KOTAGALA PLANTATIONS PLCANNUAL REPORT 2011/2012
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Corporate InformationName of the Company : Kotagala Plantations PLC
Legal Form : A Quoted Public Company with Limited Liability
Date of Incorporation : 22nd June 1992
Company Registration No. : PQ 174
Principle Activities : Cultivation, Manufacture and Sales of Tea and Rubber
Registered Office : 53 1/1, Sir Baron Jayatilaka Mawatha, Colombo 1.
E-mail : [email protected] : www.lankemplantations.lk Directors : A Rajaratnam - Chairman (Alternate - S D R Arudpragasam) S D R Arudpragasam R C Peries C P R Perera D A Ratwatte G D V Perera
Stock Exchange Listing : The Ordinary Shares of the Company are listed with the Colombo Stock Exchange of Sri Lanka
Senior Management : R C Peries - Executive Director/(CEO - Lankem Tea & Rubber M.C.I.P Plantations (Pvt) Ltd - Managing Agents) : D A Ratwatte - Executive Director-Up Country F.I.P.M : G D V Perera - Executive Director-Marketing & Administration F.I.P.M : Ms K M Ramesh - Executive Director Finance (Lankem Tea & Rubber F.C.M.A (UK), MBA (USA) Plantations (Pvt) Ltd - Managing Agents) : K G Punchihewa - Deputy CEO/Director - Lankem Tea & Rubber Plantations F.C.A (Pvt) Ltd - Managing Agents : S A Eriyagama - Executive Director Low Country (Lankem Tea & Rubber B.Sc (Plantation Mgt), Plantations (Pvt) Ltd - Managing Agents) Dip. (Plantation Mgt) - (NIPM) : H D Caldera - Executive Director Up Country - (Lankem Tea & Rubber Plantations F.I.P.M (Pvt) Ltd - Managing Agents) (Appointed w.e.f. 01.04.2011) : Amrit Rajaratnam - Director - Lankem Tea & Rubber Plantations (Pvt) Ltd - Managing Agents LLB (Notts.), Barrister-at-Law (Appointed w.e.f. 01.04.2012) : M S Madugalle - Director - Lankem Tea & Rubber Plantations (Pvt) Ltd - Managing Agents Dip. (Plantation Mgt) (NIPM) (Appointed w.e.f. 01.04.2012) : B G S Peiris - General Manager (Up Country) F.I.P.M : J K Congreve - General Manager (Manufacture) Dip. (Plantation Mgt) - (NIPM) : Ms J Kariyawasam - General Manager (Legal & Administration) Attorney-at-Law & Notary Public, Dip. in Intellectual Property Law : A M S Kulasekara - General Manager (Engineering) A.I.E. (SL), F.I.I.E. (SL), I.Eng., Graduate - City & Guilds (U.K.)
Secretaries : Corporate Managers & Secretaries (Private) Limited 8-5/2, Leyden Bastian Road, York Arcade Building, Colombo 1.
Auditors : KPMG Chartered Accountants, P.O.Box 186, Colombo 3.
Bankers : Seylan Bank PLC People’s Bank National Development Bank DFCC Bank
Legal Advisers : Messrs Julius & Creasy Attorneys-at-law P.O.Box 154, Colombo 1.
VisionTo be the foremost producer of High Quality Tea &
Rubber
MissionTo maximise land and labour productivity and
achieve excellence in the profitable management
of the Company in an acceptable and socially
responsible manner.
Core ValuesIntegrity
Courage
Commitment
ObjectivesTo lead the way in the technical and innovative
development of the Tea & Rubber agri-industries.
To provide a satisfying work experience to our
employees and ensure a rewarding investment to
our shareholders.
To be a trail-blazer in the shift away from
producing visually graded rubber as an agricultural
commodity to the production of a fully technically
specified industrial polymer
Financial Highlights 01
Chairman’s Review 02
CEO’s Review 04
Board of Directors 07
Risk Management 08
Enterprise Governance 10
Our Plantations 15
Production and Yield 16
Management Discussion & Analysis 17
Ten Year Summary 22
Shareholder & Investor Information 23
Sustainability Reporting 24
Financial Reporting
Annual Report of the Board of Directors 30
Statement of Directors' Responsibilities 33
Report of the Auditors 34
Income Statement 35
Balance Sheet 36
Statement of Changes in Equity 37
Cash flow Statement 38
Notes to the Financial Statements 39
Glossary of Financial and Non Financial Terms 65
Notice of Meeting 66
Form of Proxy 67
Corporate Information Inner Back Cover
Content
1
Year ended 31st March 2012 2011 Change %
Turnover Rs.000 3,610,320 3,683,366 (2)
Profit before interest and tax Rs.000 655,832 931,904 (30)
Profit before tax Rs.000 531,861 775,251 (31)
Profit after tax Rs.000 438,608 667,773 (34)
Dividends Rs.000 64,000 320,000 (80)
Earnings per share Rs. 13.71 20.86 (34)
Interest cover No. of times 5.29 5.95 (11)
Return on equity % 15 48 (70)
Return on capital employed % 46 53 (12)
Balance sheet highlights
Total assets Rs.000 6,503,688 5,772,589 13
Total debt Rs.000 1,129,205 1,412,720 20
Total shareholders’ funds Rs.000 2,471,241 2,352,633 5
Net assets per share Rs. 77.23 73.51 5
Debt/equity % 46 60 23
Debt/total assets % 17 24 29
Market/shareholder information
Market price (Year end) Rs. 70.00 168.00 (58)
Market capitalisation Rs.000 2,240,000 5,376,000 (58)
Dividend per share Rs. 2.00 10.00 (80)
FINANCIAL HIGHLIGHTS
Kotagala Plantations PLC Annual Report 2011/122
CHAIRMAN’S REVIEW
I take great pleasure in presenting on behalf of the Board of
Directors the Annual Report and Audited Financial Statements
of Kotagala Plantations PLC for the year 1st April 2011 to
31st March 2012.
The single most significant factor that impacted on the
performance of the Plantation Industry in the year under review
was the Collective Agreement between the major Plantation
Trade Unions representing the workers and the Employers’
Federation of Ceylon representing Regional Plantation Companies.
This Agreement which came into effect from the 1st of April 2011
is for a period of two years ending 31st March 2013.
The Collective Agreement provided for an unprecedented
increase of 33.3% in the basic wage and the final daily wage
of a worker inclusive of attendance and other incentives is now
Rs.515 per day. The total cash outflow resulting from this wage
increase for the year was Rs.400 Million excluding topping up of
the gratuity provision, which amounted to a further Rs.88 Million.
It is not often realized that, in the Plantation Industry, due to
the irregular attendance of the workforce, the estates employ
an extra 20 to 25% of the workforce to make up for the drop in
attendance. Although workers are paid only for the days they
report for work, the estate has to find housing and provide all
other benefits in terms of health services, paid holidays, etc. and
also make a full provision for gratuity at the end of each year.
This matter has, over the years, been discussed with the relevant
authorities, but unfortunately very little progress has been made
towards solving this vexed question.
COMPANY PERFORMANCE
TeaKotagala Plantations PLC has 2,451 ha of tea in bearing and 3,345
ha of rubber in bearing. The bulk of the Company’s tea is in the
Western High Grown Dimbulla District and a much smaller extent
is in the Low Grown Kalutara District.
Although the island’s tea crop at 328.3 Million kilos was a little
behind the previous years, the Company’s crop harvested in both
the High Grown and Low Grown tea areas performed better than
budget. The total crop harvested on the estates was 5,466,960
kg. The overall yield achieved by the Company for the year
was a very satisfactory 2,230 kg per hectare. In addition to the
Company’s own tea crop, an extra 1.5 Million kilos of tea was
manufactured as smallholder bought leaf.
An above budget performance in crop is generally accompanied
by a reduction in the Cost of Production, but this year, due to the
wage increase referred to above, the final Cost of Production of
the tea was Rs. 326.79 at estate level.
During the year under review, due to instability and uncertainties
in the Middle Eastern Region and a major economic downturn in
the Euro Zone, tea prices were depressed. During the first quarter
of the year 2012, the Rupee was devalued against the US Dollar
and there was a slight improvement in the local Rupee prices.
However, it is significant that the producer is not getting the full
benefit of the Rupee devaluation. The US Dollar equivalent of the
Colombo Auction price is today significantly lower than the year
2010 for both the High Grown and Low Grown teas, although
the Rupee price since devaluation has shown a small increase.
As a result of the increased wages and the depressed prices,
the Kotagala tea recorded a loss of Rs.105 Million for the year at
estate level.
Reference has been made in earlier reviews to the inadequacy
of factory capacity to manufacture the Company’s crop and this
was corrected to a very significant extent last year. We are now
able to handle most of our heavy crops. Nevertheless, cropping
patterns particularly in the high elevation teas are not very
regular and during the high cropping months, there are sudden
peaks which last a few days, which cannot be catered for by
improving manufacturing capacity. Very often, these peaks are
due to inability to harvest leaf at optimum levels due to labour
shortages arising from prolonged absences due to Pongal and
the New Year and localized Temple Festivals. We have therefore
focused on endeavouring to maintain regular plucking rounds
by the introduction of plucking shears as required. This has been
done quite successfully on two of our properties and will be
extended to other properties as necessary.
The total spent on Capital Expenditure during the year, other than
on mature and immature plantations, was Rs.63 million.
RubberKotagala has a significant extent of rubber which is in prime
condition, and due to regular replanting with newer clones, has
now started recording improved yields on most properties. Some
of the larger rubber properties still contain significant extents of
older low yielding clones and it will be sometime before these
extents are also fully replanted. During the year under review,
unusual rains interfered with tapping and against a budget of 307
days tapping for the year, only 231 days tapping were achieved.
This reduced number of tapping days resulted in a decrease in
the crop harvested when compared with budget. Nevertheless,
Kotagala produced 3 Million kilos of rubber which was nearly 2%
of the island’s total production of 157 Million kilos of rubber. Four
of the rubber properties recorded yields in excess of 1,000 kg per
hectare for the year, which is a very satisfactory yield by national
standards.
Nevertheless, the final Cost of Production at Rs.278.43 per kilo
was exceptionally high. In spite of the economic downturn in
the Euro Zone and the US economy yet to return to normal,
international rubber prices ended up stronger and for the year
3
2011/12, mainly due to heavy buying by China and India.
The price of Sri Lanka crepe rubber for the year 2011/12 was
Rs.472.10 as against Rs.409.52 in the previous year.
The Company’s rubber price was Rs.478.25 per kilo and the total
rubber profit for the year was Rs.600 Million at estate level.
We improved on our export operations and exported a total
quantity of latex crepe and sole crepe amounting to 300,000 kg
at an average price of US$ 5 per kg. In the new year, we expect
to expand this further and venture in to export of value added
rubber as well.
The rubber tree has a 30 year life span and it is therefore
necessary that 3% of the rubber hectarage is uprooted and
replanted in new rubber each year. On average, at any given
time, 18% of the total rubber extent is immature and this
extent is maintained under Capital Expenditure. The total spent
on replanting during the year under review on rubber and a
relatively small extent of tea was Rs.306 Million.
PERFORMANCEAfter Colombo charges, lease rental and the extra provision for
the gratuity top up, the tea operated at a net loss of Rs.158
Million whilst rubber recorded a profit of Rs.565 Million. The final
Company profit before tax was Rs.531 Million, which includes
provision for an exchange gain of Rs.129 Million on rubber
export earnings. Given the extremely difficult conditions under
which the Company performed during the year, this final result is
commendable.
FUTURE DEVELOPMENTWe made reference in the last report to the Company’s
diversification into a third crop; Oil Palm. The first 117 ha was
planted in the year under review and is expected to come into
bearing in 2014. We are scheduled to plant another 247 ha in the
year 2012/13 and the plants are already available in the second
stage nurseries. We expect to have a 5 Ton capacity mill in
operation by 2014 and this will be sufficient for our requirements
upto the time the planting of the full 1,000 ha is completed.
Thereafter, as the crop matures and yields increase, the capacity
of the mill will need to be increased by the addition of another 5
Ton crushing capacity.
A major project which we worked on during the year was the
investment of US$70 Million in Cambodia on the lease of 20,000
ha of secondary jungle for clearing and planting in rubber. These
negotiations have progressed very satisfactorily and we expect
to sign final agreements early in the new year. We expect to
commence the initial land clearing and establishment of nurseries
in the year 2013/2014 and hopefully commence the first
planting in the following year. When fully completed, we expect
Kotagala to be one of the major producers of natural rubber in
the world.
The development of our factories to conform to modern
environmental and social responsibility standards continues. Six of
our eight factories are fully certified for ISO 22000 environmental
standards. Mayfield Factory is scheduled to complete certification
in the coming year. Two of our properties have been accepted
by the Fair Trade Labelling Organisation and some of our teas
are bought by Fair Trade Members and sold under Fair Trade
Labels. All the Kotagala Factories also conform to the Ethical Tea
Partnership requirements.
Our social welfare activities continue as usual. We continue to
assist deserving children of employees who gain admission
to Universities and other institutions of tertiary education.
The Manager of Mayfield was selected as the Runner Up for
implementation of social welfare activities in an all island
evaluation of Plantation RPCs. Hedigalla Estate won an award for
the Best Managed and Equipped Crèche in the district.
Unacceptably high labour wages will continue to have its effect
on the performance of the Company in the year 2012/13. A
significant improvement in national tea prices is not forecast.
Colombo is still the highest selling Auction Center in the world.
In recent months, there has been talk about permitting larger
volumes of tea imports to boost the total exports of the country.
What effect such a move will have on the unique image of
“Ceylon Tea” has not been considered. As far as the producing
companies and the tea smallholders are concerned, such a move
which is designed to counteract high auction prices of “Ceylon
Tea” compared to other Centers is bound to adversely affect the
producer who sells all his produce at the auctions.
CONCLUSION
The year 2011/12 was a difficult year for the Industry. Significant
improvements are not expected for the year 2012/13.
I would like to take this opportunity to thank all staff on
plantations and the Head Office for their continued commitment
and support during a difficult year. I also wish to express my
appreciation to my colleagues on the Board for their unfailing
support and advice.
A Rajaratnam
Chairman
18th May 2012
Kotagala Plantations PLC Annual Report 2011/124
CEO’S REVIEW
I am privileged to present this report at the 19th Annual General
Meeting for the year ended 31st March 2012.
The commodity markets internationally for Tea declined
progressively during the course of the completed season. Rubber
prices that reached peak levels of Rs.685/-per kilo in April 2011
declined to Rs. 475/- per kilo levels by the fourth quarter.
The degree of the decline in tea prices could be assessed by the
fact that, the Western High Grown average declined by Rs. 24.40
per kilo to Rs. 329.00 per kilo whilst the CTC High Grown sale
average of Rs 295.87 recorded a sizeable decrease of Rs. 36.71
per kilo when compared to the previous season.
The 33.3% wage increase that came into effect with the payment
of arrears from the month of April, that is at the commencement
of the season, coupled with the decline in prices referred to
severely affected the viability of all tea plantations and reduced
the profitability of Rubber as well.
This resulted in a sharp decline in profit due to the COP exceeding
the NSA.
Tea Crop –Kotagala –Up-countryThe average rainfall recorded for the region was 2,257 mm with
160 wet days which is a considerable decrease of 1,814 mm
and also the decrease of 36 wet days when compared to the
previous season, could well affect the vegetative growth in the
forthcoming season.
The Region did extremely well to harvest the highest ever crop of
5.1 Mn. kilos made tea, and thereby achieved the highest yield
for the region of 2,268 kilos per hectare.
From the ten estates, nine estates recorded yields of over 2,000
kilos per ha.
Outstanding performances were recorded once again by Mt.
Vernon with a yield of 2,624 KPH, Mayfield 2,551 KPH, Chrystler’s
Farm 2,501 KPH Craigie Lea 2,339 KPH, Drayton 2,262 KPH,
Kelliewatte 2,229 KPH, Stonycliff 2,102 KPH, Bogahawatte 2,088
KPH and Derryclare 2,083 KPH.
Yuillefield estate is the only estate which yielded below 2,000
KPH but improved on its previous highest yield of 1,807, to obtain
a yield of 1,868 KPH.
Innovative management strategies such as shear plucking were
adopted, in order to control plucking rounds, and thereby improve
the quality of the green leaf, sent for manufacture.
Despite the increase in cost of basic wages of 33.3% and the
fuel, chemicals, packing material price increases, the COP was
maintained at a reasonable level of Rs 321.74 per kilo.
As stated earlier the steep decline in the high grown sale average
severely eroded into our overall profits.
We wish to acknowledge the dedication and hard work of all our
employees who strived under very trying conditions to obtain the
co-operation and assistance of the workforce in order to reap the
benefits of the full agricultural programme carried out.
Kotagala Low country TeaKotagala Low country Tea consists of 200 ha of 100% VP tea,
the yield for the season was 1,804 Kgs per ha. improving on the
previous yield of 1,777 Kgs per ha. The Low grown estate crop
harvested was 360,705 Kgs the bought crop from small holders
was 1.1Mn Kgs making a total of 1.5Mn. Kgs.
Rayigam estate achieved the best yield of 1,910 Kgs per ha with
Vogan and Gikiyanakande achieving 1,887 Kgs and 1,649 Kgs per
ha respectively. The depressed low grown sale average coupled
with enhanced wage increase of 33% resulted with the Low
Grown Tea sector operating at a marginal profit of Rs.7.5Mn.
The final combined COP was Rs.345.32 with a NSA of Rs. 352.24
resulting in a combined profit of Rs.6.92 per Kg.
In spite of the restricted profit recorded, the replanting of 10 ha.
in tea was undertaken during the season in the Low country.
Rubber The Rubber market in global terms progressively declined
during the course of the season and its impact was reflected
in the Colombo auctions as well. The peak prices that reached
Rs.635/- levels per Kg for TPC 1X declined to Rs. 475/-
levels by the 3rd quarter.
RSS prices also had a similar trend but improved in demand
over 1X for short period, when RSS attracted better prices than
The Region did extremely well to harvest the highest ever crop of 5.1Mn. kilos made tea, and thereby achieved the highest yield for the region of 2,268 kilos per hectare.
From the ten estates, nine estates recorded yields of over 2,000 kilos per hectare
5
Crepe. However, this trend did not continue and Crepe once
again had improved demand. The annual production of Kotagala
Rubber was 3.0Mn.Kgs. against the budgeted crop of 3.9 Mn. Kgs.
recording a shortfall of 23% against the annual budget.
The COP appreciably increased as a result of the wage hike
during the period under review, which had an impact of 18%.
The overall COP increased further due to high petroleum, energy
and packing materials cost. Despite the decline in profits, Rubber
replanting continued with an extent of 89 ha. undertaken.
Kotagala enhanced its reputation of manufacturing top quality
Crepe Rubber as well as Sole Crepe and was rewarded with 18
top prices, with all our estates contributing to this achievement
and especially Dalkeith, Arapolakande, Rayigam, Padukka,
Paiyagala and Millewa.
The Padukka ISO certified factory specializes in Sole Crepe
manufacture including Honey/colour Sole Crepe and Sole Crepe
sticks, which are exported to end users.
The revenue earned by the export of rubber increased during the
season due to remunerative prices obtained for the Sole Crepe at
US$ 9 per Kg. and Thick 1X Crepe at an average price of US$ 5. A
total quantity of 866,000 kgs was direct exported.
If the present economies of China and India, and the Euro Zone
financial crisis also improves, more favourable market condition
could be expected in the new season.
The COP at the end of the season was Rs.278.43 with a NSA of
Rs.478.25 giving a profit margin of Rs.199.82 per Kg.
The decline in crop was due to the reduced number of tapping
days. The rainfall recorded during the season was 4,115 mm with
165 wet days.
The rain guarding of tapping panels was undertaken in the virgin
bark fields. Even though in these areas there was an increase in
the actual number of days of tapping and consequently increased
crop – the quantity was inadequate to make a significant
contribution to the overall harvest.
Due to the attention given to the manufacture of top quality
Rubber and also paying attention to the percentage of premium
grades manufactured, the Company was able to secure a profit
of Rs.565.9 Mn, inclusive of all charges such as lease rental, MA
fees, gratuity top up etc., The profit for the season on Rubber can
be considered very satisfactory despite the increased expenditure
on wages and all other inputs.
Oil PalmOur target of planting an extent of 1,000 hectares of Oil Palm is
progressing satisfactorily. 117 ha has been completed to-date. It
is our intention to extend our planting programme in the current
season to 217 ha. This project is expected to be completed by
2014.
The seed material for the nurseries continues to be imported
from PNG New Britain Palm Oil Limited. Restriction enforced on
us regarding the purchase of seed material from PNG New Britain
Palm Ltd has resulted in a steady increase in cost.
With a steady increase in demand for Vegetable Oil for the World
Markets, the Oil Palm Industry will be a profitable venture.
Financial ReviewThe Company’s turnover of Rs.3,610.3Mn. indicates a marginal
decline over the previous year turnover of Rs.3,683.3Mn.
The Company recorded a profit before tax of Rs.531.9Mn. and the
cash flow stood at Rs.321.9Mn. in the year under review.
Capital expenditureTo maintain the Company asset value of the following capital
expenditure was incurred during the season under review.
Machinery Tea Rs.7.6Mn.
Machinery Rubber Rs.5.1Mn.
Repalnting Tea Rs.15.1Mn.
Replanting Rubber Rs.30.8Mn.
Equipments Rs.5.5Mn.
Kotagala enhanced its reputation of manufacturing top quality Crepe Rubber as well as Sole Crepe and was rewarded with 18 top prices, with all our estates contributing to this achievement and especially Dalkeith, Arapolakande, Rayigam, Padukka, Paiyagala and Millewa.
The Rubber market in global terms progressively declined during the course
of the season and its impact was reflected in the Colombo auctions as well. The peak prices that reached Rs.635/- levels per Kg for TPC 1X declined to Rs. 475/- levels by
the 3rd quarter.
Kotagala Plantations PLC Annual Report 2011/126
CEO’S REVIEW
Fairtrade CertificationThe demand for Fairtrade teas continues to increase with all 3
marks of Kelliewatte, Bogahawatte and Chrystler’s Farm being
patronised. These marks have been accepted by Fairtrade – USA
as well.
Kelliewatte with its connected Certificates on Environmental
worker health and safety standards, Ethical Tea Partnership and
ISO 22000:2005 & ISO 9001:2008 continued to have Fairtrade
sales on a weekly basis.
ISO Certification/Ethical Tea PartnershipAll nine plantations have received ETP certifications.
Seven plantations, that is excluding Mayfield and Bogahawatte,
have received ISO 22000: 2005 & ISO 9001:2008 certifications.
These certified factories had regular audits undertaken in order
to ensure that ETP and ISO requirements are continuously
maintained.
Mayfield estate will be ready for ISO certification by June 2012.
Social WelfareThe Company achieved recognition from the PHDT for the various
Worker Welfare activities carried out such as - building of new
units of houses, new Toilets, reproofing of Worker dwellings,
constructing new play grounds, upgrading and building child
development centers.
The infant mortality rate and maternal mortality rate on
our Plantations, are registered at zero levels. This is a great
achievement and is a tribute to our medical and welfare staff.
We give below the details of the awards received by 3
plantations in respect of the Social Welfare activities;
1. Mayfield Estate - Best Manager -1st runner-up
2. Stonycliff Estate - Best Health Care service - 2nd runner-up
3. Hedigalla Estate - Best Estate Worker Housing
Co-operative Society - 2nd runner-up
We wish to extend our thanks and appreciation to the PHDT for
their co-operation and support given in this regard.
