renuka agri foods plc - colombo stock exchange · 2017. 8. 16. · renuka agri foods plc is an...

RENUKA AGRI FOODS PLCAnnual Report 2017

CONTENTSWHO WE ARE, VISION, CULTURE AND VALUES 1

MANUFACTURING & PLANTATIONS 2

AT A GLANCE 3

PROFILES OF DIRECTORS 4-5

CHAIRMAN’S REVIEW 6

CORPORATE GOVERNANCE 7-13

AUDIT COMMITTEE REPORT 14-15

RELATED PARTY TRANSACTIONS REVIEW COMMITTEE 16-17

REMUNERATION COMMITTEE REPORT 18

NOMINATION COMMITTEE REPORT 19

RISK MANAGEMENT 20-24

SUSTAINABILITY REPORT 25-26

REPORT OF THE DIRECTORS 27-31

STATEMENT OF DIRECTORS RESPONSIBILITY 32

FINANCIAL REPORTS INDEPENDENT AUDITORS’ REPORT 33

STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME 34

STATEMENT OF FINANCIAL POSITION 35

STATEMENT OF CHANGES IN EQUITY 36-37

STATEMENT OF CASH FLOW 38

NOTES TO THE FINANCIAL STATEMENTS 39-78

DIRECTORATE OF GROUP COMPANIES 79

REAL ESTATE PORTFOLIO 80

FIVE YEAR SUMMARY 81

SHAREHOLDER AND INVESTOR INFORMATION 82-84

NOTICE OF MEETING 85

FORM OF PROXY 87-88

RENUKA AGRI FOODS PLCAnnual Report 2016/17

1

VISION

Renuka Agri Foods PLC is an Agribusiness organisation listed on the Colombo Stock Exchange. We are an organisation engaged in plantations, manufacturing and distribution, integrated across the value chain. As an organisation focused on results, the emphasis has been towards the creation of long term shareholder value in all our businesses, while being a socially reponsible corporate citizen.

To be a leading global manufacturer, marketer and center of excellence for agriculture based food and beverage products.

Culture and ValuesRenuka’s culture reflect more than a structure, it is a statement of values. Our commitment to a Responsive, Enterprising, Nurturing, Unrelenting, Knowledgeable and Accountable workplace enables us to build relationships with clients and with colleagues, on honesty and trust. It drives our ability to deliver great products and services and to generate superior long-term financial performance for our shareholders.

WHOWE

ARE


2

Kandy Plantations Ltd today is one of Sri Lanka’s largest, integrated organic certified farms contributing to uplift the rural communities around the region. While it’s subsidiary Ceylon Foresty (Pvt) Ltd is engaged in sustainable cultiva-tion of trees.

Plantations

Renuka Agri Foods PLC is involved in the manufacturing of coconut based food and beverage products for the local and interna-tional markets. Our state of the art produc-tion facilities are geared to meet the demands set out by clientele the world over and brings out the best taste in different forms of packaging.

Renuka Organics (Pvt) Ltd is the license holder for our organic plantations and facto-ries thus ensuring that the world demand for organic coconut products is sustainable on a long term basis.

Manufacturing


3

323EBIT

Million

323Net Profit

Million

817Employees

Nos,

3,726Total Assets

Million

2,541Revenue

Million

Rupees(Mn)

4,000

3,000

2,000

1,000

2013 Year

Revenue Profit

2014 2016 20172015

Group Revenue and Profit

Revenue in Year 20172,541 Mn

323 MnProfit for the Year 2017

Rupees(Mn)

4,000

3,000

2,000

1,000

2013 Year

Assets Liabilities

2014 2016 20172015

Total Assets and Liabilities

Total Assets 20173,726 Mn

897 MnTotal Liabilities 2017

Rupees(Mn)

4,000

3,000

2,000

1,000

2013 Year

Equity Capitalization

2014 2016 20172015

Total Equity and Market Capitalization

Total Equity 20172,829 Mn

1,573 MnMarket Capitalization 2017

VALUEADDEDDISTRIBUTION

Taxes

Salaries

Dividend

Retained

Operations

3%34%

9%40%14%

40

30

20

10

LKR

AT A GLANCE


4

PROFILE OF DIRECTORSDr. S.R. Rajiyah

Dr S.R.Rajiyah is the Executive Chairman of the Company. He is also the Chairman of Renuka Foods PLC, Shaw Wallace Ceylon Ltd and the Managing Director of the Renuka Group. He is a medical doctor qualified in Sri Lanka and counts over 40 years of corporate experience in operations, quality management, research and development as well as in founding and running businesses.

Mrs. I.R. Rajiyah

Mrs. I.R. Rajiyah is the Executive Deputy Chairperson of the Company. She is qualified in Business Studies from the United Kingdom and is a fellow of the British Institute of Management. She counts over 40 years of corporate experience in founding and running businesses. She was presented with the Best Women Exporter Award in 2009 by the National Chamber of Exporters Sri Lanka. She is also the Executive Chairperson of Renuka Holdings PLC, Executive Deputy Chairperson of Renuka Foods PLC, a Non-Executive Director of Shaw Wallace Ceylon Ltd, Richlife Dairies Ltd and several un-listed companies.

Mr. V. Sanmugam

Mr V. Sanmugam is an Executive Director/Chief Executive Officer of the Company. He holds a Bachelor of Engineering Degree from the Mangalore University. He counts over 30 years of industrial work experience, out of which, 20 years have been with the Renuka Group. He has extensive experience in supply chain management and overall general management functions. He is also an Executive

Director of Renuka Foods PLC, Shaw Wallace Ceylon Ltd and Richlife Dairies Ltd.

Mr. S.V. Rajiyah

Mr. S.V. Rajiyah is an Executive Director of the Company. He is also an Executive Director of Renuka Holdings PLC, Renuka Foods PLC, Shaw Wallace Ceylon Ltd and Richlife Dairies Ltd. He is Executive Chairman of Renuka Capital PLC. Mr. Rajiyah is a graduate in Management from the Warwick Business School, University of Warwick, United Kingdom. He has over 16 years of experience in General Management. He is a member of the Economic Fiscal Policy Planning Committee of the Ceylon Chamber of Commerce.

Mr. M. Terfloth

Mr M.Terfloth is a Non-Executive Director and holds MBA from IMD, Switzerland and a BSc in marketing. After trading financial instruments in London and New York with Credit Suisse-First Boston, he joined Terfloth & Kennedy (U.K.) Ltd. Since 1991 he has been President and CEO of B. Terfloth & Cie (Canada) Inc, then also taking over the chairmanship. His direct interests include international strategic sourcing, key product and brand development.

Mr. Kapila Liyanagamage

Mr. Kapila Liyanagamage is an Independent Non-Executive Director and an Attorney-at-Law of the Supreme Court of Sri Lanka with 20 years of experience in the field of Civil & Commercial Law. He holds a degree of Master of Laws in Law of International Trade from the University of Wales. He has served

as the Legal Consultant of Sri Lanka Ports Authority (2004 - 2015) and as a Director of National Savings Bank (2005 - 2008).

Ms. A.L. Rajiyah

Ms. A.L. Rajiyah is an Executive Director of the Company and holds a BSc (Hons) degree in Accounting and Finance from the University of Warwick and MSc in Law and Accounting from the London School of Economics.

She spent 3 years at the investment bank, Morgan Stanley in London where she was involved in the structuring of credit derivative products linked to European corporates. She subsequently joined Alcentra Limited (a subsidiary of Bank of New York Mellon Corporation) which is a USD 18 Bn asset management firm in London, where she was a Vice President involved in portfolio management, trading and investing in credit derivative products for Alcentra’s structured products platform. She is also an Executive Director of Renuka Foods PLC and Non-Executive Director of Renuka Holdings PLC.

Mr. S. Nagarajah

Mr. S. Nagarajah is an Independent Non-Executive Director, a fellow member of the Institute of Chartered Accountants (Sri Lanka), CIMA(U.K), and ACCA(UK). He is a retired Banker.

Mr. L.M. Abeywickrama

Mr. Lasantha Abeywickrama is a Non-Executive Director of the company. He is a Management consultant and trainer with over 30 years of management experience in the private sector both Sri


5

Profile of directors (Contd...)

Lanka and Overseas. He holds a Bachelors Degree in Science from the University of Colombo, a Post Graduate Diploma in Marketing from the Chartered Institute of Marketing and MBA from the American University Washington DC. He is a fellow of the Chartered Institute of Marketing and a past Chairman of the CIM Sri Lanka region. He serves as a Non-Executive Director on the Boards of Renuka Foods PLC and Renuka Holdings PLC.

Mr. D.S. Arangala

Mr. Daya Sumith Arangala was appointed to the Board on 2nd May 2016 as an Independent Non-Executive Director. He was the former Chief Executive Officer of Lanka Ventures PLC (LVL) and had held this position since 2002 and retired on 30th April 2016. LVL is a leading venture capital company in Sri Lanka and is a listed company in the Colombo Stock Exchange.

Mr. Arangala took up duties as the CEO of LVL Energy Fund Ltd, a subsidiary of LVL with effect from 1st May 2016. He represent LVL Energy Fund Ltd, on the Board of all of its investee companies. Prior to joining LVL he worked at the Capital Development and Investment Company Ltd, the pioneer venture capital company in Sri Lanka for over 14 years and at the time of leaving the company he held the position of Assistant General Manager. He commands considerable knowledge and experience in investing in private equity, venture capital and capital markets being associated with the industry over 30 years.

He is a Bachelor of Engineering from the Royal Melbourne Institute of Technology (RMIT), Melbourne, Australia and holds a Graduate Diploma in Quality Technology from the same institute. He is a Graduate member of the Institute of Engineers, Australia.


6

CHAIRMAN’S REVIEWIt is a pleasure to welcome you to the 18th Annual General Meeting of the Company and to place before you the Audited Financial Statements and the Annual Report of the Company for the financial year ended 31st March 2017.

Coconut is an industry in which we have made an impact by deviating from the traditional path most other agricultural companies comfortably follow. This has placed our company in a group of selected exporters concentrating on branded products. Our innovative approach to product development and marketing has strengthened our position in this regard.

The Industry Performance

The Coconut industry saw nut production in 2016 of 2,840 Mn, which is a 7.4% decrease from 3,056 Mn nuts in 2015. The Coconut Development Authority has shown initiatives in promoting the benefits of value added coconut consumption locally by educating the masses on the benefits of using processed coconut products as opposed to wasteful domestic methods, which results in at least a 40% wastage of the nut. Similarly, the Coconut Cultivation Board and the Coconut Research Institute is actively engaged in promoting new cultivations in the North and East as part of a larger government initiative to ensure increase in acreage of coconut plantations.

The drought of 2016 had an impact on the coconut crop in quarter 4 and the first three months of the year and during this lean season nut prices have shown unprecedented high levels ranging from 10-25 % higher than in the same period last year. This trend is expected to continue for most of 2017/18.

The Company Performance

I am pleased to note that we have achieved Rs 2.5 billion in revenue for the group, the year 2016/17 results show that your organization has progressed even further in bottom line, laying the foundation for future growth. We have recorded a total comprehensive income of Rs 320 million for the group during the current financial year, being a 62% increase from 2015/16. The statement of financial position has become further strengthened in the year under review with total assets increasing to Rs 3.7 billion for the group.

Our company performed well by consolidating its core business in the branded sector, sales grew in established markets as well as in new markets. The healthy bottom line achieved against a comparably static topline is mainly due to this factor of brand consolidation. The Company also undertook extensive customer endearing programs to lay a strong foundation for market expansion.

The Future

What will we do in the year ahead? We will continue to explore new markets with potential to grow our targets. We will also find new avenues to propagate our brand image and undertake a marketing strategy with minimal risk for sustainable growth.

The research and development department of the company has been urged to identify niches, deviating from traditional and price competitive options which have become the targets for many an agriculture company. Exciting new products based on coconut will continue to come out of our research laboratory to support a healthy lifestyle, naturally.

As we have often declared, the vision of our company is to be a global local. In other words, a company with a firm footing in Sri Lanka but with the strength to reach most coconut consuming countries in the world. Towards this objective, the company has set its targets to become a multinational player by the turn of the decade. We are confident that with the passion we possess in doing our business we can achieve this not impossible target and make Renuka Agri a proud Sri Lankan entity.

Acknowledgments

In conclusion I take this opportunity to express my sincere appreciation to all our employees for their contribution. It is their deep commitment that made it possible to achieve the above results. I acknowledge the cooperation and support received from our business partners and my gratitude to all my fellow Directors for their support.

On behalf of the Board of Directors I thank all our shareholders for the continuing trust and confidence placed in the Company.

Sgd.

Dr. S.R. RajiyahChairman9th August 2017


7

CORPORATE GOVERNANCECorporate Governance is a system of rules, practices and processes by which a company is directed and controlled. Corporate Governance essentially involves balancing the interests of the many stakeholders in a company - these include its shareholders, management, customers, suppliers, financiers, government and the community. Since Corporate Governance also provides the framework for attaining a company’s objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure. The Company holds itself accountable to the highest standards of Corporate Governance and provides public accessibility to the information of the Company. Corporate Governance has been institutionalized at all levels in the Group through a strong set of corporate values which have been adhered to by the senior management and Board of Directors in the performance of their official duties and in other situations which could affect the Group image. The Group is committed to the highest standards of integrity, ethical values and professionalism in all its activities.

In Renuka Agri Foods Group, we set our framework of Corporate Governance in line with Code of Best Practice on Corporate Governance issued by the Institute of Chartered Accountants of Sri Lanka and the rules set out in the Colombo Stock Exchange Listing Rules and also comply with the Country’s Legislative and Regulatory requirement.

Internal Governance Structure

Board of Directors

The Board of Directors are the ultimate governing body of the Company with diverse experience, professionalism and has a wide range of expertise in various fields as set out on pages 4 to 5.

The Board is responsible for the ultimate supervision of the Group. In all action taken by the Board, Directors are expected to exercise their business judgment considering the best interest of the Company. The Directors participate in defining goals, visions, strategies and business targets.

The Board gives leadership in setting the strategic direction and establishing a sound control framework for the successful functioning of the Company. The Boards composition reflects a sound balance of independence.

COMPOSITION OF THE BOARD AND DIRECTORS INDEPENDENCE

Composition of the Board of Directors as at 31st March 2017 consists of 10 members of which

• 5 Executive Directors

• 2 Non-Executive Directors

• 3 Non-Executive Independent Directors

The Independence of the Directors are measured in accordance with the Listing Rules of the Colombo Stock Exchange and the Independent Non-Executive Directors has submitted signed confirmation of their Independence.

Name of Director Executive Non – Executive

Independent

Dr S.R. Rajiyah

Mrs I.R. Rajiyah

Mr S.V. Rajiyah

Mr V. Sanmugam

Ms A.L. Rajiyah

Mr C. J. De. S. Amaratunge*


Mr M. Terfloth

Mr. S. Nagarajah

Mr. D.S. Arangala **

Mr K Liyanagamage ***

BOARD RESPONSIBILITIES

The Board aims at fulfilling its responsibilities by creating value for all stakeholders that is sustainable and beneficial. Under the direction of the Executive Directors and oversight of the Board, the business of the Company is conducted by its managers, officers and employees to enhance the long term value of the Company.

* Mr C. J. De. S. Amaratunge resigned from the Board on 2nd May 2016**Mr. D.S. Arangala appointed to the Board on 2nd May 2016***Mr K Liyanagamage was appointed to the Board on 1 st August 2016


8

Corporate Governance (Contd...)

Name of Director Eligible to attend

Attended

Dr S.R. Rajiyah 4 44Mrs I.R. Rajiyah 4 3/4Mr S.V. Rajiyah 4 4/4Mr V. Sanmugam 4 4/4Ms A.L. Rajiyah 4 0/4Mr. C.J.De.S. Amaratunge N/A N/A

Mr. L.M. Abeywickrama 4 1/4Mr M. Terfloth 4 0/4Mr. S. Nagarajah 4 4/4Mr. D.S. Arangala (Appointed w.e.f. 2/5/2016) 3 3/4Mr K Liyanagamage (Appointed w.e.f 1/8/2016 ) 3 3/3


Attended

Mr. S. Nagarajah (Chairman) 5 5/5Mr. L.M. Abeywickrama (Resigned w.e.f 1/8/2016) 2 2/2Mr. D.S. Arangala (Appointed w.e.f. 30/5/2016) 4 2/4Mr K Liyanagamage (Appointed w.e.f 1/8/2016) 3 3/3


Attended

Mr. T.K Bandaranayake (Chairman Appointed w.e.f 3/8/2016)

3 3/3

Mr. L.M. Abeywickrama (Resigned w.e.f 1/8/2016)

1 1/1

Mr. D.S. Arangala (Appointed w.e.f. 30/5/2016 and resigned w.e.f 3/8/2016)

N/A N/A

Mr S Nagarajah (Resigned w.e.f 3/8/2016 ) 1 1/1Mr M.S.Dominic (Appointed w.e.f 3/8/2016) 3 2/3Mr J.M.Swaminathan (Appointed w.e.f 3/8/2016) 3 3/3

The Board meets regularly and gives full consideration to the following:

• Reviewstrategicandoperationalissues

• Approveinterimandannualbudgets

• Reviewprofitandworkingcapital forecasts and monthly management accounts

• Provideadviceandguidelinestosenior Managers

• ApprovemajorInvestments

• Approveinterimandannualreports

BOARD BALANCE

The balance of Executive, Non-Executive and Independent Non-Executive Directors on the Board who are professionals/academics/business leaders holding senior positions in their respective fields ensures a right balance between executive expediency and independent judgment as no individual Director or small group of Directors dominate the Board discussion and decision making.

Directors are provided with monthly reports of performance and minutes of the Board Meetings and are given the specific documentation necessary, in advance of such meetings.

There is a distinct and clear division of responsibilities between the Chairman and the Management to ensure that there is a balance of power and authority. The roles of the Chairman and the management are separated and clearly defined. The Chairman is responsible for ensuring Board effectiveness and conduct whilst the Management has overall responsibilities over the operating units, organizational effectiveness and implementation of Board policies and decisions.

BOARD MEETINGS AND ATTENDANCE

There were 4 Board Meetings for the year ended 31st March 2017 and attendance at meetings was as follows

Audit Committee attendance for the year was as follows :

Related Party Transactions Review Committee attendance for the year was as follows

APPOINTMENT AND RE-ELECTION OF DIRECTORS

The Company’s Articles of Association call for one third of the Non-Executive Directors to retire at each Annual General Meeting and the Director who retires are those who have served for the longest period after their appointment/re-appointment.


9

PROCEDURE FOR DIRECTORS TO OBTAIN PROFESSIONAL ADVICE

The Directors obtain independent and professional advice where necessary with regard to decision making in their duties.

BOARD COMMITTEES

To assist the Board in discharging its duties various Board Committees are established. The functions and terms of references of the Board Committee are clearly defined, where applicable and comply with the recommendation of the Code of Best Practice on Corporate Governance.

AUDIT COMMITTEE

The Audit Committee reviews issues of accounting policy and presentation for external audit function and ensures that an objective and professional relationship is maintained with the external auditors. Its principal function is to assist the Board in maintaining a sound system of internal controls. The Committee has full access to the external auditors who, in turn, have access at all times to the Chairman of the Committee. The Committee meets with the external auditors without any executive present at least once a year, in line with good Corporate Governance Practice.

The Report of the Audit Committee is presented on pages 14 and 15 and the duties of the Audit Committee are included therein.

RELATED PARTY TRANSACTIONS REVIEW COMMITTEE

The related Party Transactions review committee was established on 1st January 2016 with an objective of keeping in line with the Code of Best Practice on Corporate Governance and the requirement of the Listing Rules of Colombo Stock Exchange with a view to ensure that the interests of shareholders as a whole are taken into account by Renuka Agri Foods PLC and its subsidiaries and are consistent with the Listing

Rules of Colombo Stock Exchange when entering into Related Party Transactions and make required disclosures in a timely manner.

The Related Party Transaction Committee of Renuka Agri Foods PLC is the same committee of the ultimate parent, Renuka Holdings PLC appointed with effect from 3rd August 2016,by and responsible to the Board of Directors

The Report of the Related Party Transactions Review Committee is presented on Pages 16 and 17.

REMUNERATION COMMITTEE

The Remuneration Committee is responsible for developing the Groups remuneration policy and determining the remuneration packages of executive employees of the Group. The Committee recommends to the Board and its subsidiaries the remuneration to be paid to Key Management Personnel.

The Remuneration Committee of Renuka Agri Foods PLC is the same committee of the ultimate parent, Renuka Holdings PLC appointed by and responsible to the Board of Directors, it consists of two Non-Executive Independent Directors and one Non-Executive Director. The Managing Director may also be invited to join in the deliberation as required. The Chairman of the Committee is an Independent Non-Executive Director.

SHAREHOLDER RELATIONS

The Board considers the Annual General Meeting as a prime opportunity to communicate with shareholders. The Shareholders are given the opportunity of exercising their rights at the Annual General Meeting. The notice of the Annual General Meeting and the relevant documents required are published and sent to the shareholders within the statutory period. The Company circulates the agenda for the meeting and shareholders vote on each issue separately. All shareholders are invited and encouraged to participate at the Annual General Meeting. The Annual General Meeting provides

an opportunity for shareholders to seek and obtain clarifications and information on the performance of the Company and to informally meet the Directors. The external Auditors are also present at the Annual General Meeting to render any professional assistance that may be required. Shareholders who are not in a position to attend the Annual General Meeting in person are entitled to have their voting rights exercised by a proxy of their Choice.

The Company publishes quarterly accounts in a timely manner as its principle communication with shareholders and others. This enables stakeholders to make a rational judgment of the Company.

INTERNAL AUDIT AND CONTROL

The Board is responsible for the Group’s internal control and its effectiveness. Internal control is established with emphasis placed on safeguarding assets, making available accurate and timely information and imposing great discipline on decision making. It covers all controls, including financial, operational and compliance control and risk management. It is important to state, that any system can ensure only reasonable and not absolute assurance that errors and irregularities are prevented or detected within a reasonable time.

The Group obtains the services of an independent and a leading professional accounting firm other than the statutory auditors to carryout internal audits and reviews. These reports along with management comments are discussed with the Audit Committee and the Board. Further at each meeting follow up issues from previous meetings are also discussed in order to ensure implementation of appropriate policies and procedures as a prevention mechanism.

EXTERNAL AUDIT

The Group uses three Professional Accounting Firms for its external audits. Some of them provide non-assurance services to the Group. The restrictions provided in terms



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of rulings issued by CSE and other commitments were taken into consideration when entering into engagements with the Group auditor.

The Knowledge and experience of the Audit Committee ensure effective usage of the expertise of the auditors, whilst maintaining independence, in order to derive transparent Financial Statements. This Group maintains independence from financial and non-financial interest between auditors and re-assesses the same on a regular basis.

MAJOR TRANSACTION

There are no transactions during the year under review which fall within the definition of ‘Major Transaction’ in terms of the Companies Act.

GOING CONCERN

The Directors, upon making necessary inquiries and reviews including reviews of the Group budget for the following year, capital expenditure requirements and available financing facilities, have a reasonable expectation of the Company’s existence in the foreseeable future. Therefore, the going concern basis is adopted in the preparation of the Financial Statements.

CORPORATE GOVERNANCE COMPLIANCE STATEMENT

Renuka Agri Foods PLC is fully complied with the Corporate Governance listing requirement of the Colombo Stock Exchange and adheres to different regulating authorities including the following

• CompaniesActNo.7of2007

• CodeofBestPracticesonCorporate Governance issued jointly by the CA Sri Lanka


COMPLIANCE SUMMARY

Extent of Compliance with the Listing Rules set out in Section 7.10 of the Colombo Stock Exchange’s on Corporate Governance, are summarized below. (Mandatory Provisions - Fully Complied)

CSE RuleReference

Corporate Governance Principles Compliance Status

Company’s Extent of Adoption

7.10 COMPLIANCE

a./b./c. Compliance with Corporate Governance Rules

Compliant This report declares the confirmation on compliance and refer above for "CORPORATE GOVERNANCE COMPLIANCE STATEMENT"

7.10.1 NON-EXECUTIVE DIRECTORS (NED)

a. At least 2 members or 1/3 of the Board, whichever is higher should be NEDs

Compliant Five out of Ten Directors are Non-Executive Directors

b. The Total number of Directors are to be calculated based on the number as at the conclusion of the immediately preceding Annual General Meeting

Compliant Calculation is based on number as at the conclusion of the immediately preceding Annual General Meeting

c. Any change occurring to this ratio shall be rectified within ninety (90) days from the date of the change

Compliant Not Applicable

7.10.2 INDEPENDENT DIRECTORS

a. 2 or 1/3 of NEDs, whichever is higher shall be 'independent'

Compliant Three out of five Non-Executive Directors are independent

b. Each NED to submit a signed and dated declaration annually of his/her independence or non-independence

Compliant All Non-Executive Independent Directors have submitted their confirmation on independence

and the Securities & Exchange Commission of Sri Lanka

• InlandRevenueAct

• ExchangeControlAct

• BoardofInvestmentRegulations

• CustomsOrdinance


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CSE RuleReference



7.10.3 DISCLOSURES RELATING TO DIRECTORS

a./b. Board shall annually determine the independence or otherwise of NEDs

Compliant The Board assessed the independence declared by Directors and determined the Directors who are independent.

c. A brief resume of each Director should be included in the annual report including the directors' experience

Compliant Refer page 4 and 5 for a brief resume of each Director

d. Provide a resume of new Directors appointed to the Board along with details

N/A Mr. D.S. Arangala and Mr K Liyanagamage were appointed in 2016/17 and their resumes are provided on pages 4 and 5.

