Jayasuriya - Member/Independent the year ended 31 March 2012.

Director

Mr. D.S. Weerakkody - Member/Independent 15. Investments

Director Details of investments held by the Company

are disclosed in Note 13 to the financial

Remuneration Committee statements.

Mr. D.S. Weerakkody - Chairman/Independent

Director 16. Intangible Assets

Mr. C.L.K.P. Jayasuriya - Member/Independent There were no intangible assets, other than

Director Goodwill, which is disclosed in Note 12 to the

Mr. H.D.S. Amarasuriya - Member/Independent financial statements.

Director




9

17. Property, Plant and Equipment 24. Statutory Payments

An analysis of the property, plant and The Directors to the best of their knowledge

equipment of the Company, additions and and belief are satisfied that all statutory

disposals made during the year and payments in relation to the government and

depreciation charged during the year are set the employees have been made on time.

out in Note 11 to the financial statements.

25. Corporate Social Responsibility

18. Capital Commitments Corporate social responsibility is an

There were no capital commitments extension of the values we stand for as a

outstanding as at the Balance Sheet date company. Our goal is to connect the people

(2011 – Nil). and businesses we serve with the products,

tools, and resources they need to accomplish

19. Stated Capital their goals, drive economic growth and make

The Stated Capital of the Company is communities and our Country better. Our

Rs.137,028,230/- There was no change in CSR work focuses on three key areas:

the Stated Capital of the Company during the r e s p o n s i b l e b u s i n e s s p r a c t i c e s ,

year. environmental sustainability, leadership and

service, diversity and inclusion. During

20. Taxation 2011/12 the Company sponsored and

The tax position of the Company is given in supported charitable and community

Note 9 to the Financial Statements. activities, with donations and sponsorships

totaling Rs. 1,029,175.

21. Disclosure as per Colombo Stock

Exchange Rule No.7.6 Our products go a long way towards

31.03.12 31.03.11 minimizing the felling of trees and are

Market price per share completely recyclable without any negative st impact on the environment. Schemes are in as at 31 March 25.10 56.60

place to collect off-cuts and waste which are Highest share price

recycled in-house for special applications.during the year 104.00 83.00

Lowest share price

26. Corporate Governance/Internal Controlduring the year 22.00 27.50

Lanka Aluminium Industries PLC confirms 22. Shareholding

that, as at date of the Annual Report, they The number of registered shareholders of the st comply with and firmly believe in good Company as at 31 March 2012 was 1,636.

corporate governance. The Company has 6

non-executive Directors on its Board. The 23. Major Shareholders

Board as a whole decided on the The twenty largest shareholders of the st appointment of non-executive independent Company as at 31 March 2012, together

Directors. The Directors so appointed retire with an analysis are given on page 15.

in rotation at each annual general meeting

and seek re -appo in tment by the

shareholders.




The Board holds regular meetings and also members of the committee are Mr. C.L.K.P.

meet if circumstances warrant. It reviews the Jayasuriya and Mr.D.S. Weerakkody who

strategic direction of the Company the are independent non-executive Directors.

exposure of key business risks, the annual

budgets and the progress toward achieving The report of the audit committee appears on

these budgets and their capital expenditure pages 12 & 13.

programmes.

The Board a lso recommends the 27. Contingent Liabilities

appointment and fees of the external There were no material contingent liabilities stauditors. outstandings as at 31 March 2012.

The Board had delegated the primary 28. Post Balance Sheet Events

objective to achieve the strategic policy Subsequent to the date of the Balance Sheet

within the overall business policy indicated no circumstances have arisen which would

above to the Managing Director. require adjustments to the accounts. There

are also no significant post balance sheet

The Board periodically reviews the events which in the opinion of the Directors

employment policies of the Company. The require disclosure.

remuneration committee is headed by Mr.

D.S. Weerakkody. The other member of the 29. Annual General Meeting

committee is Mr. C.L.K.P. Jayasuriya and Mr. thH.D.S. Amarasuirya. They are all non- The 26 Annual General Meeting of the

executive independent Directors. Company will be held at the Auditorium of Sri thLanka Institute of Marketing on Monday, 24

The report of the remuneration committee September 2012 at 9.30 a.m.

appears on page 14.

The Directors are responsible for the

Company's systems of internal finance For and on behalf of the Board of Directors of

controls. The Board has reviewed the LANKA ALUMINIUM INDUSTRIES PLC

effectiveness of the systems of finance

controls for the period up to the date of

signing the accounts. The Directors

responsibility for the financial statements is .......................

described on page 42. Director Director S S P Corporate

Services (Private)

Limited,The Board has set up an audit committee Secretaries

headed by a non-executive independent

Director, Mr. H.D.S. Amarasuriya, a Fellow

of the Institute of Chartered Accountants of th16 August 2012

Sri Lanka and of the Chartered Institute of

Management Accountants, U.K. The other

....................... .......................


Annual Reports & Accounts 2012 11


Sgd. Sgd. Sgd.



Audit Committee Report

12

PREAMBLE Mr. E.F.G. Amarasinghe

Audit Committee member. thThe Committee is empowered to review and up to 30 September 2011

monitor the financial reporting process of the

company so as to provide additional assurance on Mr. C.L.K.P. Jayasuriya

the reliability of the financial statements through a Audit Committee member stprocess of independent and objective review. As appointed w.e.f. 1 October 2011

such, the audit committee acts as an effective

forum in assisting the Board of Directors in Mr. E.J. Gnanam

discharging their responsibilities on ensuring the Audit Committee member thquality of financial reporting and related up to 24 January 2011

communication to the Shareholders and the

Public. Mr. D.S. Weerakkody

Audit Committee member stCOMPOSITION AND ROLE appointed w.e.f. 1 October 2011

The audit committee appointed by and

responsible to the Board of Directors, comprises MEETINGS

three non-executive Directors.

The audit committee met five times during the

The Chairman and Managing Director of the year. The attendance of the members at these

company attend meetings of the committee by meetings is as follows:-

invitation. The Chairman of the Audit Committee is

a senior Chartered Accountant. The Committee is Mr. J.S. Mather 3/3

chaired by Mr. H.D.S. Amarasuriya who was Mr. E.F.G. Amarasinghe 3/3

appointed as the Chairman of the Audit Mr. E.J. Gnanam 0/2stCommittee with effect from 1 October 2011 , on Mr. H.D.S. Amarasuriya 2/2

the resignation of Mr. J.S. Mather from the Board. Mr. C.L.K.P. Jayasuriya 2/2

Mr. D.S. Weerakkody 2/2

The following Directors serve / served on the Audit

Committee: Other members of the Board and the external &

internal auditors were present at discussions

Mr. J.S. Mather where this was appropriate. The proceedings of

Chairman the audit committee are regularly reported to the thup to 26 September 2011 Board of Directors, and the minutes of the

meetings are made available to the Board of

Mr. H.D.S. Amarasuriya Lanka Aluminium Industries PLC.

Chairman, stappointed w.e.f. 1 October 2011



Audit Committee Report

13

ACTIVITIES The Committee reviewed the nature and value of

non-audit work the External Auditors had

The Committee carried out the following activities undertaken, to ensure that it did not compromise

during the year. their independence.

The Committee reviewed the financial reporting The audit committee has recommended to the

system adopted by the Company in the Board of Directors that Messrs KPMG, Ford,

preparation of its quarterly and annual financial Rhodes, Thornton & Company be re-appointed as

statements to ensure reliability of the process and auditors for the financial year ending 31st March

consistency of the accounting policies and 2013.

methods adopted and their compliance with the

Sri Lanka Accounting Standards. The

Sgd.methodology included obtaining statements of H.D.S. Amarasuriya,compliance of relevant revenue regulations from Chairman, Audit Committee. the Finance Manager.

Colombo,The Committee recommended the financial th16 August 2012statements to the Board for its deliberations and

issuance. The Committee, in its evaluation of the

financial reporting system, also recognized the

adequacy of the content and quality of routine

management information reports forwarded to its

members.

The Committee reviewed the process to assess

the effectiveness of the internal financial controls

that have been designed to provide reasonable

assurance to the Directors that assets are

safeguarded and that the financial reporting system can be relied upon in preparation and

presentation of the financial statements.

The internal audit function is outsourced to

Messrs Ernest & Young, a firm of Chartered

Accountants. Internal Auditors directly submitted

their findings to Audit Committee and these made

available to external auditors.

The Committee met the external auditors at the

conclusion of the audit, who confirmed that the

audit was successfully completed.



Remuneration Committee Report

14

Employees are vital to our Institution. We have combination of guaranteed pay (fixed pay and

created a favourable work environment that Bonus) and variable pay (short-term incentives)

encourages teamwork and cont inuous depending on the level in the organizational

improvement. We have had no attrition of staff hierarchy and performance.

during 2011-2012.

Human Resources and Remuneration The table below reflects the employment report as Committee meetings

stat 31 March 2012:

The Committee held two meetings during the year Levels Total under review. The attendance of committee Top management 3 members at meetings is stated in the table below. Senior management 5 The Chairman of the Committee can convene a Professionally qualified and special meeting in the event a requirement arises experienced specialists and provided all members are given sufficient notice of mid-management 9 such special meeting. The quorum for a meeting is Skilled technical and academically two members. The Managing Director was invited qualified staff, junior management, to participate at the sittings of the Committee supervisors and clerical staff 73 meetings as and when required by the Chairman Workers 87 considering the topics for deliberation at such TOTAL PERMANENT 177 meeting. The proceedings of the Committee Employees on Contract 4 meetings were regularly reported to the Board of TOTAL 181 Directors.

