CEYLON GRAIN ELEVATORS PLC | ANNUAL REPORT 2018
POWERING
CEYLON
GRAIN
ELEVATORS PLC | AN
NU
AL REPORT 2018
Ceylon Grain Elevators PLCNo. 15, Rock House Lane, Colombo 15, Sri Lanka.Tel : +94 11 2522556 or 8 / 2523580 / 2526378 to 2526383Fax : +94 11 2524163E-mail : [email protected]
Ceylon Grain Elevators PLC has earned the supreme position as Sri Lanka’s largest
operator in the poultry industry. Pursuing an aggressive diversification strategy from our
core business of feed milling we are well on the path to be an integrated poultry business.
Moving up with a strong commitment towards achieving product quality and maintaining
efficiency in our manufacturing processes we have continuously recorded profitability.
Built on a strong foundation of good corporate governance and accountability with our
relentless pursuit to maintain the highest standards of quality we are on the right track
powering sustainable progress.
POWERING
Ceylon Grain Elevators PLC | Annual Report 20182
NAVIGATING THIS REPORT
REPORT STRUCTURE VALUE CREATION
REPORT BOUNDARY
EXTERNAL ASSURANCE
MATERIALITY ASSESSMENT
GOVERNANCE
02
02
109
24
32
76
Report Structure
The Annual Report of the Company covers
the period of twelve -months from
1 January 2018 to 31 December 2018 which
represents the annual reporting cycle.
The Annual Report for the financial year
ended 31 December 2018 represents
a balanced review of our financial,
environmental and social performance, our
governance framework and how we manage
risks. Our objective is to provide our readers
with an overview of how we nurtured our
capitals to achieve sustainable growth and
deliver value to our stakeholders.
Scope and Report Boundary
This Report considers the financial
performance of the subsidiaries of the
Company which are namely; Three Acre
Farms PLC, Millennium Multibreeder Farms
(Private) Limited, Ceylon Pioneer Poultry
Breeders Limited, Ceylon Livestock and
Agribusiness Services (Private) Limited,
Ceylon Warehouse Complex (Private) Limited
and Ceylon Aquatech (Private) Limited which
are collectively referred to as the ‘Group’ in
the Annual Report. The key financial aspects
are discussed in the context of the Company
as well as the Group. The non-financial
aspects are discussed from the perspective
of the Company.
Materiality Determination
We apply the principles of materiality in
assessing the information that is to be
included in the integrated report. Matters
which are identified as material are those
that affect the value creation capacity. Pages
32 to 34 of this report covers the material
aspects relevant to the Company.
This year we present our second Integrated Annual Report through which we hope to provide a comprehensive yet concise review on how Ceylon Grain Elevators PLC (the ‘Company’) created value to its stakeholders through its financial, social and environmental performance for the year ended 31 December 2018.
Ceylon Grain Elevators PLCNo. 15, Rock House Lane,
Colombo 15, Sri Lanka.
Tel: +94 11 252 2556
Fax: +94 11 252 4163
E-mail : [email protected]
3
Standards and principles of preparation
The Financial Statements presented on pages 112 to 170
of this Report have been prepared in accordance with the
Sri Lanka Accounting Standards (SLFRS / LKAS) issued by
the Institute of Chartered Accountants of Sri Lanka (CA Sri
Lanka) and the requirements of the Companies Act No. 7 of
2007. The narrative on Corporate Governance (pages 76 to
88) complies with the Code of Best Practice on Corporate
Governance issued jointly by the Securities and Exchange
Commission of Sri Lanka and CA Sri Lanka and the Listing
Rules of the Colombo Stock Exchange
We have followed the Integrated Reporting Framework adopted
by the International Integrated Reporting Council (IIRC)
Responding to our stakeholders
The Company creates value through the Business Model, which takes inputs from the six capitals and transforms through business activities to produce outputs and outcomes that create value over time for its diverse stakeholders. Our stakeholder centric approach to
value creation.
Available Forms
CEYLON GRAIN ELEVATORS PLCAnnual Report 2018
PrintAvailable onrequest
CD-RomPosted to all Shareholders
OnlineAvailable as PDF
www.prima.com.lk
Our leadershipChairman’s Message and Chief Executive Officer’s Review
are placed on page 18 and 20 respectively
Our Value CreationIn terms of value creation to the stakeholders, our
model, strategy, resource allocation and materiality
assessment disclosed on pages 24 to 32
Management Discussion and AnalysisThe operational environment, segmental review and
six capitals reports disclosed on page 36 to 75
Corporate GovernanceGovernance structure, composition and committees
and reports thereon are disclosed on pages 76 to 95
Financial StatementsFinancial statements, significance accounting
policies and related Notes disclosed on pages 112
to 170
Group Overview and Executive ReviewsOur Vision | Our Mission | Our Corporate Goals
6
Our History 7
Group Structure 8
Milestones 10
Financial Highlights 12
Our Numbers at a Glance 13
Our Product Portfolio 14
Our LeadershipChairman’s Message 18
Chief Executive Officer’s Review 20
Board of Directors 22
Creating Value for StakeholdersOur Value Creation Model 24
Business Strategy and Resource Allocation
26
Stakeholder Engagement 28
Materiality Assessment 32
Management Discussion and Analysis
Operating Environment 36
Sector Reviews 40
Financial Capital 44
Manufactured Capital 50
Intellectual Capital 54
Human Capital 58
Relationship Capital - Customer 64
Relationship Capital – Business Partners and Community
68
Natural Capital 72
Governance ReportsCorporate Governance Review 76
Audit Committee Report 89
Remuneration Committee Report 92
Nomination Committee Report 93
Related Party Transactions Review Committee Report
94
Enterprise Risk Management Review
96
Financial ReportsFinancial Calendar 103
Report of the Board of Directors on the State of Affairs of the Company
104
Statement of the Directors’ Responsibility
108
Independent Auditors’ Report 109
Statement of Profit or Loss and Other Comprehensive Income
112
Statement of Financial Position 113
Statement of Changes in Equity 114
Statement of Cash Flows 115
Notes to the Financial Statements 116
Investor Highlights and InformationFive Year Financial Summary 171
Value Added Statement 172
Shareholder Information 173
Glossary of Financial Terminology 175
Notice of Meeting 176
Form of Proxy 177
Corporate Information Inner Back Cover
Ceylon Grain Elevators PLC | Annual Report 20184
CONTENTS
Our corporate philosophy is centred upon the 3H principles of building a Healthy
Organisation, being an Honourable Winner and making an Honest Fortune. This business
philosophy is derived from our Parent Company, Prima Limited of Singapore.
HealthyOrganisation
Honourable Winner
Honest Fortune
Achieving success through fair competition. Striving towards
excellence.
Establishing trust, fairness and mutual benefits with all within our business
circle. Contributing to the well-being of society.
Developing a sound, effective and efficient organisation system. Promoting team spirit and reaching out to create a
“PRIMA FAMILY” identity.
5
OUR VISION
OUR MISSION
“To achieve complete poultry integration synergies, ultimately gaining export market competitiveness.”
To tap and harness business opportunities by expanding into various vertical integration projects. This will lead to increase in Agriculture, Aquaculture and Livestock production, thus encouraging national progress through nutritious protein-rich food to the people of this Nation.
Our Corporate Goals
In line with our Chairman’s directives and Prima Group corporate philosophy, we will continue to grow steadily in our primary activities with the ultimate goal of reaching the status of an integrated feed milling business.
Our future expansion plans shall be within our management capability and financial resources.
To establish “PRIMA” and “FARMERS’ CHOICE” as a brand name synonymous with the very best in high quality products.
To establish high standards of good corporate governance, improve transparency and the standards of accountability to shareholders.
Ceylon Grain Elevators PLC | Annual Report 20186
The corporate journey of Ceylon Grain Elevators PLC (CGE) commenced way back in December 1982, when the
Government of Sri Lanka and Prima Limited of Singapore inked an agreement beginning a partnership that has
endured over three decades of yeoman service to the poultry industry in the country.
Today, CGE is the largest operator in the poultry industry of Sri Lanka, establishing six subsidiary companies operating
not only in the field of poultry, but also offering products and services in diverse fields.
CGE and the companies under its umbrella manufacture and distribute a wide range of feeds under the “PRIMA” and “FARMERS’ CHOICE” brands. They also operate poultry and
hatchery breeder farms, commercial poultry farms and also engage in the processing, packaging and retailing of poultry
meat products, the import and sale of poultry equipment, veterinary products, produce aqua feed and provide a state-of-the-art laboratory and consultancy service to customers
and farmers throughout the Island.
7
OUR HISTORY
Ceylon Grain Elevators PLC | Annual Report 20188
Ceylon Livestock and
AgrobusinessServices (Private)
Limited(CLAS)
Ceylon WarehouseComplex
(Private) Limited(CWCL)
Ceylon Aquatech(Private) Limited
(CAT)
Integrated poultry activities including feed milling, broiler farming, processing and distribution of chicken
Import and sale of poultry equipment, drugs and vaccines
Provide storage facilitiesIntegrated shrimp operation
including breeding, processingand culture of shrimp
100% 100% 100%
CGE
GROUP STRUCTURE
9
Three Acre Farms PLC (TAF)
Prima ManagementServices (Private)
Limited(PMS)
Poultry breeder farms, hatcheries and commercial broiler farms
MillenniumMultibreeder
Farms (Private)Limited(MMF)
CeylonPioneer Poultry
Breeders Limited(CPPBL)
Poultry breederfarming
and hatchery
Renting of farmoperation
Provide ICT solutionand services
57.21% 33%
CGE Shares were introduced to the
Central Depository System at the
Colombo Stock Exchange
Bonus issue of 1-for-3 share capitalising
Rs.50 Million from capital reserves
Right issue of Rs.10 Million ordinary
shares for a premium of Rs. 35/- per
share raising CGE’s capital to Rs.300
Million
Acquisition of Three Acre Farms Limited
Incorporation of Ceylon Pioneer Poultry
Breeders Limited, a wholly-owned
subsidiary of TAF
Incorporation of Ceylon Warehouse
Complex (Private) Limited, a wholly-
owned subsidiary of CGE
Bonus issue of 1-for-2 share capitalising
Rs. 150 Million from share premium
Right issue of 15 Million ordinary shares
at a premium of Rs. 15/- per share to
raise CGE’s issued capital to Rs. 600
Million
Ceylon Aquatech (Private) Limited was
incorporated to venture further into
integrated shrimp business
Acquisition of Bulathsinhala and
Halwathura Farms
Agreement signed between SLPA and
CWCL to reclaim land from the seabed
at Mutwal, adjacent to CGE factory
Incorporation of Ceylon Grain Elevators
The Company was listed on the
Colombo Stock Exchange
First invoiced sale of Animal Feed
Breeder Farm Project at Kosgama
started production of Commercial Day-
Old Chicks
Investment in the equity of Ceylon
Livestock and Agrobusiness Services
(Private) Limited which undertakes
trading activities
Ceylon Grain Elevators PLC | Annual Report 201810
MILESTONES
Incorporation of Millennium
Multibreeder Farms (Private) Limited, a
wholly-owned subsidiary of TAF
First commercial shrimp feed plant
established in Sri Lanka.
Launched “PRIMA SUPER SHRIMP FEEDS”
Construction of New Silos - CWCL
Acquisition of Hijra Farms
Investment in Prima Management
Services (Private) Limited, an Associate
Company of CGE
Commencement of Environment
Controlled House projects at
Commercial Farms
Implementation of ERP System
ISO Quality Management System
certification (ISO 9001:2008)
Addition of a new feed mill line
Fully taking over the operation of
poultry processing plant
Construction of state-of-the art cold room in Poultry Processing Plant
Freehold ownership of Ittapana land to increase the capacity of Breeder Farms
11
Group
2018 2017 Change
Change%
Operating Results
Revenue Rs. Million 17,086 15,155 13
Operating profit Rs. Million 1,326 1,102 20
Profit for the year Rs. Million 1,211 1,070 13
Dividend (proposed) Rs. Million 180 120 50
Earnings per share (EPS) Rs. 14.84 13.17 13
Return on shareholders' fund (ROE) % 13.7% 13.8% (0.7)
Balance sheet strength
Total assets Rs. Million 11,571 10,171 14
Total debts Nil Nil -
Shareholders' fund (equity) Rs. Million 6,479 5,712 13
No. of shares in issues Rs. Million 60 60 -
Net assets per share Rs. 107.99 95.21 13
Current ratio No. of times 2.67 2.47 8
0
1,000
2,000
3,000
4,000
5,000
6,000
20182017201620152014
Value added(Rs. Million)
0
200
400
600
800
1,000
20182017201620152014
Earnings per employee(Rs.'000)
0
200
400
600
800
1,000
1,200
20182017201620152014
Net cash used in investing activities(Rs. Million)
Ceylon Grain Elevators PLC | Annual Report 201812
FINANCIAL HIGHLIGHTS
Group Revenue Operating Profit Earnings Per Share
17.1 1.3 14.84Rs. Billion Rs. Billion Rs.
2017 - Rs. 15.2 Billion 2017 - Rs. 1.1 Billion 2017 - Rs.13.17Û Û Û
13% 20%
Group Assets Dividend Per Share
11.6 3.00Rs. Billion Rs.
2017 - Rs. 10.2 Billion 2017 - Rs. 2.00Û Û
14% 50%
13%
7362017 - 640
No. ofEmployees
Employee Retention rate
94%
13
OUR NUMBERS AT A GLANCE
Ceylon Grain Elevators PLC | Annual Report 201814
We focus on sourcing the best raw materials for effective feed formulation. Maize is one of the key ingredients which plays a dominant role in the cost and quality of the feed. By purchasing locally harvested Maize at a competitive market price, we play our role as a responsible corporate citizen.
15
OUR PRODUCT PORTFOLIO
As a pioneer in the Sri Lankan feed manufacturing industry with decades of expertise, we produce a wide range of feed products to our customers. The main categories are Poultry feed, Cattle feed, Horse feed and Aqua feed. The highest volume contributor, Poultry feed consists of sub-categories of Broiler feed, Layer feed and Breeder feed of which Broiler feed contributed more than fifty percent of total feed sales. We have understood the emerging trend in cattle feed demand and accordingly we have enhanced our cattle feed range to meet specific requirements of our customers.
Poultry and other animal feeds are produced under ‘Prima’ and ‘Farmer’s Choice’ brands for the majority of farm animals bred across the island. They are considered the most preferred brands among customers as the brands are synonymous with high quality.
Broiler and Layer Chicks are provided under Prima quality chicks, a brand which is well accepted by customers from diverse sectors.
Ceylon Grain Elevators PLC | Annual Report 201816
OUR PRODUCT PORTFOLIO
The nutrition value along with competitive price are the main reasons for the increased demand in chicken every year. Thus, we guaranteed the nutrition value of Prima chicken as we are the pioneer in the integrated poultry business. With the increase in demand over the last few decades the consumer preferences have also evolved. In order to meet these customer expectations value added poultry products have been introduced in frozen and chilled forms.
Augmented with five key attributes and available in a wide array of products to suit modern lifestyles, Prima Chicken provides goodness to everyone.
With an increased growth trend evident in per capita annual chicken consumption in Sri Lanka, the demand for chicken is set to follow a growth trajectory with the increase in per capita income and the expansion of the hospitality industry.
17
Dear Valued Stakeholder,
It is with great pleasure that I present the
Integrated Annual Report and Audited
Financial Statements for the financial year
ended 31 December 2018. I consider it to
be an achievement that the Company is
nourishing the nation with the promise of
nutritious protein goodness of our products.
The theme, ‘Powering Sustainable Progress’,
indicates a successful year for the Company
as we approached our business with a
renewed sense of pride and responsibility,
raising the bar in the areas of quality and
technology advancements to take the
industry ahead.
Overall Performance
I am pleased to report that your Company
recorded an increase in Revenue and Profit
After Tax (PAT) of 13% over the previous
year while achieving PAT of over Rs. 1 Billion
for the fourth consecutive year despite
challenging market conditions. This was
achieved primarily due to efficiency in farm
operations, higher demand for feed due
to consistency in feed quality and farmers
shifting towards formulated feed from
self-mixing and optimising formulated feed
costs.
I am pleased to announce that your
company has proposed a First and Final
dividend of Rs. 3.00 per share amounting to
Rs. 180 Million for the year 2018 subject to
the approval of shareholders at the Annual
General Meeting. We remain committed to
growing shareholder wealth in a sustainable
manner.
Our sustainable development and growth is
a direct result of the prudent management
and good governance practices entrenched
in our Company’s ethos. Upholding the
principles of transparency, accountability
and ethical operations has helped sustain
profitability and enhance shareholder value.
Social and Environmental Stewardship
The Company adopts the modern human
resource management practices and is
keen on maintaining the highest working
standards for employees.
As an ethical corporate citizen, the Company
demonstrates its sense of responsibility
for the environment by enhancing waste
water treatment plants on its farms and
continuously maintaining the quality of
the end product. The Company also avidly
supports a variety of CSR events and also
continues to support the community to
uplift their livelihood.
It gives me pride to inform that our previous
Annual Report was selected for a Bronze
award at the CA Annual Report Awards 2018
under the Food and Beverages sector and
we remain committed to enhancing our
in-depth reporting to improve the quality of
the annual report with each passing year.
Looking Ahead
We remain optimistic about further
expansion of the poultry industry with
the export market opportunities that avail
in the regional countries and ambitious
infrastructure development programme by
the Government. Our Company in particular
is on a strong growth trajectory, supported
by plans for expansion and infusion of
the latest technology to meet the highest
standards of quality and nourishment.
During the year under review, we
contributed to state coffers to the tune
of over Rs. 3.1 Billion and committed to
enhancing operations continuously in future.
Appreciation
I wish to thank fellow Directors on the Board
for their support and the management and
staff of the Company for their hard work
and dedication to sustain our market leader
position through yet another challenging
year of successful operations. It is extreme
Forging ahead by nourishing
the nation with the promise of
goodness.
ON A STRONG GROWTH TRAJECTORY
Ceylon Grain Elevators PLC | Annual Report 201818
CHAIRMAN’S MESSAGE
sadness that I announce the demise of
Mr. Sunil Karunanayake (Non-Executive
Independent Director), who provided
valuable support to the Board of Directors of
your company. I would also like to welcome
our new Non-Executive Independent
Director, Dr. Prathap Ramanujam to the
Board of your Company and look forward to
his enormous expertise to contribute to our
future success. Our success despite a tough
year is due to the unwavering support from
all of our stakeholders who remain the pillars
of our success.
(Sgd.)
Wickrema Senaka Weerasooria
Non-Executive Independent Chairman
Colombo, Sri Lanka
8 April 2019
“Your Company recorded an increase in Revenue and PAT of 13% over the previous year while achieving PAT of over Rs. 1 Billion.”
19
Dear Valued Stakeholder,
It gives me great pleasure to present
before you, our Annual Report and Audited
Financial Statements for the year ended
31 December 2018. Our theme of the Annual
Report this year, ‘Powering Sustainable
Progress’, reflects our resilience as an
organisation, demonstrates our strength
in key fundamentals to sustain and grow
market leadership in the industry in a year
marked by many challenges and volatile
changes.
Operating Conditions
The Sri Lankan economy grew at 3.3% in the
first nine months of 2018 supported by the
expansion in service activities and recovery
in agricultural activities. The depreciation of
the LKR against US dollar and the increase in
fuel prices increased costs and inflation. This
resulted in a decline in disposable income,
which affected the demand for chicken
meat adversely as well. Factors such as high
level of taxes imposed on maize imports and
delay in issuing import permits affected the
cost of production of chicken and eggs. As a
result, consumers had to incur more to meet
their protein requirement.
Company Performance
The Company continues its momentum
by increasing Revenue by 13% Year-on-
Year (YoY) to Rs. 17.1 Billion for the year.
The Revenue growth was improved due to
farmers shifting towards formulated feed
from self-mixing due to scarcity of raw
materials in the country.
The Company saw growth across all three
segments in 2018, evidencing a significant
improvement in Operating Profit which
rose 20% YoY to Rs. 1.3 Billion. Our emphasis
on cost and cash management together
with our procurement of key raw materials
competitively contributed to our improved
operational performance.
Despite the challenging industry and market
trends, CGE delivered strong underlying
Profit after Tax growth of 13% YoY to
Rs. 1.2 Billion during the year, in spite of
increased income tax rates and exchange
loss amounting to Rs. 121.9 Million. The
earnings per share increased to Rs. 14.84
in year 2018, compared to Rs. 13.17 in year
2017.
Doing Business Responsibly
CGE has a strong commitment to operating
responsibly and playing our role in meeting
some of the political and economic
challenges in the country. In year 2018, we
introduced new products and implemented
significant nutritional improvements in
production. The Company is always striving
to stay one step ahead, staying in tune with
industry and customer needs.
As a responsible corporate, the Company
continues to support Government initiatives
to promote Maize production amongst local
maize farmers by purchasing majority of
locally grown Maize.
Driving Innovation
Ceylon Grain Elevators PLC is committed
to introduce environmentally-friendly
technology into its operations and deliver
significant innovation by adopting cutting
edge technology and processes. Sales Force
Automation (SFA), installation of interactive
software and control system for feed mill
operations and the new state-of-the-art cold
room facilities have boosted operational
efficiency. Moreover, laboratory facilities
were enhanced with Near-Infrared (NIR)
spectroscopic equipment and plans for
construction of a modern breeder farming
facility with advanced technology which is
currently underway.
STRENGTH IN KEY FUNDAMENTALS
Maintaining growth momentum
and enhancing profitability.
Ceylon Grain Elevators PLC | Annual Report 201820
CHIEF EXECUTIVE OFFICER’S REVIEW
Looking Ahead
With strong performance levels, quality
products, modern operation platform, a
dedicated management and experienced
staff, we have great confidence in staying at
the forefront of the industry.
The demand for poultry products is expected
to grow in tandem with the thriving tourism
sector, expanding country’s population and
fast-growing franchised restaurants. These
are encouraging signs of improving market
conditions.
Expanding Environmentally Controlled
(EC) houses, installation of maize dryer and
increasing storage capacity are some of the
company’s initiatives to meet anticipated
increase in local demand.
These initiatives will help us deliver superior
products to the industry in the future.
Appreciation
I take this opportunity to thank the Chairman
and Board of Directors for placing their
confidence in me and my team and for
providing the strategic direction for the
company’s future growth. Our success would
not be possible without the support of our
customers, suppliers and other business
partners, who have always extended
their fullest support. Our staff has been
exceptionally patient and hard-working
through a challenging year and need to be
commended for their dedication.
(Sgd.)
Cheng Chih Kwong, Primus
Executive Director and Chief Executive Officer
Colombo, Sri Lanka
8 April 2019
“Sales Force Automation (SFA), installation of interactive software and control system for feed mill operations and the new state-of-the-art cold room facilities have boosted operational efficiency.”
21
Mr. Wickrema Senaka WeerasooriaNon-Executive Independent Chairman
Mr. Wickrema Senaka Weerasooria was
appointed as a Non-Executive Independent
Director with effect from 15 January 2015
and he was appointed as the Non-Executive
Independent Chairman of the Board with
effect from 25 February 2015.
Mr. Wickrema Senaka Weerasooria holds
a Masters in Information Technology
(University of Canberra, Australia), a Graduate
Diploma in Commercial Law (Australian
National University) (ANU) and a Bachelor of
Science (ANU).
Currently, he is a Vice President of the FINCO
Group of companies as the Chief Executive
of Genesiis Software Pvt. Ltd., FINCO
Technologies Pvt. Ltd. and a Director of
Wealth Trust Securities Ltd.
He has served as a Manager / Consultant
at several Australian public sector agencies
including the Department of Primary
Industry, Department of Education and
Department of Foreign Affairs and Trade.
Mr. Cheng Chih Kwong, PrimusExecutive Director and Chief Executive
Officer
Mr. Cheng Chih Kwong, Primus was the
Chairman and Chief Executive Officer of the
Prima Group and its subsidiary companies
since 1998. He has stepped down as
Chairman of the Board and will continue as
an Executive Director and Chief Executive
Officer of the Company with effect from 25
February 2015. He is a Certified Practicing
Accountant (CPA) - Australia and also holds a
Diploma in Business Studies.
Mr. Tan Beng ChuanExecutive Director and Group General
Manager
Mr. Tan Beng Chuan is the Group General
Manager of Prima Group of Companies, Sri
Lanka since 2004. He was appointed as a
Director of the Company and its subsidiary
companies in 2004. He also serves as a
Director of Three Acre Farms PLC and its
subsidiaries, Ceylon Agro-Industries Limited
and Prima Ceylon Machinery (Private)
Limited.
He holds an MBA in Management and
Marketing from University of Warwick, UK
and B.Sc. (Hon) in Chemical Engineering
from University of Surrey UK.
Mr. Tan Beng Chuan was the past President
Mentor of Singapore (Sri Lanka) Club;
Executive Committee member of Sri
Lanka - Canada Business Council, Executive
Committee member of Sri Lanka - Singapore
Business Council and a Committee member
of Sri Lanka - China Business Council.
Mr. Cheng Koh Chuen, BernardNon-Executive Director
Mr. Cheng Koh Chuen, Bernard has been a
Director of the Company with effect from 1
August 2012. He also serves as an Executive
Director of Prima Limited.
He holds a Bachelor of Science in Business
Administration and also an MBA from the
University of Southern California.
Mr. Cheng Eng LoongNon-Executive Director
Mr. Cheng Eng Loong has been a Director
of the Company with effect from 1 August
2012.
He holds a Bachelor of Science degree
majoring in Biochemistry and Chemistry
from the National University of Singapore.
Ceylon Grain Elevators PLC | Annual Report 201822
BOARD OF DIRECTORS
Mr. Sunil KarunanayakeNon-Executive Independent Director
Mr. Sunil Karunanayake was a Director of the
Company since 2009. He was appointed as
Senior Director of the Board with effect from
25 February 2015 and was re-appointed as
Non-Executive Independent Director with
effect from 15 April 2015. He held office as
Non-Executive Independent Director until
his demise on 27 May 2018.
He held a Fellowship of the Institute
of Chartered Accountants of Sri Lanka
and Chartered Institute of Management
Accountants(UK) and an MBA from the
Postgraduate Institute of Management of
the University of Sri Jayewardenepura. He
also obtained a Diploma in Commercial
Arbitration from the Institute of Commercial
Law and Practice.
Dr. Prathap RamanujamNon-Executive Independent Director
Dr. Prathap Ramanujam was appointed as a
Non-Executive Independent Director of the
Company with effect from 7 August 2018.
After completing over 36 years of service
in the Public Sector and as a Permanent
Secretary to several important Ministries
during his last fourteen years in the Public
Sector. Dr. Prathap Ramanujam who was
responsible to setup the Secretariat for
Infrastructure Development and Investments
which was instruments to initiate the first
mini hydro power project in Sri Lanka back in
1993 joined the private sector by taking up
the directorship of Pan Asian Power in 2010.
He was appointed as the Chairman and the
Chief Executive Officer in the same year. He
brought in his diversified expertise from his
distinguished career in Public Sector over a
period of 36 years.
Dr. Ramanujam holds a First Class B.Sc.
(Hons.) degree from the University of
Peradeniya Sri Lanka, a M.Sc. degree in
Economics from the University of Bristol, UK
and a PhD in Economics from the Australian
National University (ANU), Canberra,
Australia.
He was appointed as the Chairman of
Onally Holdings PLC (2008) and Waters
Edge Limited (appointed by the Supreme
Court of Sri Lanka in 2009). Currently he is
the Chairman of Manelwala Hydropower
(Private) Limited and Padiyapelella
Hydropower Limited and serves in the Board
of Ceylon Agro – Industries Limited and
Pan Asian Investments (Private) Limited.
He is currently the Deputy Chairman of
Senkadagala Finance PLC. He was appointed
as member of the Public Service Commission
by constitutional council in August 2015.