7.10.4 CRITERIA FOR DEFINING INDEPENDENCE

a. - h. Requirements for meeting the criteria to be an Independent Director

Compliant As per 7.10.2 a & b in determining of the independence or otherwise of NEDs, board reviewed the criteria for defining independence as per 7.10.4 a to h

7.10.5 REMUNERATION COMMITTEE

a.1 A listed company shall have a Remuneration Committee

Compliant The remuneration committee of Renuka Agri Foods PLC is the same Committee of the ultimate Parent. Renuka Holdings PLC as allowed by Listing Rules of Colombo Stock Exchange.

Remuneration Committee shall comprise of NEDs, a majority of whom will be independent

Compliant The remuneration Committee comprises of 3 Non-Executive Directors of whom 2 are independent.

a.2 One Non-Executive Director shall be appointed as Chairman of the Committee by the board of directors

Compliant Mr. M.S. Dominic is the chairman of the committee who is independent/ non-executive Director.

b. Remuneration Committee shall recommend the remuneration of the CEO and the Executive Directors

Compliant Refer Page 18 for Remuneration Committee scope

c.1 Names of Remuneration Committee members

Compliant Refer Page 18 for names of the Committee members

c.2 Statement of Remuneration policy Compliant Refer Page 18

c.3 Aggregate remuneration paid to EDs and NEDs

Compliant Refer to Note 8

7.10.6 AUDIT COMMITTEE

a.1 A listed company shall have an Audit Committee.

Compliant The Company has its own Audit Committee.

Audit Committee shall comprise of NEDs or a majority of whom should be independent

Compliant The Audit Committee comprises of three Independent Non-Executive Directors

a.2 A NED shall be the Chairman of the committee

Compliant The Chairman of the Committee is an Independent Non-Executive Director

a.3 CEO and CFO should attend Audit Committee meetings

Compliant Refer to pages 14 and 15



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CSE RuleReference



a.4 The Chairman of the Audit Committee or one member should be a member of a professional accounting body

Compliant The Chairman of the Audit Committee is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka, member of Chartered Institute of Management Accountants of United Kingdom and also a member of Association of Chartered Certified Accountants of United Kingdom

b. Functions of the Audit Committee

b.1 Overseeing of the preparation, presentation and adequacy of disclosure in the financial

Compliant Refer pages 14 and 15 of Audit Committee Report

b.2 Overseeing the compliance with financial reporting requirements, information


b.3 Ensuring the internal controls and risk management, are adequate, to meet the requirements of the SLFRS/LKAS


b.4 Assessment of the independence and performance of the Entity's external auditors


b.5 Make recommendations to the Board pertaining to appointment, re-appointment and removal of external auditors and to approve the remuneration and terms of engagement of the external auditors.


c.1 Names of the Audit Committee members shall be disclosed


c.2 Audit Committee shall make a determination of the independence of the external auditors


c.3 Report on the manner in which Audit Committee carried out its functions



9.2 RELATED PARTY TRANSACTIONS REVIEW COMMITTEE(RPTR)

9.2.1 & 9.2.3 Related Party Review Committee Compliant The Functions of the Committee are stated in the Report of the Related Party Transaction Review Committee on Pages 16 and 17

9.2.2 Composition Compliant Refer the report of RPTR committee on Pages 16 and 17

9.2.4 Meetings Compliant Refer the report of RPTR committee on Pages 16 and 17

9.3.1 Immediate Disclosures Compliant Please refer Note 33 of the Notes to the Accounts on Pages 68 to 70

9.3.2 (a) & (b) Disclosure of recurrent and non-recurrent Related Party Transactions

Compliant Please refer Note 33 of the Notes to the Accounts on Pages 68 to 70

9.3.2 (c ) Report by the Related Party Transactions Review Committee

Compliant Refer the report of RPTR committee on pages 16 and 17


13


CSE RuleReference



9.3.2. (d) A declaration by the Board of Directors Compliant Please refer the Annual Report of Board of Directors for an affirmative statement of compliance of the Board on pages 27 to 31

Below summary list Company compliance with Companies Act No 7 of 2007

168 (1) (a) The state of the Company's affairs and nature of the business of the Company or any of its subsidiaries together with any change thereof during the accounting period

Compliant Refer Note 1 to 5 of the Financial Statements

168 (1) (b) Signed Financial Statement of the Company and its subsidiaries for the accounting period completed

Compliant Refer page 35 of the Annual Report

168 (1) (c) Auditors Report on Financial Statements of the Group and the Company


168 (1) (d) Accounting Policies and any changes therein

Compliant Refer Note 1 to 5 of the Financial Statements

168 (1) (e) Particulars of the entries made in the interests Register during the accounting period

Compliant Refer Annual Report of the Board of Directors on page 29

168 (1) (f) Remuneration and other benefits paid to Directors of the Company during the accounting period

Compliant Refer Note 8 of the Financial Statements

168 (1) (g) Corporate donations made by the Company during the accounting period


168 (1) (h) Names of the Directors of the Company and its Subsidiaries at the end of the accounting period and name of Directors who ceased to hold office during the accounting period

Compliant Refer pages 7 and 79 of the Annual Report

168 (1) (i) Amounts paid/payable to the External Auditor as audit fees and fees for other services rendered during the accounting period

Compliant Refer Note 8 of the Financial Statement

168 (1) (j) Other relationships or any interest of Auditors with the Company and its subsidiaries

Compliant Refer pages 14 and 15 of the Annual Report, Audit Committee Report

168 (1) (k) Acknowledgement of the content of this report and signature on behalf of the Board

Compliant Refer pages 27 to 31 of the Annual Report of the Board of Directors


14

In keeping with the Code of Best Practice on Corporate Governance and the requirement of the Securities and Exchange Commission for Public Listed Companies, Renuka Agri Foods PLC has established an Audit Committee whose function, authority and duties have been clearly identified in the Audit Committee Charter. This Charter integrates all the requirements of the Securities and Exchange Commission and the Code of Best Practice on Corporate Governance.

COMPOSITION OF THE AUDIT COMMITTEE

The Audit Committee appointed by and responsible to the Board of Directors, comprises three Non-Executive Directors of whom three are independent during the year as follows:

Mr. S. Nagarajah (IND/NED) – Chairman

Mr. L.M. Abeywickrama (IND/NED) (Resigned w.e.f 1/8/2016)

Mr. C.J.De.S. Amaratunge (NED) (Resigned w.e.f 2/5/2016)

Mr D.S Arangala (IND/NED) (Appointed w.e.f 30/5/2016)

Mr K Liyanagamage (IND/NED) (Appointed w.e.f 1/8/2016)

(IND – Independent Director, NED – Non-Executive Director)

The composition is in compliance with the requirement to have a minimum of two Independent Non-Executive Directors in terms of the rules on Corporate Governance for Listed Companies issued by the Colombo Stock Exchange.

The Chairman of the committee, Mr. S. Nagarajah is an Independent

Non-Executive Director, is a finance professional with over 39 years’ experience since 1976 in banking sector. He is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka, member of Chartered Institute of Management Accountants of United Kingdom and also a member of Association of Chartered Certified Accountants of United Kingdom.

Brief profiles of each member are given on pages 4 to 5 of this report. Their individual and collective financial knowledge and business acumen and the independence of the Committee are brought to bear on their deliberations and judgments on the matters that come within the Committee’s purview.

Executive Director - Mr S.V. Rajiyah, Chief Executive Officer - Shared Services Mr. P. Gunathilake and Chief Financial Officer Mr. A.S.G.S. Pieries attend meetings of the Committee by invitation.

CHARTER OF THE AUDIT COMMITTEE

“Rules on Corporate Governance” under the listing rules of Colombo Stock Exchange and “Code of Best Practice on Corporate Governance” issued jointly by Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka further regulate the composition, role and functions of the Audit Committee.

MEETINGS OF THE AUDIT COMMITTEE

The attendance of the members of Audit Committee meeting is stated in the table on page 8. The Committee met 5 times during the year.

Other members of the Board, Management members as well as External Auditors were present at the discussions where required. The proceedings of the Audit Committee are regularly reported to the Board of Directors.

FINANCIAL REPORTING

The Committee oversees the Company’s financial reporting on behalf of the Board of Directors as part of its responsibility and has reviewed the quarterly and Annual Financial Statements and recommended them to the Board for its deliberations prior to their issuance.

The Committee reviews the Financial Statements to ensure consistence of the accounting policies and their compliance with the Sri Lanka Accounting Standards.

The Committee has also regularly discussed the operations of the Company and its future prospects with the management and is satisfied that all reverent matters have been taken into account in the preparation of the Financial Statements.

CONTROLS AND RISKS

During the year the Committee reviewed the effectiveness of the Company’s system of Internal Control. The Committee also assessed the major business and control risks and the control environment prevalent in the company and advised the Board on action to be taken where weaknesses were observed.

The Audit Committee is satisfied that the Group’s accounting policies and operational controls provide reasonable assurance that affairs of the Group are managed in

AUDIT COMMITTEE REPORT


15

accordance with Group policies and that Group assets are properly accounted for and adequately safeguarded.

EXTERNAL AUDITORS

The Audit Committee evaluated the independence of the External Auditors and the effectiveness of the audit process. The Committee discussed the Management letter at the conclusion of the Audit.

The Committee reviewed the audited Financial Statements with the External Auditors who were responsible for expressing an opinion on the compliance with the Sri Lanka Accounting Standards. Also the External Auditor’s kept the Audit Committee advised on an on-going basis regarding any unresolved matters of significance.

The Committee has received a declaration from Messrs. KPMG as required by the Companies Act No 7 of 2007, confirming that it does not have any relationship or interest in the Company, which may have bearing on its independence within the meaning of the Code of Conduct and Ethics of The Institute of Chartered Accountants of Sri Lanka.

Audit Committee Report (Contd...)

The Audit Committee evaluated the independence of the External Auditors and recommended to the Board of Directors that M/s KPMG be re-appointed as Auditors for the financial year ending 31st March 2018 subject to the approval of the shareholders at the Annual General Meeting.

Sgd.

S. Nagarajah Chairman9th August 2017


16

RELATED PARTY TRANSACTIONS REVIEW COMMITTEEThe Related Party Transactions Review Committee was established on 1st January 2016 with an objective of keeping in line with the Code of Best Practice on Corporate Governance and the requirement of the Listing Rules of Colombo Stock Exchange with a view to ensure that the interests of shareholders as a whole are taken into account by Renuka Agri Foods PLC and its subsidiaries and are consistent with the Listing Rules of Colombo Stock Exchange when entering into Related Party Transactions and made required disclosures in a timely manner.

Composition of the Related Party Transactions Review Committee (RPTR)

The Related Party Transactions Review Committee is appointed by and responsible to the Board of Directors. However as from 3rd August 2016 the Related Party Transaction Review Committee of the Ultimate Parent Company namely Renuka Holdings PLC which is a listed legal entity functions as the RPTR for Renuka Agri Foods PLC. This is in compliance in terms of the rules on Corporate Governance for Listed Companies issued by the Colombo Stock Exchange.

Related Party Transactions Review Committee Members

Mr. T.K. Bandaranayake (IND/NED) -Chairman (Appointed w.e.f 3/8/2016)

Mr M.S.Dominic (IND/NED) (Appointed w.e.f 3/8/2016)

Mr J.M Swaminathan (IND/NED) (Appointed w.e.f 3/8/2016 )

Mr S Nagarajah (IND/NED) (Resigned w.e.f 3/8/2016)

Mr L.M Abeywickrama (NED) (Resigned w.e.f 3/8/2016)

Mr C.J.De S Amaratunga (NED) (Resigned w.e.f 2/5/2016)

Mr. D.S.Arangala (IND/NED) (Appointed w.e.f 30/5/2016 & Resigned w.e.f 3/8/2016)

IND - Independent DirectorNED - Non-Executive Director

Brief profiles of each member are given below. Their individual and collective financial knowledge and business acumen and the independence of the Committee are brought to bear on their deliberations and judgments on the matters that come within the Committee’s purview.

Mr T.K.Bandaranayake

Mr. T.K. Bandaranayake is an Independent Non-Executive Director of the ultimate holding company. He is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka. He was in public practice with Ernst & Young for 27 years since 1982. He was a Senior Partner managing a large portfolio of clients. He is also a Director of Renuka Foods PLC, Nawaloka Hospitals PLC, Overseas Realty (Ceylon) PLC, Samson International PLC, Laugfs Gas PLC, Harischandra Mills PLC, Micro Holdings Ltd. and Browns & Company PLC.

Mr. M. S. Dominic

Mr. M.S. Dominic is an Independent Non-Executive Director and holds a BSc (Hons) degree in Information Technology from the University of South Bank, United Kingdom. He has over 35 years of experience in the Information Technology field. He is also Director of The Autodrome PLC, Renuka Foods PLC and Renuka Capital PLC (formerly Kalamazoo Systems PLC). He is also a Director of Sithi Jaya Fund.

Dr. J. M. Swaminathan

Dr. J. M. Swaminathan is an independent, Non-Executive Directors of the ultimate holding company. He holds LLB (Ceylon), LLM, M. Phil. (Colombo) and LLD (Honoris Causa) Degrees and is an Attorney-at-Law. He has been in the legal profession for over 53 years. He is the precedent partner of Messrs. Julius & Creasy and is a Member of the Law Commission of Sri Lanka and Former Member of the Council of Legal Education. He is also a Member of the Company Law Advisory Commission and Intellectual Property Law Advisory Commission. He was a Member of the Board of the Faculty of Law of the University of Colombo. He also served as a Member of the Legal Cluster of the National Council for Economic Development and the Financial Systems Stability Committee of the Central Bank of Sri Lanka. He has also served as a Visiting Lecturer and an Examiner at the Faculty of Law, University of Colombo and was a Lecturer at the Institute of Advanced Legal Studies Unit of the Sri Lanka Law College and was also a Faculty Member for the LLM Courses of the University of Wales and LLM Colombo. He is a member of the Council of the University of Colombo and serves on the Board of Management of the University School of Computing. He is also a Member of the Standing Committee on Legal Studies of the University Grants Commission. He also serves on the Boards of several public and private companies.

Mandate

To ensure on behalf of the Board, that all related party transactions of Renuka Agri Foods PLC and its subsidiaries are consistent with the listing rules of Colombo Stock Exchange.


17

Related Party Transactions Review Committee (Contd...)

Number of Committee Meetings

The committee has met four times during the period from 1st April 2016 to 31st March 2017. The attendance of the members of Committee meeting is stated in the table on page 8.

Attendance by Invitation

The Executive Director - Mr S.V. Rajiyah, Chief Executive Officer - Shared Services and Chief Financial Officer attended the meetings by invitation.

DUTIES AND RESPONSIBILITIES OF THE RPTR COMMITTEE

- Establish the definitions and set out the threshold values of each related party transaction as per the Code which require discussion and disclosure.

- Identify related party transactions that need pre-approval from the Board of Directors, immediate market disclosure, transactions that need shareholder approval and disclosure in the Annual Report.

- Formulate a standard template to implement in the group to follow when documenting RPT when presenting to RPT committee.

- Establish proper guide lines to identify recurrent & non-recurrent Related party transactions to follow by the company and its subsidiaries.

- Establish a method of having access to adequate knowledge or expertise to assess all aspects of proposed related party transactions where necessary, and method of obtaining appropriate professional and expert advice from appropriately qualified persons.

- Periodic review by the Committee to ensure that required disclosures have been disclosed in the market or annual report as required by the Listing Rules of Colombo Stock Exchange.

- The committee communicates its comments/observations to the Board of Directors after each review of related party transactions.

CONCLUSION

The Committee has reviewed the related Party Transactions presented to them by the management of the Company for the financial year ended 31st March 2017. The Acivities and views of the Committee have been communicated to the Board of Directors through verbal briefing and by tabling minutes of the Committee meetings..

Sgd.

T. K. BandaranayakeChairman

9th August 2017


18

REMUNERATION COMMITTEE REPORT

The Remuneration Committee of Renuka Agri Foods PLC is the same Committee of the ultimate parent, Renuka Holdings PLC appointed by and responsible for the Board of Directors consists of two Non-Executive Independent Directors and one Non-Executive Director. The Managing Director may also be invited to join in the deliberations as required. The Chairman of the Committee is an Independent Non-Executive Director.

The members are:

1. Mr. M.S. Dominic (IND/NED) (Chairman)

2. Mr T.K. Bandaranayake (IND/NED)

3. Mr. C.J. De S. Amarathunge (NED) (Resigned w.e.f. 1/8/2016)

4. Mr L.M Abeywickrama (NED) (Appointed w.e.f 1/8/2016)

(IND - Independent Director, NED - Non-Executive Director)

The brief profile of Mr. L. M. Abeywickrama is on page 5 of the Annual Report and below listed are the profiles of other Members

Mr. M.S. Dominic

Mr. M.S. Dominic is an Independent Non-Executive Director and holds a BSc (Hons) degree in Information Technology from the University of South Bank, United Kingdom. He has over 35 years of experience in the Information Technology field. He is also Director of The Autodrome PLC, Renuka Holdings PLC and Renuka Capital PLC (formerly Kalamazoo Systems PLC). He is also a Director of Sithi Jaya Fund.

Mr T.K.Bandaranayake

Mr. T.K. Bandaranayake is an Independent Non-Executive Director of the Company. He is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka. He was in public practice with Ernst& Young for 27 years since 1982. He was a Senior Partner managing a large portfolio of clients. He is also a Director of Renuka Holdings PLC, Nawaloka Hospitals PLC, Overseas Realty (Ceylon) PLC, Samson International PLC, Laugfs Gas PLC, Harischandra Mills PLC, Micro Holdings Ltd & Browns & Company PLC.

The Remuneration Committee held a meeting during the year to review Company remuneration policy and made its recommendations.

The Committee studies and recommends the remuneration based on the prevailing market rates and perquisites applicable to the Key Management personnel of the Company and makes appropriate recommendations to the Board of Directors for Approval.

The Group policy on remuneration packages is to attract and retain the best professional managerial talent to the Group and also to motivate and encourage them to perform at the highest possible level. The Group has a structure and professional methodology in evaluating the performance of employees. The policy ensures equality and fairness between the various employees is maintained, no discrimination is practised on account of gender, age, ethnicity or religion, recognizes the basic needs of staff and ensures that compensation address cost of living and inflation, particularly in the lower income groups.

The Committee studies and recommends the remuneration and perquisites applicable to the Key Management Personal of the Group and makes appropriate recommendations to the Board of Directors for approval.

The Committee also carries out periodic reviews to ensure that the remunerations are in line with market conditions.

The remuneration policy is to attract and retain the best professional talent within the group and also motivate and encourage them to perform at the highest possible level. The Group has a structure and professional methodology in evaluating the performance of employees. The policy ensures equity and fairness between the various employees is maintained.

Sgd.

M.S. DominicChairman9th August 2017

REMUNERATION COMMITTEE REPORT


19

The Nomination Committee of Renuka Agri Foods Plc as at 31st March 2017 consist of three non-executive independent directors as follows. The ultimate holding company, Renuka Holdings PLC Nomination committee act as the Nomination committee of Renuka Agri Foods PLC.

Mr. L. M. Abeywickrema - ChairmanMr. M.S. DominicMr. T K Bandaranayake

The directives of the committee are,To identify suitable persons who could be considered to become a Board member as a non-executive director

To recommend to the Board the process of selection of chairman and Deputy Chairman

Make necessary recommendation to the board as when needed by the Board

The Scope of the committee are,

• Todefineandestablishthenomination process for non-executive directors,

• LeadtheprocessofBoardappointments and make recommendations to the Board.

• Thecommitteescopeoutthetasks such as assess skills required to be on the Board

• Periodicreviewoftheextentof skills required which are represented on the Board

• Reviewthecleardescriptionofrole and capabilities required for a particular board appointment and Identify and recommend suitable candidate to the Board.

NOMINATION COMMITTEE REPORTDuring the period under review, the Committee met once, with all members in attendance. Company Secretary acts as the secretary to the Committee.

Sgd.

L. M. AbeywickremaChairmanNomination Committee9th August 2017


20

Risk Management is an integral part of our business, since management of risks against returns is a critical trade off decision businesses have to make every day when it comes to investment and operational decision making.

We reviewed and refined our investment and business processes balancing objectively andconsistency with responsiveness and flexibility. The aim was to lay a sound foundation to integrate our risk management activities as part and parcel of our business operations.

Our Approach to Risk Management

Our definition for Risk is the potential occurrence of an external or internal event that may negatively impact our ability to acheive the group business objectives.

The process of embedding risk management system within our groups systems and procedure can be outline as below:

1. Identify Controls that are already operating

2. Monitor those controls to ensure their effectiveness

3. Improve and refine as per the requirement

4. Document evidence of monitoring and control operation

Group’s risk management framework takes into account the range of risks to be managed, and summary in to below categories.

1. Strategic Risk - A possible source of loss that might arise from an unsuccessful strategic decision taken by the organization. These contain strategies related to growth and strategic positioning which ultimately affect the

overall mission of the group.

2. Operational Risk - is the potential loss that might arise in business operation resulting from inadequate or failed internal processes, people and system or external events which ultimately affect the day to day activities of the Group.

3. Financial Risk- The likelihood of loss inherent in financing procedures which may weaken the ability to deliver adequate return to the Group. This may include liquidity risk, currency risk, and interest rate risk.

The systems and process are in place to deal with these risks, and the chain of responsibility within the organization to monitor the effectiveness of our mitigation measures.

Enterprise Risk Management ProcessRisk Identification, Prioritization and Assessment

As the initial step of the risk framework, it is important to identify risks for effective management. Renuka Group identifies all the risks by key stakeholders. We consider risk identification to be a key component of a robust risk management framework. In the absence of a proper risk identification process. The organization is incapable of effectively managing its key risks. We evaluate risks according to the likelihood of occurrence and magnitude of impact. This assessment provides a prioritized risk list, identifying those risks that need the most urgent attention.

Low Medium High

High

Medium

LowPro

ba

bil

ity

I m p a c t

Develop Risk Management Strategy

The Risk management strategies address how Group intend to

assess risk, respond to risk and making explicit and transparent the risk perceptions that organization routinely use in making both investment and operational decisions.The above concept has been embedded with risk mapping in order to develop a robust framework to determine an appropriate risk management strategy as shown below.

Mitigate or Reduce the Risk

Avoid the Risk

Accept the RiskShare or

Transfer the Risk

E v e n t I m p a c t

Ev

en

t P

rob

ab

ilit

y Hig

h

High

RISK MANAGEMENT

The Risk Management process in place ensures the clear allocation and segregation of responsibilities relating to risk identification, assessment, mitigation, monitoring, control and communication. We have in place several measures to strengthen our risk management process which are linked to our business processes. These include policies to mitigate business risks along with the upgrading of the support system that enable easy monitoring and management risks


21

RISK IMPACT RISK MANAGEMENT STRATEGIES

STRATEGIC RISK

Competitive Risk

Risks to the group’s reputation and Brand image

Reduced market share and rates reducing revenue, cash flow and profitability.

Increased promotional Expenditure.

The positive correlation between costof resources and competition.

Aim to have a broad appeal in price, range and format in a way that allows us to compete effectively in different markets.

Formed strategic relationships with a diverse pool of suppliers, enabling flexibility in pricing contracts and hedging mechanisms are used wherever possible to mitigate exposure to commodity price fluctuations.

The Group’s service excellence, committed and award winning staff, uniqueness of properties, innovative product and service developments and the strength of its brands enables the group to counter threats from new and existing players.

Maintaining a positive relationship with employees with a better remuneration and performance appraisal scheme.

OPERATIONAL RISK

Employee Risk

Risk from not being able to attract and retain skilled and experienced staff.

Reduced productivity.

Reduced quality of service resulting in reduced market share and Group’s image.