As part of the roadmap to sustainability, the HR In 2012-13, the company will continue to focus on function has the following key focus areas: introducing and strengthening HR policies,

practices & systems in the area of performance Employee Relations management, employee recognition, &employee We continue to engage our employees through engagement.various initiatives.

Sgd.Employee Development

D.S.WeerakkodyPeople development is at the centre of our agenda

Chairman, Human Resources & Remunerationin the Institution as we seek to build capacity on Committee the one hand, while creating skills pipeline and

leadership bench-strength on the other hand. thColombo,16 August 2012

RemunerationAT T E N D A N C E O F R E M U N E R AT I O N The human resource committee of the board COMMITTEE approved the remuneration philosophy, strategy The composition and attendance of the members and policy of company. The Company's of the Remuneration Committee.remuneration philosophy is anchored on the total

rewards approach. The remuneration strategy's From April to September 2011main aim is to enable the company to develop,

Mr. E.F.G. Amarasinghe - Chairman 1/1motivate, maintain and retain an internal talent Mr. J.S. Mather 1/1 pipeline; and when necessary attract the requisite

skills from the labour market to enable the

institution's growth strategy. The remuneration From October 2011policy codifies the remuneration principles, Mr. D.S. Weerakkody -Chairman 1/1processes, practices and procedures to give Mr. H.D.S. Amarasuriya 1/1effect to the Institution's remuneration philosophy Mr. C.L.K.P. Jayasuriya 1/1and strategy. The pay mix may comprise a



Shareholder Information

15

Pan Asia Banking Corporation PLC/Mr. S.A. Gulamhusein

st st31 March 2011 31 March 2012 No. Name Number of shares Percentage Number of shares Percentage

1 Clovis Company Limited 6,863,429 50.09 6,863,429 50.09

2 Mr. K D D Perera 4,637,023 33.84 3,991,589 29.13

3 Dr. A C Visvalingam/ Mrs. V I Visvalingam 135,020 0.99 256,020 1.87

4 Dr. H S D Soysa 138,150 1.01 138,150 1.01

5 Mrs. P N Bhatt 78,613 0.57 78,613 0.57

6 Mr. H G Carimjee 68,400 0.50 68,400 0.50

7 Mr. Y Esmailjee 50,000 0.36 50,000 0.36

8 45,200 0.33 45,200 0.33

9 Mr .U.W.J.P.A Sumathipala - - 43,000 0.31

10 Mr. U. D. Rajapakse 45,000 0.33 42,050 0.31

11 Mr.E.W.A.R Kumara - - 37,700 0.28

12 - - 32,700 0.24

13 Mr C.N. Pakianathan - - 28,200 0.21

14 Mr. H Esmailjee 28,000 0.20 27,800 0.20

15 - - 27,000 0.20

16 Mr. M. H. M. Nazeer 25,050 0.18 25,050 0.18

17 Mr.R.R.S Ananda - - 25,000 0.18

18 Associated Electrical Corporation Ltd - - 24,700 0.18

19 Mr.D.S Pathmasiri/ Mrs. M.N.K. Pathirana - - 22,500 0.16

20 Dr. R. S. Deraniyagala 22,000 0.16 22,000 0.16

Percentage of shares held by the public 16.07 20.78

DPMC Assetline Holdings (Pvt) Ltd. Account No. 02

First Capital Market Limited/ Mr.M.A.U. Gunathilaka

stTWENTY (20) MAJOR SHAREHOLDERS AS AT 31 MARCH 2012



Shareholder Information

16

RESIDENT NON RESIDENT TOTAL

Shareholdings Number Number (%) Number Number of (%) Number Number of (%)

of Share of Shares of Share Shares of Share Shares

holders holders holders

1 to 1,000 1245 447,560 3.27 10 6,634 0.04 1,255 454,194 3.31

1,001 to 10,000 338 1,118,203 8.16 5 25,300 0.18 343 1,143,503 8.34

10,001 to 100,000 34 855,938 6.25 0 0 0.00 34 855,938 6.25

100,001 to 1,000,000 2 394,170 2.88 0 0 0.00 2 394,170 2.88

Over 1,000,0000 1 3,981,589 29.13 1 6,863,429 50.09 2 10,855,018 79.22

1620 6,807,460 49.69 16 6,895,363 50.31 1636 13,702,823 100.00

Categories of shareholders Number of shareholders No. of shares

Individual 1566 6,528,615

Institutional 70 7,174,208

1636 13,702,823

ANALYSIS OF SHAREHOLDERS ACCORDING TO THE NUMBER OF SHARES AS ATST31 MARCH 2012



Independent Auditors’ Report

17

TO THE SHAREHOLDERS OF LANKA ALUMINIUM INDUSTRIES PLC

Report on the Financial Statements

We have audited the accompanying financial statements of Lanka Aluminium Industries PLC (the “Company”), and stthe consolidated financial statements of the Company and its subsidiaries as at 31 March 2012, which comprise

stthe balance sheet as at 31 March 2012, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 18 to 43 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.

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 styear ended 31 March 2012 and the financial statements give a true and fair view of the Company's state of affairs

stas at 31 March 2012 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Opinion – Group

stIn our opinion, the consolidated financial statements give a true and fair view of the state of affairs as at 31 March 2012 and the profit and cash flows for the year then ended, in accordance with Sri Lanka Accounting Standards, of the Company and its subsidiaries dealt with thereby, so far as concerns the shareholders of the Company.

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.

Sgd. KPMG

CHARTERED ACCOUNTANTSColombo.

th16 August 2012

KPMG Tel : +94 - 11-542 6426(Chartered Accountants) Fax +94 - 11-244 587232 A, Sir Mohamed Macan Markar Mawatha, +94 - 11-244 6058P. O. Box 186, +94 - 11-254 1249Colombo 00300, +94 - 11-230 7345Sri Lanka. Internet : www.lk.kpmg.com

KPMG, a Sri Lankan Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International cooperative (“KPMG International”), a Swiss entity.

P.Y.S. Perera FCAW.W.J.C. Perera FCAW.K.D.C. Abeyrathne ACAR.M.D.B. Rajapakse ACA

M.R. Mihular FCAC.P. Jayatilaka FCAMs. S. Joseph FCAS.T.D.L. Perera FCA

Ms. M.P. Perera FCAT.J.S. Rajakarier FCAMs. S.M.B. Jayasekara ACAG.A.U. Karunaratne ACA

Principals - S.R.I Perera ACMA, LLB, Attorney-at-Law, H.S. Goonewardene ACA



Income Statement

18

Company GroupstFor the Year ended 31 March 2012 2011 2012 2011

Note Rs.000 Rs.000 Rs.000 Rs.000

Revenue 5 793,277 665,151 1,873,089 2,524,882

Cost of Sales (650,224) (534,126) (1,624,429) (2,278,872)

Gross Profit 143,053 131,025 248,660 246,010

Other Operating Income 6 14,438 13,413 2,995 10,163

Administrative & General Expense (105,571) (98,781) (160,304) (146,315)

Marketing & Distribution Expense (11,716) (11,841) (12,868) (12,939)

Profit From Operations 7 40,204 33,816 78,483 96,919

Net Finance Expense 8 (26,187) (9,617) (60,682) (44,044)

Profit Before Taxation 14,017 24,199 17,801 52,875

Income Tax Reversal/(Expense) 9 3,909 (14,655) 3,160 (28,321)

Profit for the Year 17,926 9,544 20,961 24,554

Attributable to:

Equity Holders of the Company 17,926 9,544 17,119 20,289

Minority Interests - - 3,842 4,265

Profit for the Year 17,926 9,544 20,961 24,544

Basic Earnings Per Share (Rs.) 10 1.31 0.70 1.25 1.48

The annexed Notes to the Financial Statements form an integral part of the Financial Statements.

Figures in brackets indicate deductions.



Balance Sheet

19

Company GroupstAs at 31 March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000ASSETS NoteNon Current AssetsProperty, Plant & Equipment 11 424,690 212,570 473,570 238,381Goodwill 12 - - 116 116Investments in Subsidiaries 13.1 42,475 42,475 - -Long Term Investments 13.2 36,062 36,062 36,062 36,062Total Non Current Assets 503,227 291,107 509,748 274,559

Current AssetsInventories 14 158,231 138,379 337,311 260,256Trade & Other Receivables 15 198,946 131,514 486,004 514,404Amounts Due from Related Parties 16 33,475 39,591 104 197Current Taxation 13,926 - 12,023 -Cash & Cash Equivalents 17 87,870 79,230 141,738 135,864Total Current Assets 492,448 388,714 977,180 910,721

Total Assets 995,675 679,821 1,486,928 1,185,280

EQUITY & LIABILITIESEquityStated Capital 18 137,028 137,028 137,028 137,028Advances for Allotment of Shares 401 401 401 401 Revaluation Reserve 245,272 120,010 281,490 136,256Retained Earnings 117,035 105,960 166,261 155,993Total Equity attributable to Equity Holders of the Company 499,736 363,399 585,180 429,678Minority Interest - - 32,036 27,243 Total Equity 499,736 363,399 617,216 456,921

Non Current Liabilities Interest Bearing Borrowings 23 26,164 - 26,164 - Deferred Taxation 19 29,678 8,459 25,000 8,831Employee Benefits 20 23,675 29,462 28,642 33,917Total Non Current Liabilities 79,517 37,921 79,806 42,748

Current Liabilities Trade & Other Payables 21 56,656 23,862 75,110 71,469Current Taxation - 5,177 - 10,159Amounts Due to Related Parties 22 3,590 1,783 330 330Interest Bearing Borrowings 23 245,440 168,757 581,095 514,171Bank Overdraft 17 110,736 78,922 133,371 89,482Total Current Liabilities 416,422 278,501 789,906 685,611

Total Liabilities 495,939 316,422 869,712 728,359 Total Equity & Liabilities 995,675 679,821 1,486,928 1,185,280

The annexed notes to the Financial Statements form an integral part of the Financial Statements. These financial statements are in compliance with the requirements of Companies Act No. 7 of 2007. …………………………………….Mr. V. LekamgeSenior Accountant

The Board of Directors is responsible for the preparation and presentation of these Financial Statements.Approved and signed for and on behalf of the Board:

…………………………………….…… ………………………………………..Mr. S.T. Nagendra Mr. J.D. PeirisChairman Managing Director

thColombo - 16 August 2012

Sgd.

