alive - Colombo Stock Exchange · PDF file2 Tokyo Cement Company (Lanka) PLCC Vision Mission Vision To be the leading partner in nation ... Sustainability Report 46, Directors Responsibilities

aliveAnnual Report 2012/13

We are the embodiment of strength and stability In an uncertain world we are certainty.

We materialise dreams into concrete detail,sensation and sentiment into solid reality.

We build the future in harmony with nature, and people. We are the living reality, of strength and sustainability.

Tokyo Cement SOLID BUT alive.

Tokyo Cement Company (Lanka) PLC2 C

Vision

Mission

VisionTo be the leading partner in nation - building;

setting standards that exceed expectations

MissionReinforcing market leadership by

empowering our people, driving innovation, pursuing

sustainable development, assuring consistent quality, and

committing to impeccable service; thereby

building shareholder value and cementing consumer trust.

3Annual Report 2012/13

ContentsPerformance Highlights 4, Corporate Profile 8, Products 10, Chairman’s statement 16, Message of the

Japanese Joint Venture Partner 18, Managing Director’s Message 20, Board of Directors 24, Major

Projects 30, Annual Report of the Directors 32, Corporate Governance 38, Risk Management 42,

Sustainability Report 46, Directors Responsibilities 54, Audit Committee Report 56, Report of the

Remuneration Committee 58, Nomination Committee Report 59, Independent Auditor’s Report 60,

Statement of Comprehensive Income 61, The Statement of Financial Position 62, Statement of Changes

in Equity 64, Statement of Cash Flow 65, Significant Accounting Policies 67, Notes to the Financial

Statements 86, Shareholder & Investor Information 117, Five Year Summary 120,

Notice of Meeting 124

Tokyo Cement Company (Lanka) PLC4

Performance

Highlights

Group Revenue

27.3 Bn

5.3 Bn2011/12 - 4.2 Bn

1.2 Bn2011/12 - 1.2 Bn

Rs.

2011/12 - 22.9 Bn


Group Company

2013 2012 2013 2012

Rs. Mn Rs. Mn Rs. Mn Rs. Mn

PERFORMANCE

Revenue 27,296 22,927 9,399 8,533

Less: Cost of sales (22,007) (18,685) (7,402) (6,556)

Gross Profit 5,289 4,242 1,997 1,977

Profit Before tax 1,255 1,276 615 977

Profit After Tax 894 1,045 362 786

INFORMATION TO SHAREHOLDERS Rs. Rs. Rs. Rs.

Earnings Per Share - Voting 2.94 3.44 1.19 2.59

Earnings Per Share - Non Voting 2.94 3.44 1.19 2.59

Dividend Per Share - Voting - - 1.00 1.30

Dividend Per Share - Non Voting - - 1.00 1.30

Net Asset Value Per Share 23.63 21.99 17.26 17.37

Market Value Per Share - Voting - - 23.50 37.00

Market Value Per Share - Non Voting - - 17.50 27.00

KEY FINANCIAL INDICATORS

Return on Capital Employed (ROCE) % 9.52 11.48 5.54 11.86

Interest Cover (Times) 2.79 3.93 3.45 7.11

Price Earnings Ratio - Voting (Multiple) - - 19.75 14.29

Price Earnings Ratio - Non Voting (Multiple) - - 14.71 10.42

Current Ratio 0.76 : 1 0.80 : 1 0.60 : 1 0.72 : 1

Quick Asset Ratio 0.43 : 1 0.47 : 1 0.36 : 1 0.43 : 1

Tokyo Cement Company (Lanka) PLC6 CTokyo Cement Company (Lanka) PLC6

Performance

Highlights

Company Revenue

9.4 Bn

2.0 Bn2011/12 - 1.9 Bn

615 Mn2011/12 - 977 Mn

2011/12 - 8.5 Bn

Rs.

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Gross Profit

20

12

20

13

4,242

(Rs Mn)

5,289

25%

Gross Profit

20

12

20

13

1,977

(Rs Mn)

1,996

1.0%

Pre Tax Profit

20

12

20

13

1,276

(Rs Mn)

1,255

1.6%

Pre Tax Profit

20

12

20

13

977

(Rs Mn)

615

37.1%

Earning Per Share

20

12

20

13

3.44

(Rs)

2.94

14.5%

Earning Per Share

20

12

20

13

2.59

(Rs)

1.19

54.0%

Capital

Expenditure

20

12

20

13

1,923

(Rs Mn)

1,505

21.7%

Dividend per Share

20

12

20

13

1.30

(Rs)

1

23%

Net Operating

Cash Flow

20

12

20

13

1,843(Rs Mn)

1,752

4.9%

Net Operating

Cash Flow

20

12

20

13

787

(Rs Mn) 998

26.8%

Gearing Ratio

20

12

20

13

41.2

(%)

23.4

43.2%

Gearing Ratio

20

12

20

13

22.8(%)

13.9

39.0%

Revenue

20

12

20

13

8.5

(Rs Bn)9.4

10.6%

Revenue

20

12

20

13

22.9

(Rs Bn)

27.3

19%


Our biomass power plant is a ground breaking achievement and an inspiration for environmentally friendly manufacturing.

Tokyo Cement - investing big in

sustainable energy

Our corporate heritage includes the unique

distinction of being a pioneer in manufacturing, as

the Sri Lanka’s first private cement manufacturer.

This pioneering spirit remains a guiding force

in forming our corporate policies and business

strategies even today.

When Tokyo Cement was formed in 1982, as a

joint venture between Sri Lanka’s St Anthony’s

Consolidated and Japan’s Mitsui Mining Company

that was later name changed to Nippon Coke and

Engineering Company, we took on the mammoth

challenge of constructing the country’s first,

automated cement plant, in the Eastern coast

of Trincomalee. We then went on to build Tokyo

Cement into one of Sri Lanka’s most valuable

brands and the country’s largest manufacturer

of cement. Today we are proud to be the market

leader in Sri Lanka’s cement industry with over

seven hundred employees and Rs. 14 billion in

assets.

This journey has seen many achievements and

accolades coming our way, as we continued to


lead the way in new products and technologies, and

sustainable manufacturing. We are the first cement

manufacturer in the country, to qualify for the SLS, ISO

9002 and ISO 14001 certifications. Tokyo Cement is Sri

Lanka’s first automated cement factory and we have

successfully implemented a pipe conveyor system to

transport raw materials, to prevent environmental

pollution from clinker dust. Other technical advancements

include an electronic rotary packer and a vertical roller

press for manufacturing. The use of modern technologies

has ensured the consistent, international standard of our

products.

Over the years, we have continued to identify national

economic needs and to develop our business strategy

to respond to such needs. This has ensured economic

benefits not only for the company but the entire

country. One such initiative was our decision to invest

in renewable energy. This choice has saved the company

millions of rupees in energy costs and reduced the

burden on the national grid. Our biomass power plant

is a ground breaking achievement and an inspiration

for environmentally friendly manufacturing. We have

now taken another step in this direction by establishing

a dendro power plant, that will help green the country

while providing electricity and incomes for rural

communities. Over the years, we have introduced many

other environmental conservation initiatives that will

benefit future generations.

Another such initiative that has national significance

is our decision to acquire a fleet of ships, to mitigate

shipping cost volatilities. Freight costs are subject to

external market dynamics and are beyond the company’s

control. Therefore, sudden spikes in freight costs have

significant and unavoidable negative impacts on the

company’s balance sheet. Our decision to invest in our

own fleet of vessels therefore, has saved the company,

and the country, millions of dollars by avoiding chartering

of vessels to transport raw materials.

We have also addressed a pressing national need for

skilled construction labour. Most masons in Sri Lanka’s

construction sector do not have formal training and

recognised qualifications. This has had a severe negative

impact on their prospects for career growth and

employment opportunities in the formal sector. Skilled

masons are also a key requirement to meet government

goals for national development. Therefore, we created a

dedicated training centre for masons called the

A Y S Gnanam Construction Training Academy. The

Academy serves a national purpose and also caters to

the personal aspirations of hundreds of young people

in Sri Lanka, by paving the way for nationally and

internationally recognised qualifications in masonry. We

are happy to announce that by now, the A Y S Gnanam

Construction Training Academy is turning out qualified

personnel to support the future growth of our country.

Over the years we have introduced many new products

to the local market and we hope to introduce many

more exciting new products in the coming years. All our

new products have become extremely popular in the

domestic market and have also contributed towards

improving construction industry standards through our

new products.

As a responsible corporate citizen, governed by a

philosophy of sustainable manufacturing, we will

continue to respond to economic and social needs in the

country.

Tokyo Cement Company (Lanka) PLCTokyo Cement Company (Lanka) PLC10

Cement

Strength Class 42.5 N

SLS 107 : 2008

“Tokyo Super” brand OPC is a general purpose cement which can be used

in the production of all type of concrete used in structural and non-

structural applications.

Typical applications:

“Tokyo Super” OPC is compatible with most of the admixtures complying to

BSEN & ASTM standards. Tokyo Super

Ordinary Portland Cement


SLS 107 : 2008

“Tokyo Super” Portland Pozzolana Cement (TSPPC) is a Blended Hydraulic

Cement produced by inter-grinding fly ash with cement clinker.

“Tokyo Super” Portland Pozzolana Cement is produced to conform to SLS

1247 : 2008 Strength Class 42.5 N standard specification. This cement

is highly resistant to chemical attack and suitable for concreting and in

mortar in marine and sulphate containing soil environments. This cement

is a low heat cement and can use for mass scale concreting.

Blended cements are a lever to reduce carbon dioxide emission and it’s a

“Greener Cement”. Tokyo Super

Portland Pozzolana Cement


SLS 107 : 2008

“Nippon” is the premium brand of Ordinary Portland Cement manufactured

by Tokyo Cement Co. (Lanka) PLC. “Nippon” cement meets the stringent

quality requirement specified by Sri Lanka Standards Institution (SLS

107:2008) Strength Class 42.5 N for Ordinary Portland Cement. This cement

is suitable for structural and pre-cast concrete requiring high compressive

strength. This cement also can be used as a general purpose cement.

“Nippon” cement is compatible with most of the admixtures complying to

BSEN & ASTM standards. Nippon

Ordinary Portland Cement (OPC)

11Annual Report 2012/13 11Annual Report 2012/13

Tile Adhesives

Thin set cement base tile adhesive, which can be used for fixing ceramic,

porcelain, terracotta, granite tiles etc. on mortar screed or concrete base.

“Tokyo Superbond” Standard Set tile adhesive can be used for fixing tiles

on walls and floors.

Highly workable mix with high water retention capability make fixing

tiles on floors and walls easier, economical and resulting a high bond

strength.

Tokyo Superbond

Standard Application

Specially formulated tile adhesive to develop high bond strength within

a short time of 6 hours. This adhesive is suitable for fixing any type of

tiles, marble, granite etc. on new or existing tiled or cemented surfaces.

Advantage of using this adhesive allows grouting in 2 hours and use of

the premises after 6 hours of laying tiles.

Tokyo Superbond

Quick Setting

Tokyo Superbond High Performance tile adhesive is specially formulated to

result high bonding strength. In addition to use of this adhesive for fixing

normal all types of tiles, it is highly recommended for fixing large format

(3’x3’ or 4’x4’) porcelain or fully vitrified tiles on floors and walls.

This adhesive is suitable for fixing tiles on an existing tiled or cemented

floor without breaking. Suitable for tiling kitchens and bathrooms where

hot water is used frequently.

Tokyo Superbond

High Performance

Lay Tiles on Tiles


Flooring Waterproofing

Concrete

“Tokyo Superflow” flooring is a SWF-leveling cementitious flooring

compound which can be applied manually or by pump to achieve rapid,

flat levelled substrate prior to the application of the final floor finish.

Typical uses are in warehouses, factories, manufacturing facilities, hospitals,

commercial buildings, residential and domestic properties etc.

Flooring Compound (Standard)

“Tokyo Super Water Proofer” is a cement base material suitable for interior

or exterior surface where water proofing is required.

“Tokyo Super Water Proofer” is highly resistant to standing water or wind

driver rain water and intended for use in vertical, horizontal, and overhead

surfaces. Typical uses are in water sealing bathrooms, overhead slabs, walls,

joints etc.

Tokyo Super

Waterproofing

Consists of a mix of river sand with metal (05-20 mm) by weight basis and

cement in a separate bag. Only necessary to add required quantity of water

to make a workable concrete mix.

Equivalent concrete grade is G20. “Tokyo Super-mix” Concrete-mix can be

used for slabs, drive ways, pavements etc.

Available in 50 kg bags and 30 bags cover 10ft x 10ft x 0.25 ft

“Dry Concrete”

13Annual Report 2012/13 13Annual Report 2012/13

Wall Plasters

Just add water, mix and apply. Good workability no dropping of mortar

during plaster, easy to spread resulting a high strength plaster with no

hairline cracks.

Smooth surface of the plaster require hardly any skim coat before

painting.

Can add mineral pigments to make coloured plaster surfaces.

Tokyo Super

Plaster Master (Internal)

Specially formulated for external applications.

Waterproofing capability of this product prevents dampness or internal

walls resulting from wind driven rain.

Economical and easy to apply.

Can mix with colour pigments.

“Tokyo Super”

Plaster Master (External)

Tokyo Super Mixed concrete is produced using Quality Material to assure

concrete with good workability and high strength. All Tokyo Super-mix

Ready Mix Concrete Plants are ISO 9001 certified.

Made with river sand and OPC Cement for increased strength.

Locations: Peliyagoda, Trincomalee, Kandy, Elpitiya, Anuradhapura,

Biyagama and Jaffna.




In reviewing the performance of your company for the

year ended 31st March 2013, it is relevant to address the

state of the global economy during the period, and its

impact on the local economy. Of course, the demand for

of the company’s product, in the main, is dependent on

the state of the local economy. Accordingly, brief surveys

of both the global and domestic economies follow.

Global Economy

The continuing poor state of the economies of major

industrial countries, was not conducive to world trade.

Global economic growth continued to slow down during

the year: it is estimated at 3.3%. Sluggish output in the

main advanced economies, fragile financial conditions

and increased in unemployment remain key concerns.

Growth of the US economy is beginning to recover.

However, recession in Europe is deeper than anticipated

and recovery will be protracted. China is experiencing a

slowdown. In the Middle East, problems in Iran, Egypt and

Syria continues. At the time of writing, favourable news

from Japan is that its economy is on the mend.

Sri Lanka Economy

Year 2012 was one of challenges on the economic front.

The poor state of the global economy had an adverse

impact on the local economy. The European Union

crisis, slow growth in the US and the continuing crises in

Iran & Syria impacted the country’s exports. Inclement

weather, with flash floods followed by drought, prevailed


The Government continues to engage in major infrastructure development projects

with foreign borrowings.

in the country’s agriculture. The drop in the value of

exports was significant. Revenue collection was far below

target. The totality of losses by state owned enterprises

was substantial. On the plus side an increase in worker

remittances was recorded, tourism earnings rose and

tea prices remained firm. The rupee over the period was

devalued by 11.6%, and the high interest rate regime

continued. The country’s growth rate was 6.4%. The

Government continues to engage in major infrastructure

development projects financed mainly with foreign

borrowings. It is refreshing to see a drop in the value of

imports, and the concerted efforts being taken to address

to the shortcomings on the economic front.

Performance of the Group

The Managing Director’s message has dealt in detail

about the performance of the Group, and I believe it

would suffice if I highlight only items of significance.

Revenue increased by 19% due to demand growth and

rupee depreciation. The after tax profit was Rs. 894 Mn

as compared with Rs.1,045 Mn the previous year. The

drop in the main was due to the five months delay in

receiving Consumer Affairs authority for an increase in the

administrated price due to a depreciation of the rupee.

Further, the rise in banks’ lending rates and increase in the

quantum of the Company’s borrowing for the purchase of

two additional ships also had an impact on profitability.

Contributions from the batching plants in line of business

were encouraging. I am pleased to report our new

product, cement bond, has been very encouraging and it

is planned to expand this line of activity.

I am optimistic about a moderate growth in demand for

cement in the foreseeable future. To meet this eventuality,

an expansion programme is in place by way of a new

mill. Generous tax concessions have been received on

the investment. Its cost is estimated at US$ 50 Mn, to be

financed by a combination of internal generation and

bank borrowing. The company’s second Dendro Plant at

Dehiattakandiya costing Rs.1.5 billion is expected to be

commissioned by December 2013.

Acknowledgement

Your company is fortunate in having a committed and

loyal staff at all levels, and I thank them all.

Mr. K. Yanagihara, our Japanese director who was a board

member for 14 years retired and returned to Japan. I

record my appreciation for his services rendered and wish

him a long period of happy retirement.

To my fellow directors who have at all times guided and

adviced me, I salute them sincerely.

Edgar Gunatunga

Chairman

29th June 2013



On behalf of the Japanese Joint Venture partner, I

would like to express our heartfelt appreciation to the

shareholders of Tokyo Cement Company (Lanka) PLC for

the confidence you have granted to the members

of the Board.

I would like to extend my sincere thanks to the customers,

dealers and staff of Tokyo Cement Group for exceptional

consideration and support.

In financial year 2012/13, the total sales of Tokyo Cement

Group have increased from the previous year, because

of expansion of cement demand by activation of the Sri

Lankan economy and the revival project in North and

East districts. But, the consolidated profits of the group

have decreased due to delay in granting price increase

approval and rise in financial cost.

In financial year 2013/14, because the cement demand

is expected to expand, Tokyo Cement Group takes an

important role more and more in this field. I believe that

the group will contribute greatly to the society and grow

significantly.

I hope the financial year 2013/14 would be a prosperous

year for the Tokyo Cement Group.

Yoshichika Nishoi

President

Nippon Coke & Engineering Co. Ltd

29th June 2013

I believe that the group will contribute greatly to the society and grow


It gives me great pleasure to welcome our shareholders

to our 31st Annual General Meeting and to report that

your Company continued to sustain profits despite a

challenging year. I also take this opportunity to announce

a new three-year growth strategy for your Company, in

line with Tokyo Cement’s sustainability principles.

Economic developments

Sri Lanka’s economy grew by 6.4% in 2012 on the

backdrop of two consecutive years of 8% growth. On the

production sector, economic growth was mainly driven

by the Industry sector. The expansion in the Industry

sector by 10.3% in 2012 was predominantly sustained

by the sharp increase in construction activities. Services

sector growth moderated to 4.6% in 2012, from 8.6% in

the previous year, and the agriculture sector improved

to 5.8% in 2012, compared to the growth of 1.4% in the

previous year.

In a significant development, in early 2012, the Central

Bank adopted a tight monetary policy stance by raising

policy interest rates and imposing a ceiling on rupee

lending by licensed banks, to moderate credit growth.

Further, from February 2012, the Central Bank allowed

greater flexibility in the determination of the exchange


rate and limited its intervention in the foreign exchange

market. To curtail imports, tariffs on selected imports were

raised. These policy measures had a direct impact on the

construction industry and supply of cement and cement

based products, in the country.

Industry overview

The construction industry was a key economic driver

in 2012, and contributed significantly to overall

national economic growth. As a result of this growth in

construction, demand for cement rose by 12% in 2012.

However, due to a number of reasons, this demand

contracted by 7% in the first quarter of 2013.

Cement imports surged during the year, to cater to

the sharp increase in demand. The Indo-Sri Lanka and

Pakistan-Sri Lanka free trade agreements were utilised

by the construction industry to import cement at zero

duty. While such imports have addressed domestic

demand for cement supplies, these rapid inflows have

raised concerns about the quality standards of some

imported cement consignments. As cement is a primary

construction material, inferior cement may have long

term impacts, despite the lower prices of these products.

Therefore, there is a pressing need for the local authorities

I take this opportunity to announce a new three-year growth strategy for your Company, in line with Tokyo Cement’s sustainability principles.

to ensure quality standards of cement that is retailed the

domestic market.

During 2012, the momentum of residential housing

construction slowed down, and in the first quarter of

2013, private tourism related constructions too, indicated

signs of slower growth. Meanwhile, the SME contractor

segment, that makes up the backbone of the domestic

construction industry, experienced severe liquidity

constraints. The small scale contractor segment was

adversely affected both by the rising cost of credit, the

credit ceiling and cash flow delays. This situation reined-in

construction growth momentum and dampened demand

for cement, that would otherwise have been higher.

Our operations

Clinker prices and freight charges remained relatively

stable during the year under review. However, the rupee

depreciation experienced since end-2011, caused a

corresponding increase in the cost of imports of clinker,

the main raw material for cement manufacture. Starting

from the 3% devaluation of the rupee in November 2011,

and the Central Bank’s policy decision in February 2012

to limit its interventions in the foreign exchange market,

caused greater exchange rate volatility. However, our


MMannaagging DDireeccttorr’ss

MMessssaagee

request to the Consumer Affairs Authority to increase the

price of cement, in line with increasing import costs, was

not granted approval for five months. Therefore, Tokyo

cement’s price revision took place only after a five month

delay.

This delay in price adjustment, together with the rising

cost of credit, had a direct impact on our bottom line

by reducing overall profitability, despite higher sales

and revenues. Meanwhile, the upward price revision

of cement, resulted in an immediate drop in demand

for cement. However, this situation can be expected to

reverse in the new financial year, in the face of growing

demand.

In discussing business operations, I must make it a

point to mention that your Company’s sustainable

manufacturing policies are now evincing tangible

financial benefits for the Company. Although energy

costs, in the form of increased costs of fuel and electricity,

are a serious concern for Sri Lanka’s manufacturing sector,

Tokyo Cement has been shielded from this severe cost

increase due to our sustainable energy initiatives. Our

decision to invest in the renewable energy source of

biomass, has made us energy self sufficient and protected

the Company from energy cost increases and disruptive

power shortages.

Financial review

Tokyo cement recorded a 19% growth in top line due to

the sharp increase in cement demand compared to the

previous year. As a result our total revenues increased from

Rs. 22.9 billion in 2011/12 to Rs. 27.3 billion in the current

financial year. Despite five months delay in granting of

price increase approval in line with cost increases by the

Consumer Affairs Authority the operating profit in the year

under review had positive results. Nevertheless increase in

lending rates, elevated borrowings for capital assets, first

time adoption of SLFRS and related tax effects resulted in

having consolidated profit before tax of Rs. 1.2 billion and

profit after tax of Rs. 894 million in the financial year under

review.

Product development

To keep pace with international trends and to ensure best

value for money for Sri Lankan consumers, Tokyo Cement

has consistently invested in research and development

(R&D). In the current financial year, we upgraded

our laboratory in Trincomalee to ISO 17025 standard.

Therefore, we are now an independent laboratory,

formally accredited to provide testing facilities for cement

and concrete products. We hope our services in this

regard will contribute towards the development of the

domestic construction industry, by facilitating innovations

and setting industry standards, while ensuring high

quality for consumers.

In the new financial year, we hope to introduce a range

of exciting value added new products to the market that

will enhance the capabilities of the local construction

industry.

Future outlook

We anticipate a 10% year on year demand growth

for cement over the medium term, fuelled by major

government infrastructure projects and also private

sector investments. The trend of lowering interest

rates will contribute towards sustaining this demand.

Therefore, we have formulated a three year, US$ 50 million

expansion strategy, for capacity growth and new product

development, to cater to this demand growth. Our new

growth strategy will continue through 2013 to end- 2015.

As part of our expansion strategy we propose to set up

a new cement manufacturing facility, with a capacity

of 1 million MTs of cement per year. The new company,

called the Tokyo Eastern Cement Company Ltd, will be

located in Trincomalee, adjoining our existing factory. We

are currently in the process of finalising a 33 years lease

agreement with the government for the land, to construct

the factory. We will also introducing many new products

to the market over the next three years.


In line with our philosophy of sustainable business, our

expansion plan is formulated within a framework of

environment conservation. Therefore, we will set up a

new biomass power plant to cater to the energy needs

of our new cement manufacturing plant. The power

plant will have an output of 10MW, which is adequate

to support the energy requirements of the new facility.

Therefore, we will not add to the demand on the national

grid through our business expansion.

We have already initiated Sri Lanka’s first grid connected

dendro power project, under Tokyo Cement Power Lanka

Ltd, which will be commissioned in December 2013, and

will add 5MW to the national grid. The dendro plant is

located in Dehiattakandiya in Mahiyanganaya and is a

Rs. 1.5 billion investment. While being environmentally

friendly, the dendro plant will also contribute towards

uplifting rural livelihoods as we will educate local families

to grow and harvest Gliricidia plants and will regularly

purchase Gliricidia stems, as fuel for the dendro plant. In

addition to these sustainable practices, we have already

initiated many more environmentally friendly practices,

that are explained further in our sustainability report.

As part of our production expansion programme we will

upgrade our private dock in Trincomalee to enable the

arrival of larger ships. The channel will be deepened and

the jetty extended to permit ships of 28,000 MTs capacity

to dock, compared to the current 20,000 MTs of capacity.

During the previous financial year we purchased two

vessels and within next three financial years we propose

to add another two vessels to our fleet.

Appreciations

I extend a special note of appreciation to Mr K Yanagihara

for his long and dedicated services to the Company as the

Joint Managing Director of Tokyo cement from 1998 to

2012. Mr Yanagihara is admired and respected not only

for his industry expertise but also his adaptability and

considerate personality. My very best wishes go with Mr

Yanagihara in his retirement.

I extend my appreciations as always, to our shareholders

for their support of the Company and the Board of

Directors and management of Tokyo Cement, for their

valuable inputs during the year. I also thank all my staff

for their commitment and hard work. Last but not least, I

wish to thank all our loyal customers and dealers.

S R Gnanam

Managing Director

29th June 2013


Directors


Chairman

Appointed to the Board in 1983. Over Thirty years working experience in Business

Management, Strategic planning, Social and Economic Research. Chairman of

South Asian Investment (Private) Ltd and Alexandra Industries (Ceylon) Ltd. CEO

of Capital City Holdings (Pvt) Ltd., Capital City Development (Pvt) Ltd., Capital

City Farms (Pvt) Ltd, St. Anthony’s Consolidated (Private) Ltd and St. Anthony’s

Hardware (Pvt) Ltd.

Appointed to the Board in July 2012. Graduated Law Facility of Gakushuin

University in 1977. Entered Mitsui Mining Coking Industry Co.,Ltd in 1977. Over

thirty years working experience In Coal & Coke Procurement and Marketing

business at Nippon Coke & Engineering Co., Ltd (formerly Mitsui Mining Co., Ltd).

Assigned to President of Mitsui Mining USA Inc in 2001 for two years and to Chief

Representative of Mitsui Mining Co., Ltd Jakarta Office in 2006 for three years.

Appointed to the Board in August 1999. Attended Illinois Institute of Technology

Graduated in Industrial & Mechanical Engineering in 1973. Chairman & Managing

Director St. Anthony’s Industries Group (Pvt) Ltd., Also Chairman of Rhino Roofing

Products Ltd., CEO of many private and public liability companies.

Appointed to the Board in June 1997, Chairman since February 2007. Joined

Sampath Bank as Managing Director/Deputy Chairman in January 1991. Retired

from position of Managing Director/Deputy Chairman in December 1996 and

continued as a Director. Appointed Chairman on September 24th 1998. Counts 53

years banking experience, and serves on the

boards of several public companies.


Directors


Appointed to the Board in May 2007. Fellow Member of The Institute of Chartered

Accountants of Sri Lanka and England & Wales and holder of General Science

Degree from the University of London. Former senior partner of KPMG Ford,

Rhodes, Thornton & Company. Director of Haycarb PLC, Dipped Products PLC,

Acme Printing & Packaging PLC, Acme Packaging Solutions (Pvt) Ltd., Tea Factories

Small Holders PLC, Hayleys MGT Knitting Mills PLC, Hayleys Advantis Ltd. and in

many Public Limited Companies.

Appointed to the Board in 1983 over fifty three years of finance and management

experience in Sri Lanka. B.Com (London), F.C.A. (UK), F.C.A. (Sri Lanka). Chairman of

Central Finance Company PLC in the year 2006. Served as the Executive Chairman

of Ceylon Tobacco Company PLC and was a Director of Hatton National Bank PLC,

Richard Peiris & Company PLC, Associated Motorways PLC and Brown & Company PLC.

Appointed to the Board in February 2007. Bachelor of Arts from University of

Texas, MBA from University of Melbourne. Managing Director of South Asian

Investment (Private) Ltd., Orion City Group, Rhino Roofing Group and also in the

Board of Private, Public and listed companies. Has wide experience at leading

corporate sector institutions in the garments trade,

manufacturing and services.

Dr. H. Cabral Appointed to the Board in March 2009. President’s Counsel, Ph.D.

in Corporate Law (University of Canberra), Australia, Commissioner - Law

Commission of Sri Lanka, Member (NCED-National Council for Economic

Development), Legal Cluster, Member - Board of Studies - Council of Legal

Education SL, Lecturer and Examiner - University of Wales, University of Colombo

and Sri Lanka Law College, Vice-President - BRIPASL (Business Recovery and

Insolvency Practitioners’ Association of SL), Member - Academic Board of Studies -

Institute of Chartered Accountants of Sri Lanka.


Directors

Annual Report 2012/13 29

Appointed to the board in March 2011, Counts thirty years of experience in policy

making and providing economic advisory services, on both macroeconomic and

structural issues at National and Intergovernmental levels. Obtained Bachelors

and Masters in Economics from the Cambridge University of UK and subsequently

obtained a Doctorate from the University of Sussex. Immediate involvement as a

Director, Economic Affairs at the Commonwealth Secretariat. Has been involved

in advising the Prime Minister and the Minister of Economic Reform, Science and

Technology, Sri Lanka on negotiating with Bretton Woods institutions and other

major donors, the Central Bank of Sri Lanka and the Ministry of Finance & Planning

on matters relating to macroeconomics and structural reforms.

Appointed to Board in 2012. Graduated from Keio University in 1981 with a

Bachelor of Economics. Specialises in International legal issues, Overseas Projects

planning and administration. Joined “Mitsui Mining Company Ltd” in 1981 as a

Business Clerk and has served as Manager of Coal & Coke Department and General

Manager of Personnel & General Affairs Department.

Appointed as Group General Manager in 1991. B.A (Hons) Econ, B. Phil (Hons)

Econ. FCMA FCA & Attorney-At-Law. Director - Fuji Cement Company (Lanka)

Limited,Tokyo Super Cement Company Lanka (Pvt) Limited, Tokyo Cement

Colombo Terminal (Pvt) Limited,Tokyo Cement Power (Lanka) Limited, Tokyo

Eastern Cement Company Limited. Counts over 25 years of

experience in different industries.