Human ResourcesThe Company invested in training all categories of Management,
Staff and Workers with the assistance of NIPM, TRI, RRISL as well
as EFC with resource personnel from reputed Agencies.
The worker welfare activities highlighted in the report were
undertaken with the assistance of the PHDT and the contributions
made by the CARE International and the training programme of
the WUSC.
As done in the past, the Company has given financial assistance
to Staff and Workers’ children for higher education.
Disabled persons on the estates have been assisted through the
Sunera Foundation.
Eye clinics and health clinics continue to be held with the free
distribution of spectacles.
The season under review was very trying with many difficulties
faced with increased labour wages combined with poor prices
especially in tea and decline in prices for Rubber as well.
Our Plantation Executives and Staff, continue to show dedication
and loyalty to the Company to introduce innovative strategies,
with the assistance of all executives at the Head office as well
and an endeavour to meet the many constraints faced during the
season under review.
I wish to thank the Chairman, Board of Directors, Management
Team, Executives in the Plantations, Head office and Estate Staff
and our Workers for their co-operation and dedication during a
very difficult season.
We acknowledge with appreciation the contribution made by all.
R C PeriesChief Executive Officer
Lankem Tea & Rubber Plantations (Pvt) Ltd.
Managing Agents
18th May 2012
The demand for Fairtrade teas continues to increase with all 3 marks of Kelliewatte, Bogahawatte and Chrystler’s Farm being
patronised. These marks have been accepted by Fairtrade – USA as well.
7
BOARD OF DIRECTORS
A Rajaratnam - ChairmanNon-ExecutiveHe joined the Board of Kotagala Plantations PLC in 1996 and was appointed Chairman in the year 2003. He serves as Chairman of The Colombo Fort Land & Building Company PLC (CFLB) and several listed and unlisted companies within the CFLB Group in addition to holding other Directorships within the Group. Mr. A. Rajaratnam is a Fellow of the Institute of Chartered Accountants
of Sri Lanka.
S D R Arudpragasam Non- Executive Director He was appointed to the Board in 1996. He holds the position of Deputy Chairman on the Boards of The Colombo Fort Land and Building Company PLC (CFLB) and Lankem Ceylon PLC. Mr. Arudpragasam also functions as Managing Director of E.B. Creasy & Company PLC in addition to serving on the Boards of other Companies within the CFLB Group. Mr. S.D.R. Arudpragasam is a Fellow of the Chartered Institute of Management Accountants
(U.K.)
R C PeriesExecutive Director Having started his career with Carson Cumberbatch & Co. he then moved to George Steuarts, one of the premier Agency Houses. He has served as Manager of some of most prestigious rubber properties in the Low Country and also held senior appointments in the industry and served on the Rubber Research Board Advisory Panel. In 1983, he was appointed the Regional Director of the JEDB Hatton Board and in 1988 he was made Director General of the Kegalle - Avissawella Zone of the JEDB. In 1992 after the Privatisation of the management of plantations, he joined George Steuart Management Services as the General Manager of Low Country rubber & tea estates of Kotagala Plantations PLC. He continued to serve in this position even after the take over of the Management of Lankem Tea & Rubber Plantations (Pvt) Ltd(LT&RP), Managing Agent in 1995. He was appointed to the Directorate of LT&RP in 2002 and to the Board of KPPLC in 2005 and is presently the Chief Executive Officer of LT&RP. He also serves as a Director in other companies of the Colombo Fort Land & Building Group. He is also a member of the Rubber Research Board and the Chairman of Lankaprene Marketing Company Ltd. He is presently a committee member of the Colombo Rubber Traders Association, and is also a member of the Rubber Wages Board. Mr. R C Peries is a Member of The
Ceylon Institute of Planting.
C P R Perera Independent Non-Executive DirectorAppointed to the Board in 1996. Mr. C.P.R. Perera serves as a Director in several Companies in the Colombo Fort Land & Building Group and also holds directorships in other private and public companies. He is a past Chairman of the Sri Lanka Tea Board, Sri Lanka Insurance Corporation, PERC and Bank of Ceylon. He retired as Chairman of Forbes & Walker Ltd and its subsidiary
companies in June 2005 after almost 44 years of service. He presently functions as Chairman of Ceylon Tea Brokers PLC and Capital Alliance Finance PLC. He is a Director of the Sri Lanka Business Development Center (SLBDC) and a Board Member of the Outward Bound Trust of Sri Lanka. Mr. Perera has served as a Committee Member of the Ceylon Chamber of Commerce, The Planters Association of Ceylon and on the Committee of
Management of the Ceylon Planters Provident Society.
D A RatwatteExecutive DirectorHaving commenced his career with Messers Whittall Boustead
Ltd prior to nationalisation he has contributed many years of his
life to planting. After the nationalization of estates he continued
to be manager of two of the most prestigious plantations in up
country after which he was invited to serve on the board of the
JEDB as a Regional Director in Kandy.
After the privatization of management of the Regional Plantation
Companies in 1992, Mr. Ratwatte took charge of the operations
of Maturata Plantations Ltd. In 1999 he joined Lankem Tea
& Rubber Plantations (Pvt) Ltd.(LT&RP),Managing Agents,
as a Regional Director in charge of the Western High Grown
properties. He was appointed to the Board of LT&RP in 2002 and
joined the Board of KPPLC in 2006. He also serves as a Director
in other Companies of the Colombo Fort Land and Building
Group. Mr. D A Ratwatte is a Fellow of the National Institute of
Plantation Management.
G D V Perera Executive DirectorHe commenced his career in planting with Mackwoods Estates
& Agencies Limited in 1971. With the nationalization of
Estates, he worked as an Estate Manager and Visiting Agent
and was subsequently promoted as a Director of JEDB in the
Nuwara Eliya Region. He has provided his services to the
prestigious Commonwealth Development Corporation (CDC) of
UK on Tea Projects in Tanzania and was resident there. After
the privatization of the management of Regional Plantation
Companies, he returned to Sri Lanka and joined Forbes Plantation
Management Services Ltd., as a Plantation Director of Balangoda
Plantations Limited in 1993. He joined Lankem Tea & Rubber
Plantations (Pvt.) Limited (LT&RP), Managing Agents in 1996 and
was appointed to the Directorate of LT&RP in 2002, and KPPLC
in 2006. He also serves as a Director in other companies of the
Colombo Fort Land and Building Group.
He is a past Chairman of the Planters’ Association of Ceylon and
is a Trustee of the Colombo Tea Traders’ Charity Trust. He is a
Director of the Plantation Human Development Trust Mr. G.D.V.
Perera is a Member of the Ceylon Institute of Planting and a
Fellow of the National Institute of Plantation Management. He is
a member of the consultative committee on Tea Research.
Kotagala Plantations PLC Annual Report 2011/128
RISK MANAGEMENT
The Risk Management process
At Kotagala , we emphasise the importance of having a strong
working culture within the organization that strengthens the
internal processes. Risk Management is no longer an additional
set of processes but embedded in the business process itself .The
risks could influence the achievement of the strategy of business,
operational and financial objectives therefore the Directors have
taken the initiative to identify the organisations major risks and
introduced several measures to mitigate the risks faced by the
Company.
The following are some of the major risk factors that the
company is exposed to while carrying out its business and the
actions implemented to reduce or eliminate risk.
Operational risk
The company carries out continuous planning, quality control and
disaster recovery management strategies in order to ensure the
continuous operation of business.
Tangible assets are insured against identifiable risks and the
associated insurance policies are reviewed and evaluated
annually. Provision is also made for asset defects and
malfunctions and for obsolescence due to advances in
technology. We go to the best suppliers to ensure that defect free
products are purchased. The factories in the estates and other
infrastructure are continuously upgraded when required.
Exposure to reputation risk is minimized through product quality
controls and a comprehensive quality management process
which includes upgrading our factories to adhere to HACCP
standards
Weather
The Company’s product portfolio being Tea and Rubber, helps
to minimize the impact as tea requires wet and rubber requires
drier weather conditions. The location of our tea estates in the
High grown and Low grown elevation categories also helps in this
regard.
The Company has the option of increasing or decreasing
quantities of bought crop according to weather patterns. Prudent
agricultural practices such as rain guards for rubber trees and
planting of TRI recommended clones and other agricultural
practices to minimise drought effects and proactive planning has
helped the company to minimise the risk of adverse weather
conditions.
Business Risk
Prices are cyclical and have an impact on earnings. Tea Auctions
in Colombo are influenced by global demand and supply, and
foreign currency exchange rates. The company mitigates this
impact by producing high quality tea and rubber. The direct
export of rubber facilitates price stability and entering into
forward contracts with rubber buyers helps reduce market risk.
Kotagala Plantations process a full range of teas (low grown, high
grown and CTC) and different types of rubber which helps reduce
market instability. Initiatives have been taken for diversification
into other crops like cinnamon and oil palm which will reduce
over dependence on tea and rubber.
The Company possesses synergistic benefits from being in a
group which includes a chemical supplier and another company
in the plantation business.
Healthy relationships are maintained with our suppliers.
Fluctuations in the exchange rates are closely monitored and
hedging techniques applied when required.
In order to minimize the dependence on a single distribution
channel (brokers) the company has continued to establish its
export operations. Further the company has leased out a portion
of land to Mlesna (Ceylon) Ltd in Kotagala for the purpose of the
sub lessee to carry out sales and operate a tea centre for their
products. This facility also has provision to market KPPLC garden
mark packs.
Legal and regulatory
The Company addresses this area with great concern in order
to protect its corporate image. Quality assurance standards in
factories have been established over a period of time (ISO,
HACCP) and continuous reviews are conducted to ensure they are
maintained. The Company’s legal division ensures full compliance
with all regulatory requirements including labour regulations,
adherence to laws and instructions of governing authorities
such as Provisions of the Companies Act, Securities & Exchange
Commission and Colombo Stock Exchange requirements. The
Company also obtains expert advice from its Auditors, Tax
consultants, Actuaries, TRI, RRI as and when required. As a public
listed company we also strive for a high standard of corporate
governance in the conduct of our business.
Human resources
Kotagala Plantations has entered into Collective Agreements
with trade unions as a member of the employers’ federation.
This helps to ensure industrial peace and a well negotiated and
affordable wage. Human Resource Management is given priority,
9
where continuous training and development programmes and
workshops are held in order to motivate and develop our human
resources.
Governance Risk
These risks are dealt with preventively through the actions of
the company’s legal department and through frequent internal
& external audits to monitor compliance. The company’s
management culture stresses ethical performance in this area,
following best practices at all times.
Liquidity
We ensure sufficient liquidity is available to meet our
debt commitments and provide for our operational capital
requirements. Loans and overdraft facilities are arranged with
banks to meet planned cash flow commitments. For our long
term investments, we obtain loans from Asian Development
Bank at low interest rates, and we make use of the grants from
the Plantation Human Development Trust and the Plantation
Development Support Programme. Borrowings are suitably
structured to ensure their maturity profiles match those of the
investments they finance.
Employee related risks
Risks such as omissions, fraud, judgmental errors, negligence,
are examples of employee related risks. The company has a
set up a competent internal audit department which carries out
exhaustive checks on a routine basis in order to eliminate the
above mentioned risks. The Internal audit department functions
independently and reports directly to the Executive Directors.
They ensure all receipts have been banked, lodging of funds
have been deployed for the intended activity. Suitable delegated
authority levels have been set up and succession plans are
formulated. We maintain a conducive working environment for
all staff
Information
Proper internal controls have been established in order to secure
the information system. Routine and surprise audit checks are
carried out to detect any deficiencies and improvements are
suggested. The company has implemented sound backup systems
and procedures, and has also entered into maintenance contracts
with established agents and uses licensed software. Further the
company has entered into insurance agreements in order to
hedge financial losses arising from uncertainties.
Kotagala Plantations PLC Annual Report 2011/1210
ENTERPRISE GOVERNANCE
Enterprise Governance is the combination of Business Governance
and Corporate Governance, it is the set of responsibilities and
practices exercised by the Board and executive management
with the goal of providing strategic direction, ensuring that
objectives are achieved, ascertaining that risks are managed
appropriately and verifying that the organization’s resources are
used responsibly.
Enterprise Governance is such an important framework. It
encapsulates Corporate Governance, Performance Management,
Internal Control and Risk Management, and it strives to achieve a
balance between conformance and performance.
At Kotagala Plantations PLC we are firmly committed to the
highest standards of governance. The Company’s performances
are managed to the best interest of its shareholders whilst
maintaining high ethical standards. The Board is committed
to adhere to various business practices in order to further
establish our Company as a good corporate citizen that values
responsibility.
The Company has a management committee that acts as a Board
sub-committee and assists the Board of Directors on various
matters. This process helps the Board to review its strategic
position continually. The strategic options, implementation and
risk control strategies are closely monitored in order to deliver
better results.
The Company is in compliance with the majority of the good
corporate governance practices recommended by The Institute
of Chartered Accountants of Sri Lanka and the listing rules of the
Colombo Stock Exchange. Given below is a demonstration as to
how we adhere to good Corporate Governance practices.
Corporate Governance Principle Company’s adherence Directors
Composition of the Board The Board consists of three Executive Directors and three Non Executive
Directors of whom one is independent. The Directors possess a strong
balanced blend of skills, experience to offer guidance in core areas
important to KPPLC. These Directors are named below and profiled on
page 7.
A Rajaratnam - Chairman - Non Executive
S D R Arudpragasam - Non Executive
R C Peries - Executive
C P R Perera - Independent Non Executive
D A Ratwatte - Executive
G D V Perera - Executive
The Non-Executive Directors have submitted declarations of their
independence or non-independence to the Board of Directors
Mr. C.P.R. Perera was determined to be an Independent Non- Executive
Director with effect from 10th January, 2011. He has served on the
Board for more than nine years and is a Director on the Boards of other
Companies in which a majority of the Directors of the Company are
Directors and is also a Director on certain subsidiaries of The Colombo Fort
Land and Building Company PLC (Ultimate Parent Company) However the
Board after taking into consideration all other circumstances listed in the
Rules pertaining to the Criteria for Defining Independence is of the opinion
that Mr. C.P.R. Perera is nevertheless Independent.
11
Corporate Governance Principle Company’s adherence Directors
Decision Making of the Board In addition to attending Board Meetings, matters are referred to the Board
and decided by Resolutions in writing.
The Board is responsible for :-
• EnsuringtheconductoftheCompany’saffairsinthebest
interest of its stakeholders.
• IdentifyingStrategicoptions,implementationand
monitoring their success.
• Appointment of the Directors, ensuring comprehensive staff
succession and determining remuneration of senior executives
and staff.
• Ensuringaneffectiveinternalcontrolsystem.
• Ensuringaproactiveriskmanagementsystem.
• Ensuring compliance with highest ethical standards and legal
standards.
• Approval of major capital investments acquisition expansions
and Budgets
• Approval of interim and annual financial statements for
publication.
Company Secretaries The Company and all Directors may seek advice from Corporate Managers
& Secretaries (Pvt) Ltd who are qualified to act as Secretaries as per the
provisions of the Companies Act No. 7 of 2007.
Independent Judgement The Board of Directors at all times exhibit high standards of integrity,
commitment & independence of judgement.
Obtaining independent professional advice Advice is sought from independent experts whenever board deems it
necessary. The Directors are updated on the changes in the plantation
industry as well as on the general aspects which may affect the Company’s
operations.
Managing Agents The Board of Directors has delegated the management of Plantation and
the task of achieving the strategic objectives set out by the Board to the
managing agents Lankem Tea & Rubber Plantations (Pvt) Ltd (LT &RP).
The Board of LT&RP meets every month and review the progress towards
achieving the budgets and discuss the operational issues. The successful
implementation of the Capital Expenditure programmes and focussing on
the development strategies are also key priorities.
Finance Acumen The Board comprises of two finance professionals who together with the
Director Finance - LT&RP possess the knowledge and the competence to
offer the Board the necessary guidance on matters relating to finance.
Kotagala Plantations PLC Annual Report 2011/1212
ENTERPRISE GOVERNANCE
Corporate Governance Principle Company’s adherence Directors
Supply of Information on a timely manner Prior to each meeting all Directors are given a file of Board Papers
which includes Summarized Financial Statements, operational statistics,
performance reviews, sales reports, Schedules of Capital Expenditure and
a Progress Report, covering all significant issues with the comparatives
of prior year and budget. This information is provided at least 7 days
prior to the meeting which gives Directors adequate time for qualitative
deliberation and analysis.
Appointments to the Board New Directors are proposed for appointment in consultation with
the Chairman of the Company. The Board as a whole decides on the
appointments of Directors in accordance with the Articles of Association
of the Company and in compliance with rules on Governance. All
appointments are approved by the Board of The Colombo Fort Land and
Building Co. PLC.
Disclosure of appointments of New Directors The new appointments are made available to shareholders by
to the Shareholders. making announcements at the Colombo Stock Exchange.
Re-Election of Directors In terms of the Articles of Association of the company a Director appointed
to the Board holds office until the next Annual General Meeting, at which
he seeks re-election by the shareholders. The Articles require one-third of
the Directors in office (excluding the Managing Director and the Appointed
Directors) to retire by rotation at each Annual General Meeting. The
Directors who retire are those who have been longest in office since
their last election. Retiring Directors are eligible for re-election by the
shareholders.
Relations with Shareholders
Annual General Meeting The Company always welcomes the active participation of the shareholders
at the Annual General Meeting. Questions put up by the shareholders are
answered thus promoting a healthy dialogue. The required number of
days notice has been given to the shareholders in terms of the Companies
Act No.7 of 2007 and the Articles of Association of the Company.
Communication with Stakeholders The Company publishes the Annual Report together with the interim
reports in order to communicate information to the shareholders in a
timely manner.
Major Transactions There have been no transactions during the year under review which fall
within the definition of “Major Transactions” as set out in the companies
Act.
Price Sensitive Information Due care is exercised with respect to share price sensitive information.
13
Corporate Governance Principle Company’s adherenceRelations with Shareholders
Others The Company also maintains a website under the name of its managing
agents www.lankemplantations.lk which offers any individual or body,
information on the Company and its affairs. The Company’s principal
communicator with all its stakeholders are its Annual Report and Quarterly
Financial Statements. The shareholders are free to communicate with
the Company. When ever possible, the Company implements their
suggestions.
Accountability and Audit
Financial Reporting The Board attaches high priority to timely publication of quarterly
and annual results with comprehensive details (both financial & non
financial) going beyond statutory requirements. This enables both
existing and prospective shareholders to make fair assessments
on the company’s performance and future prospects. The financial
statements are prepared in accordance with Sri Lanka
accounting standards. The Company’s accounting formats and
procedures are in compliance with the procedures laid down by the
regulatory authorities.
Disclosures The Annual Report of the Board of Directors is on pages 30 to 32 of this
report. The Statement of Directors responsibilities for the financial reporting
is on page 33 and the auditors’ report on the financial statements is on the
page 34 of this annual report.
Going Concern The Board of Directors after reviewing the financial position and the
cash flow of the Company are of the opinion that the Company has
adequate resources to continue operations well in the foreseeable future.
Therefore the Board adopts the going concern basis in preparing Financial
Statements.
Internal Control The Directors are responsible for maintaining an effective internal control
system and proactive risk management strategy. Internal controls cover
both financial and operational matters and risk management to safe
guard the assets of the Company. The risk management strategy of the
Company is on pages 8 and 9 of this report. The Company also ensures
that effective internal and external audit procedures are followed and the
Board reviews the reports in order to maintain the progress of the systems
& results.
Internal & External Audits The Internal Audit division comprises of the Internal Audit Manager
and Assistants who report directly to the Executive Directors. They are
empowered to examine and review the financial reporting systems,
internal control procedures, accounting policies and compliance with
accounting standards. It also reviews the adequacy of systems for
compliance with legal, regulatory and ethical requirement and company
policies.
The Company maintains a professional relationship with the external
auditors, M/S KPMG. This ensures their objectivity, independence and
compliance with regulatory and ethical requirements. The Board of
Directors retains authority in determining their remuneration.
Kotagala Plantations PLC Annual Report 2011/1214
ENTERPRISE GOVERNANCE
Corporate Governance Principle Company’s adherence Accountability and Audit
Audit Committee The Audit Committee of the Company’s Ultimate Parent Company, The
Colombo Fort Land and Building Company PLC is chaired by a qualified
Chartered Accountant, Mr. R. Seevaratnam an Independent Non- Executive
Director and also constitutes of one other Independent Director, Mr. A.M.
de S. Jayaratne and a Non-Executive Director, Mr. S. D. R. Arudpragasam.
The Committee has scrutinized the quarterly accounts and the accounts for
the year ended 31st March, 2012 of Kotagala Plantations PLC.
Steps are being taken to set up the Company’s own Audit Committee.
Directors’ Remuneration
Remuneration Committee The Remuneration Committee of the Ultimate Parent Company, The
Colombo Fort Land and Building Company PLC functions as the Company’s
Remuneration Committee.
Disclosure of Remuneration Aggregate remuneration paid to Directors is disclosed in Note 5 to the
Financial Statements.
Other
Management Committees The Management committee comprises of Directors, Consultants, General
Managers and Deputy General Mangers. Meetings are held once a month
where a review in detail is carried out on the performance of each
individual estate based on both financial and relevant non financial
indicators.
Compliance with Legal Requirements The Board of Directors through the company’s Legal & Finance divisions
makes every endeavour to ensure that the business complies with all laws
and regulations.
Social & Environmental Matters The Company has for many years recognized the benefits that accrue
from responsible employment, environmental and community policies
which are dealt with in detail in the Sustainability Reporting in Pages
24 to 28.
Rights of Employees /Other Stakeholders The Company identifies the rights of employees. Several employee
performance enhancing mechanisms such as performance appraisals and
training initiatives are in place for the career building of our employees.
A series of best practices and techniques are now embedded in the
business and applied intelligently within the organization.
Constant responsiveness to all stakeholder interests and an effective
risk management process are critical success factors to ensure that the
governance process will continue to add value in the future.
The Extent to which the good Corporate Governance practices are adopted
in the Company is given as above in this report.
15
OUR PLANTATION
Estate Crop Planting District
Area in Tea (Ha.) Area in Rubber (Ha.) Other Total
Buildings, roads.
etc Total Extent Type of Factory
Factory Capacity
No. of Workers
Mature Immature Mature Immature Mature Immature (Ha) (Ha.) (Ha.)