Sgd. Sgd.



Statement of Changes in Equity

20

stFor the Year ended 31 March 2012

Company Stated Advances Revaluation Retained Total

Capital for Reserve Earnings

Allotment

of Shares

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000stBalance as at 1 April 2010 137,028 401 120,010 113,545 370,984

Profit for the Year - - - 9,544 9,544

Dividends Paid (2009/10) - - - (17,129) (17,129)stBalance as at 31 March 2011 137,028 401 120,010 105,960 363,399

stBalance as at 1 April 2011 137,028 401 120,010 105,960 363,399

Profit for the Year - - - 17,926 17,926

Revaluation surplus during the year - - 150,390 - 150,390

Dividends Paid (2010/11) - - - (6,851) (6,851)

Deferred Tax effect on Revaluation Surplus - - (25,128) - (25,128)stBalance as at 31 March 2012 137,028 401 245,272 117,035 499,736

Group Stated Advances Revaluation Retained Total Minority Total

Capital for Reserve Earnings Interest Equity

Allotment

of Shares

Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000stBalance as at 1 April 2010 137,028 401 136,256 152,833 426,518 23,173 449,691

Part Settlement of Share Capital (Note) - - - - - 1,753 1,753

Dividends Paid (2010/11) - - - (17,129) (17,129) (1,948) (19,077)

Profit for the Year - - - 20,289 20,289 4,265 24,554stBalance as at 31 March 2011 137,028 401 136,256 155,993 429,678 27,243 456,921

stBalance as at 1 April 2011 137,028 401 136,256 155,993 429,678 27,243 456,921

Part Settlement of Share Capital (Note) - - - - - 1,058 1,058

Dividends Paid (2011/12) - - - (6,851) (6,851) (1,987) (8,838)

Increase in minority shareholding - - - - - 1,880 1,880

Revaluation of PPE - - 170,362 - 170,362 - 170,362

Deferred Tax effect on Revaluation Surplus- - (25,128) - (25,128) - (25,128)

Profit for the Year - - - 17,119 17,119 3,842 20,961stBalance as at 31 March 2012 137,028 401 281,490 166,261 585,180 32,036 617,216

Note: Portion of shares are not fully paid in Classic Tea (Pvt) Ltd. During the year Classic Tea (Pvt) Ltd has

collected Rs. 1,058,000 (2011 : Rs. 1,753,000) from the shareholders.

The annexed Notes to the Financial Statements from an integral part of the Financial Statements.




Cash Flow Statement

21

Company Groupst For the Year ended 31 March 2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000

Cash Flows from Operating ActivitiesProfit before Taxation 14,017 24,199 17,801 52,875

Adjustment For:Depreciation 25,934 23,537 27,438 24,679Provision for Gratuity 3,141 5,500 3,653 6,848Profit on Disposal of Property, Plant & Equipment (25) (1,392) (25) (1,392)Exchange loss on Revaluation of Short Term Borrowings - - 27,351 -Loss from Deemed Disposal - - 1,880 -Dividend Income (10,494) (8,049) - -Interest Income (9,497) (9,640) (8,774) (7,102)Interest Expense 35,684 19,257 53,108 12,632 Operating Profit Before Working Capital Changes 58,760 53,412 122,432 88,540

(Increase)/ Decrease in Inventories (19,852) (33,377) (77,055) 69,926(Increase)/ Decrease in Trade & Other Receivables (67,432) (20,555) 28,400 (38,354)(Increase)/ Decrease in amounts due from related companies 6,116 (23,048) 93 (197)(Increase)/ Decrease in trade and other payables 32,794 (10,884) 3,642 (42,389)Increase in amounts due to related companies 1,807 1,364 - -Cash Generated from / (Used in) Operations 12,193 (33,088) 77,512 77,526

Tax Paid (19,102) (17,830) (27,981) (28,805)Interest Paid (35,684) (19,257) (53,108) (12,632)Gratuity Paid (8,928) (307) (8,928) (471)Net Cash Generated from/(used in) Operating Activities

Cash Flows from Investing Activities Investment in Long Term Investments - (17,491) - (17,491)Investment in Subsdiary - (2,000) - -Purchase of Property, Plant & Equipment (88,248) (43,535) (92,848) (46,246)Dividend Received 10,494 8,049 - -Interest Income 9,497 9,640 8,774 7,102Proceeds from Disposal of Property, Plant & Equipment 608 2,237 608 2,237 Net Cash Used in Investing Activities (67,649) (43,100) (83,466) (54,398)

Cash Flows from Financing Activities Dividend Paid (6,851) (17,129) (8,838) (17,129)Short Term Loan Obtained 932,941 529,538 2,230,076 2,468,309Repayment of Short Term Loan (830,094) (412,920) (2,164,340) (2,411,925)Part Settlement of Share Capital - - 1,058 -Net Increase in Minority Shareholder’s Interest - - - (195)Net Cash Generated from Financing Activities 95,996 99,489 57,956 39,060

Net Increase / (Decrease) in Cash & Cash Equivalents (23,174) (14,093) (38,015) 20,280

Cash & Cash Equivalent at the Beginning of the Year 308 14,401 46,382 26,102

Cash & Cash Equivalent at the End of the Year (Note 17) (22,866) 308 8,367 46,382

The annexed Notes to the Financial Statements form an integral part of the Financial Statements.


(51,521) (70,482) (12,505) 35,618



Notes to the Financial Statement

22

1. REPORTING ENTITY “Clovis Company Limited” (Bermuda) which holds

50% of voting rights.

1.1 Domicile and Legal Form

1.4 Number of Employees

Lanka Aluminium Industries Plc (the “Company”)

is a quoted public company incorporated in Sri The numbers of employees of the Group and

Lanka under the Companies Act No 17 of 1982 Company as at 31st March 2012 are as follow:

and re-registered under the new Companies Act st Group 209 (2011 – 201) No 7 of 2007. Registered office is located at 1

Company 181 (2011 – 169) Floor, Lakshman's Building, 321, Galle Road,

Colombo 03. The ordinary shares of the Company

1.5 Date of authorization for issue are listed in the Colombo Stock Exchange.

The consolidated Financial Statements of the The Consolidated Financial Statements of the stCompany as at and for the year ended 31 March Group for the year ended 31 March 2011 were

2012 comprise the Company and its subsidiaries authorized for issue in accordance with a

(together referred to as the “Group” and resolution of the Board of Directors on 16th August

individually as “Group entities”) 2012.

1.2 Principal Activities and Nature of 1.6 Responsibility for The Financial

Operations Statements

The principal activity of the Company is the The Board of Directors is responsible for

manufacture and sale of aluminium extrusions. preparation and presentation of these

The natures of the business of the Company's Consolidated Financial Statements.

subsidiaries are as follows:

2. BASIS OF PREPERATION

Comark Lanka (Pvt) Limited

Trading in Aluminium extrusions and accessories. 2.1 Statement of Compliance

Castalloys (Pvt) Limited

Manufacture and sale of Aluminium ingots and The Consolidated Financial Statements comprise

billets. the balance sheet, income statement, statement

Classic Teas (Pvt) Limited of changes in equity, cash flow statement and

Exporting Tea. notes to the financial statement. The Consolidated

Comark Engineers (Pvt) Ltd. Financial Statements have been prepared in

Undertaking contracts for aluminium fabrication accordance with the Sri Lanka Accounting

Comark Agencies (Pvt) Ltd. Standards (SLAS) as laid down by the Institute of

Trading activities. Comark Agencies (Pvt) Limited Chartered Accountants of Sri Lanka (ICASL) and

was incorporated on 05th August 2011and has not the requirements of the Companies Act No. 7 of

carried out any commercial operations during the 2007.

year.

2.2 Basis of Measurement

There were no significant changes in the nature of

the principal activities of the Group during the The Consolidated Financial Statements have

financial year under review. been prepared on the historical cost basis except

for freehold land and buildings which have been

1.3 Parent Enterprise revalued to fair values. No adjustments have been

made for inflationary factors in the financial

The Company's ultimate parent company is statements.




23

2.3Functional and Presentation Currency year's presentation.

These consolidated Financial Statements are 3. Significant Accounting Polices

presented in Sri Lankan Rupees, which is the

Group's functional currency. All financial The accounting policies set out below have been

information presented in rupees has been applied consistently to all periods presented in

rounded to the nearest thousand these Consolidated Financial Statements, and

have been applied consistently by the Group

2.4 Use of Estimates and Judgments entities.

The preparation of Consolidated Financial 3.1 Basis of Consolidation

Statements requires management to make

judgments, estimates and assumptions that effect 3.1.1 Subsidiaries

the application of accounting policies and the

reported amounts of assets, liabilities, income and Subsidiaries are entities controlled by the

expenses. Estimates and underlying assumptions Company. Control exists when the Company has

are based on historical experience and various the power, directly or indirectly, to govern the

other factors that are believed to be reasonable financial and operating policies of that enterprise

under the circumstances. The Actual results may so as to obtain benefits from its activities. In

differ from these estimates. assessing control, potential voting rights that

presently are exercisable are taken into account.