Projects


Ba

nd

aranaike I ntern atio nal Airp

ort

Havelock C it y Co n do min

iu

ms

South e rn Hig h way

Norochc h ali Pow er Plant

It gives us great pride to place on record that we have supported the groundwork of some of Sri Lanka’s iconic buildings and key national infrastructure projects.


M an a m pitiya Bridg e

Up per Ko t m ale Pow er P

lan

t

Por t o f H a m b a ntota


Directors

Management discussion and analysis

About the company

Tokyo Cement Company (Lanka) PLC is a public

quoted company listed in the Colombo Stock

Exchange, involved in the manufacture of cement

and cement based products. The company’s

subsidiaries are Fuji Cement Company (Lanka)

Limited, Tokyo Super Cement Company Lanka

(Private) Limited, Tokyo Cement Power (Lanka)

Limited and Tokyo Cement Colombo Terminal

(Private) Limited, and Tokyo Eastern Cement

Company Limited.

Principle Activities

The Company’s core activities are the manufacture

of ordinary Portland Cement, Portland Pozzolana

Cement, masonry cement, tile adhesives, water

proofing products, pre-mix concrete and ready-

mix concrete.

Group structure

Tokyo Cement Company (Lanka) Plc Subsidiaries

percentage of holding

100% owned

Limited. 100% owned

Limited. 56.85% owned

100% owned

100% owned

Global cement industry

The IMF in its World Economic Outlook report

noted that global economic prospects have

improved but the bumpy recovery and skewed

macroeconomic policy mix in advanced

economies are complicating policy making in

emerging market economies. World output growth

is forecast to reach 3.25% in 2013 and 4% in 2014

from a 3.2% growth in 2012. In the major advanced

economies, activity is expected to gradually

accelerate, following a weak start to 2013, with the

United States in the lead. In emerging market and

developing economies, activity has already picked

up steam.

Worldwide demand for cement is expected to

grow at 4.9% per year, up to 2017. The global

production volume increased by 4.1% in 2012,

for a total output of 3.73 billion MTs. The forecast

increases over the next four years will see global

per capita cement consumption grow from 448 kg

per person in 2009, to 539 kg per person in 2012

and 645 kg per person by 2017.

North America is projected to show one of the

strongest growth trends in the future. Growth in

China is expected to be positive but moderate,

while markets in Sub-Saharan Africa and some

recovering North African markets will see growth

above 6%. Latin America is expected to decelerate,

with growth falling to 5.6% as the Brazilian market

moderates. Asia (excluding China) will see growth

accelerating with Indonesia and Philippines seeing

strong growth in the next years.

Sri Lankan cement industry

In 2012, Sri Lanka’s construction sector expanded

compared to 2011, driven by large government

infrastructure projects and also some significant

private sector investments. This growth in the

construction sector resulted in higher demand for

cement. Nevertheless, demand for articles made

of concrete, cement and plaster, recorded declines,

thus negating to some extent the expansionary

impact of cement production on the industrial

production index (IPI).

It was encouraging that the government

continued to support the domestic cement

industry during 2012. The Ministry of Industry and

Commerce initiated a programme to enhance the

quality of concrete and cement based products,


to improve industrial productivity and facilitating the

construction sector. To attract investments into the sector

and promote domestic manufacture of cement, a 5-year

tax holiday, followed by a concessionary tax rate of 12%,

were granted to the cement industry.

Sri Lankan legal framework

Cement is a price controlled product in Sri Lanka and

is regulated by the Consumer Affairs Authority (CAA).

Therefore, the company requires written approval from

the CAA to increase cement prices.

Review of Operations

A Review of Operational and financial performance, the

future plans of the company and the group are described

in grater detail in the chairman’s message, managing

director’s review. These reports together with the audited

financial statements of the company and the group reflect

the respective state of affairs of the company and the

group.

Significant Accouting Policies

The significant accounting policies adopted in the

preparation of Financial Statements are given on page 67

to page 85 of the Annual Report.

Convergence and adapting of Sri Lanka Accounting

Standards (SLFRSs/LKASs)

The Company and the group prepared their annual

financial statements upto 31st March 2012 in accordance

with Sri Lanka Accounting Standards which were in effect

applicable for said period.

Sri Lanka converging fully with the international financial

reporting standard (IFRS), the institute of chartered

accountants of Sri Lanka has issued new Sri Lanka

Accounting standard (commonly known as SLFRSs/LKASs)

which is applicable for financial period begining after 1st

January 2012.

The financial statement prepared for 31st March 2013

are the 1st financial statement which are prepared in

accordance with these Sri Lanka accouning standards

(SLFRSs/LKASs). As required by the standards, the

company and the group have prepared their operning

statements of financial position(previously known as

balance sheet) as at 1st April 2011 on the basis that these

standards were applicable retrospectively with all the

applicable adjustment directly recognized in the opening

reserves. Accordingly the financial statements for the

period ended 31st March 2012 were restated to be in

accordance with SLFRSs/LKASs.

Income statement of the company and the group

Group revenue and profits

Group revenues rose 19% to Rs.27.3 billion during the

financial year ended March 31, 2013, from Rs.22.9 billion

reported during the same period a year earlier. Company

revenues rose to Rs. 9.4 billion during the year under review,

from Rs. 8.5 billion in the previous year.

Consolidated gross profits gained 25%, to Rs. 5.3 billion in

2012/13, from Rs.4.2 billion a year earlier. Company gross

profits increased to Rs.2.0 billion during the year under

review, from Rs. 1.9 billion in the previous year. However

consolidated profit before tax was Rs 1.2 billion and profit

after tax was Rs 894 million during the financial year

under review as against consolidated profit before tax of

Rs.1.27 billion and profit after tax of Rs 1.0 billion in the

year 2011/12.

Profit attributable to equity holders decreased by 24.5%

to Rs.884 million during the year under review, from

Rs.1,171 million over the 2011/12 financial year.

Donations

The Group donated Rs.5.9 million to numerous charities

during the year.

Taxation

The Company is not liable for income tax on it’s main

income at the Balance Sheet date. Deferred tax is

provided using the liability method on temporary

differences at the Balance Sheet date between the tax

bases of assets and liabilities, and their carrying amounts

for financial reporting purposes.


Directors

For Group Companies under BOI tax holidays, deferred

tax during the tax holiday period has been recognised for

temporary differences, when reversals of such differences

extend beyond the tax exemption period, taking into

account the requirements of LKASs 12 and The Institute

of Chartered Accountants of Sri Lanka (ICASL) council’s

ruling on deferred tax. Please refer accounting policy

number 2.4.2.2.2 in page 80.

Dividends

Your Directors have recommended a tax free first and

final dividend of Rs 1.00 per share, amounting to Rs 202.5

million on issued stated capital of ordinary voting shares

and Rs 1.00 per share amounting to Rs 101.25 million on

issued stated capital of non-voting ordinary shares of the

company for the financial year under review.

The dividend warrant will be posted on or before 21st

August 2013 and the shares will be quoted ex-dividend

with effect from on 12th August 2013 as per the rules of

Colombo Stock Exchange.

Earning per share

Please refer note 07 on page 89.

Financial position of the company and the group

Stated capital

The Company’s stated capital at the end of the year under

review, was represented by 202.5 million ordinary voting

shares and 101.25 million ordinary non-voting shares.

Reserves

The Group’s total reserves totaled Rs.4.8 billion, as at

March 31, 2013, compared with Rs. 4.3 billion a year

earlier. This includes Rs. 150 million in capital reserves and

Rs.4.7 billion in revenue reserves.

Debt

Group’s long term debts amounted to Rs.1.0 billion as

against Rs.1.5 billion in the previous year. Company long

term debts amounted to Rs.433 million rupees, as at

March 31, 2013, as against Rs.728 million a year earlier.

Group’s short term liabilities stood at Rs. 3.2 billion,

against Rs. 2.6 billion a year ago.

Group had incured a interest cost of Rs. 700 million during

the year as against Rs. 435 million incured in the previous

year.

Property, plant and equipment

The consolidated property, plant and equipment costs,

at the year ended March 31, 2013 was Rs.14.7 billion,

as against Rs.13.9 billion recorded at the end of the

preceding year. The cost of company’s property, plant

and equipments at the year end were at Rs. 8.2 billion,

compared to Rs.7.7 billion a year earlier.

The group’s total capital expenditure for the year under

review was Rs.1.5 billion as against Rs.1.9 billion in the

previous year. A total of Rs.145.6 million worth of group

assets were disposed of during the year.

Details regarding the movement of assets extent and

location of propeties and number of buildings are

provided in the note 9 to the Financial Statements.

Current assets

The total current assets of the group, as at March 31, 2013,

were valued at Rs. 4.1 billion, as against Rs.3.6 billion in

the previous year. The total current assets of the company

stood at Rs. 1.8 billion as at 31st March 2013, as equivalent

to the current assets position of the company as of March

31, 2012.

Post-balance sheet events

Please refer note 31 on page 110.

Outstanding litigations

In the opinion of the Directors and the company lawyers/

legal counsel, litigations pending against the company

will not have major impact to the Financial Statements.

Contingencies and commitments

Information with regards to contingent liabilities and

capital commitments as at March 31, 2013, are given


in notes 26 & 27 on page 102 to 103 of the Financial

Statement.

Going concern

The preparation of financial statements have been done

on the going concern basis, as confirmed in the Statement

of Directors’ Responsibilities on page 54.

Shareholders information

Information provided separately from page 117 to 119.

Substantial shareholdings

The twenty Substantial shareholders and the percentage

held by each of them as at March 31, 2013 appear on

page 119.

Equitable tretment to shareholders

The directors at all times ensure that all shareholders are

treated equitably.

Information on the Board of Directors and Board sub committees

Board of Directors

Board committees

The Board has appointed a number of committees, with

specified terms of reference, to improve management

effectiveness of the company. Accordingly the following

committees have been constituted

The reports of the committees are given on page 56 to 59

of the Annual Report.

Directors’ responsibilities for financial statements

The Directors are responsible for the preparation and

presentation of Financial Statements of the company to

reflect a true and fair view of the state of its affairs. The

Statement of Directors’ Responsibilities for the Financial

Statements is given on page 54 of this Annual Report.

Recommendation for re-election

Mr. A. S. G. Gnanam retires by rotation in terms of the

articles of association of the company and offer himself

for re-election at the forthcoming annual general

meeting.

Mr. Edgar Gunatunga attend the age of 70 years on 2002

and in accordance with section 210 (2) of the companies

Act no 07 of 2007, vacates office at the forthcoming

Annual General Meeting. A notice of a resolution has

been received that the age limit of 70 years referred to in

section 210(1) of the said companies act shall not apply to

Mr. Edgar Gunatunga who has attend the age of 70 and

that he be re-elected as a Director at the Annual General

Meeting.

Directors’ remuneration

Directors’ remuneration in respect of the group and the

company for the financial year ended March 31, 2013 are

given in note 05 on page 86 of the Annual Report.

Directors’ Interests

The Directors’ Interests in the Company contracts appear

on page 107 to 109 of the Financial Statements and have

been declared at the meetings of the Directors.

Apart from the information disclosed, the Directors have

no other direct or indirect interest in any contracts or

proposed contracts pertaining to the business of the

group.

Mr. Edgar Gunatunga ChairmanMr. S.R. Gnanam Managing DirectorMr. A.S.G. Gnanam Non Executive DirectorMr. E.J. Gnanam Non Executive DirectorMr. R. Seevaratnam Non Executive Independent

DirectorDr. Harsha Cabral Non Executive Independent

DirectorDr. Indrajit Coomaraswamy Non Executive Independent

DirectorMr. T. Naruse Nominee Director of Nippon

Coke & Engineering Company Limited, Japan

Mr. S.V. Wanigasekera Nominee Director of Nippon Coke & Engineering Company Limited, Japan

Mr. S. Takihara Nominee Director of Nippon Coke & Engineering Company Limited, Japan


Directors

Director’s meetings

The Board of Directors met eight times during the year

under review.

Director’s Shareholding

Director’s Shareholding - Ordinary Shares

Interest register

As required by the Companies Act No. 07 of 2007 Interest

Registers have been maintained by the company.

Related party transactions

Directors have disclosed related party transactions and

such transactions are given in notes 29 on page 107 to

109 of the Annual Report.

Employment policies

In employment practices, the group continues to abide by

its non-discriminatory policy on gender, race and religion.

The group respects each and every individual and career

advancement opportunities are provided to all employees

without exception.

The group is as committed as always to creating a

zero-lost-workday work environment, with occupational

health and safety being a primary imperative within our

operations.

We had a total of 669 permanent employees and 72

casual workers on our payroll as at March 31, 2013.

They received a total remuneration package of

Rs.449 million, which exceeds the remuneration payments

of the previous year by Rs.62 million rupees.

Corporate governance

The company considers sound governance measures

and appropriate internal control as an integral facet of

operations. The practices followed by the company are set

out on page 38 to 41.

Risk manangement

The directors have established and adhere to a

comprehensive risk management framework at both

strategic business units and group levels to ensure the

achivements of their corporate objectives. The categories

of risks faced by the group are identified and significance

of those risk are evaluated on basis of impact of such risks

and the probability of occurance of such risks. Based on

the significance of risks mitigating strategies are adopted

by the group. The Board of Directors reviews the risk

management process through the audit committee. The

risk management report of the group is on pages 42 to 43

of this report.

Voting ordinary shares Non voting ordinary shares

No of shares

held as at March

31, 2013

No of shares

held as at March

31, 2012

No of shares

held as at March

31, 2013

No of shares

held as at

March

31, 2012

Local Joint Venture Partner -

St. Anthony’s Consolidated (Pvt) Ltd. 55,687,252 55,687,252 - -

Mr. Gnanam A. S. G. 11 11 - -

Mr. Gnanam S. R. - Managing Director 11 11 - -

Mr. Gnanam E. J. 11 11 - -

Mr. Edgar Gunatunga - Chairman 2,212 - 1,000 -

Foreign Joint Venture Partner - Nippon Coke & Engineering Co. Ltd. 49,004,932 55,687,432 - -

Nominee Directors of Foreign Collaborator - - -

Mr. Wanigasekera S. V. 5,400 5,400 14,487 13,487

Mr. Naruse T. - - - -

Mr. Takihara S. Independent Directors - - - -

Mr. Ranjeevan Seevaratnam - - - -

Dr. Harsha Cabral - - - -

Dr. Indrajit Coomaraswamy - - - -

Total 104,699,829 111,380,117 15,487 13,487

Total Shares in Issued 202,500,000 202,500,000 101,250,000 101,250,000


Internal controls

The Board of Directors ensures that the group has an

effective internal control system which ensures that

assets of the company and the group are safeguarded

and appropriate systems are in place to minimize and

detect frauds, errors and other irregularities. The system

ensures that the group adapts procedures which result in

financial and operational effectiveness and efficiency. The

statement of directors responsibilities on page 54 and the

audit committee report setout on page 56 of this report

provide further infomation in respect of the above.

Statutory payments

The Directors to the best of their knowledege are satisfied

that all statutory financial obligation to the government

and to the employees have been either duly paid or

adequately provided for in the financial statements. A

confirmation of same is included in the statement of

directors responsibilities on page 54 of this annual report.

Customers

The Directors consider the patronage extended by our

customers as invaluable, titling them - the greatest source

of strength and inspiration in the forward journey of

the company. The company continues to be committed

to provide total satisfaction to our customer base by

enhancing the quality of our products and services.

Suppliers

The group continues to thrive on the strong bonds with

all its suppliers, based on trust and reliability.

Sustainability

The company continues its unequivocal commitment to

environmental conservation and preservation, instituting

best practices in the effecient use of natural resources

to ensure that future generation will have a planet that’s

green, safe and healthy. Company is the first Sri Lankan

Company in cement industry to obtain the ISO 14001

Environmental Management Certificate, and during the year

2011/12 laboratories of our company qualified for ISO 17025

standards. During the year under review our vocational

traning institute in Dambulla, the A Y S Gnanam construction

traning acadamy was recognised by the ceylon chamber

of commerce as the best CSR project in 2012. Details of our

activities are given in sustainability report in in page 46 to 51

of this annual report.

Research and Development (R&D)

The company continued to invest in R&D this year as well.

Auditors

The independent auditors report on the financial statements

is given on page 60 of the annual report. The retiring auditors

Messrs BDO Partners, Chartered Accountants have stated

their willingness to continue in office and resolution to

grant authority to the Board to determine their remuneration

will be proposed at the Annual General Meeting.

The fees payable to auditors Messrs BDO Partners, Chartered

Accountants are given in note 05 on page 86 of the annual

report. As far as the directors are aware, the auditors have

neither any other relationship with the company nor

any of its subsidiries that would have an impact on their

independence.

Messrs BDO Partners, Chartered Accountants, the auditors of

the company are also the auditors of all subsidiaries of the

group. The list of subsidiaries, audited by them is included on

page 69 of the annual report.

Annual general meeting

The Annual General Meeting will be held on 8th August

2013. The notice of the Annual General Meeting appears on

page 124.

S R Gnanam T Naruse

Managing Director Director

Seccom (Private) Limited

Company Secretaries

29th June 2013


Governance

Corporate governance is expected to achieve

strategic aims of the business within a sound

framework of controls in the best interest of

stakeholders in compliance with laws, regulations

of the country while maintaining higher standards

of business ethics.

We maintain the highest standards in corporate

governance, instituting best practices in all

areas to ensure complete transparency and

accountability in terms of principles and provisions

laid down in the Code of Best Practice on

Corporate Governance published by the Institute

of Chartered Accountants of Sri Lanka (ICASL).

Being the only listed corporate entity in

Sri Lanka who manufacture cement, our

corporate governance framework is based

on a comprehensive approach to sustainable

development and environmental protection which

is beyond mere compliance with the rules and

regulations.

Board of Directors

Shareholders appoint Board of Directors at the

Annual General Meeting except for the nominee

Directors of Nippon Coke & Engineering Co. Ltd.

Board of Directors consists of ten (10) members.

Of the Board of Directors three (3) Directors are

Independent non-executive Directors and five (5)

directors are non-executive Directors. Company is

a joint venture by St. Anthony’s consolidated (Pvt)

Ltd and Nippon Coke & Engineering Co. Ltd.

All Non-Executive Directors are professionals

in the field of banking,economic, legal and

accountancy with vast experience in business and

administration.

Corporate Governance Process

The Board of Directors formulates overall

business strategy in association with corporate

management and determine corporate goals

which are communicated down the management

hierarchy through a systematic budgetary control

procedure approved by the Board of Directors.

Board of Directors review the corporate and

operational performance of the group each month

in the context of political economic social and

technological environment and provide direction

to corporate management in managing the

business. In order to assist the Board of Directors

in implementation of their role following sub

committees have been formed.

Audit Committee

The Audit Committee comprises of four Non-

Executive Directors of which two are independent.

Chairmen of the Audit Committee is a member of

the Institute of Chartered Accountants of Sri Lanka.

Audit Committee assists the Board of Directors in

its general oversight of financial reporting, Risk

Management, internal controls and functions

relating to internal and external audit and

monitoring of compliance with laws, regulations

and best practices.

This Committee meets quarterly and the Managing

Director, Group General Manager, Chief Financial

Officer and Internal Auditor participates Audit

Committee meeting upon invitation. The report of

the Audit Committee appears on page 56 to 57.

Audit Committee Members

Mr. R. Seevaratnam - Chairman

Mr. Edgar Gunatunga

Mr. S. V. Wanigasekera

Dr. Harsha Cabraal

Remuneration Committee

The Remuneration Committee comprises three

Directors of which two are an Independent

Non-Executive Director’s. The Committee is

empowered to examine any matters relating to

remuneration paid to executive members. Their

terms of reference also encompass the review of


matters relating to human resources management of the

Company.

Remuneration Committee Members

Dr. Harsh Cabral - Chairman

Mr. R. Seevaratnam

Mr. S. R. Gnanam

Nomination Committee

The Nomination Committee comprises six directors of

which three are an independent Non-Executive Directors.

The Committee is responsible for recommend to board

the process of selecting Chairman and Managing Director,

Identifying suitable persons for appointment to the Board

as Executive and Non-Executive Directors.

Nomination Committee Members

Dr. Indrajit Coomaraswamy - Chairman

Mr. Edgar Gunatunga

Mr. S. R. Gnanam

Mr. T. Naruse

Mr. R. Seevaratnam

Dr. Harsha Cabral

Internal Control and Monitoring

Board of Directors are responsible for maintenance

of an effective system of internal control to ensure

effectiveness and efficiency of operations, reliability of

financial reporting, compliance with applicable laws

and regulations, conduct its business in an orderly and

efficient manner, safeguard its assets and resources, deter

and detect errors, fraud, and theft, ensure accuracy and

completeness of its accounting data, produce reliable

and timely financial and management information, and

ensure adherence to its policies and plans.

Board of directors achieve monitoring of operations

through monthly board meetings and review of various

management information obtained at these meetings

including reports of the intenal auditors. Internal Control

is implemented through the corporate management

by ensuring adherence to board accepted policies

and adequacy of internal control implemented by the

management is measured through the Internal Audit

team who shall review the systems and controls in

accordance with a board approved audit plan.

This includes surprise audits of sales depots, ready

mix cement operations, and factory. These reports are

scrutinised and discussed by the members of the Audit

Committee and suitable action is taken where necessary,

in consultation with senior management. Members

of the Audit Committee also reviews monthly/interim

financial statements submitted to the Board, and ensures

financial information reported are in compliance with

various accounting standards promulgated by Institute of

Chartered Accountants of Sri Lanka.

Information Technology

Group has initiated implementation of a Enterprise

Resource Planning system wide across the company and

its subsidiaries to integrate the corporate headquarters,

sales depots, and factory. While IT facilitates transaction

processing and reporting in a more systematic and

effective manner it also entail IT governance risk which

affect confidentiality integrity and availability. Board

is aware of the risk IT entails and necessary IT system

security and controls have been taken into consideration

and will be further reviewed when the ERP system is fully

operational in compliances with best practices for IT

governance and risk management.

Going Concern

The Board is tasked with ensuring that the company is

a ‘going concern’ and therefore adopts processes and

features into its decision making and in the preparation

of financial statements, to form a solid foundation of

sufficient resources to continue operations into the

foreseeable future.

Transparency

The Board discloses full information, both financial

and non financial information within the bounds of

commercial realities. Being the only cement manufacturer


Governance

listed on the Colombo Stock Exchange, it is committed

to a responsible business philosophy. Publication of

quarterly accounts and the release of the Annual Report

and Audited Accounts are complied within the stipulated

time frame.

Investor Relations

The Company continues to maintain good

communication with all shareholders comprising both

corporates and individuals. The Board invites questions

from shareholders during the General Meeting. In

addition, the Chairman and Executive Directors meet

institutional investors and analysts to discuss the

company’s performance. Share price sensitive information

not available to other shareholders is not divulged during

this meeting.

Shareholder Value and Returns

We are firmly committed to constituting a Board of

Directors who are eminent, erudite and well respected as

we strongly believe that this adds value to the company,

a fact that is reflected in the strong share value we have

gained over the years. The Board also maintains an

attractive dividend rate aligned to the expectations of the

shareholders as well as for Capital formations of future

expansion.

External governance

As a responsible corporate citizen group adheres to

regulations, codes of best practices etc, adopted by

different governing bodies including following:

issued by Institute of Chartered Accountants of Sri

Lanka and Securities & Exchange Commission of Sri

Lanka

of 2002 and other revenue related regulations and

subsequent amendment

amendments

the industry in force

We summarise below the extent to which the group is

in compliance with the rules set out in Section 7.10 of

the Colombo Stock Exchange listing rules on corporate

governance.

Rule No: Rule Compliance status

01 Board of Directors

The correct number of Non-Executive Directors, in accordance with Rule 7.10.1 (a)

Compliant

02 The correct number of Independent Non-Executive Directors, in accordance with Rule

7.10.2 (a)

Compliant

03 Specified whether the Non-Executive Directors submitted a Declaration annually of

his/her independence or non-independence to the Board of Directors - Rule 7.10.2 (b)

Compliant

04 Confirmed that the Board of Directors made an annual determination as to the

independence or non-independence of each Non-Executive Director based on the

Declaration mentioned above and other information available to the Board and states

the names of Non-Executive Directors determined to be ‘Independent’ – Rule 7.10.3 (a)

Compliant

05 If the Director does not qualify as ‘Independent’, but if the Board taking into account all

the circumstances is of the opinion that the Non-Executive Directors is ‘Independent”,

the Board has specified, in the Annual Report, the qualification not met under Rule

7.10.4 of the CSE Listing Rules and the basis for determining the Director to be

‘Independent’ Rule 7.10.3 (b)

N/A


Rule No: Rule Compliance status

06 Published a brief resume in the Annual Report, of each Director of the Board, which

includes information on the nature of his/her expertise - Rule 7.10.3 (c)

Compliant

07 Remuneration Committee

The correct number of Independent Non-Executive Directors in the Remuneration

Committee, in accordance with Rule 7.10.5 (a)

Compliant

08 Specified whether a separate Remuneration Committee was formed or whether listed

parent Company’s Remuneration Committee used - Rule 7.10.5 (a)

Compliant

09 Specified the names of Directors comprising the Remuneration Committee (where

the parent company’s Remuneration Committee qualifies to function as the listed

company’s Remuneration Committee, a statement in the Annual Report to this effect

and disclosed the names of the Directors) - Rule 7.10.5 (c)

Compliant

10 Disclosed the functions of the Remuneration Committee, in accordance with Rule

7.10.5 (b)

Compliant

11 Specified whether the Chairman of the Committee is a Non-Executive Director Rule

7.10.5 (a)

Compliant

12 The Annual Report contained a statement on the Remuneration policy - Rule 7.10.5 (c) Compliant

13 Specified the aggregate remuneration paid to Executive and Non-Executive Directors

in the Annul Report - [“Remuneration” should include cash and all non-cash benefits

paid in consideration of employment with the Listed Entity (excluding statutory

entitlements such as EPF and ETF)] - Rule 7.10.5 (c)

Compliant

14 Audit Committee

The correct number of Independent Non-Executive Directors, in accordance with Rule

7.10.6 (a)

Compliant

15 Specified whether a separate Audit Committee formed or whether listed parent

company’s Audit Committee used - Rule 7.10.6 (a)

Compliant

16 Specified the names of Directors comprising the Audit Committee (where the parent

company’s Audit Committee qualifies to function as the listed company’s Audit

Committee, a statement to this effect and disclosed the names of the Directors) Rule

7.10.6 (c)

Compliant

17 Confirmed that the functions of the Committee has being in accordance with Rule

7.10.6 (b)

Compliant

18 Specified whether the Chairman of the Committee is a Non-Executive Director Rule

7.10.6 (b)

Compliant

19 Specified whether the Chairman or one member of Committee is a member of a

recognised professional accounting body – Rule 7.10.6 (a)

Compliant

20 Specified whether the CEO and CFO attended Committee meetings, unless otherwise

determined by the Audit Committee – Rule 7.10.6 (a)

Compliant

21 The Annual Report contained a report by the Audit Committee stating the manner

of compliance in relation to the functions required of the Audit Committee and the

determinations made by the Audit Committee – Rule 7.10.6 (c )

Compliant

22 Specified the basis for determining External Auditors as being Independent Rule

7.10.6 (c)

Compliant


Risk

Management

Enterprise risk management is a process, effected

by an entity’s board of directors, management,

and other personnel, applied in strategy

setting and across the enterprise, designed

to identify potential events that may affect

the entity, and manage risk to be within the

risk appetite, to provide reasonable assurance

regarding the achievement of entity objectives.

Companies set themselves strategic and business

objectives, then manage risks that threaten

the achievement of those objectives. Internal

control and risk management should supplement

entrepreneurship, but not replace it. Increased

shareholder value is the reward for successful risk

taking and the role of internal control is to manage

risk appropriately rather than to eliminate it.

At Tokyo Cement first defense line of risk

management is rest with the divisional managers

who identify risks at their operations, evaluating

and managing the risks that they originate

within the approved risk appetite and policies

set by the board of directors. The second line of

defense includes the support functions, finance,

administration, operations, and technology. Each

of these functions, in close relationship with the

business units, ensures that risks in the business

units have been appropriately identified and

managed. The third line of defense is the internal

audit function that independently assesses the

effectiveness of the processes created in the

first and second lines of defense and provides

assurance on these processes to the Board of

Directors through the Audit Committee.

Risks are assessed on the basis of the consequence

of risks if such risk materializes and the likelihood

of materializing such risk. Any significant risk

above a threshold is requiring the response of the

management. Risks are assessed both as gross risk

and net risk. The assessment of gross risk involves

the identification of possible effect without any

mitigating actions. Net risk assessment considers

possible loss when mitigating action taken.

Major risks, evaluation of those risks in terms of

impact if those risks occur and probability of such

occurrence and mitigating actions to detect such

occuransces are detailed below.

Risk Potential Effect Impact Probability Mitigating Actions

Financial Risks

Currency Risks

Fluctuations in exchange rate causing potential losses on transactions denominated in foreign currency

Medium HighClosely monitor movement in currency rates and adjust product pricing competitively

Interest Rate Risks

Increase in interest rates impacting cost of funding and reduced business volumes due to low level of investments in constructions

Medium High

Maintaining long term interest rate agreementsStrong long term relationships with banks as a prime customerPrudent treasury management

Refinancing/Liquidity Risk

Unavailability of sufficient funds impacting smooth functioning of day to day operations of the group High Low

Arrangement of adequate banking facilitiesSound cash position Cash flow planning and monitoring

Credit Risks Possibility of incurring bad debts due to adverse economic conditions and poor credit management

High LowStrong customer credit evaluation processRegular review of credit status/worthinessCredit facilities to be backed by bank guarantees.


Risk Potential Effect Impact Probability Mitigating Actions

Market &

Strategic RisksIndustry

Risks/Sales

Market Risks

Low level of residential construction,

commercial constructions and public

constructions due to stagnating

economy

Fluctuating weather patterns such as

monsoon.

High

High

Low

High

Product diversification

Increased customer focus

Development of special products ie Tile Bonds

Planning based on analytics

Risks from

acquisitions

and

investments

Adverse impact due to changes to

financial structure, failure to integrate

employees, processes, technologies

& products, and social and political

changes

High Low Rigorous forecast and analysis of acquisition and

investments and methods of financing

Low employee turnover and employees with

long tenure with the company

Risks from

substitution

of products

Availability of low quality imported

products

High High Uncompromising quality standards

Strong dealer network

Educating of customer/decision influencers such

as masonsPolitical Risks

and risks

arising from

exceptional

external

incidents

Adverse impact on business due to

political uncertainty, and natural

disasters

High Low Country has a stable political environment after

the war and economic policies conducive a

positive business climate.