23
Manufactured Capital
� Property, plant and equipment Rs. 2,652 Million
� Increase in FAT storage capacity
� Construction of new administrative building, staff quarters in our chicken processing facility
Intellectual Capital
� Team of knowledge and expertise
� System and processes
� Brand reputation
Human Capital
� Employee engagement
� Skills, knowledge and competencies of employees
� Employee health and safety
� Compliance
Social And Relationship Capital
� Contributing to build up spiritual well-being of society
� Contributing to community service
� Relationship with business partners
� Frequent communication with customers
Natural Capital
� Land
� Water
� Energy
� Material
� Legal compliance requirements
Financial Capital
� Shareholders’ funds Rs. 6,479 Million
� Operating cash flows Rs. 1,135 Million
Capital Input
Honourable Winner
Healthy Organisation
Hon
est F
ortune
Poultry breeding and commercial
Milling and farming
Poul
try
equi
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areh
ousing and othersHow we Create ValueH
ow w
e Cr
eate
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How we Create Value
Governance
Gov
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ain
Man
agem
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Risk Managem
ent
Capital Management
Sour
cing
and
war
ehousin
g
Sourcing and attraction
Capital managem
ent
Capital enhancement and retention
Impact m
anagement
Man
ufac
turin
g
Rese
arch
and
dev
elop
men
t
Del
iver
y an
d af
ter s
ales s
ervic
es Mission
Vision Goal
s
Ceylon Grain Elevators PLC | Annual Report 201824
OUR VALUE CREATION MODEL
Manufactured Capital
� Capacity enhancement
� Cost optimisation
� Cost savings
Intellectual Capital
� Business performance improvements
� New product innovation
� Enhanced brand reputation
� Stakeholder satisfaction
Human Capital
� Talented and skilled pool employees
� Motivated and target driven employees
� Zero-non compliance
� Employee satisfaction
Social And Relationship Capital
� Over 300 registered local and foreign suppliers
� Offer fair price for suppliers, especially for local farmers to empower their live hood
� Product responsibility
� Long lasting relationship with over 50% of customers
Natural Capital
� Well-being of society
� Improved performance
� Brand reputation
� Stakeholder satisfaction
Financial Capital
� Financial stability
� Shareholder satisfaction
� Compliance
Output
Outcome
Impacts
� Customer satisfaction and loyalty
� Dynamic team and innovative attitude
� Sustainable operation and market leadership
� Protection of Environment
� Livelihood enhancement of the community
Honourable Winner
Healthy Organisation
Hon
est F
ortune
Poultry breeding and commercial
Milling and farming
Poul
try
equi
pmen
t, w
areh
ousing and othersHow we Create ValueH
ow w
e Cr
eate
Value
How we Create Value
Governance
Gov
ernan
ce GovernanceValu
e Ch
ain
Man
agem
ent
Risk Managem
ent
Capital Management
Sour
cing
and
war
ehousin
g
Sourcing and attraction
Capital managem
ent
Capital enhancement and retention
Impact m
anagement
Man
ufac
turin
g
Rese
arch
and
dev
elop
men
t
Del
iver
y an
d af
ter s
ales s
ervic
es Mission
Vision Goal
s
� Economic, Social and Environmental impacts
25
Business Strategy
The strategic focus of CGE is centred around
the following three core business principles
which are achieved through collaboration
with our stakeholders.
1) Healthy organisation
2) Honourable winner
3) Honest fortune
Thus, we believe that our business strategies
are within our capabilities to create
sustainable development while optimising
returns to shareholders and achieving
objectives of our stakeholders.
Healthy organisation
Continuous improvements in the supply
chain system will enable us create an
effective and efficient business operation.
This will enhance the competitiveness
through cost optimisation. Empowering
our employees’ soft skills, developing their
skills as well as satisfaction levels through a
comprehensive engagement plan will set in
place the foundation for a healthy business
operation.
Honourable winner
We believe that CGE should strive towards
exceptional standards to be an honourable
winner. Thus, sustainable growth, integrated
business diversification and gaining export
market entry through fair competition will
lead CGE towards excellence.
Honest fortune
Trust, fairness and mutual benefits are the
core imperatives that we focus on when
establishing relationship with our business
partners and customers. This has helped our
organisation to look beyond our capabilities
and share the benefits with them. As a
responsible corporate citizen and as a key
player in the integrated poultry industry,
we are conscious on the well-being of the
society and the community through our
business activities.
Resource allocation
Allocation of resources between business
segments when implementing our corporate
strategies towards optimising value creation
is challenging due to scarcity of resources.
However, through accumulated knowledge
and expertise over the past decades in the
business and implicit management skills,
CGE is able to optimise resource allocation
while balancing the strategic focus between
short, medium and long term goals to create
sustainable value creation. The allocation
of resources to each business segment and
capitals have been disclosed on pages 40 to
43 and pages 44 to 75 respectively.
Our Value delivery platforms
At CGE, we depend on with a view to ensure
the delivery of the value of our strategies
in accordance with and governed by our
resource allocation initiatives, objectives,
both in terms of the inputs to our activities
are outlined on pages 44 to 75 and our
strategy and the outcomes that we aspire
to in fulfilling the expectations of our
stakeholders.
� Maintaining a consistent Return on
Equity (RoE) of 13.7% in 2018
� Market capitalisation of Rs. 3,570 Million,
despite violate market conditions
� Expanded our reach to segments of
the market with high level of market
penetration
� Developed products and solutions that
are best-fit, cost effective and relevant to
prevailing needs and requirements
Ceylon Grain Elevators PLC | Annual Report 201826
BUSINESS STRATEGY AND RESOURCE ALLOCATION
STRATEGIC FRAMEWORK
Û
Û Û
Û Û
27
Sustainable shareholder return
Value creation for stakeholder
Altered capitals through value creation
Mandatory and voluntary compliances
To achieve complete poultry
integration synergies, ultimately
gaining export market
competitiveness
To tap and harness business
opportunities by expanding
into various vertical integration
projects. This will lead to increase
in agriculture, aquaculture
and livestock production, thus
encouraging national progress
through nutritious protein-rich food
to the people of this nation.
Our Vision
Our Mission
Healthy Organisation
Developing a sound, effective
and efficient organisation system.
Promoting team spirit and reaching
out to create a “PRIMA FAMILY”
Identity.
� Supply chain development
� Collaboration with employees
Honourable Winner
Achieving success through fair
competition. Striving towards
excellence.
� Sustainable growth
� Integrated business
diversification
� Gaining export market
competitiveness
Honest Fortune Establishing trust, fairness and
mutual benefits with all within our
business circle. Contributing to the
well-being of society.
� Collaboration with business
partners and customers
� Responsible corporate
behaviour
CORPORATE STRATEGY
PILLARS
CORPORATE STRATEGY
CORPORATE STRATEGY
OUTCOMES
Ceylon Grain Elevators PLC | Annual Report 201828
STAKEHOLDER ENGAGEMENT
Value creation is for the stakeholders, as they
provide capitals to the organisation. Thus,
achieving those individual goals requires
formal communication, interaction and
feedback. This is called the stakeholder
engagement and our governance parties
play a key role as this engagement derives us
to redefine our Vision, Mission and objectives
and lead to a sustainable future.
CGE operates in the agri-food supply
chain and recognises the importance of
understanding the views of its stakeholders.
CGE’s strategic focuses is on long-term
value creation, especially for customers
and suppliers. The Company believes the
importance of timely and adequately
responding to market developments. In this
light, stakeholder dialogues are vital.
We maintain regular stakeholder
engagement through a range of formal
and transparent mechanisms that facilitates
continuous communication, dialogue
and feedback from our many and varied
stakeholder groups while raising awareness
of the need for sustainable resource
consumption and sustainable lifestyles.
We also continue to pursue new avenues
of communication that would enable our
stakeholders to give us more feedback to
improve our sustainability efforts.
Û Û Û ÛStak
eholder prioritisation
Dev
elop
m
ent of engagement p
lan
Imp
lem
enta
tion of engagem
ent plan
Control,
mon
itor a
nd improve engagement plan
Identify
stakeholders
Stakeholder engagement process
Our Stakeholders
Connected
External
Internal
BOD
Management and
Em
ploy
ees
Supplie
rs a
nd B
usin
ess
Part
ners
Custo
mers
Investors/Shareholders
Government and Regulatory Bodies
Press/Media
Envi
ronm
ent
Communiti
es
Stakeholder Mapping and Prioritising
Our stakeholder mapping process is
based on Mendelow’s Matrix which take
into account the influence exerted by the
stakeholders on our business and their
interest in doing so. We have also agreed on
our strategy on each quadrant in terms of
responding.
29
Pow
er
Interest
Key Players
Shareholders
Suppliers and Business Partners
Customers
Keep Informed
Employees
Environment
Community
Financers
Keep Satisfied
Government
Regulatory Bodies
Minimal Effort
Press
Media
Low
Hig
h
High Low
We always adhere to
their expectations as
they exert high power
through decisions
though they do not have
a high level of interest in
the Company
We have given
importance to every
stakeholder by
continuously maintaining
an interest towards them.
Hence we do not have
any stakeholder in this
category.
Our strategy is to keep
them informed and
provide feedback and
suggestions about the
business as they are
able to build a strong
foundation of support for
the Company
We nurture strong
relationships with
them by continuously
engaging, as any
decision by them could
considerably impact on
our business
Stakeholder Engagement : Mendelow’s Matrix
Engaging with our stakeholders
Stakeholder Engagement mechanism and frequency Key concerns Responses
Shareholders
Shareholders are the owners of the Company who provide financial capital to our business.
Prima Limited, Singapore is the main shareholder of CGE, who holds 45.45% stake of the business and the remainder is hold by the public and institutional shareholders.
� One-on-one discussions / engagement (When required)
� Corporate Website (Online)
� Annual General Meeting
� Annual Reports
� Interim Financial Statements (Quarterly)
� CSE Announcements (Continuous)
� Extraordinary General Meetings (Ad-hoc)
� Future prospects and sustainable growth in the business
� Return on Investments
� Dividends and capital gains
� Governance and transparency
All measures taken by the Company is devoted to the wealth maximisation of the shareholders in the long run and sustainable growth by coordinating other capitals.
Accordingly, productivity improvements, cost saving initiatives and risk assessment measures are taken continuously by the Company.
Ceylon Grain Elevators PLC | Annual Report 201830
STAKEHOLDER ENGAGEMENT
Stakeholder Engagement mechanism and frequency Key concerns Responses
Customers
Customers are the main focus of the Company as their satisfaction is required to enrich the financial capital.
Our customer base consists with dealers, Farmers, HoReCa sector, Supermarket chain, Retail Outlets, Other Institutions and Consumers.
� Technical support and product awareness session (Continuous)
� Direct customer interaction with sales force (Continuous)
� Customer satisfaction surveys (Periodically)
� Corporate website (Online)
� Social media (Continuous)
� Regular one-on-one engagements and site visits (Continuous)
� Specific audit reviews (Periodically)
� Dealer convention (Annually)
� Regional Dealer Meetings (Periodically)
� Product quality
� Affordability and resilience
� Availability and convenience
� Product portfolio
� Trade discounts and promotions
� Credit facilities
We continuously invest to enrich quality of our products and increase product varieties such as fresh chicken portfolio.
Brand promotion and other promotional activities are continuously conduct in order to provide product awareness
Also, the Company maintain relationship with our dealers for a long period and provides secured credit facilities and attractive trade discounts which ultimately secure the product availability around the country.
The customer feedbacks receive on all the way of interaction links with the future strategies and improvements.
Stakeholder Engagement mechanism and frequency Key concerns Responses
Employees
Our competent and committed human capital is the key success factor in achieving sustainable growth.
� Internal communication through memo, intranet and notice board (Continuous)
� Regular training sessions (Continuous)
� Employee council meeting (Quarterly)
� Open-door policy (Continuous)
� Annual appraisal
� Employee counselling and grievance handling (When Required)
� Staff events (Annually)
� Remuneration and other benefits
� Job safety and healthy work environment
� Work-life balance
� Employee motivation and job satisfaction
� Continuous training and career progression
� Welfare facilities
� Recognition and succession planning
One of the cooperate philosophies of CGE is devoted to create healthy organisations through promoting team spirit and reaching out to create a “PRIMA Family” identity.
Thus, all the assessment is done to bond the relationship with our employees and detailed discussion on actions taken during the year disclosed under the ‘Human Capital’.
Stakeholder Engagement mechanism and frequency Key concerns Responses
Suppliers and business partners
We source raw materials and other ingredients through a network of suppliers including local farmers and overseas suppliers.
They play a vital role in our social and relationship capital.
� Supplier selection process (When required)
� Attending trade exhibitions and supplier conventions (Periodic)
� Supplier surveys across the country (Regular)
� One-on-one engagements (Continuous)
� Site visits (Continuous)
� On time settlement and flexibility in negotiations
� Long term business relationships
� Sustainable business practices
We have built up a solid and strategic relationship with our suppliers while ensuring settlements on time and maintaining flexible terms for mutual benefits of both parties.
We have a sound communication with our suppliers to secure quality standards of our product.
31
Stakeholder Engagement mechanism and frequency Key concerns Responses
Government and Regulatory bodies
Our regulators include the Government, Board of Investments (BOI), Sri Lanka Consumer Affairs Authority, Inland Revenue Department, The Department of Animal Production and Health (DAPH), Central Environmental Authority, the Colombo Stock Exchange, etc.
Productive and constructive dialogue with our regulators and the Government to ensure a conductive industry environment.
� Directives and circulars (Continuous)
� One-on-one engagement (When required)
� Periodic returns (as specified)
� Corporate website and CSE Website (Online)
� Maintaining environment and other specific Licenses (As specified)
� Payment of taxes and other regulatory payments on time
� Timely submission of Periodic Returns
� Contribute towards community development and creating job opportunities
� Environment preservation
� Using renewable energy sources
� Sustainable growth and business expansion
Complied with all relevant regulatory and statutory requirements. Further, all liabilities were settled and the periodic returns were submitted on time.
We continued to earn over Rs. 1Billion profit after tax and supported to the growth in the national economy and the industry.
Stakeholder Engagement mechanism and frequency Key concerns Responses
Community and environment
We have a cordial and mutually beneficially relationship with the community we operate which is crucial to our success. We conduct our business operations in a manner that mitigates negative environment forces.
Also, we play a vital role in our social and relationship capital.
� Public events and sponsorship (Regular)
� Corporate website and CSE Website (Online)
� Maintaining environment and other specific Licenses (As specified)
� Social media interaction (Online)
� Contribute towards community development and creating job opportunities
� Contribute towards community and livelihood development
� CSR initiatives and responsible corporate citizen
� Social well-being
� Fair competition
Our 3H principles devoted to the well-being of our society and accordingly, our goals and strategies are always bound with it.
CGE has developed a sustainability framework comprising of material topics that affects the Group’s ability to create value in the short, medium
and long term. The creation of this framework was the result of careful stakeholder analysis.
Our approach to assessing materiality is as follows: Im
pact
on
stak
ehol
ders
Hig
hM
ediu
mLo
w
Low Medium High
Impact on the company
12
14
10
13
1
2
3
5
6 9
4
11
19
17
7
2015
16
18
8
Combines similar
issues across
categories such
as economic,
social and
environmental
Identifies the
significance of
these material
issues on
Company’s
capitals and
stakeholders
Prioritises based
on assessment
of the level of
importance
to external
stakeholders
Identifies material
aspects for
disclosure and
their boundaries
in the integrated
report of the
Company
Identifies matters
relating to Group
that affect the
Company and
stakeholders at
large.
Û Û Û Û
Inve
ntory of Material Issues A
ggre
gate Material Issues Eval
uate Material Issues Prio
ritise Material Issues
Iden
tify
Mat
erial Aspects and Boun
daries
Materiality Matrix
CGE has devised a materiality matrix that
segregates the material aspects identified
as impacting our business and stakeholders
at the highest to medium to lowest levels of
significance.
Ceylon Grain Elevators PLC | Annual Report 201832
MATERIALITY ASSESSMENT
A few material topics we have focused on this year are as follows:
Energy consumption
Livestock production requires significant
energy consumption and has therefore
been identified as a material topic. CGE
recognises that feed is a major contributor
to the environmental impact of livestock
production.
We are continuously monitoring our
electricity usage by investing in energy
efficient LED bulbs and upgrading our
systems and processes.
Ensure safe and fair working conditions
Providing a safe working environment for
all employees, temporary contracted staff,
contractors and visitors is given the highest
priority and is therefore included as a
material topic.
CGE records the number of Lost Time Incidents
(LTIs) by gender. All significant LTIs are
reported to the Management within 24 hours
and lessons learned are discussed at each
management meeting. An LTI is defined as;
“any unplanned event that results in personal
injury, where the injured party is unable to
work during their next scheduled day”.
CGE’s approach to health and safety centres
around raising awareness by training staff,
implementing clear rules, performing
dynamic risk assessments, inspiring
employees to increasingly report near
incidents in order to prevent real incidents
from occurring and effecting a change in
behaviour and audits to ensure proactive
management of all critical areas of risk.
Our material aspects and impact on the Company
Capital Stakeholder Material AspectComparison with
previous year Future outlook
Financial and Manufactured
Shareholders 1. Financial performance
2. Market leadership
3. Wealth maximisation
High
High
High
High
No change
High
Social and Relationship
Customers
Business
Partners
Community
Government
4. Customer satisfaction
5. Product responsibility and value for money products
6. Contribution to national economy
7. Supply chain and commitments
8. Community engagement and livelihood improvement
9. Compliance with rules and regulations
10. Ethical business practices
No change
High
Low
No change
High
High
Low
High
High
No change
No change
High
High
No change
Human Employees 11. Gender diversity and inclusion
12. Remuneration and benefits
13. Health and safety
14. Child labour
15. Indigenous rights
No change
High
No change
No change
No change
No change
High
No change
No change
No change
Natural Environment 16. Persevering bio-diversity
17. Management effluents
No change
No change
No change
No change
Intellectual Employees
Customers
18. Product quality and innovation
19. System and process improvement
20. Enhanced brand reputation
No change
High
No change
No change
No change
No change
33
Improve feed safety
CGE is part of the food supply chain.
Therefore, feed safety has and always will be
a priority. As such, it has been included as a
material topic. Company has in place with
effective mechanism to ensure compliance
with feed regulation and voluntary codes.
Feed safety is reported by recording the total
number of feed safety incidents of non-
compliance with regulations and voluntary
codes concerning the health and safety
impacts of products and services within the
reporting period, by:
� Number of feed safety incidents of non-
compliance with regulations resulting in
a fine or penalty;
� Number of feed safety incidents of non-
compliance with regulations resulting in
a warning;
� Number of feed safety incidents of major
non-compliance with voluntary codes
via external audits.
A feed safety incident is defined as any
incident where it is deemed that feed
produced, processed, manufactured or
distributed could be a potential risk to either
human or animal health and/or could make
the food derived from food-producing
animals unsafe for human consumption.
Feed materials and compound feeds are
continuously monitored to determine
unwanted substances as defined by
legislation.
Ceylon Grain Elevators PLC | Annual Report 201834
MATERIALITY ASSESSMENT
13%Group revenue increase
35
MANAGEMENT DISCUSSION AND
ANALYSIS
Global economy at glance [1] [2]
The global economy witnessed weakening
levels of expansion during 2018. The global
economy was expected to have grown
by 3.7% in 2018 despite weaker economic
prospects in Europe and Asia, and amidst a
tapering of industrial production and trade.
Global capital goods production, which is
highly trade-intensive, slowed notably in
Europe and developing Asia, two tightly
interconnected global manufacturing hubs.
Trade growth in the first nine months of
2018 averaged only 3.7%, compared to 4.7%
growth for the corresponding period in 2017.
The US economy grew by 2.9%, due to
a stronger domestic demand as a direct
result of ongoing fiscal stimulus and
accommodative monetary policy measures
introduced by the Federal Reserve.
This growth momentum was maintained
despite the ongoing US-China trade tensions
which began with the US administration
raising tariffs on imports from China; in turn
prompting other countries to retaliate with
tariffs on about US dollar 200 Billion worth of
US exports.
Emerging Market and Developing
Economies’(EMDE) reported stagnant
growth levels amidst the strengthening
of the US dollar, weakening capital flows,
heightened trade tensions and moderating
global manufacturing and trade. As a result,
aggregate growth in EMDEs edged down
to an estimated 4.2% in 2018, 0.3% below
previous projections.
International Monetary Fund (IMF) projects
that the global economy will grow at 3.5% in
2019 and 3.6% in 2020.
According to the Organisation for Economic
Co-operation and Development (OECD)
– FAO Agriculture Outlook 2018 -2027 the
per capita consumption of poultry meat is
expected to grow even in the developed
world, but growth rates will remain higher in
the developing regions. It is expected that
among all the meat consumed over the next
decade poultry meat is expected to account
for 44%.
Sri Lankan economy at glance [3]
During the first half of 2018, the Sri Lankan
economy recorded a modest growth of
3.6% compared to the 3.2% growth for
the corresponding period. This declining
economic performance in Sri Lanka
was partially due to the country facing
domestic challenges such as stagnant
fixed investment, weak domestic demand
and investment, trade deficit as a result of
negative net exports, higher debt servicing
ratio and tightening of monetary policy
which led to macroeconomic instability.
There was growth in the all three major
sectors of the economy—Services, Industries
ECONOMIC
GROWTH
Services
4.8%
Agriculture,Forestry and
Fishing
4.9%
Industries
1.6%(Y-o-Y)First Half 2018
Source [4]
Economic growth in Sri Lanka - First Half of 2018
[1] IMF, World Economic Outlook (WEO) Update, Jan 2019
https://www.imf.org/en/Publications/WEO/Issues/2019/01/11/weo-update-january-2019
[2] World Bank Group, Global Economic Prospects, Jan 2019
http://www.worldbank.org/en/publication/global-economic-prospects
[3] Central Bank of Sri Lanka - Recent Economic Developments 2018, chapter 2
[4] https://www.cbsl.gov.lk/sites/default/files/cbslweb_docments/publications/red/2018/3%20-%20Chapter%202%20-%20English.pdf
Ceylon Grain Elevators PLC | Annual Report 201836
MANAGEMENT DISCUSSION AND ANALYSIS
OPERATING ENVIRONMENT
and Agriculture, forestry and fishing for the
first half of the year 2018.
The Agriculture sector recorded a turnaround
in the first half of the year, indicating a
recovery from adverse weather conditions.
The agricultural sector rebounded to reach
a growth of 4.9% in the first half of 2018,
while the services sector too expanded by
4.8%. The tourism industry demonstrated
positive improvements in first ten months of
2018, with an increase of 10.6% in earnings
recording total earnings of USD 3,496 Million.
This reflected an increase in arrivals which
grew by 10.6% to reach 1.9 Million visitors,
while the construction sector fell by 0.4%
in first nine months of 2018 displaying the
predicted slowdown of industrial activities
in 2018.
The trade deficit widened to USD 7,953
Million in nine months ended 30 September
2018, an increase of 16% in comparison to
2017. This was the direct impact of an import
expenditure growth level of 10.4% against
export earnings growth of 5.6%. Capital
outflows, particularly from Government
rupee securities, the tightening conditions
in the global markets, the strengthening
of the US dollar in view of monetary policy
normalisation and speculation in the
domestic market exerted pressure on the
exchange rate.
As a result, the Sri Lankan Rupee (LKR)
depreciated by over 18% against the US
dollar in 2018, the sharpest decline in
a decade. The gross official reserves of
the country declined to USD 6.9 Billion
(equivalent to 3.7 months of imports) by end
2018 from USD 8.0 Billion reported in 2017.
Headline inflation remained in low single
digit levels while core inflation too remained
subdued. The tight monetary policy
continued in 2018 as well.
During the year several structural reforms
such as the implementation of the new
Inland Revenue Act and the introduction
of Fuel Pricing Formula in keeping with its
policy of revenue driven fiscal consolidation
were introduced. Due to political uncertainty,
Sri Lanka’s sovereign rating was downgraded
by three major credit rating agencies. A
higher rate of inflation is expected stemming
from potential risks arising from global
commodity prices, inclement weather
and the impact of rupee depreciation on
domestic prices.
Agricultural sector at glance
The agriculture sector which employs over
25% of Sri Lanka’s population contributes
about 6.9% to the national GDP out of which
the fisheries sector contributes around 1.3%
and the livestock sector accounts for 0.6%.
Although Sri Lanka is a fertile tropical land
with the potential for the cultivation and
processing of a variety of crops, issues such
as productivity and profitability hamper the
growth of the sector.
Food and Agriculture Organisation of
the United Nations (FAO) said, Sri Lanka
is forecasted to produce approximately
180,000 metric tons (MT) of Maize by the end
of the year, which is 40% decrease from last
year’s yield of 242,000 MT. This is significantly
a lower volume compared to actual annual
requirement of 400,000 MT.
High import duties imposed on Maize and a
permit system which is in force have resulted
in imported Maize being sold at very high
prices. Further, the delay in issue of permits
has resulted in lack of Maize in the market
when needed causing further prices hikes
due to lack of supply.
Poultry Industry at glance
The annual per capita consumption of
chicken in Sri Lanka has increased to 10
Kg in 2018 from 4.9 Kg a decade ago. It is
expected that this will increase further to
12 Kg in the years ahead. This is mainly due
to the increase in the tourism industry and
the overall increase in consumption levels
triggered by the increased urbanisation
and changes in lifestyle. Further, chicken is
considered a nutritious source of protein. As
Sri Lanka continues on its growth trajectory,
demand for poultry products is anticipated
to increase at an even sharper rate.
37
Key indicators at glance
Maize Production and Import Restrictions
Maize is the key ingredient for feed production. The industry requirement per annum is over 400,000 MT while country’s production is approximately 180,000 MT. Import of Maize was subject to the permit and Government imported Maize during the first half of the year.
The sourcing of raw materials is challenging due to the short supply of quality
materials at a reasonable price. As a result of continuous demand raised by the key
players in poultry industry the Government granted permit for import of Maize
subject to a Rs.10 /- special commodity levy during the latter part of the year.
GDP Growth
GDP growth rate was 3.3% for the first half of the year 2018 and it was 3.2% for the corresponding period of 2017.
Indirectly, but positively contributed to the Group performance as a result of
improvement in demand for meat and eggs.
Inflation Rate
Inflation rate was 4.3% for the year 2018 and it was 7.1% for year 2017. (CCPI based headline inflation YoY)
This resulted in a decrease in disposable income of consumers and increase in cost
of production. This created a market glut for chicken in the latter part of the year
and decrease in profit margins.
Sri Lankan Rupee Depreciation
Sri Lankan Rupee depreciated against US Dollar by over 18% for the period end 2018.
Short supply of domestic key raw materials resulted in import of materials. This
exposed the Company to exchange rate losses and increases in material costs. For
the year 2018, the Group was exposed to Rs.121.9 Million foreign exchange losses.
Ceylon Grain Elevators PLC | Annual Report 201838
MANAGEMENT DISCUSSION AND ANALYSIS
OPERATING ENVIRONMENT
Dairy Industry
The Ministry of Fisheries & Aquatic Resources Development and Rural Affairs is forecasting on importing high yield cross-breeds and issuing them to local farmers at attractive prices with necessary expertise and guidance.
This has given rise to increase in demand for cattle feed which has lead to
introduce a new product category.
Tourist Arrivals
The tourist arrival for the first ten months of 2018 has increased by 10.6% to reach 1.9 Million tourist arrivals. Sri Lanka was named as the ‘Lonely Planet’ top destinations for travel and has been recognised as one of the most photographed cities in the world due to its natural beauty and scenic
attractions.
Increase in tourist arrivals will boost the tourism sector, with more hotels,
restaurants being opened. This will increase the demand for poultry products such
as chicken and eggs.
Shortage in Skilled Labour
With the expansion in service sector and improvements in education, there is a shortage in skilled labour for certain sectors including poultry industry.
The Company faces a lack of skilled workers and therefore, the Company is focused
on automating its systems and processes.
Introduction of new Inland
Revenue Act No. 24 of 2017
The new Inland Revenue Act was effective from 2018 and the increased income tax thresholds had a negative impact on profitability levels of corporates.
Corporate tax rate of Milling and farming sector increased to 28% (2017 -12% / 10%),
Poultry breeding and commercial farming segments taxation rates increased to
14% (2017 - 10%) and corporate tax rate of warehousing operations increased to
28% (2017 - 10%).
39
Ceylon Grain Elevators PLC | Annual Report 201840
MANAGEMENT DISCUSSION AND ANALYSIS
SECTOR REVIEWS
Our integrated poultry business of the Group consists of three main business segments; Milling and farming, Poultry breeding and commercial
and Others. During the year under review, we saw a remarkable growth in all three segments of the Group, surpassing revenue of Rs.17.1 Billion
for the first time in a year. Operating profit of the Group rose by 20% to Rs.1.3 Billion showing an exceptional performance and productivity in
terms of business activities and ultimately satisfying key objectives of all stakeholders.
Each segment individually and as an integrated poultry business provided a valuable contribution to the Group performance to deliver value to
its stakeholders.
2018
l 58% Milling and farming
l 36% Poultry breeding and commercial
l 6% Others
2017
l 59% Milling and farming
l 34% Poultry breeding and commercial
l 7% Others
Asset Base 2018 2017
(Rs. Million) (Rs. Million)
Milling and farming 6,998 6,236
Poultry breeding and commercial 4,363 3,557
Others 687 685
2018
l 86% Milling and farming
l 13% Poultry breeding and commercial
l 1% Others
2017
l 85% Milling and farming
l 14% Poultry breeding and commercial
l 1% Others
2018
l 42% Milling and farming
l 54% Poultry breeding and commercial
l 4% Others
2017
l 40% Milling and farming
l 58% Poultry breeding and commercial
l 2% Others
Revenue 2018 2017
(Rs.Million) (Rs.Million)
Milling and farming 16,626 14,848
Poultry breeding and commercial 2,626 2,404
Others 126 142
Profit for the year 2018 2017
(Rs.Million) (Rs.Million)
Milling and farming 576 451
Poultry breeding and commercial 749 654
Others 62 16
41
Milling and farming segment
The milling and farming
segment engage in
manufacturing and selling of
poultry and other animal feed
and processing of chicken. This
is the main operating segment
of the Group which contribute
86%, 42% and 58% to the
Group Revenue, Profitability
and Assets base respectively.