Significant resources are invested in strengthening our human capital through the deployment of the latest Human Resource Information Systems, regular staff training & development, succession planning and fostering a performance-based culture.

Maintaining cordial relationships with labour grade staff and adopting interest based negotiations for win-win solutions.

Implemented well structured talent management process to Identify critical employees and retain them in the long run.

Periodic employee satisfaction surveys to ensure that remuneration is in line with the market.

Investments in strengthening employee brand image.

The main categories of risks that we take into account in the pursuit of our business goals are detailed below.

Risk management (Contd...)


22


IIssue Pertaining to Employees and industrial Relationship

Adverse impact on service levels, expected quality standards, operational efficiency and group reputation.

Loss of revenue.

Review all the issues with regard to employees and Industrial Regulations which affect the performance of the Group.

Steps taken to ensure employees are satisfied at all the levels and their issues are addressed in order to retain talented employees.

Maintain cordial relationship with all labour grade staff and adopting interest-based negotiations for win-win solutions.

Well structured grievance handling system is in place to handle the grievance of employees at all levels and development of a Multi-skilled work force through structured and focused training programmes.

Ensure proper industrial relationships with all the government agencies.

IT systems and infrastructure

Inability to obtain timely and accurate information due to failures in IT systems.

Potential disruption to operations

Significant financial losses.

Implementation of effective IT infrastructure and to ensure consistency of delivery,

All relevant staffs are effectively engaged to mitigate IT related risks through effective policy and procedures as well as increased awareness.

Implementation of a comprehensive IT policy within the Group, supported by adequate systems and controls, ensure the safety and security of data. Contingency plans are in place to mitigate any short term loss on IT services.

All employees are bound by the code of conduct to safeguard the Group’s information, irrespective of its physical form.

A dedicated central IT team is in place to support all IT related aspects of the group.

Product Risk Product risk implies any effect of perceived impact of our product on stakeholders in general which could bring down our market share.

In order to eliminate loss of market share or market leadership, we monitor market leadership and customer needs.

Develop innovation that add value to our customers. Enhance productivity and efficiency to improve price

competitiveness and investing in high quality machinery and equipment.

Employ established operating procedures to review and approve all raw material prior to use to ensure that quality control is maintained.

Take into account safety, health and environmental hazards to cover all avenues of possible negative publicity.

Research and development team is equipped to field any technical questions about our product,

Marketing and distribution procedures ensure complete control of the supply chain.



23


Supply Chain andOperational Risk

Operational disruption can occur due to inadequate quantity or quality of raw material supplies, longer lead time, supply disruption caused by global supply and demand.

Unable to maintain strong bond with critical suppliers over the period.

Operational risks cover the areas of system failure, continuity of decision making, dealing with contingencies and ensuring there are no deficiency in operations, application of recommended management practices.

Consistent engagement with a diverse pool of suppliers to maintain strong relationships

Structured processes are in place to add value to our supplier base through livelihood development programmes.

Technical support and guidance on enhancing quality. Manage operational risks by identifying areas of risk,formulating plans for their management, promotingbest practices.

Implement internal controls, systems and monitoring of compliance.

Legal RegulatoryCompliance

Risk of legal action due to non performance of legal and statutory requirements

Result high cost of legal and penalty fees that reduced profitability

Adversely impact to the Groups’reputation and brand image.

The legal support services to Renuka Group management come through the legal department which ensure all legal and regulatory provisions are complied with.

The legal function pro-actively identified and sets up appropriate system and processes for legal regulatory compliance in any foreign country that we operate in, and in such instances through legal council retained in those environments.

Internal audit function of the Group ensures the safeguarding of company assets and recommends process improvements in areas where process control failure are noted.

The operations of the Renuka Group come within the rules and regulations applicable to companies listed on the CSE and regulations applicable to securities trading set by the Securities and Exchange Commission of Sri Lanka. Our systems and processes are structured to satisfy the criteria set by these regulations and staff are constantly kept aware of the compliance needs imposed by these regulation.



24


Breakdown ofInternal Controls

Wastage of management time and resources.

Possible loss of data.

Increased possibility of fraud and misuse.

Disruptions to the normal course of operations.

lack of ability to track performance against budgets, forecasts and schedules.

Illegal transactions including theft or misappropriation of assets by employees

Regular reviews of the effectiveness of internal controls by the corporate internal audit department supplemented by regular management audits carried out by internal teams within the Group ensures the robustness of internal controls.

The Company uses comprehensive general and specific reporting and monitoring systems to identify, assess and manage risks.

Making each employee accountable for ethical behavior, high standards for business conduct and adherence to laws ensures that transactions occur in a reliable way.Staff rotation and special verification audits across theGroup.

Internal auditors are also engaged to carry out special reviews wherever necessary.

The Company uses comprehensive general and specific reporting and monitoring systems to identify, assess and manage risks.

Ensuring that only trained, trustworthy, knowledgeable and competent personnel perform tasks, prevents errors, irregularities and fraud.

FINANCIAL RISK

Financial risk management obligations and policies have been described in the note No 39 to the FinancialStatements.



25

Overview

We emphasize the importance of our stakeholders when developing our strategies through the competitiveness in order to achieve a common value.

Sustainability is the key element of our strategy for future growth where the utilization of resources efficiently, environmentally responsible manufacturing of product and provision of services that deliver sustainability benefits which can leverage commercial advantage for the group.

The key business drives for sustainability are internal operations and stakeholder engagement. The first focuses on our internal operations and manufacturing our products and provision of our services more efficiently using fewer resources. This approach helps us to reduce costs of goods manufactured and provision of services and at the same time reduces our impact on the environment. The second approach focuses on our partnerships with our stakeholders. Stakeholders are any individual or party that has an interest in our group, and who are affected by or can affect out organizational activities. Partnerships help to build trust amongst our key stakeholders and to reach better understanding on a variety of issues. It can also pave the way for more successful solutions to problems, concerns and challenges.

Reuka impact on economic performance

In Economic Performance, Group focused on operational excellence across all its business divisions and subsidiaries and value addition to economic development. Operational excellence measured in terms of efficiency and effectiveness of manufacturing process, process improvement and reduces waste. Further investment in IT/ERP helps measurement of operational results on time with increased accuracy. Group has made substantial investment during the year to improve value addition to economic

development. These investments have helped to improve resource utilization as well as minimization of waste and pollution.

Renuka Sustainability Policy and guidelines

Management identify the stakeholders and rate them in line with the degree of influence and importance. Such stakeholders thus identified are,

* Investors* Employees* Customers* Key suppliers and business

partners* The society* Environment

Renuka has then formulated sustainability strategies to create value for those identified stakeholders. We have created formal and informal channels to develop effective communication systems and engagements programs to involve our stakeholders and implement continuous monitoring systems through the management team in order to gauge our impact on the stakeholders.

ENVIRONMENTAL IMPACT

Renuka has strived to ensure that all our manufacturing and production processes will not knowingly harm people and will minimize the negative impact our businesses will have on human life as well as environment. In fact, we promote organic products to our customers due to health and other environmental benefits. This has created awareness among the farmer community of the long term benefits of sustainable farming.

Our Stakeholder Engagement Process

Investors support Renuka business activities

Shareholder engagement is important to us to have access to growth capital and in the process we must make a sound return to them. In meeting global challenges and evolving consumer needs we must

be geared to be proactive with new ideas and ready with the output as well. When we operate according to these principles the shareholders should realize a fair return.

Method of engagement

• We have open doors policy which enables shareholders to keep in contact, visit and obtain information from the Company Secretaries and engage in dialogue.

• Further e-mail address has been provided for comments and suggestions.

• Update with latest financials for shareholders/investor to take rational decisions which is very important.

• We produce company performance in timely and relevant manner through quarterly Financial reports and Annual Report published in the Colombo Stock Exchange web site.

• We hold Annual General and Extra Ordinary meetings to communicate with our shareholders.

Our Concern

Our concern is to increase the return on investment, sustainable profitability, good governance and transparency in carrying out group operations.

SUSTAINABILITY REPORT


26


• We have an open communication policy and have implemented a process to identify and report corruption within the business units.

• We have adopted effective two way communication system with employees and management through human resources division which has created short and long term benefits to the group.

• We also have adopted other communication methods like e-mails, presentations and team briefings on daily operations for betterment of the organization. Employees are also encouraged to access the corporate websites.

• We organize team building activities such as get-togethers, sports meets and CSR projects.

• Factories of the group companies are equipped with adequate safety measures and have educated the employees to minimize accidents.

Our Concern

Our concern is to create a friendly environment to our employees who are motivated and talent developed to offer effective service.


• We engage our customers through regular meetings, visits and web portal.

• On going participation for Industry exhibitions and trade fairs locally and internationally.

• We allow buyer inspections and audits to ensure compliance with global quality standards

Our Concern

We are concerned about the quality of our products manufactured, are in compliance with global standards. We also create innovative products to cater to our customer needs.


• We look at our business partners as a resource base to develop business efficiency and innovative products.

• Develop long term purchase contracts with our business partners & suppliers to support responsible supply chain

• Participate in industry exhibitions and trade fairs

Our Concern

We maintain effective long term relationship with our business partners and suppliers who benefit from our growth, and knowledge sharing.


• We conduct farmer training programs, medical camps, veterinary services which assist in improving the livelihood and wellness of the communities within Sri Lanka.

• Local engagement through purchasing.

Our Concern

We take measures to carryout our operations minimizing carbon foot print and saving energy by effective utilization of limited resources while reducing wastage in order that we have only a minimal negative impact on society and the environment.

• Employees at Renuka work place

At Renuka we have created a work place policy and created employee awareness for the total group. With an employee base of over 817 creation of Group identity and belongings is priority. We care for our employees and health and safety is priority, giving much attention at work place including factories..

• Customers

World class quality products and customer satisfaction is our key with our customers. The group uses its competencies and decades of experience to identify the needs and wants of our customers in order to provide quality product and services creating value-for-money.

• Suppliersandbusinesspartners We have built lasting business

relationships all over the world and not only centered in Sri Lanka. It is through our business partners that we co-exist to fulfil customer needs and wants.

• Oursociety

Renuka has been actively involved in supporting the rural farmer network for our coconut division. Renuka procures over Rs. 1Bn worth of produce from our farmer network.

Renuka considers engagement to be an increasingly important component of its corporate citizenship strategy. Our engagement efforts help Renuka identify those issues that are most material to our business operations and shape our approach to addressing a range of areas relating to the financial, social and environmental performance of the organization.

Sustainability report (Contd...)


27

Overview

The Board of Directors of Renuka Agri Foods PLC have pleasure in presenting the Annual Report of your Company together with the Audited Consolidated Financial Statements for the year ended 31st March 2017. The details set out herein provide the required information under Companies Act No.7 of 2007, the Colombo Stock Exchange Listing Rules and the recommended best practices on Corporate Governance.

Renuka Agri Foods PLC is a public limited liability company incorporated in Sri Lanka under the Companies Act No. 17 of 1982, quoted on the Colombo Stock Exchange and reregistered as required under the provisions of the Companies Act No 7 of 2007.

Principal Activities of the Company and the Group

The Principal activity of the company is manufacturing and sale of coconut related food and beverage products. Further Renuka Agri Foods PLC is a holding company that owns, directly or indirectly, investments in the numerous companies constituting the Renuka Agri Foods Group and provides services to its Group companies. The Group consists of a portfolio of diverse business operations. The main subsidiaries of Renuka Agri Foods PLC are listed on page 60.

The Principal activities of the Group are categorized into manufacturing and plantation business segments and Segmental reporting is provided in pages 71 and 72 of the annual report.

Vision, Mission and Corporate conduct

The Corporate vison and mission are provided on the page 1 of this report. In achieving its vision and mission, all Directors and employees conduct their activities with the highest level of ethical standards and integrity.

Review of Business and Future Developments

The review of the Group Progress and Performance during the year with comment on the financial

results and prospects is contained in the Chairman’s Review on page 6 as required under Section 168 (1) (a) of the Companies Act. These reports form an integral part of the report of the Directors and together with the audited financial statement reflect the state of affairs of the company.

Directors Responsibilities for Financial Statements

The Statement of Directors responsibilities for the Financial Statements is given on page 32.

Financial Statements of the Company and Group

The Financial Statements of the Company and Group are given on pages 33 to 78.

Accounting Policies and Changes During the Year

The accounting policies adopted in the preparation and presentation of the Financial Statements are given on pages 39 to 49. Further Accounting Standards issued but not yet effective are disclosed on page 49.

Group Turnover

The Turnover of the Group was Rs. 2.5 Bn as compared with Rs 2.4Bn in the previous year. A detailed analysis of the Group Turnover is given in Note No 6 of the Financial Statements.

Gross Profit

The Group Gross Profit for the year was Rs. 598Mn, compared with the Group Gross Profit of Rs. 451Mn for the previous year.

Net Profit

The Group Profit after Taxation for the year was Rs. 323Mn, compared with the Group Profit of Rs 196Mn for the previous year.

Group Investments

Investment of the Company and the Group in Subsidiaries, Associates and Other long term External equity investment amounted to Rs. 2,135Mn (2016 - Rs.1,763Mn). Detailed description of the Subsidiaries, Associates and Other long term external equity

investments held at the Reporting date are given in Note No 17 and 18 in the Financial Statements.

Property, Plant and Equipment

Group has incurred Capital Expenditure during the year on Property, Plant & Equipment (including capital work-in-progress), Biological assets, Investment Properties, Intangible assets amounting to Rs.208Mn (2016 - Rs. 223 Mn).

Detailed information relating to capital expenditure on Property, Plant & Equipment (including capital work-in-progress), Biological assets, Investment Properties, Intangible assets are given in Note 12 to 16 in the Financial Statements.

Extent, Locations, number of buildings and Valuations of the properties of the Group are given under Real Estate Portfolio on page 80 and the market values of the Land and Buildings owned by the Company and Group are included on the basis of valuation carried out by a professionally qualified valuer is given in Note No 12 to the Financial Statements.

Stated Capital

The Company did not issue any shares during the year ended 31st March 2017.

The Stated Capital of the Company as at 31st March 2017 was Rs. 1,194Mn comprising of Voting Ordinary Shares of 561,750,000.

Reserves

Total Group Reserves as at 31st March 2017 amounts to Rs. 2.7Bn (2016 - Rs, 2.5Bn) representing Revenue Reserve and the detailed movement of the Reserves shown in the Statement of Changes in equity in the Financial Statements.

Dividends

The Board of Directors has recommended a payment of Rs.0.12 per share payable for 2016/17 (2015/16 Rs. 0.12 per share). The Directors are confident that the Company would meet the solvency test requirement under Section 56

ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY


28

(2) of the Companies Act of No 7 of 2007 immediately after the proposed final dividend distribution.

Solvency Test

Solvency test has been carried out by the Board of Directors before the payment of the Final dividend as required by the Companies Act No 7 of 2007.

A solvency certificate has been received in respect of the first and final dividend of Rs. 0.12 per share (2016 - Rs. 0.12) proposed to be paid to the holders of the Company as at the close of the business on 18th September 2017.

Major Shareholdings

Details of the twenty largest shareholders with the percentage of their respective holdings are given on page 84. together with comparative shareholding as at 31st March 2016.

Public Holding

There were 3713 (2016- 3,795) registered shareholders as at 31st March 2017, with the percentage of shares held by the public , as per the Colombo Stock Exchange Rules, being 28.01% (2016 - 32.86%)

Share Holdings /Share Information

Information relating to earnings, dividend, net assets, market value per share, share trading and distribution of shareholding is given on pages 82 and 83.

Ratios and Market Price Information

The ratios relating to equity as required by the listing requirement of the Colombo Stock Exchange are given in Pages 81 and 83 to this report.

Equitable Treatment to all Shareholders

The company has made every endeavor to ensure the equitable treatment to all shareholders and adopted adequate measures to prevent information asymmetry.

Information to Shareholders

The Board strives to be transparent and provide accurate information to shareholders in all published material. The quarterly financial information during the year has been sent to the Colombo Stock Exchange in a timely manner.

Directors

The names of the Directors who held office during the financial year are given below. The brief profiles of the Board of Directors appear on pages 4 and 5.

* Mr C. J. De. S. Amaratunge resigned from the Board on 2nd May 2016** Mr. D.S. Arangala was appointed to the Board on 2nd May 2016*** Mr K Liyanagamage was appointed to the Board on 1 st August 2016

The basis on which Directors are classified as Independent Non-Executive Directors is discussed in the Corporate Governance Report.

Annual report of the board of directors on the affairs of the company (Contd...)

Name of Director Executive Non – Executive

Independent

Dr S.R. Rajiyah

Mrs I.R. Rajiyah

Mr S.V. Rajiyah

Mr V. Sanmugam

Ms A.L. Rajiyah

Mr C. J. De. S. Amaratunge*


Mr M. Terfloth

Mr. S. Nagarajah

Mr. D.S. Arangala **

Mr K Liyanagamage ***


29

Recommendation for re-election

To re-elect Mr. S. Nagarajah as a Director who retires by rotation in terms of Article 30 (1).

Entries in the Interest Register

The Company, in compliance with the Companies Act No. 7 of 2007, maintains an Interest Register. The Directors have made the declaration required by said Act and they have been entered into the Interest register.

Directors’ Interest in Transactions

The Company carried out transactions in the ordinary course of business with the entities which a Director of the Company is a Director. The transactions with entities where a Director of the Company either has control or exercises significant

influence have been classified as related party transaction and disclosed in Note 33 to Financial Statements.

The Directors have no direct or indirect interest in any other contact or proposed contract with the Company.

Directors Interest in Shares

Directors of the Company and its Subsidiaries who have relevant interest in the shares of their respective companies have disclosed their shareholdings and any acquisitions/disposals to their Boards, in compliance with section 200 of the Companies Act.

Directors’ holdings, in ordinary shares of the Company are given on below table

Name As at 31st March 2017

As at 31st March 2016

Dr. S.R.Rajiyah - -

Mrs. I.R.Rajiyah - -

Dr. S.R.Rajiyah (Jointly with Mrs I R Rajiyah) 28,090,337 22,404,654

Mr. S.V.Rajiyah 2,054,984 1,404,375

Mr. S. Vasanthakumara (Mr. V. Sanmugam) 1,010 1,010

Mr. L.M.Abeywickrama 28,000 28,000

Ms. A.L.Rajiyah 1,219,483 1,219,483

Mr. M.Terfloth - -

Mr. S. Nagarajah - -

Mr. D.S. Arangala - -

Mr. K. Liyanagamage - -

Share dealing by Directors during the year were disclosed to Colombo Stock Exchange.

Remuneration of Directors

The remuneration of the Directors in respect of the Company for the year ended 31st March 2017 is given in Note 8 to the Financial Statements.

Directors Meetings

Details of Board meetings and Board subcommittee meetings are presented on page 8 of the annual report.

Directors Responsibility for Financial Reporting

The Directors are responsible for the preparation of the financial statements of the company to reflect a true and fair view of the state of its affairs. The Directors are of the view that these financial statements have been prepared in conformity with the requirements of the Sri Lanka Accounting Standards (SLFRS/LKAS) issued by the Institute of Chartered Accountants of Sri Lanka, Companies Act No. 7 of 2007, Sri Lanka Accounting and Auditing Standards Act No 15 of 1995 and the Listing Rules of Colombo Stock exchange.

Board Committees

The Board has established Committees for better monitoring and guidance of different aspects of operations and control.

Audit Committee

The composition of the Board Audit Committee comprising of Non-Executive Directors is provided on pages 14 and 15. The Executive Directors, CEO- Shared Services, Chief Financial Officer and Internal and External auditors attend the meeting by invitation. Detail scope of Audit Committee and their work during the year is disclosed in Audit Committee report given on Pages 14 and 15.

Remuneration Committee

The composition of the Board Remuneration Committee comprising of Non-Executive Directors is provided on page 18.



30

The remuneration committee of Renuka Agri Foods PLC is the same committee of the ultimate parent, Renuka Holdings PLC, appointed by and responsible to the Board of Directors consists of two Non-Executive Independent Directors and one Non-Executive Director. The Managing Director may also be invited to join in the deliberations as required . The Chairman of the committee is an independent Non-Executive Director.

Related Party Transactions Review Committee

The composition of the Board Related Party Transactions Review Committee comprising of Non- Executive Directors is provided on Page 16. The Executive Directors, CEO -Shared Services and Chief Financial Officer attend the meeting by invitation. Detail scope of Related Party Transaction Review Committee and their work during the year is disclosed in Related Party Transactions Review Committee report given on page 16.

The company is in compliance with Rule 9 of the Listing Rules of the Colombo Stock Exchange pertaining to Related Party Transactions from 1st January 2016.

Non - Recurrent Related Party Transactions

All the Non - Recurrent Related Party transactions of which aggregate value exceeds 10% of the equity or 5% of the total assets whichever is lower of the Company as per audited Financial Statements of 31st March 2017,which required additional disclosures in the Annual Report of 2016/17 under Colombo Stock Exchange Listing Rule 9.3.2 and Code of Best Practices on Related Party Transactions under the Securities and Exchange Commission directive issued under Section 13(c) of the Securities and Exchange Commission Act are disclosed in Note 33 in the financial statements.

Recurrent Related Party Transactions

All the Recurrent Related Party Transactions which in aggregate value exceeds 10% of the revenue of the Company as per 31st March 2017 audited Financial Statements are disclosed under note 33 if any, to the Financial Statements as required by Colombo Stock Exchange Listing Rules 9.3.2 and Code of Best Practices on Related Party transactions under the Securities and Exchange Commission directive issued under Section 13(c) of the Securities and Exchange Commission Act.

Statutory Payments

The Directors, to the best of their knowledge and belief are satisfied that all statutory payments due to the Government, other regulatory institutions and those related to employees have been made on time. The declaration relating to statutory payments is made in the Statement of Directors Responsibilities on page 32.

Compliance with Laws and Regulations

The company has taken all reasonable measures to ensure that it has complied with all applicable laws and regulations. A compliance checklist is signed-off on a monthly basis by responsible officers and any violations are reported to the Board Audit Committee. Refer page 10 for a statement of compliance.

Code of Conduct

The company demand impeccable standards of conduct from its Directors and employees in the performance of their official duties and in situations that could affect the company’s image.

System of Internal control

The Board of Directors has put in place an effective and comprehensive system of internal controls covering financial,

operational and compliance controls and have obtained reasonable assurance of their effectiveness.

Corporate Governance

The Company has complied with the Corporate Governance rules laid down under the listing rules of the Colombo Stock Exchange. Refer pages 7 to 13 for further details

Going Concern

The Directors are of the view that the Company has adequate resources to continue in operations and have applied the going concern basis in preparing these Financial Statements.

Risk Management

The Board and the management of the company have put in place a comprehensive system for risk identification, measurement and mitigation process.

The group exposure to risk and structure to manage and mitigate risk is discussed in more detail to Risk Management Report on page 20.

Compliance with the transfer pricing regulations

All transactions entered into with associated persons during the period are on an arm’s length basis, and are comparable with transactions carried out with non-associated persons.

Event after the Reporting period

No event of material significance that requires adjustment to the Financial Statements have occurred subsequent to the date of the reporting date, other than those disclosed in Note 36 to the Financial Statements.

Capital Commitments

No significant capital commitments exist as at 31st March 2017 other than those disclosed in Note 35 to the financial statements.



31

Contingencies and Outstanding Litigation

In the opinion of the Directors and in consultation with the company lawyers, litigation currently pending against the company will not have a material impact on the reported financial results or future operations of the company.

Corporate Donations

Donation by the Group for the year ended 31st March 2017 is Rs. 273,500. ( 2016 - Rs 26,000 )

No donations were made for political purposes.

Employees and Industrial Relations

The Group has a structure to assess the competencies and commitment of its employees. There are no material issues pertaining to employees and industrial relations of the entity.

Auditors

Company’s Auditors during the year under review were M/s KPMG, Chartered Accountants.

The fee amount paid/payable for the services provided to the company during the year, with corresponding figures for the previous year is presented below.

2017 2016

Audit and Audit related fees (Rs)

715,000 655,000

Non audit fees (Rs)

220,500 210,000

Based on the declaration from Messrs. KPMG and as far as Directors are aware, the Auditors do not have any other relationship or interest with the Company or its Subsidiaries other than that of an auditor of the Company.

The retiring auditors have expressed their willingness to continue in office. A resolution to re-appoint them

as Auditors of the Company and authorizing the Directors to fix their remuneration will be proposed at the Annual General Meeting.

Auditors Report

Auditors Report on the financial statements is given on page 33 of this annual report.

Environmental Protection

The group effort in minimizing and conserve scarce and non-renewable resources as well as environmental objectives are discussed in detail in Sustainability Report on page No 24.