Estimates and underlying assumptions are The Financial Statements of subsidiaries are

reviewed on an ongoing basis. Revision to included in the Consolidated Financial

accounting estimates are recognised in the period Statements from the date that control effectively

in which the estimate is revised and in any future commences until the date that control effectively

periods affected. ceases. Accounting policies of subsidiaries have

been changed when necessary to align them with

Information about significant areas of estimates the policies adopted by the Company.

and uncertainty that have the most significant

effects on the amounts recognized in the Subsidiaries consolidated are:

Consolidated Financial Statements are as follow:

Name of the subsidiaries Holding Percentage

qMeasurement of employee benefit

obligations (Note 3.11) Comark Lanka (Pvt) Ltd 100%

qAssessment of impairment (Note 3.9) Castalloys (Pvt) Ltd 100%

qProvisions and contingencies (Note Classic Teas (Pvt) Ltd 69.79%

3.10) Comark Engineering (Pvt) Ltd 51%

Comark Agencies (Pvt) Ltd 50%

2.5 Materiality And Aggregation

3.1.2 Intra Group Transactions

Each material class of similar items is presented

separately. Items of dissimilar nature or function Intra-group balances and transactions, and any

are presented separately unless they are unrealized gains from the intra-group transactions

immaterial. are eliminated in preparing the Consolidated

Financial Statements.

2.6 Comparative Information

3.1.3 Profit & Loss

Comparative information has been reclassified

wherever necessary to conform to the current In arriving at the profits attributable to the



shareholders of the Company, the total profits of financial year, which ends on 31st March.

subsidiaries are included in the Consolidated

Financial Statements after eliminating intra group 3.2 Segment Reporting

transactions and profit attributable to minority

interest. A segment is a distinguishable component of the

group that is engaged either in providing product

3.1.4 Assets & Liabilities or services (Business Segments), or in providing

product or services within a particular economic

All Assets and Liabilities of the Company and its environment (Geographical Segments), which is

Subsidiaries are included in the Consolidated subject to risks and rewards that are different from

Balance Sheet. those of other segments.

3.1.5 Goodwill Segment information reflects Extrusions,

Imported Extrusions, Billets and Tea. Inter-

Goodwill arising in connection with the acquisition segments transfers are based on fair market

of subsidiaries, which is the excess of the prices.

purchase price or consolidation over the fair value

of net assets acquired at the date of acquisition, is The Group's business activities are located in Sri

recognised in the Consolidated Financial Lanka. Consequently, assets and liabilities by

Statements. Goodwill reflects the excess of the geographic regions are considered not material to

purchase price over the fair value of the net assets be segmented. Expenses that cannot be directly

as at the date of purchase. identified to a particular segment are allocated on

the basis decided by the management and applied

As required by SLAS 25 'Business Combinations' consistently throughout the year.

goodwill is not amortised. Instead goodwill will be

tested for impairment annually and assessed for 3.3 Foreign Currency Transactions

that any indication impaired at each Balance

Sheet date to ensure its carrying amount does not Transactions in foreign currencies are translated

exceed its recoverable amount. If an impairment into Sri Lanka Rupees at the spot exchange rate at

loss is identified, it will be recognized immediately the time the transaction is effected. Where foreign

in the Income Statement. However, negative exchange transactions are covered by forward

goodwill if any arises from acquisitions will be contracts the rate used is that of the contract.

credited to retained earnings immediately. Assets and liabilities denominated in foreign

currencies are converted into Sri Lanka Rupees

3.1.6 Minority Interest using the rate that prevailed on the Balance Sheet

date. All profits or losses arising from transactions

The total classified as “Minority Interest” in the in foreign currencies are recognised in the period

Consolidated Financial Statement represent the in which they arise.

portion of the consolidated profit after taxation of

the Subsidiary Companies applicable to the non- ASSETS & BASES OF THEIR VALUATION

group shareholders. The proportionate share of

the non-group shareholders in the consolidated Assets classified as current assets in the Balance

net assets of such subsidiaries is disclosed as Sheet are Cash and those, which are expected to

“Minority Interest” in the Consolidated Balance be realized in cash during the normal operating

Sheet. cycle of the Company's or within one year from the

Balance Sheet date which ever is shorter. Assets

3.1.7 Financial year other than current assets are those, which the

Company intends to hold beyond a period of one

All the Companies in the Group have a common year from the Balance Sheet date.





25

3.4 Property, Plant & Equipment has been treated as capital expenditure.

3.4.1. Recognition and Measurement The carrying amount of an item of Property, Plant

and Equipment is derecognized on disposal or

All items of Property, Plant and Equipment are when no further economic benefits are expected

initially recorded at cost. Where items of Property, from its use or disposal.

Plant and Equipment are subsequently revalued,

the entire classes of assets are revalued. When 3.4.2 Subsequent Costs

an asset is revalued any increase in the carrying

value is credited to the revaluation reserve, except The cost of replacing part of an item of properly,

to the extent that it reverses a revaluation plant equipment is recognized in the carrying

decrease of the same asset previously amount of the item if it is probable that the future

recognized in the income statement, in which economic benefits embodied within the part will

case the increase is recognized in the income flow to the Group and its cost can be measured

statement. Any revaluation deficit that off-sets a reliably. The carrying amount of the replaced is

previous surplus on the same asset is directly off- recognized. The costs of the day-to-day servicing

set against the surplus in the revaluation reserve of property, plant and profit or loss as incurred.

and any excess recognized as an expense.

3.4.3 Depreciation

The difference between the depreciation based

on the revalued carrying amount and cost has Depreciation has been provided on a straight-line

been transferred from revaluation reserve to basis over periods appropriate to the estimated

retained earnings as the said asset's economic useful lives of different types of assets, by

benefits are consumed periodically. applying the following percentages on their cost or

revalued amounts.

Revaluation model is applied for Freehold

properties owned by the Company and the Board

has decided to revalue it's Freehold Land and

Building every 3-5 years thereafter to comply with

requirement of Revaluation Model under the Sri

Lanka Accounting Standard 18 (Revised 2005)

"Property Plant and Equipment".

Property, Plant and Equipment other than

Freehold properties are recorded at cost less

accumulated depreciation and impairment losses,

in accordance with the "Cost Model" as set out in

Sri Lanka Accounting Standards 18 - "Property,

Plant and Equipment".

Cost of property, plant and equipment is the cost

of acquisition or construction together with any

expenses incurred in bringing the assets to its

usable condition and location for its intended use.

Expenditure incurred for the purpose of acquiring,

extending or improving assets of a permanent

nature by means of which to carry on the business

or to increase the earning capacity of the business



Lanka Aluminum Castalloys Classic ComarkIndustries Ltd. (Pvt) Ltd. Teas (Pvt) Ltd Engineers Ltd

Building 50% 40% - -

Building improvements - - 3% -

Motor Vehicles 4% 5% 4% 4%

Furniture & Fittings and equipment 8% 10 -6.67% 20-3.33% 8%

Plant, Machinery & Electrical Substation

Long term 20% - - -

Short term 10% 10% - -

Leasehold Equipment 10% - - -

Dies 4% - - -

Tools - Replacement basis -

All assets (excluding land) are depreciated from the month the asset is available for use and ceases at the

earlier of the date that the asset is classified as held for sale or is derecognized.

The replacement cost of tools (cutting tools, Blades, etc.) is capitalized and the difference between the

replaced cost and the purchase cost of the tools is charge to Income Statement.

Depreciation methods, useful lives and residual values are reviewed regularly.





27

3.4.4 Borrowing Costs

3.6 Inventories

Interest and related costs incurred on

external borrowings relating to tangible Raw materials, finished goods, spare parts

Property, Plant and Equipment under & consumables, work in progress, goods in

construction or installation is capitalized transit and others, are stated at lower of

until the assets are ready for their intended cost or net realizable value after making

use. due allowance for obsolete and slow

moving items.

3.4.5 Impairment of Property, Plant and

Equipment The cost of inventories is determined on a

first in first out basis. Principle inventories

The carrying value of Property Plant and are measured at the lower of cost and net

Equipment is reviewed for impairment realizable value. The cost of inventories is

when events or changes in circumstances based on the first-in first-out principle, and

indicate the carrying value may not be includes expenditure incurred in acquiring

recoverable. If any such indication exists the inventories, production or conversion

and where the carrying value exceed the costs and other costs incurred in bringing

estimated recoverable amount the assets them to their existing location and

are written down to their recoverable condition. In the case of manufactured

amount . Impa i rment losses are inventories and work in progress, cost

recognized in the Income Statement includes an appropriate share of

unless it reverses a previous revaluation production overheads based on normal

surplus for the same asset. operating capacity.

3.5 Investments Net realizable value is the estimated

selling price in the ordinary course of

3.5.1 Investment in Subsidiaries business, less the estimated costs of

completion and selling expenses.

Investments in subsidiaries are treated as

long term investments and are valued at 3.7 Trade and Other Receivables

cost in the Company’s balance sheet.

However, where necessary, provision is Trade and other receivables are stated at

made for diminution in value of the amounts estimated to be realised.

investments which are considered other Where necessary, provisions are made for

than temporary. bad and doubtful debts.