Kotagala Region
Bogahawatte Tea Nuwara Eliya 125.50 5.00 - - 70.00 0.25 200.75 42.25 243.00 Leafy 11,000 309
Chrystler’s Farm Tea Nuwara Eliya 116.00 1.00 - - 46.32 0.75 164.07 24.32 188.39 Leafy 7,200 321
Craigie Lea Tea Nuwara Eliya 228.00 4.50 - - 64.55 1.10 298.15 65.85 364.00 Orthodox 15,624 464
Drayton Tea Nuwara Eliya 236.25 2.00 - - 42.50 0.50 281.25 61.75 343.00 Orthodox 19,200 688
Kelliewatte Tea Nuwara Eliya 79.18 5.75 - - 55.28 1.35 141.56 4.55 146.11 Leafy 8,000 210
Mayfield Tea Nuwara Eliya 260.75 21.00 - - 197.00 1.50 480.25 57.00 537.25 Orthodox 17,010 908
Mount Vernon Tea Nuwara Eliya 368.37 22.50 - - 191.93 3.00 585.80 56.13 641.93 CTC 29,250 946
Stonycliff Tea Nuwara Eliya 307.50 10.50 - - 205.75 0.75 524.50 76.50 601.00 Orthodox 21,000 912
Yulliefield Tea Nuwara Eliya 335.00 3.00 - - 214.25 1.25 553.50 106.25 659.75 Orthodox 16,772 861
Derryclare Tea Nuwara Eliya 191.75 4.75 41.75 2.00 240.25 53.75 294.00 No Factory - 524
Regional Total 2,248.30 80.00 - - 1,129.33 12.45 3,470.08 548.35 4,018.43 6,143
Horana/Kalutara Region
Eduragala Tea/Rubber Kalutara 20.82 9.70 240.75 66.22 34.20 - 371.69 159.67 531.36 - 252
Hedigalla Tea/Rubber Kalutara 7.42 3.00 244.94 20.85 31.85 25.00 333.06 146.75 479.81 499
Gikiyanakanda Tea/Rubber Kalutara 52.24 14.20 330.49 124.43 39.11 22.00 582.47 295.13 877.60 Orthodox 1,944 285
Rayigam Tea/Rubber Kalutara 78.27 28.75 211.19 96.98 5.80 420.99 270.02 691.01 Orthodox/Crepe 2800/1975 517
Vogan Tea/Rubber Kalutara 41.25 13.32 265.31 136.21 3.96 460.05 346.71 806.76 Orthodox 1,140 197
Arapolakanda Rubber Kalutara - - 241.17 67.16 39.08 22.05 369.46 258.26 627.72 Crepe 1,500 189
Dalkeith Rubber Kalutara 1.00 - 514.18 170.82 56.18 124.45 866.63 337.37 1,204.00 Crepe 4,500 285
Millewa Rubber Kalutara - - 220.56 65.02 16.21 301.79 91.86 393.65 Crepe/Sole crepe 1,500 272
Padukka Rubber Kalutara - - 253.83 104.12 9.24 367.19 48.81 416.00 Sole Crepe 4,400 607
Paiyagalla Rubber Kalutara - - 280.64 97.01 26.02 403.67 67.60 471.27 Crepe 2,900 317
Sorana Rubber Kalutara - 1.00 254.04 167.49 2.60 61.46 486.59 157.39 643.98 Crepe 3,600 290
Usk Valley Rubber Kalutara - - 287.73 65.78 76.72 117.16 547.39 253.16 800.55 - 481
Regional Total 201.00 69.97 3,344.83 1,182.09 340.97 372.12 5,510.98 2,432.73 7,943.71 4,191
Company Total 2,449.30 149.97 3,344.83 1,182.09 1,482.75 372.12 8,981.06 2,981.08 11,962.14 - 10,334
Kotagala Plantations PLC Annual Report 2011/1216
PRODUCTION AND YIELD
Production (KG ‘000) Yield per Hectare (KG)
2011/12 2010/11 2009/10 2008/09 2007/08 2011/12 2010/11 2009/10 2008/09 2007/08
Tea
Western High Grown
Bogahawatte 342 433 395 344 333 2,088 2,113 2,190 1,986 1,985
Chrystler’s Farm 380 298 286 327 340 2,501 2,357 2,428 2,299 2,542
Craigie Lea 536 570 587 533 510 2,339 2,281 2,386 2,293 2,228
Drayton 534 898 862 852 883 2,262 2,082 2,005 1,977 2,048
Kelliewatte 360 301 260 295 315 2,229 2,174 2,211 2,037 2,246
Mayfield 665 599 576 504 429 2,551 2,380 2,324 2,074 1,810
Mount Vernon 984 951 948 909 940 2,624 2,505 2,518 2,421 2,505
Stonycliff 646 655 671 615 653 2,102 2,067 1,965 1,824 1,938
Yulliefield 624 605 562 524 617 1,868 1,807 1,492 1,409 1,636
Derryclare 404 - - - - 2,083 - - - -
Sub Total 5,475 5,310 5,147 4,903 5,020 2,268 2,182 2,111 1,996 2,061
Low Grown
Eduragala 33 29 31 21 21 1,574 1,420 1,687 1,321 1,499
Hedigalla 15 15 13 11 13 1,955 2,070 1,693 1,777 2,312
Gikiyanakanda 377 359 363 355 459 1,649 1,660 1,737 1,803 1,897
Rayigam 704 727 746 620 812 1,910 1,918 1,914 1,591 1,956
Vogan 365 321 385 291 371 1,887 1,799 1,725 1,574 1,956
Sub Total 1,494 1,451 1,538 1,298 1,675 1,804 1,779 1,800 1,620 1,916
Total Crop - Tea 6,969 6,761 6,685 6,201 6,695 2,230 2,151 2,088 1,969 2,052
Rubber
Arapolakanda 285 282 292 303 312 1,182 1,216 1,229 1,227 1,285
Dalkeith 348 402 481 545 690 678 635 736 740 859
Eduragala 178 203 233 258 280 739 705 793 873 890
Gikiyanakanda 229 234 266 267 291 694 609 719 680 738
Hedigalla 144 145 163 196 175 588 578 650 732 662
Millewa 215 195 229 253 278 976 872 1,057 1,153 1,211
Padukka 274 260 273 299 345 1,081 978 1,019 1,134 1,230
Paiyagalla 392 394 418 422 416 1,398 1,403 1,513 1,401 1,394
Rayigam 207 217 212 242 261 981 925 890 1,011 1,034
Sorana 262 222 252 275 292 1,030 935 974 1,017 1,000
Usk Valley 248 218 236 260 288 862 707 754 852 952
Vogan 222 224 252 233 307 835 889 877 768 964
Total Crop - Rubber 3,006 2,996 3,307 3,552 3,934 899 835 903 925 983
17
MANAGEMENT DISCUSSION & ANALYSIS
RUBBERGlobal Rubber Industry – Asia has the virtual monopoly
Asia is now home to around 92% of the world supply of Natural
Rubber. Thailand and Indonesia are in the forefront of Natural
Rubber production and the global supply of Natural Rubber
continues to be centered on these two nations. This trend is likely
to continue in the next decade.
Industrial development gathered momentum and the Asian
Natural Rubber consumption increased. About 48% of the global
demand for Natural Rubber comes from China, India and Malaysia
which are three major rubber consuming countries within the
Association of Natural Rubber Producing Countries. (ANRPC).
Global rubber demand is forecast to reach 27.2Mn. metric tonnes
in 2012. The global Natural Rubber production is forecast to rise
by 5.1% in 2012, driven by high growth in normal production
according to a study by “International Rubber Study group”.
Global rubber consumption is forecast to rise 4.3% on a year on
year basis till 2015 to 30.5Mn. metric tonnes. Tyres represent by
far the largest market for rubber .Development in the automobile
industry throughout the globe will significantly boost the amount
of rubber consumed.
Sri Lanka performed creditably well in respect of production by
reaching a historically high crop figure of 157,000 metric tonnes
in 2011.
Sri Lanka performed creditably well in respect of production by
reaching a historically high crop figure of 157,000 metric tonnes
in 2011.
Company Performance
Crop
During the year under review the company produced a crop
of 3.0Mn.kgs recording a marginal increase compared to the
previous year. Due to adverse weather conditions in the rubber
growing areas, budgeted crop could not be achieved.
Net Sales Average (NSA)
Sri Lankan rubber prices remained at attractive levels though
they were not as remunerative as in the previous year. The
highest price per 01kg of Ribbed Smoked Sheets No.01 (RSS 01)
at Rs. 625.25 was recorded in June 2011. The prices came down
subsequently owing to the slow growth of the global economy
which impacted on the demand for rubber .The average NSA
recorded for rubber was Rs.478.25 which fell short marginally
compared to the previous year’s figure of Rs.478.74.
Recent increases in the crude oil price, which has reached nearly
$110 a barrel, has driven international rubber prices upward. The
demand for naturally produced rubber always strengthens when
the crude oil price rises because its utilisation becomes more
economical.
WORLD RUBBER CONSUMPTION (%)
18%
28%
47%
6%
1%
Asia Europe North America
Latin America Africa
Sri Lankan Rubber Averages (LCR 1X)
300
400
500
600
700
800
Rs.
2010/2011 2011/2012
April
May
June Jul
Augu
sty
Sept
embe
r
Octo
ber
Nove
mbe
r
Dece
mbe
r
Janua
ry
Febr
uary
Marc
h
CROP- RUBBER
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
08 09 10 11 12
Kg '000
Kotagala Plantations PLC Annual Report 2011/1218
MANAGEMENT DISCUSSION & ANALYSIS
Cost of Production (COP)
The COP for rubber increased from Rs.228.62 to Rs.278.43 as
a result of the high wage increases granted to the plantation
workers.
TEATea Industry
Sri Lanka’s tea crop of 328.3 Mn. kgs in 2011 fell short of 2010’s
all time record harvest of 331.4 Mn. kgs, by only 3.06 Mn. kgs.
Having commenced with a record crop harvest in the first quarter
of 2011, production slowed down as the year progressed.
World tea crop too was lower by approximately 17 Mn. kgs. China
continues to dominate World tea production, with India the 2nd
largest producer followed by Kenya and Sri Lanka. However, it is
the latter two origins that have the larger exportable surpluses,
Kenya being the largest exporter of Black Tea in the World,
followed by Sri Lanka.
Volatile Tea market conditions prevailed in all quarters of Season
2011/2012. Unrest in the Arab world & North Africa, together
with the earth quake in Japan which resulted in a Tsunami,
affected the Colombo Tea Auction prices. Hence the anticipated
advantage of lower production in major tea producing countries
such as Kenya and India did not materialize.
Company Performance
Crop
Favourable weather conditions experienced this year, caused tea
production to rise by 4% to 7.0Mn kgs compared to 6.8 Mn. kgs
produced in the previous year. Our own estate crop exceeded
budget by 3%for both high grown and low grown regions
whereas the budgeted crop target could not be achieved for
bought crop and it fell short by 19%.
8 of the 9 estates in the high grown region reported yields
in excess of 2,000 Kgs per ha, as in the past. The significant
contributors are Mount Vernon, Mayfield and Chrystlers Farm.
Net Sales Averages (NSA)
The sale prices dropped below the corresponding periods in
the previous year, and the decline was further aggravated by
currency fluctuations.
The “Dimbula” quality season during the year was a
disappointment due to erratic weather patterns.
NSA VS COP - RUBBER
100
200
300
400
500
08 09 10 11 12
Rs./Kg
COP NSA
MAJOR TEA PRODUCING COUNTRIES
0
100
200
300
400
500
600
700
800
2010 2011North India South India Bangaladesh Sri Lanka
Indonesia Indonesia Kenya Malawi
Tanzania Uganda Zimbabwe
Kg. 000’
Sri Lanka’s tea production hit by bad weather and low prices
CROP- TEA (Combined)
0
1,000
2,000
3,000
4,000
5,000
6,000
08 09 10 11 12
Kg.000
High Grown Low Grown
The highest price per 01kg of Ribbed Smoked Sheets No.01 (RSS 01) at Rs. 625.25 was recorded in June 2011
19
The policy of attaining an NSA above the COP in order to maintain
a profit margin, was not conducive for our Up-Country estates to
achieve the High grown Elevation Average.
In the face of intensive competition for good quality Bought leaf,
with the exception of Rayigam, company’s other two Low Grown
factories did not fare well
Cost of Production (COP)
The COP stood at Rs.326.79 resulting in an increase of 6.34%
Among the many setbacks suffered by the tea industry, the
wage increase caused the most damage as tea is a more labour
intensive crop than rubber. Wage increase and related gratuity
adjustment wiped out profits. The increases in fuel and electricity
costs further eroded margins.
Diversification – Oil Palm
Oil Palm, (botanical name- Elaeis guineensis ) is native to West
& South Africa and tropics of central America. Most believe this
crop migrated to South-East Asia as an ornamental plant and
later developed as an agricultural crop. Commercial cultivation
is undertaken in many South-Asian countries and Indonesia,
Malaysia and Papua New Guinea account for the bulk of Palm Oil
production in the world.
The commercial planting material consists of Tenera Palms or DxP
Hybrids which are obtained by crossing thick-shelled dura with
shell-less pisifera. These hybrid seeds are imported by Kotagala
Plantations PLC from New Britania Palm Oil Nurseries of Papua
New Guinea under strict quarantine controls. These plants are
planted in two stage Nurseries prior to planting in the field.
Kotagala Plantations PLC has planted 120 ha in the year 2011 and
is programmed to plant 220 ha in the year 2012. The scheduled
extent of 1000 ha is expected to be completed by the year
2014. The first Oil Palm crop is expected in early 2014. This will
enable the reduction of the country’s annual import quantity of
80000 MT at a cost of Rs.14 billion as out-flow. The areas already
planted in Kotagala Low-country are Dalkeith, Usk Valley and
Arapolakande. Bulk of the extents will be confined to Dalkeith,
Usk Valley and Hedigalla since the available land there is not best
suited for rubber with the present weather changes envisaged in
this area.
With diversification to this crop coming in, Kotagala Low-country
will have three major agricultural crops that could sustain it even
during adverse marketing trends for Tea and Rubber.
Field and Factory Development
Investments in replanting and other factory modernization
activities were given priority.Productivity has to increase to
sustain the tea industry. Re-planting and infilling is given priority
with a view to evade this problem.
In the year under review 149.97 ha of tea and 1182.09 ha of
rubber was maintained under immature extents, expending
Rs.306.0Mn.in total.
The company spent Rs.46.7Mn. on plant and machinery,infra
structure development , social work, vehicles, IT development
and to meet HACCP standards .
NSA VS COP - TEA
200
250
300
350
400
08 09 10 11 12
Rs. /Kg
NSA - High grown COP - High grown
NSA - Low grown COP - Low grown
CAPITAL EXPENDITURE
400
500
600
08 09 10 11 12
Rs./Mn.
Kotagala Plantations PLC has planted 120 ha of oil palm in the year 2011 and is programmed to plant 220 ha in the year 2012.
Kotagala Plantations PLC Annual Report 2011/1220
IT Developments
The Company has embarked on implementing a new Enterprise
Resource Planning (ERP) system in the year under reveiw. ERP
system integrates internal management information accross
the Company. The main advantages is improved efficiency
information integration for better decision-making.
Challenges
Despite the impressive progress of the Sri Lankan rubber industry,
it is still faced with stiff challenges such as the incapability of the
aged tappers which affects productivity, labour shortage, high
cost of production, inadequate resources etc.
Our Vision for future
Our vision is to stabilize long term sustainability. This includes
enhancing productivity and look for new markets. In today’s
dynamic and turbulent business environment, it is vital that the
industry re-examines its strategies, taking into consideration the
changing scenario and developments.
There is an urgent need for some level of automation at the tea
picking stage to overcome the problem of a shrinking workforce.
New Venture
We have recently embarked on a venture in collaboration with
an associate Company within our group, M/s C W Mackie PLC,
who have launched the “Kotagala Kahata” brand through their
extensive distributor network.
We are committed to supply a consistent quality of tea for this
purpose, while C W Mackie PLC is adding value to it, for the
benefit of the group.
Investment Abroad
The Company is evaluating possibilities of expanding its land
bank as a strategy to increase revenue generating capacity and
shareholders wealth.
Due to the limited land resources available in our country (to
facilitate large scale planting in a contiguous block), low labour
productivity due to highly unionized labour force and scarcity of
labour who would prefer not to work in the plantation sector, the
company has explored the possibility of securing land from other
rubber growing countries in this region. Approvals required for
the investment have been obtained from the relevant authorities
in Sri Lanka and the project is expected to commence during the
year 2012.
FINANCIAL REVIEW
Net profit after tax was Rs.438.6Mn. which is a decrease of 34%
when compared to the previous year.
The profit recorded for the rubber sector was Rs.565.9Mn.
contributing 139% of the total profit. Tea sector did not perform
well in the year under review. The year’s results were adversely
affected by the decline in tea prices throughout the year.
Substantial contribution from other income of Rs.247.1Mn.
strengthen the Company’s bottom line. This includes Rs.129.1Mn.
of exchange gain.
Turnover
The Company’s turnover of Rs.3,610.3Mn. indicates
a marginal decline over the previous year turnover.
(2010/11-Rs.3,683.4Mn.) Tea was the highest contributor
generating a 60% of the company’s topline.
Rubber sector revenue increased to Rs.1,437.5Mn. from
Rs.1,434.2Mn. of the previous year. Increase in export turnover
and the effect of exchange gain were the factors responsible for
the increase in turnover.
The Company results were commendable given the very difficult conditions that prevailed
PROFIT BEFORE TAX
0
100
200
300
400
500
600
700
800
08 09 10 11 12
Rs. Mn.
MANAGEMENT DISCUSSION & ANALYSIS
The Company has embarked on implementing a new Enterprise Resource Planning (ERP) system in the year under reveiw.
21
Rs.Mn. 2011/12 2010/11
Cumulative 1st 2nd 3rd 4th
Up to Qtr Qtr Qtr Qtr
Revenue 889 1,770 2,749 3,610 3,683
Gross Profit 77 221 391 646 1,043
Profit after Tax 26 95 235 439 667
Shareholders’
Fund 2,219 2,128 2,267 2,471 2,353
Total Assets 5,960 6,040 6,306 6,504 5,773
Earnings per
share -Rs. 0.82 2.97 7.33 13.71 20.86
Net Asset per
Share- Rs. 69.34 66.49 70.85 77.23 73.51
Market price per
Share - Rs. 139.70 92.00 64.30 70.00 168.00
Gross Profit
The company recorded a gross profit Rs.646.2Mn.when compared
with previous year figure of Rs.1,042.8Mn.this was mainly due to
the wage increase in and downturn trend in the prices.
Balance Sheet
The Balance Sheet of the Company has been further
strengthened during the year under review. Total assets stood at
Rs.6,603.7Mn., non current assets and current assets increased by
Rs.631.3Mn. and Rs.99.8Mn. respectively. The Company invested
in Lankem Development PLC and Agarapatana Plantations Ltd
expending Rs.350.0Mn. in the year under review. The Company
spent Rs.352.7Mn. in total on capital expenditure.
Cash Flow
The Company’s cash flow at the end of the year stood at
Rs.321.8Mn. including the exchange gain of Rs.122.3Mn.
Repayment of long term borrowings and dividend payment
amounted to Rs.277.2Mn. and Rs.318.5Mn. respectively.
TURNOVER
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
07 08 09 10 11
Rs.Mn.
SEGMENTAL TURNOVER (Rs.Mn)
1,437
2,173
Tea Rubber
Dividends Per Share
0
2
4
6
8
10
07 08 09 10 11
Rs. /Share
Performance Measurement
Dividend
The Directors recommended a first and final dividend Rs.2.00 per
share which will be declared at the Annual General Meeting.
Share Price
The share price of a Kotagala share was Rs,70.00 as at 31st March
2012. In keeping with market sentiments , share prices reached
a peak of Rs. 210.00 And dropped to a low of Rs. 48.00 The year
end market capitalization for the Company was Rs. 2.2 Bn.
Kotagala Plantations PLC Annual Report 2011/1222
TEN YEAR SUMMARY
2011
/12
2010
/11
2009
/10
2008
/20
09 2
007/
2008
2
006/
2007
2
005/
2006
2
004/
2005
2
003/
2004
2
002/
2003
R
s. ‘0
00
Rs.
‘000
R
s. ‘0
00
Rs.
‘000
R
s. ‘0
00
Rs.
‘000
R
s. ‘0
00
Rs.
‘000
R
s. ‘0
00
Rs.
‘000
TRA
DIN
G R
ESU
LTS
Rev
enue
3
,610
,320
3
,683
,366
3
,173
,728
2
,331
,370
2
,749
,132
2
,175
,599
1
,751
,122
1
,537
,574
1
,222
,295
1
,249
,009
Gro
ss P
rofit
6
46,2
27
1,0
42,7
94
567
,852
2
93,1
63
736
,750
5
84,7
67
364
,929
3
01,1
26
173
,464
1
65,5
68
Oth
er O
pera
ting
Inco
me
247
,058
1
38,3
18
93,
841
134
,827
9
7,46
7 1
17,7
43
60,
276
56,
776
44,
279
46,
937
Ope
ratin
g Pr
ofit/
(Los
s) b
efor
e
Man
agem
ent
Fee
& In
tere
st
743
,321
1
,070
,292
5
54,7
34
314
,853
7
05,5
75
621
,705
3
46,9
93
294
,336
1
41,5
13
132
,199
Pro
fit/(
Loss
) be
fore
Inco
me
Tax
531
,861
7
75,2
51
397
,325
2
05,0
38
547
,401
4
00,8
75
142
,350
1
26,0
49
(36
,767
) (
38,5
67)
Pro
fit/(
Loss
) af
ter
Tax
438
,608
6
67,7
73
323
,190
1
71,0
15
495
,541
3
83,0
70
141
,505
1
24,2
03
(36
,767
) (
38,5
67)
BA
LAN
CE S
HEE
T
Non
-Cur
rent
Ass
ets
4,3
76,5
30
3,8
65,2
41
3,4
97,0
52
2,8
05,3
20
2,3
25,6
09
2,0
81,0
04
1,9
21,4
39
1,8
36,4
11
1,9
60,6
43
1,9
11,7
99
Cur
rent
Ass
ets
2,1
27,1
58
1,9
07,3
48
1,0
70,9
91
853
,549
9
51,3
85
626
,089
5
29,1
71
571
,367
2
71,4
82
328
,277
6
,503
,688
5
,772
,589
4
,568
,043
3
,658
,869
3
,276
,994
2
,707
,093
2
,450
,610
2
,407
,778
2
,232
,125
2
,240
,076
Issu
ed C
apita
l 3
20,0
00
320
,000
3
20,0
00
320
,000
3
20,0
00
320
,000
3
20,0
00
320
,000
3
20,0
00
320
,000
Gen
eral
Res
erve
s 2
40,0
00
240
,000
2
40,0
00
240
,000
2
40,0
00
240
,000
2
40,0
00
240
,000
2
40,0
00
240
,000
Ret
aine
d Pr
ofit/
(Los
s)
1,9
11,2
41
1,7
92,6
33
1,2
20,8
60
929
,670
8
22,6
55
415
,114
1
43,0
83
25,
578
(98
,625
) (
61,8
58)
Sha
reho
lder
s’ F
unds
2
,471
,241
2
,352
,633
1
,780
,860
1
,489
,670
1
,382
,655
9
75,1
14
703
,083
5
85,5
78
461
,375
4
98,1
42
Def
erre
d In
com
e 3
09,4
96
311
,616
2
75,8
81
232
,639
1
82,2
60
161
,926
1
56,1
73
147
,853
1
39,8
92
131
,836
Inte
rest
Bea
ring
Borr
owin
gs
739
,584
1
,163
,240
9
86,4
31
457
,126
3
07,4
04
390
,869
3
04,0
43
280
,149
3
40,9
11
367
,380
Ret
irem
ent
Bene
fit O
blig
atio
ns
568
,897
5
50,2
26
496
,836
3
81,7
00
363
,276
2
79,5
25
245
,052
2
27,2
92
206
,517
1
94,3
79
Net
Lia
bilit
y To
Les
sor
397
,769
4
03,7
97
409
,590
4
15,1
60
420
,514
4
25,6
64
430
,616
4
35,3
77
439
,886
4
44,3
58
Def
erre
d Ta
x 2
76,9
23
177
,890
1
34,7
56
89,
332
63,
851
39,
039
JED
B/SL
SPC
Leas
e A
rrea
rs P
ayab
le
-
-
7
,878
1
9,87
8 2
5,28
6
Lon
g Te
rm R
elat
ed P
arty
Bal
ance
-
74,
094
146
,338
1
64,6
30
-
Cur
rent
Lia
bilit
ies
1,7
39,7
78
813
,187
4
83,6
89
593
,242
5
57,0
34
434
,956
5
37,5
49
577
,313
4
59,0
36
578
,695
6
,503
,688
5
,772
,589
4
,568
,043
3
,658
,869
3
,276
,994
2
,707
,093
2
,450
,610
2,40
7,77
8 2
,232
,125
2
,240
,076
Net
Cas
h Fl
ow
Fro
m/(
Use
d in
) O
pera
ting
Act
iviti
es
811
,786
6
14,5
70
465
,913
2
92,6
97
632
,024
4
01,8
23
267
,018
1
86,0
90
75,
943
98,
153
Fro
m/(
Use
d in
) In
vest
ing
Act
iviti
es
(44
9,03
5) (
477,
774)
(64
0,09
4) (
600,
339)
(40
4,02
5) (
215,
013)
(14
2,46
9) (
104,
951)
(81
,329
) (
68,0
74)
Fro
m/(
Use
d in
) Fi
nanc
ing
Act
iviti
es
(68
9,29
1) 1
87,7
79
501
,585
3
8,36
2 (
183,
971)
(16
,031
) (
18,6
89)
(74
,046
) (
683)
(19
,001
)
Incr
ease
/(D
ecre
ase)
in C
ash
&
Cas
h Eq
uiva
lent
s (
326,
540)
324
,575
3
27,4
05
(26
9,27
9) 4
4,02
8 1
70,7
79
105
,860
7
,093
(
6,06
9) 1
1,07
8
Per
Sha
re -
Rs.