The YoY growth of Revenue
and Profit After Tax (PAT), when
compared to last year was
reported at an impressive 12%
and 28%, respectively, where
the segment achieved the
highest ever monthly feed sales
volume, reported during the
current year.
The reported growth in revenue during the
year were directly correlated to the increase
in demand for formulated feed with farmers
shifting from self-mixing and improved
market for other animal feed such as cattle
feed as a result of increased demand with
the emerging dairy industry. Additionally,
consistent feed quality, a wide range of
customised animal feed and sustainable
partnerships with key chicken processes also
heavily contributed to the revenue growth
during the year. The milling operation
provides a basis and the success of this
segment has been heavily beneficial and
directly impact on the performance of the
remaining operations of the Group.
The escalating prices of raw materials in the market and continuous depreciation of LKR against
USD significantly affected the sector performances. This was recovered to a certain extent with
effective feed formulation and alternative sourcing of materials, improved operational efficacy
and cost saving measures that took place in year 2018. However, the scarcity of quality local
Maize and pricing pressure together with quota restrictions imposed on Maize importation by
the Government have suppressed the operational performance of the sector.
The glut in the chicken market during the latter part of the year along with high competition
led to the decrease in demand for processed chicken and resulted in price competition. Further,
increased material costs and utility expenses together with increase in income tax rates to 28%,
narrowed the profit margins of the segment.
Additionally, the upward revision of fuel prices and adverse weather conditions negatively
affected the consumer purchasing power which resulted in decrease in the demand for the
end products, chicken and egg.
Despite these challenges, the milling and farming segment reported a revenue and profit of Rs.
16.6 Billion and Rs. 576 Million respectively during the current year against Rs. 14.8 Billion and
Rs. 451 Million recorded in the previous year, with the prudent management and cost controls.
Key indicators and contribution
Milling and farming 2018 2017 Change
(Rs. Million) (Rs. Million)
Revenue* 16,626 14,848 1,778 Û
EBIT 909 589 320 Û
PBT 779 584 195 Û
PAT 576 451 125 Û
TA 6,998 6,236 762 Û
TL 2,903 2,594 309 Û
*Revenue includes inter-company sales
Number of employees
4822017 Number of employees 430
Net assets (Rs. Million)
4,0952017 Net assets Rs. 3,642 Million
Ceylon Grain Elevators PLC | Annual Report 201842
MANAGEMENT DISCUSSION AND ANALYSIS
SECTOR REVIEWS
Poultry breeding and commercial segment
The poultry breeding and
commercial segment consist
of selective breeding, hatchery
and sale of commercial Day-Old
Chicks (DOCs) and commercial
farming, is the second largest
contributor to the Group’s
revenue and profitability during
the year. The sector contributed
to the Group’s Revenue, PAT
and Assets base respectively
by 13%, 54% and 36%. The YoY
growth of Revenue and profit,
when compared to last year
was reported at an impressive
9% and 14%, respectively.
The reported growth in revenue during
the year was attributable to the improved
demand for Broiler DOCs due to the increase
in demand for chicken and table eggs.
However, the Revenue from export of Parent
Stock DOCs to regional countries affected
due to the imposition of transit tariff and
restriction from suppliers’ countries due to
Avian Flu Influenza.
Along with the increase in revenue, the
segment was able to maintain its profitability
throughout the year due to effective farm
management in Breeder and Commercial
farms, application of leading industry
technical know-how, resulting in efficiency in
poultry breeding and improved productivity
in farm operations, despite the increase in
raw material and utility costs.
CGE’s subsidiary, Three Acre Farms PLC (TAF) holds the sole franchise for Hy-Line breeds for
commercial Layers and the Indian River breeds for commercial Broilers.
Unfavourable weather conditions resulted in lower productivity in the commercial farms.
Revenue from Layer DOCs continued to deteriorate due to instability in the table egg market at
the beginning of the year. Unsold layer DOCs were stemmed from poor demand was recovered
during the third quarter of the year and contributed positively to the bottom line at the end.
The segment continued to produce disease-free, healthy products upheld by the segment’s
stringent quality control measures, bio-security standards and effective farm and capacity
management. This ensured the Company maintains the continuous supply of highest quality
DOCs to the Sri Lankan market under the Prima brand name, whilst enabling the segment to
export Parent Stock DOCs to meet the increased demand from countries in the region.
During the year the Company faced increase in corporate taxes by the Government and further
narrowing of profit margins. However, despite these challenges the segment continued to
perform exceptionally as the largest contributor to the Group’s profitability during the year.
The segment recorded revenue and profitability of Rs. 2.6 Billion and Rs. 749 Million
respectively during the year against Rs. 2.4 Billion and Rs. 654 Million which was recorded
in the previous year.
Key indicators and contribution
Poultry breeding and commercial 2018 2017 Change
(Rs. Million) (Rs.Million)
Revenue* 2,626 2,404 222 Û
EBIT 903 779 124 Û
PBT 896 780 116 Û
PAT 749 654 95 Û
TA 4,363 3,557 806 Û
TL 725 597 128 Û
*Revenue includes inter-company sales
Number of employees
2462017 Number of employees 202
Net assets (Rs. Million)
3,6382017 Net assets Rs. 2,960 Million
43
Other segments
The other segments of the
Group consists of revenue
generated from other
activities which includes,
renting of warehouse storage
spaces, supply of specialised
equipment, drugs and vaccines
to the poultry industry. The
revenue from this sector for
the year amounted to Rs. 126
Million when compared to Rs.
142 Million during the previous
year. Decrease in revenue from
this segment is attributable
to the rental expense paid to
third parties due to insufficient
storage facilities.
Despite this fact, the segment has reported
a profit after tax of Rs. 62 Million reflecting
a growth of Rs.46 Million against the year
2017. This growth was achieved as a result
of improved efficiency and warehouse
management. 6% of the Group’s asset
base which amounts to Rs. 687 Million is
attributable to this segment.
This segment provides warehousing and
silo facilities, where the Group is able
to obtain a competitive advantage by
purchasing raw materials in bulk. Our
warehousing and silo facilities are built
with the aim of preserving the quality of
raw materials. Consequently, we are able
to maintain the quality of our feed.
The segment also supports local farmers in the production of Maize. This is in support of the
Government policy to assist farmers in maintaining better and constant prices.
Key indicators and contribution
Other 2018 2017 Change
(Rs.Million) (Rs.Million)
Revenue* 126 142 (16) Ü
EBIT 89 86 3 Ü
PBT 88 86 2 Û
PAT 62 16 46 Û
TA 687 685 2 Û
TL 214 200 14 Û
*Revenue includes inter-company sales
Number of employees
82017 Number of employees 8
Net assets (Rs. Million)
4732017 Net assets Rs. 485 Million
We see positive signs in the operating environment which
will enable us to continue with our growth momentum. With the
anticipated increase in tourist arrivals, expected upward revision in public sector employee salaries, continuing trend for dining out and LKR stabilisation against the USD, CGE expects a growing market demand and profit margins. Further, we foresee an improved demand for our export in regional countries and robust prices for Broiler and Layer Day Old Chicks.
However, financial performance may affect due to adverse weather conditions, fluctuation in global crude oil prices and pricing pressures on key raw materials. Nevertheless, the market is expected to grow despite these challenges.
Ceylon Grain Elevators PLC | Annual Report 201844
MANAGEMENT DISCUSSION AND ANALYSIS
FUTURE OUTLOOK
OUR CAPITAL INPUTS AND RESOURCES
HOW WE PERFORMED
HOW WE MEASURE OUR
PROGRESS
Value created by utilising
our Financial Capital
Our financial strategy is designed to create
capacity over the long term and to maintain financial stability. To meet
market demand, CGE invests for long-term growth prospects.
� Sourcing of funds
� Working capital management
� Performance management
� Investments
� Internal controls
� Shareholders’ funds
� Borrowings
� Working capital
� CAPEX
� Compliances
FINANCIAL CAPITAL
6,479,396
14.84
OUR FINANCIAL STABILITY
Group net current assets position
Sri Lankan Rupees thousands
Group earnings per share
(2017 - 5,712,458) (2016- 5,066,472)
STAKEHOLDER VALUE ADDED (%)
Value retained 16% 18%
2018 2017
To Shareholders 3% 2%
To Capital providers and creditors 5% 6%
To Government 52% 53%
To Employees 24% 21%
2017
2018
45
CGE has gained financial stability over the lastfour years due to improved performance.
The Significance of Financial Capital to CGE Group
The balancing of other capitals to create
sustainable value while securing all the
stakeholders’ expectation depends on
Financial Capital. Further, shareholders’ funds
is the key component of the financial capital,
thus derives through vision and mission of
the Company while trade-off with other
capitals is challenging in present competitive
business environment. Also, the sustainable
growth of the company is derived through
strengthen financial capital and the
significance could not measure under the
negative market circumstances.
Management Approach
The Company manages its financial capital
by prioritising its compliance with the
best practices and standards of all relevant
statutory and regulatory bodies and placing
an effective safeguard mechanism to deal
with uncertainty and associated risk. CGE
practices prudent financial management in
all areas of business and operates under the
financial advantages which have placed us
on a solid financial foundation.
Our capital inputs and resources
Shareholders’ funds are represented in
equity capital whereas borrowings consist of
generated funds to facilitate operational
activities and new investments. Therefore,
internally generated cash was the main
source of funds of the Company for past
few years and the Company has not utilised
any debt capital for creating value to the
stakeholders.
Working capital management
The managing of working capital is vital as
it helps the smooth operation of business
while optimising allocation of financial
capital for value creation. Management
takes prudent actions to manage
individual items of the working capital
through the accumulated experience in
the industry that it operates.
interest bearing borrowings and interest free
borrowings from lenders. Working capital
includes, trade receivables, trade payables
and inventories while CAPEX includes
non-current assets such as Investment
in subsidiaries, equity investment and
biological assets.
There are many compliance requirements
which are applicable for managing financial
capital such as Sri Lanka Accounting
Standards, Inland Revenue Act, Foreign
Exchange Act, Money Laundering Act, etc.
How we performed
Sourcing of funds
CGE has gained financial stability over last
four years due to improved performance.
As a result, CGE was able to use internally
Group (Rs. ‘000) 2018 2017 2016 2015
Cash generated from operating activities 1,135,429 1,927,046 1,923,557 2,804,969
Utilised for:
Investing activities 809,320 1,065,320 679,102 501,630
Financing activities 150,225 190,300 87,157 1,111,500
As cash reserve 175,884 671,426 1,157,298 1,186,600
Sources of funds
Ceylon Grain Elevators PLC | Annual Report 201846
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL CAPITAL
Inventories
The sourcing of quality raw materials at
the right price for manufacture of feed is
challenging due to the short supply in local
market and escalating cost of imported key
raw materials as a result of Sri Lankan Rupee
depreciation. Accordingly, CGE has allocated
additional funds to collect raw materials
at competitive prices which resulted in
increasing total inventory by 31% at the end
of current year.
The value of raw materials and consumables has increased during the period under review due to increase in unit costs and quantities. However, composition of inventories has reduced to 76% from 78% in the previous year as a result of increased finished goods due to the glut prevailed in chicken market at the latter part of the year. Thus, inventory turnover ratio has slightly dropped in the current year despite the increase in gross profit. However, the increase in inventory level will secure the forthcoming years business operation of CGE.
Inventory turnover ratio (No. of times)
2018 4.06
2017 4.64
Receivables
Receivables include amount dues from trade,
prepayments and other receivables. The
current year total receivables have gone up
to Rs. 821.5 Million (2017 - Rs. 619.1 Million)
after deducting impairment provision of
Rs. 182.9 Million (2017 - Rs. 216.5 Million).
This increase was due to providing secured
credit facilities to key chicken processors
under the prevailed market glut. However,
during the year, all outstanding trade dues
amounting to Rs. 33.5 Million was written
off and reversed the impairment provision
accordingly.
Operational Performance
Revenue
The remarkable growth in revenue of 13%
to Rs. 17,085.6 Million (2017 - Rs. 15,154.9
Million) was achieved due to valuable
contribution given by milling and farming
segment. The contribution to the Group
revenue by the segment for the current
year was Rs. 15,725.8 Million compared
to Rs. 13,950.2 Million in year 2017, which
was a 13% increase when compared to the
previous year.
The improved market condition in chicken
market in first nine months was the key
factor for increase in sales volume and
average selling prices of Broiler Chicken,
Broiler DOCs and Broiler Feed.
Group Revenue(Rs. Million)
0
5,000
10,000
15,000
20,000
20182017201620152014
Profitability
The Group’s gross profit for the year 2018
was Rs. 1,872.1 Million, an increase of
Rs. 328.6 Million or 21%, when compared
to Rs. 1,543.5 Million in year 2017. The
operating profit of the Group for the year
was Rs. 1,325.7 Million (2017 - Rs. 1,101.9
Million) while profit before tax reported for
the year was Rs. 1,586.2 Million (2017 - Rs.
1,399.6 Million).
Although the escalating cost of key raw
materials, restrictions on import of locally
sourced key raw materials and emerged
chicken market glut experienced at the
latter part of the year negatively affected the
industry, CGE was able to reach over
Rs. 1 Billion profitability for the fourth
consecutive year as a result of effective
utilisation of each capital. For the last three
years, profit before tax amount has gone
up other than operating profit due to the
contribution received from finance income.
Composition of inventories(Rs. Million)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Out grower stock(Working Progress)
Finished goodsGoods in transitRaw materialsand consumables
20182017
47
The Group was able to report of Rs. 1,210.9
Million profit after tax compared to Rs.
1,069.9 Million reported in year 2017,
which was a 13% increase compared to the
previous year.
Finance Income
The impressive skills on working capital
management and business operation, CGE
was able to earn Rs. 373.9 Million
(2017 - Rs. 293.3 Million) interest income by
investing in short term bank deposits and
commercial papers.
Finance Costs
Finance costs comprises of foreign exchange
loss and interest costs on overdraft facilities
utilised by CGE. The significant increase in
finance costs was due to the Sri Lankan Rupee
depreciation against United State Dollars
and for the current year, reported a foreign
exchange loss of Rs. 121.9 Million while it was
Rs. 1.0 Million in the year 2017.
Taxation
Taxation has gone up for the current year
as a result of change in corporate tax rates
as per the new Inland Revenue Act and
accordingly, taxation for the current year
was Rs. 375.3 Million (2017 - Rs. 329.7 Million)
which was an increase of
Rs. 45.6 Million or 14%. The total tax
comprises of income tax, deferred tax and
dividend tax on inter-company dividend.
Taxation(Rs. Million)
0
50
100
150
200
250
300
350
400
20182017
Deferred taxDividend tax on intercompany dividend Income tax
Income tax expense has increased
significantly by 94% in the current year is
due to the increased taxable income (Note
10 - Taxation) and change in corporate tax
rates. However, the deferred tax charged for
the current year has decreased by 86% as
an adjustment of impact of new corporate
tax rate to the temporary differences at the
end of year 2017. The change in dividend tax
on intercompany dividends was due to the
increased dividend income and increase in
tax rate from 10% to 14%.
Other Comprehensive Income
The effect of changes in fair value or actuarial
assumptions on defined benefit obligations
is recognised as other comprehensive
income or expenses. For the current year
it was an expense of Rs. 5.2 Million while
during the previous year it was an income of
Rs. 8.6 Million. The increase in expense was
due to the decrease in discount rate from
11.5% to 11% and new recruitments during
the year. Taxation represents deferred tax on
change in defined benefit obligations.
Investments
It is required to continue improvements in
existing assets to improve the efficiency
and productivity while capitalising business
opportunities. Thus, we manage our financial
capital for by maximising the sustainable
outcome. As a result of current macro-
economic factors and the nature of business,
significant expansion is not advisable.
Accordingly, CGE is mainly focusing on
infrastructure development and productivity
improvements which will enable us to be
more competitive in the market.
For the current year, CGE has invested of
Rs. 261.9 Million ( 2017 - Rs. 482.2 Million)
on property, plant and equipment and
the detailed breakup of key investments
has been disclosed on pages 50 to 53,
under Manufactured Capital. During the
year under review, Company received the
freehold ownership of Ittapana land which
was acquired under leasehold basis in
year 2016 amounting to Rs. 68.8 Million.
Further, investment made in new software
amounting to Rs. 0.8 Million
(2017 - Rs. 7.6 Million) has boosted the
efficiency in financial reporting.’
Profitability(Rs. Million)
0
500
1,000
1,500
2,000
2,500
20182017201620152014
Operating profit Gross profitProfit before tax
Ceylon Grain Elevators PLC | Annual Report 201848
MANAGEMENT DISCUSSION AND ANALYSIS
FINANCIAL CAPITAL
Internal Controls
Effective internal control policies and
procedures are in place for each aspect of
business operation to satisfy that intentional
or unintentional act of employees or
management will not risk the financial
capital of the Group. The monitoring of
effectiveness is hold by the governance
and drill down the responsibility up to the
employees. Our Internal Audit department
together with Finance Department takes
comprehensive control procedures
which are quarterly reported to the Audit
Committee of the Group.
How we measure our progress
Financial Stability
Assets Base
The impressive performance over the last
four year together with over Rs. 1 Billion in
profitability, CGE has become a stable entity
in the industry and increased the total assets
amounting to Rs. 11,571.2 Million from
Rs. 10,170.8 Million in the previous year.
The total assets at the end of year 2013 was
amounting to Rs. 5,743.4 Million and it was
a remarkable achievement by CGE over the
last five year which doubled its asset value.
Equity
The retained earning reserves also
increased significantly over the last
five years even after the distribution of
dividends for shareholders. For the current
period, an amount of Rs. 886.9 Million
(2017 - Rs. 796.0 Million) was transferred
from total comprehensive income of the
Group to the shareholders’ equity while
amount of Rs. 320.1 Million (2017 - Rs.
280.7 Million) was transferred to the non-
controlling interest equity.
Liquidity
The pre-emptive actions taken by the
management through managing of flow of
funds has upgraded CGE’s liquidity position
over the last five years. The Group is in a
position to serve the liabilities on normal
course of business and hold excess cash
position to meet the capital expenditure
requirements.
The current ratio of the Group at the end of
current year was 2.67 times while it was 2.47
times in previous year. The cash ratio stood
1.27 times over the current year and previous
year which implied the continuation of
liquidity position of the CGE.
Shareholder satisfaction
Dividend
During the current year the Company has
distributed dividend amounting to Rs.
120 Million in respect of previous year and
Board of Directors has proposed Rs. 180
Million or Rs. 3.00 per share in respect of
the current year performance subject to
the shareholders’ approvals. The Company
has satisfied the solvency test in terms of
dividend distribution.
Total assets(Rs. Million)
0
2,000
4,000
6,000
8,000
10,000
12,000
20182017201620152014
Total assets and equity(Rs. Million)
0
2,000
4,000
6,000
8,000
10,000
12,000
20182017201620152014
Non-controlling interestTotal liabilities Shareholders’ equity
Investments(Rs. Million)
0
100
200
300
400
500
600
20182017201620152014
Leasehold assetsIntangible assetsProperty plant and equipment
2018 2017 2016 2015 2014
EPS (Rs.) 9.60 7.51 13.63 10.25 (0.81)
DPS (Rs.) 3.00 2.00 2.50 1.10 -
Dividend and Earnings Per Share
49
Nest Assets Value and Market Price of the Share
The net assets per share has gone up in the
current year up to Rs. 68.25 from
Rs. 60.70 in the previous year as a result of
increase in accumulated reserves of the
Company. However, the closing market price
has dropped to Rs. 59.50 per share from
Rs. 66.10 per share in the previous year due
to the poor capital market performance.
Net Assets and Market Price(Rs.)
20
40
60
80
100
20182017201620152014
Market Price Per Share
Net Assets Per Share
Compliance
The Group is committed to comply with
the financial reporting and other rules
and regulations. The Board of Directors
has expressed their responsibility over
compliances on page 108, under the
Statement of the Directors’ Responsibility.
Further, Annual Reports of both CGE and
TAF have been recognised with awards
of compliance at the CA Sri Lanka Annual
Report Awards 2018 where CGE was
awarded a Bronze Award in the Food and
Beverage category.
We are focused on improving our productivity in potential
areas as it will drive us towards sustainable growth in future years.
Our expansions plans for breeder farm facilities with advanced technology is currently underway to enhance our production capacity. Also, we will continue with our planned capacity increase in Commercial Farms with new Environmentally Controlled Houses. Our state-of-the-art cold room facilities at the chicken plant, Seeduwa has an added competitive advantage to the Group. Installation of the Maize Dryer will enable CGE to purchase more maize from local farmers.
Ceylon Grain Elevators PLC | Annual Report 201850
MANAGEMENT DISCUSSION AND ANALYSIS
FUTURE OUTLOOK
OUR CAPITAL INPUTS AND RESOURCES
HOW WE PERFORMED
HOW WE MEASURE OUR
PROGRESS
Value created by utilising our Manufactured
Capital
The physical infrastructure used in the
administration and operations of the business activities of the
Company form the Manufactured Capital.
� Investments
� Controlling and monitoring
� Maintenance
� Safety
� Buildings
� Plant, machinery and equipment
� Motor vehicles
MANUFACTURED CAPITAL
275,018
OUR CAPITAL BASE
Investment for manufactured capital
Sri Lankan Rupees thousands
(2017 - 482,226) (2016- 137,918)
MANUFACTURED CAPITAL COMPOSITION (%)
2018 2017
Buildings 42% 44%
Plant, machinery and equipment 45% 43%
Furniture and �ttings 4% 4%
Motor vehicles 5% 5%
Capital work-in-progress 4% 4%
2017
2018
51
Manufactured Capital includes the infrastructure that we use in our business activities which includes the integrated poultry manufacturing platform and our extensive distribution network.
The Significance of Manufactured Capital to CGE Group
As a manufacturing organisation and leader
in the integrated poultry business, we
believe that manufactured capital is the
heart of our business process and success
we achieved over the years. The importance
is not limited to our success story but helped
to provide quality products for our valued
customers and enhanced the responsible
usage of natural resources.
Management Approach
All aspects of the business process of CGE,
manufacture of feed, processing of chicken,
growing of birds and hatching of eggs are
involved with manufactured capital. Thus,
the management prudently evaluates
technology utilised by the Company on a
periodical basis and continuously invests
in innovative technology to satisfy our
customer needs with minimum and effective
resource utilisation. We also evaluate the
machinery held by the Company and adhere
to a maintenance plan with the help of
technical expertise.
Our Capital Inputs and Resources
Physical assets used for reproduction,
administrative function and delivering
value to the customers considered as
manufactured capital and based on nature,
we divided them into three categories
namely Buildings, Plant, Machinery and
Equipment and Motor Vehicles.
Buildings comprise of factory buildings,
warehouse and silo buildings, EC houses
and open houses, etc. The details of number
of freehold buildings and value has been
disclosed in Note 12 - Property, Plant and
Equipment and details of leasehold buildings
were disclosed in Note 13 - Leasehold Right
over Land and Buildings. Plant, machinery
and equipment includes production plants,
machinery, farm and factory equipment,
electrical equipment and other specific
equipment used for each business segment.
These vehicles are commercial vehicles
used mainly for transportation of goods and
materials between farms and other business
units.
How we Performed
Investment in manufactured capital
During the period under review, the
Company has invested Rs. 258 Million for
capacity enhancement and cost saving
initiatives. These investments are funded by
funds that are generated internally rather
than utilising any debt capital. The category
wise additions during the period are as
follows;
Investment in Manufactured Capital
Category 2018 2017
(Rs. ‘000) (Rs. ‘000)
Buildings 28,125 25,543
Plant, machinery and equipment 189,189 316,177
Furniture and fittings 15,795 16,798
Motor Vehicles 3,898 29,690
Capital work-in-progress 38,011 94,018
Total 275,018 482,226
Ceylon Grain Elevators PLC | Annual Report 201852
MANAGEMENT DISCUSSION AND ANALYSIS
MANUFACTURED CAPITAL
Controlling and Monitoring
Manufactured capitals are relatively
movables except for any buildings and
could damage as a result of continuous use
and without proper maintenance. Thus,
the Company has proper controlling and
monitoring procedures in place to overcome
damages. Also, policies and procedures
are followed for purchase and disposal of
manufactured capital of the Company to
achieve purpose of such assets.
Meanwhile, the Company invests in training
facilities for the staff in order to optimise the
utilisation of manufactured capital for value
creation.
Maintenance
Scheduled maintenance is carried out by
in-house team to ensure smooth flow of
operations and to avoid every possible
down-time. Every repair or maintenance
job follows a well-structured process and
procedure by the Company’s engineering
department. We also obtain technical
expertise from our principals in Singapore as
well as local service providers.
Safety Measures
Detailed safety plans are drawn up for all
CGE locations. The Company also places a
lot of importance on creating heightened
awareness, as well as train all staff (this
also refers to logistics safety), completing
inventories in all factories with regards to
safety aspects and reporting on the status
of any shortcomings and actions to resolve
these.
We have installed new fire hydrant and a
new fire pump house as safety measures
for adverse fire situations. We conduct fire
drills and safety training (including first aid
training) for employees in association with
the Fire Brigade of Sri Lanka.
Also, in preparation for any workplace
injuries we have highly trained in-house
first aid in place, who can handle minor
injuries to severe injuries. If any injury related
incident was to occur such cases will be
discussed in monthly management meeting
and corrective/preventive action will be
taken to ensure that such an injury is avoided
in the future.
How we Measure our Progress
Capacity Enhancement
The Group invested in the following key
expansion projects during the year:
� Increase in cool room capacity.
� Increase in FAT storage capacity.
� Construction of new administrative
building, staff quarters in our processing
plant and farms.
CGE is equipped with its own fleet of vehicles for distribution of feed among our farms
53
Cost optimisation
The increase in efficiency and effectiveness
of the current business process will lead us
to save cost and new initiatives introduced
are as follows:
� Conveyor belt for feed loading to
increase daily sales volume
� Installation of interactive software &
control system and PLC system upgrade
for feed mill operations
� Adaptation of modern testing methods
Our renewed emphasis on research and development will
benefit us in terms of new product development, improved quality and
increased productivity. Training and development programmes designed for our employees will allow them to seize new business opportunities while facing global and local market challenges. Our market surveillance programmes and Sales Force Automation systems will continue to identity the changing customer expectations by collecting proprietary information. Also, our focused efforts on CSR events and activities will improve the brand awareness in the forthcoming year.
Ceylon Grain Elevators PLC | Annual Report 201854
MANAGEMENT DISCUSSION AND ANALYSIS
FUTURE OUTLOOK
OUR CAPITAL INPUTS AND RESOURCES
HOW WE PERFORMED
HOW WE MEASURE OUR
PROGRESS
� Research and development (R&D)
� Training and development
� Employee retention
� System and process development and modification
� Engage with corporate community
� Knowledge and expertise
� System and processes
� Brand reputationValue created
by utilising our Intellectual
Capital
The Intellectual Capital of the Company is
developed and enhanced within our unique corporate culture, to ensure that our business is
sustainable well into future.
INTELLECTUAL CAPITAL
2,237,000
AA-
OUR BRAND VALUE
Brand value for “PRIMA” and “FAMERS’ CHOICE”
Sri Lankan Rupees thousands
Brand rating for the year 2018
(2017 - 2,125,000) (2016- 2,164,000)
OUR BRAND LOGOS
The Significance of Intellectual Capital to CGE Group
Over the decades of accumulated
knowledge and industry expertise,
innovative business process and strong
brand reputation have been the invisible
strength for market leadership in overall
poultry industry. As such, we believe the
intellectual capital is material aspect of CGE
value creation.
Management Approach
We consolidate our intellectual capital
to address all the aspects of the livestock
industry yet continuing to advance towards
more efficient livestock production and
improved qualities of livestock products. Our
investments in intellectual capital are aimed
at safeguarding our livestock by considering
animal welfare, external constituencies such
as customers and various other associated
entities. As a result, we were able to
harmonies people and their competencies
and knowledge, organisational and
management systems, and external
constituencies to uplift our intellectual
capital to greater heights.
Value Created by utilising Our Intellectual Capital
The intellectual capital of the Company
is developed and enhanced within our
unique corporate culture, to ensure that our
business is sustainable well into future.
Our Capital Inputs and Resources
Knowledge and experience possess by our
employees that accumulated over the period
and sharing with expertise those who within
the Group or outside. “PRIMA” and “FARMERS’
CHOICE” are our brands and always reflect
quality in customers’ mind. Processes and
procedures are continually upgrading
with experience and innovations through
research and development.
How we Performed
Invest in Research and Development
In line with the requirements of our
customers we have introduced new feeds,
special breeder feeds and chicken products
to the market in order to cater to their
needs and as a response to the changes in
our business environment. We believe that
these products would benefit the respective
brands, by facilitating increased brand
loyalty and brand equity in the long run. We
always ensure the quality of our product
to maximise the customer satisfaction and
experience.