3.5.2 Long Term Investments 3.8 Cash & Cash Equivalents

Investments in unquoted shares are stated Cash and Cash Equivalents are defined as

at cost and where necessary provision is cash-in-hand, deposits held at call with the

made for diminution in value of banks net of bank overdraft, short term

investments which are considered other highly liquid investments, and readily

than temporary. convertible loan amounts subject to

insignificant risk of changes in value.



Sheet when the Company has a legal or

For the purpose of the cash flow statement, constructive obligation as a result of a past

cash and cash equivalents comprise of event.

cash in hand, deposits held in banks and

investments in money market instruments, 3.11 Employee Benefits

net of short-term loans and bank

overdrafts. (a) De f ined Cont r ibu t ion P lans -

(Employees Provident Fund &

Overdrafts are classified under Current Employees Trust Fund)

Liabilities in the Balance Sheet.

A defined contribution plan is a post-

3.9 Impairment of assets employment benefit plan under which an

entity pays fixed contributions into a

The carrying amount of the company's separate entity and will have no legal or

non-financial assets other than inventories constructive obligation to pay further

and deferred tax assets are reviewed at amounts. Obligations for contributions to

each reporting date to determine whether defined contribution pension plans are

there is any indication of impairment and recognized as an employee benefit

any impairment losses are recognized in expense in profit or loss when they are due.

profit or loss. An impairment loss is Prepaid contributions are recognized as an

recognised when an assets recoverable asset to the extent that a cash refund or a

amount is less than its carrying amount. reduction in future payments is available.

LIABILITIES AND PROVISIONS All employees of the Company are

members of the Employees' Provident

Liabilities classified as Current Liabilities in Fund and Employees' Trust Fund, to which

the Balance Sheet are those obligations the Company contributes 12% and 3%

payable on demand or within one year from respect ive ly o f such employees

the Balance Sheet. Items classified as non consolidated salary. The Company

current liabilities are those obligations, contributions are recognised as expenses

which expire beyond a period of one year in the Income Statement when incurred.

from the Balance Sheet date.

(b) Defined benefit plans – Retirement

All known liabilities have been accounted gratuity

for in preparing the Financial Statements.

Provision and Liabilities are recognized A defined benefit plan is a post

when the company has a legal or employment benefit plan other than a

constructive obligation as a result of past defined contribution plan. Gratuity is a

events and it is probable that an outflow of defined benefit plan. The liability

economic benefits will be required to settle recognized in the balance sheet in respect

the obligation. of defined benefit plan is the present value

of the defined benefit obligation at the

3.10 Provision balance sheet date together with

adjustments for unrecognized past-service

A provision is recognized in the Balance costs. The defined benefit obligation is





29

calculated annually by independent salary for each completed years of service.

actuary using the 'projected unit credit However the liability for payments of

method' as required by SLAS 16 (Revised gratuity arises only upon the completion of

2006) – “Retirement Benefit”. Such five years continuous service.

actuarial valuations are carried out once in

every three years. The retiring gratuity is not externally

funded.

However, according to the payment of

Gratuity Act, No. 12 of 1983, the liability to 3.12 Trade and Other Payables

an employer arises only on completion of

five years of continued service. Trade and other payables are stated at

Cost.

The liability is not externally funded.

3.13 Capital Commitments & Contingent

Classic Teas (Pvt) Limited applies the Liabilities

g r a t u i t y f o r m u l a e m e t h o d a s

recommended by Sri Lanka Accounting All discernible risks are accounted for in

Standards 16 (Revised 2006) - Employee determining the amount of all known

Benefits (“SLAS 16”) order to compute the liabilities. The Company's share of any

liability recognized in the Balance Sheet. contingencies and capital commitments of

a subsidiary for which the Company is also

Comark Lanka (Pvt) Limited liable severally or otherwise are also

No provision has been made for Retiring included with appropriate disclosure.

Gratuity as there were no employees as at

the Balance Sheet date. Contingent liabilities are possible

obligations whose existence will be

Castalloys (Pvt) Limited confirmed only by uncertain future events

No provision is made for Retiring Gratuity or present obligations where the transfer of

as there were only 3 employees as at the economic benefit is not probable or cannot

Balance Sheet date, which is below the be reliably measured. Contingent liabilities

minimum number of employees required are not recorded in the balance sheet but

for an employer to become liable to pay are disclosed unless they are remote.

retiring gratuity.

INCOME STATEMENT

Comark Engineers (Pvt) Limited

3.14 Revenue Recognition.

Based on the revised Sri Lanka Accounting

Standards 16 (Revised 2006) – “Employee Revenue is recognized to the extent that it

Benefits” (“SLAS 16”) which became is probable that the economic benefits will

effective from the f inancial year flow to the group and the revenue and st associated costs incurred or to be incurred commencing after 1 July 2007, the

can be reliably measured. Revenue is Company does not fall with in the definition

measured at the fair value of the of Appendix D1 and D2 of the SLAS 16.

consideration received or receivable, net Accordingly the Company will continue to

of trade discounts and sales taxes and make provision for Gratuity at ½ Month



after eliminating sales within the group.

The following specific criteria are used for 3.16 Income Tax Expense

the purpose of recognition of revenue.

Income Tax Expenses comprises Current

Revenue from sale of goods is recognized Taxation and Deferred Taxation.

in the Income Statement when the

significant risks and rewards of ownership 3.16.1 Current Tax

have been transferred to the buyer.

Provision for current taxation is based on

Gains & losses of a nature on the disposal the profit of the year adjusted to arrive at

property, plant & equipments have been the taxable profit in accordance with the

accounted for in the Income Statement Inland Revenue Act No. 10 of 2006 and

amendments there to.

Dividend income is recognized on a cash basis.

3.16.2 Deferred Tax

3.15 Expenditure Recognition

Deferred Taxation has been provided for

3.15.1 Operational Expenses under the liability method on temporary

differences as at the Balance Sheet date

Expenses are recognized in the Income between the tax bases of assets and

Statement on the basis of a direct liabilities, and their carrying amounts for

association between the cost incurred and financial reporting purposes.

the earning of specific items of income. All

expenditure incurred in the running of the Deferred Tax assets are recognised for all

business and in maintaining the property, temporary differences to the extent that it is

plant and equipment in a state of efficiency probable that taxable profit will be available

has been charged to income in arriving at against which the deductible temporary

the profit for the year. differences can be utilised.

3.15.2 Financial Expenses The carrying amount of Deferred Tax

assets is reviewed at each Balance Sheet

Interest expenses are recognised on an date and reduced to the extent that it is no

accrual basis longer probable that sufficient taxable

profit will be available to allow all or part of

3.15.3 Borrowing Costs the Deferred Tax assets to be utilised.

Unrecognised Deferred Tax assets are re-

Borrowing Costs that are directly assessed at each Balance Sheet date and

attributable to the construction of a are recognised to the extent that future

qualifying asset have been capitalized. taxable profit will be available to recover

Other borrowing costs are recognized as the Deferred Tax assets.

expenses in the period in which they are

incurred. Deferred Tax assets and liabilities are

measured at tax rates that are expected to

apply to the period when the asset is

realised or the liability is settled, based on





31

tax rates that have been enacted or were not effective for the year ended 31st

substantially enacted by the Balance March 2012.

Sheet date.

These Sri Lanka Accounting Standards

3.17 Earnings Per Share comprise Accounting Standards prefixed

both SLFRS (corresponding to IFRS) and

The Group presents its earnings per share LKAS (corresponding to IAS). Application

based on the consolidated profit for the of Sri Lanka Accounting Standards

year in accordance with the requirements prefixed SLFRS and LKAS for the first time

of Sri Lanka Accounting Standard 34 – shall be deemed to be an adoption of

“Earnings per share” (SLAS-34.) SLFRSs.

3.18 Related Party Transactions The Group / Company is currently in the

process of evaluating the potential effects

Disclosure has been made in respect of of these Standards on its consolidated

transactions in which one party has the financial statements and the impact on the

ability to control or exercise significant adoption of these Standards have not

influence over the financial and operating been quantified as at Balance Sheet date.

pol ices/ decis ions of the other,

irrespective of whether a price is charged

or not.

3.19 Cash Flow Statement

The Cash Flow Statement has been

prepared using the indirect method.

Interest paid is classified as an Operating

cash flows, interest received is classified

as an investing cash flow, while dividends

paid are classified as a financing cash flow

for the purpose of presentation of the Cash

Flow Statements.

4 NEW ACCOUNTING STANDARDS

ISSUED BUT NOT EFFECTIVE AS AT

BALANCE SHEET DATE

The Institute of Chartered Accountants of

Sri Lanka has issued a new volume of Sri

Lanka Accounting Standards which will

become applicable for financial periods

beginning on or after 1st January 2012.

Accordingly, these Standards have not

been applied in preparing these

consolidated financial statements as they




Rs.000 Rs.000 Rs.000 Rs.00005. REVENUE Gross Revenue 904,313 765,147 1,995,292 2,633,541Less:

VAT (96,067) (81,980) (105,626) (88,315)BTT - - - (671)

NBT (14,969) (18,016) (16,577) (19,673) Net Revenue 793,277 665,151 1,873,089 2,524,882

Refer Note 30 for segmental analysis of revenue.