Assets and business interruptions are covered by

insurances with major insurers

Operational

RisksVolatility of

energy and

raw material

prices

Adverse effect on the cost of

production due to increased energy

prices and increased world market

prices on imported raw materials

High Low

Utilization of renewable energy sources to

maximum and long term supplier contracts to

reduce volatility of raw material prices

Availability of

raw materials

and additives

Interruption to business activity due

to non availability of raw materials

and additives

High Low Long term contracts with reliable material

suppliers who are with the company for many

years and own supply of additives such as fly ash Production

Technology

Related Risks

Technological obsolescence could

adversely affect the performance

High Low Regular investment in upgrading technology . In

house and overseas training for staff

Quality Risks Adverse impact due to sales returns

and damages due to claims for supply

low quality products and decrease in

sales volume

High Low Strict quality maintenance in terms of ISO 9001

Quality management System and compliance

with SLS requirements

Legal &

Regulatory

Risks

Negative Effect on business on

changes to regulations or non

compliance with regulations mainly

connected with environmental and

consumer protection Acts

High Low Regular review of compliances with statutory

provisions and scrutiny of legal agreements by

legal consultants prior to signing.

IT Risk Adverse impact on loss of

confidentiality, integrity and non

availability of systems

High Medium Back up procedures, password controls, firewalls,

malware and antivirus protections are in

implementation and continuously measure and

upgrade and protect data, applications, systems

and networks.




Report

Corporate Citizenship

At Tokyo Cement we’ve constantly pursued

a triple-bottom-line philosophy that places

an impetuous on people, planet and profits.

By empowering our employees to innovate

within their areas of expertise, we’ve discovered

sustainable solutions that we’ve organically

adopted and integrated into our daily business

activities.

As a large scale manufacturer, we are well

aware that every little bit we do – whether it is

waste prevention or a charitable contribution

– amasses towards making a considerably

greater impact than previously imagined. It

is this mentality that has made us pioneers in

Sri Lanka from our successful harnessing of

renewable energy for our daily production needs

to our consistent support of social development

projects.

We hope that these multifaceted and

revolutionary ventures into corporate citizenship

excite you as much as they inspire us.

Commitment to our People

At Tokyo Cement we believe in looking after

our employees because our staff is the key to

our success. We provide them with training and

development opportunities and other benefits

beyond statutory requirements. All health


cement factory in Trincomalee, we comply with all

Central Environmental Authority standards and we

implement mechanisms to minimise water, sound and

air pollution. The environmental safeguards extend

beyond raw material unloading and manufacturing.

Even the clinker we import is transferred from ship to

factory in enclosed belts, preventing any possible air

pollution from dust.

and safety standards are observed within the factory

premises and health and safety training is provided. As

a result we enjoy extremely low staff turnover and high

retention.

We had a total of 669 permanent employees and 72

casual workers on our payroll as at March 31, 2013. They

received a total remuneration package of Rs. 449 million

rupees.

We provide in house and external training for our staff

every year to upgrade the competency level to match

with company goals and better prepare our employees

for future success.

We provide hospitalisation insurance cover for

employees with 10 years or more of employment.

As part of our employee welfare system, we provide

accommodation for senior and junior staff in

Trincomalee. To improve productivity and efficiency

we have invested in modern management procedures,

from advanced software systems to unrestricted

communication practices.

Commitment to the Environment

Over the past few years we have initiated many

programs for the conservation and propagation of

our natural environments. During the current year

we’ve continued to build on our environmentally

friendly practices and have initiated a number of new

conservation projects. These eco-friendly programmes

We provide many in-house and external training for our

with company goals and better prepare our employees for future success.

have the dual benefit of being environmentally friendly,

while also supporting local communities, through

income generation, or by ensuring a healthier natural

environment.

Sustainability Incorporated: A Philosophy

We have invested in the latest technologies to reduce

environmental impacts from our operations. At our


Report

Today, we are proud to say our cumulative efforts

towards becoming an accountable corporation through

the minimising of environmental impacts in our

business activities and support of local communities are

creating tangible value not only for our shareholders,

but our employees and the greater society. Our

investments in alternative energy sources that are more

environmentally friendly than fossil fuels have generated

cost savings running into millions of rupees annually.

Meanwhile, our business model of involving rural

communities in the collection of agricultural waste has

created new avenues of income for these communities.

Tokyo Cement Power: Clean and Constant Energy

Tokyo Cement is widely-considered a pioneer in biomass

power generation in Sri Lanka as our current 10MW

biomass power plant in Trincomalee successfully powers

the entirety of our manufacturing facilities.

In 2012, we took another step forward in the application

of renewable energy solutions to our manufacturing

process. Encouraged to expand our efforts through a

request by the Ceylon Electricity Board(CEB) we initiated

a 5MW biomass-dendro power plant in Mahiyanganaya.

The plant is a permanent solution for the low voltage

situation that cripples the Mahiyanganaya area by

meeting the increasing demand for electricity.

The Rs 1.5 billion power plant has been built in

consultation with the CEB and the Sri Lanka Sustainable

Energy Authority and is expected to generate electricity

for the next 25 years, in an eco-friendly manner. The

plant will be commissioned in the new financial year.

People in the surrounding areas will benefit through

the supply electricity and also through a new source

of income. The power plant requires a daily supply

of 200 tonnes of Gliricidia sticks as fuel. We expect

to meet this requirement through our own Gliricidia

plantation and by purchasing Gliricidia from farmers in

many districts, supplemented through an out-grower

system. Accordingly, we will supply saplings and

educate farming families about commercial cultivation

of Gliricidia. The trees will contribute towards greening

the environment and 200 young men and women in the

area will gain direct employment.

Carbon Credits

Our 10 MW biomass power plant in Trincomalee,

commissioned October 2009, is the first renewable

energy project in Sri Lanka to qualify for carbon credits

under the (United Nations Framework Convention on

Climate Change) UNFCCC Carbon Credit Program.

The biomass plant was issued with certified emission

reductions (CERs) of 40,000 tonnes per year (by 2012),

by generating power from agricultural residue such as

paddy husk, sawdust and Gliriidia sticks.

Mangrove Reforestation

For tactical reasons during the war, the Sri Lankan

Navy cleared large forests of mangroves leaving empty

wastelands in its wake. Our shores were no longer

protected by this tidal buffer (that considerably softened

the impact of the 2004 tsunami), as wells as acting as a

habitat for numerous forms of wildlife. Together, with the

assistance of the SL Navy’s Eastern Command we hope

to bring back endemic ecosystems that are essential for

the survival of our coasts and our fishing economies.


To implement the project, we have already started our

mangrove nursery. We intend to begin cultivation with

an initial yield of 20,000 plants from various indigenous

species. We intend to propagate 15 Acres over the next

five years.

The mangrove cover will have multiple long term

environmental and social benefits. It will create a

healthy ecosystem for fish, crustaceans and other small

organisms to flourish, which will contribute towards

fisheries activities. Secondly, the mangroves will also

insulate the coastlines from tsunamis, and soil erosion,

making the coast a safer place for coastal communities.

Finally, the greenery will add to the scenic beauty of the

coastline.

Coral Rehabilitation

After decades of limestone harvesting and unchecked

fishing conducts such as careless anchoring, use of

illegal netting or dynamite fishing, the corals that skirt

our shores have been severely depleted. The importance

of corals is widely acknowledged; they are not only

habitats and sources of nourishment for flourishing fish

species but are essential tidal blockers that deter erosion

and defend us from tsunamis.

So in collaboration with the Wildlife Research &

Conservation Trust of Sri Lanka (WRCT) we are

spearheading a re-coral-isation pilot project. Our

remedy is hollow concrete blocks. We will build these

hollow blocks, using ph-neutralised concrete and have

started growing indigenous coral species on said blocks

in imitated water/climate conditions. We will then

introduce these blocks into the water and the progress

of growth shall be monitored by WRCT.

Commitment to Society

We believe that social harmony springs from equal

opportunity. To realize this seemingly incredible task

we’ve designed and supported programs that encourage

educational pursuits, develop technical skills and foster

economic ingenuity. Hopefully our efforts will inspire an

environment in which businesses flourish and people

prosper.

So we decided to prove this belief by taking steps

towards the strengthening of the domestic workforce

through educational incentives and technical skills

development.


Report

The A Y S Gnanam Construction Training Academy, a first

of its kind by a business in Sri Lanka, was a result of this

thinking. Our objective was to respond to the dearth of

skilled construction personnel in the county by ensuring

a regular supplying of trained personnel. Through this

effort we have also helped many young people, by

providing employment avenues that are supported by

recognised qualifications. The institute commenced

operations in 2011 and we are proud to say it has more

than stood up to its expectations.

AYS Gnanam Construction Training Academy –

Winner of Best CSR (education & Training)

It gives us great pleasure to announce that our

vocational training institute in Dambulla, the A Y S

Gnanam Construction Training Academy, was recognised

by the Ceylon Chamber of Commerce, as the best CSR

project in 2012, under the category education and

training. This is indeed an encouraging response to our

efforts and we are happy to say the training institute

has grown in popularity and recognition since its

establishment in 2011.

The institute was established at a cost of Rs. 34.2 million

and is located in a Company owned property of 5 acres.

The establishment provides nationally recognised

masonry training, together with accommodation for the

duration of the training, for 50 people, free of charge.

Currently the courses are accredited and evaluated

by the National Apprentices & Industrial Training

Authority (NITA). During the current financial year over

125 persons were trained in courses of various duration,

at the institute, enriching the local construction industry.

Student Nutritional Aid

For almost a decade we’ve sponsored lunch programs for

several schools in impoverished communities to increase

attendance levels, while ensuring that these growing

children receive their necessary daily nourishment. The

success of these projects has encouraged us to expand

the scope of operations to more schools that require this

form of support.

Under our school nutrition programme, we have

taken over the provision of mid day meals for some

underprivileged schools in the Trincomalee and Kandy

districts. All schools were recording poor attendance,

and most children suffered from poor nutrition, due to

poverty. Many children in these schools could not be

sure of three daily meals. This situation discouraged

children from completing their education. Therefore,

we initiated a daily mid-day meal programme, for all the

children, in collaboration with the schools and

the parents.

Our nutrition programme has been able to successfully

organise daily, balanced meals, cooked under

supervised, hygienic conditions. The food is prepared

by groups of volunteer parents, in the school kitchens.

The kitchens have been equipped by Tokyo Cement to


cook and serve the food to all the children. The fresh

vegetables, fish and meat for the meals, are supplied

through a nearby grocery shop and Tokyo Cement

makes the payments for these supplies.

We are happy to announce that since the

implementation of our nutrition programme all schools

have seen a marked improvement in attendance. The

provision of the mid-day meal has become a comfort

factor for both children and parents in the area. Parents

are happy in the knowledge that their children are

getting the nutrition they require to support their

education and children are motivated to attend school

as they are assured of a tasty and healthy meal.

Tokyo Cement All Island Schools’ Quiz

We must prepare our children for the world that they

are to live in. With every generation the world becomes

more crowded and competitive; while resources and

opportunities diminish with each passing day.

So we are proud to announce that Tokyo Cement, in

collaboration with Swarnavahini, and endorsed by the

Ministry of Education will be launching the first truly

national education competition. “Tokyo Cement All

Island Schools’ Quiz 2013” will pit schools from across the

nation against each other, no matter the language they

speak, the race or religion they identify with or whether

they hail from village or city.

In this inaugural competition we’re sending out

invitations to 9000+ schools across the country,

representatives of which will take comprehensive

academic tests to become one of the 32 schools that

will be featured on Swarnavahini’s TV show. They will

fight for school pride, individual recognition and to be

in contention for attractive personal prizes, as well as

a lump sum worth Rs. 5.2 million for the development

of their school, furnished by Tokyo Cement. We look

forward to this new program and hope that this sparks a

fire in every student island-wide to pursue academics as

they would the arts and competitive sports.

Annual dealer convention

We use our Annual Dealer Convention to recognize and

reward our best performing dealers.

This highly anticipated event celebrates and thanks the

dealer community for their contribution to maintaining

the company’s top ranked position in the cement

manufacturing industry.

Our appreciation of their commitment and loyalty is

reflected in this gala celebration, where gifts ranging

from cruises, foreign trips and many other rewards, are

presented to the cream of the dealer network.




Responsibilities

The responsibility of the directors in relation to the financial

statements is set out in the following statement. The

responsibility of the auditors, in relation to the financial

statements prepared in accordance with the provision of the

Companies Act No 7 of 2007, is set out in the Report of the

Auditors.

The financial statements comprise of: Income statement and

Statement of Comprehensive income of the Company and its

subsidiaries, which present a true and fair view of the profit

and loss of the Company and its subsidiaries for the financial

year and 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.

In terms of Section 150(1),151,152(1) & 153 of the Companies

Act No 7 of 2007, Directors are responsible to ensure

compliance with requirements set out therein to prepare

financial statements for each year, giving a true and fair

view of the state of affairs of the company and the group as

at the end of financial year and of the profit and loss of the

Company and its subsidiaries of the group for the

financial year.

In terms of Section 148 of the Companies Act No 7 of 2007

Directors are also required take appropriate steps to ensure

that the Companies within the Group maintain adequate and

accurate records which reflect the true financial position of

each such Company and hence the Group.

The directors are also responsible for taking reasonable

steps to safeguard the assets of the Company and 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 while acknowledging that there is no single

system of internal control that could guarantee absolutely

against mismanagement or fraud.

The directors are required to prepare the financial statements

and to provide the auditors with every opportunity to take

whatever steps and undertake whatever inspections that

may be considered being appropriate to enable them to give

their audit opinion.

The financial statements presented in the Annual Report for

the year ended 31st March 2013, have been prepared based

on the new Sri Lanka Accounting Standards (SLFRSs/LKASs)

which came into effect for the financial periods commencing

after 1st January 2012.The comparative figures for the year

ended 31st March 2012 were restated based on the new

accounting standards. The Directors have selected the

appropriate accounting policies and such policies adopted

by the Group are disclosed and explained in the financial

statements.

The Board of Directors confirm that the Company and the

Group’s Consolidated Statements of Financial Position as at

31st March 2013 and the Comprehensive Income Statements

for the Company and the Group for the financial year ended

31st March 2013 reflect a true and fair view of the Company

and the Group respectively.

The Directors further confirm that the financial statements

and other statutory reports of the Company and its

subsidiaries for the year ended 31st March 2013 incorporated

in this report have been prepared in accordance with the

Companies Act No.7 of 2007, the Sri Lanka Accounting and

Auditing Standards Act No. 15 of 1995 and the Listing Rules

of the Colombo Stock Exchange.

The Directors having considered the Group’s business plans,

and a review of its current and future operations, are of

the view that the Company and the Group have adequate

resources to continue in operation. The Directors have

adopted the going concern basis in preparing the financial

statements.

Further, as required by Section 56 (2) of the Companies Act

No 7 of 2007, the Board of Directors have confirmed that

the Company, based on the information available, satisfies

the solvency test immediately after the distribution, in

accordance with Section 57 of the Companies Act No. 7 of

2007, and have obtained a certificate from the auditors, for

the payment of first and final dividend of Rs.1.00 per share

on ordinary voting and ordinary non voting shares for the

financial year 2012/13.


Compliance Report

The directors confirm that to the best of their knowledge,

all taxes, duties and levies all contributions, levies and taxes

payable on behalf of and in respect of the employees of the

Company and its subsidiaries and all other known statutory

dues as were due and payable by the Company and its

subsidiaries as at the reporting date have been paid, or

where relevant provided for, except as specified in note 27 to

the financial statements covering contingent liabilities.

By Order of the Board of

Tokyo Cement Company (Lanka) PLC

Seccom (Private) Limited

Company Secretaries,

29th June 2013


Report

Terms of Reference

In terms of best corporate governance practices Audit

Committee is responsible to the Board of Directors and

reports on its activities regularly. It also assists the Board of

Directors in its general oversight of financial reporting, Risk

Management, internal controls and functions relating to

internal and external audit and monitoring of compliance

with laws, regulations and best practices.

Composition

The composition requirements, roles and functions of the

Committee are set out ‘Rules on Corporate Governance

under Listing Rules of the Colombo Stock Exchange’ and

‘Code of Best Practice on Corporate Governance’ issued

jointly by The Institute of Chartered Accountants of Sri Lanka

and the Securities and Exchange Commission of Sri Lanka.

Company’s Audit Committee Comprises of two Non

Executive Independent Directors and two Non-Executive

Directors. They are Mr. R. Seevaratnam, Mr. S. V. Wanigasekera,

Mr. E. Gunatunga and Dr. Harsha Cabral respectively.

Two members of the committee are qualified Chartered

Accountants .The other members participating at the Audit

Committee deliberations are Managing Director, Group

General Manager, Chief Financial Officer, and Internal Auditor.

The Committee also invited representatives from the SJMS

Associates assisting in Internal Audit at factory to make

presentations on their observations and findings. Members

of the Senior Management of the company were also invited

to participate in the meetings as and when the necessity

arose.

Meetings

The Audit Committee met four times during the year ended

31st March 2013 and proceedings of the meetings are

reported to the Board of Directors regularly

Name Attendance

Mr. R. Seevaratnam, Chairman 4/4

Mr. S. V. Wanigasekera 4/4

Mr. E. Gunatunga 4/4

Dr. Harsha Cabral 4/4

Financial Reporting

The Committee assists the Board of Directors to discharge

their responsibility in the preparation of Financial Statements

to reflect a true and fair view on financial position and

performance, based on the company’s accounting records

and in accordance with the stipulated requirements of the

Sri Lanka Accounting Standards. In accordance with the

mandate mentioned above, the Committee reviews the

following:

transactions are accurately and completely recorded in

the books of account.

to ensure reliability of the information provided to the

stakeholders.

accounting policies after considering all choices

available.

Standards, Companies Act No 7 of 2007 and other

regulatory provisions relating to financial reporting and

disclosures are ensured.

for publication prior to submission to the Board.

Internal Control, Internal Audit & Risk Management

The Committee reviewed the business processes in operation

in order to evaluate the effectiveness of the internal

controls that have been designed to provide reasonable

assurance to the directors that assets are safeguarded and

that the financial reporting system can be relied upon in

preparation and presentation of the financial statements.

The Audit Committee monitors and guides the Internal Audit

Department which performs audits according to the plan

of activities which covers financial and operational audits,

risk assessments and IT security reviews. The reports of the

Internal Audit Department have been reviewed, discussed by

the Committee, and initiated corrective measures.


Transition to New/Revised Sri Lanka Accounting

Standards

With effect from January 01, 2012, it is mandatory for the

Company to comply with the requirements of new/revised

Sri Lanka Accounting Standards (SLFRS/LKAS) which are

based on the International Accounting Standards (IAS)

and International Financial Reporting Standards (IFRS).

These standards require substantial changes to some of

the accounting treatments adopted by the Company. The

Board Audit Committee evaluated the proposals made by

the finance team, with the guidance of Messrs BDO Partners,

Independent Auditors for the purpose and obtained approval

from the Board of Directors for such proposals. The Board

Audit Committee would continue to monitor the progress of

implementation of new Accounting Standards and keep the

Board of Directors informed at regular intervals.

Independent Auditors

The Committee is satisfied that the independence of the

External Auditors has not been impaired by any event

or service that gives rise to a conflict of interest. Due

consideration has been given to the nature of the services

provided by the Auditors and the level of audit and non-audit

fees received by the Auditors from the Group. The Committee

also reviewed the arrangements made by the Auditors to

maintain their independence and confirmation has been

received from the Auditors of their compliance with the

independence guidance given in the Code of Ethics of the

Institute of Chartered Accountants of Sri Lanka.

The Audit Committee recommends the reappointment of

Messes BDO Partners for the financial year ending

31st March 2014.

Conclusion

The Audit Committee is satisfied that the Group’s Accounting

policies, internal controls including operational controls

provides reasonable assurance that the affairs of the group

are managed in accordance with policy framework of the

group setout by board of directors and that group assets are

properly accounted and adequately safeguarded.

R. Seevaratnam

Chairman - Audit Committee

Colombo

29th June 2013



The Remuneration Committee appointed by the Board

of Directors comprises Two Non-Executive Independent

Directors namely Mr. R Seevaratnam, Dr. Harsha Cabral, &

Mr. S R Gnanam Managing Director attend Committee

meetings by invitation.

The Remuneration Committee was established with the

objective of recommending the remuneration of Board of

Directors.

Terms of reference of the committee is also to make

recommendations to the Board, the remuneration and

its cost and to determine on behalf of the Board specific

remuneration packages for Senior Management Team, and

recommend any contract of employment or related contract

with Senior Management Team and determine the terms of

any compensation package in the event of early termination

of the contract of any member of Senior Management Team

and make recommendations to the Board regarding the

content to be included in the Annual Report on Directors’

remuneration.

The Committee is not responsible for setting the level

of remuneration of Non-Executive Directors, which is

determined by the Board.

Company has adopted a policy of remuneration to

Senior Management Team and Executive Directors based

on performance. It is a policy of the company to link

remuneration of Senior Management Team with the

company’s short range and long range business strategies

and committee make its best endeavor to maintain

remuneration levels sufficient to attract and retain Senior

Management Team of the company. The decisions on the

matters relating remuneration of Senior Management

Team were arrived in consultation with the Chairman and

Managing Director. No director is involved in determining his

or her own remuneration.

The Minutes of the Remuneration Committee approved

by the said committee are circulated and affirmed by the

Board of Directors. The Committee also discusses and

advises the Directors and Executive Officers on structuring

of remuneration packages. The Committee has the authority

to seek external independent professional advice on matters

within its purview.

Director’s emoluments in aggregate for Executive and Non

Executive Directors are disclosed in note 5 to the financial

statements in page 86.

Dr. Harsha Cabral

Chairman


29th June 2013


Report

The Nomination Committee consists of the Non Executive

Chairman Mr Edgar Gunatunga, Managing Director

Mr. S R Gnanam and nominee Director Mr T Naruse and three

Non Executive Independent Directors Mr R Seevaratnam,

Dr. Harsha Cabral and Dr Indrajit Coomaraswamy. The Role

and Responsibilities of the Committee are :

Chairman and Managing Director.

for appointment to the Board as Executive and Non

Executive Directors.

Board.

During the year under review, the Committee did not meet as

there were no referrals and there were no new appointments

to the Directorate.

Dr. Indrajit Coomaraswamy

Chairman

Nomination Committee

29th June 2013


Report

TO THE SHAREHOLDERS OF TOKYO CEMENT COMPANY

(LANKA) PLC

Report on the Financial Statements

We have audited the accompanying financial statements

of Tokyo Cement Company (Lanka) PLC (“Company”), the

consolidated financial statements of the company and its

subsidiaries which comprise the statements of financial

position as at 31st March, 2013, and the statements of

comprehensive Income, statements of changes in equity

and statements of cash flow for the year then ended, and

a summary of significant accounting policies and other

explanatory notes as set out on pages 67 to 116.

Management’s Responsibility for the Financial

Statements

Management is responsible for the preparation and fair

presentation of these financial statements in accordance with

Sri Lanka Accounting Standards. This responsibility includes:

designing, implementing and maintaining internal control

relevant to the preparation and fair presentation of financial

statements that are free from material misstatement,

whether due to fraud or error; selecting and applying

appropriate accounting policies; and making accounting

estimates that are reasonable in the circumstances.

Scope of Audit and Basis of Opinion

Our responsibility is to express an opinion on these financial

statements based on our audit. We conducted our audit

in accordance with Sri Lanka Auditing Standards. Those

standards require that we plan and perform the audit

to obtain reasonable assurance whether the financial

statements are free from material misstatement.

An audit includes examining, on a test basis, evidence

supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the accounting

principles used and significant estimates made by

management, as well as evaluating the overall financial

statement presentation.

We have obtained all the information and explanations which

to the best of our knowledge and belief were necessary for

the purposes of our audit. We therefore believe that our audit

provides a reasonable basis for our opinion.

Opinion

In our opinion, so far as appears from our examination, the

Company maintained proper accounting records for the year

ended 31st March, 2013 and the financial statements give a

true and fair view of the Company’s state of affairs as at 31st

March, 2013 and its profit and cash flows for the year then

ended in accordance with Sri Lanka Accounting Standards.

In our opinion, the consolidated financial statements give

a true and fair view of the state of affairs as at 31st March,

2013 and its profit and cash flows for the year then ended

in accordance with Sri Lanka Accounting Standards, of the

company and its subsidiaries dealt with thereby, so far as

concerns the shareholders of the company.

Report on Other Legal and Regulatory Requirements

These financial statements also comply with the

requirements of Sections 151(2) and 153(2) to 153(7) of the

Companies Act No. 07 of 2007.

CHARTERED ACCOUNTANTS

29th June, 2013

Colombo


Comprehensive Income

Group Company

31st March, 31st March, 31st March, 31st March,

For the year ended 31st March 2013 2013 2012 2013 2012

Note Rs. Rs. Rs. Rs.

Continuing Operations

Turnover 27,295,943,705 22,927,176,489 9,398,647,037 8,533,037,198

Cost of Sales (22,006,934,585) (18,685,172,521) (7,402,400,968) (6,555,741,019)

Gross Profit 5,289,009,120 4,242,003,968 1,996,246,069 1,977,296,179

Other Income 3 105,328,544 80,164,436 329,938,350 409,980,430

5,394,337,664 4,322,168,404 2,326,184,419 2,387,276,609

Distribution Expenses (2,505,862,011) (1,895,106,494) (970,979,029) (829,469,273)

Administrative Expenses (948,873,843) (726,537,254) (497,747,011) (423,793,881)

Profit from Operations 1,939,601,810 1,700,524,656 857,458,379 1,134,013,455

Finance Income 15,215,481 11,081,060 8,479,155 3,332,259

Finance Expenses 4 (700,113,255) (435,507,538) (251,348,278) (160,066,763)

Profit Before Taxation 5 1,254,704,036 1,276,098,178 614,589,256 977,278,951

Income Tax Expense 6 (360,314,818) (230,639,086) (252,246,039) (190,813,374)

Profit for the year 894,389,218 1,045,459,092 362,343,217 786,465,577

Other Comprehensive Income

Actuarial gains/(Loss) on Defined Benefit Plan (1,871,945) (3,509,855) (1,316,434) (3,117,899)

Tax relating to Components of other

Comprehensive income (99,617) (494,082) - -

Total other Comprehensive Income, net of Tax (1,971,562) (4,003,937) (1,316,434) (3,117,899)

Total Comprehensive Income 892,417,656 1,041,455,155 361,026,783 783,347,678

Attributable to Equity Holders of the Parent 883,614,648 1,170,873,544 361,026,783 783,347,678

Non controlling interest 8,803,008 (129,418,389) - -

Earnings Per Ordinary Share (Rupees per Share)

- Voting 7 2.94 3.44 1.19 2.59

- Non Voting 7 2.94 3.44 1.19 2.59

Dividend Per Ordinary Share (Rupees per Share)

- Voting 8 - - 1.00 1.30

- Non Voting 8 - - 1.00 1.30

Figures in brackets indicate deductions

The Accounting Policies and Notes from pages 67 to 116 form an integral part of these financial statements.


Financial Position

Group Company

As at 31st March, 2013 31st March, 31st March, 01st April, 31st March, 31st March, 01st April,

2013 2012 2011 2013 2012 2011

Note Rs. Rs. Rs. Rs. Rs. Rs.

Assets

Non-Current Assets

Property, Plant and Equipment 9 9,900,812,566 9,680,939,135 8,869,953,569 5,654,953,060 5,463,710,464 4,482,129,484

Capital Work-In-Progress 10 701,021,147 162,396,447 53,341,664 173,389,264 85,584,484 53,303,261

Intangible Assets 11 20,075,680 21,937,130 13,186,823 - - -

Investments in Subsidiaries 12 - - - 1,880,151,026 1,730,150,026 1,730,150,016

Investment In Fixed Deposit - - 3,000,000 - - -

Operating Lease Prepayment 13 82,176,263 86,937,585 91,698,907 21,398,487 21,818,539 22,238,591

Total Non-Current Assets 10,704,085,656 9,952,210,297 9,031,180,963 7,729,891,837 7,301,263,513 6,287,821,352

Current Assets

Inventories 14 1,792,620,415 1,482,956,695 1,122,366,999 715,011,490 729,317,477 419,638,892

Trade & Other Receivables 15 1,740,117,802 1,568,709,662 1,090,845,300 667,443,680 778,880,511 475,471,839

Tax Receivables 207,068,530 295,638,331 345,555,480 100,580,367 149,800,273 152,574,914

Amount Due from Related Parties 16 - - - 167,246,055 88,082,641 726,045,800

Financial Investments 17 3,711,693 7,100,196 271,330 1,077,269 2,114,416 100,605

Cash and Cash Equivalents 368,795,554 231,961,985 198,983,637 135,910,736 44,987,270 37,560,245

Total Current Assets 4,112,313,994 3,586,366,869 2,758,022,746 1,787,269,597 1,793,182,588 1,811,392,295

Total Assets 14,816,399,650 13,538,577,166 11,789,203,709 9,517,161,434 9,094,446,101 8,099,213,647

Equity & Liability

Stated Capital 18 2,366,750,000 2,366,750,000 2,366,750,000 2,366,750,000 2,366,750,000 2,366,750,000

Reserves 19 150,000,000 150,000,000 150,000,000 - - -

Retained Earnings 4,678,019,362 4,189,279,714 3,322,156,170 2,874,726,373 2,908,574,590 2,428,976,912

Equity Attributable to the

Equityholders of the Parent 7,194,769,362 6,706,029,714 5,838,906,170 5,241,476,373 5,275,324,590 4,795,726,912

Non-Controlling Interest (17,179,074) (25,982,082) 103,436,306 - - -

Total Equity 7,177,590,288 6,680,047,632 5,942,342,476 5,241,476,373 5,275,324,590 4,795,726,912


Group Company

As at 31st March, 2013 31st March, 31st March, 01st April, 31st March, 31st March, 01st April,

2013 2012 2011 2013 2012 2011

Note Rs. Rs. Rs. Rs. Rs. Rs.