Further our Research and Development
(R&D) function is carried out by our technical
and nutrition team which consists of highly
skilled and experienced professionals.
Kno
wledge and Experience
Brand Reputation
Proc
esses and Procedures
55
Our R&D function is carried out by our technical and nutrition team which consists of highly skilled and experienced professionals.
Activities during the year
� The Company invested into a new
modern laboratory for chicken
processing.
� Research on feed for continuous
improvement.
� Cost effective feed formulations through
continuous trials resulted in improved
digestibility and antibiotics free.
Training and Development
In order to adopt with new technologies
and practices around the world, our
employees were given continuous training
opportunities within the country as well
as around the world. The learning and
experience gathered by the employees have
been ultimately contributed to the overall
performance of the Group.
Employee Retention
Retention of our key employees those who
have accumulated industry knowledge over
their long service period and experience are
vital in order to focus on sustainable growth
in future. Hence, the management took
necessary steps to identify the knowledge
base of each individual and provide
satisfactory facilities above the industry
standards which include performance
rewards, training facilities, promotions and
recognition.
System and Process development and modification
� Introducing a Sales Force Automation
(SFA) system for automated chicken sales
operation.
� Invested in new cool room facility which
improves our store capacity to preserve
our chicken stock.
� Adoption of supportive software to
minimise manual work in ERP system in
terms of Financial Reporting.
� Purchase of modern laboratory
equipment to enhance our accuracy
level in scrutinising nutritional
parameters within lesser time.
Engage with Corporate Community
In order to enhance our brand strength
and stakeholder engagement the following
activities have been carried out during the
financial year:
1. Consumer Exhibitions (Culinary Art Food
Expo)
2. Launch of Digital Video Commercials
3. Radio campaigns
Ceylon Grain Elevators PLC | Annual Report 201856
MANAGEMENT DISCUSSION AND ANALYSIS
INTELLECTUAL CAPITAL
We continuously invest in Research and Development to maintain our quality levels which is our key strength.
How we Measure our Progress
During the year, the Group was able to
achieve Rs.1.2 Billion profit for the fourth
consecutive year despite the challenging
market condition.
As per Brand Finance Lanka (2018) our brand
was ranked 40th amongst the 100 most
valuable consumer brands in the Island,
valued at Rs. 2,237 Mn with a brand rating of
AA (Source: Brand Finance Lanka, 2018).
Our first integrated Annual Report of 2017
was selected for a Bronze Award at the CA
Annual Report Awards 2018 in the Food and
Beverages sector.
Kno
wledge and experience
Syst
em and Processes
Brand Reputation
� Skilled and trained employees
� Technical experts
� R&D Team
� Quality assurance
� ERP system
� High bio-security measures
� Experimental farms and in house laboratories
� Brand Equity
� Outstanding relationships with stakeholders
Intellectual Capital enhancing activities
57
Our professional team of employees are dedicated
to sustain the Group’s corporate reputation and most of
the achievements are mainly because of their tireless efforts. CGE will continue to reward them by enabling them to pursue greater career progress and by creating a learning culture. The local and foreign training programmes will assist them to meet challenges in the industry and improved welfare facilities and accommodation enhance their productivity.
However, sourcing of skilled labour for manufacturing and farming is challenging. The improvement in service sector specially tourism, hotels and malls are attracting the new generation. We have been successful at retaining our permanent staff by offering a bundle of benefits as well as brand reputation, under the “PRIMA” family.
Ceylon Grain Elevators PLC | Annual Report 201858
MANAGEMENT DISCUSSION AND ANALYSIS
FUTURE OUTLOOK
OUR CAPITAL INPUTS AND RESOURCES
HOW WE PERFORMED
HOW WE MEASURE OUR
PROGRESS
� Talent attraction
� Talent retention
� Training and development
� Administration
� Employee engagement
� Skills, knowledge and competencies of employees
� Employee composition
� Employee health and safety compliancesCreated by utilising our
Human Capital
Human capital is an essential
building block for creating value. The competencies, motivation
and ethical work practices of our employees and service providers
enable us to create commercial and sustainable developmental
value.
HUMAN CAPITAL
736
25%
OUR EMPLOYEE BASE
Number of employees of the group
Total employees
Women composition
(2017 - 640) (2016- 546)
TENURE BREAKDOWN (%)
18<25 12% 10%
2018 2017
26<35 30% 30%
36<45 28% 29%
46<55 25% 26%
56 and above 5% 5%
2017
2018
59
We focus on nurturing and building our Human Capital by enhancing skills and expertise by providing opportunities for career development and personal growth.
The Significance of Human Capital to CGE Group
CGE Group specialised in integrated poultry
business which requires very own set of
skills, knowledge and expertise to survive
in the business which is highly volatile by
its nature. The motive for CGE Group being
leader in integrated poultry business is
our unique employee capital those who
enhanced intellectual capital to deliver
desired objectives of our stakeholders.
Also, the unique capital that has potential to
improve itself, thus CGE Group considered
Human Capital is vital in value creation.
Management Approach
The success of our organisation, to a high
degree, is determined by the commitment
and performance of our employees.
Therefore, it is of great importance to right
staff at right place for the organisation
and facilitates them to progress internally.
The Group has in place extensive Human
Resource Management (HRM) strategies
which ensure the Company’s recruitment,
retention, development and rewards of employees are well-integrated as part of the
overarching corporate strategies of the Group. In consideration of the complexities of the
macro environment and in anticipation of the challenges and emerging opportunities, the
Company annually develops a plan to manage and oversee all activities related to employees.
Rewards Need to be Added Under Process
From the date of recruitment notice to retirement date, the interaction with employees is much
vital to deliver the value. Also, the skills, knowledge and competencies need to be effectively
managed through the comprehensive administrative structure including legal and voluntary
compliances. Continuous measures on health and safety will lead to improve confidence of our
workforce.
CGE Group has a staff cadre that comprises 526 permanent employees and 210 fixed term
contract staff who works full time and certain work functions are outsourced to few contractors.
The composition of employee group as follows;
Gender Composition 2018 2017
No. of Employees
Percentage No. of
Employees
Percentage
Male 551 75% 488 76%
Female 185 25% 152 24%
736 100% 640 100%
Ceylon Grain Elevators PLC | Annual Report 201860
MANAGEMENT DISCUSSION AND ANALYSIS
HUMAN CAPITAL
How we performed
Talent Attraction
The right person for the right place at the
right time will lead CGE Group achieving
its corporate goals. Thus, recruitment of
right candidate at right time is the key to
the success and brand reputation “PRIMA”
is provided a strong perception to attract
right talent. Also, the Group provides
remuneration packages in part with the
industry standards together with bundle of
other benefits.
Talent Retention
It is a challenge to the governance body of
the Group to retain recruited employees to
deliver the stakeholder objectives. As our
employees possess accumulated knowledge
Designation Composition 2018 2017
No. of Employees
Percentage No. of
Employees
Percentage
GM 1 - 1 -
AGMs 9 1% 9 2%
Managers (E6 to E4) 53 7% 51 8%
Executives (E7 and E8) 68 9% 67 10%
Non-Executives 605 83% 512 80%
736 100% 640 100%
Age Composition 2018 2017
No. of Employees Percentage No. of Employees Percentage
Executive and Above
Non-Executive
Total Executive
and Above
Non-
Executive
Total
18 < 25 1 85 86 12% 1 59 60 10%
26 < 35 32 192 224 30% 28 164 192 30%
36 < 45 41 168 209 28% 44 144 188 29%
46 < 55 47 136 183 25% 46 121 167 26%
55 < 10 24 34 5% 9 24 33 5%
130 605 736 100% 128 512 640 100%
and competencies, we are facing a rising
threat from competitive organisation
and labour markets in retaining our staff.
However, the risk has been managed to
an acceptable level through the tools of
Performance Management, Recognition and
Employee Welfare.
Performance Management
Evaluation of employee performance is
required to assess the achievement of
given strategic objectives of CGE as well
as personnel objectives of each employee.
The performance appraisal conducts by
the immediate supervisor and confirm by
the Head of the Department. This helped
management to assess achievements and
competencies of each individual. It provides
comprehensive information for training
requirements, map the career growth
and manage the rewards. Based on the
performance evaluation made for the year
2018, 46 employees were promoted.
Recognition
CGE is an equal opportunity employer. Each
employee is considered a member of the
‘Prima Family’. The Company brand name is
an internationally recognised brand name
and each employee of the Group receives
that recognition. We recognise our staff
throui qualitative and quantitative incentives
to enrich their work experience.
Further, within the Group, individual
employees are recognised for their long
service in each year and for the year ended
2018, 103 employees received the ‘Long
Service Award’ out of which 7 employees
received award for more than 25 year of
service.
61
Employee welfare
CGE considers employee work and life
balance as a responsibility of the Company
as we recognise employees as the heart of
the Company and accordingly provides a
bundle of welfare benefits to our employees.
This includes, family insurance benefits,
personal accident insurance, children
education benefits, scholarship for children
higher education, contribution for death
of nearest family member, meal and
refreshment, uniforms and laundry, study
leave for the professional exams and etc.
The Company permits allowed our staff to
purchase PRIMA products at discounted
prices. CGE Sports and Recreation Club
organised numerous activities such as inter-
department Cricket Tournament, helping
hand to the needy employees and ‘Bakmaha
Senakeliya’.
The Company annually organises a staff
event that allows our staff members to
interact with each other and enhance the
team spirit.
Breeder farms annual staff get-together
Training and development
The implementation of our strategies
requires clear leadership from managers and
willingness to change from employees. This
is why CGE devotes particular attention to
training of staff.
Our training process consists of identifying
skill gaps, evaluating training needs
and selecting the appropriate training
programmes to bridge this gap. On the other
hand, it also focuses on succession planning,
where competencies required to undertake
a higher role is identified and training
is provided as a strategic measure. All
managers take part in management training,
which places an emphasis on aspects such
as being able to translate strategy to the
department, financial management and
commercial excellence. Attention is also
devoted to skills such as giving feedback or
holding recruitment interviews to identify
candidates’ qualities. Technical training
and skill training are also developed and
imparted.
To keep knowledge and skills, refresher
sessions were first given to those who
had previously taken part in the Senior
Management and potential programmes.
The HR Department committed to
continuously improve training programmes
and to ensure their roll-out is coordinated.
CGE has access to a broad pool of
knowledge and skills due to its international
affliation. This knowledge is shared internally
and employed for the benefit of customers.
The main aims of these training programmes
are to improve technical knowledge, to share
new developments and strategic partners,
and to fine-tune sales skills.
In 2018, our employees were invited to take
part in many training programmes. These
programmes are very appealing aspect of
our HR policy, both for talent from outside
the organisation and for internal talent.
Through our comprehensive training
approach, CGE gives substance to
professional employment practices and
talent development. The motto of our
training is ‘Continuous Development’. With
the Management Programmes, many
forms of career progression, traineeships,
the opportunity to follow other (external)
training courses and career interviews
forming a fixed part of the annual appraisals,
CGE stimulates promotion among
employees.
Also, the training evaluation is conducted
after three months to identify the application
of such knowledge to our day to day
operations and employee self-development.
Ceylon Grain Elevators PLC | Annual Report 201862
MANAGEMENT DISCUSSION AND ANALYSIS
HUMAN CAPITAL
Administration
The governance structure comprises with
the Remuneration Committee and HR
Department which set the guidelines and
direction for human capital management for
value creation. As part of the administrative
process, HR Department utilise integrated
Information System, health and safety
measures and grievance handling.
HR Information system
CGE is focused on exchanging and making
the best use of internal knowledge and
further professionalising the organisation,
achieving a uniform way of working and
making optimal use of economies of scale.
In this context, we strive to continuously
improve our HR systems. Accordingly, the
foundation has been laid for optimising the
management and execution of HR processes
and the documentation of agreements.
Managers and employees are not only
supported in standardised HR processes but
also in talent management, career planning
and strategic personnel planning.
Health and Safety
CGE wants to offer employees a safe
work environment. That is why significant
attention is paid to safety, monitoring and
proactive identification of hazardous or
potentially hazardous situations at CGE’s
premises and manufacturing facilities, in
order to provide a safe working environment
for all employees, including contracted staff
and visitors.
CGE records the number of Lost Time
Incidents (LTIs) by gender. An LTI is defined as
“any unplanned event that results in personal
injury, where the injured party is unable to
work during their next scheduled day”.
CGE’s objective is to reduce LTIs as much as
possible. As increased attention are paid to
health and safety, an increasing number of
LTIs and near misses have been recorded in
recent years.
CGE’s approach to Health and Safety is
about raising awareness by training staff,
implementing clear rules, performing
dynamic risk assessments, inspiring
employees to increasingly report near
incidents in order to prevent real incidents
from occurring and effecting a change in
behaviour and audits to see to the correct
management of all critical areas of risk. In
addition, more has been invested in the
factories and in employee know-how.
The positive outcome of this has led to
an increase in the number of near-miss
notifications that are used to prevent
accidents from occurring.
Notwithstanding all the measures taken,
accidents still can occur in exceptional
circumstances. During the year 2018,
unfortunately one male employee from
the group has been subject to a health and
safety incident.
CGE is committed to ensuring the safety
of people, processes and products and
aims for fair and good working conditions
throughout the entire supply chain.
Grievance handling
Company maintains an open and
transparent process in all aspects of dealing
with its workforce and considers positive
industrial relations as being an essential
aspect of the business. The guidance receive
for the grievance handling is received from
the top of the governance and strictly
followed by the CGE Group.
Open Door Policy
Employees are always encouraged to speak
directly even with top of the governance for
any matters which could affect the employee
and secure the confidentiality by the
Company. The conducting of investigation
is done by the independent parties such as
internal auditors or Audit Committee in order
to secure the informer.
Session on supervisory skills development programme
63
Employee Council
The management regularly conducts
employee council meeting to hear from the
employee and resolve the matters that affect
the employees. The council comprises with
representatives from each department and
Sectional Heads and General Manager. The
employees are encouraged to present their
circumstances and follow up action review at
the initiate of next meeting.
Code of Conduct
CGE has a Code of Conduct, which provides
a set of guidelines for work ethics within the
Company. The code describes values that
guide employees on their way of working
and working together. These values allow
employees to work independently and to
call each other to account with respect
to misconduct. The matters involved
are handled in accordance with a set
procedures.
How we measure our progress
As a result of comprehensive process of
human capital management, the Group was
able to retain their employees for continuity
of value creation. Staff got their annual
increments and performance benefits that
helped them to enhance their lifestyle.
Average Employee
Turnover
2018 2017
Male 5.8% 9.3%
Female 7.7% 11.4%
Group has paid Rs. 1,452.7 Million for staff
salaries and other benefits.
Compliance
Group adhered to the all the legal and
other voluntary compliances related to the
employees during the year and not reported
any incident against violation of these
regulations. CGE does not recruit any child
labour nor considered religion, ethnic or
gender as an evaluation criterion.
We observing that society in general and consumers in
particular placing an ever-increasing emphasis on the origin of
food, quality, animal health and welfare. In order to successfully meet the challenges ahead, we are planning to further strengthen our brand loyalty and product responsibility along with the emerging opportunities in the tourism and HoReCa sector.
We believe that segregation of business operations will help us to differentiate the strong customer-oriented products and services. This will enable us to position the right people in the right function to cater to customer expectations in an effective manner. This will empower us to keep our brand promise while navigating our business as a customer-centric profitable organisation.
Ceylon Grain Elevators PLC | Annual Report 201864
MANAGEMENT DISCUSSION AND ANALYSIS
FUTURE OUTLOOK
OUR CAPITAL INPUTS AND RESOURCES
HOW WE PERFORMED
HOW WE MEASURE OUR
PROGRESS
� Understanding the trends in the market and customer behaviour
� Response to the customer feedback
� Creating value additions to the products
� Sharing of knowledge
� Events and activities
� Customer base
� Communication channels
� ProductValue created
by utilising our Customer
Relationship
CGE’s customers consist of the dealer network,
government institutions, hotels and restaurants, supermarkets and farmers. Equipped with a
customer-centric approach we aim at providing maximum customer
satisfaction to maintain and build strong relationships.
RELATIONSHIP CAPITAL - CUSTOMER
91%
97%
OUR CUSTOMER BASE
Total customer satisfaction percentage
Overall satisfaction
Satisfaction on customer service
(2017 - 83%) (2016- 78%)
QUALITY STANDARD
OUR QUALITY POLICY
We are committed to provide quality products and support services to our customers
at competitive price whilst adhering to ISO 9001:2015 standard and other applicable
regulatory requirements. We consider employees as most valuable asset and will
develop their competence in this sector, to improve processes in quality management
system continually, create value to customers and improve business performance.
We ensure the policy is reviewed, understood and communicated to all levels of the
organisation.
65
We recognise the importance of engaging with our customers at a deeper level to understand their needs and expectations with the objective of delivering on customer expectations to retain our customers in the long term.
The Significance of Customer Relationship to CGE Group
In an extremely competitive business
environment, customer relationship
management strategies play a critical role
in understanding and meeting existing
and potential customers’ diverse needs and
expectations. CGE’s customers consist of the
dealer network, government institutions,
hotels and restaurants, supermarkets and
farmers. Our customer-centric approach
is aimed at providing maximum customer
satisfaction. Therefore, CGE maintains strong
relationships with its valuable customer
network to obtain market information
related to changes in consumer preferences,
market trends and product quality
expectations.
Management Approach
During the last few years there has been an
increasing level of interest and awareness
been built up on the quality and provenance
of food products. This has been driven by
the state as well as through overall interest
by the public towards nutrition and quality
of food. This is a growing phenomenon
Globally as well where customers are moving
towards Genetically Modified Organisms
(GMO) free and organic products. This has
reshaped purchasing patterns of food in
the recent years. However, price and quality
continue to be important factors in the
customer decision making process. CGE
plays a proactive role in managing customer
relations by responding to changing
customer needs and provides an integrated
solution comprising feed and other related
products and associated advisory services by
fulfilling customer satisfaction levels.
Our Capital Inputs and Resources
Our customer base mainly consists of the
following segments:
� Chicken and feed customers
� DOC customers.
In order to ensure that customer
expectations are fulfilled, our sales teams
continuously engages with customers on a
regular basis to understand and cater to their
requirements.
We frequently communicate with our
customers to understand their expectations
and concerns towards the Company. We
have in place a comprehensive engagement
plan to connect and engage with customers
as shown in Stakeholder Engagement on
pages 28 to 31.
Ceylon Grain Elevators PLC | Annual Report 201866
MANAGEMENT DISCUSSION AND ANALYSIS
RELATIONSHIP CAPITAL - CUSTOMER
How we Performed
Understand the trend in market and customer behaviour
The evolving market trends are usually
depend on customer behavioural changes
and other macro-environment factors. Thus,
CGE continuously evaluates the market
trends to identify changes in customer
behaviours and restructure of processes
to satisfy their needs. Therefore, CGE is
equipped with a better mechanism on
understanding customer preferences and
their changes in advance. This has helped us
in modifying our marketing mix to develop
and sustain the customer relationships with
CGE.
As a result of these market evaluations,
CGE has realised that there is an increasing
demand for fresh chicken and dairy feed. This
understanding has helped us to provide a
better service for our customers especially
for key chicken processors in order to secure
their business at the time of glut in the
chicken market.
Response to the feedback
We value and take into cognisance the
feedback provided by our customers
in terms of product quality and other
improvements. We respond with remedial
actions on a priority basis to resolve matters
as and when they arise. Our staff, especially
the sales force and front-end office staff
have been trained to obtain customer
feedback on variables such as quality of the
product, competitor information, consumer’s
comments and etc. These feedback is
frequently discussed in the management
meetings and are incorporated into the
strategic imperatives.
Creating value for product
We add value to our products by offering
other auxiliary services such as discounts
and transportation. Our products are
marketed under the brand name of ‘PRIMA’
and ‘FARMERS CHOICE’. All our products
bear exclusive quality standards. We remain
focused on delivering supreme quality and
nutritional value which far exceeds the price
of the product.
Quality standards are guaranteed through
the intensive research and product
developments which are conducted to
enhance the nutritional value. During the
year a new laboratory was constructed at our
chicken processing plant upgraded with the
state-of-the-art equipment. Further, we have
equipped our existing laboratory designated
to the feed mill with the latest equipment.
Sharing Knowledge
The poultry industry in Sri Lanka is exposed
to many externalities. In order to maintain
market leadership, position the expertise and
accumulated experience play a critical role.
Demands for poultry productions are highly
volatile in its nature. Therefore, accumulated
Our brand marketing department continuously organises events and activities that create product awareness and direct interactions with our customers.
67
experience and technical knowledge will
mitigate the risk of falling of poultry business.
Due to established business acumen of CGE
as a leading player in the poultry business
we possess a competitive advantage. As
a responsible corporate citizen, we share
our knowledge and expertise with our
customers through our qualified field
staff force. We continuously educate our
customers on best practices and provide
advisory services as an additional service.
We have also taken steps to update the
knowledge and technical expertise of our
farmers with the latest technology and
practices. During the year under review our
key feed and DOC customers were sent to
the ‘VIV Exhibition’ held in Bangkok to update
their knowledge on the new trends in
poultry industry.
How we Measure our Progress
Customer satisfaction surveys are carried out
on a regular basis through comprehensive
feedback forms which track multiple
indicators relating to product quality, sales
staff service, complaint handling, product
range, innovativeness, prices, delivery times
and etc. CGE has performed well in all
parameters achieving its quality standard.
During the year under review CGE
introduced a fresh chicken product to the
market. Furthermore, we expanded our
product range with the introduction of dairy
feed which would have a positive demand
considering the focus on the dairy industry,
The Company will continue to integrate supply chain
with its sustainability strategy through long lasting relationships with
business partners, especially out-growers. With the growing business prospects of the Company and the increasing demand for our products, the interaction with our business partners will be a key factor in achieving our business objectives. We intended to buy a greater volume of raw materials from local suppliers by focusing on enhanced collaboration with our out-grower suppliers through better terms and conditions for mutual benefits.
Further, we aim to give investors clear, accurate and prompt information on developments within our organisation and maintain strong relationships with our stakeholders.
Ceylon Grain Elevators PLC | Annual Report 201868
MANAGEMENT DISCUSSION AND ANALYSIS
FUTURE OUTLOOK
OUR CAPITAL INPUTS AND RESOURCES
HOW WE PERFORMED
HOW WE MEASURE OUR
PROGRESS
Value created by utilising
our Business Partner and community relationship
Our business partners and community are a vital component of the sustainable
operations of the Company. We ensure that our relationships with our business
partners are maintained to secure the interests of all stakeholders. We reach
out to communities as a responsible corporate citizen.
� Evaluation of business partners
� Relationship building
� Conflict resolution
� Business partner base
� Communication channels
� Engagement term and conditions
RELATIONSHIP CAPITAL – BUSINESS PARTNERS AND COMMUNITY
1,649,522
OUR SUPPLIER BASE
Total payment for local raw material suppliers
Sri Lankan Rupees thousands
(2017 - 1,993,193) (2016- 1,000,532)
SOURCE OF RAW MATERIAL PURCHASED (%)
Local 43% 33%
2018 2017
Imports 57% 67%
2017
2018
71Number of out-grower agreement
69
Maize is an integral component of feed production. We strive to source locally grown maize in order to promote the local industry.
The Significance of Business Partner Relationship to CGE Group
The nutritional value and quality of our
product is largely dependent on the
ingredients and processes we use. Hence,
sourcing of right product at the right price is
a critical aspect which we need to manage.
We also need the right platform with
the support services in place to ensure a
smooth business operation to create value.
CGE believes that sustainable business
relationship with our business partners is a
vital component for the sustainable growth
of the Company.
Management Approach
As part of our procurement process, we
carefully screen prospective business
partners before we select them as a supplier.
We strive to adhere to our procurement
standards of quality, reliability and cost. We
pursue sustainable long-term relationships
with our business partners and endeavour to
build mutually beneficial relationships based
on trust and professional conduct nurtured
over the years to create value.
Our capital inputs and resources
Our business partners consist mainly of
goods and service suppliers, bankers and
other connected parties with those who
we have built relationships over the years.
Infrastructure and communication channels
help us to build up strong relationship
with our business partners. All the business
relationships that we enter into are legally
bound by terms and conditions to secure
the interests of the connected parties and all
stakeholders.
How We Performed
Evaluation of Business Partners
The evaluation process of our existing
business partners is carried out continuously
and on a periodical basis in order to enhance
the business relationship and to compare
with our goals on creating value.
Our suppliers and other business partners
are evaluated on four basic criteria namely:
� Quality of product and service;
� Ethical business practices;
� Compliance with laws and regulations
and
� Protection of human rights
Our supplier base mainly consists of
local and foreign suppliers of goods and
services. However, small and medium size
suppliers and local farmers are given special
consideration to encourage them to increase
production by purchasing their goods at fair
price.
Periodic evaluation also helps CGE to
identify any issues in the relationship with
our suppliers and improve the policies and
procedure on procurement.
Relationship Building
Encouraging existing business partners
as well as engaging with new partners
is an important source of input for our
manufacturing process. CGE strives to
comply with ethical business practices
and ensure transparency in all its business
transactions.
Our strategic long standing key suppliers are
listed in the table on page 70.
During the year 2018, CGE had registered
300 suppliers, of which 3 suppliers are
foreign institutions. These new registrations
have helped CGE to sufficiently procure raw
materials for feed productions.
CGE maintains the supplier settlement
period within agreed credit periods and offer
fair price for the suppliers, with the objective
Ceylon Grain Elevators PLC | Annual Report 201870
MANAGEMENT DISCUSSION AND ANALYSIS
RELATIONSHIP CAPITAL – BUSINESS PARTNERS AND COMMUNITY
of empowering and strengthening local
farmers.
Over the years CGE has received many
accolades and recognitions which bear
testimony to CGE’s ability to meet business
partners’ expectations.
Conflict Resolution
CGE maintains good business practices
with its business partners and as a result
was able to minimise conflicts. These
experiences have helped us to negotiate for
‘win-win’ solutions for both parties. Through
collaborative arrangements entered into
with our suppliers we have been successful
to avert any conflicts with our business
partners.
How we Measure our Progress
All the activities that take place with
our business partners contributed to a
sustainable business process in term of
value creation. These partnerships created
rewarding for our business partners and
at the same time provided economic
empowerment to local farmers.
Business partner Country Transaction typeApproximate relationship period
Aviagen USA Supply of PS Layer
DOCs
Above 50 years
Jamesway
Incubators inc.
Canada Supply of Incubators
and spare parts
Above 50 years
Long standing key suppliers
71
The Significance of Community Relationship to CGE Group
CGE’s corporate philosophy is underpinned
by the importance of being a corporate
entity that focus on social well-being.
As a responsible corporate citizen, we
reach out to the communities with many
community centred initiatives to uplift the
local communities. We always ensure that
these initiatives will benefit society at large
while contributing to the national economic
growth. We have been consciously adopting
a stance of sharing the benefits among each
stakeholder category in a just and equitable
manner.
Management Approach
As part of building long term relationships,
CGE continues to protect and uplift the
livelihoods of our local communities. CGE
therefore follows a strategy to promote
initiatives targeted to help the less privileged
segments of the community, the youth
of today who are the future of tomorrow
and the spiritual needs of the community
members. The process that we follow is
a combination of proactive and reactive
approaches to identify community needs
and implement programmes to address and
solve these needs. We are proud of the fact
that our employees also share the same spirit
and actively participate in these programmes
by volunteering their time along with
financial contributions.
Corporate Social Responsibility (CSR) Initiatives Spearheaded by CGE
Contributing to foster spiritual well-being of society
� CGE supported the construction of a
new building of ‘Samudrarama Maha
Viharaya’ at Modara during the year
under review.
� CGE contributed to the development of
‘Church of Our Lady of Compassion’ at
Bandarawatta during the year.
� CGE entered into a partnership with
the Urban Development Authority to
organise ‘Colomthota Vesak Kalapaya’
during the annual Vesak period in May
to support the dissemination of the
Buddhist philosophy among urban
communities.
Contributing to community service
CGE as a responsible corporate citizen,
extended financial support to the ‘National
Dangerous Drugs Control Board’ to create
greater awareness amongst the community
of the usage of dangerous drugs and
eradication of the drug addiction.
We encourage our employees to take part
in building societal relationships. During
the year, CGE employees contributed and
donated the entire stationary requirements
to the school children studying in
‘Dikwennagama Primary School’ in
Galkiriyagama for the academic year 2019.
The ‘Culinary Art Food Expo 2018’ is an
annual event organised by the Chefs
Guild of Lanka to increase awareness and
promote the food industry. This event
draws professionals from the culinary field
as well as business entities in the food
and beverages sector and is considered a
platform to showcase their products. CGE as
a premier player in the food industry took an
active role in this event.
Due to population growth and improved economic
performance, the demand for animal protein such as meat, eggs and
dairy products is expected to increase in the future. It is challenging to produce this increasing amount of food in a sustainable manner by optimising the use of raw materials and natural resources such as energy, land and water. We are focused on operating as an environmentally friendly, sustainable organisation, posing no threat to the environment.