Employment Policies

The Group employment policies respect the individuals and offer equal career opportunities, regardless of sex, race or religion and consider the relationship with the employees to be good. The number of persons employed in the Company and its subsidiaries as at 31st March 2017 was 817 (2016 - 602 )

Annual Report

The Board of Directors approved the Consolidated Financial Statements along with Company Financial Statements on 9th August 2017. The appropriate number of copies of this report will be submitted to Colombo Stock Exchange and to the Sri Lanka Accounting and Auditing Standards Monitoring Board on or before 25th August 2017.


Annual General Meeting

The Annual General Meeting will be held at The Sri Lanka Foundation Institute No100 Independence Square Colombo 7 on the 15th of September 2017 at 2.30pm . The notice of the Annual General Meeting appears on page 85.

This Annual report is signed For and on behalf of the Board of Directors by:

Sgd.

Dr. S.R. Rajiyah

Sgd.

S. Nagarajah

Sgd.

Company SecretariesRenuka Enterprises (Pvt) Ltd9th August 2017


32

STATEMENT OF DIRECTORS’ RESPONSIBILITYThe responsibility of the Directors in relation to the Financial Statements for the year ended 31st March 2017 which have been prepared and presented in accordance with the requirements of the Sri Lanka Accounting Standards, the Listing Rules of the Colombo Stock Exchange and the Companies Act No.7 of 2007 is set out in the following statement.

As per the provisions of the Companies Act No. 7 of 2007, the Directors are required to prepare Financial Statements, for each financial year and presented before a General Meeting which comprise

a) A statement of Income and Statement of Profit or Loss and Other Comprehensive Income of the Company and its subsidiaries which present a true and fair view of the profit or loss of the Company for the financial year

b) A Statement of Financial Position, which presents a true and fair view of the state of affairs of the Company and its subsidiaries as at the end of the financial year together with explanatory notes to the financial statements

c) A statement of changes in Equity which presents a true and fair view of the changes in the Company’s and its Subsidiaries retained earnings for the financial year; and

d) A Statement of Cash Flow which presents a true and fair view of the flow of cash in and out of the business for the financial year for the Company and its Subsidiaries and; notes to the Financial Statements

and which comply with the requirements of the Act.

The Directors are of the view that, in preparing these Financial Statements:

a) The appropriate accounting policies have been selected and applied in a consistent manner, material deviations if any have been disclosed and explained;

b) All applicable Accounting Standards, in accordance with the Sri Lanka Accounting Standards (SLFRS/LKAS) as relevant have been applied

c) Reasonable and prudent judgements have been made so that the form and substance of transactions are properly reflected

d) It provide the information required by and otherwise complies with the Companies Act No. 7 of 2007, Listing Rules of Colombo Stock Exchange and requirement of any other regulatory authority as applicable to the company.

Further the Directors have a responsibility to ensure that the Company maintains sufficient accounting records to disclose, with reasonable accuracy of the financial position of the Company and of the Group, also to reflect the transparency of transactions and to ensure that the Financial Statements presented comply with the requirements of the Companies Act.

The External Auditors, M/s KPMG who were deemed reappointed in terms of the Companies Act No. 07 of 2007 were provided with every opportunity to undertake the inspections they considered appropriate to enable them to form their opinion on the Financial Statements. The Report of the Auditors, shown on page 33 set out

their responsibilities in relation to the Financial Statements.

The Directors are also of the view that the Company has adequate resources to continue in operations and have applied the going concern basis in preparing these Financial Statements.

The Directors are also responsible for taking reasonable steps to safeguard the Assets of the Company and that of the Group and in this regard to give proper consideration to the establishment of appropriate internal control systems with a view to preventing and detecting fraud and other irregularities.

As required by Companies Act, the Board of Directors has authorized distribution of the dividend now proposed, being satisfied based on information available to it that the Company would satisfy the solvency test after such distribution in accordance with the Section 57 of the Companies Act, and have obtained in respect of the dividend now proposed, a certificate of solvency from the Auditors.

COMPLIANCE REPORT

The Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the company, all contributions, levies and taxes payable on behalf of and in respect of the employees of the company and all other known statutory dues as were due and payable by the company as at the reporting date have been paid or where relevant provided for.

By order of the Board

Sgd.

Company SecretariesRenuka Enterprises (Pvt) Ltd9th August 2017


33

INDEPENDENT AUDITORS’ REPORTTO THE SHAREHOLDERS OF RENUKA AGRI FOODS PLC

Report on the Financial Statements

We have audited the accompanying financial statements of Renuka Agri Foods PLC, (“the Company”), and the consolidated financial statements of the Company and its subsidiaries (“Group”), which comprise the statement of financial position as at 31st March 2017, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising summary of significant accounting policies and other explanatory information as set out on pages 34 to 78.

Board’s Responsibility for the Financial Statements

The Board of Directors (“Board”) is responsible for the preparation of these financial statements thatgive a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as Board determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with

INDEPENDENT AUDITORS’ REPORT

Sri Lanka Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Board, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial positionof the Group as at 31st March 2017,

and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on Other Legal and Regulatory Requirements

As required by section 163 (2) of the Companies Act No. 07 of 2007, we state the following:

a) The basis of opinion and scope and limitations of the audit are as stated above.

b) In our opinion;

• Wehaveobtainedalltheinformation and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company.

• ThefinancialstatementsoftheCompany give a true and fair view of its financial position as at 31st March 2017, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

• ThefinancialstatementsoftheCompany and the Group comply with the requirements of sections 151 and 153 of the Companies Act No. 07 of 2007.

Chartered AccountantsColombo9th August 2017


34

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME GROUP COMPANY

FOR THE YEAR ENDED 31ST MARCH 2017 2016 2017 2016 Note Rs. Rs. Rs. Rs.

Revenue 6 2,541,036,943 2,431,781,879 2,521,289,308 2,417,352,936

Cost of Sales (1,942,635,742) (1,980,741,372) (1,954,491,818) (1,996,480,544)

Gross Profit 598,401,201 451,040,507 566,797,490 420,872,392

Other Operating Income 7 9,271,635 15,409,145 38,800,205 4,636,062

Administration Expenses (209,318,813) (172,458,793) (146,123,840) (124,236,875)

Selling and Distribution Expenses (104,638,746) (108,217,143) (99,342,640) (100,935,741)

Profit from Operations 8 293,715,277 185,773,716 360,131,215 200,335,838

Finance Income 25,696,561 30,852,147 3,079,244 14,222,620

Finance Cost (7,517,124) (8,328,457) (6,979,033) (6,030,310)

Net Finance Income / (Cost) 9 18,179,437 22,523,690 (3,899,789) 8,192,310

Share of Profit for Equity Accounted Investees 29,490,251 25,531,391 - -

Profit Before Tax 341,384,965 233,828,797 356,231,426 208,528,148

Taxation 10 (18,604,931) (38,315,658) (21,460,238) (33,072,555)

Profit for the Year 322,780,034 195,513,139 334,771,188 175,455,593

Other Comprehensive Income

Revaluation of Property, Plant and Equipment - 5,369,837 - -

Actuarial Gain / (Loss) on Defined Benefit Plan (2,227,020) (3,212,527) (2,479,232) (2,428,597)

Equity-accounted Investees - Share of OCI (332,783) 196,735 - -

Income Tax Effect 267,243 385,504 297,508 291,432

Other Comprehensive Income for the Year, Net of Tax (2,292,560) 2,739,549 (2,181,724) (2,137,165)

Total Comprehensive Income for the Year 320,487,474 198,252,688 332,589,464 173,318,428

Profit Attributable to:

Equity Holders of the Company 322,363,394 195,356,347 334,771,188 175,455,593

Non Controlling Interest 416,640 156,792 - -

Profit for the Year 322,780,034 195,513,139 334,771,188 175,455,593

Total Comprehensive Income Attributable to :

Owners of the Company 320,056,667 197,797,172 332,589,464 173,318,428

Non Controlling Interest 430,807 455,516 - -

Total Comprehensive Income for the Year 320,487,474 198,252,688 332,589,464 173,318,428

Earnings Per Share

Basic Earnings Per Share (Rs.) 11.1 0.57 0.35 0.60 0.31

Diluted Earnings Per Share (Rs.) 11.2 0.57 0.35 0.60 0.31

Figures in brackets indicate deductions

The Financial Statements are to be read in conjunction with the related notes, which form a part of the Financial Statements of the

Group set out on pages 39 to 78. The Audit Report is given on page 33.


35

STATEMENT OF FINANCIAL POSITION GROUP COMPANY

AS AT 31ST MARCH 2017 2016 2017 2016 Note Rs. Rs. Rs. Rs.

ASSETSNon-Current AssetsProperty, Plant and Equipment 12 1,251,817,390 1,148,708,568 982,506,660 1,016,026,217Biological Assets 13 54,915,883 51,476,902 - -Intangible Assets 14 95,005 13,788,968 - 193,963Immovable Estate Assets on Lease 15 43,999,968 46,749,972 - -Premium Paid Leasehold Premises 16 7,224,914 7,399,730 7,224,914 7,399,730Investment In Subsidiaries 17 - - 1,496,884,721 1,144,275,000Investment In Equity Accounted Investees 18 637,883,483 618,731,015 - -Investments in Available for Sale Financial Assets 19 436,350,000 378,760,756 - -Deferred Tax Asset 30.1 5,914,940 408,674 - - 2,438,201,583 2,266,024,585 2,486,616,295 2,167,894,910Current AssetsInventories 20 524,273,238 450,366,980 519,502,511 431,874,276Trade and Other Receivables 21 311,275,313 229,584,041 304,246,268 225,674,724Tax Recoverable 22 28,683,122 16,891,649 24,133,911 10,477,117Amounts Due from Related Companies 23 19,617,151 21,864,252 19,617,151 23,131,075Cash and Cash Equivalents 24 403,520,699 163,453,325 125,943,328 76,750,006 1,287,369,523 882,160,247 993,443,169 767,907,198TOTAL ASSETS 3,725,571,106 3,148,184,832 3,480,059,464 2,935,802,108

EQUITY AND LIABILITIESCapital and ReservesStated Capital 25 1,194,452,950 1,194,452,950 1,194,452,950 1,194,452,950Revaluation Reserve 26 97,776,362 97,769,633 92,742,554 92,742,554Retained Earnings 1,440,185,362 1,188,009,485 1,367,946,327 1,102,766,863Equity attributable to Owners of the Company 2,732,414,674 2,480,232,068 2,655,141,831 2,389,962,367Non Controlling Interest 96,594,443 43,394,775 - - 2,829,009,117 2,523,626,843 2,655,141,831 2,389,962,367Non- Current LiabilitiesRetirement Benefit Obligations 27 35,645,046 25,713,164 31,514,268 21,784,598Loans and Borrowings 28 2,047,172 4,094,343 - -Finance Lease Obligation 29 52,500,000 55,000,000 - -Deferred Tax Liability 30.1 95,174,093 93,830,004 89,977,821 89,023,675 185,366,311 178,637,511 121,492,089 110,808,273Current LiabilitiesLoans and Borrowings 28 313,621,422 185,266,029 311,574,251 183,218,858Finance Lease Obligation 29 2,500,000 2,500,000 - -Trade and Other Payables 31 248,606,489 199,770,304 244,430,805 195,551,394Amounts Due to Related Companies 32 40,839,903 3,849,083 45,595,624 3,849,083Dividend Payable 5,072,685 4,613,637 3,722,685 3,263,637Income Tax Payable 34,299,922 10,309,232 34,299,922 10,260,970Bank Overdraft 24 66,255,257 39,612,193 63,802,257 38,887,526 711,195,678 445,920,478 703,425,544 435,031,468TOTAL LIABILITIES 896,561,989 624,557,989 824,917,633 545,839,741TOTAL EQUITY AND LIABILITIES 3,725,571,106 3,148,184,832 3,480,059,464 2,935,802,108

The Financial Statements are to be read in conjunction with the related notes, which form a part of the Financial Statements of the Group set out on pages 39 to 78. The Audit Report is given on page 33.

I certify that the Financial Statements of the Group comply with the requirement of the Companies Act No, 07 of 2007

A. S. G. S. PieriesCFO

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

Dr. S. R. Rajiyah S. Nagarajah Chairman Director

9th August 2017Colombo


36

STATEMENT OF CHANGES IN EQUITY

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37

STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31ST MARCH Stated Revaluation Retained Total Capital Reserve Earnings Rs. Rs. Rs. Rs.

Company

Balance as at 1st April 2015 1,194,452,950 92,742,554 996,858,435 2,284,053,939

Profit for the Year - - 175,455,593 175,455,593Other Comprehensive Income - - (2,137,165) (2,137,165)Total Comprehensive Income - - 173,318,428 173,318,428

Transactions with Owners of the Company, Directly Recognized in EquityDividend Paid - - (67,410,000) (67,410,000)

Total Transactions with Owners of the Company - - (67,410,000) (67,410,000)

Balance as at 31st March 2016 1,194,452,950 92,742,554 1,102,766,863 2,389,962,367

Balance as at 1st April 2016 1,194,452,950 92,742,554 1,102,766,863 2,389,962,367

Profit for the Year - - 334,771,188 334,771,188Other Comprehensive Income - - (2,181,724) (2,181,724)Total Comprehensive Income - - 332,589,464 332,589,464

Transactions with Owners of the Company, Directly Recognized in EquityDividend Paid - - (67,410,000) (67,410,000)Total Transactions with Owners of the Company - - (67,410,000) (67,410,000)

Balance as at 31st March 2017 1,194,452,950 92,742,554 1,367,946,327 2,655,141,831



38

STATEMENT OF CASH FLOWS GROUP COMPANY

FOR THE YEAR ENDED 31ST MARCH 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Cash Flow from Operating ActivitiesProfit Before Tax 341,384,965 233,828,797 356,231,426 208,528,148Adjustments forDepreciation 105,487,803 95,923,726 97,324,480 90,986,964Fair Value Gain on Biological Assets (3,308,981) (5,719,655) - -Amortization of Intangible asset 1,318,963 4,186,894 193,963 2,686,894Amortization of Immovable Estate Assets on Lease 2,750,004 2,750,004 - -ESC write off 2,740,636 - 2,740,636 -Provision for Retirement Benefit Obligation 8,829,987 6,976,894 7,730,231 5,944,555Trade License Written-off 12,375,000 - - -Provision for Obsolete Inventories 35,097,267 2,000,000 35,097,267 2,000,000Finance Income (25,696,561) (30,852,147) (3,079,244) (6,179,303)Finance Expense 7,517,124 8,328,457 6,979,034 6,030,310Dividend Income - - (35,265,000) (429,000)Profit on Disposal of Property, Plant and Equipment - (2,850,000) - -Share of Profit of Equity Accounted Investees (29,490,251) (25,684,405) - -Amortization of Prepaid Lease Rent 174,816 174,818 174,816 174,818Operating Profit Before Working Capital Changes 459,180,772 289,063,383 468,127,609 309,743,386

Working Capital Changes(Increase)/Decrease in Inventories (106,181,399) 108,450,294 (122,725,502) 79,321,170(Increase)/Decrease in Trade and Other Receivables (81,134,472) 52,255,499 (59,631,340) 26,579,070(Increase)/Decrease in Dues from Related Parties 2,247,101 (117,629,408) 3,513,924 6,105,381Increase/(Decrease) in Trade and Other Payables 48,836,185 (67,696,793) 37,111,858 (48,677,631)Increase/(Decrease) in Dues to Related Parties 36,990,820 (23,357,376) 36,990,820 (20,521,985)Cash Generated from Operations 359,939,007 241,085,599 363,387,368 352,549,391Interest Paid (7,517,124) (8,328,457) (6,979,034) (6,030,310)Tax Paid (13,041,284) (14,537,297) (9,523,766) (9,065,193)Payment of Retirement Benefit Obligation (1,125,125) (2,282,414) (479,793) (1,556,191)Net Cash Flows Generated from /(Used in) Operating Activities 338,255,474 215,937,431 346,404,775 335,897,697

Cash Flows from Investing ActivitiesAcquisition of Property, Plant and Equipment (209,155,425) (222,860,006) (63,804,923) (167,993,775)(Acquisition)/Disposal of Biological Assets (130,000) 85,585 - -Proceeds from Disposal of Property, Plant and Equipment - 2,850,000 - -(Investment in)/Disposal of Investment in Unit Trust 167,410,756 383,844,097 - 300,000,000(Investment in)/Disposal of Other Equity Shares (225,000,000) (211,349,000) - -Acquisition of Subsidiaries Net of Cash Acquired - (1,327) - -Investments in Existing Subsidiaries - - (347,854,000) (485,275,000)Investment in equity accounted investees (15,000,000) (153,000,000) - -Interest Received 22,874,435 30,852,147 1,749,132 6,179,304Dividend Income from Investments includingEquity Accounted Investees 25,005,000 20,012,000 35,265,000 429,000(Acquisition from)/Disposed to Non-Controlling Interest 52,502,800 - - -Net Cash Used in Investing Activities (181,490,134) (149,566,504) (374,644,791) (346,660,471)

Cash Flows from Financing ActivitiesLoans and Borrowings obtained during the period 311,574,251 183,013,050 309,497,000 183,013,050Repayment of Loans and Borrowings (185,266,029) (295,634,534) (190,027,441) (232,933,603)Repayment of Lease Obligations (2,500,000) (2,500,000) - -Dividend Paid (67,148,952) (66,888,306) (66,950,952) (66,888,306)Net Cash Flows Generated From/(Used) in Financing Activities 56,659,270 (182,009,790) 52,518,607 (116,808,859)

Net Increase/ (Decrease) in Cash and Cash Equivalents 213,424,310 (115,638,863) 24,278,591 (127,571,633)Cash and Cash Equivalents at the beginning of the Year 123,841,132 239,479,995 37,862,480 165,434,113Cash and Cash Equivalents at the End of the Year (Note 24) 337,265,442 123,841,132 62,141,071 37,862,480



39

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.1. Reporting Entity

Renuka Agri Foods PLC is a public quoted Company incorporated and domiciled in Sri Lanka under the Companies Act No 17 of 1982, re registered under the Companies Act No 07 of 2007. The registered office of the Company is located at No. 69, Sri Jinarathana Road, Colombo 2.

The consolidated financial statements of the Company as at and for the year ended 31st March 2017 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”).

The principal activities of the Company is manufacturing and sale of coconut related food products. Ceylon Forestry (Private) Limited and Ceylon Botanical (Private) Limited are engaged in a business of planting timber species in identified plots of land & manage them till harvest and to purchase, buy, acquire, or take on lease or otherwise acquire land & other property for purpose of Group/Company subject. Kandy Plantations Limited is engaged in business of cultivating coconut, producing organic coconut, green pepper and sale of coconut and copra. Coco Lanka (Private) Limited is engaged in sourcing, manufacturing and exporting of organic Food Products.

1.2. Parent and Ultimate Parent Undertaking

The Company’s parent enterprise is Renuka Foods PLC, and the Company’s ultimate parent is Renuka Holding PLC which is incorporated in Sri Lanka.

1.3. Financial Year

Financial Statements of the Company and Group entities ends on 31st March.

2. BASIS OF PREPARATION

2.1. Statement of compliance

The Consolidated Financial Statements of the Group as at 31st March 2017 have been prepared in accordance with the Sri Lanka Accounting standards (SLFRS/LKAS) issued by the Institute of Chartered Accountants of Sri Lanka and the requirements of the Companies Act No. 7 of 2007.

The consolidated financial statements were authorized for issue by the Board of Directors on 9th August 2017.

2.2. Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:

• Biological assets are measured at fair value less costs to sell

• Liability for defined benefit obligations is carried at the present value of the defined benefit obligations.

• Land and Buildings are carried at fair value

Land and buildings are measured at fair value less accumulated depreciation on buildings and impairment charged subsequent to the date of the revaluation. Valuations are performed every 3-5 years (or frequently enough) to ensure that the fair value of a revalued asset does not differ materially from its carrying amount.

2.3. Functional and presentation currency

These consolidated financial statements are presented in Sri Lankan rupees, which is the Company’s functional currency. All financial information presented has been rounded to the nearest rupee unless otherwise indicated.

2.4. Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with SLFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments in applying accounting policies that have significant effect on the amounts recognized in the Financial Statements is included in the respective notes to the Financial Statements.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in respective notes to the Financial Statements.

2.4.1. Transfer pricing regulation

The group is subject to income taxes and other taxes including transfer pricing regulations. Prevailing uncertainties with respect to the interpretation of respective transfer pricing regulations, necessitated using management judgment to determine the impact of transfer pricing regulations. Accordingly critical judgments and estimates were used in applying the regulations in aspects including but not limited to identifying associated undertakings, estimation of the respective arm’s length prices and selection of appropriate pricing mechanism. The current tax charge is subject to such judgments. Differences between estimated income tax charge and actual payable may arise as a result of management’s interpretation and application of transfer pricing regulation.

NOTES TO THE FINANCIAL STATEMENTS


40

2.5. Going Concern

The Board of Directors has made an assessment of the Group’s ability to continue as a going concern in the foreseeable future and they do not intend to liquidate or cease trading.

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these consolidated Financial Statements, and have been applied consistently by Group entities.

3.1. Basis of consolidation

The consolidated Financial Statements include the Financial Statements of the company, its subsidiaries and other companies over which it has control. The group’s Financial Statements comprise of the consolidated Financial Statements of the Company and the Group which have been prepared in compliance with the group’s accounting policies.

3.1.1. Business combinations

The Group accounts for business combinations using the acquisition method as at the acquisition date which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

The Group measures goodwill at the acquisition date as:

• The fair value of the consideration transferred; plus

• The recognized amount of any non - controlling interest in acquiree; plus

• If the business combination is achieved in stages, the fair value of the pre - existing equity interest in the acquire; less

• The net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed

• When the excess is negative, a bargain purchase gain is recognized immediately in profit or loss.

3.1.2. Subsidiaries

Subsidiaries are entities controlled by the Group. The group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

3.1.3. Non-controlling interests

Non - controlling interests (NCI) are measured at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners.

3.1.4. Loss of Control

When the group loses control over a subsidiary, it derecognises the assets and liabilities of the

subsidiary, and any related NCI and other components of equity.

Any resulting gain or loss is recognised in profit or loss. Any Interest retained in the former subsidiary is measured at fair value when control is lost.

3.1.5. Interests in equity-accounted investees

The Group’s interests in equity-accounted investees comprise interests in associates. Associates are those entities in which the Group has significant influence, but not control over the financial and operating policies.

Interests in associate is accounted for using the equity method. It is initially recognized at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and OCI of equity accounted investees, until the date on which significant influence or joint control ceases.

3.1.6. Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated Financial Statements. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

3.2. Foreign Currency

3.2.1. Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)


41

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on translation are generally recognized in profit or loss.

However, foreign currency differences arising from the translation of the following items are recognised in OCI:

• Available-for-saleequityinvestments (except on impairment, in which case foreign currency differences that have been recognised in OCI are reclassified to profit or loss)

3.3. Financial instruments

The Group classifies non-derivative financial assets into the following categories: loans and receivables and available-for-sale financial assets.

The Group classifies non-derivative financial liabilities into the following categories: financial liabilities at fair value through profit or loss and other financial liabilities category.

3.3.1. Non-Derivative Financial Assets

The Group initially recognizes loans and receivables and debt securities on the date that they are originated. All other financial assets are recognized initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognised financial assets that is created or retained by the Group is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

The Group has the following non-derivative financial assets:

• Loansandreceivables

• CashandCashEquivalents

• Available-for-salefinancialassets

a. Loans and Receivables

Loans and receivables are financial assets with fixed or determinable payment that are not quoted in an active market. Such assets are recognized at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses.

Loans and receivables comprise of trade receivables, other receivables and cash and cash equivalents.

b. Cash and Cash Equivalents

Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value and are used by the Group in the management of its short term commitments.

c. Available-for-sale Financial Assets

These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on debt instruments, are recognised in OCI and accumulated in the fair value reserve. When these assets are derecognised, the gain or loss accumulated in equity is reclassified to profit or loss.

3.3.2. Non-derivative financial liabilities

The Group initially recognizes debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities are recognized initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

The Group classifies non derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognized initially at fair



42

value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest method.

Other financial liabilities comprise loans and borrowings, debt securities issued, bank overdrafts, and trade and other payables.

Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the statement of cash flows.

3.3.3. De-recognition of Financial Instruments

The Group derecognizes a financial asset when the right to receive cash flows from the asset have expired or when it transfers the financial asset in a transaction in which substantially all the risks and rewards of the ownership of the financial assets are transferred or in which the Group neither transfer nor substantially all risks and rewards of ownership and it does not retain control of the financial asset.

In transactions in which the Group neither retains nor transfers substantially all the risks and rewards of ownership of a financial asset and it retains control over the asset, the Group continues to recognize the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset.