06. OTHER OPERATING INCOME Rent Income 2,400 2,877 2,400 2,877Insurance Commission 72 60 72 60Tea Sample Sales - - 931 444Profit on Disposal of Property, Plant, & Equipment 25 1,392 25 1,392Dividend Income from Subsidiaries 10,494 8,049 - -Gain on Foreign Currency 1,399 1,018 1,399 4,541Loss from Deemed Disposal - - (1,880) -Sundry Income 48 17 48 849

14,438 13,413 2,995 10,163

07. PROFIT FROM OPERATIONS

Profit from operations is stated after charging all the expenses including followings;

Depreciation 25,934 23,537 27,438 24,679Directors Emoluments 24,545 32,015 30,747 36,683Auditors Remuneration(a) Audit Fee 200 165 460 364(b) Audit Related Services 45 45 45 45(c) Non Audit Services Fee 113 90 219 195Defined Benefits Plan- Gratuity 3,141 5,500 3,653 6,848Defined Contribution Plan- EPF & ETF 9,110 9,056 10,423 10,265Personnel Costs 72,396 61,847 91,840 64,344 08. NET FINANCE EXPENSES

Finance IncomeInterest Income 9,497 9,640 8,774 7,102

Finance ExpensesInterest on Term Loans 25,542 11,660 25,541 38.514Overdraft Interest & Bank Charges 10,142 6,372 27,567 9,630Debit Tax - 1,225 1 3,002Loss on Foreign Currency - - 16,347 -

35,684 19,257 69,456 51,146Net Finance Expense 26,187 9,617 60,682 44,044





33


Rs.000 Rs.000 Rs.000 Rs.000

09 INCOME TAX (REVERSAL)/EXPENSE

Current Tax Expense

Current Tax Profits for the Year (Note 9.1) - 16,006 5,557 29,649

Under Provision for the Prior Years Charged - - 242 137

Social Responsibility Levy - 240 - 449

- 16,246 5,799 30,235

Deferred Tax Expense

Deferred Tax Liability Recognised / (Reversed) (Note 19.2) (3,909) (1,591) (8,959) (1,914)

(3,909) (1,591) (8,959) (1,914)

Total Income Tax Expense (3,909) 14,655 28,321

9.1 Reconciliation to Accounting Profits and Taxable Income

Profit Before Taxation 14,017 24,199 17,801 52,875

Disallowed Expenses and Provisions 17,862 58,643 28,823 63,933

Aggregate Allowable Items (43,829) (37,111) (43,673) (41,323)

Taxable Profit (11,950) 45,731 2,951 75,485

Current Tax on Profits for the Year - 16,006 5,799 29,649

Effective Tax Rate 0% 66% 33% 56%

Effective Tax Rate of Total Income Tax Expense -28% 61% -18% 54%

9.2 Analysis of Tax Losses

Tax Losses originated during the year (11,950) - (27,545) -

Tax Losses utilized during the year 3,200 - 3,200 -

Balance at the end of the year (8,750) - (24,345) -

(a) Company

The profits and income of the Company is liable for income tax at 28%.

(b) Subsidiaries

Comark Lanka (Pvt) Ltd is liable for income tax at 28%.

Castalloys (Pvt) Ltd is liable for income tax at 10%.

Classic Teas (Pvt) Ltd is liable for income tax at 15% on its export turnover and 28% on its profit from other

activities.

Comark Engineering (Pvt) Ltd is liable for income tax at 10%

(c) Social Responsibility Levy (SRL) was abolished with effect from 1st April 2011 (2011 - 1.5% of income tax

expense)

(3,160)



10. BASIC EARNINGS PER SHARE

The Company's & the Group's earnings per share is calculated on the profit attributable to the shareholders of Lanka

Aluminium Industries PLC over the weighted average number of ordinary shares in issue during the year, as required by

Sri Lanka Accounting Standard 34 (Revised 2005) - "Earnings per Share".

The following reflects the earnings and share data used for the computation of “Basic Earnings per Share”.

Company Group

For the Year ended 31 March 2012 2011 2012 2011

Amounts used as the Numerator

Net Profit Attributable to Ordinary Shareholders (Rs. ‘000’) 17,926 9,544 17,119 20,289

Number of Ordinary Shares in issue used as the Denominator

Weighted Average Number of Ordinary Shares 13,702,823 13,702,823 13,702,823 13,702,823

Basic Earnings Per Share (Rs.) 1.31 0.70 1.25 1.48

There were no potential dilutive ordinary shares outstanding at any time during the year. Therefore, diluted Earning Per

Share is same as Basic Earning Per Share shown above.

11. PROPERTY PLANT & EQUIPMENT

11.1 COMPANY Land Buildings Machinery Motor Furniture & Generator Capital Total Total

& Electrical Vehicles Fittings Lab & WIP 2012 2011

Sub Station Equipment Equipment

& A.P.U. Tools & Dies

Cost / Valuation Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

stBalance as at 1 April 73,664 75,582 199,311 42,512 155,325 9,859 1,184 557,437 515,547

Revaluation 60,647 89,743 - - - - - 150,390 -

Transferred to Revaluation Reserve - (11,369) - - - - - (11,369) -

Additions during the year - 3,343 35,560 10 20,769 - 28,566 88,248 43,535

Disposals during the year - - (128) (7,188) (1,112) - - (8,428) (1,645)stBalance as at 31 March 134,311 157,299 234,743 35,334 174,982 9,859 29,750 776,278 557,437

DepreciationstAs at 1 April - 8,848 180,870 24,241 121,049 9,859 - 344,867 322,130

Charged for the year - 2,521 4,394 7,110 11,909 - - 25,934 23,537

Depreciation on Assets Disposals - - (128) (7,091) (625) - - (7,844) (800)

Transferred to Revaluation Reserve - (11,369) - - - - - (11,369) -stBalance as at 31 March - - 185,136 24,260 132,333 9,859 - 351,588 344,867

Carrying value stAs at 31 March 2012 134,311 157,299 49,607 11,074 42,649 - 29,750 424,690

stAs at 31 March 2011 73,664 66,734 18,441 18,271 34,276 - - 212,570

The deferred tax effect on revaluation surplus arrising from the revaluation of freehold building during the year amounting

to Rs. 25Mn has been adjusted against the revaluation reserve in the statement of changes in equity.

11.3 The WIP refers to the building work in progress.

11.2 The Land & Building of the Company was revalued to market values by Mr. K. Arther Perera, a independent certified

valuer, as at 31st March 2012 and the book value was written up to correspond with the valuation. Had the asset been

carried at cost less depreciation, the written down value for building would have been Rs.30,660,000/- (2011-

Rs.31,567,000/-)





35

11. Property, Plant & Equipment

11.4 GROUP Land Buildings Motor Furniture Generator Capital Total Total& Vehicles Fittings, & WIP

Electrical Tools EquipmentSubstation & Dies 2012 2011

& A.P.U.

Cost / Valuation Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000 Rs.000

stAs at 1 April 89,664 81,107 216,200 42,775 155,719 15,658 1,184 602,307 557,706Revaluation 76,647 93,715 - - - - - 170,362 -Transferred to Revaluation Reserve - (11,369) - - - - - ((11,369) -Additions during the year - 3,344 36,363 3,660 20,915 - 28,566 92,848 46,246Disposals during the year - - (128) (7,188) (1,111) - (8,427) (1,645)As at 31st March 166,311 166,797 252,435 39,247 175,523 15,658 29,750 845,721 602,307

Depreciation

stAs at 1 April 2010 - 10,722 193,426 24,503 121,423 13,852 - 363,926 340,047Charge for the Year - 2,687 5,231 7,566 11,954 - - 27,438 24,679Depreciation on Assets Disposals - - (128) (7,091) (625) - - (7,844) (800)Transferred to Revaluation Reserve - - - - - - -As at 31st March - 2,040 198,529 24,978 132,752 13,852 - 372,151 363,926

Carrying value stAs at 31 March 2012 166,311 164,757 53,906 14,269 42,771 1,806 29,750 473,570 stAs at 31 March 2011 89,664 70,385 22,774 18,272 34,296 1,806 1,184 238,381

11.5

11.6

Company Property & Asset Category MethodCarrying Value ofCarrying Value ofCarrying Value ofLocation of Valuation Revalued Assets Revalued Assets Revalued Assets

if carried at cost 2012 2011No.20, Temple Rd, Freehold Land Market Approach 722 134,311 73,664Ekala, Ja-Ela. Building Market Approach 30,660 157,299 66,734

GroupProperty & Asset Category Method Carrying Value of Carrying Value of Carrying Value ofLocation of Valuation Revalued Assets Revalued Assets Revalued Assets

if carried at cost 2012 2011No.60, Temple Rd, Freehold Land Market Approach 1,522 166,311 89,664Ekala, Ja-Ela. Building Market Approach 33,097 164,756 71,047

11.7

11.8

11.9

Machinery

-

(11,369) (11,369)

The deferred tax effect on revaluation surplus, arising from the revaluation of freehold building during the year amounting to Rs. 25 mn has been adjusted against the revaluation reserve in the Statement of Changes in Equity.

There is no deferred tax effect on revaluation surplus of land and building revalued by Castalloys (Pvt) Ltd.

Freehold land and freehold building of the Company are stated based on a valuation performed by Mr. K. Arthur perera, A.M.I.V (Sri Lanka), an independent professional valuer as at 31st March 2012, the details of which are as follows;

The Land & Building of the Company was revalued to market values by Mr. K. Arther Perera, a independent certified valuer, as at 31st March 2012 and the book value was written up to correspond with the valuation. Had the asset been carried at cost less depreciation, the written down value for building would have been Rs. 30,660,000/- (2011- Rs. 31,567,000/-).

The Land & Building of the Castalloys (Pvt) Limited was revalued to market values by Mr. K. Arther Perera, a independent certified valuer, as at 31st March 2012 and the book value was written up to correspond with the valuation. Had the asset been carried at cost less depreciation, the written down value for building would have been Rs. 2,437,232/ (2011- Rs.2,591,167/-).