Ceylon Grain Elevators PLC | Annual Report 201872
MANAGEMENT DISCUSSION AND ANALYSIS
FUTURE OUTLOOK
OUR CAPITAL INPUTS AND RESOURCES
HOW WE PERFORMED
HOW WE MEASURE OUR
PROGRESS
� Efficient usage of energy
� Effective formulation and efficient usage of materials
� Responsible usage of water
� Sustainable usage of land
� Waste management
� Land
� Water
� Energy
� Material
� Mandatory and voluntary compliances
Value created by utilising our Natural Capital
The Natural Capital include
air, water, land, minerals and forests, as well as biodiversity and ecosystems’ health. CGE embraces
its responsibility to institute activities that enhance the natural
environment’s capacity to meet the resource needs of future
generations.
NATURAL CAPITAL
388A - 2R - 4.47P
418
OUR LAND OCCUPATION
Total freehold land for farming
Acres (A) Roods (R) Perch (P)
Value invested in Land (Rs. Million)
(2017 - 357A - 0R - 16.37P) (2016 - 357A - 0R - 16.37P)
MANAGING OUR IMPACT
73
As responsible corporate citizen we strive to conduct our operations in manner which will reduce our environmental footprint.
The Significance of Natural Capital to CGE Group
As a responsible corporate citizen, CGE
adopts environmentally conscious practices
in making the production sustainable.
CGE therefore, considers natural capital
and sustainability to be an integral and
unequivocal part of its business. It is CGE’s
ambition to stay ahead of the field in terms
of sustainability in terms of the use of raw
materials, production, logistics, development
and supply of efficient feed solutions for
healthy livestock. In this way, the Company
intends to contribute to commercially
profitable and sustainable food production.
Management Approach
As an agricultural business, our sustainability
concerns are the use of quality raw
materials, the impact on the environment,
consideration for people and society and
respecting animal welfare. CGE leads the
poultry industry in terms of environmental
responsibility, particularly the use of raw
materials, production, logistics, efficient and
more animal-friendly concepts.
Our capital inputs and resources
CGE utilises land, water and energy for its
business operations. Land represents, lands
purchased on outright basis and leasehold
basis. These lands are utilised throughout
our value chain activities in a way that the
environment is conserved and preserved.
Ground water as well as pipe-borne water
are the primary sources of water for our
operational requirement. Key materials
which are used for feed production are
mostly agro-based products such as Maize
and other cereal products which are
considered scarce materials.
Energy is also another key natural resource
which we use across our production
process. CGE uses both renewable and
non-renewable energy sources and we
have implemented energy saving measures
throughout our business operations.
How we Performed
Efficient usage of energy
Our key sources of energy are electricity,
furnace oil, gas and diesel. While we are
mindful of our energy consumption, we
monitor the use of electricity and fuel
consumption levels to drive continuous
improvements in the manufacturing
processes to reduce energy consumption.
� Energy consumption
Through our energy preserving
techniques, we have reduced our
electricity consumption during the
financial year 2018 in comparison
to 2017. This was the result of a
combination of factors including
investment in energy efficient plant and
equipment and a favourable energy mix.
Effective formulation and efficient usage of material
Due to the lack of land for cultivation, the
industry requirement for raw materials is not
sufficiently generated within the country.
Hence, the industry relies on imported
materials. We as a responsible corporate
citizen and market leader in the integrated
poultry business with accumulated
intellectual capital of our employees always
focus on effective feed formulation by
optimising material usage and feed quality.
CGE uses many by-products from agricultural
produce to formulate feed in order to reduce
the wastage and lead to optimisation of
utilisation of resources.
Ceylon Grain Elevators PLC | Annual Report 201874
MANAGEMENT DISCUSSION AND ANALYSIS
NATURAL CAPITAL
CGE always purchases local raw materials
whenever it is available, to promote local
farmers and production. However, it could
preclude by lower quality due to higher
moisture levels. Higher levels of moisture
could lead to wastage arising from difficulties
encountered in storing the raw materials for
a longer period. Therefore, CGE management
has taken steps to establish a ‘Dryer’ in the
forthcoming year which could reduce the
moisture level of agricultural produce.
Responsible usage of water
The Group uses mainly ground water sources
and also pipe-borne water and is dependent
on continuous access to high quality water
across its operations. This is a critical factor in
sustaining a healthy agricultural business. Every
effort is expended to ensure that water is used
mindfully and taking steps to conserve and
efficient usage of water at all times.
Achieving efficiencies in our water
consumption is an important environmental
priority for the Group.
Sustainable usage of Land
The details of the land occupied by the
Group have been disclosed in Note 12 -
Property, Plant and Equipment and Note 13 -
Leasehold Right over Land and Buildings. The
Group takes substantial measures to monitor
and ensure that, utilisation of land will not
create future destruction to the property as
well as to the society. As discussed above,
the recycling of used water and also the
waste management have been properly
planned with each operating activities.
Waste management
As a hygiene and quality control necessity in
chicken processing and feed manufacturing,
water and energy usage consequently
generate waste water, effluents and
emissions. As such we have not disposed of
this waste water in a manner which will have
a negative impact on the environment.
� Solid waste management and waste mapping
CGE believes that waste mapping is
a crucial step in identifying where
exactly waste is generated in day-to-day
processes of an organisation. We have
clearly mapped out the points in which
waste is generated and how much it
costs the organisation. This has enabled
us to cut down on waste and increase
the efficiency of material usage which
saves cost and eliminate the impact on
the environment.
We have invested in a dedicated scrap
yard, which has enabled us to segregate
our waste effectively. Through this
mechanism we are able to identify
non-harmful by-products of poultry
production such as litter to utilise these
as compost and organic fertiliser due to
their high nutrient content.
We dispose of our waste materials in
conjunction with the Municipal Council
on a daily basis. All other disposables
including e-waste are disposed responsibly
in conjunction with the Municipal Council
of the area that we are located.
� Waste water management
Due to the high usage of consumption
of fresh water and the possible depletion
of water resources, public authorities
have taken steps to reduce the water
footprint of regions and businesses.
Companies are therefore facing
technological challenges involved in
measuring and lowering their water
consumption and reducing their
production costs. To obtain this virtuous
circle, businesses must make the best
choices in terms of production sites and
processes, assess their supply chain’s
water footprint as accurately as possible
and select the most suitable means of
transport for their goods and services.
CGE monitors and reviews its own water
usage by site and continuous efforts are
made to optimise water usage. Waste
water at our chicken processing plant
are treated at our in-house effluent
treatment plant before it is discharged to
the environment.
Additionally, we have established an
in-house water treatment facility which
ensures that the waste water disposed
from our farm premises are treated, so
that water does not adversely affect the
environment.
Currently, we are measuring water
quality parameters on an ongoing basis
and the quality of water discharged is in
par with acceptable levels imposed by
regulatory controls.
� Recycling
We have formulated recycling methods
to reduce the waste sent to landfills
along with our waste collection
frequency, given that availability of
landfills is rapidly reducing. As the cost
of waste management increases with
volume, we have identified that correctly
recycled waste will have a beneficial
impact on our company’s waste
handling costs.
As such we use our own rendering
plant which utilises waste of our meat
processing plant and recycles them
after a high-quality refining process
that includes boiling, steaming and
palletising.
75
Environment Management System
The Environmental Management System
is developed within the Group to ensure
the policies and procedures initiated are
effective to optimise resource consumption,
impact management and comply with legal
and voluntary compliances.
In House KPI’s
Managing Output and Impacts
Waste and Effluents
Effluents Waste Management
Material
Optimise Material Consumption
Water
Optimise Water Consumption
Energy and Fuel
Preserving Energy and
reduce Carbon Footprint
Preserving Bio-Security
Regulatory Framework
Compliance
Managing Inputs
Environmental Framework
How we measure our progress
Responsible and optimised resource
utilisation leads well-being of our society in
many ways: such as increase in income of
our farmers, healthy environment, minimum
agricultural waste and sharing of scarce
resources with all parties, reservation of
resources to the future generation and etc.
Also, these initiatives have been guided us to
focus more on cost savings and improve the
financial performance of the Group.
� Compliance
As a Company that operates in the
agriculture sector, we have given a
high level of priority to compliance
with Central Environmental Authority
(CEA) requirements. This includes farm
management, usage and monitoring
of natural resources. These compliance
indicators are regularly monitored to
ensure that the Company is always in
line with the required environmental
conservation measures.
Executive Summary
Corporate governance is the mechanism that enhances transparency and accountability towards our stakeholders. We, at Ceylon Grain Elevators PLC (CGE), are committed to maintain the highest standards of ethical practices to ensure compliance with all statutory and regulatory requirements in achieving our strategic goals. This helps us create value for our shareholders whilst safeguarding the business through the adoption of effective risk management strategies.
CGE has created a corporate governance structure, which is based on well-structured processes and ethical business practices that incorporates internal and external benchmarks within the organisation. This has enabled us to build long-term credible relationships with our stakeholders whilst ensuring the sustainability of the business over decades. The sustainability of our governance principles is preserved by the commitment of all employees by inculcating a culture of awareness and continuous efforts to adhere with best practices.
This report explains how we have complied with relevant mandatory provisions of the Companies Act No. 7 of 2007, Listing Rules of Colombo Stock Exchange (CSE) and the voluntary adoption of best practices as set out by the Code of Best Practice on Corporate Governance (2013) issued jointly by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the Securities and Exchange Commission (SEC). Further, we are currently evaluating the applicability of new Governance Code (2017) and adopting the same where applicable together with relevant internal and external benchmarks.
Compliance to these mandatory and voluntary regulatory governance
requirements is undertaken in a regular and timely manner by the adoption of a control and monitoring framework which reviews the corporate governance structure and the level of adherence to specific references by both internal and external benchmarks, as well as the Board of Directors and specific Board sub-committees. A summary of compliances to regulatory benchmarks is shown in Table on page 77.
The extent of compliance with the Code of Best Practice on Corporate Governance jointly issued by SEC and CA Sri Lanka is shown from pages 87 to 88.
Further, certain functions of the Board have been delegated to Board Sub-committees for reviewing and enhancing the accountability of several areas which require greater expertise and knowledge. However, the Board has the final decision rights and responsibilities over these Sub-Committees thereby safeguarding the good governance practices of the Group.
The Board sub-committees play a vital role in the company’s governance structure and is headed by a designated Board Director who is empowered to act on behalf of the company’s Board to carry out the duties and responsibilities of Sub-committees.
Internal Governance Structure
The corporate governance practices adopted by CGE are a well established internal governance structure which consists of external and internal and external governance benchmarks. This provides a proper mechanism and communicate transparently to its stakeholders about the company’s business activities and operations. (Figure 2) on page 78.
The internal governance structure is so designed and strengthened that the executive authority is entrusted and designated through a committee structure. All listed benchmarks are incorporated within day-to-day business operations and employees from the highest to the lowest level are deemed accountable and responsible for undertaking business in accordance with the set corporate governance policies and practices.
The internal governance structure consists of:
� The Board of Directors;
� Senior Management Committees;
� Role of Chairman of the Board and
separation of Chairman and CEO;
� Group Management Committees;
� Senior Management and
� Employee Empowerment.
The Management Committee is a vital part of
the company’s management structure and is
headed by the Chief Executive Officer (CEO).
He is empowered to act on behalf of the
Company. The members of this Management
Committee are: The Executive Director
and Group General Manager, the General
Manager, the Board of Directors, the Audit
Committee and the Senior Management
Committee. These positions and committees
are complemented by strong internal
governance procedures and are responsible
for the day-to-day operations including
functions of each business segment of the
Group. It also ensures a continuous flow
of functions and proper implementation
and execution of the Group’s corporate
governance framework.
Ceylon Grain Elevators PLC | Annual Report 201876
CORPORATE GOVERNANCE REVIEW
Key External Benchmarks
� Companies Act No. 7 of 2007
� Listing Rules of the Colombo Stock
Exchange
� Code of Best practice on Corporate
Governance issued jointly by the SEC
and CA Sri Lanka (2013)
� Code of Best practice on Corporate
Governance issued jointly by the SEC
and CA Sri Lanka (2017)
� Inland Revenues Acts
� External Audits
Key Internal Benchmarks
� Articles of Association
� The Code of Conduct
� Recruitment, selection and career
development policies
� Rewards and recognition policy
� Policy on grievance handling
� Terms of Reference of Board sub-
committees
� ISO and Quality Management
Framework and Standards
� Risk Management Framework
� Employee Declaration Policy
� Internal Audits
The Code of Conduct
The Board carries out its functions based
on a well-structured Code of Conduct
which supports the adoption of standards
for sustainability, accountability and
transparency across business operations.
The Code includes internal and external
benchmarks and the structure of key
stakeholder groups which is facilitated by
an assurance mechanism which ensures
good governance practices are properly and
continuously adopted and adhered to.
CGE’s Code of Conduct is based on the four
key tenets as shown below.
� Trust, professionalism and integrity in all
partnerships and transactions
� Continuous professional development
along with the Company and individual
compliance with all rules and regulations
� Conduct business in an ethical manner
in keeping with international industry
standards
� Always act in the best interests of the
Company, ensuring transparency in all
matters
Benchmarks Specific Details Adherence
Companies Act No. 7 of 2007 Mandatory provisions Fully compliant
Listing Rules of the CSE Disclosure requirements for the Listed companies in the CSE
including Corporate Governance mandatory requirements
Complied. Disclosures are stated on
pages 84 to 88.
The Code of Best Practice on
Corporate Governance jointly issued
by SEC and CA Sri Lanka (2013)
The Code of Best Practices on Corporate Governance All relevant voluntary provisions are
fully complied and are disclosed on
pages 87 to 88.
The Code of Best Practice on
Corporate Governance jointly issued
by SEC and CA Sri Lanka (2017)
The Code of Best Practices on Corporate Governance Under review for relevant voluntary
provisions.
Inland Revenues Acts Mandatory provisions Fully compliant
Stakeholder Engagement Report provides information to all stakeholders with regard
to the most material areas that are identified through
stakeholder engagement
Engagement with key Stakeholders
are reported in the stakeholder
Engagement on pages 27 to 31.
Articles of Association Requirement stated in the Articles of Association of the Group Complied
The Code of Conduct Compliance requirements applicable to all employees All the employees sign a declaration
to the effect that they will follow the
Code of Conduct
Table 1: Summary of compliances
77
External and Internal Audits
External audit functions provide an
independent opinion to the shareholders
on the truth and fairness of the Financial
Statements and whether they have been
properly prepared in accordance with the
Companies Act while internal audit functions
provide an independent assurance that
CGE’s risk management, governance and
internal control procedures are operating
effectively.
The internal audit function of the Group
is carried out by the Group internal audit
division which ensures the internal control
function of the Company is complied with
Company requirements and standards of
governance.
Benchmarks Assurance Mechanisms
Audi
t Committe
e Nomination Comm
itteeRelated Party Transactions
Review Committee
Remuneratio
n Comm
ittee
External
� Companies Act No. 7 of 2007
� Listing Rules of the Colombo Stock Exchange (CSE)
� The Code of Best Practice on Corporate Governance jointly issued by SEC and CA Sri Lanka (2013 and 2017)
Internal
� Articles of Association
� Code of Conduct
� Internal Control System
� Quality Management
� Risk Management Framework
� The Code of Conduct
� Internal Audit
� Independent Audit
� Compliance Reviews
� Independent Certifications
Shareholders
Group ManagementCommittee
EmployeeEmpowerment
SeniorManagement
Chairman CEO
BOD and SeniorManagement Committees
Figure : Internal Governance Structure
Internal Governance Structure
Ceylon Grain Elevators PLC | Annual Report 201878
CORPORATE GOVERNANCE REVIEW
Internal Controls
The effectiveness of the internal controls
of CGE is ensured via frequent reviews
and a proper monitoring mechanism.
The Board of Directors including the
Audit Committee are responsible for the
company’s system of internal controls
and for reviewing its effectiveness. The
system is designed to safeguard assets of
the Company against unauthorised use or
disposal and is supported by a structured
documentation procedure. Internal controls
of CGE incorporate financial, operational, risk
management, and regulatory compliance
controls.
The Audit Committee carries out regular
reviews of the internal control process and
the effectiveness of risk management on
behalf of the Board and reports to the Board
during the regular Board meetings to enable
the Board to take final responsibility for the
oversight of the internal controls of the
Company.
The Board of Directors
Board Responsibilities
The Board provides the leadership in
achieving business objectives, value creation
and risk management while promoting
a culture of transparency and integrity
in carrying out the company’s business
functions. The Statement of Directors
Responsibility in relation to financial
reporting is given on page 108 and in
Note 34 - Directors’ Responsibility on page
170. Directors have no interest with the
Company other than those disclosed in
the Financial Statements in Note 31.1 - Key
Management Personnel on page 164 and
the Report of the Board of Directors on the
State of Affairs of the Company on pages
104 to 107. Further, the Board of Directors
have made a declaration in the Related
Party Transactions Review Committee on
page 95 in accordance with the section
9.3.2.(d) of Listing Rules issued by the CSE
on their responsibility towards Financial
Statements. The Board takes all reasonable
steps to ensure that accurate and timely
information is available to shareholders
and regulatory bodies and published in the
annual and quarterly Financial Statements in
consultation with the Audit Committee and
the External Auditors.
In addition to the responsibilities mentioned
above, the following key responsibilities
are also collectively held by the Board and
individually by the Directors who act in
accordance with the laws of the Country.
� Providing guidance on formulation
and implementation of a sustainable
business strategy;
� Conducting business functions
efficiently and profitably to create
shareholder value;
� Ensuring effective systems to secure
integrity of information, internal controls
and risk management;
� Ensuring that the Group accomplishes
its goals;
� Meeting regularly to establish and
maintain the company’s direction and
position;
� Providing guidance and direction
to ensure the Group has adequate
resources and is effectively utilised;
� Reviewing the Group’s operating and
financial performance and evaluating
progress against plans and budgets;
� Ensuring compliance with laws,
regulations, governance and ethical
standards;
� Ensuring all stakeholder interests are
considered in corporate decision
making;
� Reviewing and approving major
transactions including acquisitions,
disposals and capital expenditures and
� Fulfilling any other function that is
vital to the growth and success of the
business.
In carrying out these functions the Board
seeks professional advice on matters that
need specialist expertise such as litigation
from Company lawyers, and from any other
external experts as appropriate. The provision
for the Company’s Directors to retire by
rotation has also been recommended by
the Board to preserve expertise within the
Group.
Functions of the Board
Providing strategic direction
The Board of Directors collectively
responsible for establishing the Group’s
general direction, corporate policies,
overall strategic objectives and corporate
plans which are communicated to the
Management Committee. They also layout
a schedule of issues and directions which
could only be approved by the Board as part
of the monitoring controls processes.
Additionally, Board approval is required
on all matters relevant to overall strategy
formulation, annual budget development,
preparation of business plans, dissemination
of management information, reporting
financial statements, dividend payments,
investments and business acquisitions/
disposals. The Board is also responsible for
the continuous review and monitoring of the
performance of the Group against the set
objectives while directing the Management
Committee on specific action points.
Communication with shareholders
Communication with shareholders is an
important part of the Board’s responsibilities.
CGE communicates with its shareholders on
a number of issues to ensure transparency
of operations. The Board is responsible
for reporting statutory and other relevant
information to shareholders regularly and
79
in a timely and accurate manner. To ensure
transparency, the Board has laid down
very definite policies in relation to keeping
accurate records of accounts together with
the preparation of financial statements to
represent a balanced view of the Group.
The Board also takes measures to report
statutory and all relevant information with
full disclosure of all major transactions
to shareholders’ in a timely and accurate
manner. Meanwhile, the Board welcomes
shareholders’ independent advice on matters
of investment and divestment. Quarterly and
annual results are prepared and presented
in accordance with the Sri Lanka Accounting
Standards, Companies Act No. 7 of 2007,
Colombo Stock Exchange (CSE) and the
Securities and Exchange Commission.
Overseeing risk management
Another important duty of the Board is
overseeing risk management mechanism
of the Group. The Board is responsible for
the regular evaluation of the risk factors
of the Group while maintaining updated
control systems by regularly making policy
recommendations on risk factors and the
improvement of controls. The formulation
of the risk management process is overseen
by the Board and ensures that an effective
system is implemented to identify, evaluate
and manage significant risks encountered
by the Group in protecting its assets and
processes. This risk management process is
regularly reviewed by the Board based on
the guidelines set by relevant regulatory
bodies. The Management Committee
is responsible for the detail, design and
operation of the system of internal controls
on risk management. However, the Board
maintains overall responsibility for the
management of risks within the Group.
CGE has also in place a well-established
control framework consisting of clear
structures and accountabilities, policies and
procedures together with budgeting and
review processes. Each business segment
of the Group has a formal management
structure with clear responsibilities operating
within defined policies which incorporate
key areas such as product safety, financial
matters, health and safety, safeguarding the
environment, human resource management,
operational matters, and purchasing and
engineering.
Compliance
The Board is also responsible for ensuring
that the Group always operates within
the laws and adheres to regulations and
standards as laid down by the various
regulatory bodies in the country. The Board
is also constantly updated with information
in respect of compliance with laws and
regulations and directs the Management
Committee regarding any action that needs
to be taken.
Appointments to board sub-committees
The Board of Directors is also responsible for
the appointment of members to the various
Board sub-committees and guarantee that
they act in accordance with the Terms of
Reference as set out by the Board sub-
committee charters. The Board of Directors
in turn appoint Directors to the Audit,
Remuneration, Nomination and Related
Party Transactions Review Committees along
with Directors and Key Senior Management
personnel to the Management Committee.
Each such committee acts within its own
set of Terms of Reference. An expanded
review of each such committee’s function is
described further in this report on pages 89
to 95.
Board Composition
The Group maintains a balance between
Executive and Non-Executive Directors to
ensure that no individual or a small group of
individuals dominates the decision making
within the Board of Directors, thereby
ensuring objectivity and independent
oversight. Board composition is also
maintained to enable the Company to
add value to all stakeholders by leveraging
on the expertise of both Executive and
Non-Executive Directors’ experience and
know-how.
The Board consisted of six (6) members
during the year 2018, with two (2) Executive
Directors, two (2) Non-Executive Directors
and two (2) Non-Executive Independent
Directors. This composition complies with
the Listing Rules of the Colombo Stock
Exchange, which requires a minimum of
three or one third of the Board whichever is
higher be Non-Executive Directors.
Board Evaluations
The Board periodically appraises its own
and its sub-committees’ performance to
ensure that their responsibilities are properly
carried out in fairness to the Company
and to stakeholders. For the year under
consideration an assessment was made
regarding the Board composition and they
reached the conclusion that the current
knowledge and expertise of the current
Board matches the strategic requirements
of the Group. A brief profile of the Board of
Directors is shown on pages 22 to 23.
Appraisal of Chief Executive Officer (CEO)
At the end of each fiscal year, the
Remuneration Committee assesses the
performance of the Chief Executive Officer
based on pre-agreed goals established at
the commencement of the fiscal year, set in
consultation with the Board, covering the
following broad aspects.
� Creating and adding value to
shareholders and other stakeholders;
� Achievement of financial objectives and
goals;
� Developing human capital;
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CORPORATE GOVERNANCE REVIEW
� Ensuring integrity and good governance
in the Group;
� Identifying and implementing projects and
� Building sustainable business
relationship with external parties.
Board Skills
Board diversity must be considered when formulating the balance of a Board which enables them to make collective decisions more effectively with a wide exposure to the fields of finance, administration, management, law, economics, marketing, taxation and human resources. In choosing directors to the Board, the Company seeks people who possess high levels of business experience together with an elevated sense of integrity and judgment. In addition, the Board has ensured the availability within its ranks of those with financial acumen and knowledge to offer guidance on matters of finance.
CGE is mindful of the need to maintain an appropriate mix of skills and expertise within the Board and hence undertakes timely review of the Board composition to ensure the skill representation is matched with the current and future needs of the Group. The Board consists of IT professionals, Marketing professionals and a Banker who possess the required knowledge and expertise in various subject matters to drive the business to sustainable success.
Access to Independent Professional Advice
The Board encourages its members to obtain independent professional advices that may be required in discharging their responsibilities at the company’s expense to strengthen the decision making and to preserve the independence of the Board. This is generally coordinated through the Board Secretary as and when required. Hence, when required the Board seeks advice on various areas such as laws and regulations, taxes, valuation, macro-economic conditions,
and any other subject matters as Directors thinks as appropriate and required.
Continuous Training and Development
The Group is dedicated to empowering all
employees with opportunities to enhance
their individual skills, knowledge and
expertise. Such development programmes
are also available to Board members. To
enable new Board Directors to understand
business operations a comprehensive
induction programme is conducted that
ensures new Board members garner the
required knowledge on the values, culture,
operations, business model, policies and
procedures, governance, and business norms
so as to integrate well and perform efficiently
when carrying out duties and responsibilities.
This programme is conducted over a
period of several months and includes
presentations from key Senior Management
members and visits to the various business
segments of the Group. If a Director seeks
a deeper understanding on a specific area,
further follow-up meetings are arranged to
make available the required information to
the Board members. In addition, all Directors
are provided required training and regularly
updates on the latest developments within
the industry and the Group which enables
them to discharge their duties at the
expected standard of quality and form.
Board Secretary
The Board Secretary facilitates the Board in carrying out good corporate governance practices. The responsibilities and functions of the Board Secretary includes providing timely and accurate information about company operations, board procedures, changes on applicable laws and regulations, as well as guidance on matters of interest. The Board Secretary also maintains Board minutes and other records of information. This information is documented with the Board Secretary and available to members of the Board at any time as and when they required or requested.
Changes to the Board
Board Tenure
The Executive Directors are appointed and
recommended for re-election subject to
their prescribed company retirement age
and Non-Executive Directors are appointed
and recommended for re-election subject to
the age limits as per statutory provisions at
the time of re-appointment.
Retirement
At each Annual General Meeting one
third of the Directors retire by rotation on
the basis prescribed in the Articles of the
Association of the Company and are eligible
for re-election. The Directors who retire are
those who have been longest in office since
their appointment or re-election. In addition,
any new Director who has been appointed
to the Board during the year is required to
stand for re-election at the next Annual
General Meeting.
Re-election
The re-election of Directors ensures that
the shareholders have an opportunity to
re-assess the composition of the Board.
The names of the Directors submitted for
re-election are provided to the shareholders
in advance to enable them to make an
informed decision concerning their election.
The names of the retiring Directors eligible
for re-election this year are given in the
Notice of the Annual General Meeting of the
Company on page 176. Further, Directors
who are over the age of 70 years are re-
elected to the Board annually in accordance
with the Section 210 of the Companies Act
No. 7 of 2007.
Timely Supply of Information
All members of the Board are continually
updated and supplied with timely, accurate
and comprehensive information to enable
them to perform their duties successfully.
81
This enables board members to engage in a
healthy debate and a process of optimised
decision making towards the betterment of
the Company.
Directors are provided access to:
� Board minutes and reports which are
circulated before Board meetings;
� Clarification on any matter contained in
the minutes;
� The advice of experts and professionals
if required;
� Advice and services provided by the
Company Secretaries;
� Information wherever necessary to carry
out duties and responsibilities more
effectively and efficiently and
� Information updates from management
on topical matters, formulation of
new regulations and best practices as
relevant to the Group’s business.
Role of Chairman of the Board and the CEO
The Chairman of the Board
The Non-Executive Independent Chairman
of the Board is Mr. Wickrema Senaka
Weerasooria who provides the leadership to
the Board and is entrusted with a number of
responsibilities including conducting board
meetings. He ensures that board functions
are effectively discharged by all members
of the Board. He chairs Board meetings
and steers it in the proper direction, taking
responsibility for the Board’s composition,
facilitating the effective contribution of Non-
Executive Directors and ensuring that there
is a positive correlation between Executive
and Non-Executive Directors.
The CEO
The execution of company’s business
activities including implementation of
business strategies approved by the Board
are entrusted to the CEO. There is a clear
division of responsibilities between the
Chairman and the CEO, in accordance with
best practices that ensure no one individual
has unfettered power of decision making.
Board Meetings
The Board met four (4) times over the
past year to review the overall strategic
development of the Group. The Chairman
convenes board meetings at regular intervals
and as and when necessary. The Chairman
also facilitates the effective contribution of
all Board members to discuss routine and
non-routine matters depending on the
need and ensures that the Board operates
effectively in keeping with the interests of
the shareholders.
The Company Secretaries, SSP Corporate
Services, are in turn responsible on behalf
of the Chairman to ensure that all Board
meetings are conducted in a proper manner
and that all Directors receive the necessary
information prior to meetings so that the
Board could review the Key Performance
Indicators (KPI’s).
In addition, the Company Secretaries
also guide the Board in order that good
governance practices are considered and
implemented. The Board is brought up to
date on the latest financial position of the
Company by the Group General Manager.
Board Minutes
The Board minutes are prepared by the
Company Secretaries. In the event of a
matter not being unanimously adopted at
a Board meeting, the concerns expressed at
such situations are recorded in the minutes.