Non-Current Liabilities

Interest Bearing Borrowings 20 1,044,271,592 1,552,906,775 939,937,323 433,749,991 728,541,662 566,604,001

Deferred Tax Liability 21 1,095,139,753 787,633,650 598,508,163 802,597,812 568,085,682 383,048,585

Retirement Benefits Obligation 22 56,887,333 45,443,928 37,233,952 41,148,833 32,971,615 25,722,661

Deferred Revenue - - 4,073,748 - - -

Lease Creditors 23 - 2,674,536 17,357,292 - - -

Total Non-Current Liabilities 2,196,298,678 2,388,658,889 1,597,110,478 1,277,496,636 1,329,598,959 975,375,247

Current Liabilities

Trade & Other Payables 24 1,762,951,451 1,565,447,286 1,053,856,978 686,693,046 591,015,632 458,713,889

Amount Due to Related Parties 25 - - - 1,105,083,818 559,048,778 555,688,197

Short Term Borrowings 20 3,195,980,225 2,612,862,734 2,894,673,700 918,541,218 1,151,534,353 1,157,824,799

Lease Creditors 23 - 14,682,767 39,937,627 - - 1,498,166

Deferred Revenue- Current Maturity Portion - 1,198,161 - - - -

Bank Overdrafts 483,579,008 275,679,697 261,282,450 287,870,343 187,923,789 154,386,437

Total Current Liabilities 5,442,510,684 4,469,870,645 4,249,750,755 2,998,188,425 2,489,522,552 2,328,111,488

Total Equity & Liabilities 14,816,399,650 13,538,577,166 11,789,203,709 9,517,161,434 9,094,446,101 8,099,213,647



These financial statements are prepared in compliance with the requirements of the Companies Act No.07 of 2007.

Mr. N. Kuruwita

Chief Financial Officer (CFO)

The Board of Directors is responsible for the preparation and presentation of these financial statements.

Approved and Signed for and on behalf of the Board

Mr. S. R. Gnanam Mr. T. Naruse

Managing Director Director

Colombo

29th June, 2013


Changes In Equity

Attributable to Equity Shareholders

GROUP Capital

Redemption Stated Retained Non

Reserve Fund Capital Earnings Total Controlling Total Equity

Interest

Rs. Rs. Rs. Rs. Rs. Rs.

As at 1st April, 2011 150,000,000 2,366,750,000 3,322,156,170 5,838,906,170 103,436,306 5,942,342,476

Profit for the Year (Note 33) - - 1,170,873,544 1,170,873,544 (129,418,388) 1,041,455,156

Dividend Paid - - (303,750,000) (303,750,000) - (303,750,000)

As at 31st March, 2012 150,000,000 2,366,750,000 4,189,279,714 6,706,029,714 (25,982,082) 6,680,047,632

Profit for the Year - - 883,614,648 883,614,648 8,803,008 892,417,656

Dividend Paid - - (394,875,000) (394,875,000) - (394,875,000)

As at 31st March, 2013 150,000,000 2,366,750,000 4,678,019,362 7,194,769,362 (17,179,074) 7,177,590,288

COMPANY Stated Retained

Capital Earnings Total

Rs. Rs. Rs.

As at 1st April, 2011 2,366,750,000 2,428,976,912 4,795,726,912

Profit for the Year (Note 33) - 783,347,678 783,347,678

Dividend Paid - (303,750,000) (303,750,000)

As at 31st March, 2012 2,366,750,000 2,908,574,590 5,275,324,590

Profit for the Year - 361,026,783 361,026,783

Dividend Paid - (394,875,000) (394,875,000)

As at 31st March, 2013 2,366,750,000 2,874,726,373 5,241,476,373




Cash Flow

Group Company


2013 2012 2013 2012

Note Rs. Rs. Rs. Rs.

Cash Flow from Operating Activities

Net profit before taxation 1,254,704,036 1,276,098,178 614,589,256 977,278,951

Adjustments for :

Depreciation 711,412,018 711,954,412 345,953,246 351,766,685

Amortisation of Intangible Assets 2,423,991 - - -

Retirement Benefit Obligation 10,406,173 7,284,935 7,352,094 5,769,845

Profit on Disposal of Property, Plant and Equipment (9,108,482) (20,233,927) (392,182) (9,464,285)

Loss on Disposal of Property, Plant and Equipment - 14,975,840 - 14,975,840

Interest Expense 699,227,157 428,856,259 251,348,278 160,026,153

Lease Interest 886,097 6,651,278 - 39,939

Amortization of Operating Lease 4,761,322 4,341,270 420,052 420,052

Interest Income (8,479,155) (11,081,060) (8,479,155) (3,332,259)

Dividend Income - - (214,307,792) (241,941,890)

Deferred Revenue (1,198,161) (2,875,587) - -

Loss of Impairment 433,489 556,632 - -

Reversal of Impairment - (1,836,388) - (1,836,388)

ESC Write off 31,609,382 26,572,135 - -

Write off of Capital work-in-Progress - 38,403 - -

Operating Profit Before Working Capital Changes 2,697,077,867 2,441,302,380 996,483,797 1,253,702,643

(Increase)/Decrease in Inventory (309,663,720) (360,589,695) 14,305,987 (309,678,585)

(Increase)/Decrease in Receivables (57,490,320) (441,989,102) 23,956,666 (301,572,292)

Increase/(Decrease) in Payables 191,504,161 665,446,866 214,643,572 309,305,757

Cash Generated from Operation 2,521,427,988 2,304,170,449 1,249,390,022 951,757,523

Interest Paid (699,227,157) (428,856,259) (251,348,278) (160,026,153)

Taxation Paid (68,942,075) (30,110,722) - (3,001,636)

Retirement Benefit Obligation Paid (834,711) (2,584,815) (491,310) (1,638,790)

Net Cash Flow From / (Used in) Operating Activities 1,752,424,045 1,842,618,653 997,550,434 787,090,944

Cash Flow from/(Used in) Investing Activities

Purchase of Property, Plant and Equipment Note A (840,832,549) (1,803,960,985) (434,657,028) (1,606,038,417)

Intangible Asset Acquired (562,543) - - -

Dividend Received - - 214,307,792 241,941,890

Expenditure Incurred on Capital Work-In-Progress (664,424,984) (118,737,116) (196,996,564) (41,925,162)

Interest Received 8,479,155 11,081,060 8,479,155 3,332,259

Proceeds from Sale of Property, Plant and Equipment 9,098,723 287,592,779 7,045,152 276,823,135

Investment/Withdrawals on Short-term Deposits 3,388,503 (6,828,866) 1,037,147 (2,013,811)

Withdrawal /(investment) in Fixed Deposit - 3,000,000 - -

Investment in Subsidiary - - (150,001,000) -

Net Cash From / (used in) Investing Activities (1,484,853,695) (1,627,853,128) (550,785,346) (1,127,880,106)

Cash Flow from/(used in) Financing Activities

Repayment of Interest Bearing Loans and Borrowings (15,328,643,497) (8,571,386,869) (4,818,510,967) (1,836,356,800)

Receipt of Interest Bearing Loans and Borrowings 15,403,125,805 8,725,540,668 4,290,726,162 1,815,000,000

Dividend Paid (394,875,000) (303,750,000) (394,875,000) (303,750,000)

Lease Rental Paid (18,243,400) (46,588,223) - (1,538,105)

Advances (to) / from Subsidiary (Net) - - 466,871,629 641,323,740

Net Cash From / (used in) Financing Activities (338,636,092) (196,184,424) (455,788,176) 314,678,835

Net Increase / (Decrease) in Cash and Cash Equivalents (71,065,742) 18,581,101 (9,023,088) (26,110,327)

Cash and Cash Equivalents at the Beginning of the year Note B (43,717,712) (62,298,813) (142,936,519) (116,826,192)

Cash and Cash Equivalents at the End of the year Note C (114,783,454) (43,717,712) (151,959,607) (142,936,519)




Cash Flow Statement

Group Company


2013 2012 2013 2012

Rs. Rs. Rs. Rs.

Note

A Purchase of Property, Plant and Equipment

Total of Additions during the year 966,632,833 1,813,604,924 543,848,812 1,615,682,356

Less: Transferred from Work-in-Progress Balance (125,800,284) (9,643,939) (109,191,784) (9,643,939)

840,832,549 1,803,960,985 434,657,028 1,606,038,417

B Cash and Cash Equivalents at the Beginning

Bank Balances and Cash 231,961,985 198,983,637 44,987,270 37,560,245

Bank Overdraft (275,679,697) (261,282,450) (187,923,789) (154,386,437)

(43,717,712) (62,298,813) (142,936,519) (116,826,192)

C Cash and Cash Equivalents at the End

Bank Balances and Cash 368,795,554 231,961,985 135,910,736 44,987,270

Bank Overdraft (483,579,008) (275,679,697) (287,870,343) (187,923,789)

(114,783,454) (43,717,712) (151,959,607) (142,936,519)



Colombo

29th June, 2013


Accounting Policies

1. CORPORATE INFORMATION

1.1 General

Tokyo Cement Company (Lanka) PLC is a Public

limited liability Company incorporated and domiciled

in Sri Lanka and listed on the Colombo Stock

Exchange. The Registered Office and the principal

place of business of the Company is located at

No.469 - 1/1, Galle Road, Colombo 03. Factory is

located at Cod-Bay China bay, Trincomalee.

1.2 Principal Activities and Nature of Operations

During the year, the principal activities of the

Company and the subsidiaries dealt within these

financial statements were as follows:

Name of the Company Nature of Business

Tokyo Cement Company Manufacturing &

(Lanka) PLC Marketing of Cement

& Ready Mixed

Concrete

Tokyo Super Cement Manufacturing &

Company Lanka (Pvt) Ltd Marketing of Cement

Fuji Cement Company Manufacturing &

(Lanka) Ltd Marketing of Cement

Tokyo Cement Power Generation of power

(Lanka) Ltd (under development)

Tokyo Cement Colombo Import, packaging &

Terminal (Pvt) Ltd marketing of Cement

Tokyo Eastern Cement Manufacturing &

Company Ltd Marketing of Cement

(under development)

1.3 Parent Enterprise

The parent undertaking is Tokyo Cement Company

(Lanka) PLC, and ultimate parent of the Group is also

Tokyo Cement Company (Lanka) PLC.

1.4 Date of Authorization for issue

The consolidated financial statements for the year

ended 31st March 2013 were authorized for issue by

the Board of Directors on 29th of June, 2013.

1.5 Responsibility for Financial Statements

The board of directors is responsible for the

preparation and presentation of these financial

statements.

The responsibility of the Directors in relation to the

financial statements is set out in “the statement of

director’s responsibility”.

2. SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES

2.1 General Accounting Policies

2.1.1 Basis of Preparation

The consolidated financial statements of the Group

have been prepared in accordance with Sri Lanka

Accounting Standards comprising of SLFRS and

LKAS (hereafter referred as “SLFRS”), as issued by the

Institute of Chartered Accountants of Sri Lanka

(CA Sri Lanka).

For all periods upto and including the year ended

31 March 2012, the Group prepared its financial

statements in accordance with Sri Lanka Accounting

Standards (SLAS) effective upto 31st March 2012.

These financial statements for the year ended 31

March 2013 are the first the Group has prepared

in accordance with Sri Lanka Financial Reporting

Standards (SLFRs) effective for the periods beginning

on or after 01st April 2012. (Refer Note 33 for

explanation of the transition)

Subject to certain transition elections and exceptions

disclosed in Note 33, the Group has consistently

applied the accounting policies used in preparation

of its opening SLFRS statement of financial position

as at 01st April, 2011 through all periods presented,

as if these policies had always been in effect.

Note 33 discloses the impact of the transition to

SLFRS on the Group’s reported financial position,

financial performance and cash flows, including the

nature and effect of significant changes in accounting

policies from those used in the Groups’ consolidated


financial statements for the years ended 31 March

2011 and 31 March 2012 prepared under SLAS.

2.1.2 Basis of Measurement

The consolidated financial statements have been

prepared on a historical cost basis, except for

investment properties, available-for sale financial

assets and financial assets at fair value through profit

or loss that have been measured at fair value.

2.1.3 Presentation and Functional Currency

The consolidated financial statements are presented

in Sri Lankan Rupees, the Group’s functional and

presentation currency, which is the primary economic

environment in which the Holding Company

operates. Each entity in the Group uses the currency

of the primary economic environment in which they

operate as their functional currency.

2.1.4 Statement of Compliance

The Statement of financial position, Statement of

comprehensive income, Changes in Equity and

Cash Flows, together with Accounting Policies and

Notes (“financial statements”) of the company and

the Group as at 31st March 2013 and for the year

then ended have been prepared in compliance with

the Sri Lanka Accounting Standards (LKAS & SLFRS)

issued by the Institute of Chartered Accountants of

Sri Lanka.

The preparation and presentation of these financial

statements are in compliance with the Companies

Act No. 7 of 2007.

2.1.5 Going Concern

The directors have made an assessment of the

Company and its subsidiaries ability to continue as

going concerns and they do not intend either to

liquidate or to cease trading.

Tokyo Cement Colombo Terminal (Pvt) Ltd., which is

a subsidiary of the Group has a total liability position

of Rs.39,809,448/-. The impact on the situation is

mitigated by management’s plan to maintain the

adequate positive future cash flows and obtaining

financial comfort from its parent company.

2.1.6 Comparative Information

The accounting policies have been consistently

applied by the company and are consistent

with those of the previous year. The previous

year’s figures and phrases have been rearranged

wherever necessary to conform to the current year’s

presentation.

2.1.7 Discontinuing Operations

A discontinuing operation is a clearly distinguishable

component of the company’s business that is

abandoned or terminated pursuant to a single

plan and which represents a separate major line of

industry or geographical area of operations.

As at the date of financial position, the company does

not have any discontinuing operations.

2.1.8 Foreign Currency Transaction

All foreign exchange transactions are converted to

Sri Lanka Rupees, which is the reporting currency,

at the rates of exchange prevailing at the time the

transactions were affected.

Monetary assets and liabilities denominated in

foreign currencies are translated to Sri Lanka Rupee

equivalents using year end spot foreign exchange

rates, the resulting gains or losses are accounted in

the statement of comprehensive income.

Non monetary assets and liabilities are translated

using exchange rates that existed when the values

were determined. The resulting gain or loss is

accounted in the statement of comprehensive

income.

2.1.9 Materiality and Aggregation

Each material class of similar items is presented

separately in the financial statements. Items of a

dissimilar nature or function are presented separately

unless they are immaterial.

Accounting Policies


2.1.10 Significant Accounting Judgements, Estimates

and Assumptions

a) Judgements

In the process of applying the accounting policies,

management has made the judgements, apart

from those involving estimations, which has most

significant effect on the amounts recognized in the

financial statements.

b) Estimates and Assumptions

The preparation of the Company’s financial

statements require management to make

judgements, estimates and assumptions that affect

the reported amounts of revenue, expenses, assets

and liabilities and the disclosure of contingent

liabilities at reporting date.

The key assumptions concerning the future and

other key sources of estimation uncertainty at the

date of financial position, that have a significant

risk of causing material adjustments to the carrying

amounts of assets and liabilities within the next

financial year have been considered.

2.2 Basis of Consolidation

The consolidated financial statements comprise

the financial statements of the Company and its

subsidiaries as at 31 March 2013.

Subsidiaries are consolidated from the date of

acquisition, being the date on which the Group

obtains control and continue to be consolidated

until the date when such control ceases. The financial

statements of the subsidiaries are prepared for the

same reporting period as the parent company, using

consistent accounting policies.

a) Subsidiaries

Subsidiaries are all entities over which the Group has

the power directly or indirectly to govern the financial

and operating policies generally accompanying a

shareholding of more than one half of the voting

rights. The existence and effect of potential voting

rights that are currently exercisable or convertible

are considered when assessing whether the Group

controls another entity. Subsidiaries are fully

consolidated from the date on which control is

transferred to the Group. They are de-consolidated

from the date that control ceases.

Name of the Subsidiary Control

Tokyo Super Cement Company Lanka (Pvt) Ltd 100%

Fuji Cement Company (Lanka) Ltd 100%

Tokyo Cement Power (Lanka) Ltd 100%

Tokyo Cement Colombo Terminal (Pvt) Ltd 56.85%

Tokyo Eastern Cement Company Ltd 100%

The total profits and losses for the year of the

company and of its subsidiaries included in

consolidation and all assets and liabilities of

the company and of its subsidiaries included

in consolidation are shown in the consolidated

statement of comprehensive income and the

statement of financial position respectively.

The purchase method of accounting is used to

account for the acquisition of subsidiaries by the

Group. The cost of an acquisition is measured as the

fair value of the assets given, equity instruments

issued and liabilities incurred or assumed at the date

of exchange, plus costs directly attributable to the

acquisition. Identifiable assets acquired and liabilities

and contingent liabilities assumed in a business

combination are measured initially at their fair values

at the acquisition date irrespective of the extent of

any Non-Controlling Interest. The excess of the cost of

acquisition is over the fair value of the group’s of the

identifiable assets acquired is recorded as goodwill. If

the cost of acquisition is less than the fair value of the

net assets of the subsidiary acquired, the difference

is recognized directly in the statement of financial

position.

Related party transactions, balances and unrealized

profits or losses between group of companies are

eliminated.


b) Non-Controlling Interest

The interest of the outside shareholders in net

assets of the Group and proportion of the profit

after taxation applicable to outside shareholders are

stated separately in the consolidated statement of

financial position and the consolidated statement of

comprehensive income under the heading Non-

Controlling Interest.

c) Transactions Eliminated on Consolidation

All intra group balances, income and expenses and

unrealized gains and losses and dividends resulting

from Intra group transactions are eliminated in full.

Subsidiaries are fully consolidated from the date

of acquisition or incorporation, being the date on

which the group obtains control and continue to be

consolidated until the date that such control ceases.

d) Reporting Date

The financial statements of the subsidiaries are

prepared for the common reporting period as the

parent company, which is 12 months ending 31

March, using consistent accounting policies.

e) The consolidated cash flow statement includes the

cash flows of the company and its subsidiaries.

2.3 ASSETS & BASES OF THEIR VALUATION

2.3.1 Property, Plant & Equipment

a) Property, plant and equipment is stated at cost

,excluding the costs of day to day servicing less

accumulated depreciation and accumulated

impairment in value. Such cost includes the cost of

replacing part of the property, plant and equipment

when that cost is incurred, if the recognition criteria

are met. When significant parts of property, plant and

equipment are required to be replaced at intervals,

the Group recognizes such parts as individual assets

with specific useful lives and depreciates them

accordingly.

When a major inspection is performed, its cost is

recognized in the carrying amount of the property,

plant and equipment as a replacement if the

recognition criteria are satisfied.

Further Vessel Dry Docking cost and special

survey dry docking cost are also recognized in the

carrying amount of the vessel. All other repair and

maintenance costs are recognized in the profit or loss

as incurred.

An item of property, plant and equipment is de-

recognised upon disposal or when no future

economic benefits are expected from its use or

disposal. Any gain or loss arising on de-recognition

of the asset (calculated as the difference between the

net disposal proceeds and the carrying amount of the

asset) is included in the statement of comprehensive

income in the year the asset is de-recognised.

Depreciation is calculated on a straight line basis over

the useful life of the assets as disclosed below:,

Years

Factory Buildings Over the lease period

Generator House 20

Other Buildings 10

Fuel Storage Tanks 20

Plant and Machinery 50

Power Plant 30

Laboratory Equipment and Generators 10

Office Equipment 4 – 8

Factory and Other Equipment 20

Recycling System 8

Furniture and Fittings 8

Vehicles 4 – 5

Cement Silo 60

Tug Boat 10

Railway Platform 10

Barges 10

Computer and Other Electrical Equipment 8

Packer House 20

Landing Jetty 20

Batching Plant 30

Vessel 32

Vessel Dry Docking 2.5

Dry Docking – Special Survey 5

Vessel Equipment 20

Bio Mass Building 30

Bio Mass Plant & Machinery 30

Accounting Policies


b) Useful Lives of Property, Plant and Equipment

The Group reviews the assets’ residual values, useful

lives and methods of depreciation at each reporting

date judgment made by management based on the

professional experts is exercised in the estimation of

these values, rates and methods.

c) Restoration Costs

Expenditure incurred on repairs or maintenance of

property, plant and equipment in order to restore

or maintain the future economic benefits expected

from originally assessed standard of performance is

recognized as an expense when incurred.

d) De-recognizing

An item of property, plant and equipment is de-

recognized upon disposal or when no future

economic benefits are expected from its use or

disposal. Any gain or loss arising on de-recognizing of

the asset is calculated as the difference between the

net disposal proceeds and the carrying amount.

2.3.2 Capital Work-in-Progress

Capital work in progress is transferred to the

respective asset accounts at the time of the first

utilization of the asset.

2.3.3 Intangible Assets

An intangible asset is recognised if it is probable

that the future economic benefits will flow to the

entity and the cost of the assets economic benefits

will flow to the entity and the cost of the assets can

be measured reliably in accordance with LKAS 38

on intangible assets. Intangible assets with finite

useful lives are measured a cost, less accumulated

amortisation and accumulated impairment losses.

The useful lives of intangible assets are assessed to be

either finite or indefinite.

a) Goodwill

Goodwill represents the excess of the cost of an

acquisition over the fair value of the Group’s share of

the net identifiable assets of the acquired subsidiary

at the date of acquisition.

Goodwill is reviewed for impairment annually or

more frequently if events or changes in circumstances

indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing

the recoverable amount of the cash generating unit

(or Group of cash generating units) to which the

goodwill relates. Where the recoverable amount of

cash generating unit (or Group of cash generating

units) is less than the carrying amount of cash

generating unit (or Group of cash generating units)

to which goodwill has been allocated, an impairment

loss is recognized. Impairment losses relating to

Goodwill cannot be reversed in future periods.

b) Accounting and Related Software

Intangible assets acquired separately are measured

on initially at cost. Following initial recognition,

intangible assets are carried at cost less accumulated

amortization and accumulated impairment losses.

The useful lives of intangible assets are assessed as

either finite or indefinite.

Intangible assets with finite lives are amortized

over their useful economic lives and assessed for

impairment. Whenever there is an indication that the

intangible asset may be impaired. The amortization

period and the amortization method for an intangible

asset with a finite useful life are reviewed at least

at the end of each reporting period. Changes in

the expected useful life or the expected pattern of

consumption of future economic benefits embodied

in the asset is accounted for by changing the

amortization period or method, as appropriate, and

are treated as changes in accounting estimates. The

amortization expense on intangible assets with finite

lives is recognized in the statement of comprehensive

income in the expense category consistent with the

function of the intangible assets

Gains or losses arising from de-recognition of an

intangible asset are measured as the difference

between the net disposal proceeds and the carrying

amount of the asset and are recognized in the


statement of comprehensive income when the asset

is de-recognized

2.3.4 Leases

a) Finance Leases

Leases in terms of which the Group assumes that

substantially of all the risks and rewards of ownership

are classified as finance leases. Assets acquired by

way of a finance lease are measured at an amount

equal to the lower of their fair value or the present

value of minimum lease payments at the inception

less accumulated depreciation and accumulated

impairment losses.

The corresponding principal amount payable to the

lessor is shown as a liability. The finance charges

allocated to future periods are separately disclosed in

the notes.

The interest element of the rental obligation

applicable to each financial year is charged to the

statement of comprehensive income over the period

of the lease so as to produce a constant periodic rate

of interest on the remaining balance of the liability for

each period.

The cost of improvements to or on leased property

is capitalized and depreciated over the unexpired

period of the lease or the estimated useful lives of the

improvements, whichever is shorter.

Any excess of sales proceeds over the carrying

amount of assets in respect of a sale and leaseback

transaction that result in a finance lease is deferred

and amortized over the lease term.

b) Operating Leases

Leases where the lessor effectively retains

substantially all the risks and rewards of an asset

under the leased term are classified as operating

leases.

Lease payments (excluding cost of service such as

insurance and maintenance) paid under operating

leases are recognized as an expense in the statement

of comprehensive income over the period of lease on

a straight line basis.

c) Leasehold Property

The initial cost of acquiring leasehold property is

treated as an operating lease and is amortised over

the period of the lease in accordance with the pattern

of benefits expected to be derived from the lease. The

carrying amount of leasehold property is tested for

impairment annually.

2.3.5 Impairment of Non Financial Assets

The company assesses at each reporting date

whether there is an indication that an asset may

be impaired. If such indication exists or when

annual impairment testing for an asset is required

the company makes an estimate of the asset’s

recoverable amount. An asset’s recoverable amount

is the higher of an asset’s or cash generating unit’s

fair value less costs to sell and its value in use

and determined for an individual asset, unless

the asset does not generate cash inflows that are

largely independent of those from other assets or

group of assets. Where the carrying amount of an

asset exceeds its recoverable amount, the asset

is considered impaired and is written down to its

recoverable amount. 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 assessment of the time value

of money and the risk specific to the asset. These

calculations are collaborated by valuation multiples,

quoted share prices or other available fair value

indicators.

Impairment losses of continuing operations are

recognized in the statement of comprehensive

income in those expense categories consistent

with the function of the impaired asset, except for

property previously revalued where the revaluation

was taken to equity. In this case the impairment is

also recognized in equity up to the amount of any

previous revaluation.

For assets excluding goodwill, an assessment is made

at each reporting date as to whether there is any

Accounting Policies


indication that previously recognized impairment

losses may no longer exist or may have decreased.

If such indication exists, the company makes an

estimate of recoverable amount. A previously

recognized impairment loss is reversed only if

there has been a change in the estimates used to

determine the assets recoverable amount since the

last impairment loss was recognized. If that is the case

the carrying amount of the asset is increased to its

recoverable amount.

That increased amount cannot “exceed” the carrying

amount that would have been determined, net of

depreciation had, had no impairment loss been

recognized for the asset in prior years. Such reversal

is recognized in the statement of comprehensive

income unless the asset is carried at revalued

amount, in which case the reversal is treated as a

revaluation increase.

2.3.6 Non-Current Assets (or Disposal Group) Held for

Sale

Non-current assets (or disposal group) are classified

as assets held for sale when their carrying amount

is to be recovered principally through a sales

transaction and a sale is considered highly probable.

They are stated at the lower of carrying amount and

fair value less cost to sell.

2.3.7 Financial Instruments - Initial Recognition and

Subsequent Measurement

2.3.7.1 Financial Assets

Initial Recognition and Measurement

Financial assets within the scope of LKAS 39 are

classified as financial assets at fair value through

profit or loss, loans and receivables, held-to-maturity

investments, available-for-sale financial assets or

as derivatives designated as hedging instruments

in an effective hedge as appropriate. The Group

determines the classification of its financial assets at

initial recognition.

All financial assets are recognized initially at fair value

plus, in the case of assets not at fair value through

profit or loss, directly attributable transaction costs.

Purchase or sale of financial assets that require

delivery of assets within a time frame established by

regulation or convention in the marketplace (regular

way trades) are recognized on the trade date, i.e., the

date that the Group commits to purchase or sell the

asset .

The Group’s financial assets include trade and

other receivables, loans and other receivables and

investments made in quoted equity securities.


The subsequent measurement of financial assets

depends on their classification as described below:

a) Financial Assets at Fair Value through Profit or

Loss

Financial assets at fair value through profit or loss

include financial assets held for trading and financial

assets designated upon initial recognition at fair value

through profit or loss. Financial assets are classified as

held for trading if they are acquired for the purpose

of selling or repurchasing in the near term. This

category includes derivative financial instruments

entered into by the Group that are not designated

as hedging instruments in hedge relationships as

defined by LKAS 39. Derivatives, including separated

embedded derivatives are also classified as held

for trading unless they are designated as effective

hedging instruments. Financial assets at fair value

through profit and loss are carried in the consolidated

statement of financial position at fair value with

changes in fair value recognized in finance income

or finance costs in the statement of comprehensive

income.

The Group’s financial assets at fair value through

profit or loss include investments made in quoted

equity securities.

b) Loans and Receivables

Loans and receivables are non-derivative financial

assets with fixed or determinable payments that are

not quoted in an active market.


After initial measurement, such financial assets are

subsequently measured at amortized cost using the

effective interest rate method (EIR), less impairment.

Amortized cost is calculated by taking into account

any discount or premium on acquisition and fees

or costs that are an integral part of the EIR. The EIR

amortization is included in finance income in the

consolidated statement of comprehensive income.

The losses arising from impairment are recognized

in the consolidated statement of comprehensive

income in selling and distribution expenses.

c) Held-to-Maturity Investments

Non-derivative financial assets with fixed or

determinable payments and fixed maturities are

classified as held-to-maturity when the Group has

the positive intention and ability to hold them to

maturity. After initial measurement, held-to-maturity

investments are measured at amortized cost using

the effective interest method, less impairment.



or costs that are an integral part of the EIR. The EIR

amortization is included in finance income in the

consolidated income statement. The losses arising

from impairment are recognized in the consolidated

income statement in finance costs.

The Group did not have any held-to-maturity

investments as at 31 March 2011, 31 March 2012 and

31 March 2013.

d) Available-for-Sale Financial Investments

Available-for-sale financial investments include

investments made in quoted equity securities.

Equity investments classified as available for- sale

are those, which are neither classified as held for

trading nor designated at fair value through profit

or loss. After initial measurement, available-for-sale

financial investments are subsequently measured at

fair value with unrealized gains or losses recognized

as other comprehensive income in the available-for-

sale reserve until the investment is de-recognized, at

which time the cumulative gain or loss is recognized

in other operating income, or determined to be

impaired, at which time the cumulative loss is

reclassified to the statement of comprehensive

income in finance costs and removed from the

available-for-sale reserve. Interest income on

available-for-sale debt securities is calculated using

the effective interest method and is recognized in

profit or loss.

The Group evaluates its available-for-sale financial

assets to determine whether the ability and intention

to sell them in the near term is still appropriate. When

the Group is unable to trade these financial assets

due to inactive markets and management’s intention

to do so significantly changes in the foreseeable

future. The Group may elect to reclassify these

financial assets in rare circumstances.

Reclassification to loans and receivables is permitted

when the financial assets meet the definition of loans

and receivables and the Group has the intention

and ability to hold these assets of the foreseeable

future or until maturity. Reclassification to the held-to

maturity category is permitted only when the entity

has the ability and intention to hold the financial

asset accordingly.

For a financial asset reclassified out of the available-

for-sale category, any previous gain or loss on that

asset that has been recognized in equity is amortized

to profit or loss over the remaining life of the

investment using the EIR. Any difference between

the new amortized cost and the expected cash flows

is also amortized over the remaining life of the asset

using the EIR .If the asset is subsequently determined

to be impaired, then the amount recorded in equity

is reclassified to the statement of comprehensive

income.

De-recognition

A financial asset (or, where applicable a part of a

financial asset or part of a group of similar financial

assets) is de-recognised when:

Accounting Policies


The rights to receive cash flows from the asset have

expired,

The Group has transferred its rights to receive cash

flows from the asset or has assumed an obligation

to pay the received cash flows in full without

material delay to a third party under a ‘pass through’

arrangement; and either

i) The Group has transferred substantially all the risks

and rewards of the asset, or

ii) The Group has neither transferred nor retained

substantially all the risks and rewards of the asset, but

has transferred control of the asset.