On de-recognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset transferred), and the sum of (i) the consideration received (Including any new asset obtained less any new liability assumed)

and (ii) any cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss.

The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled or expired. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when and only when, the group has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset or settle the liability simultaneously.

3.3.4. Determination of Fair Value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• Intheprincipalmarketfortheasset or liability or

• Intheabsenceofaprincipalmarket, in the most advantageous market for the asset or liability.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

•Level1-Quoted(unadjusted) market prices in active markets for identical assets or liabilities

• Level2-Valuationtechniquesfor which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

• Level3-Valuationtechniquesfor which the lowest level input that is significant to the fair value measurement is unobservable

Level 1

When available, the Company measures the fair value of an instrument using active quoted prices or dealer price quotations (assets and long positions are measured at a bid price; liabilities and short positions are measured at an asking price), without any deduction for transaction costs. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm’s length basis.

Level 2

If a market for a financial instrument is not active, then the Company establishes fair value using a valuation technique. Valuation techniques include using recent arm’s length transactions between knowledgeable, willing parties (if available), reference to the current fair value of other instruments that are substantially the same, discounted cash flow analyses, credit models, option pricing models and other relevant valuation models. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Company, incorporates all factors that market participants would consider in setting a price, and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument. The Company calibrates valuation techniques and tests them for validity using prices from observable current market transactions in the same



43

instrument or based on other available observable market data.

The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e. the fair value of the consideration given or received, unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument, i.e. without modification or repackaging, or based on a valuation technique whose variables include only data from observable markets. When transaction price provides the best evidence of fair value at initial recognition, the financial instrument is initially measured at the transaction price and any difference between this price and the value initially obtained from a valuation model is subsequently recognised in profit or loss on an appropriate basis over the life of the instrument but not later than when the valuation is supported wholly by observable market data or the transaction is closed out.

Level 3

Certain financial instruments are recorded at fair value using valuation techniques in which current market transactions or observable market data are not available. Their fair value is determined by using valuation models that have been tested against prices or inputs to actual market transactions and also using the best estimate of the most appropriate model assumptions. Models are adjusted to reflect the spread for bid and ask prices to reflect costs to close out positions, credit and debit valuation adjustments, liquidity spread and limitations in the models. Also, profit or loss calculated when such financial instruments are first recorded (‘Day 1’ profit or loss) is deferred and recognised only when the inputs become observable or on derecognition of the instrument.

3.3.5. Stated Capital

3.3.5.1. Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.

3.4. Property, Plant and Equipment

3.4.1. Recognition and Measurement

Land and Buildings are measured at fair value less accumulated depreciation and accumulated impairment loss and other items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located.

Purchased software that is integral to the functionality of the related equipment is capitalized as part of the equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

3.4.1.1. Revaluation Method

Land and buildings are measured at fair value less accumulated depreciation on buildings and impairment charged subsequent to the date of the revaluation. Where land and buildings are subsequently revalued, the entire class of such assets is revalued at fair value on the date of revaluation. Valuations are

performed every 3-5 years (or frequently enough) to ensure that the fair value of a revalued asset does not differ materially from its carrying amount.

Any revaluation surplus is recognized in other comprehensive income and accumulated in equity in the asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognized in the income statement, in which case the increase is recognized in the income statement. A revaluation deficit is recognized in the income statement, except to the extent that it offsets an existing surplus on the same asset recognized in the asset revaluation reserve.

Any gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognized net within other income in profit or loss.

Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.

Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.

3.4.2. Subsequent costs

The cost of replacing a 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 Group, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.



44

3.4.3. Depreciation

Items of property, plant and equipment are depreciated from the date they are available for use or, in respect of self-constructed assets, from the date that the asset is completed and ready for use.

Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using a straight-line basis over their estimated useful economic life. Depreciation is generally recognized in profit or loss, unless the amount is included in the carrying amount of another asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.

Capital expenditure incurred in relation to fixed assets which are not completed as at the reporting date are shown as capital work-in-progress and is stated at cost. On completion, the related assets are transferred to property, plant and equipment. Depreciation on capital work-in-progress commences when the assets are ready for their intended use.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

Class of Assets Useful Lifetime (Years)

Factory Buildings 40 Plant and machinery 10-20 Land Development 10-20 Electrical Installation 10 Workshop Tools 10 Laboratory Equipment 10 Factory Equipment 10 Office Equipment 10 Furniture and Fitting 10 Motor vehicle 05 Revalued Buildings 20-25

3.5. Intangible Assets and Goodwill

3.5.1. Goodwill

Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. Goodwill is measured at initial recognition in accordance with Note 3.1.1.

3.5.1.1. Subsequent Measurement

Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment, and any impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity accounted investee.

3.5.2 Other intangible assets

Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortization and accumulated impairment losses.

3.5.3 Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

3.5.4. Amortization

Intangible assets are amortized on a straight-line basis in profit or loss over their estimated useful lives from the date that they are available for use. The estimated useful lives for the current and comparative years are as follows:

Class of Assets Useful Lifetime

(Years)

Computer Software 5 years

Trade License 10 years

Amortization methods, useful lives and residual value are reviewed at each reporting date and adjusted if appropriate.

3.6. Biological assets

Biological assets are measured at fair value less costs to sell, with any change therein recognized in profit or loss. Costs to sell include all costs that would be necessary to sell the assets, including transportation costs.

Biological assets are classified as mature biological assets and immature biological assets. Mature biological assets are those that have attained harvestable specifications or are able to sustain regular harvests. Immature biological assets are those that have not yet attained harvestable specifications. Managed Timber, Tea, rubber, other plantations and nurseries are classified as biological assets.

Biological assets are further classified as bearer biological assets and consumable biological assets.

Bearer biological asset includes tea and trees, those that are not intended to be sold or harvested, however used to grow for harvesting agricultural produce from such biological assets.

Consumable biological assets includes managed timber those that are to be harvested as agricultural produce or sold as biological assets. The Group recognizes the biological assets when, and only when, the entity controls the assets as a result of past event, it is probable that future economic benefits associated with the assets will



45

flow to the entity and the fair value or cost of the assets can be measured reliably.

The managed timber is measured on initial recognition and at the end of each reporting periods at its fair value less cost to sell in terms of LKAS 41. The cost is treated as approximation to fair value of young plants as the Impact on biological transformation of such plants to price during this period is immaterial. The fair value of timber trees are measured using DCF method taking in to consideration the current market prices of timber, applied to expected timber content of a tree at the maturity by an independence professional valuer. All other assumptions are given in Note 13 to the financial statements.

The gain or loss arising on initial recognition of biological assets at fair value less cost to sell and from a change in fair value less cost to sell of biological assets are included in profit or loss for the period in which it arises.

3.7. Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and, except for investment property, the leased assets are not recognized in the Group’s statement of financial position.

3.8. Premium paid on Leasehold Land

The premium paid by the subsidiary for leasehold land represents prepaid rental charges

which are amortized over 50 years, commencing from the second year of operation.

3.9. Inventories

Inventories are measured at the lower of cost and net realizable value.

The cost of inventories includes expenditure incurred in acquiring the Inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Cost incurred in bringing inventories to the present location and condition is recognized as follows.

• RawMaterial-Atcostdetermined at the factory on weighted average cost method

• FinishedGoods-Atfactorycost of direct materials, direct labor and appropriate proportion of fixed production overheads at normal operating capacity.

• Goodsintransit-Attheactualcost

• PackingMaterial-Atcostdetermined at the factory on weighted average cost method

• HarvestedCrops–Inventoryof harvested crop sold has been valued at realized price. Unsold harvested crop have been valued at estimated realizable value net of direct selling expenses. This basis has been adopted to recognize the profit/loss on perennial crops in the financial period of harvesting.

Net realizable value is the estimated selling price in the ordinary course of business,

less the estimated costs of completion and selling expenses.

3.10. Impairment

3.10.1. Financial assets

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future Cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

The Group considers evidence of impairment for receivables and held-to-maturity investment securities at both a specific asset and collective level. All individually significant receivables and held-to-maturity investment securities are assessed for specific impairment. All individually significant receivables and held-to-maturity investment securities found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables and held-to-maturity investment securities that are not individually significant are collectively assessed for impairment by grouping together receivables and held to-maturity investment securities with similar risk characteristics.



46

Losses are recognized in profit or loss and reflected in an allowance account against loans and receivables. When an event occurring after the impairment was recognized causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

3.10.2. Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than biological assets, investment property, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.

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 a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets.

For the purposes of goodwill impairment testing, goodwill acquired in a business combination is allocated to the group of CGUs that is expected to benefit from the synergies of the combination. This allocation is subject to an operating segment ceiling test and reflects

the lowest level at which that goodwill is monitored for internal reporting purposes. The Group’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss.

Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. 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 if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the 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.

3.11. Employee benefits

3.11.1. Defined contribution plan-Gratuity

A defined benefit plan is a post- employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of defied benefit plan is calculated by estimating the amount of future benefit that employees have earned in return

for their service in the current and prior period; that benefit is discounted to determine its present value.

The retirement benefit obligation of the Group is based on the actuarial valuation using Projected Unit Credit (PUC) methods as recommended by Sri Lanka Accounting Standards (LKAS 19) Employee Benefits. The calculation is performed by individual actuary using the projected unit credit method. The assumptions based on which the results of the actuarial valuation was determined, are included in Note 27 to the Financial Statements.

The Group recognizes all actuarial gains and losses arising from the defined benefit plans immediately in the statement of comprehensive income. The liability is disclosed under non – current liabilities in the statement of financial position and not externally funded.

However, as per the Payment of Gratuity Act No. 12 of 1983 the liability to an employee arises only on completion of 5 years of continued services.

3.11.2. Defined benefit plan-Employee Provident Fund and Employee Trust Fund

All employees who are eligible for Employees Provident Fund contribution and Employees Trust Fund contribution are covered by relevant contribution funds in line with respective statutes and regulations. The Company contributes 12 % and 3% of gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fund respectively.

3.12. Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and



47

it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

3.13. Commitments and Contingent Liabilities

Contingent Liabilities are possible obligations whose existence will be confirmed only by occurrence or non-occurrence of uncertain future events not wholly within the control of the Company or present obligations where the transfer of economic benefits is not probable or cannot be reliably measured.

Capital Commitment and Contingent Liabilities of the Company and the Group are disclosed in the respective notes to the Financial Statements.

3.14. Events after the Reporting Period

The materiality of the events after the reporting period has been considered and appropriate adjustments and provisions have been made in the Financial Statements wherever necessary.

3.15. Revenue

3.15.1. Sale of goods

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates.

Revenue is recognized when significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing

management involvement with the goods, and the amount of revenue can be measured reliably.

If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.

3.15.2. Rental income

Rental income from investment property is recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives granted are recognized as an integral part of the total rental income, over the term of the lease. Rental income from subleased property is recognized as other income.

3.15.3. Export Sales

Export sales are recognized at the time of shipment.

3.15.4. Local Sales

Local sales are recognized at the time of dispatch.

3.16. Finance income and finance costs

Finance Income comprises interest income on funds invested recognized in profit or loss using the effective interest method.

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in profit or loss using the effective interest method.

Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position.

Dividend income recognized when the right to receive the dividend is established.

3.17. Income tax

Tax expense comprises current and deferred tax. Current tax and deferred tax is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

3.17.1. Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss 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. Current tax payable also includes any tax liability arising from the declaration of dividends.

3.17.2. Deferred tax

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:

• Temporarydifferencesontheinitial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

• Temporarydifferencesrelated to investments in subsidiaries, associates and jointly controlled entities to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

• Taxabletemporarydifferencesarising on the initial recognition of goodwill.

The measurement of deferred tax reflects the tax consequences that would follow the manner



48

in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. For investment property that is measured at fair value, the presumption that the carrying amount of the investment property will be recovered through sale has not been rebutted.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

3.18. Statement of Cash Flows

The Statement of Cash Flows has been prepared using the “indirect method”.

Interest paid are classified as operating cash flows, interest received is classified as investing cash flows for the purpose of presenting Statement of Cash Flows.

3.19. Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

3.20. Related Party Transactions

Disclosure has been made in respect of the transactions in which one party has the ability to control or exercise significant influence over the financial and operating policies/decisions of the other, irrespective of whether a price is charged.

3.21. Segment Reporting

Segment results that are to the group’s CEO (the Chief Operating decision maker) include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses and tax assets and liabilities.

3.22 Comparative Information

The comparative information is re-classified wherever necessary to conform with the current year’s presentation in order to provide a better presentation.

4. DETERMINATION OF FAIR VALUES

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods.

When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

4.1. Biological assets

The fair value of immature timber plantations is based on the present value of the net cash flows expected to be generated by the plantation at maturity.

4.2. Inventories

The fair value of inventories acquired in a business combination is determined based on the estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.

4.3. Equity and debt securities

The fair value of equity and debt securities is determined by reference to their quoted closing bid price at the reporting date, or if unquoted, determined using a valuation technique. Valuation techniques employed include market multiples and discounted cash flow analysis using expected future cash flows and a market-related discount rate. The fair value of held-to-maturity investment is determined for disclosure purposes only.

4.4. Trade and other receivables

The fair values of trade and other receivables are estimated at the present value of future cash flows, discounted at the market rate of interest at the measurement date. Short-term receivables with no stated interest rate are measured at



49

the original invoice amount if the effect of discounting is immaterial. Fair value is determined at initial recognition and, for disclosure purposes, at each annual reporting date.

5. ACCOUNTING STANDARDS ISSUED BUT NOT EFFECTIVE AS AT REPORTING DATE

The Institute of Chartered Accountants of Sri Lanka has issued the following new Sri Lanka Accounting Standards which is not applicable for the current financial period.

Accordingly, these Standards have not been applied in preparing these financial statements.

5.1. SLFRS 15 – Revenue from Contracts with Customers

SLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance LKAS 18 Revenue, LKAS 11 Construction Contracts.

SLFRS 15 is effective for annual reporting period beginning on or after 1st January 2017, with early adoption permitted. However, IASB has deferred the adoption of IFRS 15 which corresponds to SLFRS 15 to be adopted from financial reporting periods beginning on or after 1st January 2018.

5.2. SLFRS 9 – Financial Instruments: Classification and Measurement

The objective of this SLFRS is to establish principles for the financial reporting of financial assets and financial liabilities that will present relevant and useful information to users of financial statements for their assessment of the amounts, timing and uncertainty of an entity’s future cash flows.

An entity shall apply this SLFRS to all items within the scope of LKAS 39 Financial Instruments: recognition and measurement. SLFRS 9 is effective for annual reporting periods beginning on or after 1st January 2018, with early adoption permitted.

5.3. SLFRS 16 Leases

SLFRS 16 provides a single lessee accounting model, requiring leases to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value even though lessor accounting remains similar to current practice.

This supersedes: LKAS 17 Leases, IFRIC 4 determining whether an arrangement contains a Lease, SIC 15 Operating Leases- Incentives; and SIC 27 evaluating the substance of Transactions Involving the Legal form of a Lease. Earlier application is permitted for entities that apply SLFRS 15 Revenue from Contracts with customers.

SLFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019. The impact on the implementation of the above Standard has not been quantified yet.



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6 REVENUE

Export Sales 2,147,323,407 2,060,776,858 2,147,323,407 2,057,416,368

Local Sales 393,713,536 371,005,021 373,965,901 359,936,568

2,541,036,943 2,431,781,879 2,521,289,308 2,417,352,936

7 OTHER OPERATING INCOME

Insurance Claim 30,000 884,561 18,000 873,683

Fair Value Gain on Biological Assets 3,308,981 5,719,655 - -

Profit on Sale of Property, Plant & Equipment - 2,850,000 - -

Dividend Income 123,640 - 35,265,000 429,000

Sundry Income 5,809,014 5,954,929 3,517,205 3,333,379

9,271,635 15,409,145 38,800,205 4,636,062

8 PROFIT FROM OPERATIONS Is stated after charging all expenses including the following

Directors’ Remuneration 21,171,000 12,320,000 21,171,000 12,320,000 Auditors’ Remuneration - Audit Services 1,072,143 1,263,328 715,000 655,000 - Non Audit Services 220,500 210,000 220,500 210,000 Depreciation on Property, Plant and Equipment 105,487,803 95,923,726 97,324,780 90,986,963 Amortization on Intangible Assets 1,318,963 4,186,894 193,963 2,686,894 Provision for Obsolete Inventories 35,097,267 2,000,000 35,097,267 2,000,000 Personnel Costs (Note 8.1) 285,593,433 237,354,825 257,035,117 214,670,095

8.1 PERSONNEL COSTS Salaries, Wages and Related Expenses 250,868,402 207,550,824 226,509,727 187,991,476 Defined Contribution Plan Costs - EPF and ETF 25,895,044 22,827,107 22,795,159 20,734,064 Defined Benefit Plan Costs - Retirement Benefit Obligation 8,829,987 6,976,894 7,730,231 5,944,555 285,593,433 237,354,825 257,035,117 214,670,095

GROUP COMPANY




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9 NET FINANCING COSTS

Finance Income Interest on - Call Deposit 2,436,619 1,132,299 923,669 592,146 - Savings Accounts 1,973,677 - - - - Foreign Currency Accounts 519,112 1,078,502 206,215 1,078,502 - Fixed Deposits 8,844,508 2,722,888 619,248 4,508,655 - Unit Trust 9,100,519 17,875,141 - - Exchange Gain 2,822,126 8,043,317 1,330,112 8,043,317 25,696,561 30,852,147 3,079,244 14,222,620

Finance Cost Interest on - Bank Loans (5,752,615) (3,496,450) (5,217,894) (3,087,015) - Bank Overdraft (219,397) (247,189) (216,027) (241,004) - Packing Credit Loans (1,545,112) (3,667,511) (1,545,112) (2,702,291) - Other - (199) - - Exchange Loss - (917,108) - - (7,517,124) (8,328,457) (6,979,033) (6,030,310)

18,179,437 22,523,690 (3,899,789) 8,192,310

10 TAXATION

Income Tax Charge for the Year (Note 10.1) 27,299,222 8,677,841 25,241,953 7,492,140 10% WHT on Intercompany Dividends 290,400 353,000 - - Under/ (Over) Provisions in Respects of Previous Years (5,089,757) 6,032,568 (5,033,369) 6,565,830 Deferred Tax Provision/(Reversal) for the Year (Note 30) (3,894,934) 23,252,249 1,251,654 19,014,585 18,604,931 38,315,658 21,460,238 33,072,555

10.1 Reconciliation Between Accounting Profit and Taxable Income

Profit Before Tax 341,384,965 233,828,797 356,231,426 208,528,148 Share of Results of Equity Accounted Investees (29,490,251) (25,531,391) - - Dividend Income from Group Companies 62,883,597 23,415,497 - - Other Consolidation Adjustments 6,000 1,260,000 - - Profit Before Income Tax Before Adjustments 374,784,311 232,972,903 356,231,426 208,528,148

Aggregate Disallowable Expenses 174,183,547 131,703,720 144,284,656 106,558,718 Aggregate Allowable Expenses (278,017,949) (268,545,897) (267,682,773) (259,268,367) Aggregate Other Income (40,901,727) (33,538,733) (1,542,917) (5,529,801) Aggregate Exempt Income (46,126,651) (12,594,003) (37,014,132) (1,078,502) Statutory Income from Business 183,921,531 49,997,990 194,276,260 49,210,196 Taxable Aggregate Other Income 24,744,239 9,902,204 3,085,834 5,667,557 Total Statutory Income 208,665,770 59,900,194 197,362,094 54,877,753 Brought Forward Loss Claimed during the Year (3,956,287) (787,790) - - Taxable Income 204,709,483 59,112,404 197,362,094 54,877,753

Income Tax at 28% 10,621,759 2,772,617 8,564,490 1,586,916 Income Tax at 12% - 5,905,224 - 5,905,224 Income Tax at 10% 16,677,463 - 16,677,463 - 27,299,222 8,677,841 25,241,953 7,492,140

GROUP COMPANY



10.2 Tax Losses

Tax Losses Brought Forward 21,453,157 - - - Tax Losses incurred during the year 32,407,788 22,240,947 - - Tax Losses Utilised (3,956,287) (787,790) - - Tax Losses Carried Forward 49,904,658 21,453,157 - -


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10 TAXATION (CONTINUED)

10.3 Income tax rates applicable to the company and subsidiaries

10.3.1 The Company

In terms of the agreement with the Board of investment of Sri Lanka (BOI), business profit of the Company is exempted from income tax for a period of 12 years from the date of commencement of its business, which came to an end in the year of assessment 2011/12. Subsequently the said exemption period was extended for another three years of assess-ments ending 2014/15 by a supplementary agreement. After the expiration of said tax exemption period, the Company will be liable for taxation at the rate of 12%. However, in terms of section 59(A) of the Inland Revenue Act No. 6 of 2006, export profit of the Company is liable for tax at the rate of 10%. Further in terms of section 59 (2) of the same Act, the Company is entitled to a 50% tax credit on the income tax liability of the business of food procesisng.

Dividend paid by the Company out of exempt profits during the 12 year tax holiday period or within one year thereafter is exempt from tax. Other income is liable for income tax at the rate of 28%.

10.3.2 Subsidiaries

a) Renuka Organics (Private) Limited

According to the agreements entered into with Board of Investment of Sri Lanka, the profit and income of the Company were exempt from income tax for a period of five (5) years. This tax holiday period expired on 31st March 1999.

From the year of assessments 2006/2007, under section 16 of the inland revenue act No. 10 of 2006, the Company’s profit was exempted from income tax for a period of five years. This tax holiday period expired on 31st march 2011. The Company is liable to income tax at 12% on profit from agriculture from the year of assessment 2011/2012.

The Company’s other income is liable for income tax at the rate of 28%.

b) Ceylon Botanicals (Private) Limited

The Company is liable to income tax at the rate of 28%

c) Ceylon Forestry (Private) Limited

In accordance with the provisions of section 17 of the Board of Investment of Sri Lanka law No. 4 of 1978, the Company is entitled to the following exemptions/benefits with regard to income tax;

(i) For a period of eight (08) years reckoned from the year of assessment as may be determined by the BOI, the profits and income of the Company is exempt from tax. For the above purpose, the year of assessment shall be reckoned from the year in which the Company commences to make profits or any year of assessment not later than two (02) years reckoned from the date of commencement of commercial operations whichever year is earlier, as specified in a certificate issued by the BOI, Sri lanka.

(ii) After the expiration of the aforesaid tax exemption period, referred to in sub clause (i) above, the profits and income of the Company shall for each year of assessment be charged at the rate of ten per centum (10%) for a period of two (2) years (“concessionary period”) immediately succeeding the last date of the tax exemption period during which the profits and income of the Company is exempted from it.

(iii) After the expiration of the aforesaid concessionary period referred to in sub clause (ii) above, the profits and income of the Company shall be charged for any year of assessment at the rate of 20%.

However, other income would be liable to Income Tax @ 28% for the year.

d) Kandy Plantations Limited

According to the agreement with the BOI of Sri Lanka, the Profits and Income of Kandy Plantations Ltd were exempt for a period of 5 years from the year of assessment in which the enterprise commences to make profit (i.e. 2003/2004). Accordingly, the said tax holiday period was expired on 31st March 2008.

However, the profit from agriculture of the company continued to be exempt from income tax for further 3 years of assess-ments ending 2010/2011, under section 16 of the inland revenue act No. 10 of 2006. This tax holiday was expired on 31st March 2011. The Company is liable to income tax at 12% on profit from agriculture from the year 2011/2012.

The other income of the company is liable to income tax at 28%. The profit from export sales is liable to income tax at 12%.

e) Coco Lanka (Private) Limited

The Company is liable to income tax at the rate of 12%.



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Group Company

2017 2016 2017 2016

Group Company

2017 2016 2017 2016

Profit for the period, attributable to Ordinary Shares (Rs) 322,363,394 195,356,347 334,771,188 175,455,593 Weighted Average number of Ordinary Shares 561,750,000 561,750,000 561,750,000 561,750,000 Basic Earnings per Share (Rs.) 0.57 0.35 0.60 0.31

Profit for the period, attributable to Ordinary Shareholders (Rs) 322,363,394 195,356,347 334,771,188 175,455,593 Weighted Average number of Ordinary Shares 561,750,000 561,750,000 561,750,000 561,750,000 Diluted Earnings per Share (Rs.) 0.57 0.35 0.60 0.31

11 EARNINGS PER SHARE

11.1 Basic Earnings Per Share

The Computation of the basic earnings per Share is based on the profit for the year attributable to ordinary shareholders for the year divided by the weighted average number of shares outstanding during the year and calculated as follows:

11.2 Diluted Earnings Per Share

The Computation of diluted earnings per share is based on profit attributable to ordinary shareholders for the year divided by the weighted average number of shares outstanding after adjusting for the effects of all dilutive potential ordinary shares.