Ear
ning
s/(L
oss)
1
3.71
2
0.86
1
0.10
5
.34
15.
49
11.
97
4.4
2 3
.88
(1.
15)
(1.
21)
Div
iden
ds
2.0
0 1
0.00
3
.00
1.0
0 3
.00
3.0
0 1
.00
0.7
5 -
-
Net
Ass
ets
(Yea
r En
d)
77.
23
73.
51
55.
65
46.
55
43.
21
31.
69
21.
97
18.
30
14.
42
15.
57
Mar
ket
Valu
e (Y
ear
End)
7
0.00
1
68.0
0 4
4.75
1
6.00
6
7.50
2
8.50
1
7.00
8
.50
6.5
0 6
.00
23
SHAREHOLDER & INVESTOR INFORMATION
1 STOCK EXCHANGE LISTINGThe issued ordinary shares of the Company are listed with the Colombo Stock Exchange
2 DISTRIBUTION OF ORDINARY SHARES
31st March 2012 31st March 2011 No. of Total Percentage of No. of Total Percentage
Shareholders Holding Total Shares Shareholders Holding
1-1000 12,325 1,751,056 5.47 13,877 2,008,256 6.27 1001- 10,000 241 825,310 2.58 225 837,188 2.62 10001-100,000 63 1,871,999 5.85 59 1,953,600 6.10 100,001 - 1,000,000 10 2,048,979 6.40 9 1,698,300 5.31 Over - 1,000,000 3 25,502,656 79.70 3 25,502,656 79.70 12,642 32,000,000 100.00 14,173 32,000,000 100.00
No. of Total Percentage of No. of Total Percentage
Shareholders Holding Total Shares Shareholders Holding
Categories of
Shareholders
Individuals 12,524 4,434,406 13.86 14,061 4,285,982 13.40
Institutions 118 27,565,594 86.14 112 27,714,018 86.60
12,642 32,000,000 100.00 14,173 32,000,000 100.00
3 PUBLIC HOLDINGThe percentage of shares held by the public as at 31st March 2012 was 19.97%. (31st March 2011 - 20.17%)
4 MARKET VALUEThe market value of the Company’s ordinary shares was
2012 (Rs.) 2011 (Rs.)
Highest 210.00 230.00 Lowest 48.00 44.75 Close 70.00 168.00
5 MAJOR SHAREHOLDERS
31st March 2012 31st March 2011 No. of Shares % No. of Shares %
1 LANKEM PLANTATION HOLDINGS LIMITED 12,100,000 37.81 12,100,000 37.81 2 LANKEM TEA & RUBBER PLANTATIONS (PVT) LIMITED 9,602,100 30.01 9,602,100 30.01
3 SECRETARY TO THE TREASURY 3,800,556 11.88 3,800,556 11.88 4 PERSHING LLC S/A AVERBACH GRAUSON & CO. 388,300 1.21 434,800 1.36 5 PAN ASIA BANKING CORPORTION PLC/MR.M.MATHEWS 278,900 0.87 - - 6 MR. TALIB TAWFIQ TALIB AL-NAKIB 276,600 0.86 157,200 0.49 7 MR. LOAY MAHMOUD SAYED HAMED ALNAQIB 275,000 0.86 225,000 0.70 8 MR. MUSHTAQ MOHAMED FUAD 199,627 0.62 160,900 0.50 9 MACKSONS HOLDINGS (PVT) LTD 167,400 0.52 50,300 0.16 10 WALDOCK MACKENZIE LTD/HI-LINE TRADING (PVT) LTD 161,000 0.50 131,000 0.41 11 MR. MOHAMED MAKEEN MOHAMED MIZVER 152,052 0.48 54,100 0.17 12 MR. MOHAMED ZAREEN RASHEED 120,450 0.38 109,700 0.34 13 MR. MOHAMED MILFER MOHAMED MAKEEN 101,350 0.32 46,000 0.14 14 SEYLAN BANK PLC/THIRUGNANASAMBANDAR SENTHILVERL 100,000 0.31 - - 15 MR. DAVID KOTTHOFF 98,400 0.31 85,000 0.27 16 MISS. ASHA MORARJI UDESHI 97,500 0.30 97,500 0.30 17 MR. KANGASU CHELVADURAI VIGNARAJAH 74,500 0.23 69,200 0.22 18 SEYLAN BANK PLC/RISING SUN GARMENTS (PVT) LTD 71,500 0.22 90,600 0.28 19 LUNUGANGA TRUST 67,998 0.21 - - 20 BANK OF CEYLON NO. 1 ACCOUNT 64,500 0.20 24,600 0.07
TOTAL 28,197,733 88.12 27,238,556 85.11
Kotagala Plantations PLC Annual Report 2011/1224
SUSTAINABILITY REPORTING
Economic ContributionKotagala is committed to sustainable growth and performance. Our
strategies are geared to deliver sustainable economic growth to all
stakeholders. The Company is committed to enhance shareholders’
value through steady growth in earnings, maintaining effective
cash positions and distributing dividends over the long term.
The Statement of “Value Added” given below explains the value
created by business activities and how it was distributed among
the stakeholders.
Statement of Value Added
2011/12 2010/11
Rs.000 Rs.000
Economic Value Generated
Revenue 3,610,320 3,683,366
Other Income 247,058 138,318
Share of results of associates 1,474 (509)
3,858,852 3,821,175
Economic Value Distributed
Operating Costs 1,298,757 1,432,797
Employee wages and benefits 1,902,789 1,456,983
To- Providers of capital (interest) 77,415 67,261
To- Government as lease rental 46,556 89,392
To- Shareholders as dividends 320,000 96,000
Economic Value Retained
Provision for Depreciation 165,471 145,185
Profit after dividends 118,608 571,773
284,079 716,958
Kotagala maintains a centralized procurement system and
purchases at fair and reasonable prices complying with trade
terms and conditions.
Kotagala is committed to ensure that all dues as per statutory
requirements are paid within the specified time periods.
Defined Contribution Plan Obligations
Employees are eligible for Employees’ Provident Fund and
Employees Trust Fund contributions and the applicable
percentages are contributed to the EPF and ETF.
Retirement Benefit Obligations
Every employee with more than 5 years of continuous service
will receive half month’s salary for every year of service on
retirement or termination of service. An Actuarial Valuation was
carried out by M/s Actuarial Management Consultants (Pvt)
Ltd. According to the valuation, the gratuity liability as at 31st
March 2012 was Rs.568.9Mn. in the year under review, gratuity
payments amounted to Rs.69.5Mn.
Our PeopleKotagala is an equal opportunity employer having a workforce of
11,085 and considers its employees as its greatest asset.
We are conscious of the importance of sustainable practices and continue to balance our social, economic and environmental responsibilities with our business strategy.
Economic Our Customer EnvironmentalContribution People Centric Impact
25
Strength of Kotagala Family
The total workforce is spread around different locations and functional levels as shown below.
Workers Clerical, Technical & Executives Total Other Staff
2011/12 2010/11 2011/12 2010/11 2011/12 2010/11 2011/12 2010/11
Total Employees 10,334 11,063 663 656 88 92 11,085 11,811
Region Wise Kotagala 6,244 6,603 299 291 23 23 6,566 6,917
Horana 4,090 4,460 343 335 31 31 4,464 4,826
Head Office - - 21 30 34 38 55 68
10,334 11,063 663 656 88 92 11,085 11,811
Gender Wise Male 4,632 4,869 495 494 75 70 5,202 5,433
Female 5,702 6,194 168 162 13 22 5,883 6,378
10,334 11,063 663 656 88 92 11,085 11,811
Age Distribution Below 30 years 2,260 2,272 101 100 17 19 2,378 2,391
30 - 45 years 4,585 4,668 223 221 35 33 4,843 4,922
Over 45 years 3,489 4,123 339 335 36 40 3,864 4,498
10,334 11,063 663 656 88 92 11,085 11,811
Service Below 5 years 3,578 2,881 109 108 31 46 3,718 3,035
Distribution 6 - 15 years 3,150 4,154 284 281 23 29 3,457 4,464
Over 15 years 3,606 4,028 270 267 34 17 3,910 4,312
10,334 11,063 663 656 88 92 11,085 11,811
Good employee relations are a necessity in today’s corporate world. It enhances productivity, motivates and also builds up loyalty towards
the company. We at Kotagala invest in our people and their communities to improve their livelihoods.
Kotagala Plantations PLC Annual Report 2011/1226
Housing and Infrastructure
Welfare of our estate workers is given priority under our
corporate responsibility programme. We are working with
Government bodies to provide better facilities for the estate
workers. Kotagala has introduced various welfare projects to
improve worker welfare.
Kotagala, with the assistance of Ministry of Livestock &
Rural Community Development and the Plantation Human
Development Trust (PHDT), expended Rs.29.6Mn. on improving
living standards of workers as shown below.
Re-roofing 98 Units
Sanitation/ Upgrading 150 Units
New Life Housing 25 Units
Playground 2 Units
Water Scheme 2 Units
Child Development Centres 1 Unit
Investments made so far has led to significant improvements in
living standards resulting in evidently better social indicators.
Health care, child care, skill development , sports and recreational
activities
It is our high priority to ensure a safe and conducive environment
for our employees.
Many activities related to welfare, such as health care, child
care, skill development, sports and recreation activities, were
conducted during the year.
Three of our plantations received awards in respect of the
social welfare activities at a ceramony conducted by PHDT.
• Mayfield Estate - Best Manager - 1st runner up
• Stonycliff Estate - Best Health Care Service- 2nd runner up
• Hedigalle Estate - Best estate worker Housing
Cooperative society - 2nd runner up
A workshop was organized by the Department of Labour on
“Protection of Labour Rights” and “Protection of Child Rights”
on Eduragala estate.
We have made a significant breakthrough in the health status of
plantation workers.
A dengue prevention programme was held to create awareness
among the workers and a shramadana was conducted to destroy
the breeding grounds of dengue mosquitos. Estate management
took time and effort to organize a health camp for women over
35 years of age. This was mainly an educational programme.
A free dental clinic was conducted for the needy on Vogan estate.
Infant Mortality Rate (IMR) and Maternal Mortality Rate (MMR)
are registered as zero on our estates.
In addition, the Company also promotes sports activities, cultural
and religious programmes. As done in the past, children’s day
was celebrated with passion in the year under review in our
plantations. Many activities, traditional and novel, were organized
in honour of children.
A “Singithi Pola” was organized by the Child Development Centre
of Eduragala estate. Good quality home grown vegetables were
sold at reasonable prices for everyone’s satisfaction.
Vogan and Padukka estates organized avurudu celebrations
specially for the amusement of children. Estate management
donated gifts to those who excelled in traditional “Avurudu”
games.
SUSTAINABILITY REPORTING
Three of our plantations received awards in respect of the social welfare activities at a ceremony conducted by PHDT.
27
CUSTOMER CENTRIC
Endeavour for Greater Standards
Food Safety Management System
The Global tea trade has called upon the Tea Industry to
implement new national standards of ISO 22000 which is a food
safety management system. This is to comply with the growing
demand to ensure higher standards of quality and safety of
food produced and exported from the country. Many of our tea
factories have met this requirement with additional participation
in Fair Trade, Ethical Tea Partnership etc.
During the year under review our plantations in Kotagala continue
to strengthen the work done while completing the surveillance
audits carried out by Messrs. SGS Lanka Pvt Ltd .This surveillance
measures are meant to ensure the ISO standards for which
certification has been given are maintained/ improved upon.
Vogan, Chrystlers Farm and Kelliewatte continue its membership
in the fairtrade organization patronage for Kelliewatte
(Nadoototam) teas continued.
Forest Stewardship Coucil (FSC)
FSC certification provides a credible link between responsible
production and consumption of our forest products , enabling
consumers and business to make purchasing decisions that
benefit people and the environment ,as well as providing
business value. In order to achieve the certification, FSC requires
compliance with a comprehensive set of universally applicable
standards of forest management. The aim is to ensure that forest
resources are managed to meet social, economic and ecological
needs of present and future generations. The FSC label on wood
or any paper product guarantees the consumer that the source is
reliable and can be trusted.
We take pride in announcing that Kotagala has effectively fulfilled
the requirements of the FSC and was awarded certification with
effect from 1st July 2011 to 30th June 2016, subject to annual
surveillance audits.
We are among the very few plantation companies to successfully establish that we manage our rubber properties and the forest areas in tea estates on par with the international standards specified by FSC.
Our customers are important to us.
Kotagala Plantations PLC Annual Report 2011/1228
ENVIRONMENTAL IMPACT
Kotagala is committed to promoting sound environmental practices within our business through policies and practices that enable us to operate in a sustainable and environmentally sound manner.
As a plantation Company we understand the importance of
being green. We proudly state that the 8,981.06 Ha of tea and
rubber plantations we have are themselves a forest cover which
improves the air quality ,environment and enriches the eco –
system.
We have adopted many environment friendly agricultural
practices such as using leguminous cover crops, live and stone
terraces, draining on an annual basis, planting shade and green
manure belts.
The company emphasises the importance of protecting water
resources and ensuring that they are not contaminated. We
make sure that our agricultural practices do not pollute the water
resources on our properties.
Energy Saving
Energy is a critical input for tea manufacture and the tea industry
is one of the biggest consumers of energy in Sri Lanka. Whilst
electrical energy is required at almost all stages of manufacture
,thermal energy is required to remove moisture from the green
leaf as well as from the fermented tea.
We mostly depend on firewood for thermal energy .We have
started installing modern thermal Heaters and state of the art
Boilers/Hot Water Generators. As a result our thermal efficiency
has improved to over 75%. Almost all our large factories are now
equipped with Hot Water Generators. We have installed seven
units of wood fired Hot Water Generators.
Usage of properly dried firewood is another option to save
energy. A modest saving of 30% is not beyond reach.
Future energy management activities
• Continuingtoimproveonthecurrentenergymanagement
practices.
• Carryoutcontinuousperiodicenergyauditstoidentifyfurther
improvements.
• Continuetoevaluatetheuseofrenewableenergyasa
primary source.
• Itissuggestedtosplitfirewoodpriortostoragethereby
increasing the surface area exposed to the atmosphere,
which in turn will lead to faster and more efficient drying of
the firewood.
• Wegiveprioritytocultivationofourownfuelwoodtrees
ensuring the continuous supply of firewood. A sustainable
forest management programme has been already
implemented and is monitored by a dedicated Forestry
Officer.
• UseofvarioustypesofbriquettesmadeofPaddyHusk,
Coconut Husk, Saw Dust, Refuse Tea etc is also an option for
thermal energy but is costly and the technology is still in the
elementary stages.
SUSTAINABILITY REPORTING
29
Financial CalendarQuarterly Financial Statements
3 Months ended 30th June 2011 08th August 2011
6 Months ended 30th September 2011 09th November 2011
9 Months ended 31st December 2011 08th February 2012
12 Months ended 31st March 2012 18th May 2012
Annual Report 2011/2012 18th May 2012
19th Annual General Meeting 27th June 2012
Annual Report of the Board of Directors 30
Statement of Directors’ Responsibilities 33
Report of the Auditors 34
Income Statement 35
Balance Sheet 36
Statement of Changes in Equity 37
Cash flow Statement 38
Notes to the Financial Statements 39
Financial Reporting
Kotagala Plantations PLC Annual Report 2011/1230
ANNUAL REPORT OF THE BOARD OF DIRECTORS
The Board of Directors of Kotagala Plantations PLC present their
Report together with the Audited Financial Statements for the
year ended 31st March, 2012.
The details set out herein provide the pertinent information
required by the Companies Act No. 7 of 2007, the Colombo Stock
Exchange Listing Rules and are guided by recommended best
practices
Principal Activities, Business Review/Future
DevelopmentsThe principal activities of the Company are production, processing
and selling of Tea & Rubber. The Chairman’s Review, CEO’s
Review (Lankem Tea & Rubber Plantations (Pvt) Ltd., Managing
Agents), Management Discussion and Analysis, Financial Review
describes the performance of the Company during the year with
comments on financial results and future developments.
The Directors to the best of their knowledge and belief confirm
that the Company has not engaged in any activities that
contravene laws and regulations.
Financial StatementsThe Financial Statements of the Company are given on pages 35
to 64.
Auditors’ ReportThe Auditors’ Report on the Financial Statements is given on Page 34.
Accounting PoliciesThe Accounting Policies adopted in the preparation of the
Financial Statements are given on pages 39 to 44. There were no
changes in the Accounting Policies adopted during the year.
Interests Register
Directors’ Interest in Transactions The Directors have made general disclosures as provided for
in Section 192 (2) of the Companies Act No. 7 of 2007. Arising
from this, details of contracts in which they have an interest are
disclosed in Note 29 to the Financial Statements on pages 63
to 64.
Directors’ Interest in SharesThe Directors of the Company who have an interest in the shares
have disclosed their shareholdings and any acquisitions/disposals
to the Board in compliance with Section 200 of the Companies
Act. No. 7 of 2007.
Details pertaining to Directors direct and indirect shareholdings
are set out herein.
Name of Director No. of Shares No. of Shares as at as at 31.03.2012 31.03.2011
Mr. C P R Perera 20,000 30,000
Mr. R C Peries 500 500
Directors’ RemunerationThe Directors’ remuneration in respect of the Financial Year
2011/2012 is disclosed in Note 5 to the Financial Statements.
Corporate DonationsNo donations were made during the year.
DirectorateThe names of the Directors who held office during the financial
year are given below. Brief profiles of the Directors currently in
office appear on page 7.
Mr. A Rajaratnam - Chairman
Mr. S D R Arudpragasam
Mr. C P R Perera
Mr. R C Peries
Mr. D A Ratwatte
Mr. G D V Perera
In terms of Articles 92 and 93 of the Articles of Association Mr.
D.A. Ratwatte retires by rotation and being eligible offers himself
for re-election.
Mr. A. Rajaratnam who is seventy years of age retires and offers
himself for reappointment under and by virtue of the Special
Notice received from a shareholder of the Company which is
referred to in the Notice of Meeting.
Mr. R.C. Peries being over seventy years of age retires and
offers himself for reappointment under and by virtue of the
Special Notice received from a shareholder of the Company
which is referred to in the Notice of Meeting.
Corporate GovernanceAdoption of good governance practices has become an essential
requirement in today’s corporate culture. The practices carried
out by the Company are given in the Corporate Governance
Statement on pages 10 to 14.
AuditorsIn accordance with the Companies Act No. 7 of 2007 a resolution
proposing the reappointment of Messrs. KPMG as Auditors of the
Company will be submitted at the Annual General Meeting.
31
The Auditors, Messrs. KPMG was paid Rs. 2.8 Mn. (2010/11 -
Rs. 2.5 Mn.) as fees for audit services, Rs. 0.09 Mn. (2010/2011
- Rs. 0.04) as fees for audit related services and Rs. 0.08 Mn.
(2010/2011 - Rs. 0.08 Mn.) as fees for non-audit related work,
which consisted mainly of provision of tax compliance services.
As far as the Directors are aware the Auditors do not have any
relationship (other than that of an Auditor) with the Company.
The Auditors do not have any interests in the Company.
RevenueThe revenue of the Company for the year was Rs. 3,610.3 Mn.
(2010/11 - Rs. 3,683.4 Mn.) which comprises of Rs. 2,172.8 Mn.
from tea (2010/11 - Rs. 2,249.2 Mn.) and Rs. 1,437.5 Mn. from
rubber (2010/11 - Rs. 1,434.2 Mn.).
Results The Company made a Net Profit before Tax of Rs. 531.9 Mn.
against a profit of Rs. 775.2 Mn. in the previous year. The
Company became liable to income tax of Rs. 22.9 Mn. due to
the restriction of setting off the brought forward losses up to
35% of total statutory income from the current year Rs. 72.0 Mn.
(2010/11 - Rs. 72.0 Mn.) As a result, the Net Profit after Tax was
Rs. 438.6 Mn. (2010/11 - Profit of Rs. 667.8 Mn.). The detailed
results are given in Income Statement on page 35 and Note 3 to
the Financial statements on page 45.
Managing Agents & Management FeeLankem Tea & Rubber Plantations (Pvt) Limited, a fully owned
subsidiary of Lankem Plantation Holdings Limited, continue to
manage the affairs of the Company.
The Managing Agent’s Fees charges for the year amounting to
Rs. 87.5 Mn. (2010/11 - Rs. 138.4 Mn.) is based on the
Agreement signed between the Company and Ministry of
Plantation Industries, Sri Lanka State Plantations Corporation and
Janatha Estates Development Board on 4th August 2003.
Investments Investments made by the Company are given in Note 13 to the
Financial Statements on page 51 to 52.
Property, Plant & EquipmentThe capital expenditure during the year amounted to
Rs. 445.7 Mn. (2010/11 - Rs. 517.9 Mn.) which includes
Rs. 383.2 Mn. in replanting expenditure (2010/11 - Rs. 322.6
Mn.) Information relating to movements in Property, Plant &
Equipment are given in Notes 9, 10, 11 and 12 to the Financial
Statements.
Stated Capital The Stated Capital of the Company of Rs. 320,000,010/- is
represented by 32,000,000 Ordinary Shares and 01 Golden Share.
There was no change in the Stated Capital during the year.
ReservesThe total reserves of the Company as at 31st March 2012 amount
to Rs. 2,152.2 Mn., comprising General Reserve Rs. 240.0 Mn.
(31st March 2011 - Rs. 2,032.6 Mn.) and Retained Profits of Rs.