When the Group has transferred its rights to receive

cash flows from an asset or has entered into a pass-

through arrangement and has neither transferred

nor retained substantially all of the risks and rewards

of the asset nor transferred control of it. The asset is

recognized to the extent of the Group’s continuing

involvement in it. In that case, the Group also

recognizes an associated liability. The transferred

asset and the associated liability are measured on a

basis that reflects the rights and obligations that the

Group has retained.

Continuing involvement that takes the form of a

guarantee over the transferred asset is measured at

the lower of the original carrying amount of the asset

and the maximum amount of consideration that the

Group could be required to repay.

2.3.7.2 Impairment of Financial Assets

The Group assesses at each reporting date whether

there is any objective evidence that a financial asset

or a group of financial assets is impaired. A financial

asset or a group of financial assets is deemed to be

impaired if, and only if, there is objective evidence

of impairment as a result of one or more events that

has occurred after the initial recognition of the asset

(an incurred ‘loss event’) and that loss event has an

impact on the estimated future cash flows of the

financial asset or the group of financial assets that can

be reliably estimated.

Evidence of impairment may include indications that

the debtors or a group of debtors is experiencing

significant financial difficulty, default or delinquency

in interest or principal payments, the probability

that they will enter bankruptcy or other financial

reorganization and where observable data indicate

that there is a measurable decrease in the estimated

future cash flows, such as changes in arrears or

economic conditions that correlate with defaults.

a) Financial Assets Carried at Amortised Cost

For financial assets carried at amortized cost, the

Group first assesses whether objective evidence of

impairment exists individually for financial assets

that are individually significant or collectively for

financial assets that are not individually significant.

If the Group determines that no objective evidence

of impairment exists for an individually assessed

financial asset, whether significant or not, it includes

the asset in a group of financial assets with similar

credit risk characteristics and collectively assesses

them for impairment. Assets that are individually

assessed for impairment and for which an impairment

loss is, or continues to be, recognized are not

included in a collective assessment of impairment.

If there is objective evidence that an impairment

loss has been incurred, the amount of the loss is

measured as the difference between the assets

carrying amount and the present value of estimated

future cash flows (excluding future expected

credit losses that have not yet been incurred). The

present value of the estimated future cash flows are

discounted at the financial asset’s original effective

interest rate. If a loan has a variable interest rate, the

discount rate for measuring any impairment loss is

the current effective interest rate.

The carrying amount of the asset is reduced through

the use of an allowance account and the amount of

the loss is recognized in the consolidated income

statement. Interest income continues to be accrued

on the reduced carrying amount and is accrued using

the rate of interest used to discount the future cash

flows for the purpose of ensuring the impairment


loss. The interest income is recorded as part of finance

income in the statement of comprehensive income.

Loans together with the associated allowance are

written off when there is no realistic prospect of

future recovery and all collateral has been realized.

If in a subsequent year, the amount of the estimated

impairment loss increases or decreases because of an

event occurring after the impairment was recognized,

the previously recognized impairment loss is

increased or reduced by adjusting the allowance

account. If a future write-off is later recovered, the

recovery is credited to finance costs in the statement

of comprehensive income.

b) Available-for-Sale Financial Investments

For available-for-sale financial investments, the Group

assesses at each reporting date whether there is

objective evidence that an investment or a group of

investments is impaired.

In the case of equity investments classified as

available-for-sale, objective evidence would include

a significant or prolonged decline in the fair value

of the investment below its cost. ‘Significant’ is

evaluated against the original cost of the investment

and ‘prolonged’ against the period in which the fair

value has been below its original cost.

Where there is evidence of impairment, the

cumulative loss measured as the difference between

the acquisition cost and the current fair value, less

any impairment loss on that investment previously

recognized in the consolidated income statement

is removed from other comprehensive income and

recognized in the consolidated income statement.

Impairment losses on equity investments are not

reversed through the consolidated income statement;

increases in their fair value after impairments are

recognized directly in other comprehensive income.

Future interest income continues to be accrued based

on the reduced carrying amount of the asset, using

the rate of interest used to discount the future cash

flows for the purpose of measuring the impairment

loss. The interest income is recorded as part of finance

income. If, in a subsequent year, the fair value of a

debt instrument increases and the increase can be

objectively related to an event occurring after the

impairment loss was recognized in the consolidated

income statement, the impairment loss is reversed

through the statement of comprehensive income.

2.3.7.3 Financial Liabilities

Initial Recognition and Measurement

Financial liabilities within the scope of LKAS 39 are

classified as financial liabilities at fair value through

profit or loss, loans and borrowings or as derivatives

designated as hedging instruments in an effective

hedge, as appropriate. The Group determines

the classification of its financial liabilities at initial

recognition.

All financial liabilities are recognized initially at fair

value and, in the case of loans and borrowings,

carried at amortized cost. This includes directly

attributable transaction costs.

The Group’s financial liabilities include trade and

other payables, bank overdrafts and loans and

borrowings.


The measurement of financial liabilities depends on

their classification as follows:

a) Financial Liabilities at Fair Value through Profit or

Loss

Financial liabilities at fair value through profit or

loss include financial liabilities held-for-trading

and financial liabilities designated upon initial

recognition as at fair value through profit or loss.

Financial liabilities are classified as held-for-trading

if they are acquired for the purpose of selling in the

near term. This category includes derivative financial

instruments entered into by the Group that are

not designated as hedging instruments in hedge

relationships as defined by LKAS 39. Separated

embedded derivatives are also classified as held-

for-trading unless they are designated as effective

hedging instruments.

Accounting Policies


Gains or losses on liabilities held-for-trading are

recognized in the statement of comprehensive

income.

The Group has not designated any financial liabilities

upon initial recognition as at fair value through profit

or loss.

b) Loans and Borrowings

After initial recognition, interest bearing loans and

borrowings are subsequently measured at amortized

cost using the effective interest rate method. Gains

and losses are recognized in the consolidated income

statement when the liabilities are de-recognised as

well as through the effective interest rate method

(EIR) amortization process.



or costs that is an integral part of the EIR. The EIR

amortization is included in finance costs in the

statement of comprehensive income.

De-recognition

A financial liability is de-recognised when the

obligation under the liability is discharged or

cancelled or expires. When an existing financial

liability is replaced by another from the same

lender on substantially different terms or the terms

of an existing liability are substantially modified,

such an exchange or modification is treated as

a de-recognition of the original liability and the

recognition of a new liability and the difference in

the respective carrying amounts is recognized in the

statement of comprehensive income.

2.3.7.4 Offsetting of Financial Instruments

Financial assets and financial liabilities are offset

with the net amount reported in the consolidated

statement of financial position only if there is

a current enforceable legal right to offset the

recognized amounts and intent to settle on a net

basis, or to realize the assets and settle the liabilities

simultaneously.

2.3.7.5 Fair Value of Financial Instruments

The fair value of financial instruments that are

traded in active markets at each reporting date is

determined by reference to quoted market prices or

dealer price quotations (bid price for long positions

and ask price for short positions), without any

deduction for transaction costs.

For financial instruments not traded in an active

market, the fair value is determined using appropriate

valuation techniques. Such techniques may include:

instrument that is substantially the same;

models.

Trade and Other Receivables

Trade and other receivables are initially measured at

fair value and, after initial recognition at amortized

cost less impairment losses for bad and doubtful

debt, if any except for the following receivables.

any fixed repayment terms or the effect of

discounting being immaterial, that are measured

at cost less impairment losses for bad and doubtful

debt, if any

and the effect of discounting being immaterial,

that are measured at their original invoice amount

less impairment losses for bad and doubtful debt,

if any.

Cash and cash equivalents includes cash in hand,

deposits held at call with banks, other short term

highly liquid investments with original maturities

of three months or less, and – for the purpose of

the statement of cash flows - bank overdrafts. Bank

overdrafts are shown within loans and borrowings

in current liabilities on the Company’s Statement of

Financial Position.


2.3.8 SLFRS 7 Fair Value Measurement Hierarchy

SLFRS 7 requires certain disclosures which require the

classification of financial assets and financial liabilities

measured at fair value using a fair value hierarchy

that reflects the significance of the inputs used in

making the fair value measurement. The fair value

hierarchy has the following levels:

Level 1. Quoted prices (unadjusted) in active

markets for identical assets or liabilities;

Level 2. Inputs other than quoted prices included

within Level 1 that are observable for the

asset or liability, either directly (i.e. as prices)

or indirectly (i.e. derived from prices) and;

Level3. Inputs for the asset or liability that are

not based on observable market data

(unobservable inputs);

The level in the fair value hierarchy within which the

financial asset or financial liability is categorized is

determined on the basis of the lowest level input that

is significant to the fair value measurement. Financial

assets and financial liabilities are classified in their

entirety into only one of the three levels.

2.3.9 Investments

Long Term Investment

Long term investments are classified as non

current investments and are stated at cost less

any impairment losses. The cost of the Investment

includes acquisition charges such as brokerages, fee,

duties and bank charges.

In the parent Company’s financial statement,

investment in subsidiaries is carried at cost less

impairment loss.

Provision for impairment is made in the Statement

of Comprehensive Income when in the opinion

of the Directors there has been a decline other

than temporary in the value of the investments

determined on individual basis.

2.3.10 Inventories

Inventories are measured at the lower of cost and

net realizable value, after making due allowances

for obsolete and slow moving items. Net realizable

value is price at which inventories can be sold in the

ordinary course of business less the estimated cost

of completion and estimated cost necessary to make

the sale.

The cost incurred in bringing inventories to its

present location and condition is accounted using the

following cost formula.

Raw Material - At cost determined on first-in-

first-out basis

Finished Goods - At the cost of direct materials,

direct labour and appropriate

proportion of fixed Production

overheads at normal

operating capacity.

Work-In-progress - At the cost of direct materials,

direct labour and appropriate

proportion of fixed Production

overheads.

Packing Material - At cost determined on first-in

first-out basis

Goods in Transit - At actual cost

2.3.11 Trade and Other Receivables

Trade and other receivables are recognized at

the amounts they are estimated to realize net of

provisions for impairment. Other receivables and

dues from related parties are recognized at fair

value less provision for impairment. The amount

of the provision is recognized in the statement

of comprehensive income. Trade receivables are

initially recognize at fair value and subsequently at

amortized cost using the effective interest method,

less provision for impairment.

2.3.12 Cash and Cash Equivalents

Cash and cash equivalents are defined as cash in

hand and demand deposits.

Accounting Policies


For the purpose of cash flow statement, cash & cash

equivalent consists of cash in hand and deposits in

banks net of outstanding bank overdrafts.

The cash flow statements are reported based on the

indirect method.

2.4 LIABILITIES & PROVISIONS

2.4.1 Liabilities

Liabilities classified under current liabilities in the

Statement of Financial Position are those expected

to fall due within one year from the Statement of

Financial Position date. Items classified as non-current

liabilities are those expected to fall due at point of

time after one year from the date of financial position.

Trade and Other Payables

Trade creditors and other payables are stated at Fair

Value.

2.4.2 Provisions, Contingent Assets and Contingent

Liabilities

Provisions are recognized when the group has

a present obligations (legal & constructive) as a

result of a past event, where it is probable that an

outflow of resources embodying economic benefits

will be required to settle the obligation and a

reliable estimate can be made of the amount of 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 dis-counties recognized as

finance cost.

All the contingent liabilities are disclosed as notes

to the Financial Statements unless the outflow

of resources is made contingent asset if exits are

disclosed when inflow of economic benefit is

probable.

2.4.2.1 Retirement Benefit Obligations

2.4.2.1.1 Defined Benefit Plans – Gratuity

Provision has been made for retirement gratuities, in

conformity with LKAS 19 / Gratuity Act No.12 of 1983.

The liability is not externally funded. The gratuity

liabilities were based on actuarial valuation carried

out. The actuarial gains and losses are charged or

credited to the statement of other comprehensive

income in the period is which they arise.

The retirement benefit obligation of the Company

and its subsidiaries with more than 100 employees

are based on the actuarial valuation carried out

by Messrs. Actuarial & Management Consultants

(Pvt) Ltd actuaries. The actuarial valuations involve

making assumptions about discount rates and future

salary increases. The complexity of the valuation, the

underlying assumptions and its long term nature,

a defined benefit obligation are highly sensitive

to changes in these assumptions. All assumptions

are reviewed at each reporting date. Details of

the key assumptions used in the estimates are

contained in Note 22 on page 100 and 101. The main

assumptions used relate to mortality, disability rates

and withdrawal rates. The assumptions regarding the

discount rate and salary rate are of critical importance

in determining the pace of providing for a final salary

retirement scheme.

2.4.2.1.2 Defined Contribution Plans – Employees’

Provident Fund and Employees’ Trust Fund

Employees are eligible for Employees’ Provident

Fund Contributions and Employees’ Trust Fund

Contributions in line with respective statutes and

regulations. The company contributes 12% and 3%

of gross emoluments of employees to the Employees’

Provident Fund and to the Employees’ Trust Fund

respectively.

2.4.2.2 Taxation

Income tax comprises of current tax and deferred tax.

This is recognize profit or loss except to the extent


that it relate to the items recognized directly in the

statement of comprehensive income or statement

of changes in equity in which case it is recognized

directly in the respective statement.

2.4.2.2.1 Current Tax

The provision for Income Tax is based on the

elements of income and expenditure as reported in

the financial statements and computed in accordance

with the provisions of the Inland Revenue Act No.10

of 2006 and the amendments thereto.

The company has entered into an agreement with

Board of Investment of Sri Lanka Law No. 4 of 1978

under which the profit is exempt from Income Tax for

a period of ten years of assessment from the date of

the completion of the stipulated investment of Rs.500

Million which was fulfilled on 1st July, 2003 and as

such the tax exemption period commenced on the

said date.

Tokyo Super Cement Company Lanka (Pvt) Ltd a

subsidiary of the company has entered into an

agreement with Board of Investment of

Sri Lanka Law No. 4 of 1978 under which the profit

is exempt from Income Tax for a period of ten

years of assessment reckoned from the date of

commencement of business in April 2008.

Fuji Cement Company (Lanka) Limited a subsidiary of

the company, is liable for income tax under the Inland

Revenue Act No. 10 of 2006 at the rate of 28%.

Tokyo Cement Colombo Terminal (Pvt) Ltd a

subsidiary of the company is liable to pay income tax

under the Inland Revenue Act No.10 of 2006 at the

rate of 28%.

2.4.2.2.2 Deferred Taxation

Deferred tax is provided using the liability method

on temporary differences at the date of the financial

position between the tax bases of assets and

liabilities and their carrying amounts for financial

reporting purposes.

Deferred tax assets and liabilities recognized for

all temporary differences. Deferred tax assets are

recognized for all deductible temporary differences,

carry-forward of unused tax credits and unused tax

losses, to the extent that it is probable that taxable

profit will be available against which the deductible

temporary differences, and the carry-forward of

unused tax credits and unused losses can be utilized.

The carrying amount of deferred tax assets is

reviewed at each statement of financial position

date and reduced to the extent that it is no longer

probable that sufficient taxable profit will be available

to allow all or part of the deferred tax assets to

be utilized. Unrecognised deferred tax assets are

reassessed at each date of the financial position

and are recognized to the extent that it has become

probable that future taxable profit will allow the

deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the

tax rates that are expected to apply to the year when

the asset is realized or the liability is settled, based

on tax rates and tax laws that have been enacted

or substantively enacted at the date of the financial

position.

Income tax relating to items recognized directly in

equity is recognized in equity.

Deferred tax asset and deferred tax liabilities are

offset, if a legally enforceable right exists to set off

current tax assets against current tax liabilities and

the deferred taxes relate to the same taxable entity

and the same taxation authority.

Deferred Tax for Tax Holiday Companies

Deferred tax during the tax holiday period for

group companies under BOI tax holidays has been

recognized for temporary differences, where reversals

of such differences extend beyond the tax exemption

period, taking into account the requirements of LKAS

12 and The Institute of Chartered Accountants of

Sri Lanka (ICASL) council’s ruling on deferred tax.

Accounting Policies


2.4.3 Commitment

All material commitments as at the date of the

financial position date have been identified and

disclosed in the notes to the financial statements.

2.5 STATEMENT OF COMPREHENSIVE INCOME

2.5.1 Revenue Recognition

a) Sale of Goods

Revenue is recognized to the extent that it is probable

that the economic benefits will flow to the company

and the revenue and associated costs incurred can

be reliably measured. Revenue is measured at the

fair value of the consideration received or receivable

net of trade discounts and sales taxes. Revenue is

recognized when the significant risks and rewards

of ownership have been transferred to the buyer,

recovery of the consideration is probable, the

associated costs and possible return of goods can be

estimated reliably.

b) Interest

Interest income is recognized using the effective

interest method. When a loan and receivable is

impaired,the group reduces the carrying amount to

its recoverable amount, being the estimated future

cash flow discounted at the original effective interest

rate of the instrument and continues unwinding

the discount as interest income. Interest income on

impaired loan and receivables is recognized using

the original effective interest rate. Interest income is

recognized as the interest accrued on the time basis.

c) Dividend

Dividend income is recognized when the share

holder’s right to receive payment has been

established.

d) Others

Other income is recognized on an accrual basis.

e) Gains and Losses

Net gains and losses of a revenue nature on the

disposal of property, plant and equipment and

other non current assets including investments have

been accounted for in the income statement having

deducted from proceeds on disposal, the carrying

amount of the assets and related property, plant

and equipment amount remaining in revaluation

reserve relating to that asset is transferred directly to

accumulated profit/(loss).

2.5.2 Expenditure Recognition

2.5.2.1 Expenses are recognized in the statement of

comprehensive income on the basis of a direct

association between the cost incurred and

the earning of specific items of income. All the

expenditure incurred in the running of the business

and in maintaining the property, plant and

equipment in a state of efficiency has been charged

to income in arriving at the profit for the year.

2.5.2.2 For the purpose of presentation of the statement

of comprehensive income, the directors are of the

opinion that function of expenses method presents

fairly the elements of the company’s and group’s

performance and hence, such presentation method is

adopted.

2.5.2.3 Borrowing Costs

Borrowing costs are recognized as an expense in the

period in which they are incurred except to the extent

where borrowing costs are directly attributable to

the acquisition, construction or production of a

qualifying assets which are assets that necessarily

takes a substantial period of time to get ready for

its intended purpose are added to the cost of those

assets. Until such time as the assets are substantially

ready for their intended use or sale.

Investment income earned on temporary investment

of specific borrowings pending their expenditure on

qualifying assets is deducted from the borrowing cost

eligible for capitalization.

All other borrowing cost are recognized in profit or

loss in the period in which they are incurred.


2.6 Financial instruments - Risk Management

The Company is exposed through its operations to

the following financial risks:

In common with all other businesses, the Company

is exposed to risks that arise from its use of financial

instruments. This note describes the Company’s

objectives, policies and processes for managing those

risks and the methods used to measure them.

There have been no substantive changes in the

Company’s exposure to financial instrument risks, its

objectives, policies and processes for managing those

risks or the methods used to measure them from

previous periods unless otherwise stated in this note.

Principal financial instruments

The principal financial instruments used by the

Company, from which financial instrument risk arises

are as follows:

General Objectives, Policies and Processes

The Board has overall responsibility for the

determination of the Company’s risk management

objectives and policies and whilst retaining ultimate

responsibility for them, it has delegated the authority

for designing and operating processes that ensures

the effective implementation of the objectives and

Instrument Risk(s)

Credit risk

Liquidity risk

Interest rate risk

Currency risk

Liquidity risk

Interest rate risk/

Liquidity risk

policies to the Company’s finance function. The

Board receives monthly reports from the Company’s

Financial Controller through which it reviews the

effectiveness of the processes put in place and the

appropriateness of the objectives and policies it sets.

The Company’s internal auditors also review the risk

management policies and processes and report their

findings to the Audit Committee.

The overall objective of the Board is to set polices

that seek to reduce risk as far as possible without

unduly affecting the Company’s competitiveness and

flexibility. Further details regarding these policies are

set out below:

Credit Risk

Credit risk is the risk of financial loss to the Company

if a customer or counter-party to a financial

instrument fails to meet its contractual obligations.

The Company is mainly exposed to credit risk from

credit sales. It is Company policy, implemented

locally, to assess the credit risk of new customers

before entering contracts. Such credit ratings are

taken into account by local business practices.

Steps taken by the Company to minimize the Credit

Risk;

- Credit policy , which analyses the customer credit

worthiness

- Credit limits

- Bank guarantees

Credit risk also arises from cash and cash equivalents

and deposits with banks and financial institutions. For

banks and financial institutions, only independently

rated parties with minimum rating “A/AA/AAA” are

accepted.

Liquidity Risk

Liquidity risk arises from the Company’s management

of working capital and the finance charges and

principal repayments on its debt instruments. It is

the risk that the Company will encounter difficulty in

meeting its financial obligations as they fall due. The

Accounting Policies


group’s approach managing liquidity is to ensure,

as far as possible, that it will always have sufficient

liquidity to meet it liabilities when due, under both

normal and stressed conditions, without incurring

unacceptable losses or risking damage to the group’s

reputation.

Interest Rate Risk

Interest rate risk is the risk that the entity’s financial

position will be adversely effected by movements in

floating interest and this risk is minimised by investing

excess funds in diversified entities, effective decision

making by group finance division etc. The group

manages interest rate risk on borrowings by using a

combination of fixed and floating interest rates.

Currency Risk

The Group is exposed to currency risk on purchases

that are dominated in a currency other than the

respective functional currencies of group entities.

The currency in which these transactions primarily

the denominated in US Dollars. The currency risk

is limited by the short term nature of the period

between the dates of the purchase and the

settlements of the related liability.

Market Risk

Market risk arises from the Company’s use of interest

bearing, tradeable and foreign currency financial

instruments. It is the risk that the fair value or future

cash flows of a financial instrument will fluctuate

because of changes in interest rates (interest rate

risk), foreign exchange rates (currency risk) or other

market factors (other price risk). The objective of

market risk management is to manage and control

market risk exposures within acceptable parameters,

while optimising the return.

2.7 GENERAL

2.7.1 Events Occurring after the Date of the Financial

Position

All material events occurring after the statement of

financial position date have been considered and

where necessary adjustments to or disclosures have

been made in the respective notes to the Financial

Statements.

2.7.2 Related Party Transactions

Disclosures are made in respect of the transactions

in which the company has the ability to control or

exercise significant influence over the financial and

operating decisions/policies of the other, irrespective

of whether a price is charged.

2.7.3 Earnings Per Share

Basic EPS is calculated by dividing the profit or loss

attributable to ordinary share holders of the company

by the number of voting or non voting ordinary

shares.

2.7.4 Segment Reporting

A segment is a distinguishable component of the

Group that is engaged either in providing related

products or services within a particular economic

environment (Geographical Segment), which is

subject to risks and rewards that are different from

those of other segments.

2.7.5 Comparative Figures

Where necessary, comparative figures have been

reclassified to conform to the current year’s

presentation.

2.7.6 Cash Flow Statements

The cash flow statement has been prepared using the

‘indirect method’.

2.7.7 Effect of Sri Lanka Accounting Standards Issued

but not yet Effective

The standards and interpretations that are issued

but not yet effective upto the date of issuance of the

Group financial statements are disclosed below. The

Group intends to adopt these standards, if applicable,

when they become effective.


a) SLFRS 9 - Financial Instruments : Classification and

Measurement

SLFRS 9, as issued reflects the first phase of work on

replacement of LKAS 39 and applies to classification

and measurement of financial assets and liabilities as

defined in LKAS 39. SLFRS 9 was issued in 2012 and

become effective for the financial periods beginning

on or after 01 January 2015. Accordingly, the financial

statements for the year ending 31 March 2016 will

adopt the SLFRS 9. The Group will quantify the effect

in due course.

b) SLFRS 10 - Consolidated Financial Statements

SLFRS 10 replaces the portion of LKAS 27 -

Consolidated and Separate Financial Statements that

addresses the accounting for consolidated financial

statements. It also addresses the issues raised in SIC

12 – Consolidation Special Purpose Entities. SLFRS

10 establishes a single control model that applies

to all entities including special purpose entities.

The changes introduced by SLFRS 10 will require

management to exercise significant judgement

to determine which entities are controlled and

therefore, are required to be consolidated by a

parent, compared with the requirements that were

in LKAS 27. SLFRS 10 was issued in 2012 and become

effective for the financial periods beginning on or

after 01 January 2015. Accordingly, the financial

statements for the year ending 31 March 2016 will

adopt the SLFRS 10. The Group will quantify the effect

in due course.

C) SLFRS 11 - Joint Arrangements

SLFRS 11 replaces LKAS 31- interest in joint ventures

and SIC - 13 jointly - control entities - Non - monetary

contributions by ventures. SLFRS 11 removes the

option to account for Jointly Controlled Entities (JCEs)

loosing proportionate consolidation. Instead, JCEs

that meet the definition of a joint venture must be

accounted for using the equity method. The company

does not have any joint venture arrangements

presently recognized under proportionate

consolidation method.

d) SLFRS 12 - Disclosure of Interests in Other Entities

SLFRS 12 includes all of the disclosures that were

previously in LKAS 27 related to consolidated

financial statements, as well as all of the disclosures

that were previously included in LKAS 31 and LKAS

28. These disclosures relate to an entity’s interest

in subsidiaries, joint arrangements, associates and

structured entities. The number of new disclosures

are also required, but has no impact on the Group’s

financial position or performance. SLFRS 12 was

issued in 2012 and become effective for the financial

periods beginning on or after 01 January 2015.

Accordingly, the financial statements for the year

ending 31 March 2016 will adopt the SLFRS 12.

e) SLFRS 13 - Fair Value Measurement

SLFRS 13 establishes a single source of guidance

under SLFRS for all fair value measurements. SLFRS

13 does not change when an entity is required to

use fair value, but rather provides guidance on how

to measure fair value under SLFRS when fair value

is required or permitted. This standard is effective

for annual periods beginning on or after 1 January

2015. Accordingly, the financial statements for the

year ending 31 March 2016 will adopt the SLFRS 13.

Pending the full study of this standard, the financial

impact is not yet known and reasonably estimable.

2.7.8 First Time Adoption of SLFRS

These financial statements, for the year ended 31

March 2013, are the first the Group has prepared

in accordance with SLFRS. For periods up to and

including the year ended 31 March 2012, the Group

prepared its financial statements in accordance with

previous SLAS.

Accordingly, the Group has prepared its financial

statements which comply with SLFRS applicable for

periods ending on or after 31 March 2013 and prior

periods, together with the comparative period’s

data as at and for the years ended 31 March 2012,

as described in the accounting policies. In preparing

these financial statements, the Group’s opening

statement of financial position was prepared as at 01

April 2011, the Group’s date of transition to SLFRS.

Accounting Policies


This note explains the principal adjustments made by

the Group in restating its SLAS statement of financial

position as at 01 April 2011 and its previously

published SLAS financial statements as at and for the

year ended 31 March 2012.

The effect of Group’s transition to SLFRS, described in

Note 33 is summarized in this note as follows:

as previously reported under previous SLAS and

SLFRS

flows

Transition Elections

SLFRS 1 – First-time Adoption of Sri Lanka Financial

Reporting Standards allows first-time adopters

certain exemptions from the retrospective application

of certain SLFRS. Accordingly, the Group has applied

the following transition exceptions and exemptions

to full retrospective application of SLFRS.

a) Deemed Cost of Property, Plant and Equipment

Certain items of property, plant and equipment

have been measured at fair value at the date of

transition to SLFRS which were carried in the

consolidated statement of financial position prepared

in accordance with previous SLAS on the basis of

acquisition cost.

The Group has elected to regard those values as

deemed cost at the date of the revaluation since they

were broadly comparable to fair value.

b) Business Combinations

SLFRS 3 - Business Combinations has not been

applied to acquisitions of subsidiaries, which are

considered businesses for SLFRS, or of interests in

associates and joint ventures that occurred before

01st April 2011.

Use of this exemption means that the SLAS carrying

amounts of assets and liabilities, that are required

to be recognised under SLFRS, is their deemed cost

at the date of the acquisition. After the date of the

acquisition, measurement is in accordance with

SLFRS.

Assets and liabilities that do not qualify for

recognition under SLFRS are excluded from the

opening SLFRS consolidated statement of financial

position.

The Group did not recognise or exclude any

previously recognized amounts as a result of SLFRS

recognition requirements.

SLFRS 1 also requires that the SLAS carrying amount

of goodwill must be used in the opening SLFRS

consolidated statement of financial position (apart

from adjustments for goodwill impairment and

recognition or derecognition of intangible assets).

In accordance with SLFRS 1, the Group has tested

goodwill for impairment at the date of transition

to SLFRS. No goodwill impairment was deemed

necessary at 01st April 2011.

c) Employee Benefits - Disclosure Requirements

The Group has elected to disclose the following

amounts prospectively from the date of transition

regarding the post employment benefit liability.

(SLFRS ordinarily requires the amounts for the current

and previous four annual periods to be disclosed.)

i. The present value of the defined benefit obligation,

the fair value of the plan assets and the surplus or

deficit in the plan; and

ii. The experience adjustments arising on the plan

liabilities and the plan assets


Financial Statements

3. OTHER INCOME

Group Company


2013 2012 2013 2012

Rs. Rs. Rs. Rs.

Biomass Power Income (Net) 40,272,373 53,009,068 99,378,200 156,737,865

Profit on Sale of Property, Plant & Equipment 9,108,482 20,233,927 392,182 9,464,285

Sale of Carbon Credit 6,240,655 - 6,240,655 -

Exchange Gain 39,065,836 - 7,404,603 -

Amortization of Deferred Income - Lease Back of Motor Vehicle 1,198,161 2,875,587 - -

Dividend Received from Subsidiaries - - 214,307,792 241,941,890

Handling Charges - 1,505,935 - -

Hiring Income of Prime Movers - 703,529 - -

Sundry Income 7,228,119 - - -

Reversal of Impairment of Trade Debtors 2,214,918 1,836,390 2,214,918 1,836,390

105,328,544 80,164,436 329,938,350 409,980,430

4. FINANCE EXPENSES

Interest Expenses on Borrowings 698,833,468 428,856,260 250,954,588 160,026,153

Interest on Lease 1,099,906 6,651,278 213,809 40,610

Bank Guarantee Commissions 179,881 - 179,881 -

700,113,255 435,507,538 251,348,278 160,066,763

5. PROFIT BEFORE TAXATION

A Profit Before Taxation 1,254,704,036 1,276,098,178 614,589,256 977,278,951

B Profit before taxation is stated after charging all

expenses including the following:

Depreciation On Property, Plant, and Equipment 711,412,018 711,954,412 345,953,246 351,766,685

Directors Emoluments 19,345,000 17,051,884 19,345,000 17,051,884

Auditors Remuneration

- Audit Services 3,834,250 3,580,750 1,725,000 1,600,000

Charity and Donations 5,910,739 2,676,089 5,616,622 2,109,182

Staff Cost Including All Benefits 405,732,089 352,891,034 309,214,636 261,992,582

Defined Benefits Cost - Retirement Benefit Obligation 10,529,789 8,518,393 7,475,714 5,769,845

Defined Contribution Plan Cost - E.P.F. & E.T.F. 32,449,714 26,171,299 23,479,839 19,029,409

Amortization of Operating Lease 4,341,270 4,341,270 - -

Research and Development Cost 1,491,868 885,259 1,471,638 881,521

Legal Expenses & Professional Fee 26,323,532 17,113,353 16,327,942 10,851,690

Repairs and Maintenance 612,151,095 521,968,413 508,328,372 416,242,070

Reimbursement of Vessel Operational Expenses 566,372,140 470,472,145 172,160,570 132,004,305

Sales Commission 682,789,775 508,059,361 235,515,398 204,967,714

NBT Expenses 484,510,685 312,957,260 169,898,082 146,168,671

Advertisements 63,520,250 71,156,816 51,930,916 54,363,792

Loss on Disposal of Property, Plant and Equipment - 14,975,840 - 14,975,840

Disallowed VAT 14,549,023 19,079,223 14,549,023 19,079,223


6. INCOME TAX EXPENSE

Group Company

31st March 31st March 31st March 31st March

2013 2012 2013 2012

Rs. Rs. Rs. Rs.