11 Earnings Per Share

11.3 There was no dilution of ordinary shares outstanding at any time during the year. Therefore, diluted earnings per share is the same as basic earning per share as shown in Note 11.1

GROUP COMPANY

2017 2016 2017 2016

11.4 Dividend Per Share

Dividend Declared and Paid during the Year (Rs.) 67,410,000 67,410,000 67,410,000 67,410,000 Weighted Average Number of Ordinary Shares 561,750,000 561,750,000 561,750,000 561,750,000 Dividend Per Share (Rs.) 0.12 0.12 0.12 0.12


54

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)C

ost

As

at 1

st A

pril

2015

40,6

13,5

77

304,

265,

721

878,

635,

126

- 19

,368

,176

17

,603

,793

11

8,70

1 8,

333,

178

65,6

98,3

67

9,84

3,40

7 62

,397

,258

9,

395,

014

1,41

6,27

2,31

8

Addi

tions

Dur

ing

the

Year

- 91

,679

,143

38

,956

,110

-

2,32

1,76

4 89

8,90

0 -

- 6,

460,

203

1,57

2,13

1 28

,277

,763

52

,693

,992

22

2,86

0,00

6

Reva

luat

ion

of B

uild

ings

- (1

,273

,532

) -

- -

- -

- -

- -

- (1

,273

,532

)

Dis

posa

ls d

urin

g th

e Ye

ar

-

- -

- -

- -

- -

- (3

,404

,726

) -

(3,4

04,7

26)

Tran

sfer

s du

ring

the

Year

- 5,

912,

349

2,17

4,35

0 -

- -

- -

- -

- (8

,086

,699

) -

As

at 3

1st M

arch

201

6

40,6

13,5

77

400,

583,

681

919,

765,

586

- 21

,689

,940

18

,502

,693

11

8,70

1 8,

333,

178

72,1

58,5

70

11,4

15,5

38

87,2

70,2

95

54,0

02,3

07

1,63

4,45

4,06

6

As

at 1

st A

pril

2016

40,6

13,5

77

400,

583,

681

919,

765,

586

- 21

,689

,940

18

,502

,693

11

8,70

1 8,

333,

178

72,1

58,5

70

11,4

15,5

38

87,2

70,2

95

54,0

02,3

07

1,63

4,45

4,06

6

Addi

tions

Dur

ing

the

Year

127,

482,

760

20,0

66,7

59

17,2

77,1

02

10,9

44,0

00

274,

549

2,15

8,69

1 -

154,

770

970,

936

1,27

3,68

4 27

,662

,500

88

7,67

4 20

9,15

3,42

5

Tran

sfer

s du

ring

the

Year

- 23

,770

,332

29

,675

,175

-

- -

- -

- -

- (5

4,00

2,30

7)

(556

,800

)

As

at 3

1st M

arch

201

7

168,

096,

337

444,

420,

772

966,

717,

863

10,9

44,0

00

21,9

64,4

89

20,6

61,3

84

118,

701

8,48

7,94

8 73

,129

,506

12

,689

,222

11

4,93

2,79

5 88

7,67

4 1,

843,

050,

691

Dep

reci

atio

n

As a

t 1st

Apr

il 20

15

-

25,5

57,8

09

283,

221,

244

- 14

,294

,100

13

,669

,342

95

,040

3,

193,

390

15,7

42,1

21

3,44

5,70

2 40

,651

,119

-

399,

869,

867

Char

ge fo

r the

Yea

r

- 7,

288,

198

63,8

06,6

20

- 76

3,24

9 57

5,52

8 3,

979

95,0

33

6,42

5,16

7 1,

017,

368

15,9

48,5

84

- 95

,923

,726

Dis

posa

ls d

urin

g th

e Ye

ar

-

- -

- -

- -

- -

- (3

,404

,726

) -

(3,4

04,7

26)

Reva

luat

ion

Adju

stm

ent

-

(6,6

43,3

69)

- -

- -

- -

- -

- -

(6,6

43,3

69)

As

at 3

1st M

arch

201

6

- 26

,202

,638

34

7,02

7,86

4 -

15,0

57,3

49

14,2

44,8

70

99,0

19

3,28

8,42

3 22

,167

,288

4,

463,

070

53,1

94,9

77

- 48

5,74

5,49

8

As

at 1

st A

pril

2016

- 26

,202

,638

34

7,02

7,86

4 -

15,0

57,3

49

14,2

44,8

70

99,0

19

3,28

8,42

3 22

,167

,288

4,

463,

070

53,1

94,9

77

- 48

5,74

5,49

8

Char

ge fo

r the

Yea

r

- 11

,771

,961

67

,121

,380

-

881,

526

730,

082

3,16

1 88

,436

6,

819,

358

1,06

1,75

6 17

,010

,143

-

105,

487,

803

As

at 3

1st M

arch

201

7

- 37

,974

,599

41

4,14

9,24

4 -

15,9

38,8

75

14,9

74,9

52

102,

180

3,37

6,85

9 28

,986

,646

5,

524,

826

70,2

05,1

20

- 59

1,23

3,30

1

Writ

ten

Dow

n V

alue

As

at 3

1st M

arch

201

7

168,

096,

337

406,

446,

173

552,

568,

619

10,9

44,0

00

6,02

5,61

4 5,

686,

432

16,5

21

5,11

1,08

9 44

,142

,860

7,

164,

396

44,7

27,6

75

887,

674

1,25

1,81

7,39

0

As a

t 31s

t Mar

ch 2

016

40

,613

,577

37

4,38

1,04

3 57

2,73

7,72

2 -

6,63

2,59

1 4,

257,

823

19,6

82

5,04

4,75

5 49

,991

,282

6,

952,

468

34,0

75,3

18

54,0

02,3

07

1,14

8,70

8,56

8

Free

hold

Fa

ctor

y Pl

ant a

nd

Land

Fu

rnitu

re a

nd

Elec

tric

al

Wor

ksho

p La

bora

tory

Fa

ctor

y O

ffice

M

otor

C

apita

l Wor

k

La

nd

Build

ings

M

achi

nery

D

evel

opm

ent

Fitt

ings

In

stal

latio

n To

ols

Equi

pmen

t Eq

uipm

ent

Equi

pmen

t V

ehic

les

In P

rogr

ess

Tota

l

Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

.

AS

AT

31S

T M

AR

CH

12 P

rope

rty,

Pla

nt a

nd E

quip

men

t G

roup


55

Cos

t

As

at 1

st A

pril

2015

21

,428

,000

26

3,84

1,53

0 85

5,49

4,61

4 19

,180

,989

15

,998

,216

11

8,70

1 2,

555,

654

66,7

91,0

52

8,89

5,30

9 38

,067

,493

5,

912,

349

1,29

8,28

3,90

7

Addi

tions

Dur

ing

the

Year

-

91,6

79,1

43

37,6

61,3

77

2,14

0,50

8 89

8,90

0 -

- 6,

460,

203

1,39

9,88

1 27

,753

,763

-

167,

993,

775

Tran

sfer

s D

urin

g th

e Ye

ar

- 5,

912,

349

- -

- -

- -

- -

(5,9

12,3

49)

-

As

at 3

1st M

arch

201

6 21

,428

,000

36

1,43

3,02

2 89

3,15

5,99

1 21

,321

,497

16

,897

,116

11

8,70

1 2,

555,

654

73,2

51,2

55

10,2

95,1

90

65,8

21,2

56

- 1,

466,

277,

682

As

at 1

st A

pril

2016

21

,428

,000

36

1,43

3,02

2 89

3,15

5,99

1 21

,321

,497

16

,897

,116

11

8,70

1 2,

555,

654

73,2

51,2

55

10,2

95,1

90

65,8

21,2

56

- 1,

466,

277,

682

Addi

tions

Dur

ing

the

Year

-

20,0

66,7

59

17,2

77,1

02

255,

986

2,15

8,69

1 -

154,

770

700,

734

1,18

3,68

4 21

,400

,000

60

7,19

7 63

,804

,923

As

at 3

1st M

arch

201

7 21

,428

,000

38

1,49

9,78

1 91

0,43

3,09

3 21

,577

,483

19

,055

,807

11

8,70

1 2,

710,

424

73,9

51,9

89

11,4

78,8

74

87,2

21,2

56

607,

197

1,53

0,08

2,60

5

Dep

reci

atio

n

As

at 1

st A

pril

2015

-

24,6

78,6

30

262,

683,

032

14,2

41,0

46

13,0

94,0

09

95,0

40

1,91

1,45

6 14

,759

,443

2,

906,

682

24,8

95,1

64

- 35

9,26

4,50

2

Char

ge fo

r the

Yea

r -

6,47

0,83

5 62

,545

,757

75

2,24

7 41

4,97

0 3,

979

95,0

33

6,14

1,19

5 94

0,41

3 13

,622

,534

-

90,9

86,9

63

As

at 3

1st M

arch

201

6 -

31,1

49,4

65

325,

228,

789

14,9

93,2

93

13,5

08,9

79

99,0

19

2,00

6,48

9 20

,900

,638

3,

847,

095

38,5

17,6

98

- 45

0,25

1,46

5

As

at 1

st A

pril

2016

-

31,1

49,4

65

325,

228,

789

14,9

93,2

93

13,5

08,9

79

99,0

19

2,00

6,48

9 20

,900

,638

3,

847,

095

38,5

17,6

98

- 45

0,25

1,46

5

Char

ge fo

r the

Yea

r -

10,2

92,2

51

62,8

76,7

89

865,

971

569,

524

3,16

1 88

,436

6,

552,

197

1,01

9,46

0 15

,056

,691

-

97,3

24,4

80

As

at 3

1st M

arch

201

7 -

41,4

41,7

16

388,

105,

578

15,8

59,2

64

14,0

78,5

03

102,

180

2,09

4,92

5 27

,452

,835

4,

866,

555

53,5

74,3

89

- 54

7,57

5,94

5

Writ

ten

Dow

n V

alue

As

at 3

1st M

arch

201

7 21

,428

,000

34

0,05

8,06

5 52

2,32

7,51

5 5,

718,

219

4,97

7,30

4 16

,521

61

5,49

9 46

,499

,154

6,

612,

319

33,6

46,8

67

607,

197

982,

506,

660

As a

t 31s

t Mar

ch 2

016

21,4

28,0

00

330,

283,

557

567,

927,

202

6,32

8,20

4 3,

388,

137

19,6

82

549,

165

52,3

50,6

17

6,44

8,09

5 27

,303

,558

-

1,01

6,02

6,21

7

Fr

eeho

ld

Fact

ory

Plan

t and

Fu

rnitu

re a

nd

Elec

tric

al

Wor

ksho

p La

bora

tory

Fa

ctor

y O

ffice

M

otor

C

apita

l Wor

k

Land

Bu

ildin

gs

Mac

hine

ry

Fitt

ings

In

stal

latio

n To

ols

Equi

pmen

t Eq

uipm

ent

Equi

pmen

t V

ehic

les

In P

rogr

ess

Tota

l

Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

. Rs

.

AS

AT

31S

T M

AR

CH

12 P

rope

rty,

Pla

nt a

nd E

quip

men

t (C

ont

inue

d)

Com

pany



56


12.2 Fully depreciated property, plant and equipment still in use

Group

The gross carrying amount of fully depreciated property, plant and equipment still in use as at 31st March 2017 is Rs.182,307,029/- (2016 - Rs. 152,811,829/-).

Company The gross carrying amount of fully depreciated property, plant and equipment still in use as at 31st March 2017 is

Rs.166,583,357. (2016 - Rs. 148,821,520/-).

12.3 Property, Plant and Equipment of the Group include land owned by Ceylon Botanicals (Private) Limited, which is currenly rented out by Ceylon forestry (Private) Limited (also a subsidiary of the group). The rental income & expense recognised is Rs.99,996 (2016 Rs. 99,996).

12.4 Original cost of the purchase of property, plant and equipment of the group was Rs.399,565,880.

13 BIOLOGICAL ASSETS Immature Plantation

Balance as at the Beginning 51,476,902 45,842,832 - - Additions During the Year 130,000 - - - Disposals During the Year - (85,585) - - Gain on Fair Value During the year 3,308,981 5,719,655 - - Balance at the End 54,915,883 51,476,902 - -

GROUP COMPANY

2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Biological Assets as at 31st March 2017 consist of Ceylon Forestry (Pvt) Limited’s investments made for Teak and Mahogany Plants and Kandy Plantations Limited’s investment in Coconut Plant Nursery.

Kandy Plantations Limited

During the year, Kandy Plantations Limited has incurred a cost of Rs.130,000/- in planting a Coconut Nursery. The nursery is for inplant vacant areas of the plantation held by Kandy Plantations Limited.

The biological asset is carried at cost as at reporting date, since the nursery has just started its operations, and the expected useful life is estimated to be 2-3 years.

Ceylon Forestry (Private) Limited

The biological asset harvested is on the land owned by Ceylon Botanicals (Private) Limited (a subsidiary Company of the group), for which rent has been paid by Ceylon Forestry (Private) Limited. The total extent of the land is 67 acres. The planted area is 42 acres. Number of Trees are 20,331.

Managed trees include commercial teak timber plantations cultivated on the estates in Matale. The cost of im-mature trees up to 5 years from planting are treated as approximate fair value particularly on the grounds of little biological transformation has taken place and impact of the biological transformation on price is not material.

When such plantation become mature, the additional investment since taken over to bring them to maturity are transferred from immature to mature.

The fair value of managed trees was ascertained in accordance with LKAS 41 - “Agriculture” which is applicable only for managed agricultural activity in terms of the ruling issued by the Institute of Chartered Accountants of Sri Lanka. The Valuation was carried out by an independent Chartered Valuation Surveyor Mr. W.M. Chandrasena using discounted Cash Flows (DCF) method.

Valuation of biological assets are considered as a level III valuation, and details of the valuation are given below.


57

13.1 Key assumptions used in valuation are as follows

Variable Comment

Timber Content Estimated based on the girth, height and considering the growth and present age of the trees of each species in different geographical regions, factoring all the prevailing statu-tory regulations enforced against harvesting of timber coupled with forestry plan of the Company approved by the Forestry Department.

Economic Useful Life Estimated based on normal life span of each species by factoring the forestry plan of the Company approved by the Forestry Department

Selling Price Estimated based on prevailing Sri Lankan market prices factoring all the conditions to be fulfilled in bringing the trees in to salable condition.

Discount Rate Future cash flows are discounted at the rate of 13% (2016 - 12.5%)

The valuations, as presented in the external valuation models based on net present values, take into account the long-term exploitation of the timber plantation. Because of the inherent uncertainty associated with the valuation at fair value of the biological assets due to the volatility of the variables, their carrying value may differ from their realizable value. The Board of Directors retains their view that commodity markets are inherently volatile and that long-term price projections are highly unpredictable. Hence, the sensitivity analysis regarding selling price and discount rate variations as included in this note allows every investor to reasonably challenge the financial impact of the assumptions used in the LKAS 41 against his own assumptions.

Inter-relationship between The estimated average future sales price of timber may increase or decrease withkey unobservable inputs and in a +10% to -10% range.fair value measurement: The risk-adjusted discount rate of 13% may stimulate an increase or a decrease

between the ranges +0.5% to -0.5%

13.2 Sensitivity Analysis

Sensitivity variation on sales price

Values as appearing in the Statement of Financial Position are very sensitive to price changes with regard to the average sales prices applied. Simulations made for timber, shows that an increase or a decrease by 10% of the estimated future selling price has the following effect on the net present value of biological assets:

Sales price fluctuation +10% 0 -10%

Managed Timber Rs. Rs. Rs. As at 31st March 2017 60,264,471 54,785,883 49,307,295

Sensitivity variation on discount rate Values as appearing in the Statement of Financial Position are very sensitive to changes of the discount rate applied.

Simulations made for timber, shows that an increase or a decrease by 0.5% of the estimated discount rate has the follow-ing effect on the net present value of biological assets:

Discount rate fluctuation +0.5% 0 -0.5%

Manage Timber Rs. Rs. Rs. As at 31st March 2017 51,878,090 54,785,883 57,902,301



58

14.3 Trade License

Balance at the Beginning 13,500,000 15,000,000 - - Amortisation during the year (1,125,000) (1,500,000) - - Write-offs during the year (12,375,000) - - - Balance at the end - 13,500,000 - -

14.3.1 Renuka Organic (Private) Limited has aquired the Trade License to operate Desiccated Coconut Mill at Unagahadeniya during the year 2015/16 for a sum of Rs. 15,000,000. However, during the year 2016/17 the management has decided to write off the asset due to policy changes made by The Coconut Board.

15 IMMOVABLE ESTATE ASSETS ON LEASE

Balance as at the Beginning 46,749,972 49,499,976 - - Amortization During the Year (2,750,004) (2,750,004) - - Balance at the End 43,999,968 46,749,972 - -

Kandy Plantations Limited - Immovable Estate Assets on Lease

Leases have been executed for 3 estates (Primarily coconut) comprising 33 contiguous allotments of Land called and known as “Giriulla Estate” by Mr. L.H. Croos Dabrera. This contiguous allotments of Land comprise a total extent of 640A-3R-32P. This lease has been executed for a period of 30 years under 2 separate lease agreements. The first lease agreement relates to 10 years period from 1st April 2003 to 31st March 2013 and the second lease agreement relates to the next 20 years commencing from 1st April 2013 and ending on 31st March 2033.

A valuation report dated 11th October 2003 prepared by Leon M.P. Perera Dip.In.Val. F.I.V. indicates only the method of ascertaining the maximum amount payable to the owner of the Estate for the 30 years period which was Rs. 88,000,000/-. The agreed amount payable of Rs. 82.5 Mn. had been capitalised on the basis that it represents the value of immovable assets taken over by Kandy Plantations Limited.

14 INTANGIBLE ASSETS

Goodwill on Acquisition (Note 14.1) 95,005 95,005 - - Computer Software (Note 14.2) - 193,963 - 193,963 Trade License (Note 14.3) - 13,500,000 - - Balance at the End 95,005 13,788,968 - 193,963

14.1 Goodwill on Acquisition

At the Beginning of the Year 95,005 - - - Additions During the Year - 95,005 - - At the End of the Year 95,005 95,005 - - 14.1.1 Goodwill on Acquisition Consist of Following Company

Coco Lanka Private Limited 95,005 95,005 - - 95,005 95,005 - -

14.2 Computer Software

Balance at the Beginning 193,963 2,880,857 193,963 2,880,857 Amortisation during the year (193,963) (2,686,894) (193,963) (2,686,894) Balance at the end - 193,963 - 193,963

14.2.1 Renuka Agri Foods PLC has acquired an ERP system for a sum of Rs. 13,648,153 on 30th of April 2011. The Carrying value of the asset at the end of the reporting period is Nil (2016 - Rs.193,963). As of reporting date the management has fully amortised the Computer Software.

GROUP COMPANY

2017 2016 2017 2016 Rs. Rs. Rs. Rs.



59

16 PREMIUM PAID FOR LEASEHOLD PREMISES

Balance as at the Beginning 7,399,730 7,574,548 7,399,730 7,574,548 Amortization During the Year (174,816) (174,818) (174,816) (174,818) Balance at the End 7,224,914 7,399,730 7,224,914 7,399,730

This represents the premium paid to the Board of Investment of Sri Lanka for the acquisition of leasehold land in year 2001 and in year 2014. The premium is amortized over the leasehold period of 50 years with effect from the year 2001 and year 2014 re-spectively.

17 INVESTMENT IN SUBSIDIARY

Investment in Subsidiary Companies - Unquoted COCO Lanka (Private) Limited - - 44,999,000 - Renuka Organics (Private) Limited - - 1,451,885,721 1,144,275,000 - - 1,496,884,721 1,144,275,000

17.1 Investment in subsidiary - Company

Renuka Organics (Private) Limited 100% 100% 10,979,500 8,816,250 COCO Lanka (Private) Limited 30% - 449,990 -

17.2 Further Investments in Subsidiaries

a) Renuka Organics (Private) Limited On 27th December 2016 and on 31st January 2017 Renuka Agri Foods PLC has further invested Rs. 237,610,721/- and

Rs. 70,000,000/- respectively in 2,163,250 ordinary shares issued by Renuka Organics (Pvt) Ltd, a wholly owned subsidi-ary of Renuka Agri Foods PLC.

b) Coco Lanka (Private) Limited On 27th December 2016, Renuka Organics (Private) Limited, Renuka Agri Foods PLC and Kandy Plantations Limited

invested Rs. 52,500,00/-, Rs. 44,999,000/- and Rs. 52,498,000/- respectively in Coco Lanka (Private) Limited’s share issue. This transaction effectively increased the group’s holding in the company to 97.77%.

Subsequently, at of 31st March 2017, Renuka Organics (Private) Limited disposed its investment in Coco Lanka (Private) Limited to an external party at cost value. The group’s effective holding in Coco Lanka (Private) Limited dropped to 62.76% correspondingly.

17.3 Group Investment in Subsidiary

c) Ceylon Botanical (Private) Limited Ceylon Forestry (Private) Limited, a sub-subsidiary of Renuka Agri Foods PLC, has sold part of its investment in Ceylon

Botanical (Private) Limited to Kandy Plantations Limited (also a sub-subsidiary of Renuka Agri Foods PLC) at a cost value of Rs. 6,249,900/-. The transaction was completed on 28th of February 2017.

GROUP COMPANY

2017 2016 2017 2016 Rs. Rs. Rs. Rs.

% Holding No. of Shares

2017 2016 2017 2016 Rs. Rs. Rs. Rs.



60

17 INVESTMENT IN SUBSIDIARIES (CONTINUED)

17.4 PRINCIPAL SUBSIDIARIES

As at 31st March 2017The following disclosure excerpt highlights the group composition and the proportion of ownership interests held by NCI.

Company and Country of Class of Shares Proportion of Group Non-controllingIncorporation/Operation Principal Activities Held class held Interest (%) interest (%)

Sri LankaRenuka Organics (Private) Limited Manufacture and export of Ordinary 100% 100% 0% coconut and spice products

Kandy Plantations Limited (KPL) Organic cultivation of Ordinary 94% 94% 6% agricultural produce

Ceylon Forestry (Private) Limited (CFL) Planting and managing of Forestry Ordinary 56% 56% 44%

Ceylon Botanical (Private) Limited (CBL) Investment in Agricultural property Ordinary 66% 66% 34%

Coco Lanka (Private) Limtied (CLP) Organic Cultivation of Agricultural Ordinary 63% 63% 37% produce

Non-controlling interest represents the equity in subsidiaries that are not attributable, directly or indirectly to the parent Company. Profit or loss and each component of other comprehensive income are attributed to the Company and non-controlling interests. Losses are attributed to non-controlling interests even if the non-controlling interests balance reported in the consolidated statement of financial position in negative.

Non-controlling interests are directly recognized as the difference between the proceeds received and the carrying amount of the acquired interests. The difference is recorded as a reduction or increase in equity under transactions with non-controlling interests. Upon disposal of rights in a subsidiary that does not result in a loss of control, an increase or decrease in equity is recognized as the difference between the consideration received by the Group and the carrying amount of the non-controlling interests in the subsidiary adjusted for the disposal of goodwill in the subsidiary, if any, and amounts recognized in other comprehensive income, if any. Transaction costs in respect of transaction with non-controlling interests as also recorded in equity.

Significant inter group balances and transaction and gain ad losses resulting from intergroup transactions are eliminated in full in the consolidated financial statements

The financial statement of the Company and of the consolidated investees are prepared as of the same date and period. The accounting policies in the financial statements of those investees are applied consistently and uniformly with the policy applied in the financial statements of the Company.

Summary financial information for subsidiaries that have non-controlling interests that are material to the Group.

This summarized financial information is shown on a 100 per cent basis. It represents the amounts shown in the subsidiaries financial statements prepared in accordance with Group accounting policies, including fair value adjustments, and before intercompany eliminations.

CLP KPL CFL CBL 2017 2017 2017 2017

Revenue - 47,913,845 - -Profit/(loss) after tax (1,922,955) 1,869,803 840,288 (27,899)- attributable to non-controlling interests (59,289) 119,349 368,296 (11,716)- attributable to Renuka Agri Foods PLC (1,863,666) 1,750,454 471,992 (16,183)Other comprehensive income/(loss) - 221,947 - -Total comprehensive income/(loss) (1,922,955) 2,091,750 840,288 (27,899)Non-current assets 141,479,462 150,579,015 73,865,577 20,002,057Current assets 6,837,769 193,403,495 110,646 5,114,001Current liabilities (416,139) (7,975,972) (3,945,094) (42,228)Non-current liabilities - (58,580,747) (5,195,696) (576)Net assets 147,901,092 277,425,791 64,835,433 25,073,254- attributable to non-controlling interests 55,071,468 12,681,562 20,199,105 8,642,308- attributable to Renuka Agri Foods PLC 92,829,624 264,744,229 44,636,328 16,430,946Cash flow from/(used in) operations (3,801,175) 11,428,091 (5,822,606) 1,867,498Dividend paid to non-controlling interests - 198,000 - -



61

18.1 PRINCIPAL ASSOCIATES

AS AT 31ST MARCH 2017

The following disclosure excerpt provides summarized financial information for associates and a reconciliation to the carrying amount in the statement of financial position.