1,911.3 Mn. (31st March 2011 - retained profits of Rs. 1,792.6
Mn). The movement is shown in the Statement of Changes in
Equity in the financial Statements.
TaxationThe Company, in term of section 16 (i) of the Inland Revenue Act
No.10 of 2006 (amendments) “Specified Profits” from cultivation
would be exempt from income tax for a period of 5 years from
2006/07. The Corporate rate of tax applicable to other income
would be at 28%. Further, for the year of assessment 2005/06
the Inland Revenue allows only 35% of the total statutory income
to be set off against the carried forward tax losses. However the
Company paid income tax amounting to Rs. 7.9 Mn. in the year
under review, which includes Rs. 7.9 Mn. ESC paid. Further details
of Income Tax Expense are given in Note 7 to Financial Statements
on Page 47.
The Company is liable to pay Economic Service Charge (ESC)
effective from 1st April 2004, as the liable turnover of the
previous year of assessment has exceeded Rs. 50 Mn. The
turnover relating to agriculture activity and exports is liable to
ESC at the rate of 0.25% and any other turnover is liable to ESC
at 1%. ESC may be set off against income tax payable of the
Company during the year in which the payment was made and
within two years thereafter. Accordingly the Company has paid
Rs. 7.9 Mn. during the year under review and that has been set
off against current year tax payable.
Tea which was previously “zero rated” in Value Added Tax (VAT)
has been classified as “exempt” item with effect from 1st January
2005. As a result the Company is not entitled to claim any input
tax on supplies relevant to tea and this will adversely effect the
profitability of the Company.
Share InformationInformation relating to earnings, dividends, net assets and share
trading is given on pages 23, 35, 38, 47 and 48.
Events Occurring after the Balance Sheet DateNo circumstances have arisen since the Balance Sheet date that
would require adjustment, other than those disclosed in Note 28
to the Financial Statements on page 62.
Kotagala Plantations PLC Annual Report 2011/1232
Capital Commitment and Contingent LiabilitiesCapital Commitments and Contingent Liabilities as at the Balance
Sheet date are disclosed in Notes 26 and 27 to the Financial
Statements on page 62 respectively.
Employment PolicyThe Company’s recruitment and employment policy is non-
discriminatory. The occupational health and safety standards
receive substantial attention. Appraisals of individual employees
are carried out in order to evaluate their performance and realise
their potential. This process benefits the company and the
employees. The number of persons employed by the Company at
the year end was 11,085 (2010/11 - 11,811)
ShareholdersIt is the Company’s policy to endeavour to ensure equitable
treatment of its shareholders.
Statutory PaymentsThe Directors, to the best of their knowledge and belief, are
satisfied that all statutory payments due in relation to employees
and the Government have been made promptly, up to date.
Environmental ProtectionThe Company’s business activities can have direct and indirect
effects on the environment. It is the Company’s policy to
minimize any adverse effects its activities have on the
environment and to promote co-operation and compliance with
the relevant authorities and regulations. We confirm that the
Company has not undertaken any activities which have caused or
likely to cause detriment to the environment.
Enterprise Governance/Internal ControlAdoption of good governance practices has become an essential
requirement in today’s corporate culture. The practices carried
out by the Company are given in the Enterprise Governance
Statement on pages 10 to 14.
The Directors acknowledge their responsibility for the
Company’s system of internal control. The system is designed
to give assurance regarding the safeguarding of assets, the
maintenance of proper accounting records and the reliability
of financial information generated. However, any system can
ensure only reasonable, and not absolute, assurance that errors
and irregularities are either prevented or detected within a
reasonable period of time.
The Board is satisfied with the effectiveness of the system of
internal control for the period up to the date of signing the
Financial Statements.
Going ConcernAs noted in the Statement of Directors’ Responsibilities on
page 33, the Directors have adopted the going concern basis in
preparing Financial Statements.
For and on behalf of the Board
R C Peries G D V Perera
Director Director
By Order of the Board
Corporate Managers & Secretaries (Private) Ltd.
Secretaries
18th May 2012
ANNUAL REPORT OF THE BOARD OF DIRECTORS
33
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The responsibilities of the Directors in relation to the Financial
Statements of the Company are detailed below. The responsibility
of the Auditors’ in relation to the Financial statements is set out in
the Independent Auditors’ Report appearing on page 34.
The Directors are responsible under the provisions of the
companies Act to ensure compliance with the requirements set
out therein to prepare Financial Statements for each financial
year giving a true and fair view of the state of affairs of the
Company as at the end of the financial year and of the Profit &
Loss of the Company for the financial year.The Directors confirm
that in preparing the Financial Statements, appropriate accounting
policies have been selected and applied consistently, reasonable
and prudent judgements and estimates have been made and Sri
Lanka Accounting Standards have been followed.
The Directors are responsible for ensuring that the Company
keeps sufficient accounting records to disclose with reasonable
accuracy the financial position of the Company and for ensuring
that the Financial Statements have been prepared and presented
in accordance with the Sri Lanka Accounting Standards and
provide the information required by the Companies Act No. 07
of 2007 and the Rules of the Colombo Stock Exchange. They are
also responsible for taking reasonable measures to safeguard the
assets of the Company, and in that context to have proper regard
to the establishment of appropriate systems of internal control
with a view to the prevention and detection of fraud and other
irregularities.
The Directors are required to prepare the Financial Statements
and to provide the Auditors with every opportunity to undertake
whatever inspections they consider appropriate to enable them to
submit their audit report.
The Directors confirm that they have complied with these
requirements. They have a reasonable expectation, after making
enquiries and following a review of the Company’s budget for
the ensuing year, including cash flows and borrowing facilities,
that the Company has adequate resources to continue in
operational existence for the foreseeable future, and therefore
have continued to adopt the going concern basis in preparing the
accounts.
As required by the Section 56 (2) of the Companies Act No 7 of
2007, the Board of Directors signed certificates in respect of the
dividend recommended stating that in their opinion based on the
information available,the company would satisfy the Solvency
Test immediately after the distribution in accordance with
Section 57 of the Companies Act and has sought in respect of
the said dividends certificates of solvency from the Auditors. The
recommended a first and final dividend is to be approved by the
Shareholders at the Annual General Meeting.
Compliance Report
The Directors confirm that to the best of their knowledge all
statutory payments relating to employees and the Government
that were due in respect of the Company as at the Balance Sheet
date have been paid or where relevant provided for.
On behalf of the Board
R C Peries
G D V Perera
Directors
Colombo
18th May 2012
Kotagala Plantations PLC Annual Report 2011/1234
Independent Auditors’ Report
TO THE SHAREHOLDERS OF KOTAGALA PLANTATIONS PLC
Report on the Financial Statements
We have audited the accompanying financial statements of
Kotagala Plantations PLC, which comprise the balance sheet as
at 31st March 2012, and the income statement, statement of
changes in equity and cash flow statement for the year then
ended, and other explanatory notes as set out in pages 35 to 64.
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 controls
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
In our opinion, so far as appears from our examination, the
Company maintained proper accounting records for the year
ended 31st March 2012, and the financial statements give a true
and fair view of the Company’s state of affairs as at 31st March
2012, and its profit and cash flows for the year then ended in
accordance with Sri Lanka Accounting Standards.
Report on Other Legal and Regulatory Requirements
These financial statements also comply with the requirements of
Section 151(2) of the Companies Act No. 07 of 2007.
Chartered Accountants
18th May 2012
Colombo
35
Income Statement
For the year ended 31st March 2012 2011
Note Rs`000 Rs`000
Revenue 3 3,610,320 3,683,366
Cost of Sales (2,964,093) (2,640,572)
Gross Profit 646,227 1,042,794
Other Operating Income 4 247,058 138,318
Administrative Expenses (237,453) (249,208)
Net Financing Cost 6 (123,971) (156,653)
Profit /(Loss) share of Associate Company 13.2 1,474 (509)
Profit before Income Tax Expense 5 533,335 774,742
Income Tax Expense 7 (94,727) (106,969)
Profit for the Year 438,608 667,773
Basic Earnings Per Share (Rs.) 8.1 13.71 20.86
Dividends per Share (Rs.) 8.2 2.00 10.00
The Accounting Policies and Notes on pages 39 to 64 form an integral part of these Financial statements.
Figures in brackets indicate deductions.
Kotagala Plantations PLC Annual Report 2011/1236
Balance Sheet
As at 31st March 2012 2011 Note Rs`000 Rs`000
ASSETS Non Current Assets Property, Plant & Equipment Leasehold Right to Bare Land of JEDB/SLSPC Estates 9 214,550 221,008 Immovable Leased Assets of JEDB/SLSPC Estates (Other than Bare Land) 10 173,067 188,256 Tangible Assets (Other than Mature/Immature Plantations) 11 935,636 964,151 Mature/Immature Plantations 12 2,325,501 1,999,207 Investment in Associates 13.1 90,965 89,491 Other long term Investments 13.3 636,811 283,128 4,376,530 3,745,241 Current Assets Inventories 14 459,150 527,441 Trade & Other Receivables 15 188,810 192,843 Amounts Due from Related Parties 16 323,345 455,079 Assets Held for Sale 13.4 - 120,000 Fixed Deposit 64,116 158,647 Cash and Cash Equivalents 17 1,091,737 573,338 2,127,158 2,027,348 Total Assets 6,503,688 5,772,589 EQUITY AND LIABILITIES Equity Stated Capital 18 320,000 320,000 General Reserve 240,000 240,000 Retained Earnings 1,911,241 1,792,633 Shareholders’ Funds 2,471,241 2,352,633 Non Current Liabilities Interest Bearing Borrowings 20.1 739,584 1,128,240 Retirement Benefit Obligations 21 568,897 550,226Deferred Income 19 309,496 311,616 Net Obligation to Lessor of JEDB/SLSPC 22 397,769 403,797 Deferred Taxation 23 276,923 177,890 2,292,669 2,571,769 Current Liabilities Interest Bearing Borrowings 20.2 389,621 284,480 Income tax payable - 33,925 Trade & Other Payables 24 511,544 396,977 Amounts Due to Related Parties 25 68,665 85,521 Bank Overdraft 17 769,948 47,284 1,739,778 848,187 Total Equity and Liabilities 6,503,688 5,772,589 Net Asset per share (Rs) 77.23 73.51
Notes on pages 39 to 64 form an integral part of these Financial Statements.I certify that the financial statements have been prepared in compliance with the requirements of the Companies Act No.7 of 2007
K M RameshDirector FinanceLankem Tea & Rubber Plantations (Pvt) Ltd -Managing Agents
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 of Directors of Kotagala Plantations PLC.
R C Peries G D V Perera Director Director Colombo 18th May 2012
37
Statement of Changes in Equity
Stated General Retained Total Capital Reserve Earnings Equity
Rs.’000 Rs.’000 Rs.’000 Rs.’000
Balance as at 01st April, 2010 320,000 240,000 1,220,860 1,780,860
Dividend Paid - - (96,000) (96,000)
Net Profit for the year - - 667,773 667,773
Balance as at 31st March, 2011 320,000 240,000 1,792,633 2,352,633
Dividend Paid - - (320,000) (320,000)
Net Profit for the year - - 438,608 438,608
Balance as at 31st March, 2012 320,000 240,000 1,911,241 2,471,241
The Accounting Policies and Notes on pages 39 to 64 form an integral part of these Financial statements.
Figures in brackets indicate deductions.
Kotagala Plantations PLC Annual Report 2011/1238
Cash Flow Statement
For the year ended 31st March 2012 2011
Rs`000 Rs`000
OPERATING ACTIVITIES Profit before Income Tax Expense 533,335 774,742
Adjustments for : Depreciation/Amortisation/Writeoff 165,868 145,185 Share of (Profit)/ Loss of Associate Company (1,474) 509 Profit on Disposal of Property, Plant and Equipment (2,259) (9,106)Profit on disposal of shares (30,000) (27,886)Interest Income (47,500) (13,179)Interest Expense 171,471 169,232 Exchange (gain) / Loss (129,130) 600 Provision for Retirement Benifit Obligation 88,166 103,835 Amortisation of Grants (9,222) (8,393)
Operating Profit before working capital changes 739,255 1,135,539 (Increase)/Decrease in Inventories 68,291 (114,056)(Increase)/Decrease in Trade & Other Receivables 4,033 18,492 (Increase)/Decrease in Amounts Due from Related Parties 131,734 (321,556)Increase/(Decrease) in Trade & Other Payables 132,802 (6,053)Increase/(Decrease) in Amounts Due to Related Parties (16,856) 80,690
Cash Generated from Operations 1,059,259 793,056 Income Tax/ESC paid (32,115) (8,105)Interest Received 47,500 13,179 Interest Paid (193,363) (133,115)Gratuity Paid (69,495) (50,445)
Net Cash from Operating Activities 811,786 614,570
INVESTING ACTIVITIES Purchase of Tangible Assetes (Other than Mature/ Immture Plantations) (46,702) (152,035)Investment in Immature Plantations (306,036) (261,499)Proceeds from Disposal of Property, Plant & Equipment 6,000 9,106 Net Investment in Fixed Deposit 98,078 (104,347)Proceeds from Disposal of shares 150,000 35,239 Investment in shares (350,375) (4,237)
Net cash used in Investing Activities (449,035) (477,774)
FINANCING ACTIVITIES Payments of Finance Lease Rental (30,856) (29,337)Payments to Lessor on Leasehold Rights (69,774) (65,075)Proceeds from Long Term Borrowings - 427,700 Repayments of Long Term Borrowings (277,259) (94,817)Grants Received 7,102 44,128 Dividend Paid (318,504) (94,819)
Net Cash used in Financing Activities (689,291) 187,779
Net Increase/(Decrease) in Cash and Cash Equivalents (326,540) 324,575 Cash and Cash Equivalents at the beginning of the year 526,054 202,821 Effect of Exchange Rate changes 122,275 (1,342)Cash and Cash Equivalents at the end of the year (Note 17) 321,789 526,054
The Accounting Policies and Notes on pages 39 to 64 form an integral part of these Financial Statements.
Figures in brackets indicate deductions.
39
Notes to the Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
1.1 General
1.1.1 Basis of Preparation
The Balance Sheet and related Statements of Income, Cash
Flow, Changes in Equity and Accounting Policies and Notes
to the Financial Statements of Kotagala Plantations PLC have
been prepared in accordance with the Sri Lanka Accounting
Standards laid down by the Institute of Chartered Accountants
of Sri Lanka and requirements of Companies Act No 07 of 2007.
These Financial Statements are prepared in accordance with the
historical cost convention other than bare land and leased assets
of JEDB/SLSPC, which have been revalued as described in Note 9
and 10 to the Financial Statements. Where appropriate, specific
policies are explained in the succeeding notes. No adjustments
have been made for inflationary factors in the Financial
Statements. The said Financial Statements are prepared in Sri
Lankan Rupees. (Rs.) The Directors are responsible for preparation
& presentation of these financial statements.
1.1.2 Use of Estimates and Judgements
The preparation of Financial Statements in conformity with
SLAS requires management to make judgments, estimates
and assumptions that influence the application of accounting
policies and the reported amounts of assets, liabilities, income
and expenses. Judgments and estimates are based on historical
experience and other factors, including expectations that are
believed to be reasonable under the circumstances. Hence, actual
experience and results may differ from these judgments and
estimates.
Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognized
in the period in which the estimate is revised, if the revision
affects only that period and any future periods affected.
1.1.3 Going Concern
The Directors have made an assessment of the Company’s ability
to continue as a going concern and they do not intend either to
liquidate or to cease trading.
1.1.4 Comparative Information
The Accounting Policies have been consistently applied by the
Company with those used in the previous year. Previous year’s
figures and phrases have been rearranged wherever necessary to
conform to the current year’s presentation.
1.1.5 Events occurring after the Balance Sheet date
All material post balance sheet events have been considered and
where appropriate adjustments to or disclosures have been made
in the Financial Statements.
1.1.6 Income Tax
Income tax expense comprises current and deferred tax. Income
tax expense is recognized in profit or loss except to the extent
that it relates to items recognized directly in equity, in which case
it is recognized in equity.
Current Tax
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the reporting date, and any adjustment to tax payable in respect
of previous years. The elements of income and expenditure as
reported in the financial statements and computed in accordance
with the provisions of the Inland Revenue Act No. 10 of 2006 and
amendments thereto. Relevant details are disclosed in note 7 to
the Financial Statements.
Deferred Tax
Deferred tax is provided using the liability method on temporary
differences at the balance sheet date between the tax bases
of assets and liabilities, and their carrying amounts for financial
reporting purposes.
Deferred tax assets and liabilities are recognised for all temporary
differences. Deferred tax assets are recognised for all deductible
temporary differences, carry forward of unused tax credits and
unused tax losses, to the extent that it is probable that taxable
profit will be available against which the deductible temporary
differences, and the carry-forward of unused tax credits and
unused tax losses can be utilized. The carrying amount of
deferred tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred
tax asset to be utilised. Unrecognised deferred tax assets are
reassessed at each balance sheet date and are recognised to the
extent that it has become probable that future taxable profit will
allow the deferred tax asset to be recovered. Deferred tax assets
and liabilities are measured at tax rates that are expected to
apply to the year when the asset is realised or liability is settled,
based on the tax rates and tax laws that have been enacted or
substantively enacted as at the balance sheet date. Income tax
relating to items recognized directly in equity is recognised in
equity. Deferred tax assets and deferred tax liabilities are offset,
if a legally enforceable right exists to set off current tax assets
Kotagala Plantations PLC Annual Report 2011/1240
against current tax liabilities and the deferred taxes relate to the
same taxable entity and the same taxation authority.
1.1.7 Borrowing Costs
Borrowing costs are recognised as an expense in the period in
which they are incurred, except to the extent where borrowing
costs that are directly attributable to the acquisition, construction,
or production of a qualifying asset, which takes a substantial
period of time to get ready for its intended use or sale are
capitalised as part of the specific asset. Borrowing Costs that
are not capitalised are recognised as expenses in the period in
which they are incurred and charged to the Income Statement.
The amount of borrowing costs eligible for capitalisation
are determined in accordance with the Allowed Alternative
Treatment of Sri Lanka Accounting Standard No. 20 -“Borrowing
Costs”. Borrowing costs incurred in respect of specific loans that
are utilised for field development activities have been capitalized
as a part of the cost of the relevant Immature Plantation. The
capitalisation will cease when the crops are ready for commercial
harvest. The amount so capitalised and the capitalisation rates
are disclosed in the notes to the financial statements.
1.2 Assets and Bases of Their Valuation
Assets classified as current assets in the Balance Sheet are cash
and those which are expected to realise in cash, during the
normal operating cycle of the Company’s business, or within one
year from the Balance Sheet date, whichever is shorter. Assets
other than current assets are those, which the Company intends
to hold beyond a period of one year from the Balance Sheet date.
1.2.1 Property, Plant and Equipment Property, Plant and
Equipment - Recognition and measurement
The Property, Plant & Equipment are recorded at cost /valuation
less accumulated depreciation and impairment losses. When an
asset is revalued, any increase in the carrying amount is credited
directly to a revaluation reserve, except to the extent that it
reverses a revaluation decrease of the same asset previously
recognised in the income statement, in which case the increase
is recognised in the income statement. Any revaluation deficit
that offsets a previous surplus in the same asset is directly offset
against the surplus in the revaluation reserve and any excess
recognised as an expense. Upon disposal, any revaluation reserve
relating to the asset sold is transferred to retained earnings.
Items of property, plant and equipment are derecognised upon
disposal or when no future economic benefits are expected from
its use. Any gain or loss arising on derecognition of the asset
is included in the income statement in the year the asset is
derecognised. The cost of property, plant & equipment is the cost
of purchase or construction together with any expenses incurred
in bringing the assets to its working condition for its intended
use. Expenditure incurred for the purpose of acquiring, extending
or improving assets of permanent nature by means of which to
carry on the businesses or to increase the earning capacity of
the business has been treated as capital expenditure. The cost
of property, plant and equipment is the cash price equivalent
at the recognition date. If payment is deferred beyond normal
credit terms, the difference between the cash price equivalent
and the total payment is recognized as interest over the period
of credit unless such interest is recognized in the carrying
amount of the item in accordance with the allowed alternative
treatment in SLAS 20. The carrying values of property plant and
equipment are reviewed for impairment when events or changes
in circumstances indicate that the carrying value may not be
recoverable.
- Subsequent Costs/ Replacement of Parts.
The cost of replacing part of an item of property, plant and
equipment is recognized in the carrying amount of the item if it
is probable that the future economic benefits embodied within
the part will flow to the Company and its cost can be measured
reliably. The carrying amount of those parts that are replaced is
derecognised. The costs of the day-to-day servicing of property,
plant and equipment are recognized in profit or loss as incurred.
a) Depreciation/Amortisation
Provision for depreciation is calculated by using a straight-
line method on the cost or valuation of all property, plant and
equipment, in order to write off such amounts over the estimated
useful economic life of such assets. The leased assets are
depreciated over the shorter of the lease term and their useful
lives.
Buildings & Land Improvement Over 40 years
Plant & Machinery Over 13 1/3 years
CTC Machinery Over 20 Years
Furniture & Fittings Over 10 years
Motor Vehicles Over 5 years
Equipment Over 8 years
Water Projects & Sanitation Over 20 years
Leasehold Assets
- Plant & Machinery Over 13 1/3 years
- Motor Vehicles Over 05 years
Mature Plantations
- Tea Over 33 1/3 years
- Rubber Over 20 years
Notes to the Financial Statements
41
The leasehold rights of assets taken over from JEDB/SLSPC are
being amortized in equal amounts, over the following years.
(Lower of lease period and economic useful life).
Bare Land Over 53 years
Mature Plantations
- Tea & Rubber Over 30 years
- Others Over 25 years
Buildings Over 25 years
Plant & Machinery Over 15 years
Land Development Cost Over 30 years
Water Supply Scheme Over 30 years
Depreciation of an asset begins when it is available for use and
ceases at the earlier of the date that the asset is classified as
held for sale and the date that the asset is derecongnised. Leased
assets are depreciated over the shorter of the leased term and
their useful lives. The useful life, residual values and depreciation
methods of assets are reviewed, and adjusted if required, at the
end of each financial year.
1.2.2 Impairment of Assets
The carrying amount of the Company’s non financial assets,
other than inventories and deferred tax assets, are reviewed
at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the
asset’s recoverable amount is estimated. For intangible assets
that have indefinite lives or that are not yet available for use,
recoverable amount is estimated at each reporting date. An
impairment loss is recognized if the carrying amount of an assets
or its cash generating units exceeds its recoverable amount.
A cash generating unit is the smallest identifiable asset group
that generates cash flows that largely are independent from
other assets and Company. Impairment losses are recognized
in profit or loss. The recoverable amount of an asset or cash
generating unit is the greater of its value in use and its fair value
less costs to sell. In assessing value in use, the estimated future
cash flows are discounted to their present value using pre tax
discount rate that reflects current market assessment of the time
value of money and the risks specific to the asset. In respect of
other assets, impairment losses recognized in prior periods are
assessed at each reporting date for any indications that the loss
has decreased or no longer exists. An impairment loss is reversed
only to the extent that the asset’s carrying amount does not
exceed the carrying amount that would have been determined,
net of depreciation or amortization, if no impairment loss had
been recognized.