Property, Plant and Equipment includes fully depreciated assets which are in the use of normal business activities having of a cost of Rs. 274,164Mn.



stAs at 31 March2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 12. GOODWILL

Balance at the beginning of the year - - 116 116 Balance at the end of the year - - 116 116

12.1Impairment Test - Goodwill on ConsolidationGoodwill is allocated to cash generating units (CGU) operative within the Group. When testing for impairment on goodwill, the recoverable amount of a cash generating unit is determined on the basis of fair value less cost to sell and value-in-use, whichever is higher.

The fair value less cost to sell is computed based on earnings multiples of comparable companies (listed), adjusted to reflect the liquidity. Value-in-use calculations are cash flow projections based on financial budgets, which are approved by management, typically covering a five-year period. The cash flows were discounted at an appropriate discount rate.

13. INVESTMENTS 2012 2011No. of Holding Cost Directors No. of Holding Cost Directors

Shares % Valuation Shares % Valuation000 Rs.000 Rs.000 000 Rs.000 Rs.000

13.1 Investments in Subsidiaries Non Quoted (Company) Comark Lanka (Pvt) Ltd 100 100% 1,000 1,000 100 100% 1,000 1,000Comark Engineers (Pvt) Ltd 200 51% 2,000 2,000 200 66.67% 2,000 2,000Castalloys (Pvt) Ltd 780 100% 600 600 780 100% 600 600Classic Teas (Pvt) Ltd 3,000 69.79% 38.875 38.875 3,000 69.79% 38,875 38,875

42,475 42,475 42,475 42,475

13.2 Long Term Investments Company Group 2012 2011 2012 2011

Rs. 000 Rs. 000 Rs. 000 Rs. 000Unquoted Investments in Equity Shares (Note 13.3) 5,104 5,104 5,104 5,104Quoted Investments in Equity Shares (Note 13.4) 30,958 30,958 30,958 30,958

36,062 36,062 36,062 36,062

13.3 Unquoted Investments in Equity Shares (Company/Group)2012 2011

No. of Holding Cost Directors No. of Holding Cost Directors Shares % Valuation Shares % Valuation

000 Rs.000 Rs.000 000 Rs.000 Rs.000

Timpex (Pvt) Ltd 510 2% 5,104 5,104 510 2% 5,104 5,104

13.4 Quoted Investments in Equity Shares (Company/Group)2012 2011

No. of Holding Cost Directors No. of Holding Cost Directors Shares % Valuation Shares % Valuation

000 Rs.000 Rs.000 000 Rs.000 Rs.000

ACME Printing & Packaging PLC 1,836 7.17% 30,958 35,802 1,836 7.17% 30,958 39,117

Company Group





37


Rs.000 Rs.000 Rs.000 Rs.000

14. INVENTORIES

Raw Materials 60,164 30,460 87,339 107,055

Work in Progress 17,378 15,751 17,418 37,047

Finished Goods 44,176 52,923 195,747 67,382

Spare Parts & Consumables 17,511 15,533 17,805 15,673

Goods in Transit 7,126 4,438 7,126 4,438

Others 11,876 19,274 11,876 28,661

158,231 138,379 337,311 260,256

Inventories of Classic Teas (Pvt) Ltd are on an “agreed to mortgage” condition, againest short term bank

borrowings.

15. TRADE & OTHER RECEIVABLES

Trade Receivables 185,188 116,833 428,838 451,799

Other Receivables 7,529 8,340 13,981 51,877

Advances & Deposits 6,229 6,341 43,185 10,728

198,946 131,514 486,004 514,404

Trade receivable of Classic Teas (Pvt) Ltd are on an “agreed to mortgage” condition, againest short term

bank borrowings.

16. AMOUNTS DUE FROM RELATED PARTIES

Comark Lanka (Pvt) Ltd 24,553 18,250 - -

Comark Engineering (Pvt) Ltd. 8.922 21,144 - -

Acme Printing and Packaging PLC - 197 - 197

Comark Agencies (Pvt) Ltd - - 104 -

33,475 39,591 104 197

Lanka Aluminium Industries PLC Charging interest at the rate of 10% per annum from Comark Lanka

(Pvt) Ltd and no interest is charged from Comark Engineers (pvt) Ltd and Acme printing packagingas as

it is in the normal course of business.

17. CASH & CASH EQUIVALENTS

Cash in Hand 275 184 387 1,382

Cash at Bank 87,595 79,046 141,351 134,482

Cash & Cash Equivalents 87,870 79,230 141,738 135,864

Bank Overdraft (110,736) (78,922) (133,371) (89,482)

Cash and Cash Equivalents as per the

Cash Flow Statement (22,866) 308 8,367 46,382

A renewable fixed deposit (FD No -115031035430) of Rs.65Mn at Hatton National Bank PLC has been

pledged against short term bank borrowings.

18. STATED CAPITAL

13,702,823 Ordinary Shares 137,028 137,028 137,028 137,028




Rs.000 Rs.000 Rs.000 Rs.000

19. DEFERRED TAX

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax

assets against tax liabilities and when the deferred taxes related to the same fiscal authority.

19.1 Deferred Tax Liabilities

Deferred Tax Asset (Note 19.3) 9,079 8,249 14,741 9,497

Deferred Tax Liability (Note 19.4) (38,757) (16,708) (39,741) (18,328)

(29,678) (8,459) (25,000) (8,831)

The gross movement on the deferred tax asset is as follow:

Balance as at the beginning of the Year 8,459 10,050 8,831 10,711

Impact on Tax Rate change - (2,115) - (2,816)

Originating during the Year (3,909) 524 (8,959) 936

Deferred Tax on Revaluation Surplus 25,128 - 25,128 -

Net Deferred Tax Charged/(Reversed)

for the Year (Note 19.2)

Balance as at end of the Year 29,678 8,459 25,000 8,831

19.2 Deferred Tax Charge/(Reversed) for the Year

Property, Plant & Equipment 22,049 (1,346) 21,413 (2,022)

Employee Benefits 1,620 (245) 1,573 142

Tax Losses (2,450) - (6,817) -

Net Deferred Tax (Charge)/Reversal

for the Year 21,219 (1,591) 16,169 (1,880)

19.3 Deferred Tax Asset

Tax Effect on Employee Benefits 6,629 8,249 7,924 9,497

Tax effect on Tax Losses 2,450 - 6,817 -

Total Deferred Tax Assets 9,079 8,249 14,741 9,497

19.4 Deferred Tax Liability

Tax effect on Property, Plant & Equipments 38,757 16,708 39,741 18,328

Total Deferred Tax Liability 38,757 16,708 39,741 18,328

20. EMPLOYEE BENEFITS

20.1. Defined Contribution Plan

Following contributions have been made to Employees' Provident Fund and Employees' Trust Fund during

the year.

Employees' Provident Fund

Employers' contribution 7,287 7,244 8,843 8,407

Employees' contribution 4,871 4,830 5,895 5,604

Employees' Trust Fund 1,823 1,811 2,211 2,102

21,219 (1,591) 16,169 (1,880)





39


Rs.000 Rs.000 Rs.000 Rs.000

20.2 Defined Benefit Plan

Balance at the beginning of the Year 29,462 24,269 33,917 27,540

Provision for the Year 3,141 5,500 3,653 6,848

32,603 29,769 37,570 34,388

Payments during the Year (8,928) (307) (8,928) (471)

Balance as at end of the Year 23,675 29,462 28,642 33,917

The gratuity liability of Group and the Company as at 31st March 2012 amounting to Rs. 28,642/- and

Rs.23,675/- (2011 – Rs. 33,917/- and Rs. 29,462/-) respectively are made based on an actuarial

valuation carried out by Mr.Poopalanathan,AIA of Acturial & Management Consultants (Pvt) Ltd. As

recommended by the Sri Lanka Accounting Standards No. 16 (Revised 2006) - “Employee benefits", the

"Projected Unit Credit " (PUC) method has been used in this valuation.

The principal assumptions used are:

- Rate of discount 11%p.a.

- Rate of salary increase 10%p.a.

- Retirement age 55 years

- Mortality A 67/70 mortality table, issued by the Institute of Actuaries, London was used.

- Staff turnover sliding scale by the age of employee from 20% - 0%

- The company is a going concern.

20.4. The above has not been externally funded

21. TRADE & OTHER PAYABLES

Trade Creditors 3,857 2,990 14,825 45,123

Other Creditors 39,301 7,201 46,705 9,537

Unclaimed Dividend 1,326 1,227 1,326 1,227

Accrued Expenses 12,172 12,444 12,254 15,582

56,656 23,862 75,110 71,469

22. AMOUNTS DUE TO RELATED PARTIES

Castalloys (Pvt) Ltd. 3,260 1,453 - -

Texpo Industries Ltd. 330 330 330 330

3,590 1,783 330 330

23. SHORT TERM BORROWINGS

Balance as at beginning of the Year 168,757 52,139 514,171 457,787

Obtained during the Year 932,941 529,538 2,230,076 2,468,309

Exchange Loss on Revaluation - - 27,352 -

Repayments during the Year (830,094) (412,920) (2,164,340) (2,411,925)

Balance at end of the Year 271,604 168,757 607,259 514,171

Payable within One Year 245,440 168,757 581,095 514,171

Payable after One Year 26,164 - 26,164 -

271,604 168,757 607,259 514,171

Current bank borrowings were obtained to fulfill working capital requirements. Securities for these

borrowings are inventories, trade receivables and fixed deposits as disclosed in Note 14, Note 15 and

Note 17 respectively.