Current Income Tax Provision 6 A 52,808,716 41,513,599 17,733,909 5,776,277

Deferred Taxation 6 B 307,506,102 189,125,487 234,512,130 185,037,097

360,314,818 230,639,086 252,246,039 190,813,374

6 A INCOME TAX

Reconciliation between Current Tax Expense

and the Product of Accounting Profit.

Operating Profit Before Taxation 1,254,704,036 1,276,098,178 614,589,256 977,278,951

Other comprehensive Income (1,871,945) (3,509,855) (1,316,434) (3,117,899)

Less : Income Considered Separately (235,472,031) (194,598,473) (231,634,702) (411,476,299)

Effect of SLFRS/LKAS Convergence - (233,972,115) - (162,088,948)

Profit from Trade or Business 1,017,360,060 844,017,735 381,638,120 400,595,805

Less: Exempt Profit (Note 2.4.2.2.1) (674,351,151) (1,045,618,418) (381,638,120) (400,595,805)

Taxable Profit from Trade or Business a 343,008,909 (201,600,683) - -

Income Considered Separately 359,674,676 192,389,009 352,938,350 411,476,299

Exempt Other Income 6A.2 (214,307,792) (23,109,514) (214,307,792) (251,406,175)

Liable Other Income b 145,366,884 169,279,495 138,630,558 160,070,124

Accounting Profit /(Loss) Chargeable to Income Taxes (a+b) 488,375,793 169,279,495 138,630,558 160,070,124

Tax Rate for the Year 28% 28% 28% 28%

Tax Effect on Chargeable Profits 136,745,222 47,398,259 38,816,556 44,819,635

Add : Tax Effect of Disallowable Expenses 99,838,483 172,884,530 40,790,614 29,124,774

Tax Effect of Allowable Expenses (166,991,072) (165,348,746) (61,873,261) (68,168,132)

69,592,633 54,934,043 17,733,909 5,776,277

Tax Effect on Deduction Under Section 32 (16,783,917) (13,420,444) - -

Tax @ 28% Before Adjustments on Tax Credits 52,808,716 41,513,599 17,733,909 5,776,277

Income Tax Provision for the year 52,808,716 41,513,599 17,733,909 5,776,277

Less /Add: Income Tax Under/(Over Provision)

for Previous Years - 1,175 - -

Current Tax Charged to the Statement of

Comprehensive Income 52,808,716 41,514,774 17,733,909 5,776,277

Tax Loss Carried Forward to the Y/A 2013/2014 1,099,555,221 358,204,066 - 33,362,346



Group Company


2013 2012 2013 2012

Rs. Rs. Rs. Rs.

6A.1 Current Tax Attributable to Comprehensive

Income/Loss and Other Comprehensive Income/Loss

Tax Attributable to Operating Profit 52,808,716 41,513,599 17,733,909 5,776,277

Tax Attributable to Other Comprehensive Income 99,617 494,082 - -

52,908,333 42,007,681 17,733,909 5,776,277

6A.2 Exempt Profits

Dividend Income included under Other Income has been treated as exempt under the Inland Revenue Act, No. 10 of 2006,

as amended which is received from the exempted profit.

Profit on disposal of Property, Plant and Equipment is exempted as capital allowance not claimed for the asset.

Group Company


2013 2012 2013 2012

Rs. Rs. Rs. Rs.

6 B Deferred Tax Expenses

Deferred Tax Expense Arising from;

- Accelerated Depreciation for Tax Purposes

on Freehold Property 309,935,634 64,664,872 236,801,751 156,362,324

- Accelerated Depreciation for Tax Purposes

on Leasehold Property - 363,191 - -

- Retirement Benefit Liabilities (2,429,532) (2,178,605) (2,289,621) (2,029,706)

- Tax Effect Arising from Tax Losses - 126,276,029 - 30,704,479

307,506,102 189,125,487 234,512,130 185,037,097

6B.1 Deferred tax has been calculated at 28% that is expected to apply after the tax exemption period, assuming that tax rate will

not be changed over the specified period.


7. EARNINGS PER ORDINARY SHARE

Basic Earnings Per Share is calculated by dividing the net profit attributable to equity holders of the company by the

weighted average number of ordinary shares in issue (both voting and non-voting) during the year, as required by the

Sri Lanka Accounting Standard No.33

Group Company

31st March 31st March, 31st March, 31st March,

2013 2012 2013 2012

Rs. Rs. Rs. Rs.

Profit Attributable to Equity Holders 894,389,218 1,045,459,092 362,343,217 786,465,577

Weighted Average Number of Ordinary Shares 303,750,000 303,750,000 303,750,000 303,750,000

Earnings per Ordinary Share 2.94 3.44 1.19 2.59

Weighted Average Number of Ordinary Shares - Voting 202,500,000 202,500,000 202,500,000 202,500,000

Weighted Average Number of Ordinary Shares - Non Voting 101,250,000 101,250,000 101,250,000 101,250,000

303,750,000 303,750,000 303,750,000 303,750,000

7.2 Diluted Earnings Per Share

There is no potentially dilutive ordinary share of the company and as a result the diluted earnings per share (DPS) is the

same as basic EPS shown above.

8. DIVIDEND PER SHARE (Rs.)

First and Final Dividend - Voting - - 1.00 1.30

- Non Voting - - 1.00 1.30



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,990

-

-

2

2,33

8,57

7

59,

894,

746

5

3,76

1,12

9

8,4

97,5

33

Lan

ding

Jett

y

66,

420,

752

-

- -

6

6,42

0,75

2

39,

852,

452

3

,321

,038

-

-

4

3,17

3,49

0

23,

247,

262

2

6,56

8,30

0

29,

889,

338

Bat

chin

g Pl

ant &

Pum

per T

ruck

2

67,1

00,9

11

87,

179,

565

-

-

354

,280

,476

6

1,42

4,18

5

8,1

88,0

37

-

-

69,

612,

222

2

84,6

68,2

54

205

,676

,726

2

00,4

75,6

90

Ves

sel

-

- -

-

-

-

-

-

-

-

-

-

-

Ves

sel D

ry D

ocki

ng

-

53,

807,

523

-

-

53,

807,

523

-

1

9,03

0,52

3

-

-

19,

030,

523

3

4,77

7,00

0

-

354

,651

,999

Bio

Mas

s Bui

ldin

g

218

,492

,125

2

,145

,795

-

-

220

,637

,920

3

4,82

1,51

1

7,0

39,7

51

-

-

41,

861,

262

1

78,7

76,6

58

183

,670

,614

1

79,6

72,4

82

Bio

Mas

s Pla

nt &

Mac

hine

ry

2,4

16,2

26,2

79

2,4

71,4

79

- -

2

,418

,697

,758

2

82,7

26,3

13

80,

718,

154

-

-

3

63,4

44,4

67

2,0

55,2

53,2

91

2,1

33,4

99,9

66

2,1

78,5

35,1

30

New

Ves

sel

1,2

50,2

86,8

00

4,9

97,6

64

- -

1

,255

,284

,464

3

0,62

7,49

3

73,

794,

530

-

-

1

04,4

22,0

23

1,1

50,8

62,4

41

1,2

19,6

59,3

07

-

7

,743

,718

,399

5

43,8

48,8

12

7,3

60,7

52

-

8,2

80,2

06,4

59

2,2

80,0

07,9

37

345

,953

,246

7

07,7

82

-

2,6

25,2

53,3

99

5,6

54,9

53,0

60

5,4

63,7

10,4

64

4,4

81,1

99,8

28

Lea

seho

ld A

sset

s-M

otor

Veh

icle

s -

-

-

-

-

-

-

-

-

-

9

29,6

56

Gra

nd To

tal

7,7

43,7

18,3

99

543

,848

,812

7

,360

,752

-

8

,280

,206

,459

2

,280

,007

,935

3

45,9

53,2

46

707

,782

-

2

,625

,253

,399

5

,654

,953

,060

5

,463

,710

,464

4

,482

,129

,484



9. PROPERTY, PLANT AND EQUIPMENT (Contd.)

9.C Value of Land and Ownership

Number of Building Cost Land Cost

Company Location Land Extent Building Rs. Rs.

a) Tokyo Cement Company (Lanka) PLC Cod Bay, China Bay, Acres 44.00 5 1,001,915,081 -

Trincomalee (Leasehold)

Elpitiya Acres 7.50 2 101,101,240 17,906,600

Jaffna Acres 6.50 1 27,792,397 8,495,843

Colombo Perches 40.90 - - 180,982,714

Peliyagoda (Leasehold) Acres 1.90 4 26,254,277 -

Negombo Land Acres 1.97 - - 28,935,510

b) Tokyo Super Cement Company

Lanka (Pvt) Ltd Cod Bay, China Bay, 2 655,271,169 -

Trincomalee (Leasehold)

Dambulla Acres 5.00 2 85,378,803 14,675,000

c) Tokyo Cement Power (Lanka) Ltd Mahiyanganaya Acres 19.00 - - 13,338,695

10. CAPITAL WORK-IN-PROGRESS

10.A Group

Description Balance Expenses Capitalized Balance Balance Balance

As at Incurred During the As at As at As at

01.04.2012 During the year Year 31.03.2013 31.03.2012 01.04.2011


Rest Room - - - - - 38,403

Gypsum Transporter System 13,717,500 - 13,717,500 - 13,717,500 -

Clinker Silo Up-gradation 2,352,000 - 2,352,000 - 2,352,000 -

Cement Store - Dambulla 200,000 - 200,000 - 200,000 -

Bio Mass Power Plant Storage Yard - - - - - 8,459,910

Mill Upgrading 38,732,073 - - 38,732,073 38,732,073 38,732,073

Resource Plant Project 6,982,501 5,831,369 - 12,813,870 6,982,501 4,927,249

Lab Extension Work - - - - - 1,184,029

Outer Circular Highway Buildings 1,466,893 35,144,822 36,611,715 - 1,466,893 -

Outer Circular Highway

Plant & Machineries - 35,830,809 35,830,809 - - -

Installation of Bio-Mass

Derived Silica Storage System 10,777,952 7,526,070 18,304,022 - 10,777,952 -

Packing Plant Upgrading 5,589,796 4,948,980 9,438,776 1,100,000 5,589,796 -

Mill Renovation 7,697,462 1,648,000 9,345,462 - 7,697,462 -

Raw Material Unloading System 931,577 - - 931,577 931,577 -

ERP Implementation 13,745,229 31,507,140 - 45,252,369 13,745,229 -

Mahiyangana Power Plant 60,203,464 444,763,073 - 504,966,537 60,203,464 -

Cement unloading Pipe Line - 22,665,347 - 22,665,347 - -

Engineers Quarters &

Canteen Buildings - 6,142,383 - 6,142,383 - -

Weigh Bridge - 2,646,255 - 2,646,255 - -

Batching Plants-Kadawatha

and Negombo - 65,770,736 - 65,770,736 - -

TOTAL 162,396,447 664,424,984 125,800,284 701,021,147 162,396,447 53,341,664


10. CAPITAL WORK-IN-PROGRESS (Contd.)

10.B COMPANY

Description Balance Expenses Capitalized Balance Balance Balance

As at Incurred During the As at As at As at

01.04.2012 During the year Year 31.03.2013 31.03.2012 01.04.2011


Bio Mass Power Plant Storage Yard - - - - - 8,459,910

Mill Upgrading 38,732,073 - - 38,732,073 38,732,073 38,732,073

Resource Plant Project 6,982,501 5,831,369 - 12,813,870 6,982,501 4,927,249

Lab Extension Work - - - - - 1,184,029

Outer Circular Highway Buildings 1,466,893 35,144,822 36,611,715 - 1,466,893 -

Outer Circular Highway

Plant & Machinery - 35,830,809 35,830,809 - - -

Installation of Bio-Mass

Derived Silica Storage &

Extraction System 10,438,952 7,526,070 17,965,022 - 10,438,952 -

Packing Plant Upgrading 4,489,796 4,948,980 9,438,776 - 4,489,796 -

Mill Renovations 7,697,462 1,648,000 9,345,462 - 7,697,462 -

New Packing Plant 1,100,000 - - 1,100,000 1,100,000 -

Raw Material unloading System 931,577 - - 931,577 931,577 -

ERP Implementation 13,745,230 31,507,140 45,252,370 13,745,230

Engineers Quarters &

Canteen Buildings - 6,142,383 - 6,142,383 - -

Weigh Bridge - 2,646,255 - 2,646,255 - -

Batching Plants

Negombo - 18,099,585 - 18,099,585 - -

Kadawatha - 47,671,151 - 47,671,151 - -

85,584,484 196,996,564 109,191,784 173,389,264 85,584,484 53,303,261



11. INTANGIBLE ASSETS

Item WDV

Note 31.03.2013 31.03.2012 01.04.2011

Rs. Rs. Rs.

Goodwill 11.1 13,186,823 13,186,823 13,186,823

Accounting & Related Software 11.2 6,888,857 8,750,307 -

20,075,680 21,937,130 13,186,823

11.1 Goodwill

In compliance with SLFRS 3-Business Combinations upon acquiring controlling interest , the accounted Goodwill reflect

the excess of the purchase price of shares in Tokyo Cement Colombo Terminal (Pvt) Ltd (Formerly known as Samudra

Cement Company Lanka (Pvt) Ltd) over the fair value of the proportionate share of the net assets of such company as at

the date of acquisition. Unamortised balance of Goodwill as at 01st April 2005 as well as goodwill generated from further

acquisition which was made on 31st December 2006 recorded as a permanent asset.

When assessing the impairment, the recoverable amount of the Cash Generating unit has been determined using the

higher of Fair Value less Cost To Sell and the Value in Use.

Since the Value in Use of the Cash Generating Unit is higher than the Fair Value less Cost to sell, it has been considered as

the recoverable amount where the value in use are based on the present value of the future cash flows of the forecasted

business operations of the Tokyo Cement Colombo Terminal (Pvt) Ltd for next five years using the key assumptions made

considering past experience or if appropriate consistent with external source of information and which is approved by the

Board of Directors of the company .

Key Assumptions Used in Value in Use (VIU) Calculations

Discount Rate

Discount rate is used at 16.3% per annum, which is the rate for the bank facilities over the import demand loan as the cost

of capital of the company.

Inflation and General Price

The basis used to determine the value assigned to the budgeted cost inflation is the inflation rate, based on projected

economic conditions and assumed that General expenses will be increased at the rate of 10%. per annum.

Exchange Rate

Rupee rate fluctuation against USD has been considered from Rs.129 to Rs. 134 throughout the period.

11.2 Accounting and Related Software

Cost/Valuation Amortization WDV

Item 01.04.2012 Additions Disposals 31.03.2013 01.04.2012 For the Year 31.03.2013 31.03.2013 31.03.2012 01.04.2011

Rs. Rs. Rs. Rs. Rs. Rs Rs. Rs. Rs. Rs.

ABAS ERP Solution

System 9,080,327 - - 9,080,327 567,520 2,270,082 2,837,602 6,242,725 8,512,807 -

H Senid HRM-Payroll

Enterprise System 475,000 - - 475,000 237,500 118,750 356,250 118,750 237,500 -

Weigh Bridge

Integration

Software - 562,541 - 562,541 - 35,159 35,159 527,382 - -

9,555,327 562,541 - 10,117,868 805,020 2,423,991 3,229,011 6,888,857 8,750,307 -


12. INVESTMENTS

Group Company

31st March, 31st March, 01st April, 31st March, 31st March, 01st April,

2013 2012 2011 2013 2012 2011


Investments In Subsidiaries

Unquoted - At Cost;

Fuji Cement Company

(Lanka) Ltd.

Ordinary Shares (9,000,000 shares) - - - 90,000,000 90,000,000 90,000,000

10% Convertible Preference Shares

(6,000,000 Shares) - - - 60,000,000 60,000,000 60,000,000

Tokyo Cement Colombo

Terminal (Pvt.) Ltd.

Ordinary Shares (19,425,000 Shares) - - - 235,050,010 235,050,010 235,050,010

Tokyo Super Cement

Company Lanka (Pvt) Ltd.

Ordinary Shares (48,388,380 Shares) - - - 1,345,100,006 1,345,100,006 1,345,100,006

Tokyo Cement Power (Lanka) Ltd

Ordinary Shares (150,000,010 Shares) - - - 150,000,010 10 -

Tokyo Eastern Cement Company Ltd.

Ordinary Shares of Rs. 1/- each

1,000 Shares - - - 1,000 - -

- - - 1,880,151,026 1,730,150,026 1,730,150,016

13. OPERATING LEASE PREPAYMENT

At the beginning of the Year 86,937,585 91,698,907 96,460,229 21,818,539 22,238,591 22,658,643

Amortization during the Year (4,761,322) (4,761,322) (4,761,322) (420,052) (420,052) (420,052)

At the end of the Year 82,176,263 86,937,585 91,698,907 21,398,487 21,818,539 22,238,591

Prepaid lease rentals to acquire the land use rights have been classified as lease rental paid in advance/lease hold property

and are amortized over the lease term in accordance with the pattern of benefits provided.



14. INVENTORIES

Group Company


2013 2012 2011 2013 2012 2011


Raw Materials 720,006,054 455,395,229 396,286,303 383,856,349 340,482,693 135,965,141

Finished Goods - Manufactured 376,503,672 508,170,073 196,514,412 141,956,532 126,598,543 148,444,261

Packing Materials 568,488,763 368,381,299 43,852,657 92,664,201 160,594,079 34,112,955

Spares and Consumables 81,023,658 130,549,118 149,500,497 55,407,741 86,777,511 68,810,039

Grinding Media 46,598,268 20,460,976 34,367,888 41,126,667 14,864,651 32,306,496

Goods - in - Transit - - 301,845,242 - -

At the end of the Year 1,792,620,415 1,482,956,695 1,122,366,999 715,011,490 729,317,477 419,638,892

The inventories have been pledged against borrowings-Refer Note No 28.

15. TRADE & OTHER RECEIVABLES

Group Company

31st March, 31st March, 01st April 31st March, 31st March, 01st April

2013 2012 2011 2013 2012 2011


Trade Debtors 1,153,798,749 801,763,383 623,051,225 384,051,204 428,038,548 286,054,519

Deposits, Advances and Pre-payments 77,522,155 90,088,684 99,654,337 42,420,903 41,350,960 43,224,838

Other Receivables 508,796,898 676,857,595 368,139,738 240,971,573 309,491,003 146,192,482

At the end of the Year 1,740,117,802 1,568,709,662 1,090,845,300 667,443,680 778,880,511 475,471,839

15.1 The trade & other receivables are classified as loans and receivables other than prepayments. The management reviews

impairment indications by each of debtors by individual basis and fair value of trade debtors are subject to the net of

impairment loss of Rs.6,571,219/- & Rs. 6,137,730/- in group and company respectively.

16. AMOUNT DUE FROM RELATED PARTIES

Group Company


2013 2012 2011 2013 2012 2011


Tokyo Cement Colombo

Terminal (Pvt) Ltd. - - - 10,195,764 5,840,494 6,129,191

Tokyo Super Cement Company

Lanka (Pvt) Ltd. - - - - - 706,577,915

Tokyo Cement Power (Lanka) Ltd - - - 156,462,022 82,242,147 13,338,694

Tokyo Eastern Cement

Company Ltd - - - 588,269 - -

- - - 167,246,055 88,082,641 726,045,800


17. FINANCIAL INVESTMENTS AVAILABLE FOR SALE

Group Company


2013 2012 2011 2013 2012 2011


Investments on Treasury Bills 15,031 - - 15,031 - -

Money Market Deposits 3,678,339 7,081,873 253,007 1,043,915 2,096,093 82,282

Savings at Banks 18,323 18,323 18,323 18,323 18,323 18,323

3,711,693 7,100,196 271,330 1,077,269 2,114,416 100,605

Under previous SLAS, the Group and Company accounted for Short term investments measured at cost. Under SLFRS/

LKAS, the Group and Company have designated such investments as available-for-sale investments. SLFRS/LKAS requires

available-for-sale investments to be measured at fair value. Difference between the fair value under SLFRS/LKAS and

carrying value under previous SLAS has been recognised as a separate component of equity.

18. STATED CAPITAL

Group Company

At the At the At the At the At the At the

End of Beginning Beginning End of Beginning Beginning

Description the Year of the Year of the Year the Year of the Year of the Year

01.04.2013 01.04.2012 31.03.2011 01.04.2013 01.04.2012 31.03.2011


Value of Ordinary Shares 2,366,750,000 2,366,750,000 2,366,750,000 2,366,750,000 2,366,750,000 2,366,750,000

18.1 Movement in Number of Ordinary Shares

Group Company

At the At the At the At the At the At the

End of Beginning Beginning End of Beginning Beginning

Description the Year of the Year of the Year the Year of the Year of the Year

01.04.2013 01.04.2012 31.03.2013 01.04.2013 01.04.2012 31.03.2011

Nos. Nos. Nos. Nos. Nos. Nos.

Ordinary Shares

- Voting 202,500,000 202,500,000 202,500,000 202,500,000 202,500,000 202,500,000

- Non Voting 101,250,000 101,250,000 101,250,000 101,250,000 101,250,000 101,250,000

303,750,000 303,750,000 303,750,000 303,750,000 303,750,000 303,750,000

The above shares are quoted in the Colombo Stock Exchange. The non-voting shares rank pari passu in respect of all rights

with the ordinary voting shares of the Company except voting rights on resolutions passed at general meetings.



19. RESERVES

Group Company

Description 31st March, 31st March, 01st April, 31st March, 31st March, 01st April,

2013 2012 2011 2013 2012 2011


Capital Redemption Reserve Fund 150,000,000 150,000,000 150,000,000 - - -

150,000,000 150,000,000 150,000,000 - - -

20. INTEREST BEARING BORROWINGS

20.1 Long Term Interest Bearing Borrowings

Group Company

As at As at


2013 2012 2011 2013 2012 2011


At the Beginning of the Year 2,750,305,318 3,243,761,023 3,743,719,375 1,202,911,999 1,224,268,800 1,145,770,600

Add: Loans Obtained/Exchange

Loss during the Year 348,789,075 7,923,406,343 5,489,986,746 348,789,075 1,815,000,000 1,050,000,000

3,099,094,393 11,167,167,366 9,233,706,121 1,551,701,074 3,039,268,800 2,195,770,600

Less: Settlements during the Year (1,419,480,279) (8,416,862,048) (5,989,945,098) (824,201,079) (1,836,356,800) (971,501,800)

At the End of the Year 1,679,614,114 2,750,305,318 3,243,761,023 727,499,995 1,202,912,000 1,224,268,800

Current Maturity Portion 20.2 635,342,522 1,197,398,543 2,303,823,700 293,750,004 474,370,338 657,664,799

Non-Current Maturity Portion 20.2 1,044,271,592 1,552,906,775 939,937,323 433,749,991 728,541,662 566,604,001

1,679,614,114 2,750,305,318 3,243,761,023 727,499,995 1,202,912,000 1,224,268,800

20.2 Short Term Interest

Bearing Borrowings

Import Demand Loan 20.2.1 2,310,637,703 1,415,464,191 590,850,000 624,791,214 677,164,015 500,160,000

Working Capital Loan 20.2.2 250,000,000 - - - - -

Current Maturity Portion of

Long Term Loan 635,342,522 1,197,398,543 2,303,823,700 293,750,004 474,370,338 657,664,799

Repayable within One Year 3,195,980,225 2,612,862,734 2,894,673,700 918,541,218 1,151,534,353 1,157,824,799

Repayable between One and

Five Years 1,044,271,592 1,552,906,775 939,937,323 433,749,991 728,541,662 566,604,001

Repayable After Five Years - - - - - -

Note: Current term and Long term portion of the borrowings over interest cost and capital repayable has been apportioned

between borrowings repayable within one year, repayable between one and five years and more than five years


20.2.1 Import Demand Loan

Group Company

As at As at


2013 2012 2011 2013 2012 2011


At the Beginning of the Year 1,415,464,191 590,850,000 1,125,811,716 677,164,015 500,160,000 538,840,952

Add: Loans Obtained/Exchange

Loss during the Year 14,804,336,730 7,779,365,404 4,660,281,897 3,941,937,087 3,575,036,641 3,043,007,540

Less: Settlements During the Year (13,909,163,218) (6,954,751,213) (5,195,243,613) (3,994,309,888) (3,398,032,626) (3,081,688,492)

Closing Balance at the End of the Year 2,310,637,703 1,415,464,191 590,850,000 624,791,214 677,164,015 500,160,000

20.2.2 Working Capital Loans

At the Beginning of the Year - - - - - -

Add: Loans Obtained/Exchange Loss

During the Year 250,000,000 - - - - -

Less: Settlements During the Year - - - - - -

Closing Balance at the End of the Year 250,000,000 - - - - -

21. DEFERRED TAX

Group Company

As at As at


2013 2012 2011 2013 2012 2011


At the Beginning of the Year 787,633,651 598,508,163 498,529,717 568,085,682 383,048,585 236,245,120

Charge to / (from) Statement

of Comprehensive

Income 6.B 307,506,102 189,125,487 99,978,446 234,512,130 185,037,097 146,803,465

At the End of the Year 1,095,139,753 787,633,650 598,508,163 802,597,812 568,085,682 383,048,585



21. DEFERRED TAX (Contd.)

Group Company

As at As at


2013 2012 2011 2013 2012 2011


21.1 Tax effect on Temporary

Difference on Property,

Plant & Equipment 1,114,401,011 848,175,141 934,035,958 633,103,011 466,976,516 420,955,409

Tax effect on Temporary

Difference on Leased Assets - 609,480 (340,813) - -

Tax effect on Temporary Difference

on Retirement Benefit Obligations (15,931,291) (6,675,640) (15,060,896) (11,521,673) (9,232,052) (7,202,345)

1,098,469,720 842,108,981 918,634,249 621,581,338 457,744,464 413,753,064

Less: Unused Tax Losses (233,891,488) (197,405,325) (422,298,048) - - (30,704,479)

Probable Deferred Tax Liability 864,578,232 644,703,656 496,336,201 621,581,338 457,744,464 383,048,585

21.2 Deferred tax assets amounting to Rs.161,738,022/- for the group has not been recognized for the year, since the subsidiary

companies do not expect these assets to reverse in the foreseeable future. The deferred tax asset in the subsidiary has arisen

as a result of carried forward losses.

21.3 Deferred Tax for Tax Holiday Companies

For group companies under BOI tax holidays, deferred tax has been recognized for temporary differences, when reversals of

such differences extend beyond the tax exemption period, taking into account the requirements of LKAS 12 and the ICASL

council’s ruling on deferred tax.

22. RETIREMENT BENEFITS OBLIGATION

Group Company

As at As at


2013 2012 2011 2013 2012 2011


At the Beginning of the Year 45,443,928 37,233,953 29,867,629 32,971,615 25,722,661 21,028,732

Actuarial Gain or Loss 1,871,945 2,241,178 256,100 1,316,434 3,117,899 104,740

Current Service Cost 5,407,338 4,457,877 4,202,108 3,725,216 2,940,352 2,276,028

Interest Cost 4,998,832 4,095,735 2,998,645 3,626,878 2,829,493 2,313,161

Provision for the Year 12,278,115 10,794,790 7,456,853 8,668,528 8,887,744 4,693,929

57,722,043 48,028,743 37,324,482 41,640,143 34,610,405 25,722,661

Payment made During the Year (834,710) (2,584,815) (90,530) (491,310) (1,638,790) -

At the End of the Year 56,887,333 45,443,928 37,233,952 41,148,833 32,971,615 25,722,661


22. RETIREMENT BENEFIT OBLIGATION (Contd..)

The retirement benefit obligation of Tokyo Cement Company (Lanka) PLC and its subsidiaries with more than 100

employees are based on the actuarial valuations carried out by Messrs. Actuarial & Management Consultants (Pvt) Ltd.

The group has adopted the “Project Unit Credit Method” to determine the present value of the retiring benefit obligation as

recommended by LKAS 19.

The principal assumptions used in determining the cost of employee benefits were;

2012/2013 2011/2012 2010/2011

a) Discount Rate 11% 11% 11%

b) Salary Increment 10% 10% 10%

c) Retirement Age 55 Years 55 Years 55 Years

Assumptions regarding future mortality are based on a 67/70 mortality table issued by the Institute of Actuaries, London.

23. LEASE CREDITOR

Group Company

As at As at


2013 2012 2011 2013 2012 2011


At the Beginning of the Year 18,694,135 65,282,359 123,390,255 - 1,538,105 19,156,773

Add: Facility Obtained During the Year - - 5,575,800 - - -

18,694,135 65,282,359 128,966,055 - 1,538,105 19,156,773

Less: Payments Made During the Year (18,243,400) (46,588,224) (63,683,696) - (1,538,105) (17,618,668)

At the end of the year 450,735 18,694,135 65,282,359 - - 1,538,105

Interest in Suspense Balance

At the Beginning of the Year 1,336,832 7,987,440 21,570,924 - 39,939 1,430,852

Add: Due to Facility Obtained During the Year - - 1,378,701 - - -

Less: Charge to the Income Statement (886,097) (6,650,608) (14,962,185) - (39,939) (1,390,913)

At the End of the Year 450,735 1,336,832 7,987,440 - - 39,939

Net Liabilities

Net Liability to Lease Creditors - 17,357,303 57,294,919 - - 1,498,166

Less: Short Term Lease Liabilities - 14,682,767 39,937,627 - - 1,498,166

Long Term Lease Liabilities - 2,674,536 17,357,292 - - -

Note: Current term and Long term portion of Finance lease obligation over finance charges and Capital repayable has been

apportioned between finance lease repayable within one year and repayable between one and five years.