Minutes of the Board meetings are circulated
to all Directors and adopted at subsequent
Board meetings.
Board sub-committees
Some functions of the Board have been delegated to Board sub-committees for monitoring, reviewing and enhancing the accountability for several areas which require greater expertise and knowledge. However, the Board has the final decision rights and responsibilities over these sub-committees thereby safeguarding the good governance practices of the Group.
The five Board subcommittees are as follows:
I. Management Committee
II. Remuneration Committee
III. Audit Committee
IV. Nomination Committee
V. Related Party Transactions Review
Committee
The above sub-committees carry out their
duties and responsibilities in accordance
with the Terms of Reference as set out by the
Board. The proceedings of their meetings
are regularly communicated to the Board.
(Table 3)
Management Committee
Members of the Committee are selected by
the Board. The Management Committee is
responsible for the following:
� Implementing group strategy;
� Monitoring business performance;
� Approving budgets and capital
expenditure recommendations to the
Board and
� Ensuring efficient management of the
Group.
The Management Committee has also been vested with the authority to implement Board decisions. This authority is exercised within the policy framework as stipulated by the Board.
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The Management Committee meets once a month to discuss and evaluate various topics including segmental performance of the Group, business development plans, financial and operating budgets and forecasts, capital expenditure proposals, management issues and Key Performance Indicators (KPIs). The Board constantly reviews reports from the Management Committee and also from executives and sectional heads of key risk areas and makes decisions pertaining to segmental performance. The Management Committee has the right to run the business of the Group as they deem fit to meet the demand of the customers of the Group and the strategic and financial targets set by the Board in addition to the required corporate guidelines. Such a deregulated structure is necessary to ensure that decisions are made and implemented in a timely manner, speedy innovation at a rate as demanded
by the customer is enabled while providing products and services which cater to consumers specific needs.
Remuneration Committee
This Board Sub-Committee is responsible to determine the remuneration policy for the Executive Directors and Senior Managers. The Remuneration Committee comprises of two (2) Non-Executive Independent Directors, one of whom is the Chairman of the Committee and is appointed by the Board. The detailed report by the Remuneration Committee appears on page 92.
Nomination Committee
The Nomination Committee is entrusted
with maintaining the Board composition
to meet business needs while facilitating
a formal and transparent procedure for
all new appointments to the Board. The
Nomination Committee consists of one (1)
Executive Director and two (2) Independent
Non-Executive Directors one of whom is
the Chairman of the Committee who is
appointed by the Board. The report by the
Committee appears on page 93.
Audit Committee
The Audit Committee is responsible for assisting the Board in accomplishing its oversight responsibilities in the financial reporting process. The Audit Committee consists of two (2) Independent Non-Executive Directors one of whom is the Chairman of the Committee and is appointed by the Board. The detailed Audit Committee Report appears on pages 89 to 91.
Name of the Directors Capacity
No. of shares
held
BoardAudit
CommitteeNomination Committee
Remuneration Committee
Related Party
Transactions Review
Committee
Position
No. of meetings
held
No. of meetings attended Position Position Position Position
Mr. Wickrema Senaka Weerasooria
Non-Executive Independent Chairman
2,800 Chairman 4 4 Member Chairman Chairman Chairman
Mr. Cheng Chih Kwong, Primus
Executive Director and Chief Executive Officer
397 Member 4 4 - Member - -
Mr. Tan Beng Chuan
Executive Director and Group General Manager
- Member 4 4 - - - Member
Mr. Cheng Koh Chuen, Bernard
Non-Executive Director
- Member 4 4 - - - -
Mr. Cheng Eng Loong
Non-Executive Director
- Member 4 4 - - - -
Mr. Sunil Karunanayake
Non-Executive Independent Director
- Member 4 2 Chairman
(Former)
Member
(Former)
Member
(Former)
Member
(Former)
Dr.Prathap Ramanujam
Non-Executive Independent Director
- Member 4 1 - Member Member Member
Table3: Composition of the Board and Board Committees and attendance at Meetings for 2018
83
Related Party Transactions Review Committee
The Related Party Transactions Review
Committee was formed to strengthen the
effective management and oversight of
related party transactions of the Group.
Details of the Related Party Transactions
Review Committee are disclosed in
the Related Party Transactions Review
Committee Report on pages 94 and 95.
Shareholder / Investor Relationship
Stakeholder Management is a key
component in CGE’s corporate governance
mechanism.
The primary modes of communication
between the Company and its stakeholders
are, the Annual and Quarterly Financial
Reports and the Annual General Meetings
(AGM).
Release of Information to the Public and CSE
All material and price sensitive information
is communicated to the CSE in a timely
and accurate manner to minimise the
information gap among shareholders/
investors.
Annual General Meetings (AGM)
The effective relationship with shareholders
is maintained by conducting AGMs where
every shareholder is given a chance to vote
and raise specific queries regarding the
company’s operations.
Serious Loss of Capital
It is unlikely that the company’s net assets
fall below a half of the stated capital, the
shareholders would be notified of an
Extraordinary General Meeting (EGM) in
terms of Section 220 of the Companies Act
No. 7 of 2007.
Disclosures
The table given below provides the relevant
details and disclosures mandated by the
Companies Act No. 7 of 2007 and the Listing
Rules of CSE.
Disclosures required by the Companies Act No. 7 of 2007.
Section Reference Requirement
Annual Report Reference
168 (1) (a) The nature of the business of the Group and the Company together with any change thereof during the
accounting period
page 104
168 (1) (b) Signed Financial Statements of the Group and the Company for the accounting period completed pages 112 to 170
168 (1) (c) Auditors’ Report on Financial Statements of the Group and the Company pages 109 to 111
168 (1) (d) Accounting policies and any changes therein pages 116 to 131
168 (1) (e) Particulars of the entries made in the interest register during the accounting period page 104
168 (1) (f ) Remuneration and other benefits paid to Directors of the Company during the accounting period pages 104 and
165
168 (1) (g) Corporate donations made by the Company during the accounting period page 104
168 (1) (h) Information on the Directorate of the Company and its subsidiaries during and at the end of the accounting
period
pages 104 to 105
168 (1) (i) Amounts paid/payable to the External Auditor as audit fees and fees for other services rendered during the
accounting period
page 105
168 (1) (j) Auditors’ relationship or any interest with the company and its Subsidiaries page 105
168 (1) (k) Acknowledgement of the contents of this Report and Signatures on behalf of the Board pages 107 to 108
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Disclosures required by Section 7.10 of the Listing Rules of the CSE.
Rule No. Subject RequirementCompliance
status Remarks
Disclosures regarding Board of Directors
7.10.1 (a) Non-Executive Directors
Two or one third of the total number of Directors shall be Non-Executive Directors, whichever is higher.
Compliant Corporate Governance Review - page 80
7.10.2 (a) Independent Directors
Two or one third of Non-Executive Directors, whichever is higher shall be Independent.
Compliant Corporate Governance Review - page 80
7.10.2 (b) Independent Directors
Each Non-Executive Director should submit a declaration of independence / non-independence in the prescribed format.
Compliant Non-Executive Directors have submitted declaration during the year 2018
7.10.3 (a) Disclosure relating to Directors
Names of Independent Directors should be disclosed in the Annual Report.
Compliant Board of Directors - pages 22 to 23
7.10.3 (b) Disclosure relating to Directors
The basis for the Board to determine a Director is Independent, if criteria specified for Independent is not met.
Compliant The Board has determined the Independence / Non- Independence of each Non-Executive Director
7.10.3 (c ) Disclosure relating to Directors
A brief resume of each Director should be included in the Annual Report including the area of expertise.
Compliant Board of Directors - pages 22 to 23
7.10.4 (a-h) Determination of Independence
Requirements for meeting criteria of ‘Independence’. Compliant The Board has determined the Independence of each Non-Executive Director during the year 2018
Disclosures regarding the Remuneration Committee
7.10.5 Remuneration Committee
A Listed Company shall have a Remuneration Committee.
Compliant Remuneration Committee Report - page 92
7.10.5 (a) Composition of Remuneration Committee
The Committee shall consist of Non-Executive Directors, a majority of whom shall be independent.
Compliant Remuneration Committee Report - page 92
7.10.5 (b) Functions of Remuneration Committee
The Remuneration Committee shall recommend the remuneration of the Chief Executive Officer and Executive Directors.
Compliant Remuneration Committee Report - page 92
7.10.5 (c) Disclosure in the Annual Report relating to Remuneration Committee
The Annual Report should set out:
a. Names of Directors comprising the Remuneration Committee.
Compliant Remuneration Committee Report - page 92
b. Statement of Remuneration Policy. Compliant Remuneration Committee Report - page 92
c. Aggregated remuneration paid to Executive and Non-Executive Directors.
Compliant Note 31.1 - Key Management Personnel information - page 164
Disclosures regarding the Audit Committee
7.10.6 Audit Committee A Listed Company shall have an Audit Committee. Compliant Audit Committee Report - page 89
7.10.6 (a) Composition of Audit Committee
The Committee shall comprise Non-Executive Directors, the majority of whom shall be independent.
Compliant Audit Committee Report - page 89
85
Rule No. Subject RequirementCompliance
status Remarks
7.10.6 (b) Functions of Audit Committee
a. Overseeing of the preparation, presentation and adequacy of disclosures in the Financial Statements of a Listed Entity, in accordance with Sri Lanka Accounting Standards.
Compliant Audit Committee Report - page 89
b. Overseeing of the Entity’s compliance with financial reporting requirements, information requirements of the Companies Act and other relevant financial reporting related regulations and requirements.
Compliant Audit Committee Report - page 89
7.10.6 (b) Functions of Audit Committee (Contd.)
c. Overseeing the processes to ensure that the Entity’s internal controls and risk management are adequate to meet the requirements of the Sri Lanka Auditing Standards.
Compliant Audit Committee Report - page 89
d. Assessment of the independence and performance of the Entity’s external auditors.
Compliant Audit Committee Report - page 89
e. To make recommendations to the Board pertaining to appointment, re-appointment and removal of external auditors and to approve the remuneration and Terms of Engagement of the external auditors.
Compliant Audit Committee Report - page 89
7.10.6 (c) Disclosure in Annual Report relating to Audit Committee
a. Names of Directors comprising the Audit Committee.
Compliant Audit Committee Report - page 89
b. The Audit Committee shall make a determination of the independence of the Auditors and disclose the basis for such determination.
Compliant Audit Committee Report - page 89
c. The Annual Report shall contain a Report of the Audit Committee setting out of the manner of compliance with their functions.
Compliant Audit Committee Report - page 89
Disclosures required by Section 9.3.2 of the Listing Rules of the CSE
Rule No. Disclosure Requirement Section ReferencePage Reference
9.3.2 (a) In the case of non-recurrent Related Party Transactions, if aggregate value of the non-recurrent Related Party Transactions exceeds 10% of the equity or 5% of the Total Assets whichever is lower, of the Listed Entity according to the latest Audited Financial Statements.
Related Party Transactions Note in the Financial Statements
page 167
9.3.2 (b) In the case of recurrent Related Party Transactions, if the aggregate value of the recurrent Related Party Transactions exceeds 10% of the Net revenue/income as per the latest Audited Financial Statements
Related Party Transactions Note in the Financial Statements
page 167
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CORPORATE GOVERNANCE REVIEW
Rule No. Disclosure Requirement Section ReferencePage Reference
9.3.2 (c) Annual Report shall contain a report compiled by the RPTRC
including the following:
� Names of the Directors who are in the Committee;
� Statement about related party transactions reviewed during the financial year;
� Number of times the Committee has met during the financial year and
� Policies and procedures adopted by the RPTRC.
Related Party Transactions Review Committee Report
page 94
9.3.2 (d) A declaration by the Board of Directors as an affirmative statement of the compliance with the rules pertaining to Related Party Transactions or a negative statement in the event the Entity has not entered into any Related Party Transactions.
Report of the Board of Directors on the State of Affairs of the Company
page 95
Disclosures required by the Code of Best Practice on Corporate Governance jointly issued by SEC and CA Sri Lanka.
Rule SubjectCompliance
Status Reference
A. Directors
A.1 Effective Board to Control the Company
Yes Corporate Governance Review - section (6)
A.2 Chairman and Chief Executive Officer Yes No one individual has unfettered powers of decisions
A.3 Chairman’s Role Yes Corporate Governance Review - section (6.8)
A.5 Board Balance Yes Corporate Governance Review - section (6.3)
A.6 Supply of Information Yes Corporate Governance Review - section (6.7.4)
A.7 Appointments to the Board Yes Corporate Governance Review - section (6.11.3), Nomination Committee Report, Board of Directors - pages 22 to 23
A.8 Re-election Yes Corporate Governance Review - section (6.7.3)
A.9 Appraisal of Board Performance Yes Corporate Governance Review - section (6.4)
A.10 Disclosure of Information in respect of Directors
Yes Board of Directors - pages 22 to 23
A.11 Appraisal of Chief Executive Officer Yes Corporate Governance Review - section (6.4.1)
B Director’s Remuneration
B.1 Remuneration Procedure Yes Corporate Governance Review - section (6.11.2), Remuneration Committee Report - page 92
B.2 The level and make up of Remuneration
Yes Corporate Governance Review - section (6.11.2), Remuneration Committee Report - page 92
B.3 Disclosure of Remuneration Yes Corporate Governance Review - section (6.11.2), Remuneration Committee Report - page 92
87
Rule SubjectCompliance
Status Reference
C Relations with Shareholders
C.1 Constructive use of the AGM and conduct of general meetings
Yes Corporate Governance Review - section (7.2)
C.2 Communication with shareholders Yes Corporate Governance Review - section (7)
C.3 Major and material transactions Yes Notes to the Financial Statements
D. Accountability and Audit
D.1 Financial Reporting Yes Corporate Governance Review - section (6.1), Report of the Board of Directors on the State of Affairs of the Company, Statement of the Directors’ Responsibility, Independent Auditors’ Report, Management Discussion and Analysis, Notes to the Financial Statements relating to Related Party Transactions.
D.2 Internal Control Yes Risk Management Review, Corporate Governance Review - section (5)
D.3 Audit Committee Yes Audit Committee Report - pages 89 to 91
D.4 Code of Business Conduct and Ethics
Yes Corporate Governance Review - section (3)
D.5 Corporate Governance Disclosures Yes Corporate Governance Review
E. Institutional Investors
E.1 Shareholder Voting Yes Corporate Governance Review - section (7), Institutional Investors are encouraged to provide any feedback on the governance arrangements.
E.2 Evaluation of Governance Disclosures
Yes Corporate Governance Review
F. Other Investors
F.1 Investing/ Divesting Decisions Yes The extensive nature of the information given in the annual report facilitates the shareholders in carrying out adequate analysis when making their decisions.
F.2 Shareholder Voting Yes Proxy Form
G. Sustainability Reporting Yes Sustainability Review
Disclosures Specified by section 7.6 of the Listing Rules of the Colombo Stock Exchange
1. Disclosures specified by section 7.6
of Listing Rules of the Colombo Stock
Exchange are contained in this Annual
Report.
2. There is no evidence of the book value
being substantially different from the
market value of land and other fixed
assets of the Company or its subsidiaries.
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89
AUDIT COMMITTEE REPORT
The Audit Committee is a sub-committee of
the Main Board which provides assistance
to the Board of Directors in fulfilling its
oversight responsibilities over various
functions.
Functions of the Committee
The key function of the Committee is to
assist the Board in the following:
� Preparation, fair presentation and assure
adequacy of disclosures in the financial
statements of the Company and the
Group, in accordance with the Sri Lanka
Accounting Standards;
� Ensure compliance with financial
reporting requirements, information
requirements of the Companies Act and
other relevant financial reporting related
regulations and requirements by the
Group;
� Review processes to ensure the
adequacy of CGE’s internal controls
and risk management procedures to
meet the requirements of the Sri Lanka
Auditing Standards;
� Assessing the company’s ability to
continue as a going concern in the
foreseeable future;
� Evaluate adequacy and performance of
the company’s internal audit function;
� Ensure independence and performance
of the company’s external audit function
and
� Establish procedures to identify, monitor
and manage significant business and
financial risks.
Accordingly, the Committee carries out its
responsibilities under various functional
areas such as financial reporting, internal controls and risk management, internal and external
audit, compliance, regulatory reporting and any other function for the advancement of the
Group.
The Committee carried out its duties and responsibilities in accordance with the written Terms
of Reference as approved and reviewed annually by the Board. This report from the Committee
is an overview of the functions and responsibilities pertaining to the Group as a whole.
Composition of the Committee
The Committee comprises of two (2) Non-Executive Independent Directors and the group’s
Internal Auditor, functions as the Secretary to the Committee.
New appointment to the Committee
During the reporting period Dr. Prathap Ramanujam was appointed to the Audit Committee
with effect from November 2018, in place of Mr. Sunil Karunanayake (Former Non-Executive
Independent Director).
Meetings
For the year under review, the Committee held four (4) meetings with the members of the
management and auditors of the Company, to discuss the relevant matters and to review the
results of the Group and to provide appropriate information to those matters which are integral
to the Group . On invitation, these meetings were also attended by the Executive Director
and Group General Manager, the General Manager and the AGM - Finance, of the Company.
Meeting agendas are prepared by the Committee Secretary and provided to members in
advance along with required previous meeting minutes.
In addition, the Chairman of the Committee attends the Annual General Meeting of the
Company and responds to any questions from shareholders on the activities of the Committee.
The information on the attendance of the meetings by the Committee Members is given
below.
Name CapacityNo.of
meetings heldNo.of meetings
attendedMr. Sunil Karunanayake
Chairman / Non-Executive Independent Director (Former)
4 2
Dr. Prathap Ramanujam
Chairman / Non-Executive Independent Director
4 1
Mr. Wickrema Senaka Weerasooria
Member / Non-Executive Independent Chairman
4 4
Mr. Majintha Illankone
Secretary / Group Internal Auditor
4 4
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AUDIT COMMITTEE REPORT
Financial reporting
During the financial year, the Committee has reviewed and discussed the Group’s quarterly and
annual financial results with the Management and the External Auditors, prior to its publication.
In this connection, the Committee partners with the Board in ensuring that the financial and
non – financial information that are reported to the Shareholders is a fair assessment of the
position of the Company.
This review includes:
� The evaluation of the appropriateness of the Accounting Standards and Policies adopted
by the Company in the preparation and presentation of the Financial Statements and
consider whether they are complete and consistent with information known to committee
members;
� Compliance with the relevant accounting standards, laws and regulations;
� Assessing the adequacy and validity of the estimates and judgments made by the
management on significant and complex accounting transactions and regulatory
pronouncements and understand their impact on the Financial Statements;
� Assessing the company’s ability to continue as a going concern in the foreseeable future;
� Review other sections of the Annual Report and ensure the accuracy and completeness of
the information and
� Discussion of Key Audit Matters in connection with the preparation of financial statements
and evaluates the extent of internal and external auditors involvement.
Internal controls and risk management
The Committee is responsible to review the adequacy and effectiveness of internal controls and
risk management procedures adopted by the Company. Accordingly, risk mitigating strategies
are recommended and incorporated by the Committee based on the related findings in order
to overcome internal and external threats from the environment.
Also, the Committee reports on regulatory matters that may have a significant impact on the
Financial Statements, non-compliance with the relevant ethical guidance and misappropriation
of assets. Furthermore, the Committee reviews the whistle blowing policy of the Group and
discuss with the management for changes and improvements where necessary.
Accordingly, the Company is able to safeguard the investment of the Shareholders in the
Company and meet the expectations of other stakeholders’ of the Company.
Internal audit
Internal auditors have direct access to the Audit Committee and submit their reports on
a quarterly and annual basis to the Committee. The Committee is responsible to evaluate
the effectiveness of internal audit function and performance and provides appropriate
recommendations for improvement. The adequacy of the scope of the internal audit and
internal audit plans for the Group are also discussed by the Committee.
External audit
The Committee reviews the independence,
performance and the objectivity of the
external auditors and is further responsible
for:
� Making recommendations to the
Board regarding the appointment,
re-appointment and removal of the
external auditors at the Annual General
Meeting;
� Approving the remuneration and terms
of engagement of the external auditors;
� Discussion and review of the external
audit scope and plan including
coordination with internal audit prior
to the commencement of the external
audit;
� Discussion with the external auditors
and management on the key audit
findings and their recommendations;
� Discussion of the company’s financial
statements prepared quarterly and
annually and
� Reviewing of the non audit services
provided by the external auditors and
evaluate how it affects their objectivity
and independence and disclose the
basis for such determinations.
The Committee meets external auditors to
discuss the findings of their audit over the
company’s financial statements and obtain
their views on any specific matters.
The Audit Committee has recommended to
the Board of Directors that KPMG Sri Lanka,
Chartered Accountants be re-appointed
as external auditors for the financial year
ending 31 December 2019 subject to the
approval of Shareholders at the Annual
General Meeting.
91
Compliance and other responsibilities
The committee is held responsible for
compliance with laws and regulations and
regularly reports to the board regarding
committee activities. Accordingly the
committee;
� Reviews the effectiveness of the system
of monitoring compliance with the laws
and regulations by the Group;
� Obtains regular updates regarding
compliances from the management and
company’s legal counsel;
� Monitors compliance with corporate
conduct and ethical principals;
� Assures confidentiality of whistle
blowing employees and
� Performs special investigations and any
other assignments as requested by the
management in order to enhance the
internal control system and transparency
of the performance of the Company.
Evaluation of the functions of the Committee
The functions of the Audit Committee have
been evaluated by the Board throughout
the year and they have concluded that
the Committee has performed their
responsibilities to the complete satisfaction
of the Board and seek the continued support
of the Committee in the future in achieving
the stakeholders’ expectations.
(Sgd.)Dr. Prathap RamanujamChairman, Audit Committee
Ceylon Grain Elevators PLC | Annual Report 201892
The Remuneration Committee was
established for the purpose of developing a
formal and transparent policy on Executive
Directors remuneration and setting the
remuneration packages of individual
Directors of the Board. The Committee
has acted within the parameters set out
by its Terms of Reference in order to avoid
potential conflicts of interest, Hence no
director is involved in deciding his own
remuneration.
In discharging committee responsibilities,
the Committee obtains advices from
Chairman and / or CEO in proposing
remuneration of directors, when they think
as necessary.
Functions of the Committee and Remuneration Policy
The remuneration policy is designed to
attract, retain and motivate the company’s
Executive Directors to support the continued
long term success of the business and
creation of stakeholder value, provided they
are not paying more than the required level
for this purpose and remunerations are in
line with the industry standards.
The aggregated remuneration paid to
Executive and Non-Executive Directors are
disclosed in Note 31.1 - Key Management
Personnel information, on page 164.
Composition of the Committee
The Board appointed Remuneration
Committee comprises of two (2) members
both of whom are Non-Executive
Independent Directors as required by the
guidelines as set out by the Colombo Stock
Exchange.
New appointment to the Committee
During the reporting period Dr. Prathap Ramanujam was appointed to the Remuneration
Committee with effect from November 2018, in place of Mr. Sunil Karunanayake (Former Non-
Executive Independent Director).
Meetings
Remuneration Committee meetings were held when necessary and a total of three (3)
meetings were conducted over the past year.
The information on the attendance of the meetings by the Committee members is given
below.
Name Capacity
No. of meetings
held
No. of meetings eligible to attended
No. of meetings attended
Mr. Wickrema Senaka
Weerasooria
Chairman / Non-Executive
Independent Chairman
3 3 3
Dr. Prathap
Ramanujam
Member / Non-Executive
Independent Director
3 1 1
Mr. Sunil
Karunanayake
Member / Non-Executive
Independent Director
(Former)
3 1 -
Mr. M.C.M. De Costa Secretary 3 3 3
The Executive Director and Group General Manager who is responsible for the overall
management of the Group provides information to the Committee and participates in all
deliberations except in relation to those matters where the committee objectives impaired with
his presence. Group Treasurer and the General Manager were also attended to the meetings on
invitation.
Evaluation of the functions of the Committee
The annual evaluation of the Committee was carried out by the Board and it was concluded
that the Committee continues to operate effectively.
(Sgd.)Wickrema Senaka WeerasooriaChairman, Remuneration Committee
REMUNERATION COMMITTEE REPORT
93
The Nomination Committee is entrusted with keeping the board composition under review while facilitating a formal and transparent procedure for all new appointments to the Board.
Composition of the Committee
The Committee, as at the end of the year 2018, consisted of three (3) members including two (2) Non-Executive Independent Directors and the Chief Executive Officer of the Company. The Non-Executive Independent Chairman is the Chairman of the Committee.
New appointment to the Committee
During the reporting period Dr. Prathap Ramanujam was appointed to the Nomination Committee with effect from November 2018, in place of Mr. Sunil Karunanayake (former Non-Executive Independent Director).
Functions of the Committee
The Nomination Committee oversees a range of responsibilities which include:
� Consider the making of new appointment or re-appointment to the Board;
� Provide appropriate advices and recommendations to the Board or the Chairman in making such appointments to the Board;
� Evaluate the skills, knowledge and experience of any individual who is recommended to the Board, by considering the required strategic skills by the Company;
� Review the structure, size and composition of the Board and make appropriate recommendations to the Board with regard to any required changes;
� Evaluate the performance of the members of the Board to determine whether they are
adequately performing their duties and responsibilities as a director;
� Recommend insurance cover to be taken for all directors indemnity and
� Provide any other appropriate professional advices to the Board as and when it considers as
necessary.
During the reporting period the appointment of Dr. Prathap Ramanujam was recommended
by the Nomination Committee as a Non-Executive Independent Director with effect from 7
August 2018, in place of Mr. Sunil Karunanayake (Former Non-Executive Independent Director)
and the Board accepted the recommendation.
Meetings
The Committee met on two (2) occasions during the year 2018 in order to discharge their
responsibilities in keeping with the combined knowledge and experience of the Board
according to the strategic demands of the Company.
The information on the attendance of the meetings by the Committee members is given
below.
Name Capacity
No. of meetings
held
No. of meetings eligible to attended
No of meetings attended
Mr. Wickrema
Senaka Weerasooria
Chairman / Non-Executive
Independent Chairman
2 2 2
Mr. Cheng Chih
Kwong, Primus
Member / Executive Director
and Chief Executive Officer
2 2 2
Mr. Sunil
Karunanayake
Member / Non-Executive
Independent Director (Former)
2 1 -
Dr. Prathap
Ramanujam
Member / Non-Executive
Independent Director
2 1 1
Mr. M.C.M. De Costa Secretary 2 2 2
On invitation, these meetings were also attended by the Executive Director and Group General
Manager, the General Manager and the Group Treasurer.
(Sgd.)Wickrema Senaka WeerasooriaChairman, Nomination Committee
NOMINATION COMMITTEE REPORT
Ceylon Grain Elevators PLC | Annual Report 201894
RELATED PARTY TRANSACTIONS REVIEW
COMMITTEE REPORT
The Board formed the Related Party Transactions Review Committee (RPTRC) on 13 November
2015, to exercise supervision on behalf of the Board to ensure overall related party transactions
(RPTs) of the Group are in compliance with Code of Best Practices on Related Party Transactions
issued by Securities and Exchange Commission of Sri Lanka (SEC) together with Colombo Stock
Exchange (CSE).
Composition of the Committee
The Committee comprises of two (2) Non-Executive Independent Directors and an Executive
Director in accordance with Listing Rule No. 9.2.2 of the CSE. The Group’s Internal Auditor,
functions as the Secretary to the Committee.
New appointment to the Committee
During the reporting period Dr. Prathap Ramanujam was appointed to the Related Party
Transactions Review Committee with effect from November 2018, in place of
Mr. Sunil Karunanayake (Former Non-Executive Independent Director).
Meetings
The Committee met four (4) times during the period to comply with Listing Rule No. 9.2.4 of the
Colombo Stock Exchange.
The details of attendance of members at meetings held for the year under review are as follows:
Name Capacity
No. of meetings
held
No.of meetings attended
Mr. Wickrema Senaka
Weerasooria
Chairman / Non-Executive
Independent Chairman
4 4
Mr. Sunil Karunanayake Member/ Non-Executive
Independent Director (Former)
4 2
Dr. Prathap
Ramanujam
Member / Non-Executive
Independent Director
4 1
Mr. Tan Beng Chuan Member / Executive Director and
Group General Manager
4 4
Mr. Majintha Illankone Secretary / Group Internal
Auditor
4 4
Policies and procedures
The members of the Board of Directors of the Company have been identified as Key
Management Personnel (KMP), with a view to enhance transparency and good governance.
In accordance with the Related Party Transactions policy, the declarations were obtained from
each KMP of the Company for the purpose
of identifying any RPTs that were carried out
by the Company if any and were reviewed by
the Committee.
Functions of the Committee
The key function of the Committee is to
ensure on behalf of the Board, that all RPTs of
the Company and its listed subsidiaries are
consistent with the Code of Best Practices on
Related Party Transactions.
This include the following functions:
� Adopting policies and procedures to
ensure that company does not engage
in any transaction with related parties in
a manner that is not within the normal
course of business;
� Reviewing and overseeing existing
policies and procedures for RPTs;
� Reviewing in advance all proposed RPTs
of the Company except those explicitly
exempted in the Code.