For the Year ended 31st March 2012

24. CONTINGENT LIABILITIES

There were no material contingent liabilities as at the Balance Sheet date.

25. CAPITAL COMMITMENTS

There were no material capital commitments outstanding as at the balance sheet date, which would

require adjustments to or disclosures in the Financial Statements. (2011 - Nil)

26. RELATED PARTY TRANSACTIONS

26.1 Key Management Personnel Information

According to Sri Lanka Accounting Standard 30 (Revised 2006) “Related Party Disclosures”, Key Management Personnel are those having authority and responsibility for planning and controlling the activities of the Group as well as the subsidiaries, directly or indirectly.

Compensation paid to / on behalf of key management personnel of the companies are as follows:

Company Group2012 2011 2012 2011

Rs.000 Rs.000 Rs.000 Rs.000 Short Term Employee Benefits 24,545 32,015 30,747 36,683Post Employment Benefits 9,653 2,891 9,920 3,134

34,198 34,906 40,667 39,817

In addition to the above, the Company also provided non cash benefits to the Key Management Personnel.

Mr. S.T.Nagandra, Mr.J.D.Peiris, Mr.V.R.Chandraria, Mr.J.M.Swaminthan, and Mr.R.Seevaratnam, Mr. H.D.S Amarasooriya, Mr. C. L. K. P Jayasooriya, Mr. D. Weerakody the directors of the Company are also directors of the following companies as set out below and with transaction in Note26.2 have been carried out.

Name of the Related Name of the DirectorCastalloy’s (Pvt) Limited Mr. J.D. Peiris

Mr. J.M. Swaminathan

Comark Lanka (Pvt) Limited Mr. J.D. PeirisMr. J.M. Swaminathan

Classic Teas (Pvt) Limited Mr. J.D. PeirisMr. R. Seevaratnam

Acme Printing & Mr. J.D. PeirisPackaging PLC Mr. N.M. Chandaria

Mr. J.M. SwaminathanMr. R. Seevaratnam

Mr. Paras ChandariaMr. H. D. S. AmarasuriyaMr. C. L. K. P. Jayasuriya

Mr. D. S. Weerakkody





41

Acme Solutions (Pvt) Limited Mr. J.D. PeirisMr. J.M. Swaminathan

Mr. R. Seevaratnam

Texpro Industries Limited Mr. J.D. Peiris

Metecno Lanka (Pvt) Limited Mr. J.D. PeirisMr. J. M. Swaminathan

Mr. R. Seevaratnam

Comark Engineers (Pvt) Ltd Mr. J.D. PeirisMr. R. Seevaratnam

Mr. J.M.Swaminathan

26.2 Transactions with related entitles

The Group carries out transactions in the ordinary course of its business with parties who are defined as related parties in Sri Lanka Accounting Standard 30 " Related Party Disclosure " The details of which are reported below:

26.2 (a) Transactions with Subsidiaries

Name of Nature of Transaction Amount AmountRelated Entities 2012 2011

Rs. ‘000’ Rs. ‘000’Castalloy’s Reimbursement:(Pvt) Limited Security and Sales 480 563

Charged:Conversion Charges & Purchases 16,929 12,721

Comark Reimbursement:Lanka (Pvt) Limited Rent and Interest 2,387 4,751

Charged: Service Charges 2,622 2,651Sales of windows 2,277 1,829

Comark Engineers(Pvt) Ltd Reimbursement:

Rent 720 240Charged:Sales & Extrusions 11,683 17,368Scrap Sales Nil 144

Classic Reimbursement:Teas (Pvt) Limited Salary & Accounting Fees 300 466

Charged:Sale of Tea 140 66

26.2 (b) Transactions with Other Related Entities

ACME Printing & Reimbursement: Packaging PLC Salary & Accounting Fees 2,808 2,820 Rent & A.G.M. Expenses 135 172

Charges:Telephone Charges - 166



Texpo Industries Reimbursement: Limited Salary, Printing Expenses. Rent, Electricity,

Advertisements, Water and Staff Welfare. 4,066 4,477Sales of Motor Cycle 121 -Charged:Telephone Charges 1,568 1,533Local Sales - 50

Metecno Lanka Reimbursement: (Pvt) Limited Salary and Accounting Fees 3,662 3,612

Amounts Payable to/Receivable from Related Parties are disclosed in Note No 16 and 22 respectively to the financials statements.

27. EVENTS AFTER THE BALANCE SHEET DATE

There were no material events occurring after the balance sheet date as at 31st March 2012 that require adjustments to or disclosure in the Financial Statements, other than those disclosed below.

27.1 Proposed Dividends for approval at AGM

The Board of Directors has recommended a first and final dividend of Rs.0.50 per share amounting to Rs.6.85 million for the year ended 31st March 2012, which is to be approved by the shareholders at the Annual General Meeting to be held on 24th September 2012. As stipulated by Sri Lanka Accounting Standard No. 12 " Events After the Balance Sheet Date", the proposed dividend is not recognized as a liability as at 31st March 2012 in the Financial Statements.

Compliance with Section 56 and 57 of the Companies Act No. 7 of 2007

As required by Section 56 of the Companies Act, No.7 of 2007, the Board of Directors of the Company has certified that the Company satisfies the Solvency Test in accordance with the Section 57, prior to recommending the first and final dividend for the year ended 31st March 2012. A statement of solvency

thcompleted and duly signed by the Directors on 16 August 2012 has been audited by M/S KPMG .

27.2 Subsequent to the balance sheet date, a case has been instituted by Alutec Extrusion (Pvt) Limited against the Company on 12th August 2012 bearing No. HC/Civil/27/2012(P) in respect of alleged disputes arising out of Intellectual Property Act No.36 of 2003. The matter has been fixed for inquiry.

28. LITIGATION AND CLAIM

There are no litigations and claims as at the balance sheet date.

29. COMPARATIVE FIGURES

Where necessary information has been rearranged to conform to current year’s presentation and classification.

30. SEGMENTAL INFORMATION - GROUP

Refer next page.

31. DIRECTORS’ RESPONSIBILITY STATEMENT

The Board of Directors is responsible for the preparation and presentation of these financial statements, in accordance with the applicable regulatory requirements.


30.

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43



stYear ended 31 March

2012 2011 2010 2009 2008

Rs. 000 Rs. 000 Rs. 000 Rs. 000 Rs. 000

Operating Results

Turnover (net) 793,277 665,151 525,251 660,371 716,116

Profit Before Taxation 14,017 24,199 46,701 28,671 57,907

Income Tax Expense 3,909 14,655 18,152 8,120 29,232

Profit After Taxation 17,926 9,544 28,549 20,551 28,675

Shareholder’s Funds

Stated Capital 137,028 137,028 137,028 137,028 137,028

Reserves 362,708 226,371 233,956 215,685 212,263

Shareholders’ Funds 499,736 363,399 370,984 352,713 349,291

Dividends 6,851 17,129 10,278 17,129 17,129

Assets Employment

Current Assets 492,448 388,714 303,952 242,781 243,535

Current Liabilities (416,422) (278,501) (151,112) (117,524) (102,520)

Working Capital 76,026 110,213 152,840 125,257 141,015

Non Current Assets 503,227 291,107 252,463 261,793 246,425

Assets Employed 579,253 401,320 405,303 387,050 387,440

Non Current Liabilities (79,517) (37,921) (34,319) (34,337) (38,149)

Net Assets 499,736 363,399 370,984 352,713 349,291

Rations and Statistics

Year ended 31st March 2012 2011 2010 2009 2008

Rs. Rs. Rs. Rs. Rs.

Earnings per Share 1.31 0.70 2.08 1.50 2.09

Year on Year Growth in EPS 0.61 1.38 0.58 (0.59) (0.50)

Dividends per Share 0.50 1.25 0.75 1.25 1.25

Year on Year Growth in DPS (0.75) 0.50 (0.50) - 0.65

Net Assets per Share 36 27 27 26 25

Year end Price Earning Ratio 19.19 81.26 13.10 15.00 15.31

Dividend Yield 1.99 2.21 2.75 5.56 3.91

Operating Return on Investment 0.05 0.05 0.09 0.09 0.16

Borrowings as a % of Total Assets 50 47 33 30 29

Interest Cover 1.54 3.52 18.39 3.01 4.18

Five Year Summary



INSTRUCTIONS FOR COMPLETION OF FORM OF PROXY

1. Kindly perfect the Form of Proxy by filling in legibly your full name and address, and 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 or if there is any doubt as to how the Proxy should vote by reason of the manner in

which the instructions are carried out, the proxy in his/her discretion may vote as he/she thinks fit.

st 3. The completed Form of Proxy should be deposited at the Registered Office of the Company at 1

Floor, Lakshman's Building, 321, Galle Road, Colombo – 03, not less than 48 hours before the time

appointed for holding 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.7 of 2007 applies to

corporate shareholders of Lanka Aluminium Industries 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, may, where 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 of that other Company.

Instruction for Completion of Form of Proxy

st1 Floor, Lakshman’s Building, 321, Galle Road, Colombo 03. Tel : 011 5503300, 011 2565951-53 Fax : 011 5503381, 011 2576944

E-mail : [email protected] | [email protected] : www.lankaaluminium.lk | www.aluminium.lk

REGIONAL SALES & SERVICE CENTRES545 1/A, Sri Sangaraja Mawatha, Colombo 10. Tel/Fax : 011 2388216

132, Dehiwala Road, Maharagama. Tel/Fax : 0115 553301

FACTORY20, Remple Road, Ekala-Jaela. Tel: 011 5354700-1, 011 2236941 Fax : 011 2236942

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