Name of associate and place of incorporation

Principal Activities Financial statement reporting date

% holding in voting rights

Renuka Agri Organics Limited (RAO)

Manufacturing and export of Coconut based products

31st March 2017 20%

Shaw Wallace Ceylon Limited (SWCL)

Manufacture, market and distribute Fast moving consumer goods

31st March 2017 20%

RAO SWCL 2017 2017

Percentage Ownership Interest 20% 20% Non-current assets 228,148,954 2,541,828,274 Current assets 365,039,642 1,087,635,887 Non-current liabilities (3,707,334) (447,420,036) Current liabilities (198,974,353) (965,796,956) Non-controlling interests - (7,903) Net Assets (100%) 390,506,909 2,216,239,266 Group’s share of net assets (20%) 78,117,002 443,247,853 Goodwill 199,580,570 - Carrying amount in the statement of financial position 277,697,572 360,185,911 Revenue (20%) 142,230,580 759,273,153 Profit from operations (20%) 34,267,150 (4,776,899) Net income (20%) 34,267,150 (4,776,899) Other comprehensive income/(expense) (20%) (543,939) 211,156 Total comprehensive income (20%) 33,723,211 (4,565,743) Cash dividends received by the company 25,005,000 -

18 INVESTMENT IN EQUITY ACCOUNTED INVESTEES

Renuka Agri Organics Limited 277,697,572 253,979,361 - - Shaw Wallace Ceylon Limited 360,185,911 364,751,654 - - 637,883,483 618,731,015 - -

Renuka Agri Organics Limited During the year, Renuka Organics (Pvt) Ltd, a 100% owned subsidiary of Renuka Agri Foods PLC, has invested in 150,000 shares

(non-voting) of Renuka Agri Organics Limited for a total consideration of Rs. 15,000,000/-. The investment was made on 31st December 2016.

GROUP COMPANY

2017 2016 2017 2016 Rs. Rs. Rs. Rs.



62

19 INVESTMENTS IN AVAILABLE FOR SALE FINANCIAL ASSET

Investments in Unit Trusts (Note 19.1) - 167,410,756 - - Investments in Equity Shares - Renuka Development Limited (Note 19.2) 436,350,000 211,350,000 - - 436,350,000 378,760,756 - -

19.1 Investments in Units Trusts As at 31st March 2017, Kandy Plantations Limited has disposed of its investment held in Capital Alliance Corporate Treasury

Fund. In 2016, this investment had a carrying value of Rs.167,410,756/-.

19.2 Investment in Equity Share of Renuka Development Limited Renuka Organics (Private) Limited, a wholly owned subsidiary of Renuka Agri Foods PLC, has made a further investment of

Rs.225,000,000/- (2016 - Rs.211,350,000/-) in 22,500,000 ordinary shares of Renuka Development Limited. Total investment made by Renuka Organics (Private) Limited is equal to 11.79% of the Renuka Development’s issued capital.

19.3 The Group carries unquoted equity shares at cost as the fair value cannot be reliably measured.

GROUP COMPANY

2017 2016 2017 2016 Rs. Rs. Rs. Rs.


20 INVENTORIES

Harvested Crop 3,890,781 9,274,856 - - Raw Materials and Consumables 33,238,024 32,843,624 32,544,187 23,731,542 Finished Goods 316,894,574 237,968,505 316,894,574 237,968,505 Packing Material and Consumables 106,818,816 84,707,550 106,818,816 84,707,550 Machinery Spare Parts 62,852,380 51,538,924 62,666,271 51,433,158 Goods in Transit 2,651,054 1,807,354 2,651,054 1,807,354 Work in Progress 45,917,694 45,118,985 45,917,694 45,118,985 572,263,323 463,259,798 567,492,596 444,767,094 Less : Provision for the Obsolete Inventories (47,990,085) (12,892,818) (47,990,085) (12,892,818) 524,273,238 450,366,980 519,502,511 431,874,276

20.1 Provision for Obsolete Inventories

Balance at the Beginning 12,892,818 10,892,818 12,892,818 10,892,818 Provisions made During the Year 35,097,267 2,000,000 35,097,267 2,000,000 Balance at the End 47,990,085 12,892,818 47,990,085 12,892,818

21 TRADE AND OTHER RECEIVABLES

Trade Debtors 230,607,414 171,873,576 230,607,414 171,867,576 Staff Loans and Advances 102,746 5,350,464 102,746 3,274,016 Other Receivables 3,127,411 1,557,114 1,100,150 485,245 Pre- Payments 6,449,048 6,454,878 6,449,048 6,454,878 Deposit and Advances 70,298,694 44,348,009 65,986,910 43,593,009 Sundry Debtors 690,000 - - - 311,275,313 229,584,041 304,246,268 225,674,724


63

22 TAX RECOVERABLES

VAT Recoverable 5,663,201 7,814,537 2,269,887 2,524,928 NBT Recoverable 216,596 147,985 216,596 147,985 Income Tax 1,155,897 1,124,923 - - Notional Tax 415,525 415,525 415,525 415,525 WHT Recoverable 358,055 265,688 358,055 265,688 ESC Recoverable 20,873,848 7,122,991 20,873,848 7,122,991 28,683,122 16,891,649 24,133,911 10,477,117

23 AMOUNTS DUE FROM RELATED COMPANIES

Kandy Plantations Limited - - - 1,266,823 Richlife Diaries Limited 1,037,223 3,301,696 1,037,223 3,301,696 Shaw Wallace Ceylon Limited 18,579,928 18,562,556 18,579,928 18,562,556 19,617,151 21,864,252 19,617,151 23,131,075

24 CASH AND CASH EQUIVALENTS

Short Term Deposits 245,719,853 1,072,927 1,123,080 1,072,927 Call Deposits 31,761,457 64,451,123 27,243,154 40,285,707 Cash at Bank and in Hand 126,039,389 97,929,275 97,577,094 35,391,372 403,520,699 163,453,325 125,943,328 76,750,006 Bank Overdraft (66,255,257) (39,612,193) (63,802,257) (38,887,526) Cash and Cash equivalents for the Cash Flow Purpose 337,265,442 123,841,132 62,141,071 37,862,480

25 STATED CAPITAL

561,750,000 Shares 1,194,452,950 1,194,452,950 1,194,452,950 1,194,452,950

26 REVALUATION RESERVE

Opening Balance 97,769,633 92,742,554 92,742,554 92,742,554 Effect of change in holding in subsidiary 6,729 - - - Surplus on revaluation of building - 5,027,079 - - Closing balance 97,776,362 97,769,633 92,742,554 92,742,554

GROUP COMPANY

2017 2016 2017 2016 Rs. Rs. Rs. Rs.



64

27 RETIREMENT BENEFIT OBLIGATION

Balance as at the Beginning of the Year 25,713,164 17,806,157 21,784,598 14,967,637 Interest Cost for the Year 2,821,320 1,966,069 2,396,306 1,646,440 Current Service Cost for the Year 6,008,667 5,010,825 5,333,925 4,298,115 Payments Made During the Year (1,125,125) (2,282,414) (479,793) (1,556,191) Actuarial (Gain)/Loss for the Year 2,227,020 3,212,527 2,479,232 2,428,597 Balance at the Year End 35,645,046 25,713,164 31,514,268 21,784,598 Recognised in Profit or Loss 8,829,987 6,976,894 7,730,231 5,944,555 Recognised in OCI 2,227,020 3,212,527 2,479,232 2,428,597 11,057,007 10,189,421 10,209,463 8,373,152

An actuarial valuation of retirement benefit obligation was carried out as at 31st March 2017 by Mr.M.Poopalanathan, Actuarial and Management Consultants (Private) Limited. The valuation methods used by the actuary to value the benefit is the “Projected unit credit method”, the method recommended by the Sri Lanka Accounting Standards No 19 (LKAS 19) “Employee Benefits”. The Principal assumptions used were as follows and those had been uniformly applied to all the companies in the group.

2017 2016

1. Retirement age 55 Years 55 Years 2. Discount rate 11% 11% 3. Salary increment rate 12% 12% 4. Demographic Assumption A 67/70 Mortality Table A 67/70 Mortality Table

GROUP COMPANY

2017 2016 2017 2016 Rs. Rs. Rs. Rs.

27.1 Sensitivity Analysis - Group

ln order to illustrate the significance of the Salary Escalation rate and Discount Rate assumed in this valuation as at 31st March 2017, the sensitivity analysis for all employees assuming the following salary escalation rate and discount rate are as follows.

Discount Rate Salary Escalation rate Present Value of Defined Benefit Obligation (Rs.)

One Percentage Point increase As given in Report 31,338,678 One Percentage Point decrease As given in Report 35,188,633 As given in Report One Percentage Point increase 35,299,844 As given in Report One Percentage Point decrease 31,203,668


28 LOANS AND BORROWINGS

Balance at the Beginning of the Year 189,360,372 301,981,856 183,218,858 233,139,411 Borrowings During the Year 311,574,251 183,013,050 311,574,251 183,013,050 Repayment During the year (185,266,029) (295,634,534) (183,218,858) (232,933,603) Balance at the Year End 315,668,594 189,360,372 311,574,251 183,218,858

28.1 Repayments Due within One Year 313,621,422 185,266,029 311,574,251 183,218,858

28.2 Repayments Due After One Year 2,047,172 4,094,343 - - 315,668,594 189,360,372 311,574,251 183,218,858

GROUP COMPANY

2017 2016 2017 2016 Rs. Rs. Rs. Rs.


65


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29 FINANCE LEASE OBLIGATION

Balance as at the Beginning of the Year 57,500,000 60,000,000 - - Repayments During the Year (2,500,000) (2,500,000) - - Balance at the End of the Year 55,000,000 57,500,000 - - Lease rentals Payables within One Year 2,500,000 2,500,000 - - Lease Rental Payable After One Year 52,500,000 55,000,000 - - Balance Payable as at Year End 55,000,000 57,500,000 - -

29.1 Analysis by Company

Kandy Plantations Limited (Note 29.2) 55,000,000 57,500,000 - - 55,000,000 57,500,000 - -

29.2 Kandy Plantations Limited

Land Balance as at the Beginning of the Year 57,500,000 60,000,000 - - Repayments During the Year (2,500,000) (2,500,000) - - Balance as at the Year end 55,000,000 57,500,000 - - Lease Rental Payable within One Year 2,500,000 2,500,000 - - Lease Rental Payable After One Year 52,500,000 55,000,000 - -

GROUP COMPANY

2017 2016 2017 2016 Rs. Rs. Rs. Rs.


30 DEFERRED TAXATION

Balance at the Beginning 93,421,330 70,554,585 89,023,675 70,300,522 Provision Made / ( Reversal) during the year (Note 30.4) (4,162,177) 22,866,745 954,146 18,723,153 Balance at the Year end (Note 30.3) 89,259,153 93,421,330 89,977,821 89,023,675

30.1 Deferred tax asset (5,914,940) (408,674) - - Deferred tax liability 95,174,093 93,830,004 89,977,821 89,023,675 89,259,153 93,421,330 89,977,821 89,023,675

30.2 Renuka Agri Foods PLC, Kandy Plantations Limited and Ceylon Forestry (Private) Limited have applied the effective tax rate of 12% where as 28% was applied by Renuka Organics (Private) Limited and Ceylon Botanicals (Private) Limited for the calculation of deferred tax asset/liability as at the reporting date.


67

AS AT 31ST MARCH 2017 2016

Temporary Tax Temporary Tax Differences Effects Differences Effects Rs. Rs. Rs. Rs.

a. Company On Property, Plant and Equipment 781,329,446 93,759,534 763,648,559 91,637,827 On Retirement Benefit Obligation (31,514,268) (3,781,713) (21,784,598) (2,614,152) 749,815,178 89,977,821 741,863,961 89,023,675

b. Group On Property, Plant and Equipment 797,197,100 97,846,923 780,972,773 93,716,478 On Biological Assets 54,785,883 6,574,306 51,476,902 5,147,691 On Accumulated Tax Losses (40,904,658) (10,923,551) (21,453,157) (2,372,812) On Retirement Benefit Obligation (35,450,640) (4,238,525) (25,583,557) (3,070,027) 775,627,685 89,259,153 785,412,961 93,421,330

30.3 Provision for Deferred Tax is attributable to the followings.


30.4 Reconciliation of Deferred Tax Provision

Recognized in Profit or Loss (3,894,934) 23,252,249 1,251,654 19,014,585 Recognized in OCI (267,243) (385,504) (297,508) (291,432) (4,162,177) 22,866,745 954,146 18,723,153

GROUP COMPANY

2017 2016 2017 2016 Rs. Rs. Rs. Rs.

31 TRADE AND OTHER PAYBLES

Trade Creditors 137,447,372 93,591,804 136,907,721 92,696,727 Accrued Expenses 65,347,933 63,223,310 64,265,680 62,365,545 Other Payables 45,811,184 42,955,190 43,257,404 40,489,122 248,606,489 199,770,304 244,430,805 195,551,394

32 AMOUNT DUE TO RELATED COMPANIES

Renuka Shipping and Travel (Private) Limited 489,669 269,121 489,669 269,121 Renuka Agro Exports Limited - 3,579,962 - 3,579,962 Renuka Organics (Pvt) Ltd - - 4,755,721 - Renuka International Limited 8,651,210 - 8,651,210 - Renuka Group Limited 31,699,024 - 31,699,024 - 40,839,903 3,849,083 45,595,624 3,849,083


68


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69


Rep

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g th

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nsac

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as a

%

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s &

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ansa

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-19

1,15

9-

--

-


70


33 RELATED PARTY DISCLOSURE(CONTINUED)

33.3 Transactions with Key Management Personnel

Key Management Personnel include members of Board of Directors of the Company and Subsidiaries

Short Term Employee benefits 21,171,000 12,320,000 21,171,000 12,320,000 Consultancy fee - 191,159 - 191,159 Rent 11,520,000 8,640,000 11,520,000 8,640,000 Total Compensation Paid to Key Management Personnel 32,691,000 21,151,159 32,691,000 21,151,159

34 CONTINGENT LIABILITIES There were no significant contingent liabilities as at the reporting date which require adjustments or disclosures in the Financial

Statements other than the following;

Kandy Plantations Limited Land Reform Commission has filed a case in the District Court of Attanagalla against the Trustees of John Leo De Cross Trust

for which Kandy Plantation is a respondent. In the opinion of the Lawyers, that there is a strong likelihood of the outcome of this case being in favour of the trustees The John Leo De Croos Trust.

35 COMMITMENTS There were no material capital commitments as at the reporting date.

36 EVENTS OCCURRING AFTER REPORTING DATE No material events have occured since the reporting date which require adjustment to or disclosure in the financial statements.

37 COMPARATIVE INFORMATION Comparative information has been reclassified where necessary to conform with the current year presentation.

AS AT 31ST MARCH GROUP COMPANY

2017 2016 2017 2016 Rs. Rs. Rs. Rs.


71


38

OPE

RA

TIN

G S

EGM

ENTS

Se

gmen

t in

form

atio

n is

pre

sent

ed in

res

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of

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grou

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atin

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ts. O

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ting

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are

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n th

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d in

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al r

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stru

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d lia

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tem

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r th

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ear

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d 31

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r th

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ear

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020,

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424

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7,71

5 32

2,78

0,03

4 19

5,51

3,13

9


72


38 OPERATING SEGMENTS (CONTINUED) Segmental Financial Position

Manufacturing Plantation Group

For the Year Ended 31st March 2017 2016 2017 2016 2017 2016 Rs. Rs. Rs. Rs. Rs. Rs.

ASSETS Non-Current Assets Property, Plant and Equipment 1,062,524,668 1,100,828,383 189,292,722 47,880,185 1,251,817,390 1,148,708,568 Biological Assets - - 54,915,883 51,476,902 54,915,883 51,476,902 Intangible Assets - 13,693,963 95,005 95,005 95,005 13,788,968 Immovable Estate Assets on Lease - - 43,999,968 46,749,972 43,999,968 46,749,972 Premium Paid Leasehold Premises 7,224,914 7,399,730 - - 7,224,914 7,399,730 Investment In Equity Accounted Investees 637,883,483 618,731,015 - - 637,883,483 618,731,015 Available for sale Investments 436,350,000 211,350,000 - 167,410,756 436,350,000 378,760,756 Deferred Tax Asset 5,695,702 - 219,238 408,674 5,914,940 408,674 Segment Non-Current Assets 2,149,678,767 1,952,003,091 288,522,816 314,021,494 2,438,201,583 2,266,024,585

Current Assets Inventory 519,502,511 431,874,276 4,770,727 18,492,704 524,273,238 450,366,980 Trade and Other Receivables 307,613,829 226,006,593 3,661,484 3,577,448 311,275,313 229,584,041 Tax Recoverable 27,851,150 13,831,565 831,972 3,060,084 28,683,122 16,891,649 Amounts Due from Related Companies 19,617,151 21,864,252 - - 19,617,151 21,864,252 Cash and Cash Equivalents 211,210,107 102,722,028 192,310,592 60,731,297 403,520,699 163,453,325 Segment Current Assets 1,085,794,748 796,298,714 201,574,775 85,861,533 1,287,369,523 882,160,247

TOTAL ASSETS 3,235,473,515 2,748,301,805 490,097,591 399,883,027 3,725,571,106 3,148,184,832 Non-Current Liabilities Retirement Benefit Obligations 31,611,471 21,849,400 4,033,575 3,863,764 35,645,046 25,713,164 Loans and Borrowings - - 2,047,172 4,094,343 2,047,172 4,094,343 Finance Lease Obligation - - 52,500,000 55,000,000 52,500,000 55,000,000 Deferred Tax Liability 89,977,821 89,686,409 5,196,272 4,143,595 95,174,093 93,830,004 Segment Non- Current Liabilities 121,589,292 111,535,809 63,777,019 67,101,702 185,366,311 178,637,511

Current Liabilities Loans and Borrowings 311,574,251 183,218,858 2,047,171 2,047,171 313,621,422 185,266,029 Finance Lease Obligation - - 2,500,000 2,500,000 2,500,000 2,500,000 Trade and Other Payables 244,665,363 195,852,610 3,941,126 3,917,695 248,606,489 199,770,304 Amounts Due to Related Companies 40,839,903 3,849,083 - - 40,839,903 3,849,083 Dividend Payable 5,072,685 4,613,637 - - 5,072,685 4,613,637 Income Tax Payable 34,299,922 10,309,232 - - 34,299,922 10,309,232 Bank Overdraft 66,255,257 39,013,843 - 598,350 66,255,257 39,612,193 Segment Current Liabilities 702,707,381 436,857,263 8,488,297 9,063,216 711,195,678 445,920,478

TOTAL LIABILITIES 824,296,673 548,393,072 72,265,316 76,164,918 896,561,989 624,557,989


73


Gro

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ryin

g A

mo

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ir v

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ir v

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and

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l 1

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re

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r sa

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liab

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-

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1,27

5,31

3 31

1,27

5,31

3C

ash

and

cash

equ

ival

ents

40

3,52

0,69

9 -

- 40

3,52

0,69

9 -

403,

520,

699

- 40

3,52

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9

714,

796,

012

- -

714,

796,

012

- 40

3,52

0,69

9 31

1,27

5,31

3 71

4,79

6,01

2

Fina

ncia

l lia

bili

ties

no

t ca

rrie

d a

t fa

ir v

alue

Ban

k ov

erdr

afts

-

- 66

,255

,257

66

,255

,257

-

66,2

55,2

57

- 66

,255

,257

Sec

ured

ban

k lo

ans

- -

315,

668,

594

315,

668,

594

- -

315,

668,

594

315,

668,

594

Fina

nce

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e lia

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ies

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55,0

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00Tr

ade

paya

bles

-

- 13

7,44

7,37

2 13

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2 -

- 13

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2 13

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2

- -

574,

371,

223

574,

371,

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- 66

,255

,257

50

8,11

5,96

6 57

4,37

1,22

3

C

arry

ing

Am

oun

t

Fair

val

ue

Fair

val

ue

31st M

arch

201

6 Lo

ans

and

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vaila

ble

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ther

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al

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tal

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l 1

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l 2

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l 3

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tal

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able

s fo

r sa

le

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R

s.

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R

s.

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s.

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s.

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ncia

l ass

ets

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sure

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t fa

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ts

- 16

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0,75

6 -

167,

410,

756

- 16

7,41

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6 -

167,

410,

756

Equ

ity s

ecur

ities

-

211,

350,

000

- 21

1,35

0,00

0 -

- 21

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0 21

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0,00

0

- 37

8,76

0,75

6 -

378,

760,

756

- 16

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nanc

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sset

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t ca

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Trad

e an

d ot

her

rece

ivab

les

229,

584,

041

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229,

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- -

229,

584,

041

229,

584,

041

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h an

d ca

sh e

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ts

163,

453,

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163,

453,

325

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39

3,03

7,36

6 -

- 39

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6 -

163,

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325

229,

584,

041

393,

037,

366

Fina

ncia

l lia

bili

ties

no

t ca

rrie

d a

t fa

ir v

alue

Ban

k ov

erdr

afts

-

- 39

,612

,193

39

,612

,193

-

39,6

12,1

93

- 39

,612

,193

Sec

ured

ban

k lo

ans

- -

189,

360,

372

189,

360,

372

- -

189,

360,

372

189,

360,

372

Fina

nce

leas

e lia

bilit

ies

- -

57,5

00,0

00

57,5

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00

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ade

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bles

-

- 93

,591

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-

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340,

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176

380,

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ST

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The

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show

s th

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nts

and

fair

valu

es o

f fin

anci

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sset

s an

d fin

anci

al li

abili

ties.


74

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)C

om

pan

y

Car

ryin

g A

mo

unt

Fa

ir v

alue

Fa

ir v

alue

31st M

arch

201

7 Lo

ans

and

A

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ble

O

ther

fin

anci

al

To

tal

Leve

l 1

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l 2

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l 3

To

tal

re

ceiv

able

s fo

r sa

le

liab

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es

Rs.

R

s.

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Rs.

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s.

Fina

ncia

l ass

ets

not

carr

ied

at

fair

val

ueTr

ade

and

othe

r re

ceiv

able

s 30

4,24

6,26

8 -

- 30

4,24

6,26

8 -

- 30

4,24

6,26

8 30

4,24

6,26

8

Cas

h an

d ca

sh e

quiv

alen

ts

125,

943,

328

- -

125,

943,

328

- 12

5,94

3,32

8 -

125,

943,

328

43

0,18

9,59

6 -

- 43

0,18

9,59

6 -

125,

943,

328

304,

246,

268

430,

189,

596

Fina

ncia

l lia

bili

ties

no

t ca

rrie

d a

t fa

ir v

alue

Ban

k ov

erdr

afts

-

- 63

,802

,257

63

,802

,257

-

63,8

02,2

57

- 63

,802

,257

Sec

ured

ban

k lo

ans

- -

311,

574,

251

311,

574,

251

- -

311,

574,

251

311,

574,

251

Trad

e an

d ot

her

paya

bles

-

- 24

4,43

0,80

5 24

4,43

0,80

5 -

- 24

4,43

0,80

5 24

4,43

0,80

5

-

- 61

9,80

7,31

3 61

9,80

7,31

3 -

63,8

02,2

57

556,

005,

056

619,

807,

313

C

arry

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oun

t

Fair

val

ue

Fair

val

ue

31st M

arch

201

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ans

and

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fin

anci

al

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tal

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l 1

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l 2

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able

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r sa

le

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es

Rs.

R

s.

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Rs.