� Determining whether RPTs that are to be
entered into by the Company require the
approval of the Board or shareholders of
the Company;
� Establish procedures to identify and
report recurrent and non-recurrent RPTs
and obtain required approvals from the
Board or Shareholders of the Company;
� Ensuring that no director of the
Company shall participate in any
discussion of a proposed related party
transaction for which he or she is a
related party, unless such Director is
requested to do so by the Committee
95
for the express purpose of providing
information concerning the related party
transaction to the Committee;
� If there is any potential conflict in any
related party transaction, the Committee
may recommend the creation of
a special committee (including
independent consultant if necessary)
to review and approve the proposed
related party transaction;
� Ensuring that immediate market
disclosures and disclosures in the Annual
Report as required by the Code are
made in a timely and detailed manner
and
� Update the Board on RPTs of the Group
on a quarterly basis.
Activities during the year
� All recurrent and non-recurrent related
party transactions that had taken place
during the year 2018 were reviewed by
the RPTRC and communicated to the
Board where necessary.
� In addition, the Board of Directors were
updated on the RPTs of the Group on a
quarterly basis.
The RPTRC convenes quarterly. The minutes
of all meetings are properly documented
and communicated to the Board of Directors.
Declaration
A declaration by the Board of Directors as an
affirmative statement of the compliance with
the rules set out in the CSE Listing Rules 9.3.2
(d) pertaining to RPTs is given on page 106 of
this Annual Report.
(Sgd.)Wickrema Senaka WeerasooriaChairman, Related Party Transactions Review
Committee
Enterprise Risk Management (ERM)
Proactive and effective identification, evaluation and management of risks is an essential and supportive element in the Group’s sustainable value creation process which ensures continuity of operations and achievement of financial, operational and social objectives of the entity.
ERM is an ongoing process that has been adopted across the entire organisation by the Management in strategy setting, which is designed to identify potential events that affect the entity and to manage risks within the Company’s risk appetite. It provides a reasonable assurance regarding the achievement of financial and non-financial strategic objectives of the Group.
Risk Awareness Culture in CGE
People cannot be expected to avoid risks if
they are not aware of and educated on risks.
Therefore, embedding the Risk Management
Framework into organisation culture plays a
vital role and it should be communicated to
all the levels across the entity, on what the
risk management philosophy is and what
is expected from the organisation’s people.
Accordingly, risk management process is
driven through a combination of a ‘top-
down’ (driven by the Board) and ‘bottom-up’
(originating from business unit level such
as from the level of employees at farms
and plants) approaches where people are
educated through numerous ways such as:
� discuss risks and risk responses with
employees;
� induction session for new employees;
� consult employees with higher
management on appropriate when new
risk events are identified;
� regularly communicate ERM policies,
procedures and standards across the
entity;
� conducting awareness workshop and
training on risk management to enhance
the understanding and given them a
stake in the risk management of the
entity.
Risk Governance
RiskManagementAu
dit C
omm
ittee
Corporate Management
BoD
The Board
The Board has the overall responsibility
for risk management and ensure risk
management is embedded to all processes
and activities of the business. They create
a risk awareness culture and provide
guidance to the Senior Management, Audit
Committee and Employees in formulating
appropriate strategies, policies and
procedures on risk management and internal
controls, by analysing entity’s risk profiles
and determines entity’s risk appetite.
Audit Committee
The Audit Committee, reviews the
effectiveness of the risk management
process and internal controls, including the
systems established to identify, assess, and
monitor the overall exposure to risks and
ensures that these identified risks are within
the risk appetite set by the Board. Further,
the Committee provides advance warnings
to the Board on emerging risk issues and
significant changes to the Company’s risk
profile.
Senior Management
Senior Management held responsible for
communicating risk management policies
and procedures to employees across the
organisation and provides guidance on
the same. They examine processes and
events, uncertainties and changes in
the environment that might expose to
situations that could seriously reduce future
earnings, impair its asset value or create
legal, regulatory or reputational risks. They
also evaluate options available to eliminate
or mitigate risks and implement risk
management strategies within the Group
Monitoring and reporting of potential risks
and their impact on the business, to the
Board is also a responsibility that rests with
the Senior Management.
Employees
Amongst all the above parties, employees
play a major role in risk management. They
need to understand and follow the risk
management processes and procedures set
by the management in order to be on alert
on conditions and events that may arise
unfavourable results to the organisation. In
doing so , they report on failure on existing
risk controls and inefficient work conditions
and corporate with the management in
achieving risk management objectives.
Ceylon Grain Elevators PLC | Annual Report 201896
ENTERPRISE RISK MANAGEMENT REVIEW
Risk Management Framework (RMFW)
CGE as a business that operates in the poultry industry is exposed to a myriad of risks and
uncertainties in the day to day operations. In order to overcome these risks, the management
has developed a Risk Management Framework, which facilitates the management to identify
all potential risks related to Environment, Business, Operation and product and evaluates
the impact on the business by considering both financial and non-financial factors and take
necessary precautionary actions to overcome the threat of those risks. The impacts of such
identified risks are assessed in terms of potential loss or damage.
Establishing the Context
Com
mun
icat
ion
and
Cons
ulta
tion
Monitor, Review
and Docum
entation
Risk Treatment
Prevention CorrectionDetectionÛ Û
Risk Identifi cation Risk Analysis Risk Evaluation
Û Û
Risk Assessment
Û
Û
Û
Û
Û
Û
The RMFW emphasises the importance of proper management and the Company’s system of
internal controls that implement the policies, procedures, processes and systems to monitor,
detect, correct, prevent and report matters relating to the continued effectiveness of the
framework.
The risk management process identifies risks, evaluates them by mapping them and assessing
the potential impact and identifies mitigating action following a rigorous review and
monitoring process.
Risk Appetite
Risk appetite is the aggregate amount and
type of risks the entity is willing to accept in
different aspects of business in achieving its
strategic objectives.
The Company has set clear guidance on
identification of risks that embedded within
their processes and activities and accordingly
prioritised them based on the level of impact
on the business. As a result, the Company is
aiming to achieve the following benefits:
� develop a common understanding of
risks across the organisation and manage
risk effectively
� achieve competitive advantage through
better understanding and managing
risks
� better management of internal resources
and achieve cost savings
� provides insights and supports the Board
in decision making
� create an environment promoting
sustainable long term growth in the
entity
97
Continuous Increase of Corporate
Value
ÛÛÛ
Business Value Creation vs. Risk
� Customers
� Employees
� Shareholders
� Business Partners
� Regulatory Bodies
� Community
Stakeholder Value Proposition
� Financial Capital
� Manufactured Capital
� Human Capital
� Social and Relationship Capital
� Natural Capital
� Intellectual Capital
Capitals
Periodic AdequacyReview
Org
anis
atio
n an
d Governance
Reporting and Monitorin
g Systems Measures Controls
Procedures
Business Value Creation
Continuous Risk Management
Impa
ct o
n st
akeh
olde
rs
Hig
hM
ediu
mLo
w
Low Medium High
Impact to the company
6.3
6.4
4.2
4.1
1.2
5.1
6.2
1.73.3
2.11.6
2.2
4.3
1.5
1.8 5.1
4.41.1
3.1
6.1
2.3
3.2
1.4
1.3
Risk Evaluation
Each risk is evaluated in terms of probability
of occurrence and business impact of event/
events:
� Probability of occurrence is evaluated
based on past experience, industry
conditions and the mitigating controls
that are in place. A rating of 1-3 has been
assigned for high, medium and low for
likelihood of occurrence.
� The impact of the event is evaluated by
determining the estimated loss it would
cause and the extent of the business
impact. A rating of 1-3 has been
assigned for high, medium and low for
impact for each risk.
Upon assessment of the likelihood of
occurrence and the extent of the business
impact of each risk, it is plotted in the
following matrix to identify the nature and
extent of action required. A ranking of high,
moderate, low is assigned based on the
risk factor derived through probability and
impact assessment.
Ceylon Grain Elevators PLC | Annual Report 201898
ENTERPRISE RISK MANAGEMENT REVIEW
Risks and Challenges
These risks and challenges are related to the capitals and stand as the backdrop to the decision-making process and strategy formulation.
Impacted CapitalRisk Ref Risk statement Risk mitigating strategy Risk Factor
1. Financial Capital
1.1 Sourcing of raw materials at the right time,
right quantity and at the expected standard
of quality
Having multiple sources both locally and
internationally
HighContinuous research and development on
alternative raw materials
Obtaining the import permits from the
Government on time
1.2 Frequent changes in government policies Periodic evaluation and adaptation of regulations
and policiesMedium
1.3 Interest rate fluctuations Maintaining an appropriate combination of
investment.Medium
1.4 Threat of substitutes Carrying out promotional activities and engage in
product developmentMedium
1.5 Exchange rate fluctuations Timely monitoring of international transactions
and effective treasury functionHigh
1.6 Credit risk arises from credit exposure to
customers on unsecured debts
Timely assessment of customer credit worthiness
LowAge analysis of debtors
Set credit controls over the value and terms
1.7 Availability of sufficient funds to settle dues Strong relationship with banks to ensure that
urgent borrowing needs are met at short notice.Low
1.8 Price volatility Continuous market surveillance High
2. Human Capital
2.1 Recruiting and retaining employees Development of Competency Matrix and skill pool.
Low
Maintain a succession plan
Adaptation of HR best practices
Conducting employee satisfaction surveys
Continuous training and development
2.2 Losses from low productivity and low
employee engagement
Open door policy to discuss on grievancesLow
Livelihood development programmes
2.3 Sourcing of skilled labour Agreements with outsource labour suppliers High
99
Impacted CapitalRisk Ref Risk statement Risk mitigating strategy Risk Factor
3. Natural Capital
3.1 Natural catastrophes including disease
outbreaks adversely affecting Company’s
operations
Building environmentally controlled houses
Insurance coverage High
3.2 Waste and disposal management Adaptation of central drain system, incineration,
disposal of liquid waste through dilutive and
cleansed process
Medium
3.3 Negative impact on the environment due to
its operations
Environmental factors are considered in decision
making
LowObtaining all required approvals for our business
operations
Promoting importance of carbon foot print
Promoting energy saving initiatives
4. Social And Relationship Capital
4.1 Loss of customers Conducting customer satisfaction surveys
MediumAwareness programs to customers
Effective brand marketing initiatives
4.2 Loss of suppliers Conducting supplier grading surveysMedium
Periodic evaluation of principal’s satisfaction levels
4.3 Procurement and supply chain
management
Develop and maintaining long term business
relationshipsLow
4.4 Regulatory risk All relevant statutes that the Company has to
comply with has been identified and updated as
and when necessary
High
5. Manufactured Capital
5.1 Machine breakdown and system failures Continuous check-ups and upgrades
MediumAdherence to a maintenance plan
Evaluation of man and machine hours
6. Intellectual Capital
6.1 Reputational risk Adhering into corporate governance principals
MediumAdaptation of ethical practices in supply chain and
manufacturing processes
CSR activities
6.2 Loss of data through system breaches Controls over IT infrastructure and data regular
back up off data Medium
Availability of disaster recovery plan
6.3 Product quality risk Regular process monitoring and update
MediumContinuous quality checks
Test on the input of raw materials and
experimental farm tests
6.4 Risk of technological obsolescence Regular investment in new technology Medium
Ceylon Grain Elevators PLC | Annual Report 2018100
ENTERPRISE RISK MANAGEMENT REVIEW
Built on a strong foundation of good corporate governance
and accountability we relentlessly pursue to maintain
the highest standards of quality.
101
Ceylon Grain Elevators PLC | Annual Report 2018102
We strive to uphold quality in every aspect of our business in bringing forth nutrition to our nation.
103
Financial CalendarFinancial year ended 31 December 2018
Results Announcements to the Colombo Stock Exchange
1st Quarter End Publication of Interim Financial Statements
31 March 2018
10 May 2018
2nd Quarter EndPublication of Interim Financial Statements
30 June 2018
7 August 2018
3rd Quarter EndPublication of Interim Financial Statements
30 September 2018
12 November 2018
4th Quarter EndPublication of Interim Financial Statements
31 December 2018
30 January 2019
Publication of Annual Report for 2017
Publication of Annual Report for 2018
6 April 2018
10 April 2019
Meetings
35th Annual General Meeting 9 May 2018
36th Annual General Meeting 8 May 2019
FINANCIAL REPORTS
Financial ReportsFinancial Calendar 103
Report of the Board of Directors on the State of Affairs of the Company
104
Statement of the Directors’ Responsibility
108
Independent Auditors’ Report 109
Statement of Profit or Loss and Other Comprehensive Income
112
Statement of Financial Position 113
Statement of Changes in Equity 114
Statement of Cash Flows 115
Notes to the Financial Statements 116
Investor Highlights and InformationFive Year Financial Summary 171
Value Added Statement 172
Shareholder Information 173
Glossary of Financial Terminology 175
Notice of Meeting 176
Form of Proxy 177
Corporate Information Inner Back Cover
Ceylon Grain Elevators PLC | Annual Report 2018104
REPORT OF THE BOARD OF DIRECTORS ON THE STATE OF AFFAIRS OF THE COMPANY
The Board of Directors is pleased to present
their Report and the Audited Financial
Statements of the Company for the year
ended 31 December 2018. The details set
out herein provide pertinent information
required by the Companies Act No. 7 of 2007,
Listing Rules issued by the Colombo Stock
Exchange and are guided by recommended
best accounting practices.
1. Principal Activities
The principal businesses of the Group
are manufacturing and selling of poultry
feed and other animal feed, importing
and selling of poultry equipment, drugs
and vaccines, operating of poultry
breeder farms, raising grandparent and
parent stock and hatcheries, hatching
and selling of day old chicks, operation
of commercial farms, poultry processing
and distribution and provision of
warehouse facilities.
2. Review of Performance for the year ended 31 December 2018 and Future Developments
A review of the company’s performance
during the year, with comments on
financial results for the year ended
31 December 2018 and future
developments are contained in the
Chairman’s Message (pages 18 to 19)
and Chief Executive Officer’s Review
(pages 20 to 21). These reports, together
with the Financial Statements reflect the
state of affairs of the Company.
3. Financial Statements
The Financial Statements of the
Company are given on pages 112 to 170.
4. Independent Auditors’ Report
The Independent Auditors’ Report on the
Financial Statements is given on pages
109 to 111.
5. Accounting Policies
The accounting policies adopted in preparation of Financial Statements are given on pages 116 to 131. There were no material changes in the accounting policies adopted by the entity except for SLFRS 9 and SLFRS 15 related policies.
6. Interest Register
The Company maintains an Interest Register and the particulars of those Directors who were directly or indirectly interested in a contract of the Company are stated therein.
7. Directors’ Interest
None of the Directors had a direct or
indirect interest in any contracts or
proposed contracts with the Company
other than as disclosed in Note 31
– Related Party Transactions to the
Financial Statements.
8. Directors’ Remuneration and Other Benefits
Directors’ remuneration in respect of the
Company for the financial year ended
31 December 2018 is given in Note
31 - Related Party Transactions, to the
Financial Statements.
9. Corporate Donations
Donations made by the Company
amounted to Rs. 127,419/-
(2017 - Rs. 310,200/-). No donations were
made for political purposes.
10. Directorate
The names of the Directors who held office as at 31 December 2018 are given below.
Mr. Wickrema Senaka Weerasooria Non-Executive Independent Chairman
Mr. Cheng Chih Kwong, Primus Executive Director and Chief Executive
Officer
Mr. Tan Beng Chuan
Executive Director and Group General
Manager
Mr. Cheng Eng Loong
Non-Executive Director
Mr. Cheng Koh Chuen, Bernard
Non-Executive Director
Dr. Prathap Ramanujam
Non-Executive Independent Director
Mr. Sunil Karunanayake, Non-Executive
Independent Director passed away on 27
May 2018. The Board wishes to place on
record the company’s sincere appreciation
to the late Mr. Sunil Karunanayake for the
valuable contribution extended to the
Company during his tenure on Board.
Dr. Prathap Ramanujam was appointed as
a Non - Executive Independent Director of
the Company on 7 August 2018.
In accordance with the provisions of
Article 87 of the Articles of Association
of the Company, Mr. Cheng Koh Chuen,
Bernard retires by rotation and being
eligible, offers himself for re-election.
In accordance with the provisions of
Article 95 of the Articles of Association
of the Company, Dr. Prathap Ramanujam
retires and being eligible, offers himself
for re-election.
A resolution for the re-appointment of
Mr. Tan Beng Chuan, who is 72 years
of age, will be proposed at the Annual
General Meeting in terms of Section 211
of the Companies Act No. 7 of 2007.
Mr. Tan Beng Chuan’s re-appointment is
recommended by the Directors.
A resolution for the re-appointment of
Mr. Cheng Chih Kwong, Primus who is
70 years of age, will be proposed at the
Annual General Meeting in terms of
Section 211 of the Companies Act No.
105
7 of 2007. Mr. Cheng Chih Kwong, Primus’s re-appointment is recommended by the
Directors.
A resolution for the appointment of Mr. Rajanayagam Nalliah Asirwatham who is 76
years of age, will be proposed at the Annual General Meeting in term of section 211 of
the Companies Act No. 7 of 2007. Mr. Rajanayagam Nalliah Asirwatham’s appointment is
recommended by the Directors.
11. Directors’ Shareholdings
Number of shares
As at 31/12/2018 As at 31/12/2017
Mr. Wickrema Senaka Weerasooria 2,800 2,800
Mr. Cheng Chih Kwong, Primus 397 397
Mr. Tan Beng Chuan Nil Nil
Mr. Cheng Koh Chuen, Bernard Nil Nil
Mr. Cheng Eng Loong Nil Nil
Dr. Prathap Ramanujam Nil Nil
12. Auditors
The Financial Statements for the year ended 31 December 2018 have been audited
by Messrs KPMG Chartered Accountants, who express their willingness to continue in
office. In accordance with the Companies Act No. 7 of 2007, a resolution relating to their
re-appointment and authorising the Directors to determine their remuneration will be
proposed at the forthcoming Annual General Meeting.
The Auditors Messrs KPMG were paid Rs. 4,377,500/- (2017 - Rs. 3,985,000/-) as audit fees by
the Company. As far as the Directors are aware, the Auditors do not have any relationship
(other than that of an Auditor) with the Company other than those disclosed above.
The Auditors also do not have any interest in the Company.
13. Turnover
Group turnover amounted to Rs. 17,085.6 Million (2017 - Rs. 15,154.9 Million) and company
turnover amounted to Rs.16,626.4 Million (2017 - Rs. 14,848.0 Million)
14. Dividends
The Directors recommend a First and Final Dividend of Rs. 3.00 per share for the financial
year ended 31 December 2018.
15. Investments
Details of investments held by the Company are disclosed in Note 15 – Investment in
Associate Company and Note 16 – Investment in Subsidiary Companies, to the Financial
Statements.
16. Intangible Assets
An analysis of the intangible assets of the
Company, additions and amortisation
charged during the year are set out
in Note 14 – Intangible Assets, to the
Financial Statements.
17. Property, Plant and Equipment
An analysis of the property, plant and
equipment of the Company, additions
and disposals made during the year and
depreciation charged during the year are
set out in Note 12 – Property, Plant and
Equipment, to the Financial Statements.
18. Capital Commitments
Capital expenditure contracted for
as at 31 December 2018 for which
no provision has been made in
the accounts are set out in Note
27 – Commitments, to the Financial
Statements.
19. Stated Capital
The issued and fully paid up
stated capital of the Company is
Rs.1,017,996,000/- divided into
60,000,000 ordinary shares. There was
no change in the stated capital of the
Company during the year.
20. Reserves
Total reserves of the Company as at 31
December 2018 amounted to
Rs. 3,077.2 Million (2017 - Rs. 2,624.2
Million) and the Group reserves
amounted to Rs. 5,461.4 Million
(2017 - Rs. 4,694.5 Million). The
movement of reserves is shown in the
Statement of Changes on Equity on
page 114.
Ceylon Grain Elevators PLC | Annual Report 2018106
REPORT OF THE BOARD OF DIRECTORS ON THE STATE OF AFFAIRS OF THE COMPANY
21. Events after the reporting period
No significant events have occurred after the reporting period other than those disclosed
in Note 32 – Events After the Reporting Period, to the Financial Statements.
22. Employment Policies
The Company identifies Human Resources as one of the most important factors
bequeathing the survival and growth of the Company in the current competitive business
environment. While appreciating and valuing the service of our employees, a greater effort
is being made to hire the best talent from external sources, to bolster weak areas and
continue to maintain the highest standards prevalent in the Industry. Human Resource
head count is considered as a key indicator and recruitment is based on the annual
manpower planning. The Company provides equal opportunities. Greater emphasis is
given to the areas of training, professional development and ethical business practices. All
rewards and career opportunities are based on merit and on performance.
23. Taxation
The tax position of the Company is given in Note 10 – Taxation, to the Financial Statements.
24. Share Information
Information relating to earnings, dividend, market price, net assets per share and
information on share trading is given on page 171.
25. Disclosure as per CSE Rule No.7.6 (xi)
2018 2017
Rs. Cts. Rs. Cts.
Market price per share as at 31 December 59.50 66.10
Highest share price 76.00 72.80
Lowest share price 54.50 63.00
Net assets per share 68.25 60.70
Earnings per share 9.60 7.51
Dividend per share (proposed) 3.00 2.00
Dividend payout ratio (%) 31.25 26.63
26. Shareholding
The number of registered shareholders of the Company as at 31 December 2018 was 4,767.
The distribution and analysis of shareholding are given on page 173.
27. Major Shareholders
The twenty largest shareholders of the Company as at 31 December 2018, together with an
analysis are given on page 174.
28. Statutory Payments
The Directors to the best of their
knowledge and belief are satisfied that
all statutory payments in relation to the
Government and the employees have
been made on time.
29. Environment, Health and Safety
Company policy continues to ensure
that all Environmental, Health and
Safety regulations are strictly adhered
to, minimising any adverse effects to
the environment. Recycling of waste
is carried out wherever possible.
Employees are provided with all personal
protective equipment as health and
well-being which are our prime
concerns. Fire fighting and safety
systems are in place to safeguard the
company’s best interests.
30. Corporate Governance / Internal Control
The Corporate Governance and Internal
Control Policies of the Company are
given on pages 70 to 78.
31. Contingent Liabilities
Contingent Liabilities as at 31 December
2018 are set out in Note 26 – Contingent
Liabilities, to the Financial Statements.
32. Related Party Transactions
The company’s transactions with related
parties, given in Note 31 - Related Party
Transactions, to the Financial Statements,
have complied with Colombo Stock
Exchange Listing Rule 9.3.2 and the
Code of Best Practices on Related
Party Transactions under the Securities
Exchange Commission Directive issued
under section 13(c) of the Securities
Exchange Commission Act.
107
33. Annual General Meeting
The 36th Annual General Meeting of
the Company will be held at the Sri
Lanka Foundation Institute Auditorium,
No. 100, Sri Lanka Padanama Mawatha,
Independence Square, Colombo 7 on
Wednesday, 8 May 2019 at 10.45 a.m.
By Order of the Board of
Ceylon Grain Elevators PLC
(Sgd.)Wickrema Senaka WeerasooriaNon-Executive Independent Chairman
(Sgd.)Tan Beng ChuanExecutive Director and Group General Manager
(Sgd.)S S P Corporate Services (Private) LimitedSecretaries
Colombo8 April 2019
Ceylon Grain Elevators PLC | Annual Report 2018108
STATEMENT OF THE DIRECTORS’ RESPONSIBILITY
The responsibility of the Directors in relation
to the Financial Statements of the Company
and the Group, is set out in the following
statement. The responsibility of the auditors,
in relation to the Financial Statements, is set
out in their report appearing on pages 109
to 111.
The Companies Act No. 7 of 2007 requires
the Directors to prepare Financial Statements
for each financial year which give a true
and fair view of the status of affairs of the
Company and the Group and of the profit or
loss for that year.
In preparing these Financial Statements, the
Directors are required to:
• Selectsuitableaccountingpoliciesand
then apply them consistently.
• Makejudgementsandestimatesthatare
reasonable and prudent.
• Statewhateverapplicableaccounting
standards have been followed, subject to
any material departures and explained in
the Financial Statements.
• PreparetheFinancialStatementson
a going concern basis, unless it is
inappropriate to presume that the Group
will continue in business.
The Directors are responsible for keeping
proper accounting records which disclose
with reasonable accuracy of any time the
financial position of the Company and the
Group and to ensure that the Financial
Statements comply with the Companies Act.
The Directors are also responsible for taking
such steps as they deemed reasonable or
required in order to safeguard the assets
of the Company and the Group, and in this
regard, to give proper consideration to the
establishment of appropriate internal control
systems, with a view to prevent and detect
fraud and other irregularities.
The Directors are required to prepare the
Financial Statements to provide the auditors
with every opportunity to take whatever
steps and undertake whatever inspections
they may consider to be appropriate to
enable them to express their audit opinion.
Compliance Statement
The Directors are of the view that they have
discharged their responsibilities as set out
in this statement. They also confirm that to
the best of their knowledge, all statutory
payments payable by the Company and its
subsidiaries, as at the reporting date, have
been paid or where relevant, provided for.
By Order of the Board of
Ceylon Grain Elevators PLC
(Sgd.)Wickrema Senaka WeerasooriaNon-Executive Independent Chairman
(Sgd.)Tan Beng ChuanExecutive Director and Group General
Manager
Colombo, Sri Lanka
8 April 2019
109
INDEPENDENT AUDITORS’ REPORT
TO THE SHAREHOLDERS OF CEYLON GRAIN ELEVATORS PLC
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Ceylon Grain Elevators PLC (“the Company”) and the consolidated financial statements of the Company and its subsidiaries (“the Group”), which comprise the statement of financial position as at December 31, 2018, and the statement of profit or loss and comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information set out on pages 112 to 170.
In our opinion, the accompanying financial statements of the Company and the Group give a true and fair view of the financial position of the Company and the Group as at December 31, 2018, and of their financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.
Basis for Opinion
We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics), and we have fulfilled our other ethical responsibilities
in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the company financial statements and the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the Company financial statements and the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
1) Valuation of Biological Assets
Refer Note 3.6 significant accounting policy and Note 17 to the Financial Statements.
Risk Description Our Response
The carrying value of bearer and consumable biological assets measured at fair value less cost to sell, is Rs.556 Million and Rs.18 Million respectively as at 31 December 2018, with a gain arising from changes in fair value less costs to sell recorded in the Statement of Profit or Loss and Other Comprehensive Income amounting to Rs.17 Million.
The Group’s consumable biological assets comprise of Hatchable eggs and commercial Day Old Chicks (DOC).
The Group has identified grandparent, parent and livestock as bearer biological assets as they are self-regenerating.
Management performed an internal valuation of the biological assets of the company as at reporting date.
The calculation of the fair value involves a significant judgments and assumptions particularly in respect of DOC yield, DOC selling price, discounting rate and mortality.
We focused on this area because the valuation of biological assets is dependent on certain key assumptions, which require the exercise of significant judgments and are subject to an inherent risk of error or potential management bias.
Our audit procedures included,• Understanding,evaluatingandtestingthekeyinternalcontrols
over the valuation of biological assets.
• Onsamplebasis,testingthecapitalisedamountsandreasonableness of the inputs used in valuation of biological assets.
• Evaluatingthereasonablenessofcashflowsandrelatedassumptions associated with deriving the fair value of breeder biological assets.
• Challengingthekeyassumptionsusedinthevaluation,inparticular the discount rate, DOC yield, DOC market price and mortality.
• Challengingthemethodologiesadoptedinthevaluationofbiological assets with reference to the requirements of the accounting standards.
• Assessingtheadequacyoftherelateddisclosuresinthefinancialstatements and consistency with the accounting policies.
Ceylon Grain Elevators PLC | Annual Report 2018110
INDEPENDENT AUDITORS’ REPORT
2) Carrying Value of Inventories
Refer Note 3.7 significant accounting policy and Note 19 to the Financial Statements
Risk Description Our Response
As shown in the Note 19, inventory balance comprise of raw materials and consumables, finished goods, goods in transit and out grower stock which forms a significant part of the Group’s assets, amounting to Rs. 4,246 Million as at December 31, 2018.
Carrying value of inventories is identified as a Key Audit matter because establishing a provision for slow-moving, obsolete and damaged inventory and valuation of inventories involve significant judgments and assumptions exercised by the management.
Our audit procedures included,
• Obtaininganunderstandingoverthesupplychainandtestingselected key controls over recognition and measurement of inventory and inventory provisioning.
• Testingonasamplebasistheaccuracyofcostforinventoryby verifying the actual production costs, and testing the net realizable value by comparing actual cost with relevant market data.
• Forasampleofwarehouses,attendingthephysicalstock-takeprocedures or reconciling third party confirmations with the accounting records of the Group.
• Gaininganunderstandingofthemovementsintheinventoryfor the year and assess the adequacy of the provision for non-moving and slow moving inventory.