1.2.3 Permanent Land Development Costs
Permanent land development costs are those costs incurred to
make major changes to land contours to build new access roads
and other major infrastructure development. Such expenditure
on leasehold land has been capitalized and amortized over
the remaining lease period. Permanent impairments to land
development costs are charged to the Income Statement in full
or reduced to the net carrying amounts of such asset in the year
of occurrence after ascertaining the loss.
1.2.4 Limited Life Land Development Costs
(Immature and Mature Plantations)
The cost of new planting, replanting, interplanting and crop
diversification incurred between the time of field development
and being ready for commercial harvesting are classified as
immature plantations. Further, the general charges incurred
on the plantation are apportioned on the labour days spent on
respective replanting and new planting, and capitalized on the
immature areas. The remaining portion of the general charges
is charged to the Income Statement in the year in which it is
incurred. No depreciation is provided for immature plantation.
The total expenditure incurred on perennial crops (Tea & Rubber)
which come into bearing during the year have been transferred
to mature plantations and depreciated over its useful life time.
No depreciation has been charged on mature plantations in the
year of transfer. Permanent impairments to land development
costs are charged to the Income Statement in full or reduced to
the net carrying amounts of such asset in the year of occurrence
after ascertaining the loss.
1.2.5 Infilling Cost
Where infilling results in an increase in the economic life of
the relevant field beyond its previously assessed standard of
performance, the costs are capitalized in accordance with Sri
Lanka Accounting Standard 32 “Plantations” and depreciated over
the useful life at rates applicable to mature plantations. Infilling
costs that are not capitalized have been charged to the Income
Statement in the year in which they are incurred.
1.2.6 Leased Assets
Property, Plant and Equipment on finance leases, (which
effectively transfer substantial risks and benefits incidental
to ownership of the leased item) are capitalized at their cash
price, and depreciated/amortized over the period the Company
is expected to benefit from the use of the leased assets. The
corresponding principal amount payable to the lessor is shown as
a liability. The interest element of the rental obligation applicable
to each financial year is charged to the Income Statement over
the period of the lease so as to produce a constant periodic
Kotagala Plantations PLC Annual Report 2011/1242
rate of interest on the remaining balance of the liability for
each period. The cost of improvements to the leased property
is capitalized and depreciated over the unexpired period of
the lease or the estimated useful lives of the improvements
whichever is shorter.
1.2.7 Investments
1.2.7.1 Investments in Associates
Investments in companies where the company has the significant
influence have been treated as associate companies. The results
of the associate companies have been accounted for on the
equity method of accounting, by incorporating the investor’s
share of profits or losses in the income statement, and the
related investment is presented in the Balance Sheet at values
adjusted to reflect the company’s share of retained assets. The
carrying value of the investment in such associates is reduced
to the extent of the dividend received from these associate
companies.
1.2.7.2 Other Long Term Investments
All the other long term investments are reflected in the
Balance Sheet at cost less any amount written off to reflect any
permanent diminution in the value of such investments. The
investments are also tested for impairment annually.
1.2.8 Inventories
Inventories other than produce stocks are valued at the lower
of cost and estimated net realisable value, after making due
allowance for obsolete and slow moving items. Net realisable
value is the price at which stocks can be sold in the normal
course of business after allowing for cost of realisation and/
or cost of conversion from their existing state to saleable
condition. Cost is arrived as follows, Input Material At actual
cost on FIFO basis. Growing Crop Nurseries At the cost of direct
materials, direct labour, and an appropriate proportion of directly
attributable overheads less provision for overgrown plants. Spares
and Consumables At actual cost on FIFO basis. Produce Stocks
Valued on the basis of estimated realisable price or since realised
price.
1.2.9 Trade and Other Receivables
Trade receivables are stated at the amounts they are estimated
to realise inclusive of provisions for bad and doubtful debts. Other
receivables and dues from related parties are recognised at cost
less provision for bad and doubtful receivables.
1.2.10 Cash and Cash Equivalents
Cash and cash equivalents are defined as cash in hand, demand
deposits and short term highly liquid investments readily
convertible to known amounts of cash and subject to insignificant
risk of changes in value. For the purpose of Cash Flow Statement,
cash and cash equivalents consist of cash in hand and deposits
in banks net of outstanding bank overdrafts. Interest paid and
received are classified as operating cash flows for the purpose of
presentation of Cash Flow Statement. The cash flow Statement
reported is based on indirect method.
1.3 Liabilities and Provisions
1.3.1 Retirement Benefits to Employees
a) Defined Benefit Plans
The Retirement Benefit Plan adopted is as required under the
Payment of Gratuity Act No 12 of 1983 and the Indian Repatriate
Act No. 34 of 1978 to eligible employees. This item is grouped
under Retirement Benefit Obligations in the Balance Sheet.
Provision for Gratuity on the employees of the Company is on
an actuarial basis, using the Projected Unit Credit (PUC) method
as recommended by Sri Lanka Accounting Standard No.16
(revised 2006) “Employee Benefits”. The actuarial valuation was
carried out by a professionally qualified firm of actuaries Messrs
Actuarial and Management Consultants (Pvt) Limited as at 31st
March 2011. The Company expects to carry out a comprehensive
actuarial valuation once in every two years, unless there’s a
revision of wage rates. The key assumptions used by the actuary
include the following:
i Rate of Interest -11% p.a. (net of tax)
ii Rate of Salary Increase
- Workers -16% every two years
- For other
categories of staff -10% p.a.
iii Retirement Age
- Workers - 60 years
- For other categories of staff - 60 years
iv Daily wage rate Rs. 380/ - for workers.
v The Company will continue in business as a going concern.
The liability is not externally funded. However according to the
Payment of Gratuity Act No. 12 of 1983, the liability for payment
to an employee arises only after the completion of 5 years
continued services.
b) Defined Contribution Plans - EPF, ESPS, CPPS & ETF
All employees who are eligible for defined Provident Fund
Contributions (EPF, ESPS & CPPS) and Employees Trust Fund
Contributions are covered by relevant contributory funds in line
with respective statutes.
Notes to the Financial Statements
43
1.3.2 Trade and Other Payables
Trade and other payables are stated at their costs.
1.3.3 Provisions, contingent assets and contingent liabilities
A provision is recognized if, as a result of a past event, the
Company has a present legal or constructive obligation that
can be estimated reliably, and it is probable that an outflow
of economic benefits will be required to settle the obligation
All contingent liabilities are disclosed as a note to the financial
statements unless the outflow of resources is remote. Contingent
assets are disclosed, where inflow of economic benefit is
probable.
1.4 Deferred Income
1.4.1 Grants and Subsidies
Grants and subsidies are credited to the Income Statement over
the periods necessary to match them with the related costs,
which hey are intended to be compensated on a systematic
basis. Grants related to Property, Plant and Equipment, including
non-monetary grants at fair value is deferred in the Balance
Sheet and credited to the Income Statement over the useful life
of the related assets. Grants related to income are recognised in
the Income Statement in the period in which it is receivable.
1.5 Income Statement
1.5.1 Revenue and Expenditure Recognition
1.5.1.1 Revenue Recognition
Revenue from rendering services or sale of goods is measured
at the fair value of the consideration received or receivable, net
of returns and allowances, trade discounts and volume rebates.
Revenue is recognized when the significant risks and rewards of
ownership have been transferred to the buyer, recovery of the
consideration is provable, the associated costs and possible return
of goods can be estimated reliably, and there is no continuing
management involvement with the goods or services rendered.
The following specific criteria are used for recognition of revenue:
a) In keeping with the practice in the Plantation Industry,
revenue on Perennial crops are recognized in the financial
period of harvesting. Revenue is recorded at invoice value
net of brokerage, sale expenses and other levies related to
revenue.
b) Gains or losses of a revenue nature have been accounted
for in the Income Statement.
c) Interest income is recognised on accrual basis.
d) Other income is recognised on accrual basis.
1.5.1.2 Expenditure Recognition
a) All expenditure incurred in the running of the business and
in maintaining the Property, Plant and Equipment in state
of efficiency has been charged to income statement in
arriving at the profit/(loss) for the year.
b) For the purpose of presentation of Income Statement,
the Directors are of the opinion that function of expenses
method presents fairly the elements of the enterprise’s
performance and, hence such presentation method is
adopted.
1.6 Segmental Reporting
A Segment is a distinguishable component of the Company that
is engaged in providing services, which is subject to different
risks and rewards. The Company’s core business is manufacturing
and sale of Tea and this line of business accounts for the entire
operation of the company. The Company’s business is located
in different geographical locations where the risks and rewards
related to each segment could be identified. Revenue and
expenses directly attributable to each segment are allocated
intact to the respective segments. Revenue and expenses not
directly attributable to a segment are allocated on the basis of
their resource utilisation wherever possible. Assets and Liabilities
directly attributable to each segment are allocated intact to the
respective segments. Assets and Liabilities, which are not directly
attributable to a segment, are allocated on a reasonable basis
whenever possible.
1.7 Effects of Accounting Standards issued but not yet ef-
fective
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 financial statements as the effective dates of
these standards are after the Balance Sheet date.
These Sri Lanka Accounting Standards comprise accounting
standards prefixed both SLFRS (corresponding to IFRS) and LKAS
(corresponding to IAS). Application of Sri Lanka Accounting
Standards prefixed SLFRS and LKAS for first time shall be deemed
to be an adoption of SLFRSs.
The Company is currently in the process of evaluating the
potential effect of these standards on its financial statements and
the impacts of the adoption of these standards have not been
quantified as at balance sheet date.
Kotagala Plantations PLC Annual Report 2011/1244
2. CORPORATE INFORMATION
2.1 Domicile and Legal Form
Kotagala Plantations PLC (Formerly known as Kotagala Plantations
Limited) is a limited liability Company incorporated and
domiciled in Sri Lanka, under the Companies Act No. 17 of 1982
(reregistered under the Companies Act No 7 of 2007) in terms
of the provisions of the Conversion of Public Corporation and
Government Owned Business Undertaking into Public Companies
Act No. 23 of 1987. The registered office of the Company is
located at No 53-1/1, Sir Baron Jayathilaka Mawatha, Colombo
01 and Plantations are situated in the planting districts of Nuwara
Eliya and Kalutara.
2.2 Historical Background
The Company was formed on 22 June 1992 under the Companies
Act No. 17 of 1982 (reregistered under the Companies Act
No 7 of 2007) in terms of the provisions of the conversion of
Corporations and Government Owned Business Undertakings in to
public companies Act No. 23 of 1987, to take over the plantations
which were owned and Managed by Janatha Estate Development
Board (JEDB) and the Sri Lanka Estate Plantation Corporation
(SLSPC) both of which owned and managed a number of
plantations and estates.
2.3 Parent and Ultimate Parent Company
The Company’s parent undertaking and controlling party is
Lankem Plantation Holdings Limited which is incorporated in Sri
Lanka as a limited liability company, and the ultimate parent
Company is The Colombo Fort Land and Building Co. PLC.
2.4 Principal Activities and Nature of Operations
During the year, the principal activity of the Company was the
cultivation, manufacture and sale of Tea and Rubber, which
remained unchanged.
Notes to the Financial Statements
45
For the year ended 31st March 2012 2011
Rs`000 Rs`000
3. REVENUE Sale of Produce Tea 2,172,853 2,249,188 Rubber 1,437,467 1,434,178 3,610,320 3,683,366
3.1) Segmental Analysis of Principal Crops
Tea Rubber Total Total
2012 2011 2012 2011 2012 2011
Rs`000 Rs`000 Rs`000 Rs`000 Rs`000 Rs`000
a) Segmental Result
Revenue 2,172,853 2,249,188 1,437,467 1,434,179 3,610,320 3,683,366
Less:Cost of Sales (2,211,698) (2,002,789) (752,395) (637,784) (2,964,093) (2,640,572)
Gross Profit / (Loss) (38,845) 246,399 685,072 796,395 646,227 1,042,794
Less: Unallocated Expenses (361,424) (405,861)
Add: Other Income 247,058 138,318
Profit before Income Tax Expense 531,861 775,251
Share of Profit/(Loss) of Associate Company 1,474 (509)
Income Tax Expense (94,727) (106,969)
Net Profit for the year 438,608 667,773
b) Segmental Assets
Non current assets 1,504,315 1,551,884 1,840,904 1,766,826 3,345,219 3,318,710
Current assets 400,150 402,854 201,286 196,966 601,436 599,819
1,904,465 1,954,738 2,042,190 1,963,792 3,946,655 3,918,529
Unallocated 2,557,033 1,854,060
Total Assets 6,503,688 5,772,589
c) Segmental Liabilities
Non current liabilities 462,654 430,554 164,990 182,617 627,644 613,171
Current liabilities 174,688 114,365 121,343 90,495 296,031 204,860
637,342 544,919 286,333 273,112 923,675 818,031
Unallocated 3,108,772 2,601,925
Total Liabilities 4,032,447 3,419,956
d) Segmental Capital Expenditure
Allocated 137,009 262,239 203,079 211,775 340,088 474,014
Unallocated 105,631 43,883
Total Capital expenditure 137,009 262,239 203,079 211,775 445,719 517,897
e) Segmental Depreciation
Allocated 72,627 57,236 74,705 74,823 147,332 132,059
Unallocated 18,139 13,126
Total Depreciation 72,627 57,236 74,705 74,823 165,471 145,185
Kotagala Plantations PLC Annual Report 2011/1246
For the year ended 31st March 2012 2011
Rs`000 Rs`000
4. OTHER OPERATING INCOME
Amortisation of Capital Grants 9,222 8,393
Profit on Disposal of Property, Plant & Equipment 2,259 9,106
Profit on Disposal of Shares 30,000 27,886
Sale of Rubber and Other Trees 44,444 68,696
Rent Income 5,490 2,325
Sale of Refuse Tea 10,836 13,407
Exchange gain 129,130 -
Dividend Income 12,908 6,442
Sundry Income 2,769 2,063
247,058 138,318
5. PROFIT BEFORE INCOME TAX EXPENSE
Is stated after charging all expenses including the following;
Directors’ Emoluments 7,550 4,550
Auditor’s Remuneration - Audit fees and expenses 2,800 2,500
- Audit related services 90 46
- Non Audit 80 80
Depreciation/Amortisation
- Leasehold rights to Bare Land 6,458 6,458
- Immovable Leased Assets 15,209 15,209
- Tangible Property, Plant & Equipment 86,853 90,851
- Mature Plantations 56,951 50,006
Managing Agent’s Fees - Lankem Tea & Rubber Plantations (Pvt) Limited 87,489 138,388
Personnel Costs Includes; - Salaries and Wages 1,716,156 1,293,956
- Defined Benefit Plan Cost - Retiring Gratuity 88,166 103,835
- Defined Contribution Plans - EPF, ETF,CPPS and ESPS 186,633 163,027
6. NET FINANCING COSTS
Finance Income
Interest Income 47,500 13,179
47,500 13,179
Finance Cost On;
Bank Overdraft (31,947) (3,124)
Finance Leases (8,759) (7,860)
Net Obligation to Lessor (46,556) (89,392)
Debentures (2,747) (4,168)
Bank Loans (71,514) (64,209)
Broker Advances (9,467) -
Related Company Loans (480) (480)
Exchange loss - (600)
(171,471) (169,833)
Net Financing Cost (123,971) (156,653)
Notes to the Financial Statements
47
7. INCOME TAX EXPENSE
7.1) Current Taxation
Profits from any agricultural undertaking which falls within the Section 16 of the Inland Revenue Act No. 10 of 2006, was exempt for
a period of 5 years from 2006/2007. ( Expired on 31st March 2011). Such profits are liable for income tax at 10% from the year of
assessment 2011/2012. The Corporate rate of tax applicable for Agriculture is 10% and Manufacturing and other income is 28%.
For the year ended 31st March 2012 2011
Rs`000 Rs`000
Income tax on profits for the year 22,869 47,486
Under/(over) Provision in respect of previous years (27,175) 16,349
Deferred Tax charge for the year (Note 23) 99,033 43,134
94,727 106,969
7.2) Reconciliation between accounting profit and Income tax
Accounting Profit before Income Tax Expense 531,861 775,251
Aggregate Disallowed Items 277,275 288,264
Aggregate Allowable Expenses (701,348) (231,614)
Statutory Income from Business 107,788 831,901
Statutory Income exempt from taxation under section 16 - (643,223)
Statutory Income not covered under section 16 107,788 188,678
Other sources of income 97,348 16,968
Total Statutory Income 205,136 205,646
Tax Losses set off during the year (71,797) (71,976)
Assessable Income 133,338 133,670
Taxable Income 133,338 133,670
Income Tax at the rate of 10% 8,037 46,785
Income Tax at the rate of 28% 14,832 -
Social Responsibility Levy @ 1.5% - 701
Current Income Tax Expense 22,869 47,486
7.3) Tax Losses
Tax Loss Brought Forward 455,224 567,606
Adjustments to b/f Tax losses 42,761 (40,406)
Tax Losses set off during the year (71,797) (71,976)
Tax Loss Carried Forward 426,188 455,224
7.4) During the year, Rs.7.9Mn. has been paid as ESC and set off against the income tax payable.
8. BASIC EARNINGS PER SHARE/DIVIDENDS PER SHARE
8.1 Basic Earnings per Share
The computation of Basic Earnings per Share is based on profit attributable to ordinary shareholders after tax for the year divided by
the weighted average number of ordinary shares outstanding during the year and calculated as follows;
For the year ended 31st March 2012 2011
Amount used as the Numerator
Profit attributable to Ordinary Shareholders (Rs.’000) 438,608 667,773 Amount used as the Denominator Weighted average number of Ordinary Shares (‘000) 32,000 32,000 Basic Earnings per Share (Rs.) 13.71 20.86
Kotagala Plantations PLC Annual Report 2011/1248
8.2 Dividends per Share
The Directors have recommended the payment of a first and final dividend of Rs. 2.00 per share amounting to Rs. 64,000,000/-
for the year ended 31 March 2012, which will be declared at the Annual General Meeting. However, in accordance with Sri Lanka
Accounting Standard No. 12 (Revised) - “Events after the Balance Sheet Date”, this proposed first and final dividend has not been
recognised as a liability as at 31st March 2012.
For the year ended 31st March 2012 2011
Amount used as the Numerator Proposed/Paid Dividends for the year (Rs.’000) 64,000 320,000 Amount used as the Denominator
Number of Ordinary Shares (‘000) 32,000 32,000 Dividend per Share (Rs.) 2.00 10.00
9. LEASEHOLD RIGHT TO BARE LAND OF JEDB/SLSPC ESTATES
The leases of all the 23 estates have been executed and will be retroactive from 22nd June, 1992. The leasehold rights to land on all
these estates have been taken into the books of the Company as at 22nd June, 1992 immediately after formation of the Company,
in terms of the ruling obtained from the Urgent Issues Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka. For this
purpose, the Board decided at its meeting held on 8th March,1995 that these bare lands would be revalued, at the value established
for these lands, by the valuation Specialist Mr.D.R.Wickramasinghe, just prior to the formation of the Company. The value taken into
the 22nd June, 1992, Balance Sheet and the amortisation of leasehold rights upto 31st March, 2012 are as follows.
Revaluation As at Balance Balance
Life of 22.06.1992 31.03.2012 31.03.2011
the Asset Rs`000 Rs`000 Rs`000
Leasehold Right to Bare Land of
JEDB/SLSPC Estates 53 years 358,928 342,287 342,287
Amortisation Carrying Value
Balance Charge Balance As As
as at for the as at at at
year
01.04.2011 31.03.2012 31.03.2012 31.03.2011
Rs`000 Rs`000 Rs`000 Rs`000 Rs`000
121,278 6,458 127,736 214,550 221,008
Notes to the Financial Statements
49
10. IMMOVABLE LEASED ASSETS OF JEDB/SLSPC ESTATES (OTHER THAN BARE LAND)
In terms of the ruling of the UITF of the Institute of Chartered Accountants of Sri Lanka, all immovable assets in the JEDB/SLSPC
estates under finance leases have been taken into the books of the Company retroactive to 22nd, June 1992. For this purpose, the
Board decided at its meeting on 8th March, 1995 that these assets be restated at their book values as they appear in the books of
the JEDB/SLSPC , on the day immediately preceeding the date of formation of the Company. These assets are taken into the Balance
Sheet as at 22nd June 1992 and depreciated as follows:
Revaluation As at Balance Balance
as at as at
Life of 22.06.1992 31.03.2012 31.03.2011
the Asset Rs`000 Rs`000 Rs`000
Land Development Cost 30 years 6,712 6,701 6,701
Buildings other than worker housing 25 years 26,519 25,902 25,902
Plant & Machinery 15 years 8,757 8,757 8,757
Water Projects and Sanitations 30 years 8,688 8,688 8,688
Mature Plantations -
- Tea 30 years 69,767 227,655 227,655
- Rubber 30 years 61,138 172,379 172,379
- Others 25 years - 8,140 8,140
Immature Plantations
- Tea 158,960 - -
- Rubber 126,898 - -
- Others 8,140 - -
475,579 458,222 458,222
Amortisation Balance Charge Balance As As
as at for as at at at
01.04.2011 the year 31.03.2012 31.03.2012 31.03.2011
Rs`000 Rs`000 Rs`000 Rs`000 Rs`000
Land Development Cost 4,192 223 4,415 2,285 2,506
Buildings other than Worker Housing 19,454 1,036 20,490 5,412 6,446
Plant & Machinery 8,755 - 8,755 2 -
Water Projects and Sanitations 5,437 290 5,727 2,962 3,250
Mature Plantations
- Tea 131,337 7,588 138,925 88,730 96,313
- Rubber 97,516 5,746 103,262 69,117 74,858
- Others 3,255 326 3,581 4,560 4,884
Immature Plantations
- Tea - - - -
- Rubber - - - -
- Others - - - -
269,946 15,209 285,155 173,067 188,256
Investment in Immature Plantations at the time of handing over to the Company by way of estate leases are shown under Immature
Plantations as at 22.06.1992. Further investment in such plantations to bring them to maturity are shown under Note 12.
Kotagala Plantations PLC Annual Report 2011/1250
11.
TAN
GIB
LE A
SSET
S (O
THER
TH
AN
MA
TURE
/ IM
MA
TURE
PLA
NTA
TIO
NS)
Bu
ildin
gs
Wat
er
Plan
t an
d M
achi
nery
M
otor
Veh
icle
s
Equi
pmen
t Fu
rnit
ure
Wor
k-in
31.
03.2
012
31.0
3.20
11
an
d La
nd
Proj
ects
and
and
Prog
ress
Im
prov
emen
ts
Sani
tati
ons
Free
hold
Le
aseh
old
Free
hold
Le
aseh
old
Fi
ttin
gs
To
tal
Tota
l
Rs
`000
Rs
`000
Rs
`000
Rs
`000
Rs
`000
Rs
`000
Rs
`000
Rs
`000
Rs
`000
Rs
`000
Rs
`000
Cost
At th
e be
ginn
ing
of th
e ye
ar
557,
703
60,8
89
451,
005
23,6
74
192,
435
78,4
05
59,5
54
9,27
0 6,
652
1,43
9,58
7 1,
252,
868
Addi
tions
/Tra
nsfe
r in
11,8
17
464
12,7
01
- 1,
320
15,7
74
5,53
3 36
6 14
,831
62
,806
23
8,67
8
Disp
osal
s/Tr
ansf
er o
ut
- -
(489
) -
(8,8
96)
- -
- (3
30)
(9,7
15)
(51,
964)
At th
e en
d of
the
year
56
9,52
0 61
,353
46
3,21
7 23
,674
18
4,85
9 94
,179
65
,087
9,
636
21,1
53
1,49
2,67
8 1,
439,
587
Dep
reci
atio
n
At th
e be
ginn
ing
of th
e ye
ar
63,2
65
19,5
79
167,
929
7,07
2 15
5,88
6 20
,613
33
,400
7,
692
- 47
5,43
6 41
0,31
5
Char
ge fo
r the
yea
r 13
,803
3,
098
31,6
44
1,75
1 13
,853
17
,020
5,
428
256
- 86
,853
90
,851
Disp
osal
s/Tr
ansf
er o
ut
-
(92)
-
(5,1
55)
- -
- -
(5,2
47)
(25,
730)
At th
e en
d of
the
year
77
,068
22
,677
19
9,48
1 8,
823
164,
584
37,6
33
38,8
28
7,94
8 -
557,
042
475,
436
Carr
ying
Val
ue a
s at
31.