R

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ncia

l ass

ets

not

carr

ied

at

fair

val

ue

Trad

e an

d ot

her

rece

ivab

les

225,

674,

724

- -

225,

674,

724

- -

225,

674,

724

225,

674,

724

Cas

h an

d ca

sh e

quiv

alen

ts

76,7

50,0

06

- -

76,7

50,0

06

- 76

,750

,006

-

76,7

50,0

06

30

2,42

4,73

0 -

- 30

2,42

4,73

0 -

76,7

50,0

06

225,

674,

724

302,

424,

730

Fina

ncia

l lia

bili

ties

no

t ca

rrie

d a

t fa

ir v

alue

Ban

k ov

erdr

afts

-

- 38

,887

,526

38

,887

,526

-

38,8

87,5

26

- 38

,887

,526

Sec

ured

ban

k lo

ans

- -

183,

218,

858

183,

218,

858

- -

183,

218,

858

183,

218,

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Trad

e an

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her

paya

bles

-

- 19

5,55

1,39

4 19

5,55

1,39

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- 19

5,55

1,39

4 19

5,55

1,39

4

-

- 41

7,65

7,77

8 41

7,65

7,77

8 -

38,8

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26

378,

770,

252

417,

657,

778

FIN

AN

CIA

L IN

ST

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FA

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K M

AN

AG

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unti

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lass

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ns a

nd f

air

valu

es

The

follo

win

g ta

ble

show

s th

e ca

rryi

ng a

mou

nts

and

fair

valu

es o

f fin

anci

al a

sset

s an

d fin

anci

al li

abili

ties.


75


39 Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.

The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.

The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

Financial Risk Factors

The activities of the Company’s and the Group exposed to variety of financial risks:

1. Market Risk - Currency Risk - Interest Rate Risk 2. Credit risk 3. Liquidity risk 4. Capital Management 5. Operational Risk

The Company’s and the Group’s overall financial risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the Company and the Group. Financial risk management is carried out through risk reviews, internal control systems, insurance programs and adherence to the Company’s and the Group’s financial risk management policies.

The Board of Directors regularly reviews these risks and approves the risk management policies, which covers the management of these risk.

1. Market Risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Company’s

and the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

a. Currency Risk The risk that the fair value or future cash flows of a financial instrument fluctuation due to changes in foreign exchange rates.

The Company and the Group is exposed to currency risk on sales, purchases that are denominated in a currency other than Sri Lankan Rupees (LKR). The foreign currencies in which these transactions primarily denominated is US Dollars.

Exposure to Currency Risk The Company and the Group’s exposure to foreign currency risk was as follows based on notional amounts.

The Company and the Group involves with foreign exchange transactions and are exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency.

Trade and other Payables (727,634) (337,670) (727,634) (1,332,276) Trade and other Receivables 1,442,843 1,033,538 1,442,843 1,537,503 Cash and cash equivalents 1,019,896 332,392 512,308 522,891 Gross Statement of Financial Position Exposure 1,735,105 1,028,260 1,227,517 728,118

The following significant exchange rates were applicable during the year

Average Rate Reporting Date Spot Rate

AS AT 31ST MARCH 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

US Dollars 148.16 140.95 151.99 146.78

AS AT 31ST MARCH Group Company 2017 2016 2017 2016 USD USD USD USD


76


39 Risk management framework (Continued)

Sensitivity Analysis

A strengthening of the Sri Lankan Rupees as indicated below, against the US Dollar as at 31st March 2017 would have increased/(decreased) the equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant.

b. Interest Rate Risk

The Market risk is that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates at the reporting date, the Group’s and the Company’s interest-bearing financial instruments were as follows;

2. Credit risk

Risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Credit risk is managed on the Company and the Group basis. Credit risk arises from cash and cash equivalents, derivative finan-cial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstand-ing receivables (net of deposits held). Individual risk limits are set, based on internal or external ratings. The utilization of credit limits is regularly monitored. The Company and the Group place its cash and cash equivalents with a number of creditworthy financial institutions. The Company’s and the Group’s policy limits the concentration of financial exposure to any single financial institution. The maximum credit risk exposure of the financial assets of the Company and the Group are approximately their car-rying amounts as at statement of financial position date.

Exposure to Credit Risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows;

Strengthen Weakening Profit or Loss Equity Profit or Loss Equity Rs. Rs. Rs. Rs.

31st March 2017 26,371,862 - (26,371,862) - USD (10% movement)

31st March 2016 5,813,254 - (5,813,254) - USD (10% movement)

Carrying Amount Carrying Amount

Group Company


Fixed Rate Instruments Financial Assets Bank Deposits 277,481,310 542,214,081 28,366,234 41,358,634

Variable Rate Instruments Financials Liabilities Loans and Borrowings (315,668,594) (189,360,372) (311,574,251) (183,218,858) Bank Overdrafts (66,255,257) (39,612,193) (63,802,257) (38,887,526) (104,442,541) 313,241,516 (347,010,274) (180,747,750)


Group Company


Trade and other Receivables 311,275,313 229,584,041 304,246,268 225,674,724 Amount due from Related Companies 19,617,151 21,864,252 19,617,151 23,131,075 Balances with Banks 403,332,339 163,264,965 125,834,968 76,641,646 734,224,803 414,713,258 449,698,387 325,447,445


77



Impairment Losses

The Company and the Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of Trade and Other Receivables. The main components of this allowance are a specific loss component that relates to individu-ally significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incur but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets.

The aging of Trade and Other Receivables at the reporting date was as follows;

Group Company


Past due 0 – 30 265,445,223 218,635,041 258,416,178 214,725,724 Past due 31 – 160 45,830,090 10,949,000 45,830,090 10,949,000 311,275,313 229,584,041 304,246,268 225,674,724

The maximum exposure to credit risk for Trade and Other Receivables as at the reporting date by geographic areas as follows;

Group Company



Domestic 91,977,634 80,041,486 84,948,589 76,112,169 Europe 110,838,477 80,422,207 110,838,476 80,442,207 Middle East 26,712,075 23,225,893 26,712,075 23,225,893 Asia 1,367,910 9,889,296 1,367,910 9,889,296 United States 34,557,419 5,701,841 34,557,419 5,701,841 Canada - 1,210,051 - 1,210,051 Caribbean - 29,093,267 - 29,093,267 Australia 45,821,798 - 45,821,798 - 311,275,313 229,584,041 304,246,268 225,674,724

Cash and Cash Equivalents

The Group and the Company held cash and cash equivalents of Rs.403,520,699 and Rs. 125,943,328 as at 31st March 2017 (Rs.163,453,325 and Rs. 76,750,006 as at 31st March 2016) respectively, which represent its maximum credit exposure on these assets.

3. Liquidity Risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, without incurring unacceptable losses or risking damage to the Group’s reputation.

Prudent liquidity risk management implies maintaining sufficient liquid funds to meet its financial obligations. In the management of liquidity risk, the Group monitor and maintain a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows. Due to the dynamic nature of the underlying business, the Group aim at maintaining flexibility in funding by keeping both committed and uncommitted credit lines available.


78


Liquidity Risk Carrying 0-12 More than Amount Months 1 year Rs. Rs. Rs.

As at 31st March 2017 Financial Liabilities (Non-Derivate) Interest Bearing Borrowings 315,668,594 313,621,422 2,047,172 Amount due to Related Companies 40,839,903 40,839,903 - Trade and other Payables 248,606,489 248,606,489 - Bank OD’s 66,255,257 66,255,257 - Total 671,370,243 669,323,071 2,047,172

As at 31st March 2016 Financial Liabilities (Non-Derivate) Interest Bearing Borrowings 189,360,372 185,266,029 4,094,343 Amount due to Related Companies 3,849,083 3,849,083 - Trade and other Payables 199,770,304 199,770,304 - Bank OD’s 39,612,193 39,612,193 - Total 432,591,952 428,497,609 4,094,343


4. Capital Management

The primary objective of the Company’s and the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. The Company and the Group man-age its capital structure and make adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Company and the Group may or may not make dividend payments to shareholders, return capital to shareholders or issue new shares or other instruments. Consistent with others in the industry, the Company and the Group monitor capital on the basis of the Net Debt to Equity Ratio. This ratio is calculated as Net Debt by total equity. Net Debt includes non-current and current borrowings as shown in the statements of financial position. Total equity is calculated as ‘Total equity’ in the statements of financial position.

Group Company


Total Liabilities 896,561,989 624,557,989 824,917,633 545,839,741 Cash and cash equivalents (403,520,699) (163,453,325) (125,943,328) (76,750,006) Net Debt 493,041,290 461,104,664 698,974,305 469,089,735 Total Equity 2,829,009,117 2,523,626,843 2,655,141,831 2,389,962,367 Net Debt to Equity Ratio 17.43% 18.27% 26.33% 19.63%

5. Operational Risk

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behavior. Operational risks arise from all of the Group’s operations.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management.

This responsibility is supported by the development of overall Group standards for the management of operational risk in the following areas:

• Requirementsforappropriatesegregationofduties,includingtheindependentauthorizationoftransactions• Requirementsforthereconciliationandmonitoringoftransactions• Documentationofcontrolsandprocedures• Requirementsfortheperiodicassessmentofoperationalrisksfaced,andtheadequacyofcontrolsandproceduresto

address the risks identified• Developmentofcontingencyplans• Trainingandprofessionaldevelopment


79

DIRECTORATE OF GROUP COMPANIES

Name of Director RAF ROL KPL CFL CBL COCO

Mrs.I.R.Rajiyah

Dr.S.R.Rajiyah

Mr.S.V.Rajiyah

Mr.L.M.Abeywickrama - - - - -

Mr.S.Vasanthakumara -

Ms.A.L.Rajiyah - - - - -

Mr.S.Nagarajah - - - - -

Mr.M.Terfloth - - - - -

Mr.D.S.Arangala - - - - -

Mr.K.Liyanagamage - - - - -

RAF Renuka Agri Foods PLC CFL Ceylon Forestry (Pvt) LtdROL Renuka Organics (Pvt) Ltd CBL Ceylon Botanicals (Pvt) LtdKPL Kandy Plantations Ltd COCO Coco Lanka (Pvt) Ltd


80

NO COMPANY LOCATIONLAND /

BUILDING

LAND EXTENT

(PERCHES)BUILDING

CLASSIFICATION COMPANY

CLASSIFICATION GROUP

ORIGINAL COST OF

PURCHASE

FAIR VALUE AS AT 31.03.2017 UNDER FAIR

VALUE METHODLEASE HOLD/

FREE HOLD

NO OF BUILDINGS

BUILDING IN SQ. FT

1Ceylon Botanicals (Pvt) Ltd

Viharagama Estate, Matale Land

10,842 IP PPE 20,000,000 20,000,000

2Kandy Plantations Ltd

“Mahawatta Estate, Indigolla Estate, Kurundugolla Estate, at Nalla Diuldeniya”

Right to use Estate

102,552 PPE PPE

49,499,976

43,999,968

Building 4 12,743 PPE PPE 13,656,673

3Renuka Agri Foods PLC

UnagahadeniyaEPZ, Wathupitiwela

Land420.4

21,428,000 21,428,000

Building 9 81,364 PPE PPE 158,452,264 340,058,065

4Renuka Organics (Pvt) Ltd

Unagahadeniya Land 303.3 PPE PPE 22,702,880 22,702,880

5Coco Lanka (Pvt) Ltd

Cocowatta Estate, Puttalam

Land 26,443 PPE PPE 127,482,760 127,482,760

REAL ESTATE PORTFOLIO


81

FIVE YEAR SUMMERYYear Ended 31St March 2017 2016 2015 2014 2013

Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 (Restated)

a) Summery of Operation Revenue 2,541,037 2,431,782 3,420,161 3,450,194 2,564,829 Gross Profit 598,401 451,041 758,654 699,866 604,807 Profit before finance cost and tax 293,715 185,774 481,508 65,178 211,430 Profit before taxation 341,385 233,829 479,840 39,317 189,216 Taxation (18,605) (38,316) (37,256) (10,973) 1,446 Profit after tax 322,780 195,513 442,584 28,344 190,661 Profit attributable to equity holders of the company 322,363 195,356 434,786 22,711 200,971

b) Summery of Financial Position Capital and reserves Stated capital 1,194,453 1,194,453 1,194,453 1,194,453 1,194,453 Revaluation Reserve 97,776 97,770 92,743 Retained earnings 1,440,185 1,188,009 1,062,649 677,389 710,245 Shareholders’ fund 2,732,414 2,480,232 2,349,845 1,871,842 1,904,698 Minority interest 96,594 43,395 43,148 37,866 482,739 Total Equity 2,829,009 2,523,627 2,392,993 1,909,708 2,387,437

Liabilities Non- Current liabilities 185,366 178,638 154,049 241,253 291,713 Current liabilities 711,196 445,920 625,647 694,269 572,390 Total Liabilities 896,562 624,558 779,696 935,522 864,103

Total Equity and Liabilities 3,725,571 3,148,185 3,172,689 2,845,230 3,251,540

Assets Property, plant and equipment 1,251,817 1,148,709 1,015,702 1,078,920 1,436,515 Investment properties - - 20,000 - 283,495 Investments 1,074,233 997,491 - - - Other non-current assets 112,151 119,825 735,399 361,634 307,670 Current assets 1,287,370 882,160 1,401,588 1,404,676 1,223,860 Total Assets 3,725,571 3,148,185 3,172,689 2,845,230 3,251,540

c) Key Indicators Earnings per share (Rs.) 0.57 0.35 0.77 0.04 0.38 Net profit margin (%) 12.38% 8.04% 12.94% 0.82% 7.37% Net assets value per share (Rs.) 4.85 4.42 4.18 3.33 3.39 Dividends per share (Rs.) 0.12 0.12 0.12 0.10 0.15 Dividends payout (%) 21.43% 34.29% 15.58% 250.00% 39.47% Dividend cover (times) 4.67 2.92 6.41 0.40 2.53 Interest cover (times) 39.07 25.07 25.17 1.81 5.13 Current ratio (times) 1.80 1.98 2.24 2.07 2.14 Gearing ratio (%) 13.57% 9.95% 2.67% 8.08% 8.60% Return on equity (%) 8.43% 6.21% 18.83% 1.51% 10.01%


82

2017 2016Total No of Shareholders 3,713 3,795

Total No of Shares 561,750,000 561,750,000

The percentage of Shares held by the public 2017 2016

Ordinery Shareholding (%) 28.01% 32.86

31st March 2017 31st March 2016

No of Shares HeldNo of

ShareholdersNo of Shares %

No of Shareholders

No of Shares %

1 - 1,000 1,433 578,973 0.10% 1,399 591,518 0.11%

1,001 - 10,000 1,383 6,203,458 1.10% 1,456 6,552,546 1.17%

10,001 - 100,000 732 23,073,236 4.11% 771 25,179,387 4.48%

100,001 1,000,000 133 38,827,607 6.91% 136 40,362,861 7.19%

1,000,000 & Over 32 493,066,726 87.77% 33 489,063,688 87.06%

3,713 561,750,000 100.00% 3,795 561,750,000 100.00%




No of Shareholders

No of Shares %

Individuals 3,573 143,191,127 25.49% 3,641 152,727,525 27.19%

Institutions 140 418,558,873 74.51% 154 409,022,475 72.81%

Total 3,713 561,750,000 100.00% 3,795 561,750,000 100.00%




No of Shareholders

No of Shares %

Resident 3,671 484,433,600 86.23% 3,755 474,029,810 84.38%

Non Resident 42 77,316,400 13.77% 40 87,720,190 15.62%

Total 3,713 561,750,000 100.00% 3,795 561,750,000 100.00%




No of Shareholders

No of Shares %

Renuka Foods PLC and Affiliate Companies

2 371,770,686 66.18% 2 350,891,298 62.46%

Directors and Spouses 6 32,613,299 5.81% 6 26,277,007 4.68%

Public 3,705 157,366,015 28.01% 3,787 184,581,695 32.86%

Total 3,713 561,750,000 100.00% 3,795 561,750,000 100.00%

SHARE INFORMATION

PUBLIC SHARE HOLDING

ORDINARY SHAREHOLDING

Percentage of Shares held by the Public as at 31st March 2017 is 28.01%

SHAREHOLDER AND INVESTOR INFORMATION


83

1st of April to 31St March 2017 2016

Share Price

Highest (Rs.) 3.80 5.00

Lowest (Rs.) 2.60 2.70

As at 31St March 2.80 3.10

Market Capitalization

As at 31st March (Rs. '000) 1,572,900,000 1,741,425,000

No of Trades 3,840 5,940

No of shares Traded 62,749,609 134,810,554

Value of Shares Traded (Rs.) 205,670,280 573,301,207

Dividends

Proposed/paid final Dividend (Rs.) 67,410,000 67,410,000

(Rs. 0.12 cents per Share)

(Rs. 0.12 cents per Share)

SHARE TRADING INFORMATION

SHAREHOLDER AND INVESTOR INFORMATION (CONTINUED)


84

RENUKA AGRI FOODS PLC - TOP 20 MAJOR SHAREHOLDERS Voting as at 31.03.2017 Voting as at 31.03.2016

No. Name No. of shares % No. of shares %

1 RENUKA FOODS PLC 337,034,943 60.00% 316,155,555 56.28%

2 GREVEN HOLDINGS LTD 34,735,743 6.18% 34,735,743 6.18%

3 DR.S R RAJIYAH & MRS I R RAJIYAH (JT) 28,090,337 5.00% 22,404,654 3.99%

4 MRS. A T T T ALNAKIB 14,855,280 2.64% 15,289,150 2.72%

5 DEUTSCHE BANK AG AS TRUSTEE FOR NAMAL

ACUITY VALUE FUND 8,220,240 1.46% 8,220,240 1.46%

6 INSITE HOLDINGS (PVT) LTD 7,000,000 1.25% 2,999,999 0.53%

6 MR W DUSFORD 7,000,000 1.25% 7,000,000 1.25%

8 MR. H A PIERIS 5,103,454 0.91% 5,103,454 0.91%

9 PEOPLES BANK -TREASURY 4,557,361 0.81% 4,557,361 0.81%

10 MR K C VIGNARAJAH 4,220,360 0.75% 4,220,340 0.75%

11 DISTILLERIES COMPANY OF SRI LANKA PLC A/C NO. 02 3,668,560 0.65% 3,668,560 0.65%

12 MR. I RAHEEL & MR A RAHEEL (JT) 3,479,500 0.62% 3,479,500 0.62%

13 MR.H A A H ALGHARABALLY 3,168,237 0.56% 3,168,237 0.56%

14 MR. S S FONSEKA 3,092,945 0.55% 1,640,000 0.29%

15 STANDARD CHARTERED BANK SINGAPORE S/A HL BANK

SINGAPORE BRANCH 3,000,000 0.53% 3,000,000 0.53%

15 MR. T T T ALNAKIB 3,000,000 0.53% 15,289,150 2.72%

17 J.B. COCOSHELL (PVT) LTD 2,102,201 0.37% 126,940 0.02%

18 MR. A M T T ALGHANIM & MRS A T T T ALNAQUIB (JT) 2,078,000 0.37% 2,078,000 0.37%

19 MR. S V RAJIYAH 2,054,984 0.37% 1,404,375 0.25%

20 MR. N PERERA 2,025,105 0.36% 2,025,105 0.36%

478,487,250 85.16% 456,566,363 81.25%


85

Notice is hereby given that the 18th Annual General Meeting of the Company will be held at the Sri Lanka Foundation Institute No 100 Independence Square Colombo 7 on the 15th of September 2017 at 2.30pm . for the following purposes :-

1. To receive and consider the Report of the Directors and the Statement of the Audited Financial Statement for the year ended 31st March 2017 with the Report of the Auditors thereon.

2. To re-elect Mr. S.Nagarajah as a Director who retires by rotation in terms of Article 30 (1).

3. To declare a dividend of Rs 0.12 per share.

4. To authorise the Directors to determine the contribution to charity.

5. To re-appoint M/s KPMG, Chartered Accountants as the Auditors and authorise the Directors to determine their remuneration.

By Order of the Board,

Sgd.Renuka Enterprises (Pvt) LtdCompany Secretaries9th August 2017

Note:-

(i) A member entitled to attend and vote at the above Meeting is entitled to appoint a proxy to attend and vote instead of the member, such proxy need not be a member.

(ii) A Form of Proxy is enclosed with this Annual Report.

(iii) The completed Form of Proxy should be deposited at the Registered Office of the Company at “Renuka House”, No. 69, Sri Jinaratana Road, Colombo 2, on or before 2.30pm on 13th September 2017 being not less than 48 hours before the time ap-pointed for the holding of the Meeting.

NOTICE OF MEETING


86

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87

I / We .................................................................................................................................................................of ………………

……………………………………………………………………………….......................................... being a member/members

of Renuka Agri Foods PLC, hereby appoint; ..........................................................................................................……………

……………………………………….……………... (NIC No. …….………………………………………..)

of …………………….........................................................................................................................................................

…………………………………………………………………………………………………....................................................

Or failing her/him

Dr. S.R. Rajiyah or failing him Mrs. I.R. Rajiyah or failing her Mr. S.V. Rajiyah or failing him Mr. V. Sanmugam or failing him Mr. L.M. Abeywickrama or failing him Ms. A.L. Rajiyah or failing her Mr. S. Nagarajah or failing him Mr. M. Terfloth or failing him Mr. D.S. Arangala or failing him Mr. K. Liyanagamage

as my/ our proxy to represent me / us and to speak and to vote on my / our behalf at the Annual General Meeting of the Company to be held on the 15th day of September 2017 and at any adjournment thereof and at every poll which may be taken in consequence thereof.

For Against

1. To receive and consider the Report of the Directors and the Statement of the Audited Financial Statements for the year ended 31st March 2017 with the Report of the Auditors thereon.

2. To re-elect Mr. S.Nagarajah as a Director

3. To declare a dividend of Rs 0.12 per share.

4. To authorise the Directors to determine the contribution to charity.

5. To re-appoint M/s KPMG, Chartered Accountants as Auditors to the Company and au-thorise the Directors to determine their remuneration.

Dated this …………………………. day of ……………………………. 2017.

…………………………….Signature of Shareholder

Note:

(a) A proxy need not be a member of the Company.

(b) Instructions regarding completion appear overleaf.

FORM OF PROXY


88

INSTRUCTIONS AS TO COMPLETION OF THE FORM OF PROXY

1. To be valid, the completed Form of Proxy should be deposited at the Registered Office of the Company, at “Renuka House”, No. 69, Sri Jinaratana Road, Colombo 2, on or before 2.30pm on 13th September 2017 being not less than 48 hours before the time appointed for the holding of the Meeting.

2. In perfecting the Form of Proxy, please ensure that all the details are legible.

3. Please indicate with an ‘X’ in the space provided how your proxy to vote on each resolution. If no indication is given the proxy, in his discretion, will vote, as he thinks fit.

4. In the case of a Company / Corporation, the proxy must be under its Common Seal which should be affixed and attested in the manner pre-scribed by its Articles of Association.

5. In the case of proxy signed by the Attorney, the Power of Attorney must be deposited at the Registered Office at “Renuka House”, No. 69, Sri Jinaratana Road, Colombo 2, for registration.

CORPORATE INFORMATION

Name of CompanyRenuka Agri Foods PLC

Registration No.PB 1108/PQ

Legal FormQuoted Public Company with Limited Liability

Principal ActivityAgri Business

SubsidiariesRenuka Organics (Pvt) LtdKandy Plantations LtdCeylon Forestry (Pvt) LtdCeylon Botanicals (Pvt) LtdCoco Lanka (Pvt) Ltd

Board of DirectorsDr. S.R.Rajiyah-ChairmanMrs I.R.RajiyahMr S.V.RajiyahMr L.M.AbeywickramaMr M.TerflothMr V. SanmugamMrs A.L.RajiyahMr S. NagarajahMr. D. S. ArangalaMr. K. Liyanagamage

Audit CommitteeMr S. Nagarajah - ChairmanMr. D. S. ArangalaMr. K. Liyanagamage

Related Party Transaction Review Committee(Represented by ultimate parent company)Mr. T.K.Bandaranayake-ChairmanMr J.M.SwaminathanMr M.S.Dominic

Remuneration Committee(Represented by ultimate parent company)Mr M.S.Dominic - ChairmanMr. T.K.BandaranayakeMr. L.M.Abeywickrama

Nomination CommitteeMr. L.M.Abeywickrama - ChairmanMr. T.K.BandaranayakeMr M.S.Dominic

Company SecretariesRenuka Enterprises (Pvt) Ltd69 Sri Jinaratana Road,Colombo 2

RegistrarsS S P Corporate Services (Pvt) Ltd546 Galle Road,Colombo 3

Parent CompanyRenuka Foods PLC

Registered Office"Renuka House"69 Sri Jinaratana Road,Colombo 2Telephone: 00941-11-2314750-5Email: [email protected]: 00941 11-2445549

Postal AddressP.O.Box 961, Colombo

Stock Exchange ListingColombo Stock Exchange

AuditorsKPMG Chartered Accountants

Legal ConsultantsNithya Partners - Attorneys- at-Law

BankersNational Development Bank PLCHong Kong & Shanghai Banking Corporation LtdCommercial Bank of Ceylon PLCDFCC Bank PLCHatton National Bank PLCStandard Chartered Bank

Deisgned & Printed by Ceylon Printers PLC

renuka agri foods plc - colombo stock exchange · 2017. 8. 16. · renuka agri foods plc is an...

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