24. TRADE & OTHER PAYABLES

Group Company

As at As at


2013 2012 2011 2013 2012 2011


Bills Payable 398,902,000 141,040,636 152,732,507 128,916,428 44,441,211 -

Expense Creditors 908,167,345 1,102,250,023 640,157,190 479,856,283 454,306,436 398,816,928

Other Creditors 455,882,106 322,156,627 260,967,281 77,920,335 92,267,985 59,896,961

1,762,951,451 1,565,447,286 1,053,856,978 686,693,046 591,015,632 458,713,889

25. AMOUNT DUE TO

RELATED PARTIES

Fuji Cement Company (Lanka) Ltd - - - 1,060,794,001 451,220,296 555,688,197

Tokyo Super Cement Company

Lanka (Pvt) Ltd - - - 44,289,817 107,828,482 -

- - - 1,105,083,818 559,048,778 555,688,197

26. CAPITAL AND OTHER COMMITMENTS

26.1 Capital Commitments

The following capital commitments have been approved by the respective Board of Directors, but not provided for in the

financial statements.

a) Implementation of new Enterprise Resource Planning (ERP) System with the estimated cost of Rs.58.6 Mn. Total cost of

project completed as at 31st March, 2013 is Rs. 45.2Mn.

b) Installation of new batching plants at Negombo, Kadawatha and Biyagama by investing around Rs.295 Mn. Total cost of work

completed as at 31st March, 2013 is Rs. 65 Mn.

26.2 Other Commitments

a) The company has entered into an agreement to export Bio-Mass power with Ceylon Electricity Board (CEB) for a period of

20 years subject to the terms and conditions.

b) The company has entered into an agreement with Ceylon Electricity Board (CEB) to purchase Coal Ash from Norochchola

Power Plant for a period of 5 years.


26.3 Subsidiary Companies

a) Tokyo Cement Power (Lanka) Ltd

Establishment of Dentro Power Plant under Ceylon Electricity Board (CEB) as medium voltage development plan amounting

to Rs. 1.5 Bn. Total cost of, work completed as at 31st March, 2013 is Rs. 505 Mn.

b) Tokyo Eastern Cement Company Ltd

Company has announced an investment of USD 50 Mn Under newly incorporated subsidiary Tokyo Eastern Cement Company

(Lanka) Ltd. This investment will take place within next three financial years.

27. CONTINGENT LIABILITIES AND CONTINGENT ASSETS

27.1 Tokyo Cement Company (Lanka) PLC

a) The Department of Inland Revenue has not allowed Rs. 300 Mn donation made in the year of assessment 2002/03 to the

Ministry of Shipping and Ports Development, as a qualifying payment relief and an appeal has been preferred to the court

of appeal on question of law under section 141 (1) of the Inland Revenue Act. Lawyers have informed that the question of

law is very much in favour of the company to overturn the Board of Review determination.

27.2 Fuji Cement Company (Lanka) Limited

a) Value Added Tax assessments for the months ending November 2002, March 2003, December 2003 and March 2004 have

been issued by the Department of Inland Revenue and the company has filed appeals against the assessments and the

Commissioner General of Inland Revenue has confirmed these assessments. The matter is pending for hearing at Court of

Appeal.

Representation Provided by the legal and tax experts and based on information available the contingent liabilities as at

31st March, 2013 may not have a material impact.

27.3 Contingent Assets

There were no material contingent assets for the Group existing as at the date of statement of financial position.



28. ASSETS PLEDGED

Following assets have been pledged as security for liabilities

Name of the

Company

Nature of Liabilities

and the Name of

Bank

Loan/Facility

Granted

Rs.

Balance

Outstanding

as at

31.03.2013

Rs.

Balance

Outstanding

as at

31.03.2012

Rs.

Repayment Security Pledged

Tokyo

Cement

Colombo

Terminal (Pvt)

Ltd

a. Term Loans

Commercial Bank

of Ceylon PLC

750,000,000 - 8,304,000

Term Loan Loan agreement on term loan

and corporate guarantee from

Tokyo Cement Company Lanka

PLC.

450,000,000 - 150,000,000 Term Loan Sub-limit of trust receipt loan

facility Rs. 750 Mn

b. Money Market

Loans

i. Sampath Bank

PLC.

200,000,000 - 105,000,000 On demand Loan agreement MML and

hypothecation bond over

stocks at Port Premises,

Colombo and book debts of

the company for Rs. 200 Mn

ii. Sampath Bank

PLC

623,000,000 441,280,000 584,060,000 Repayable in 48 equal

monthly installments of

Rs.12,980,000

Loan agreement on term

loan and corporate guarantee

from Tokyo Cement Company

(Lanka) PLC.

c. Trust Receipts

Loans

i Sampath Bank PLC 150,000,000 109,000,000 - On demand Hypothecation Bond for Rs.

125 mn over inventory at Port

premises, Colombo book

debts and Leasehold Land and

Buildings.

ii Sampath Bank PLC 525,000,000 488,892,319 - On demand Primary mortgage bond over

cement plant and machinery

at Port premises - Colombo

for Rs.150 mn. Secondary

mortgage bond over cement

plant and machinery at Port

Premises - Colombo for

Rs.36 mn.


Name of the

Company

Nature of Liabilities

and the Name of

Bank

Loan/Facility

Granted

Rs.

Balance

Outstanding

as at

31.03.2013

Rs.

Balance

Outstanding

as at

31.03.2012

Rs.


iii. Commercial Bank

of Ceylon PLC

750,000,000 40,000,000 - On demand Corporate guarantee of Fuji

Cement Company Lanka Ltd of

Rs.609 Mn and Mortgage Bond

No. 1649 dated 06th August,

2002, executed over stock in

trade and book debts of the

company for Rs,110 Mn ranking

equal and pari passu with the

primary mortgage on executed

by the company in favour of

Sampath Bank for Rs.385 Mn

and documents relating to

goods received duly accepted

by the company.

d. Hypothecation

Loan

i. Bank of Ceylon,

450,000,000 -

114,769,001 On demand Mortgage Bond over Inventory

and book debts.

Tokyo

Cement

Company

(Lanka) PLC

a. Term Loans

i. Sampath Bank

PLC.

300,000,000 - 41,662,000 Repayable in 35 equal

monthly installments

of Rs.8,334,000/- and

final installment of Rs.

8,310,000/- after a grace

period of 1 year from the

date of disbursement

The Loan Agreement &

Corporate Guarantee of Tokyo

Super Cement Company Lanka

(Pvt) Ltd for Rs.300 Mn

1,125,000,000 703,125,000 984,375,000 In 48 equal monthly

installments of

Rs. 23,437,500

An Undertaking to Mortgage

over the Vessel “ID Symphony”

(Tabernacle Star ii)

ii Bank of Ceylon, 40,000,000 24,374,996 36,874,999 Repayment will

commence after 24

months from first

disbursement of

the loan, there after

repayable in 48 equal

monthly installments.

On Demand Loan Agreement.

iii Citi Bank 690,000,000

(US$ 2.5 Mn)

- 140,000,000 On demand Inventory and Trade debtors

28. ASSETS PLEDGED (Contd.)



Name of the Company

Nature of Liabilities The Name of Bank

Loan/Facility Granted

Rs.

Balance Outstanding

as at 31.03.2013

Rs.

Balance Outstanding

as at 31.03.2012

Rs.


Tokyo Super

Cement

Company

Lanka (Pvt)

Ltd.

a. Term Loans

i DFCC Bank 850,000,000 23,333,318 163,333,318 Repayable in 60 equal monthly installments

(a) Primary mortgaged over proposed machinery and equipments

(b) Corporate Guarantee from Tokyo Cement Company (Lanka) PLC.

b. Short Term Loansii Citi Bank

(US$ 7.5 Mn)

435,622,069

305,914,493

Repayable within 90 days from the date of grant

Unconditional Corporate

Guarantee from Tokyo Cement Company (Lanka) PLC

iii Sampath Bank PLC

500,000,000

272,359,295

126,820,891


(a) Short Term Import Loan Agreement for Rs.500 Mn

(b) Existing Hypothecation Bond for Rs.520 Mn over stock and book debts of the company

c. Trust Receipts Loans

I. Commercial Bank of Ceylon PLC

100,000,000

-

170,260,000


(a) Corporate Guarantee of Tokyo Cement Company (Lanka) PLC for Rs.350 Mn

(b) Lien Over documents of Title to the goods under import

Fuji Cement Company (Lanka) Ltd

a. Term LoansI. Sampath Bank

650,000,000

487,500,800

650,000,000

Repayable in 48 equal monthly installments

(a) An undertaking to

mortgage over the vessel “ Terbancle Prince”

(b) Corporate Guarantee of TCCL for Rs.650 Mn

b. Import Demand Loans

I. Sampath Bank

500,000,000

339,972,806

20,535,791

Each Loan to be paid within 90 days

(a) General Terms and Condition documents relating to IDL.

(b) Lien over documents of Title of the goods under import

(c) Corporate Guarantee of TCCL for Rs.800 Mn

28. ASSETS PLEDGED (Contd.)


29. RELATED PARTY TRANSACTIONS

29.1 The Directors of the Company are also Directors of the following Companies:

Fuji Cement

Co (Lanka)

Ltd

Tokyo Super

Cement Co

Lanka (Pvt)

Ltd

Tokyo

Cement

Colombo

Terminal

(Pvt) Ltd

St. Anthony’s

Consolidated

(Pvt) Ltd

St. Anthony’s

Hardware

(Pvt) Ltd

South Asian

Investments

(Pvt) Ltd

Rhino

Roofing

Products

Ltd

Providence

Network &

Solutions

(Pvt) Ltd

Tokyo

Eastern

Cement

Company

Ltd

Tokyo

Cement

Power

(Lanka)

Ltd

Mr. E. Gunatunga X X X - - - - - X X

Mr. S.R. Gnanam X X X X X X X - X X

Mr.Tatsuro Naruse X X X - - - - - - X

Mr. S.V. Wanigasekera X X - - - - - - - X

Mr. A.S.G. Gnanam X X - X X X X X - X

Mr. E.J. Gnanam X X X X X X X - - X

Mr. R. Seevaratnam X X - - - - - - - X

Mr. Shiro Takihara - - - - - - - - - -

Dr.Harsha Cabral X X - - - - - - - X

Dr.I.Coomaraswamy X X - - - - - - - X

“X” denotes the companies in which each of the persons mentioned was a Director.

29.1.1 Mr. T. Naruse, Mr. S. Takihara and S. V. Wanigasekara were appointed by Nippon Coke and Engineering Co. Ltd. as nominee

directors of the company and Mr. T. Naruse was a Director of the Fuji Cement Co (Lanka) Ltd ,Tokyo Super Cement Co

Lanka (Pvt) Ltd and Tokyo Cement Colombo Terminal (Pvt) Ltd as well.

29.1.2 Mr. W.C. Fernando, Group General Manager is a Director of the Fuji Cement Co. (Lanka) Ltd, Tokyo Super Cement Co.

Lanka (Pvt) Ltd, Tokyo Cement Colombo Terminal (Pvt) Ltd, Tokyo Cement Power (Lanka) Ltd. and Tokyo Eastern Cement

Company Ltd.



29. RELATED PARTY TRANSACTIONS (Contd..)

29.2 The Company has had following transactions during the year in the ordinary course of business with related entities at

Commercial rates.

Group Company

2013 2012 2013 2012

Rs. Rs. Rs. Rs.

(a) St. Anthony’s Consolidated (Pvt) Ltd

i. Sales Commission 646,450,652 430,087,260 225,555,123 202,610,135

ii. Rent Paid in Respect of Office Premises - 630,000 - -

(b) St. Anthony’s Hardware (Pvt) Ltd

i. Purchase of Chemicals 56,491,277 34,156,231 56,491,277 34,156,231

ii Sale of Ready Mix Concrete 495,320 - 495,320 -

(c) Tokyo Cement Colombo Terminal (Pvt) Ltd

i Cement Sales including Transport Charges - 194,152,873 - -

ii. Handling & Bagging Income 249,366,060 4,182,958 - -

iii Cement Purchases including Transport Charges 203,887,378 - 203,887,378

(d) South Asian Investment (Pvt) Ltd

i. Sales Commission Paid 26,378,848 75,691,522 - -

(e) Rhino Roofing Products Ltd

i. Sale of Cement 1,651,490,264 1,725,010,758 7,363,369 -

(f) Central Finance PLC

i. Finance Lease - 14,419,358 - -

(g) Tokyo Super Cement Company Lanka (Pvt) Ltd

i. Fund Transfers from /(to) 229,314,841 (501,690,987) 449,145,952 (895,080,729)

ii. Purchase of Bio-Mass Power 35,361,615 74,460,114 35,361,615 74,460,114

iii. Purchase of Gypsum - 84,718,906 - 63,402,291

iv. Dividend Paid 200,807,797 241,941,890 200,807,795 241,941,890

(h) Fuji Cement Company (Lanka) Ltd

i Cement Purchases including Transport Charges - 21,316,615 - -

ii. Cement Sales including Transport Charges 268,653,961 29,402,885 268,653,961 -

iii. Purchase of Bio-Mass Power 23,862,569 30,729,254 23,862,569 30,729,254

iv. Fund Transfers from/(to) 708,263,759 172,140,648 708,263,759 (73,738,649)

v. Dividend Paid 13,449,995 - 13,449,995 -

(i) Tokyo Cement Power (Lanka ) Ltd

i. Investment in Stated Capital 150,000,000 10 150,000,000 10

ii. Fund Transfers from 41,624,000 68,332,297 41,624,000 68,332,297

(j) Providence Network & Solutions (Pvt) Ltd

i. Expenses incurred on ERP Implementation Project 45,252,369 13,745,229 45,252,369 13,745,229

(k) Tokyo Eastern Cement Company Ltd

i. Investment In Stated Capital 1,000 - 1,000 -


29. RELATED PARTY TRANSACTIONS (Contd..)

29.3 Transaction with Key Management Personnel (KMP)

(a) Loans to Directors

No Loans were advanced to the Directors of the company.

(b) Key Management Personnel Compensation

Key Management Personnel comprises Directors of the company and details of the compensation are given in Note 05 to

the Financial Statements.

(c) Remuneration and Allowances

The Remuneration committee decides on the remuneration of Executive Directors and sets guidelines for the remuneration

of the management staff within the group.

(d) Purchase of Company’s Voting/Non-voting Shares

The following interest recognized in acquisition of shares issued by the company to the Board.

Name of Director/KMP No of shares Nature of Date of Consideration

Acquisition Paid per share (Rs.)

E. Gunatunga 2,212 voting shares 25th April 2012 37.00

Tokyo Cement Company

(Lanka) PLC

1,000 Non voting shares 14th September 2012 20.10

Tokyo Cement Company

(Lanka) PLC

30. SUBSIDIARY COMPANIES

Company Holding

Fuji Cement Company (Lanka) Ltd 100%

Tokyo Super Cement Company Lanka (Pvt) Ltd 100%

Tokyo Cement Power ( Lanka) Ltd 100%

Tokyo Eastern Cement Company Ltd 100%

Tokyo Cement Colombo Terminal (Pvt) Ltd 56.85%



31. EVENTS OCCURRING AFTER THE DATE OF STATEMENT OF FINANCIAL POSITION

The directors have recommended the payment of a tax free first and final dividend Rs.1.00 per share amounting to Rs. 202.5

million on issued stated capital of Ordinary Voting Shares and Rs.1.00 per share amounting to Rs. 101.25 million on issued

stated capital of Non Voting Ordinary Shares for the year ended 31st March, 2013, which requires the approval of the share

holders at the Annual General Meeting to be held on 08th August 2013. In accordance with Sri Lanka Accounting Standards

(LKAS) 12 events after the reporting period, this proposed first and final dividend has not being recognised as a liability in

the financial statements under review.

There have been no material events after reporting date that require disclosure in the financial statement.

As required by section 56(2) of the Companies Act No. 07 of 2007, the Board of Directors have confirmed, that the company

satisfy the solvency test in accordance with Section 57 of the Company’s Act No. 7 of 2007 and will be obtaining the

certificate from the auditors prior to payment of the first and final dividend of Rs.1.00 per Ordinary Voting Shares and

Rs.1.00 per Ordinary Non Voting Shares for the financial year under review.

32. COMPARATIVE INFORMATION

Comparative figures have been re-classified where necessary in line with the presentation requirements for the current year.

33. EXPLANATIONS TO THE TRANSITIONS OF SLFRs

33.1 First Time Adoption of SLFRS/LKAS

These financial statements, for the year ended 31st March 2013, are the first financial statement of the Group and the

Company prepared in accordance with SLFRS. For periods upto and including the year ended 31st March 2012, the Group

and the Company have prepared their financial statements in accordance with local generally accepted accounting

practice (past SLAS)

Accordingly, the Group and the Company have prepared financial statements, which comply with SLFRS applicable for

periods ending on or after 31st March 2013, together with the comparative period data as at and for the year ended 31st

March 2012, as described in the accounting policies. In preparing these financial statements, the Group and Company’s

opening statement of financial position was prepared as at 01st April 2011, at the date of transition to SLFRS. The notes

from 33.2 ,33.3, 33.4 and 33.5 explains the principal adjustments made by the Company in restating its Local GAAP

statement of financial position as at 1st April 2011 and its previously published Local GAAP financial statements as at and

for the year ended 31st March, 2011.

Exemptions applied

SLFRS 1 First-Time Adoption of Sri Lanka Financial Reporting Standards allows first-time adopters certain exemptions from

the retrospective application of certain SLFRS.

Estimates

An entity’s estimates in accordance with SLFRS at the date of transition to SLFRS shall be consistent with estimates made

for the same date, in accordance with previous GAAP unless there is an objective evidence that those estimates were in

error. Any information received after the date of transition about the estimates that made under previous GAAP shall be

considered as non-adjusting` events under LKAS 12: Events after the date of the statement of financial position. Entity shall

not reflect new information in its opening Statement of Financial Position, instead the entity shall reflect new information

in profit or loss or if appropriate in other comprehensive income.


33. EXPLANATIONS TO THE TRANSITIONS OF SLFRS (Contd..)

33.2 First Time Adoption of SLFRS/LKAS - Reconciliation of SLAS to SLFRS Reconciliation of Equity - Company Statement of

Financial Position

For the Year Ended 31st March 2011

Group Company

Effect of Effect of

Transition to As per Transition to As per

As per SLAS SLFRS/LKAS SLFRS/LKAS As per SLAS SLFRS/LKAS SLFRS/LKAS

2011 Remeasurements/ 2011 2011 Remeasurements/ 2011

Notes Rs. Reclassifications Rs. Rs. Reclassifications Rs.

ASSETS

Non-Current Assets

Property, Plant and Equipment A, C 8,557,288,433 312,665,136 8,869,953,569 4,270,544,858 211,584,626 4,482,129,484

Capital Work-In-Progress 53,341,664 - 53,341,664 53,303,261 - 53,303,261

Goodwill 13,186,823 - 13,186,823 - - -

Investment - - - 1,730,150,016 - 1,730,150,016

Investment in Fixed Deposit 3,000,000 - 3,000,000 - - -

Operating Lease Prepayment C 69,460,316 22,238,591 91,698,907 - 22,238,591 22,238,591

8,696,277,236 334,903,727 9,031,180,963 6,053,998,135 233,823,217 6,287,821,352

Current Assets

Inventories 1,122,366,999 - 1,122,366,999 419,638,892 - 419,638,892

Trade & Other Receivables D 1,096,139,175 (5,293,874) 1,090,845,300 480,765,713 (5,293,874) 475,471,839

Tax Receivables 345,555,480 - 345,555,480 152,574,914 - 152,574,914

Amount Due from Related Parties - - - 726,045,800 - 726,045,800

Short Term Investments E - 271,330 271,330 - 100,605 100,605

Cash and Cash Equivalents E 199,254,967 (271,330) 198,983,637 37,660,850 (100,605) 37,560,245

2,763,316,621 (5,293,874) 2,758,022,746 1,816,686,169 (5,293,874) 1,811,392,295

Total Assets 11,459,593,856 329,609,852 11,789,203,709 7,870,684,304 228,529,343 8,099,213,647

EQUITY AND LIABILITIES

Stated Capital 2,366,750,000 - 2,366,750,000 2,366,750,000 - 2,366,750,000

Reserves 150,000,000 - 150,000,000 - - -

Retained Earnings A,D,G 3,102,826,104 219,330,066 3,322,156,170 2,282,285,695 146,691,217 2,428,976,912

Equity Attributable to the

Equity holders of the Parent F 5,619,576,104 219,330,066 5,838,906,170 4,649,035,695 146,691,217 4,795,726,912

Non-controlling interest F 95,328,482 8,107,824 103,436,306

5,714,904,586 227,437,890 5,942,342,476 4,649,035,695 146,691,217 4,795,726,912

Non-Current Liabilities

Interest Bearing Borrowings 939,937,323 - 939,937,323 566,604,001 - 566,604,001

Deferred Tax G 496,336,201 102,171,962 598,508,163 301,210,459 81,838,126 383,048,585

Retirement Benefits Obligation 37,233,952 - 37,233,952 25,722,661 - 25,722,661

Deferred Revenue 4,073,748 - 4,073,748 - - -

Lease Creditors 17,357,292 - 17,357,292 - - -

1,494,938,516 102,171,962 1,597,110,478 893,537,121 81,838,126 975,375,247

Current Liabilities

Trade & Other Payables H 1,644,706,977 (590,850,000) 1,053,856,978 958,873,889 (500,160,000) 458,713,889

Amount Due to Related Parties - - - 555,688,197 - 555,688,197

Current Maturity Portion of Interest

Bearing Borrowings H 2,303,823,700 590,850,000 2,894,673,700 657,664,799 500,160,000 1,157,824,799

Lease Creditors 39,937,627 - 39,937,627 1,498,166 - 1,498,166

Bank Overdrafts 261,282,450 - 261,282,450 154,386,437 - 154,386,437

4,249,750,754 - 4,249,750,755 2,328,111,488 - 2,328,111,488

Total Equity & Liabilities 11,459,593,856 329,609,852 11,789,203,709 7,870,684,304 228,529,343 8,099,213,647




33.3 First Time Adoption of SLFRS/LKAS - Reconciliation of SLAS to SLFRS (Contd..)

Reconciliation of Comprehensive Income- Consolidated Statement of Comprehensive Income for the Year Ended 31st March 2012

Group Company

Effect of Effect of





Turnover 22,927,176,489 22,927,176,489 8,533,037,198 8,533,037,198

Cost of Sales A,K (19,044,272,750) 253,910,862 (18,790,361,888) (6,718,176,108) 162,435,087 (6,555,741,021)

Gross Profit 3,882,903,739 253,910,862 4,136,814,601 1,814,861,090 162,435,087 1,977,296,177

Other Income I 194,598,473 (9,244,670) 185,353,803 411,476,299 (1,495,869) 409,980,430

Distribution Expenses (1,894,882,724) (223,770) (1,895,106,494) (829,469,273) - (829,469,273)

Administrative Expenses J (708,495,742) (18,041,512) (726,537,254) (424,729,251) 935,370 (423,793,881)

Profit from Operations 1,474,123,746 226,400,910 1,700,524,656 972,138,865 161,874,588 1,134,013,453

Finance Income I - 11,081,060 11,081,060 - 3,332,259 3,332,259

Finance Expenses (435,507,538) - (435,507,538) (160,066,763) - (160,066,763)

Profit Before Taxation 1,038,616,208 237,481,970 1,276,098,178 812,072,102 165,206,847 977,278,949

Income Tax Expense G (190,375,136) (40,263,950) (230,639,086) (162,310,283) (28,503,091) (190,813,374)

Profit/(Loss) for the Period 848,241,072 197,218,020 1,045,459,092 649,761,819 136,703,756 786,465,575

Other Comprehensive Income

Actuarial Gains/(Loss) on

Defined Benefit Plan K - (3,509,855) (3,509,855) - (3,117,899) (3,117,899)

Tax on Other Comprehensive Income K - (494,082) (494,082) - - -

Total Other Comprehensive

Income Net of Tax - (4,003,937) (4,003,937) - (3,117,899) (3,117,899)

Total Comprehensive Income 848,241,072 193,214,083 1,041,455,155 649,761,819 133,585,857 783,347,676

Attributable To;

Equity Holders of the Parent F 973,316,455 1,170,873,544

Non-Controlling Interest F (125,075,383) (129,418,389)





Group Company

Effect of Effect of





ASSETS

Non-Current Assets

Property, Plant and Equipment A, B, C 9,125,099,690 555,839,445 9,680,939,135 5,091,453,226 372,257,236 5,463,710,462

Capital Work-In-Progress 162,396,447 - 162,396,447 85,584,484 - 85,584,484

Intangibles/Goodwill B 13,186,823 8,750,307 21,937,130 - - -

Investment - - - 1,730,150,026 - 1,730,150,026

Operating Lease Prepayment C 65,119,046 21,818,539 86,937,585 - 21,818,539 21,818,539

9,365,802,006 586,408,291 9,952,210,297 6,907,187,736 394,075,775 7,301,263,511

Current Assets

Inventories 1,482,956,694 - 1,482,956,695 729,317,477 - 729,317,477

Trade & Other Receivables D 1,572,167,146 (3,457,484) 1,568,709,662 782,337,994 (3,457,483) 778,880,511

Tax Receivables 315,007,169 (19,368,838) 295,638,331 149,800,273 - 149,800,273

Amount Due from Related Parties - - - 88,082,641 - 88,082,641

Short Term Investments E - 7,100,196 7,100,196 - 2,114,416 2,114,416

Cash and Cash Equivalents E 239,062,181 (7,100,196) 231,961,985 47,101,686 (2,114,416) 44,987,270

3,609,193,190 (22,826,322) 3,586,366,869 1,796,640,071 (3,457,483) 1,793,182,588

Total Assets 12,974,995,196 563,581,969 13,538,577,166 8,703,827,807 390,618,292 9,094,446,099

EQUITY AND LIABILITIES

Stated Capital 2,366,750,000 - 2,366,750,000 2,366,750,000 - 2,366,750,000

Reserves 150,000,000 - 150,000,000 - - -

Retained Earnings A,D,G,J 3,772,392,559 416,887,155 4,189,279,714 2,628,297,514 280,277,076 2,908,574,590

Equity attributable to the

Equity Holders of the Parent F 6,289,142,559 416,887,155 6,706,029,714 4,995,047,514 280,277,076 5,275,324,590

Non-Controlling Interest F (29,746,901) 3,764,820 (25,982,082) - - -

6,259,395,658 420,651,975 6,680,047,632 4,995,047,514 280,277,076 5,275,324,590

Non-Current Libilities

Interest Bearing Borrowings 1,552,906,775 - 1,552,906,775 728,541,662 - 728,541,662

Deferred Tax G 644,703,656 142,929,994 787,633,650 457,744,464 110,341,218 568,085,682

Retirement Benefits Obligation 45,443,928 - 45,443,928 32,971,615 - 32,971,615

Lease Creditors 2,674,536 - 2,674,536 - - -

2,245,728,895 142,929,994 2,388,658,889 1,219,257,741 110,341,218 1,329,598,959






Group Company

Effect of Effect of





Current Liabilities

Trade & Other Payables H 2,866,142,474 (1,300,695,190) 1,565,447,286 1,268,179,647 (677,164,015) 591,015,632

Amount Due to Related Parties - - - 559,048,778 - 559,048,778

Current Maturity Portion of

Interest Bearing Borrowings H 1,312,167,544 1,300,695,190 2,612,862,734 474,370,338 677,164,015 1,151,534,353

Lease Creditors 14,682,767 - 14,682,767 -

Deferred Revenue -

Current Maturity Portion 1,198,161 - 1,198,161 - - -

Bank Overdrafts 275,679,697 - 275,679,697 187,923,789 - 187,923,789

4,469,870,643 - 4,469,870,645 2,489,522,552 - 2,489,522,552

Total of Equity and Liabilities 12,974,995,196 563,581,969 13,538,577,166 8,703,827,807 390,618,292 9,094,446,099


Notes to the Reconciliations;

Effect of the First Time Adoption of LKASs and SLFRSs.

A Effect on Expanded Useful Life Time of the Property, Plant and Equipment

During the year the group and company have reinstated their fully depreciated property, plant and equipment and also

carried out a comprehensive assessment of useful life of the property, plant and equipments as mentioned in the note no

2.3.1. Further components with different useful lives were also identified. Accordingly cumulative depreciation of these items

of property, plant and equipment have been restated through retain earnings. Adjusted written down values of property,

plant & equipments are shown under note No. 9A and 9B.

The group and company reassessed the useful life spans of its certain items of property, plant and equipment at the date

of transition to SLFRS. Accordingly, such reassessments of life spans have resulted in increase in carrying value of the assets

of Rs.327,903,726/-(Group), Rs.233,823,217/-(Company) and Rs.586,408,291/-(Group), Rs. 394,075,777/-(Company) as of

31st March 2011 and 31st March 2012 respectively. These have been adjusted under cost of sales and selling & distribution

expenses during the year of 2012 and through retains earnings at the date of transition to SLFRS.




B Intangible Assets

Computer application software which had been previously recognized as computer hardware and software amounting

to Rs.9,555,327/-(Group) (net book value amounts to Rs.8,770,307/- as at 31st March 2012) has now been reclassified as

intangible assets. Annual amortization amounting to Rs.805,020/- has been recognized as an administrative expense in the

statement of comprehensive income for the year ended 31st March 2012.

C Operating Lease Prepayment

Operating lease prepayment which had been previously classified under the category of property, plant & equipment

amounting to Rs.25,815,500/-(Group and company), (net book value amounts to Rs.22,238,591/- as at the date of transition

to SLFRS) has now been reclassified as operating lease prepayments. Annual amortization amounting to Rs.420,052/- has

been recognized as an administrative expense in the income statement for the year ended 31st March 2012.

D Trade & Other Receivables

Trade debtors who had due balances over one year with settlements plans at the date of transition to SLFRS have been

carried out a fair value adjustment (Impairment test of trade debtors) amounting to Rs.5,293,874/- and Rs.3,457,484/-

(Group/Company) has been recognized as selling & distribution expense in the statement of comprehensive income

amounting to Rs.3,457,484/- for the year ended 31st March 2012 and amounting to Rs.5,293,874/- through retained

earnings at the date of transition to SLFRSs.