03.2
012
492,
452
38,6
76
263,
736
14,8
51
20,2
75
56,5
46
26,2
59
1,68
8 21
,153
93
5,63
6 -
Carr
ying
Val
ue a
s at
31.
03.2
011
494,
440
41,3
11
283,
077
16,6
03
36,5
49
57,7
93
26,1
55
1,57
9 6,
652
- 96
4,15
1
(a)
The
asse
ts s
how
n ab
ove
are
thos
e m
ovab
le a
sset
s ve
sted
in t
he C
ompa
ny b
y G
azet
te n
otifi
catio
n on
the
dat
e of
for
mat
ion
of t
he C
ompa
ny (
22.0
6.19
92)
and
all i
nves
tmen
t in
tang
ible
ass
ets
by t
he C
ompa
ny s
ince
its
form
atio
n. T
he a
sset
s ta
ken
over
by
way
of
esta
te le
ases
are
set
out
in N
otes
9 a
nd 1
0.
Notes to the Financial Statements
51
Mature Plantations Immature Plantations 31.03.2012 31.03.2011
Tea Rubber Tea Rubber Other Total Total
Cost Rs`000 Rs`000 Rs`000 Rs`000 Rs`000 Rs`000 Rs’000
At the beginning of the year 542,320 675,882 284,327 697,865 150,741 2,351,133 2,028,498
Additions/Transfer in 67,760 90,025 104,902 188,324 90,017 541,028 459,854
Transfer out (67,760) (90,025) - (157,785) (137,221)
At the end of the year 610,080 765,907 321,469 796,164 240,758 2,734,378 2,351,133
Depreciation
At the beginning of the year 130,298 221,626 - - - 351,924 301,918
Charge for the year 18,924 38,027 - - - 56,951 50,006
At the end of the year 149,222 259,653 - - - 408,875 351,924
Carrying Value as at 31.03.2012 460,858 506,254 321,469 796,164 240,758 2,325,501
Carrying Value as at 31.03.2011 412,020 454,254 284,325 697,863 150,739 1,999,207
a) These are investments in mature/immature plantations since the formation of the Company. The assets (including plantation assets)
taken over by way of estate leases are set out in Notes 9 and 10. Further investment in Immature Plantations taken over by way of
leases are shown in this note. When such plantations become mature, the additional investments since taken over to bring them to
maturity are transferred from immature to mature under this note. A corresponding movement, from Immature to Mature, in respect
of the investment undertaken by JEDB/SLSPC on the same plantation prior to the leases are shown under Note 10.
b) Borrowing costs amounting Rs. 22.9 million (2010/2011 - Rs. 18.6 million) on Tea, and Rs. 54.3 million (2010/2011- Rs 47.8 million)
on Rubber incurred on term loans and overdrafts utilised to finance replanting expenditure of tea and rubber have been capitalised.
The average rate of interest for capitalisation was 11.4% (2010/11 -11.0%) The capitalisation will cease when crops are ready for
harvest.
c) Other immature plantations includes Eucalyptus, Other Timber etc. which have been cultivated and managed in separate fields and
other crops such as Cinnamon, Coconut etc. and carried at cost less impairment.
13. INVESTMENTS
As at 31st March 2012 2011
Holding % Rs`000 Rs`000
13.1 Investments in Associates
90,000,000 Ordinary shares in York Hotels (Kandy) Ltd 41.70% 90,965 89,491
90,965 89,491
13.2 Investments in York Hotels (Kandy) Ltd
Balance as at beginning of the year 89,491 90,000
Share of Profit/ (loss) for the year 1,474 (509)
Balance at the end of the year 90,965 89,491
12. MATURE/IMMATURE PLANTATIONS
Kotagala Plantations PLC Annual Report 2011/1252
As at 31st March 2012 2011
Rs`000 Rs`000
13.3 Other Long Term Investments
7,157,857 Ordinary shares in C.W. Mackie PLC (Market Value - Rs. 534.5 Mn.) 251,545 251,545
20,000,000 Ordinary shares in Agarapatana Plantations Ltd 200,000 -
6,016,000 Ordinary shares in Lankem Development PLC (Market Value - Rs. 62.6 Mn.) 150,437 62
26,083 Ordinary shares in Sigiriya Village Hotels PLC (Market Value - Rs. 1.9 Mn.) 963 963
62,677 Ordinary shares in Marawila Resorts PLC (Market Value - Rs. 0.4 Mn.) 340 340
9,949,991 Ordinary Shares in Beruwala Resorts Limited 11,300 11,300
200 Debentures in Bank of Ceylon (US $ 200,000) 25,226 21,918
Provision for dimunition in value of Beruwala Resorts Limited (3,000) (3,000)
636,811 283,128
13.4 Assets Held for Sale
6,000,000 Ordinary shares in Agarapatana Plantations Ltd - 120,000
14. INVENTORIES
Input Materials 39,044 70,691
Growing Crop Nurseries 45,631 20,063
Produce Stock (Tea and Rubber) 336,737 389,199
Spares and Consumables 37,738 47,488
459,150 527,441
15. TRADE & OTHER RECEIVABLES
Trade Receivables 71,592 98,790
Advances, Deposits, Prepayments & Other Receivables 95,087 67,590
Employee Advances (Note 15.1) 28,649 32,981
195,328 199,361
Less : Provision for bad and doubtful Receivables (6,518) (6,518)
188,810 192,843
15.1) No Loans over Rs. 20,000/- have been granted to employees and workers of the Company.
16 AMOUNTS DUE FROM RELATED PARTIES
As at 31st March 2012 2011
Relationship Rs`000 Rs`000
Agarapatana Plantations Ltd Affiliate Co. 6,318 144,588
Lankem Plantations Holdings Ltd Parent Co. 9 9
Creasy Plantations Management Ltd Affiliate Co. - 2
E B Creasy & Co. PLC Affiliate Co. 208 208
Sherwood Holidays Ltd Affiliate Co. 9,198 8,330
Marawila Resorts PLC Affiliate Co. 184 209
Beruwala Resorts Ltd Affiliate Co. 13 13
Lankem Ceylon PLC (Note 16.1) Intermediate Parent Company 306,731 300,000
Ceylon Tea Brokers PLC Affiliate Co. 684 1,721
323,345 455,079
16.1) Lankem Ceylon PLC
The company has granted a loan of Rs. 300 Million to Lankem Ceylon PLC (Intermediate Parent Company) on 28th March 2011 at an
interest rate of 9% per annum payable quarterly.
Notes to the Financial Statements
53
17. CASH AND CASH EQUIVALENTS
As at 31st March 2012 2011
Rs`000 Rs`000
Cash at Bank and Cash in Hand 1,091,737 573,338
Bank Overdraft (Note 17.1) (769,948) (47,284)Cash and cash equivalents for the purpose of the Cash Flow Statement 321,789 526,054
17.1) Bank Overdraft
Bank : Seylan Bank
Purpose : To finance working capital requirements.
Facility : Rs. 130,000,000/-
Securities Pledged : Primary mortgage over leasehold rights of the estate lands and buildings, fixed
and floating assets of Yuilliefield and Chrystlers Farm Estates
: Primary mortgage over leasehold rights of the estate lands and buildings of
Eduragala and Sorana Estates.
18. STATED CAPITAL
As at 31st March 2012 2011
32,000,000 Ordinary Shares 320,000,000 320,000,000 01 Golden Share (Note 18.1) 10 10 320,000,010 320,000,010
18.1) The Golden Shareholder
The total amount received by the Company in respect of issue of shares are referred to as Stated Capital. The Golden
share is currently held by Secretary to the Treasury and should be owned either directly by the Government of Sri Lanka
or by a 100% Government owned public Company. In addition to the rights of the normal ordinary shareholders, in
terms of the Articles of the Company, following special rights are vested with the Golden Shareholder.
a) The Company shall obtain the written consent of the Golden Shareholder prior to sub-leasing, ceding or assigning its
rights in part or all of the lands leased to the Company by the JEDB/SLSPC.
b) The Golden Shareholder shall be entitled to call upon the Board of Directors once in three months to meet him or his nominee to
discuss matters of the Company of interest to the estate.
c) The Golden Shareholder and or his nominee shall be entitled to inspect the books of accounts of the Company afte giving two weeks
written notice to the Company.
d) The company shall submit to the Golden Shareholder, within 60 days of the end of each quarter, a quarterly report relating to
the performance of the Company during the said quarter in a pre- specified format agreed to by the Golden Shareholder and the
Company
e) The Company shall submit to the Golden Shareholder, within 90 days of the end of each fiscal year, information related to the
company in a pre-specified format agreed to by the Golden Shareholder and the Company.
Kotagala Plantations PLC Annual Report 2011/1254
19. DEFERRED INCOME
Total Total
ADB-PRP PDSP PHDT Others as at as at
31.03.2012 31.03.2011
Grants and Subsidies Rs.`000 Rs.`000 Rs.`000 Rs.`000 Rs.`000 Rs.`000
Balance at the beginning of the year 39,580 197,960 17,352 56,724 311,616 275,881
Received during the year - - - 7,102 7,102 44,128
39,580 197,960 17,352 63,826 318,718 320,009
Amortisation for the year (986) (6,139) (1,219) (878) (9,222) (8,393)
Balance at the end of the year 38,594 191,821 16,133 62,948 309,496 311,616
The above represents the following :
(i) Asian Development Bank - Plantation Reform Project (ADB - PRP)
The funds received are utilised for construction of Staff Quarters, Water Projects, Latrines, Farm Roads and purchase of Forestry
Equipment.
(ii) Plantation Development Support Programme (PDSP)
The funds received are utilised for construction of Dispensaries, Staff Quarters, Water Projects and upgrading Creches.
(iii) Plantation Human Development Trust (PHDT)
The funds received are utilised for construction of Worker Housing, Water Projects and purchase of Ambulance.
(iv) Others
a) Ministry of Livestock Development and Estate Infrastructure
The funds received are utilised for construction of Community Centers, Agency Post Offices and Upgrading Farm Roads and
Creches.
b) Sri Lanka Tea Board
Funds received are utilised for the construction of the CTC Tea Factory at Mount Vernon Estate.
The amounts spent are capitalised under the relevant classification of Property Plant & Equipment and the corresponding grant component
is reflected under deferred grants and subsidies and amortised over useful life span of the asset.
20. INTEREST BEARING BORROWINGS
As at 31st March 2012 2011
Note Rs`000 Rs`000
20.1) Payable after one year
Debentures 20.3 65,000 65,000
Term Loans 20.4 636,742 1,022,341
Finance Leases 20.5 37,842 40,899
739,584 1,128,240
20.2) Payable within one year
Debentures 20.3 35,000 35,000
Term Loans 20.4 337,530 229,191
Finance Leases 20.5 17,091 20,289
389,621 284,480
Notes to the Financial Statements
55
20.3) Debenture
The Company issued Rs.35Mn. and Rs.65Mn. Guaranteed Redeemable Debentures (unquoted) on 23/04/2009 and 17/07/09
respectively to the Plantations Trust Fund at the interest rate of 15.86% . These Debentures are redeemable in 2012 (Rs.35Mn.),
2013 (Rs.50 Mn.), and 2014 (Rs.15Mn.)
20.4) Term Loans
Cost NDB DFCC Sampath LOLC Peoples Peoples Peoples Total Total
Bank Bank Bank Leasing - E friends Bank 31.03.2012 31.03.2011
Rs`000 Rs`000 Rs`000 Rs`000 Rs`000 Rs`000 Rs`000 Rs`000 Rs`000
Payable within one year 130,113 26,180 6,252 5,714 3,473 7,457 50,000 229,191 53,084
Payable after one year 789,494 80,440 40,622 22,381 31,323 28,914 29,167 1,022,341 865,563
At the beginning of the year 919,607 106,620 46,874 28,095 34,796 36,371 79,167 1,251,532 918,647
Add: Loans Obtained during
the year - 427,700
Less: Repayments made
during the year (167,613) (27,837) (6,252) (5,714) (6,642) (13,201) (50,000) (277,259) (94,817)
At the end of the year 751,994 78,783 40,622 22,381 28,154 23,170 29,167 974,272 1,251,530
Less: Payable
within one year (250,700) (28,665) (6,252) (5,714) (9,126) (7,906) (29,167) (337,530) (229,191)
(Transferred to Current
Liabilities)
Payable after one year 501,294 50,118 34,370 16,667 19,028 15,264 - 636,742 1,022,341
Kotagala Plantations PLC Annual Report 2011/1256
Bank ApprovedFacilityRs.’000
AmountObtained
Rs.’000
Balance31.03.2012
Rs.’000
Balance31.03.2011
Rs.’000
Rate ofInterest
%
Terms of Repayment Securities Pledged
a) NDB
*Term Loan 102,908 49,234 - 2,872 11.78 Repayable over 10 years from 30.11.2001 in equal monthly installments of Rs. 410,287/-, Rs.148,433/- and Rs. 57,497/- respectively.
Primary mortgage over leasehold rights of Stonycliff, Vogan, Gikiyanakanda and Dalkeith Estates and all immovable properties of these estates.
17,812 - 1,039 11.78
6,900 - 402 11.78
73,946 - 4,314
*Term Loan 123,627 74,249 8,043 15,469 11.51 Repayable over 10 years from 30.05.2003, 30.06.2003 and 30.08.2003 in equal monthly installments of Rs.618,745/-, Rs. 41,250/- and Rs.248,333/- respectively.
Secondary mortgage over lease hold rights of Stonycliff, Vogan, Gikiyanakanda and Dalkeith Estates and all immovable properties of these estates.
4,950 578 1,072 11.51
29,800 3,973 6,953 11.51
108,999 12,594 23,494
*Term Loan 215,000 198,000 198,000 198,000 23.74 Terms of repayment repayable over 5 years from 31.12.2012 ,in equal monthly instalments of Rs.3,300,000/- and Rs.283,400 respectively. (After the re-finance is received interest rate would be 15.58%)
Secondary mortgage over lease hold rights of Stonycliff, Vogan, Gikiyanakanda and Dalkeith Estates and all immovable properties of these estates.
17,000 17,000 17,000 23.74
215,000 215,000 215,000
*Term Loan 150,000 150,000 88,000 133,000 AWPLR+2.25% Repayable over 45 months starting from 29.09.2010 in 32 instalments ending in 29.07.2013
Securitisation of Kotagala tea receivable over a period of 45 months
*Term Loan 250,000 250,000 90,100 121,900 AWPLR+4.8% Payable over 4 years in first monthly instalment of Rs.900,000/- and 47 monthly instalments of Rs.3,300,000/-.
Primary mortgageover 12Mn. Ordinary shares of C W Mackie PLC. Further mortgage over leasehold rights buildings,Plant & Machinery in Stonycliff, Vogan, Gikiyanakande & Dalkeith estates.
250,000
90,100
180,200
121,900
243,800
*Term Loan 300,000 300,000 256,200 300,000 AWPLR+1.5% Payable over 38 instalments strating from 24/10/2011.
Securitisation of Kotagala Tea receivables.
Total 1,097,945 751,994 919,608
b) DFCC Bank
*Term Loan 210,852 128,665 19,190 31,982 11.55 Repayable over 10 years from 15.09.2003 in equal monthly installments of Rs. 1,067,614/- each.
Primary mortgage over lease hold rights of Drayton, Rayigam and Padukka Estate.
*Term Loan 50,000 50,000 17,916 22,917 12.75 Repayable over 10 years from 23.06.2005 in equal monthly installments of Rs. 416,667/- each.
Primary mortgage over leasehold rights to the land and buildings of Craigie Lea and Bogahawatte Estates. A Corporate guarantee of Rs. 50 million from Lankem Tea & Rubber Plantations (Pvt) Ltd.
*Term Loan 7,467 7,467 1,089 2,022 12.00 Repayable over 8 years from 25.06.2005 in equal monthly installments of Rs. 77,781/- each.
Primary mortgage over leasehold rights to the land and buildings of Craigie Lea and Bogahawatte Estates. A Corporate guarantee of Rs. 7.467 million from Lankem Tea & Rubber Plantations (Pvt) Ltd.
20.4.1) Term Loans
Notes to the Financial Statements
57
Bank ApprovedFacilityRs.’000
AmountObtained
Rs.’000
Balance31.03.2012
Rs.’000
Balance31.03.2011
Rs.’000
Rate ofInterest
%
Terms of Repayment Securities Pledged
*Term Loan 49,700 49,700 40,588 49,700 AWPR or average
treasury bill rate.
Payable over 5 years from in equal 60 monthly instalments. Grace period is 18 months
Secured under the exixting mortgage bond No.1068 dated 8th Septemebr 1998 attested by R S Wijesekara NP over the lease hold rights of Drayton, Padukka and Rayigam estates.
Total 318,019 78,783 106,621
c) Sampath Bank
Term Loan Total
50,000 50,000 50,000
40,622 40,622
46,874 46,874
15.0015.00
In 95 equal monthly instalments of Rs. 521,000/- and a final instalment of Rs. 505,000/- (capital) together with interest after a grace period of 48 months commencing from the date of 1st disbursement. (the interest will be recovered on a monthly basis during the grace period)
Loan Agreement for Rs. 50,000,000/-
Primary Mortgage Bond for Rs.50,000,000/- over leasehold rights of Arapolakande rubber estate at Kalutara together with factory buildings therein.
d) Lanka Orix Leasing Company PLC
Term Loan Total
40,000 40,000 40,000
22,38122,381
28,095 28,095
18.0018.00
Repayable over 7 years from 30.03.2009 in 84 equal monthly installments of Rs. 476,191/- each
An on demand Promissory Note for Rs. 40,000,000/- with interest @ 18% p.a. untill the receipt of refinance of the subsidiary loan from the DFCC bank, and thereafter at the rate of 10.56% p.a and the Interest shall be paid together with any taxes which may be imposed by the government from time to time Primary Mortage Bond over the Un expired Leasehold rights of Uskvalley Estate created by the Indenture of Lease bearing No: 293 dated 2nd March 1995 attested by D C Peiris, Notary Public and the amendement thereto bearing Indenture No: 1522 dated 4th July 1995 attested by M H D Amaratunga, Notary Public Corporate Guarantees of M/s Lankem Plantation Holdings Ltd. and M/s Lankem Tea & Rubber Plantations (Pvt) Ltd.
e) Peoples Leasing Co. PLC
Term Loan 13,000 13,000 3,613 7,087 13.32 Interest monthly at the rate of 24% from the time of disbursement of funds till the time the re-financve is received from DFCC.Thereafter Rs.147,070/- within the capital grace period of 12 months and Rs.350,826/- (Capital+ Interest) to be paid within 48 months.
Primary mortgage over two colour separators, Corporate guarantee of Lankem Tea and Rubber Plantations (Pvt) Ltd and Promissory Notes.
Term Loan 27,709 27,709 24,541 27,709 13.63 Interest monthly at the rate of 21% from the time of disbursement of funds till the time the re-finance is received from DFCC. Thereafter payable withing 60 months with a capital grace period of 12 months .
Primary mortgage over two colour separators, Corporate guarantee of Lankem Tea and Rubber Plantations (Pvt) Ltd and Promissory Notes.
Total 40,709 28,154 34,796
20.4.1) Term Loans (Contd.)
Kotagala Plantations PLC Annual Report 2011/1258
Bank ApprovedFacilityRs.’000
AmountObtained
Rs.’000
Balance31.03.2012
Rs.’000
Balance31.03.2011
Rs.’000
Rate ofInterest
%
Terms of Repayment Securities Pledged
f) Peoples Leasing Co. PLC
E- Friends - loan 1
1,768 1,768 1,149 1,496 6.5 Interest monthly at the rate of 25% from the time of disbursement of funds till the time the re-finance is received from PMU. Thereafter Rs.9,760 within the capital grace period of 12 months and Rs.41,924/- (Capital +Interest) to be paid within 60 months.
Loan agreement ,acceptance and receipt and Corporate guarantee from Lankem Tea and Rubber Plantations (Pvt) Ltd
E- Friends - loan 2
1,500 1,500 975 1,269 6.5 Interest monthly at the rate of 25% from the time of disbursement of funds till the time the re-finance is received from PMU. Thereafter Rs.8,281 within the capital grace period of 12 months and Rs.35,573/- (Capital +Interest) to be paid within 60 months.
Loan agreement ,acceptance and receipt and Corporate guarantee from Lankem Tea and Rubber Plantations (Pvt) Ltd
E- Friends - loan 3
10,235 10,235 7,317 9,670 6.5 Interest monthly at the rate of 25% from the time of disbursement of funds till the time the re-finance is received from PMU. Thereafter capital grace period of 12 months and the loan period is 60 months.
`Loan agreement ,acceptance and receipt and Corporate guarantee from Lankem Tea and Rubber Plantations (Pvt) LtdRubber Plantations (Pvt) Ltd.
E- Friends - loan 4
9,602 9,602 6,864 9,073 6.5 Interest monthly at the rate of 25% from the time of disbursement of funds till the time the re-finance is received from PMU. Thereafter capital grace period of 12 months and the loan period is 60 months.
Loan agreement ,acceptance and receipt and Corporate guarantee from Lankem Tea and Rubber Plantations (Pvt) Ltd
E- Friends - loan 5
9,600 9,602 6,865 9,073 6.5 Interest monthly at the rate of 25% from the time of disbursement of funds till the time the re-finance is received from PMU. Thereafter capital grace period of 12 months and the loan period is 60 months.
Loan agreement ,acceptance and receipt and Corporate guarantee from Lankem Tea and Rubber Plantations (Pvt) Ltd
E- Friends - loan 6
3,775 3,775 - 3,775 6.5 Interest monthly at the rate of 25% from the time of disbursement of funds till the time the re-finance is received from PMU. Thereafter capital grace period of 12 months and the loan period is 60 months.
Loan agreement ,acceptance and receipt and Corporate guarantee from Lankem Tea and Rubber Plantations (Pvt) Ltd
E- Friends - loan 7
2,016 2,016 - 2,016 6.5 Interest monthly at the rate of 25% from the time of disbursement of funds till the time the re-finance is received from PMU. Thereafter capital grace period of 12 months and the loan period is 60 months.
Loan agreement ,acceptance and receipt and Corporate guarantee from Lankem Tea and Rubber Plantations (Pvt) Ltd
Total 38,499 23,170 36,370
Notes to the Financial Statements
59
Bank ApprovedFacilityRs.’000
AmountObtained
Rs.’000
Balance31.03.2012
Rs.’000
Balance31.03.2011
Rs.’000
Rate ofInterest
%
Terms of Repayment Securities Pledged
g. Peoples Bank
Term Loan 100,000 100,000 29,166 79,167 Repayable within 24 instalmentsof Rs.4,166,666/- each.