E Short Term Investments

Short term investments which had been previously classified under the cash & cash equivalents amounting to

Rs.7,100,196/- (Group), Rs.2,114,416/- (Company) and Rs.271,300/- (Group) Rs.100,605/- (Company) has now been

reclassified as short term investments as of 31st March 2011 and 31st March 2012 respectively.

F Non-Controlling Interest

Non-controlling interest and profit attributable to parent have been recomputed in respect of changed profit/(Loss) of the

group with effect on IFRS adjustments.

G Differed Tax Liability

The deferred tax has been recomputed the adjustments made in respect of reassessment of life spans of property, plant

and equipment. Effect on reassessment of life spans of Property, Plant and Equipment amounting to Rs.102,171,962/- (Group)

Rs.61,192,425/- (Company) and Rs.81,838,126/- (Group) Rs.44,870,717/- (Company) as of 31st March 2011 and 31st March,

2012 respectively. That has been recognized as tax expenses in the statement of comprehensive income for the year ended

31st March 2012 and charged through retained earnings at the date of transition to SLFRs.



33. EXPLANATIONS TO THE TRANSITIONS OF SLFRSs (Contd..)


H Current Maturity Portion of Interest Bearing Borrowings

Current maturity portion of interest bearing borrowings has been renamed as short term borrowings on the financial

statements and other short term borrowings which were included in trade and other payables have been reclassified as short

term borrowings from the date of transition to SLFRS.

I Other Income

Interest income which had been previously classified as other income amounting to Rs.11,081,060/-(Group) Rs.3,332,259/-

(Company) has been reclassified as finance income. Reversal of impaired trade debtors amounting to Rs.1,836,390/- has been

occurred as of 31st March 2012.

J Administrative Expenditure

The Economic Service Charges receivables amounting Rs.19,368,838/- which was over 5 years as at 31st March, 2012 has

been written off in to the statement of comprehensive income under administrative expenditures and also actuarial loss on

retirement benefit plan relating to 2011/2012 period amounting to Rs.1,327,326/- has been reclassified under the statement

of other comprehensive income.

K Actuarial Gains/(Loss) on Defined Benefit Plan

Actuarial gains/(Loss) on defined benefit plan which had been classified as provision of retirement benefit under cost of sales

and administrative expenditure amounting to Rs.3,509,855/-(Group) and Rs.3,117,899/- (Company) has been presented under

the statement of other comprehensive income from the date of transition to SLFRSs. Accordingly the tax effect on other

comprehensive income has been presented separately in the statement of other comprehensive income.


Shareholder &

Investor Information

DISTRIBUTION OF VOTING ORDINARY SHARES AS AT 31st March 2013

Category No of Share % Holding

Holders Holdings

Nos Shares

1 250 794 67,518 0.03

251 - 500 339 142,966 0.07

501 - 1,000 356 305,530 0.15

1,001 - 2,000 454 673,681 0.33

2,001 - 5,000 494 1,611,937 0.80

5,001 - 10,000 218 1,530,168 0.76

10,001 - 20,000 178 2,453,350 1.21

20,001 - 30,000 92 2,212,950 1.09

30,001 - 40,000 30 1,016,373 0.50

40,001 - 50,000 36 1,602,341 0.79

50,001 - 100,000 55 3,946,585 1.95

100,001 - 1,000,000 53 12,316,252 6.08

1,000,001 - 99,999,999 17 174,620,349 86.23

TOTAL 3,116 202,500,000 100.00

DISTRIBUTION OF NON-VOTING ORDINARY SHARES AS AT 31st March 2013

Category No of Share % Holding

Holders Holdings

Nos Shares

1 - 250 1,142 102,735 0.10

251 - 500 487 196,515 0.19

501 - 1,000 569 485,264 0.48

1,001 - 2,000 490 747,289 0.74

2,001 - 5,000 569 1,982,498 1.96

5,001 - 10,000 303 2,349,367 2.32

10,001 - 20,000 176 2,615,201 2.58

20,001 - 30,000 85 2,129,569 2.10

30,001 - 40,000 46 1,620,229 1.60

40,001 - 50,000 23 1,073,062 1.06

50,001 - 100,000 75 5,575,763 5.51

100,001 - 1,000,000 89 27,381,811 27.04

1,000,001 - 99,999,999 16 54,990,697 54.31

TOTAL 4,070 101,250,000 100.00

Market Price per share (Rs.)

Voting Odinary Shares Non Voting Odinary Shares

31st March 2013 31st March 2012 31st March 2013 31st March 2012

Highest for the period 28.90 46.50 19.90 31.00

Lowest for the period 22.90 36.10 17.50 23.00

Last Traded for the period 23.50 37.00 17.50 27.00


Voting /Non Voting Ordinary Shares

As at 31st March 2013

Percentage of Public Shareholding

Voting Odinary Shares Non Voting Odinary Shares

No of Shares % Holding No of Shares % Holding

Nippon Coke Engineering Co Limited - Japan 49,004,932 24.20 - -

St Anthony’s Consolidated ( Pvt) Limited 55,687,252 27.50 - -

South Asian Investment (Pvt) Limited 39,659,550 19.59 - -

Capital City Holdings (Pvt) Limited 6,075,275 3.00 - -

St. Anthony’s Hardware (Pvt) Limited. 413,100 0.20 - -

150,840,109 74.49 - -

Public Shareholding 51,659,891 25.51 101,250,000 100.00

Total Shareholding 202,500,000 100.00 101,250,000 100.00

Directors and CEO Shareholding

Voting Ordinary Shares Non Voting Ordinary Shares

No of No of No of No of

Shares Held Shares Held Shares Held Shares Held

As at 31/3/13 As at 31/3/12 As at 31/3/13 As at 31/3/12

Local Joint Venture Partner - St Anthony’s

Consolidated (Private) Limited 55,687,252 55,687,252 - -

Gnanam A S G 11 11 - -

Gnanam S R - Managing Director/CEO 11 11 - -

Gnanam E J 11 11 - -

Edgar Gunatunga - Chairman 2,212 - 1,000 -

Foreign Joint Venture Partner - Nippon Coke

Engineering Co Limited, Japan 49,004,932 55,687,432 - -

Nominee Directors of Foreign Collaborator

Mr Wanigasekera S V 5,400 5,400 14,487 13,487

Mr Tatsuro Naruse - - - -

Mr Shiro Takihara - - - -

Independant Directors

Mr Ranjeevan Seevaratnam - - - -

Dr Harsha Cabral - - - -

Dr Indrajit Coomaraswamy - - - -

- - - -

104,699,829 111,380,117 15,487 13,487

Total shares in issue 202,500,000 202,500,000 101,250,000 101,250,000

Shareholder &

Investor Information


Twenty Largest Shareholders as at 31st March

Voting 31st March 13 % 31st March 12 %

Nippon Coke & Engineering Co Limited 49,004,932 24.20 55,687,432 27.50

St Anthony’s Consolidated (Private) Limited 55,687,252 27.50 55,687,252 27.50

South Asian Investment (Pvt) Ltd 39,659,550 19.58 32,977,050 16.28

Capital City Holdings (Private) Limited 6,075,279 3.00 6,075,279 3.00

Hsbc Intl Nom Ltd-Jpmcb-Forsta Ap-Fonden 3,726,552 1.84 3,976,900 1.96

Late Mr Radhakrishnan M (former director) 2,493,045 1.23 2,493,045 1.23

Employees Trust Fund Board 2,673,642 1.32 2,189,607 1.08

Associated Electrical Corporation Ltd 1,857,106 0.92 1,856,800 0.92

Sri Lanka Insurance Corporation Ltd - Life Fund 1,830,375 0.90 1,830,375 0.90

Pershing Llc S/A Averbach Grauson & Co. 1,731,600 0.86 1,731,600 0.86

Hamish Winston Mcdonald Woodward 1,411,091 0.70 1,687,500 0.83

Hsbc Intl Nom Ltd-Ssbt- Russell Institutional Fund 1,520,000 0.79 1,520,000 0.75

Hsbc Intl Nom Ltd-Ssbt-Russell Trust Company Commi 1,513,125 0.75 1,513,125 0.75

Aviva Ndb Insurance Plc A/C No 07 Not in Top 20 list - 1,231,321 0.61

National Savings Bank 1,213,200 0.60 1,213,200 0.60

Sri Lanka Insurance Corporation Ltd - General Fund 1,175,600 0.58 1,175,600 0.58

Kenneth Rudy Kamon 693,400 0.34 693,400 0.34

Gaasinather Gangaser Ponnampalam (Decd) 1,080,000 0.53 1,080,000 0.53

Bank Of Ceylon No. 1 Account 563,161 0.28 Not in Top 20 list -

Union Assurance Plc/No - 01 A/C 582,525 0.29 582,525 0.29

TOTAL 174,491,435 86.21 175,202,011 86.51

Twenty Largest Shareholders as at 31st March

NON Voting 31st March 13 % 31st March 12 %

Employees Provident Fund 9,739,241 9.61 8,632,115 8.52

Hinl-Jpmcb-Butterfield Trust ( Bermuda ) Limited 7,401,875 7.31 7,401,875 7.31

Associated Electrical Corporation Ltd 7,208,200 7.11 7,178,200 7.08

Deutsche Bank Ag As Trustee For Jb Vantage Value E 1,773,747 1.75 Not in Top 20 list -

Sri Lanka Insurance Corporation Ltd - Life Fund 4,003,600 3.95 4,003,600 3.95

Waldock Mackenzie Ltd/Hi-Line Trading (Pvt) Ltd 3,787,221 3.74 3,936,695 3.88

Peoples Bank 879,743 0.86 Not in Top 20 list -

Union Assurance Plc/No - 01 A/C 2,416,500 2.38 2,416,500 2.38

National Savings Bank 2,335,000 2.30 2,335,000 2.30

DFCC Bank A/C 1 2,247,000 2.21 2,247,000 2.21

Employees Trust Fund Board 2,271,525 2.24 2,246,525 2.21

J.B. Cocoshell (Pvt) Ltd 2,853,313 2.81 2,166,400 2.13

Bank Of Ceylon - No 2 A/C 1,746,372 1.72 1,746,372 1.72

Deutsche Bank Ag - National Equity Fund 1,401,000 1.38 1,401,000 1.38

Rajkotwala Y A 810,763 0.80 Not in Top 20 list -

Mas Capital (Private) Limited 3,654,500 3.60 1,144,500 1.13

Hsbc Intl Nominees Ltd-Credit Suisse Ag Zurich 1,125,000 1.11 1,125,000 1.11

Deutsche Bank Ag As Trustee For Namal Acuity Value 1,026,600 1.01 1,026,600 1.01

Abdulhusen Hassenally Rajkotwala 926,900 0.91 926,900 0.91

Bank Of Ceylon A/C Ceybank Century Growth Fund 878,038 0.86 811,772 0.80

TOTAL 58,486,138.00 57.66 50,746,054.00 50.03


Summary - Group

Rs. Mn.

Year ended March 31 2012/2013 2011/2012 2010/2011 2009/2010 2008/2009

OPERATING RESULTS

Turnover 27,296 22,927 16,495 14,738 17,652

Gross profit 5,289 4,242 3,219 2,295 2,719

Profit Before Taxation 1,252 1,272 1,163 347 647

Taxation (360) (231) (115) 4 (289)

Profit After Taxation 892 1,041 1,048 351 358

Non Controlling Interest (9) 129 37 18 (11)

Profit Attributable to Ordinary Shareholder 883 1,170 1,085 369 347

BALANCE SHEET

Assets

Non Current Assets

Propery, Plant & Equipment 9,901 9,681 8,870 9,055 9,359

Capital Work - in - Progress 701 162 53 93 397

Goodwill 20 22 13 13 13

Investment - - - - 0.50

Fixed Deposit - - 3 3 3

Operating Lease Prepayment 82 87 92 74 78

Total Non Current Assets 10,704 9,952 9,031 9,238 9,850

Current Assets

Inventories 1,793 1,483 1,122 688 1,388

Trade & Other Receivable 1,950 1,871 1,437 1,572 1,943

Cash & Cash Equivalent 369 232 199 911 311

Total Current Assets 4,112 3,586 2,758 3,171 3,642

Total Assets 14,816 13,538 11,789 12,409 13,492

Equity & Liabilities

Capital & Reserves

Stated Capital 2,367 2,367 2,367 1,793 1,793

Reserves 150 150 150 150 150

Retained Earnings 4,678 4,189 3,322 3,304 3,300

7,195 6,706 5,839 5,247 5,243

Non Controlling Interest (17) (26) 103 140 158

Total Capital & Reserves 7,178 6,680 5,942 5,387 5,401


Rs. Mn.

Year ended March 31 2012/2013 2011/2012 2010/2011 2009/2010 2008/2009

Non Current Liabilities

Interest Bearing Borrowing 1,044 1,553 940 1,387 868

Deferred Tax 1,095 788 599 498 264

Retirement Benefit Obligations 57 45 37 30 23

Deferred Revenue - - 4 7 10

Lease Creditors - 3 17 53 98

Total Non Current Liabilities 2,196 2,389 1,597 1,975 1,263

Current Liabilities

Trade & Other Liabilities 1,763 1,565 1,054 2,220 3,775

Short Term Borrowings 3,196 2,613 2,895 2,357 2,569

Lease Creditors - 14 40 48 43

Deferred Revenue - Current Maturity Portion - 1 - - -

Bank Overdraft 483 276 261 422 441

Total Current Liabilities 5,442 4,469 4,250 5,047 6,828

Total Equity and Liabilities 14,816 13,538 11,789 12,409 13,492

INVESTOR INFORMATION

Earnings Per Share - Voting Ordinary Share (Rs.) 2.94 3.44 3.45 1.37 12.84

Earnings Per Share - Non Voting Ordinary Share (Rs.) 2.94 3.44 3.45 1.37 1.28

Dividend Per Share - Voting Ordinary Share (Rs.) 1.00 1.30 1.65 1.65 3.00

Dividend Per Share - Non Voting Ordinary Share (Rs.) 1.00 1.30 1.65 1.65 0.30

Retun on Equity (%) 12.40 15.52 17.95 6.70 6.82

Interest Cover (Time) 2.79 3.93 3.39 1.42 1.78

Market Price Per Share (Rs.) - Voting 23.50 37.00 60.80 28.00 125.00

Market Price Per Share (Rs.) - Non Voting 17.50 27.00 44.00 18.25 9.25

Price Earnings Ratio (Times) 7.99 10.76 17.62 20.44 9.74

Assets Turnover Ratio (Times) 1.84 1.69 1.40 1.19 1.31

Net Asset Per Share (Rs.) 23.63 21.99 19.56 19.95 50.01


Summary - Graphical Review

Return on Equity

20

09

20

10

20

11

20

12

20

13

6.8

2

6.7

0

17

.95

15

.52

12

.40

(%)

Total Assets

20

09

20

10

20

11

20

12

20

13

13

,49

2

12

,40

9

11

,78

9

13

,53

8

14

,81

6(Rs Mn)

Dividend per share

Voting

20

09

20

10

20

11

20

12

20

13

3.0

0

1.6

5

1.6

5

1.3

0

1.0

0

(Rs)

* * * ** After sub division

Dividend per share

Non voting

0.3

0 1.6

5

1.6

5

1.3

0

1.0

0

(Rs)

20

09

20

10

20

11

20

12

20

13

Asset Turnover

20

09

20

10

20

11

20

12

20

13

1.3

1

1.1

9 1.4

0

1.6

9 1.8

4 (Times)

Capital Employed

20

09

20

10

20

11

20

12

20

13

6,6

60

7,3

62

7,5

39 9

,06

9

9,3

74

(Rs Mn)

Capital Investments

20

09

20

10

20

11

20

12

20

13

2,4

08

1,0

83

44

0

1.9

23

1.5

05

(Rs Mn)

Interest Cover

20

09

20

10

20

11

20

12

20

13

1.7

8

1.4

2

3.3

9 3.9

3

2.7

9

(Times)

Composition

Assets

PPE & CWIP (72%)

Inventories (12%)

Trade & Other Receivables (11%)

Other Assets (5%)


Earnings after tax &

interest

20

09

20

10

20

11

20

12

20

13

35

8

35

1

1,0

48

1,0

41

89

2(Rs Mn)

Earning per share

Non Voting

20

09

20

10

20

11

20

12

20

13

1.2

8

1.3

7

3.4

5

3.4

4

2.9

4

(Rs)

Earnings before

Interest & Tax

20

09

20

10

20

11

20

12

20

13

1,4

81

1,1

85

1,6

49

1,7

12 1,9

55(Rs)

Earning per share

Voting

20

09

20

10

20

11

20

12

20

13

12

.84

1.3

7

3.4

5

3.4

4

2.9

4

(Rs)

** *

* After sub division*

Gearing Ratio

20

09

20

10

20

11

20

12

20

13

0.6

4 0.6

9

0.5

5

0.4

1

0.2

3

(Times)

Group Revenue

20

09

20

10

20

11

20

12

20

13

17

,65

2

14

,73

8

16

,49

5

22

,92

7 27

,29

6

(Rs Mn)

Net Assets per share

20

09

20

10

20

11

20

12

20

13

50

.01

19

.95

19

.59

21

.99

23

.63

(Rs)

Composition

Liabilities

Shareholders Equity (48%)

Borrowings (22%)

Trade & Other Payables (22%)

Other Liabilities (8%)


Meeting

NOTICE IS HEREBY GIVEN that the Thirty First Annual General Meeting of the Shareholders of Tokyo Cement Company (Lanka) PLC will be held on 08th August 2013 at 4.30 p.m. at the Auditorium, Institute of Chartered Accountants of Sri Lanka, 30A, Malalasekera Mawatha, Colombo 7. The business to be brought before the Meeting to transact will be :

AgendaNormal Business1. To receive and adopt the Report of the Directors, the

statement of Audited Accounts for the year ended 31st March 2013 and the Report of the Auditors thereon.

2. To declare a final dividend of Rs. 1/- per Ordinary Share and Rs. 1/- per Non Voting Ordinary Share in respect of the Financial Year ending 31st March 2013 and on the Stated Capital of Rs. 2,366,750,000/- comprising of 202,500,000 Ordinary Shares (voting) and 101,250,000 Non Voting Ordinary Shares as recommended by the directors .

3. To authorize the Directors to fix the remuneration payable to the Auditors BDO Partners, (Chartered Accountants) or determining the manner in which such remuneration is to be given.

(An Auditor is deemed to be re-appointed at an Annual General Meeting of the Company under Article 176)

4 To authorize the Directors to determine contributions to charities

5. To re-elect Mr Arul Selvaraj Gunaseelan Gnanam who retires by rotation in terms of Article 113 of the Articles of Association.

6 Special Business

To re-elect as a director Mr Edgar Gunatunga and being over the age of 70 years and who retires in terms of Articles of Association and pursuant to Section 211 of the Companies Act No 7 of 2007 for which special notice of the following ordinary resolution has been given by a member for the purpose

THAT the age limit referred to in Section 210 of the Companies Act No 7 of 2007 shall not apply to Mr Edgar Gunatunga who is 81 years and that he be re-elected a Director of the Company

7. To transact any other business of which due notice has been given.

By Order of the Board

TOKYO CEMENT COMPANY (LANKA) PLC Seccom (Private) LimitedCompany Secretaries29th June 2013

Notes1. A member entitled to attend and vote at the above

meeting is entitled to appoint a proxy to attend and vote instead of him.

2. A proxy need not be a member of the Company.

3. A form of proxy accompanies this notice .

4. The completed Form of Proxy should be deposited at the Registered Office of the Company, 469 - 1/1, Galle Road, Colombo 3 not later than 48 hours before the time appointed for the commencement of the Meeting.

5 Shareholders / proxies attending the Annual General Meeting, please produce your National Identity Card to the security personnel stationed at the entrance

PROPOSED RESOLUTIONSORDINARY BUSINESS

Resolution 1- Adoption of AccountsTHAT the Directors’ Report and Accounts for the year ended 31st March 2013 as audited and reported by the Company’s Auditors be and they are hereby received and adopted.

Resolution 2 - Dividends“That a final dividend of -Rs. 1/- per Ordinary Share (Voting) and Rs. 1/- per Non Voting Ordinary Share in respect of the Financial Year ending 31st March 2013 be paid out of the Company’s tax free dividends received and tax free profit on the Stated Capital of Rs. 2,366,750,000/- comprising of 202,500,000 Ordinary Shares (voting) and 101,250,000 Non Voting Ordinary Shares as recommended by the directors.

Resolution 3 - RE- Appointment of AuditorsDirectors are authorized to fix the remuneration payable to the Auditors BDO Partners, (Chartered Accountants) or determining the manner in which such remuneration is to be given.

Resolution 4 - DonationsThat the directors are hereby authorised to make donations for good cause and as a corporate responsibility to the society.

Resolution 5- Re-election of DirectorsTHAT Mr. Arul Selvaraj Gunaseelan Gnanam be and is hereby re-elected a Director of the Company.

Special BusinessResolution 6 - Re-election of DirectorsAge Limit not to ApplyTHAT the age limit referred to in Section 210 of the Companies Act No 7 of 2007 shall not apply to Mr Edgar Gunatunga who is 81 years and that he be re-elected a Director of the Company

125

Proxy

For Thirty First Annual General Meeting of

TOKYO CEMENT COMPANY (LANKA) PLC

I/We .....................................................................................................................................................................................................................................................

of .............................................................................................................................................................................................................................................................

being a member /members * of the Company hereby appoint ............................................................................. of ................................................

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

Mr. Edgar Gunatunga of Colombo or failing him

Mr. Simon Rajaseelan Gnanam of Colombo or failing him

Mr. Tatsuro Naruse of Japan or failing him

Mr. Stanley Vincent Wanigasekera of Colombo or failing him

Mr. Arul Selvaraj Gunaseelan Gnanam of Colombo or failing him

Mr. Elijah Jeyaseelan Gnanam of Colombo or failing him

Mr. Shiro Takihar of Japan or failing him

Mr. Ranjeevan Seevaratnam of Colombo or failing him

Dr. Harsha Cabral of Colombo or failing him

Dr. I Coomaraswamy of Colombo or failing him

as my /our Proxy to represent me/us and * ........ / to vote for me/us on my/our behalf at the Thirty First Annual General Meeting

of the Company to be held on 08th August 2013 at 4.30 p.m. at the Auditorium, Institute of Chartered Accountants of Sri Lanka,

30A, Malalasekera Mawatha, Colombo 7 and at any adjournment thereof and at every poll which may be taken in consequence

thereof.

I/We the undersigned, hereby direct my/our proxy to vote for me/us and on my/our behalf on the resolutions set out in the

Notice convening the meeting by an “X” in the appropriate space given below

For Against

1 To receive and adopt the Report of the Directors, the statement of Audited Accounts for the

year ended 31st March 2013 and the Report of the Auditors thereon.

2 To declare a final dividend of Rs.1/- per Ordinary Share (Voting) and Rs. 1/- per Non Voting

Ordinary Share in respect of the Financial Year ending 31st March 2013 and on the Stated

Capital of Rs. 2,366,750,000/- comprising of 202,500,000 Ordinary Shares (voting) and

101,250,000 Non Voting Ordinary Shares as recommended by the directors.

3 To authorize the Directors to fix the remuneration payable to the Auditors

4 To authorize the Directors to determine contributions to charities

5 To re-elect Mr Arul Selvaraj Gunaseelan Gnanam as a Director of the Company.

6 To re-elect as a director Mr Edgar Gunatunga and being over the age of 70 years for which

special notice has been received from a member for the purpose

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

Signature of Shareholder/s Date

VOTING ORDINARY SHARES

126

Notes:

1. Please delete the inappropriate words.

2. If you wish your proxy to speak at the meeting you should interpolate the words “to speak” in the place indicated with an

asterisk and initial such interpolation.

3. Instructions as to completion are enclosed.

4. Dividend if approved, will be paid on or before 21st August 2013 to those members whose names appear on the Company ‘

Register of Members as on end of trading on 08th August 2013. (Ex div date 12th August 2013)

{ CSE Listing Rule - the date of dispatch of the dividend payment shall be within seven (7) Market Days from and excluding

the date on which the related resolution is passed by the shareholders at a meeting. The Ex-Dividend (‘XD’) date shall be the

Market Day immediately following the date on which the related resolution is passed by the shareholders at the meeting}.

5. Members are requested to inform the changes if any , in their registered addresses to the Company’s Secretaries or Central

Depository System as appropriate.

6. Members are invited to direct all correspondences relating to matters on shares, dividends, change of addresses etc to the

Company’s Secretaries quoting their register folio number.

If you maintain an account with Central Depository Systems (Private) Limited, we advice you to inform them directly through

your broker with regard to your change of address and dividend mandate.

INSTRUCTIONS AS TO COMPLETION

1. To be valid, this form of proxy must be deposited at the Registered Office, 469 1/1 Galle Road, Colombo 3 not later than 48

hours before the time appointed for holding the meeting.

2. In perfecting the form of proxy please ensure that all details are legible.

3. Please indicate with an ‘X’ in the relevant space given against each resolution how your proxy is to vote on the 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 Form of Proxy must be under its Common Seal which should be affixed and

attested in the manner prescribed by its Articles of Association.

5. In the case of a proxy signed by an attorney, the power of attorney must be deposited at the Registered Office for

Registration.

6. In the case of non-resident Shareholders, the stamping, if necessary, will be attended to, on return of the completed form of

proxy to the Registered Office of the Company in Sri Lanka.

127

Proxy NON VOTING ORDINARY SHARES

For Thirty First General Meeting of

TOKYO CEMENT COMPANY (LANKA) PLC

I/We .....................................................................................................................................................................................................................................................

of .............................................................................................................................................................................................................................................................

being a member /members * of the Company hereby appoint ............................................................................. of ................................................

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

Mr. Edgar Gunatunga of Colombo or failing him

Mr. Simon Rajaseelan Gnanam of Colombo or failing him

Mr. Tatsuro Naruse of Japan or failing him

Mr. Stanley Vincent Wanigasekera of Colombo or failing him

Mr. Arul Selvaraj Gunaseelan Gnanam of Colombo or failing him

Mr. Elijah Jeyaseelan Gnanam of Colombo or failing him

Mr. Shiro Takihara of Japan or failing him

Mr. Ranjeevan Seevaratnam of Colombo or failing him

Dr. Harsha Cabral of Colombo or failing him

Dr. I Coomaraswamy of Colombo or failing him

as my /our Proxy to represent me/us and * ................................ on my/our behalf at the Thirty First Annual General Meeting of the

Company to be held on 08th August 2013 at 4.30 p.m. at the Auditorium, Institute of Chartered Accountants of Sri Lanka, 30A,

Malalasekera Mawatha, Colombo 7 and at any adjournment thereof

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

Signature of Shareholder/s Date

128

Notes :

1. Please delete the inappropriate words.

2. If you wish your proxy to speak at the meeting you should interpolate the words “to speak” in the place indicated with an

asterisk and initial such interpolation.

3. Dividend if approved, will be paid on or before 21st August 2013 to those members whose names appear on the Company ‘

Register of Members as on end of trading on 08th August 2013.

{ CSE Listing Rule - the date of dispatch of the dividend payment shall be within seven (7) Market Days from and excluding

the date on which the related resolution is passed by the shareholders at a meeting. The Ex-Dividend (‘XD’) date shall be the

Market Day immediately following the date on which the related resolution is passed by the shareholders at the meeting}.

4. Members are requested to inform the changes if any , in their registered addresses to the Company’s Secretaries or Central

Depository System as appropriate.

5. Members are invited to direct all correspondences relating to matters on shares, dividends, change of addresses etc to the

Company’s Secretaries quoting their register folio number.

If you maintain an account with Central Depository Systems (Private) Limited, we advice you to inform them directly through

your broker with regard to your change of address and dividend mandate.

INSTRUCTIONS AS TO COMPLETION

1. To be valid, this form of proxy must be deposited at the Registered Office, 469 1/1 Galle Road, Colombo 3 not later than 48

hours before the time appointed for holding the meeting.

2. In perfecting the form of proxy please ensure that all details are legible.

3. In the case of a Company/Corporation, the Form of Proxy must be under its Common Seal which should be affixed and

attested in the manner prescribed by its Articles of Association.

4. In the case of a proxy signed by an attorney, the power of attorney must be deposited at the Registered Office for

Registration.

5. In the case of non-resident Shareholders, the stamping, if necessary, will be attended to, on return of the completed form of

proxy to the Registered Office of the Company in Sri Lanka.

Corporate Information NAME OF THE COMPANY

Tokyo Cement Company (Lanka) PLC

COMPANY REGISTRATION NO

PQ 115 - 17th March 1982

LEGAL FORM

A public Quoted Company with Limited Liability

listed with the Colombo Stock Exchange on

1st January 1984

BOARD OF DIRECTORS

Mr. Edgar Gunatunga

Chairman Non Executive Director

Mr. S. R. Gnanam

Managing Director

Mr. A. S. G. Gnanam

Non Executive Director

Mr. E. J. Gnanam

Non Executive Director

Mr. Tatsuro Naruse

Nominee Director of Nippon Coke & Engineering

Company Limited, Japan

Mr. S. V. Wanigasekera



Mr. Shiro Takihara



Mr. R. Seevaratnam

Non Executive Independent Director

Dr. Harsha Cabral


Dr. Indrajit Coomaraswamy


COMPANY SECRETARY

Seccom (Private) Limited, (Company Secretaries)

Second Floor, 1E - 2/1,

De Fonseka Place, Colombo 5

+94 11 2590 176 (G) +94 11 2581 618 (F)

+94 11 2589 679 (D)

E_Mail: [email protected]

HEAD OFFICE

469 - 1/1 Galle Road, Colombo 3

Tel: Phone +94 11 2587 619 Fax: +94 11 2500 897

Web Site: www.tokyocement.lk

SUBSIDIARY COMPANIES

Fuji Cement Company (Lanka) Limited

Tokyo Cement Colombo Terminal (Private) Limited

Tokyo Super Cement Company Lanka (Private) Limited

Tokyo Cement Power (Lanka) Limited

(under development)

Tokyo Eastern Cement Company Limited

(under development)

AUDITORS

BDO Partners, (Chartered Accountants)

Chittambalam A Gardiner Mawatha, Colombo 2

LEGAL ADVISORS

Murugesu & Neelakandan (Attorney at Law) 2,

Deal Place, Colombo 3

BANKERS

Commercial Bank of Ceylon PLC

Sampath Bank PLC

Bank of Ceylon

Citi bank N.A.

Designed & produced by REDWORKS (PVT) LTD

Digital plates & Printed by Aitken Spence Printing & Packaging (Pvt) Ltd

www.tokyocement.lk

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