Securitized tea sales of Mayfield estate
Total 100,000 29,166 79,167
Grand Total 1,685,171 974,272 1,251,530
20.5) Finance Leases
As at 31st March 2012 2011 Rs`000 Rs`000
Gross Lease Obligation 67,309 76,399 Less: Finance cost applicable for future periods (12,376) (15,211)
Net Lease Obligation 54,933 61,188
Payable within one year (Transferred to Current Liabilities)
Gross Lease Obligation 23,631 27,404 Less: Finance cost applicable for future periods (6,540) (7,115)
Net Lease Obligation 17,091 20,289 Payable within two to five years Gross Lease Obligation 43,678 48,995 Less: Finance cost applicable for future periods (5,836) (8,096)
Net Lease Obligation 37,842 40,899 Net lease obligations due after one year 37,842 40,899
Kotagala Plantations PLC Annual Report 2011/1260
20.5.1) Finance Leases
Leasing Company and Asset Cost of the Gross Lease Finance cost Net Lease Amount Amount
Asset Obligation applicable Obligation payable payable
for future within one within two
periods year to five years
Rs`000 Rs`000 Rs`000 Rs`000 Rs`000 Rs`000
People’s Leasing Co. PLC
Double cab 4,400 3,559 (454) 3,105 1,123 1,981
Total 4,400 3,559 (454) 3,105 1,123 1,981
M B S L Savings Bank
Jeep 6,944 3,778 (485) 3,293 2,219 1,074
Total 6,944 3,778 (485) 3,293 2,219 1,074
Nations Leasing Limited
Jeep 8,700 11,155 (3,141) 8,014 1,302 6,712
Truck 1,490 1,557 (251) 1,306 338 968
Total 10,190 12,711 (3,392) 9,319 1,640 7,680
Mercantile Investments PLC
Jeep 8,519 3,081 (223) 2,858 2,858 -
Lorry 2,202 967 (88) 879 741 138
Lorry 1,400 735 (80) 655 445 210
Total 12,121 4,783 (391) 4,392 4,043 348
HNB Leasing Co. Ltd
Double Cabs 38,670 36,917 (6,810) 30,107 6,757 23,350
Double Cab 5,615 5,563 (844) 4,719 1,303 3,416
Total 44,285 42,480 (7,654) 34,826 8,060 26,766
Grand Total 77,940 67,310 (12,376) 54,933 17,091 37,842
21. RETIREMENT BENEFIT OBLIGATIONS
As at 31st March 2012 2011 Rs`000 Rs`000
Balance at the beginning of the year 550,226 496,836 Provision made during the year (Note 21.1) 88,166 103,835 638,392 600,671 Payments made during the year (69,495) (50,445)Balance at the end of the year 568,897 550,226
21.1) Provision for the year consists of the following Interest cost 60,524 54,652 Current service cost 48,833 34,139 Actuarial (Gain)/Loss (21,191) 15,044 88,166 103,835
Notes to the Financial Statements
61
The actuarial valuation had been carried out by M/S Actuarial & Management Consultants (Private) Limited.
If the company had provided for gratuity on the basis of Gratuity Act. No. 12 of 1983, the liability would have been Rs.753,639,101/-
Hence, there is a contingent liability of Rs.184,742,101/- which would crystalise only if the company ceases to be a going concern.
22. NET OBLIGATION TO LESSOR
As at 31st March 2012 2011
Rs`000 Rs`000
(JEDB/SLSPC ESTATES)
Gross Lease Obligation 736,603 758,777
Less: Finance cost applicable for future periods (332,810) (349,187)
Net Lease Obligation 403,793 409,590
Payable within one year (Transferred to Current Liabilities)
Gross Lease Obligation 22,170 22,170
Less: Finance cost applicable for future periods (16,146) (16,377)
Net Lease Obligation - (Note 25) 6,024 5,793
Payable within two to five years
Gross Lease Obligation 88,680 88,680
Less: Finance cost applicable for future periods (62,075) (63,098)
Net Lease Obligation 26,605 25,582
Payable after five years
Gross Lease Obligation 625,753 647,927
Less: Finance cost applicable for future periods (254,589) (269,712)
Net Lease Obligation 371,164 378,215
Net lease obligations payable after one year 397,769 403,797
In terms of the amendment of leases, Rs.22.2 million is payable each year as lease rental, commencing from 22.06.1996 till the
end of the lease on 21.06.2045. This amount is to be inflated annually by the Gross Domestic Product (GDP) deflater in the form of
contingent rent.
Consequent to the agreement signed on 04th August 2003 by the Company with the Ministry of Plantations Industries, JEDB and
SLSPC, for the capping of management fees and freezing of lease rental in respect of the Privatised Regional Plantation Companies
relating to the Plantation Development Project, the aforesaid lease rental will be frozen for a period of six years commencing from
fiscal year 2002/03. Hence, the GDP deflator adjustment has been frozen untill 17th June 2008. Thereafter the rental will be inflated
by GDP deflator. Accordingly the all inclusive lease rental payable by the Company for a fiscal year is Rs. 59.6 million (Refer Note
22.1).
The charge to the Income Statement for the current financial year on account of interest is Rs. 46.5 million. (2010/2011 - Rs. 89.4
million)
Rs. Mn.
22.1 Gross Lease Obligation per year 22.2
Contingent Interest (GDP deflator)) 37.4
All inclusive lease rental per year 59.6
Kotagala Plantations PLC Annual Report 2011/1262
23 DEFERRED TAXATION
As at 31st March 2012 2011 Rs`000 Rs`000
Balance at the beginning of the year 177,890 134,756
Charge for the year 99,033 43,134
Balance at the end of the year 276,923 177,890
23.1 The effective tax rate used to calculate deferred tax liability as at March 2012 is 17.15% (2010/11 -14.36%)
23.2 The closing deferred tax liability arises as follows,
As at 31st March 2012 2011
Temporary Tax Temporary Tax Difference Effect Difference Effect Rs`000 Rs`000 Rs`000 Rs`000
Temporary differences on;
Tangible Assets including mature/ Immature Plantations 2,609,713 447,566 2,244,181 322,279
Retirement Benefit Obligation (568,897) (97,566) (550,226) (79,016)
Tax loss carried forward (426,187) (73,077) (455,224) (65,373)
1,614,629 276,923 1,238,731 177,890
24 TRADE & OTHER PAYABLES
As at 31st March 2012 2011 Rs`000 Rs`000
Trade payables 124,306 190,960
Other payables including Accrued charges 278,014 107,489
Payable to Employees 99,442 90,472
Payable to JEDB/SLSPC 6,024 5,793
Unclaimed Dividends 3,759 2,263
511,544 396,977
25 AMOUNTS DUE TO RELATED PARTIESAs at 31st March 2012 2011 Relationship Rs`000 Rs`000
Lankem Tea & Rubber Plantations (Private) Limited Affiliate Co. 63,619 80,598
Lankem Plantation Services Limited Affiliate Co. 4,368 4,245
Sigiriya Village Hotels PLC Affiliate Co. 678 678
68,665 85,521
26. CAPITAL COMMITMENTSThere were no material capital commitments as at the Balance Sheet date. However the budgeted capital development programme
for the next financial year amounts to approximately Rs 654.5million.
27. CONTINGENCIESThere were no other material contingent liabilities outstanding as at the Balance Sheet date.
28 EVENTS OCCURRING AFTER THE BALANCE SHEET DATE The Board of Directors has recommended a first and final dividend of Rs. 2.00 per ordinary share for the year ended 31 March 2012
for approval by the shareholders at the Annual General Meeting.No circumstances have arisen since the Balance Sheet date,which
would require adjustments to or disclosures in the Financial statements,other than above.
Notes to the Financial Statements
63
Amount (paid)/ received Balance as at 31 March
Ralated Party Name of Director Details of Transaction 2012 2011 2012 2011
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000
(1) Transactions with Intermediate Parent Company
Lankem Ceylon PLC A Rajaratnam Paid on chemicals - 59
S D R Arudpragasam Loan Given - 300,000
Expenses Paid (5,047) -
Interest Charged 27,370 -
Interest Received (15,591) - 306,731 300,000
(2) Transactions with Parent Company
Lankem Plantation A Rajaratnam Dividend (108,900) (32,670)
Holdings Limited S D R Arudpragasam Transfer of funds 108,900 32,670
Sundry expenses - 7 9 9
(3) Transactions with Other Related Companies
a. Lankem Tea & Rubber A Rajaratnam Managing Agent Fee (87,489) (138,388)
Plantations S D R Arudpragasam Reimbursement of expenses
(Private) Limited C P R Perera and Managing Agents Fee Paid 18,050 49,536
R C Peries Dividends 86,418 (25,926)
D A Ratwatte Transfer of funds - 31,025
G D V Perera (63,619) (80,598)
b. Agarapatana Plantations Limited
A Rajaratnam Reimbursement of expenses 53,775 11,684
S D R Arudpragasam Settlement of Loans (441) (18,011)
C P R Perera Shortterm advances 8,396 33,831
R C Peries Rights Issue (200,000) -
D A Ratwatte
G D V Perera 6,318 144,588
c. Lankem Plantation Services Limited
A Rajaratnam Interest on short term
S D R Arudpragasam loan (at 12%) (480) (480)
Reimbursement of
expenses and interest paid 357 329 (4,368) (4,245)
d. Sherwood Holidays Limited
A Rajaratnam Bungalow maintainence
S D R Arudpragasam expenditure - 857
D A Ratwatte VAT Paid 868 -
G D V Perera 9,198 8,330
29. Related Party Disclosures
Kotagala Plantations PLC Annual Report 2011/1264
Amount (paid)/ received Balance as at 31 March
Ralated Party Name of Director Details of Transaction 2012 2011 2012 2011
Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000
e. Beruwala Resorts Limited
A Rajaratnam
S D R Arudpragasam
C P R Perera Sale of tea - - 13 13
f. Marawila Resorts PLC A Rajaratnam
S D R Arudpragasam
C P R Perera Cash received for Tea Sales (25) - 184 209
g. E B Creasy & Co.PLC A Rajaratnam
S D R Arudpragasam Land Rent - - 208 208
h. Sigiriya Village A Rajaratnam
Hotels PLC S D R Arudpragasam
C P R Perera - - (678) (678)
i. Creasy Plantation Management Limited
A Rajaratnam Sundry expenses
S D R Arudpragasam Cash received (2) - - 2
j Ceylon Tea Brokers PLC
C P R Perera Sale of tea 101,364 99,368
Cash received (102,404) (103,231) 684 1,721
(4) Compensation of Key Management Personnel
The Key management personnel includes Board of Directors and the senior management committee of the Company
for the year ended 31st March.
As at 31st March 2012 2011
Rs`000 Rs`000
Short term employee benefits 82,191 63,637
There were no other related party transactions and balances other than those disclosed in notes 5,6,13,16,25 and 29 to the
Financial Statements
30 COMPARATIVE INFORMATION
Comparative information of the Company has been reclassified wherever necessary to conform with the current year’s presentation.
Notes to the Financial Statements
65
Financial TermsAccounting Policies
The specific principles, bases, conventions, rules and practices adopted by an enterprise in preparing and presenting financial statements.
Contingent LiabilitiesA possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise.
Current RatioCurrent Assets divided by Current Liabilities. A measure of liquidity.
Debt/Equity Ratio Total Interest Bearing Borrowings to Shareholders’ Fund.
Deferred Taxation The tax effect of timing differences deferred to / from other periods, which would only qualify for inclusion on a tax return at a future date.
DividendsDistribution of profits to holders of equity investments in proportion to their holdings of a particular class of capital.
Dividend CoverProfit attributable to Ordinary Shareholders divided by dividend. Measures the number of times dividend is covered by distributable profit.
Dividend YieldDividend per Share as a percentage of the market price. A measure of return on Investment.
Earnings per Share Profit attributable to shareholders divided by the weighted average number of ordinary shares in issue during the period
EBITDAEarnings before Interest, Tax, Depreciation and Amortisation.
ROCEProfit after Tax plus interest on loans and finance leases divided by the shareholders’ funds and interest bearing loans and borrowings.
Gearing Proportion of borrowings to capital employed.
Interest CoverProfit before tax plus net finance cost divided by net finance cost. Measure of an entity’s debt service ability.
Market CapitalisationNumber of shares in issue multiplied by the market value of a share at the reported date.
Net Assets per ShareShareholders’ Funds divided by the weighted average number of ordinary shares in issue. A basis of share valuation
Price Earnings RatioMarket price of a share divided by earnings per share as reported at that date.
Related partiesParties who could control or significantly influence the financial and operating policies of the business.
SegmentConstituent business units grouped in terms of similarity of operations and locations.
Value AdditionsThe quantum of wealth generated by the activities of the Company measured as the difference between turnover and the cost of materials and services bought in.
Working CapitalCapital required to finance the day-to-day operations computed as the excess of current assets over current liabilities.
Non Financial TermsCOPCost of producing a kilo of Tea/Rubber.
CTCCrush, Tear & Curl. A manufacturing method.
HACCPHazard Analysis Critical Control Point System. A standard for safety of foods.
Immature PlantationThe extent of plantation which is not taken in to the bearing and is in the process of development.
ISOInternational Standard Organisation.
Mature PlantationThe extent of plantation from which crop is being harvested.
NSA Net Sales Average. Measures the average value of net selling price of a kilo of Tea/Rubber.
RRIRubber Research Institute.
Seedling TeaTea grown from a seed.
TRITea Research Institute.
VP TeaVegetatively Propagated. Tea grown from a cutting of a branch of tea plant.
YPHYield per Hectare. The measure of average yearly output of produce from a hectare of mature plantation.
Glossary of Financial and Non Financial Terms
Kotagala Plantations PLC Annual Report 2011/1266
Notice of Meeting
Notice is hereby given that the Nineteenth Annual General
Meeting of Kotagala Plantations PLC will be held at the Grand
Oriental Hotel,No.2, York Street, Colombo 1, on 27th June, 2012,
at 10.30 a.m. for the following purposes:
1. To receive and consider the Annual Report of the Board of
Directors and the Statements of Accounts for the year ended
31st March, 2012 with the Report of the Auditors thereon.
2. To declare a First and Final Dividend as recommended by
the Directors.
3. To re-elect as a Director Mr. D.A. Ratwatte who retires
in accordance with Articles 92 & 93 of the Articles of
Association.
4. To reappoint Mr. A. Rajaratnam who is seventy years of age
as a Director.
Special notice has been received from a Shareholder of
the intention to pass a resolution which is set out below in
relation to his reappointment. (see Note No.4)
5. To reappoint Mr. R.C. Peries who is over seventy years of
age as a Director.
Special notice has been received from a Shareholder of
the intention to pass a resolution which is set out below in
relation to his reappointment. (see Note No.5)
6. To re-appoint as Auditors, KPMG, Chartered Accountants and
authorise the Directors to determine their remuneration.
By Order of the Board
CORPORATE MANAGERS & SECRETARIES (PRIVATE) LTD.
Secretaries
Colombo
23rd May, 2012
Notes:
1. A member of the Company who is entitled to attend and vote
may appoint a proxy to attend and vote instead of him or her.
A proxy need not be a member of the Company.
2. A Form of Proxy is enclosed for this purpose.
3. The instrument appointing a proxy must be deposited at the
Registered Office of the Company’s Secretaries at No.8-5/2,
Leyden Bastian Road, York Arcade Building, Colombo 1,not
less than forty eight hours before the time fixed for the
meeting.
4. Special Notice has been received by the Company from
a shareholder giving notice of the intention to move the
following Resolution as an Ordinary Resolution at the Annual
General Meeting:
Resolved -
“That Mr. A. Rajaratnam who is seventy years of age be and is
hereby reappointed a Director of the Company and it is further
specially declared that the age limit of seventy years referred to
in Section 210 of the Companies Act No.7 of 2007 shall not apply
to the said Director, Mr. A. Rajaratnam.”
5. Special Notice has been received by the Company from
a shareholder giving notice of the intention to move the
following Resolution as an Ordinary Resolution at the Annual
General Meeting:
Resolved -
“That Mr. R.C. Peries who is seventy one years of age be and is
hereby reappointed a Director of the Company and it is further
specially declared that the age limit of seventy years referred to
in Section 210 of the Companies Act No.7 of 2007 shall not apply
to the said Director, Mr. R.C. Peries .”
67
Form of Proxy
I/We* ………………………………………………………………......................................................................................................................……............…… of
..………….................................................................................................................… being a member/members* of Kotagala Plantations PLC, hereby
appoint,......................................................................................................of..…….............................................................………....................or failing him
1. Alagarajah Rajaratnam of Colombo or failing him
2. Sri Dhaman Rajendram Arudpragasam of Colombo or failing him
3. Chrisantha Priyange Richard Perera of Colombo or failing him
4. Ranjit Crisantha Peries of Colombo or failing him
5. Devaka Ajit Ratwatte of Colombo or failing him
6. Ganegodage Dhamitha Vaamaka Perera of Colombo
as my/our *proxy to represent me/us*,and to vote as indicated hereunder for me/us* and on my/our* behalf at the Nineteenth Annual
General Meeting of the Company to be held on 27th June 2012 at 10.30 a.m. and at any adjournment thereof and at every poll which may
be taken in consequence thereof
For Against
1. To receive & consider the Annual Report of the Board of Directors and the Statement of
Accounts for the year ended 31st March 2012 with the Report of the Auditors thereon.
2. To declare a First and Final Dividend as recommended by the Directors.
3. To re-elect Mr. D A Ratwatte as a Director.
4. To re-appoint Mr. A Rajaratnam as a Director.
5. To re-appoint Mr. R C Peries as a Director.
6. To re-appoint as Auditors, KPMG Chartered Accountants and authorise the
Directors to determine their remuneration.
* The proxy may vote as he/she thinks fit on any other resolution brought before the meeting
As witness, my/our* hands this ……................…. day of .............….. 2012.
..........................................
Signature
Note: *Please delete the inappropriate words.
1. A Proxy need not be a member of the Company.
2. If no words are struck out or there is in view of the Proxy doubt (by reason of the way in which the instructions contained in the form of
Proxy have been completed) as to the way in which the Proxy should vote, the Proxy will vote as he thinks fit.
3. Instructions as to completion are noted on the reverse hereof.
Kotagala Plantations PLC Annual Report 2011/1268
INSTRUCTIONS AS TO COMPLETION
1. Please write legibly, your name, address and date, and sign in the space provided.
2. The completed Form of Proxy should be received at the Registered Office of the Company’s Secretaries, Corporate Managers & Secretaries
(Private) Ltd. at 8-5/2 Leyden Bastian Road, York Arcade Building, Colombo 01, not less than 48 hours before the time appointed for the
holding of the meeting.
3. In case of a Company/Corporation, this Form of Proxy shall be executed either under its Common Seal or by its Attorney or by an officer
on behalf of such Company/Corporation duly authorised in writing.
4. In the case of a Proxy signed by an Attorney, the Power of Attorney must be deposited at the Registered Office of the Company’s
Secretaries for registration.
Corporate InformationName of the Company : Kotagala Plantations PLC
Legal Form : A Quoted Public Company with Limited Liability
Date of Incorporation : 22nd June 1992
Company Registration No. : PQ 174
Principle Activities : Cultivation, Manufacture and Sales of Tea and Rubber
Registered Office : 53 1/1, Sir Baron Jayatilaka Mawatha, Colombo 1.
E-mail : [email protected] : www.lankemplantations.lk Directors : A Rajaratnam - Chairman (Alternate - S D R Arudpragasam) S D R Arudpragasam R C Peries C P R Perera D A Ratwatte G D V Perera
Stock Exchange Listing : The Ordinary Shares of the Company are listed with the Colombo Stock Exchange of Sri Lanka
Senior Management : R C Peries - Executive Director/(CEO - Lankem Tea & Rubber M.C.I.P Plantations (Pvt) Ltd - Managing Agents) : D A Ratwatte - Executive Director-Up Country F.I.P.M : G D V Perera - Executive Director-Marketing & Administration F.I.P.M : Ms K M Ramesh - Executive Director Finance (Lankem Tea & Rubber F.C.M.A (UK), MBA (USA) Plantations (Pvt) Ltd - Managing Agents) : K G Punchihewa - Deputy CEO/Director - Lankem Tea & Rubber Plantations F.C.A (Pvt) Ltd - Managing Agents : S A Eriyagama - Executive Director Low Country (Lankem Tea & Rubber B.Sc (Plantation Mgt), Plantations (Pvt) Ltd - Managing Agents) Dip. (Plantation Mgt) - (NIPM) : H D Caldera - Executive Director Up Country - (Lankem Tea & Rubber Plantations F.I.P.M (Pvt) Ltd - Managing Agents) (Appointed w.e.f. 01.04.2011) : Amrit Rajaratnam - Director - Lankem Tea & Rubber Plantations (Pvt) Ltd - Managing Agents LLB (Notts.), Barrister-at-Law (Appointed w.e.f. 01.04.2012) : M S Madugalle - Director - Lankem Tea & Rubber Plantations (Pvt) Ltd - Managing Agents Dip. (Plantation Mgt) (NIPM) (Appointed w.e.f. 01.04.2012) : B G S Peiris - General Manager (Up Country) F.I.P.M : J K Congreve - General Manager (Manufacture) Dip. (Plantation Mgt) - (NIPM) : Ms J Kariyawasam - General Manager (Legal & Administration) Attorney-at-Law & Notary Public, Dip. in Intellectual Property Law : A M S Kulasekara - General Manager (Engineering) A.I.E. (SL), F.I.I.E. (SL), I.Eng., Graduate - City & Guilds (U.K.)
Secretaries : Corporate Managers & Secretaries (Private) Limited 8-5/2, Leyden Bastian Road, York Arcade Building, Colombo 1.
Auditors : KPMG Chartered Accountants, P.O.Box 186, Colombo 3.
Bankers : Seylan Bank PLC People’s Bank National Development Bank DFCC Bank
Legal Advisers : Messrs Julius & Creasy Attorneys-at-law P.O.Box 154, Colombo 1.
VisionTo be the foremost producer of High Quality Tea &
Rubber
MissionTo maximise land and labour productivity and
achieve excellence in the profitable management
of the Company in an acceptable and socially
responsible manner.
Core ValuesIntegrity
Courage
Commitment
ObjectivesTo lead the way in the technical and innovative
development of the Tea & Rubber agri-industries.
To provide a satisfying work experience to our
employees and ensure a rewarding investment to
our shareholders.
To be a trail-blazer in the shift away from
producing visually graded rubber as an agricultural
commodity to the production of a fully technically
specified industrial polymer
Financial Highlights 01
Chairman’s Review 02
CEO’s Review 04
Board of Directors 07
Risk Management 08
Enterprise Governance 10
Our Plantations 15
Production and Yield 16
Management Discussion & Analysis 17
Ten Year Summary 22
Shareholder & Investor Information 23
Sustainability Reporting 24
Financial Reporting
Annual Report of the Board of Directors 30
Statement of Directors' Responsibilities 33
Report of the Auditors 34
Income Statement 35
Balance Sheet 36
Statement of Changes in Equity 37
Cash flow Statement 38
Notes to the Financial Statements 39
Glossary of Financial and Non Financial Terms 65
Notice of Meeting 66
Form of Proxy 67
Corporate Information Inner Back Cover
Content
KOTAGALA PLANTATIONS PLCANNUAL REPORT 2011/2012
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