• Assessingwhetherthegroup’saccountingpolicieshadbeenconsistently applied and the adequacy of the group’s disclosures in respect of the judgment and estimation made in respect of inventory provisioning.
Other Information
Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
111
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with SLAuSs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identifyandassesstherisksofmaterial misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtainanunderstandingofinternalcontrol relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company and the Group’s internal control.
• Evaluatetheappropriatenessofaccounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Concludeontheappropriatenessofmanagement’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention
in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluatetheoverallpresentation,structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtainsufficientappropriateauditevidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the
financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
As required by section 163 (2) of the Companies Act No. 7 of 2007, we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company.
CA Sri Lanka membership number of the engagement partner responsible for signing this independent auditor’s report is 2618.
CHARTERED ACCOUNTANTS
Colombo, Sri Lanka
8 April 2019
Ceylon Grain Elevators PLC | Annual Report 2018112
All amounts in Sri Lankan Rupees thousandsFor the year ended 31 December
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Group Company
Notes 2018 2017 2018 2017
Revenue 4 17,085,577 15,154,866 16,626,358 14,848,045
Cost of sales (15,213,510) (13,611,362) (15,539,826) (14,086,693)
Gross profit 1,872,067 1,543,504 1,086,532 761,352
Other operating income 8 50,725 41,803 244,837 113,947
Selling and distribution expenses (225,879) (192,375) (213,650) (176,676)
Administrative expenses (371,179) (290,970) (360,063) (283,030)
Operating profit 5 1,325,734 1,101,962 757,656 415,593
Finance income 9 373,889 293,310 151,900 173,444
Finance costs 9 (123,163) (4,054) (130,499) (4,829)
Share of profit of associate 15 9,779 8,406 - -
Profit before tax 1,586,239 1,399,624 779,057 584,208
Taxation 10 (375,329) (329,688) (202,972) (133,564)
Profit after tax 1,210,910 1,069,936 576,085 450,644
Other comprehensive incomeItems that will not be reclassified to profit or lossActuarial (loss) / gain arising from defined benefit obligation 25 (5,206) 8,551 (4,333) 5,963
Taxation on other comprehensive income 24 1,340 (1,794) 1,213 (1,431)
Total other comprehensive (expenses) / income (3,866) 6,757 (3,120) 4,532
Total comprehensive income for the year 1,207,044 1,076,693 572,965 455,176
Profit attributable to :Equity holders of the parent 890,495 790,179 576,085 450,644
Non-controlling interest 320,415 279,757 - -
1,210,910 1,069,936 576,085 450,644
Total comprehensive income attributable to :Equity holders of the parent 886,938 795,986 572,965 455,176
Non-controlling interest 320,106 280,707 - -
1,207,044 1,076,693 572,965 455,176
Earnings Per Share - Basic and Diluted (Rs.) 11 14.84 13.17 9.60 7.51
The notes on pages 116 to 170 form an integral part of these Financial Statements.
Figures in brackets indicate deductions.
113
STATEMENT OF FINANCIAL POSITION
All amounts in Sri Lankan Rupees thousandsAs at 31 December
Group Company
Notes 2018 2017 2018 2017
ASSETSNon-current assetsProperty, plant and equipment 12 2,651,957 2,591,272 893,603 805,714Leasehold right over land and buildings 13 151,184 227,625 151,184 159,049Intangible assets 14 24,558 39,445 24,558 39,445Investment in associate company 15 41,730 31,951 33 33Investment in subsidiary companies 16 - - 301,625 330,920Biological assets 17 555,918 501,110 - -Total non-current assets 3,425,347 3,391,403 1,371,003 1,335,161
Current assetsBiological assets 17 17,898 27,649 - -Inventories 19 4,245,805 3,246,821 4,127,222 3,170,521Trade and other receivables 20 821,514 619,059 679,247 545,026Amount due from related companies 18 - - 2,067 837Current tax receivable 27,277 28,375 24,150 24,150Cash and cash equivalents 21 3,033,328 2,857,444 794,423 1,160,125Total current assets 8,145,822 6,779,348 5,627,109 4,900,659Total assets 11,571,169 10,170,751 6,998,112 6,235,820
EQUITYStated capital 28 1,017,996 1,017,996 1,017,996 1,017,996Retained earnings 5,461,400 4,694,462 3,077,170 2,624,205Total equity attributable to equity holders of the parent 6,479,396 5,712,458 4,095,166 3,642,201Non-controlling interest 29 1,556,631 1,266,750 - -Total equity 8,036,027 6,979,208 4,095,166 3,642,201
LIABILITIESNon-current liabilitiesDeferred tax liabilities 24 379,071 358,781 84,748 59,354Employee benefits 25 101,176 83,698 80,107 66,659Total non-current liabilities 480,247 442,479 164,855 126,013
Current liabilitiesTrade and other payables 22 1,471,052 1,036,814 944,633 720,521Amount due to related companies 23 1,583,843 1,712,250 1,793,458 1,747,085Total current liabilities 3,054,895 2,749,064 2,738,091 2,467,606Total liabilities 3,535,142 3,191,543 2,902,946 2,593,619Total equity and liabilities 11,571,169 10,170,751 6,998,112 6,235,820
Net assets per share (Rs.) 35 107.99 95.21 68.25 60.70
The notes on pages 116 to 170 form an integral part of these consolidated financial statements.These financial statements have been prepared in compliance with the requirements of the Companies Act No. 7 of 2007.
(Sgd.)K.A.R.S. PereraGeneral Manager
These financial statements were approved by the Board of Directors on 8 April 2019.
(Sgd.) (Sgd.)Wickrema Senaka Weerasooria Tan Beng ChuanNon-Executive Independent Chairman Executive Director and Group General Manager
Ceylon Grain Elevators PLC | Annual Report 2018114
All amounts in Sri Lankan Rupees thousands
STATEMENT OF CHANGES IN EQUITY
Group Attributable to equity holders of the parent
Non-
Stated Retained Total controlling Total
capital earnings interest equity
Balance as at 1 January 2017 1,017,996 4,048,476 5,066,472 1,026,343 6,092,815
Profit for the year - 790,179 790,179 279,757 1,069,936
Other comprehensive incomeActuarial gain arising from defined benefit obligation, net of tax - 5,807 5,807 950 6,757
Distribution to ownersDividend paid - (150,000) (150,000) (40,300) (190,300)
Balance as at 31 December 2017 1,017,996 4,694,462 5,712,458 1,266,750 6,979,208
Balance as at 1 January 2018 1,017,996 4,694,462 5,712,458 1,266,750 6,979,208
Profit for the year - 890,495 890,495 320,415 1,210,910
Other comprehensive income
Actuarial loss arising from defined benefit obligation, net of tax - (3,557) (3,557) (309) (3,866)
Distribution to ownersDividend paid - (120,000) (120,000) (30,225) (150,225)
Balance as at 31 December 2018 1,017,996 5,461,400 6,479,396 1,556,631 8,036,027
Company Stated Retained Total
capital earnings equity
Balance as at 1 January 2017 1,017,996 2,319,029 3,337,025
Profit for the year - 450,644 450,644
Other comprehensive income
Actuarial gain arising from defined benefit obligation, net of tax - 4,532 4,532
Distribution to ownersDividend paid - (150,000) (150,000)
Balance as at 31 December 2017 1,017,996 2,624,205 3,642,201
Balance as at 1 January 2018 1,017,996 2,624,205 3,642,201
Profit for the year - 576,085 576,085
Other comprehensive expenses
Actuarial loss arising from defined benefit obligation, net of tax - (3,120) (3,120)
Distribution to ownersDividend paid - (120,000) (120,000)
Balance as at 31 December 2018 1,017,996 3,077,170 4,095,166
The notes on pages 116 to 170 form an integral part of these Financial Statements.
Figures in brackets indicate deductions.
115
All amounts in Sri Lankan Rupees thousandsFor the year ended 31 December
STATEMENT OF CASH FLOWS
Group Company
Notes 2018 2017 2018 2017
Operating activitiesProfit before tax 1,586,239 1,399,624 779,057 584,208
AdjustmentsDepreciation 12 238,614 224,149 120,714 101,415Amortisation of leasehold right over land and buildings 13 8,565 8,320 7,865 7,620Amortisation of intangible assets 14 15,647 13,944 15,647 13,944Usage of biological assets 17 519,461 482,139 - -Loss / (profit) on disposal of property, plant and equipment 8 9,026 2,667 938 (783)Written off of work-in-progress 33,403 - 29,504 -Change in fair value less cost to sell on biological assets 17 (16,814) (203) - -Impairment provision on investment in subsidiaries - - 29,295 -(Reversal) / provision of impairment on amount due from related companies - - (100,620) 1,642Dividend income - - (114,903) (60,990)Exchange loss 9 121,941 1,041 129,355 1,848Interest income 9 (373,889) (293,310) (151,900) (173,444)Interest expense 9 1,222 3,013 1,144 2,981Written off of doubtful debts 33,549 38,388 29,112 38,388Reversal of provision for doubtful debts (33,549) (38,388) (29,112) (38,388)Provision for slow moving and obsolete items 6,479 4,954 6,136 4,050Share of profit of associate (9,779) (8,406) - -Changes in working capital
- trade and other receivables (250,224) (181,522) (217,358) (139,796)- inventories (1,001,572) (627,120) (962,845) (622,261)- trade and other payables 306,915 (140,643) 142,942 (141,176)- amount due from related companies - - 99,390 37,112- amount due to related companies (128,407) 818,903 46,373 851,621
Employee benefits 25 18,471 16,712 14,558 12,535Cash generated from operations 1,085,298 1,724,262 (124,708) 480,526Exchange loss (121,941) (1,041) (129,355) (1,848)Interest received 301,937 264,271 139,842 152,364Interest paid (1,222) (3,013) (1,144) (2,981)Employee benefits paid (6,199) (8,122) (5,443) (4,355)Tax paid (105,557) (49,311) - -Net cash generated from / (used) operating activities 1,152,316 1,927,046 (120,808) 623,706
Investing activitiesPurchase of property, plant and equipment 12 (278,783) (482,226) (239,158) (461,525)Purchase of leasehold assets 13 - (59,233) - (58,733)Purchase of Intangible Assets 14 (760) (7,568) (760) (7,568)Proceeds from disposal of property, plant and equipment 1,040 2,620 121 1,478Proceeds from dividend income - - 114,903 60,990Purchase of biological assets 17 (547,704) (518,913) - -Net cash used in investing activities (826,207) (1,065,320) (124,894) (465,358)
Financing activitiesDividend paid (150,225) (190,300) (120,000) (150,000)Net cash used in financing activities (150,225) (190,300) (120,000) (150,000)
Increase / (decrease) in cash and cash equivalents 175,884 671,426 (365,702) 8,348
Movements in cash and cash equivalentsAt the beginning of the year 2,857,444 2,186,018 1,160,125 1,151,777Increase / (decrease) in cash and cash equivalents 175,884 671,426 (365,702) 8,348Cash and cash equivalents as at 31 December 21 3,033,328 2,857,444 794,423 1,160,125
The notes on pages 116 to 170 form an integral part of these Financial Statements.
Figures in brackets indicate deductions.
Ceylon Grain Elevators PLC | Annual Report 2018116
NOTES TO THE FINANCIAL STATEMENTS
1. CORPORATE INFORMATION
1.1 Reporting entity
Ceylon Grain Elevators PLC (the
‘Company’) is a “Quoted Public
Company” with limited liability,
incorporated and domiciled in Sri
Lanka. The address of the Company’s
registered office is No.15, Rock
House Lane, Colombo - 15, Sri Lanka.
The Company was listed on the
Colombo Stock Exchange on 01
January 1984.
1.2 Financial Statements
The Financial Statements of the
Company as at and for the year
ended 31 December 2018 comprise
the Company and its subsidiaries
and the Group’s interest in associate,
listed below.
Subsidiaries
� Three Acre Farms PLC
� Millennium Multibreeder Farms
(Private) Limited
� Ceylon Pioneer Poultry Breeders
Limited
� Ceylon Livestock and
Agrobusiness Services (Private)
Limited
� Ceylon Warehouse Complex
(Private) Limited
� Ceylon Aquatech (Private)
Limited
All subsidiaries of the Company have
been incorporated in Sri Lanka.
Associate
� Prima Management Services
(Private) Limited
The Financial Statements of the
Group entities are prepared to a
common financial year ending
31 December using uniform
accounting policies.
Ultimate Parent
The Ultimate Parent Company Prima
Limited, Singapore, holds 45.45 %
of the issued share capital of the
Company.
1.3 Principal activities and nature of the operation
The principal businesses of the
Group are manufacturing and
selling of poultry feed and other
animal feed, importing and selling
of poultry equipment, drugs and
vaccines, operating of poultry
breeder farms, raising grandparent
and parent stock and hatcheries,
hatching and selling of Day Old
Chicks, operation of commercial
farms, poultry processing and
distribution and provision of
warehouse facilities.
There were no significant changes in
the nature of the principle business
activities of the Group and the
company during the financial year
under review. The activities of the
Group are described in detailed in
the Group structure on pages 8 to 9.
1.4 Approval of Financial Statements by Directors
The Financial Statements were
authorised for issue by the Board of
Directors on
8 April 2019.
1.5 Responsibility for the Financial Statements
The Board of Directors
acknowledge their responsibility
for Financial Statements, as set
out in the ‘Statement of Directors’
Responsibility’ in this Annual Report.
2. BASIS OF PREPARATION
2.1 Statement of compliance
The Financial Statements of the Company and those consolidated with such comprise the statement of Financial Position, Statement of Profit or Loss and Other Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows together with the accounting policies and Notes to the Financial Statements. The Financial Statements have been prepared and present fairly in accordance with Sri Lanka Accounting Standards (SLFRS) as issued by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and in compliance with the requirements of the Companies Act No. 07 of 2007 and provide appropriate disclosures as required by the Listing Rules of the Colombo Stock Exchange (CSE). These Financial Statements, except for information on cash flows have been prepared following the accrual basis of accounting.
2.2 Basis of measurement
The Financial Statements have been
prepared on the historical cost basis
except the valuation of retirement
benefit obligation and valuation of
biological assets which are disclosed
in Note 25 - Employee Benefits and
Note 17 - Biological Assets to the
Financial Statements.
117
2.3 Functional and presentation currency
The Financial Statements are
presented in Sri Lankan Rupees,
which is the company’s functional
and presentation currency, rounded
to the nearest thousand, unless
otherwise stated.
2.4 Significant accounting estimates, judgements and assumptions
The preparation of the Financial
Statements in conformity with
Sri Lanka Accounting Standards
(SLFRS) require management
to make judgements, estimates
and assumptions that affect the
application of accounting policies
and the reported amounts of assets,
liabilities, income and expenses.
Actual results may differ from these
estimates. Underlying estimates,
judgements, assumptions are
reviewed on an ongoing basis.
Revisions to accounting estimates
are recognised prospectively.
Going concern
The management has made
an assessment of its ability to
continue as a going concern and
is satisfied that it has the resources
to continue in business for the
foreseeable future. Furthermore, the
management is not aware of any
material uncertainties that may cast
significant doubt upon the Group’s/
company’s ability to continue as
a going concern. Therefore, the
Financial Statements of the Group
continue to be prepared on a going
concern basis.
Information about assumptions
and estimation uncertainties and
critical judgements in applying
accounting policies that have
the most significant effect on the
amounts recognised in the Financial
Statements is included in the
following notes:
� Note 3.4.5 - Depreciation
� Note 3.4.7 - Leasehold right
classification
� Note 3.5 - Intangible assets
� Note 3.6 - Biological assets
� Note 3.3 (d) - Impairment
� Note 3.8.3 - Measurement of
defined benefit obligation
� Notes 3.9 and 3.17 - Provisions,
commitments and contingencies
� Note 3.12 - Deferred taxation
2.5 Measurement of fair value
A number of the Group’s accounting
policies and disclosures require the
measurement of fair value, for both
financial and non-financial assets
and liabilities. The Group has an
established control framework with
respect to the measurement of fair
value.
This includes a valuation team
that has overall responsibility for
overseeing all significant fair value
measurements, including Level 3
fair value and reports directly to the
management.
The valuation team regularly reviews
significant unobservable inputs and
valuation adjustments.
If third party information, such as
broker quotes or pricing services,
is used to measure fair value, then
the valuation team assesses the
evidence obtained from the third
parties to support the conclusion
that such valuations meet the
requirements of SLFRS, including
the level in the fair value hierarchy
in which such valuations should be
classified. Significant valuation issues
are reported to the Group’s Audit
Committee.
When measuring the fair value of an
asset or a liability, the Company uses
observable market data as far as
possible. Fair values are categorised
into different levels in a fair value
hierarchy based on the inputs used
in the valuation techniques as
follows:
� Level 1: Quoted prices
(unadjusted) in active markets for
identical assets or liabilities.
� Level 2: Inputs other than
quoted prices included in Level 1
that are observable for the asset
or liability, either directly (i.e. as
prices) or indirectly (i.e. derived
from prices).
� Level 3: Inputs for the asset
or liability that are not based
on observable market data
(unobservable inputs).
If the inputs used to measure the
fair value of an asset or a liability
fall into different levels of the fair
value hierarchy, then the fair value
measurement is categorised at its
entirety in the same level of the fair
value hierarchy as the lowest level
input that is significant to the entire
measurement.
Ceylon Grain Elevators PLC | Annual Report 2018118
NOTES TO THE FINANCIAL STATEMENTS
The Company recognises transfers
between levels of the fair value
hierarchy at the end of the reporting
period during which the change has
occurred.
Further information about the
assumptions made in measuring
fair value is included in Note 17
-Biological Assets.
2.6 Use of materiality, offsetting and rounding
2.6.1 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.
Notes to the Financial Statements
are presented in a systematic
manner which ensure the
understandability and comparability
of Financial Statements of the Group.
Understandability of the Financial
Statements is not compromised by
observing material information or
by aggregating material items that
have different nature of functions.
2.6.2 Offsetting
Assets and liabilities and income and
expenses in the Financial statements
are not set-off unless regained by Sri
Lanka Accounting Standards.
2.6.3 Rounding
The amounts in the Financial
Statements have been rounded off
to the nearest rupees thousands,
except where otherwise indicated.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set
out below have been applied
consistently to all periods presented
in these Financial Statements and
accounting policies have been
applied consistently by the entity
except for the SLFRS 9 and SLFRS 15
related policies.
3.1 Basis of consolidation
3.1.1 Business combinations
Business combinations are
accounted for using the acquisition
method as at the acquisition
date - i.e. when control is transferred
to the Group. Control is the power to
govern the financial and operating
policies of an entity, so as to obtain
benefits from its activities. In
assessing control, the Group also
takes into consideration potential
voting rights that are currently
exercisable.
The Group measures goodwill at the
acquisition date as:
� The fair value of the
consideration transferred
� The recognised amount of any
non-controlling interests in the
acquiree
� If the business combination is
achieved in stages, the fair value
of the pre-existing equity interest
in the acquiree; less
� The net recognised amount
(generally fair value) of the
identifiable assets acquired and
liabilities assumed.
When the excess is negative, a
bargain purchase gain is recognised
immediately in profit or loss.
The consideration transferred
does not include amounts related
to the settlement of pre-existing
relationships such amounts are
generally recognised in profit or
loss. Transactions costs, other than
those associated with the issue of
debt or equity securities, that the
Group incurs in connection with a
business combination are expensed
as incurred.
3.1.2 Non-controlling interest
The total profit and loss for the year
of the Company and its subsidiaries
included in consolidation are shown
in the consolidated statement of
profit or loss with the proportion
of profit or loss after taxation
pertaining to minority shareholders
of subsidiaries being deducted as
‘Non-controlling interest’. All assets
and liabilities of the Company
and of its subsidiaries included in
consolidation are shown in the
consolidated statement of financial
position. The interest of minority
shareholders of subsidiaries in the
fair value of net assets of the Group
are indicated separately in the
consolidated statement of financial
position under the heading ‘Non-
Controlling Interest’.
Changes in the Group’s interest in
a subsidiary that do not result in a
loss of control are accounted for as
transactions with owners in their
capacity as owners. Adjustments to
non-controlling interest are based
on a proportionate amount of the
net assets of the subsidiary. No
adjustments are made to goodwill
and no gain or loss is recognised in
profit or loss.
119
3.1.3 Subsidiaries
Subsidiaries are entities controlled
by the Group. The Financial
Statements of subsidiaries are
included in the Group Financial
Statements from the date that
control commences, until the date
that control ceases.
3.1.4 Loss of control
On the loss of control, the Group
derecognises the assets and
liabilities of the subsidiary, any
non-controlling interest and the
other components of equity related
to the subsidiary. Any surplus or
deficit arising on the loss of control
is recognised in profit or loss.
There are no significant restrictions
on the ability of subsidiaries to
transfer funds to the Company
(parent) in the form of cash,
dividend or repayment of loans and
advances.
3.1.5 Investment in associates
Associates are those entities in
which the Group has significant
influence, but not control or joint
control, over the financial and
operating policies. Significant
influence is presumed to exist when
the Group holds between 20 % and
50 % of the voting power of another
entity.
Investments in associates are
accounted for under the equity
method and are recognised initially
at cost. The cost of the investment
includes transaction costs. The
Group Financial Statements include
the Group’s share of the profit or loss
and other comprehensive income
of equity-accounted investees, after
adjustments to align the accounting
policies with those of the Group,
from the date that significant
influence commences until the date
that significant influence or joint
control ceases.
When the Group’s share of losses
exceeds its interest in an equity-
accounted investee, the carrying
amount of the investment, including
any long-term interests that form
part thereof, is reduced to zero, and
the recognition of further losses is
discontinued except to the extent
that the Group has an obligation or
has made payments on behalf of the
investee.
3.1.6 Transactions eliminated on consolidation
Intra-group balances and
transactions, and any unrealised
income and expenses arising
from intra group transactions, are
eliminated in preparing the Group
Financial Statements. Unrealised
gains arising from transactions with
equity accounted investees are
eliminated against the investment
to the extent of the Group’s interest
in the investee. Unrealised losses
are eliminated in the same way as
unrealised gains, but only to the
extent that there is no evidence of
impairment.
3.1.7 Statement of Cash Flows
The Statement of Cash Flows
has been prepared by using the
‘’Indirect Method’’ of preparing cash
flows in accordance with Sri Lanka
Accounting Standards – LKAS 7 on
Statement of Cash Flows.
3.2 Foreign currency
Transactions in foreign currencies
are translated into the respective
functional currencies of the Group
at the exchange rates at the dates of
the transactions.
Monetary assets and liabilities
denominated in foreign currencies
are translated into the functional
currency at the exchange rate at the
reporting date. Non-monetary assets
and liabilities that are measured
at fair value in a foreign currency
are translated into the functional
currency at the exchange rate when
the fair value was determined.
Non-monetary assets and liabilities
dominated in foreign currencies
that are measured at fair value are
translated to the functional currency
at the exchange rate at the date that
the fair value was determined.
Foreign currency differences arising
on re-translation are recognised in
profit or loss except the differences
arising on re-translation of available
for- sale equity instruments,
which are recognised in other
comprehensive income.
3.3 Financial instruments
Financial assets –Accounting - policy applicable from 1 January 2018
(a) Recognition and initial measurement
Trade receivables are initially
recognised when they are
originated. All other financial
assets are initially recognised
when the Group becomes
a party to the contractual
provisions of the instrument.
Ceylon Grain Elevators PLC | Annual Report 2018120
A financial asset (unless it is
a trade receivable without
a significant financing
component) is initially measured
at fair value plus, for an item
not at FVTPL, transaction costs
that are directly attributable to
its acquisition or issue. A trade
receivable without a significant
financing component is initially
measured at the transaction
price.
(b) Classification and subsequent measurement
On initial recognition, a financial
asset is classified as measured
at: amortised cost; FVOCI- debt
investment; FVOCI - equity
investment; or FVTPL.
Financial assets are not
reclassified subsequent to their
initial recognition unless the
Group changes its business
model for managing financial
assets, in which case all affected
financial assets are reclassified
on the first day of the first
reporting period following the
change in the business model.
A financial asset is measured at
amortised cost if it meets both of
the following conditions and is not
designated as at FVTPL:
� it is held within a business model
whose objective is to hold assets
to collect contractual cash flows;
and
� it’s contractual terms give rise on
specified dates to cash flows that
are solely payments of principal
and interest on the principal
amount of outstanding.
A debt investment is measured
at FVOCI if it meets both of the
following conditions and is not
designated as at FVTPL:
� it is held within a business model
whose objective is achieved by
both collecting contractual cash
flows and selling financial assets;
and
� its contractual terms give rise on
specified dates to cash flows that
are solely payments of principal
and interest on the principal
amount outstanding.
On initial recognition of an equity
investment that is not held for
trading, the Group may irrevocably
elect to present subsequent
changes in the investment’s fair
value in OCI. This election is made
on an investment-by-investment
basis.
All financial assets not classified
as measured at amortised cost
or FVOCI as described above are
measured at FVTPL. This includes
all derivative financial assets. On
initial recognition, the Group may
irrevocably designate a financial
asset that otherwise meets the
requirements to be measured at
amortised cost or at FVOCI as at
FVTPL if doing so eliminates or
significantly reduces an accounting
mismatch that would otherwise
arise.
Financial assets - Business model assessment:
The Group makes an assessment
of the objective of the business
model in which a financial asset is
held at a portfolio level because this
best reflects the way the business
is managed and information is
provided to management. The
information considered includes:
� the stated policies and objectives
for the portfolio and the
operation of those policies in
practice. These include whether
management’s strategy focuses
on earning contractual interest
income, maintaining a particular
interest rate profile, matching the
duration of the financial assets
to the duration of any related
liabilities or expected cash
outflows or realising cash flows
through the sale of the assets;
� how the performance of
the portfolio is evaluated
and reported to the Group’s
management;
� the risks that affect the
performance of the business
model (and the financial assets
held within that business
model) and how those risks are
managed;
� how managers of the business
are compensated - e.g. whether
compensation is based on the
fair value of the assets managed
or the contractual cash flows
collected; and
� the frequency, volume and
timing of sales of financial assets
in prior periods, the reasons for
such sales and expectations
about future sales activity.
Transfers of financial assets to
third parties in transactions that
do not qualify for de recognition
are not considered sales for this
purpose, consistent with the Group’s
NOTES TO THE FINANCIAL STATEMENTS
121
continuing recognition of the assets.
Financial assets that are held for
trading or are managed and whose
performance is evaluated on a fair
value basis are measured at FVTPL.
Financial assets -Assessment whether contractual cash flows are solely payments of principal and interest: Policy applicable from 1 January 2018
For the purposes of this assessment,
‘principal’ is defined as the fair
value of the financial asset on initial
recognition. ‘Interest’ is defined as
consideration for the time value
of money and for the credit risk
associated with the principal
amount outstanding during a
particular period of time and for
other basic lending risks and costs
(e.g. liquidity risk and administrative
costs), as well as a profit margin.
In assessing whether the contractual
cash flows are solely payments of
principal and interest, the Group
considers the contractual terms
of the instrument. This includes
assessing whether the financial asset
contains a contractual term that
could change the timing or amount
of contractual cash flows such that
it would not meet this condition. In
making this assessment, the Group
considers:
� contingent events that would
change the amount or timing of
cash flows;
� terms that may adjust the
contractual coupon rate,
including variable-rate features;
� prepayment and extension
features; and
� terms that limit the Group’s claim to cash flows from specified assets (e.g. non-
recourse features).
A prepayment feature is consistent with the solely payments of principal and interest
criterion if the prepayment amount substantially represents unpaid amounts of
principal and interest on the principal amount outstanding, which may include
reasonable additional compensation for early termination of the contract. Additionally,
for a financial asset acquired at a discount or premium to its contractual par-amount, a
feature that permits or requires prepayment at an amount that substantially represents
the contractual par amount plus accrued (but unpaid) contractual interest (which may
also include reasonable additional compensation for early termination) is treated as
consistent with this criterion if the fair value of the prepayment feature is insignificant
at initial recognition.
Financial assets - Subsequent measurement and gains and losses: Policy applicable from 1 January 2018
Financial assets at
FVTPL
These assets are subsequently measured at fair value. Net
gains and losses, including any interest or dividend income, are
recognised in profit or loss.
Financial assets at
amortised
These assets are subsequently measured at amortised cost
using the effective interest method. The amortised cost
is reduced by impairment losses. Interest income, foreign
exchange gains and losses and impairment are recognised in
profit or loss. Any gain or loss on derecognition is recognised
in profit or loss.
Debt investments
at FVOCI
These assets are subsequently measured at fair value. Interest
income calculated using the effective interest method, foreign
exchange gains and losses and impairment are recognised in
profit or loss. Other net gains and losses are recognised in OCI.
On derecognition, gains and losses accumulated in OCI are
reclassified to profit or loss.
Equity investments
at FVOCI
These assets are subsequently measured at fair value.
Dividends are recognised as income in profit or loss unless the
dividend clearly represents a recovery of part of the cost of the
investment. Other net gains and losses are recognised in OCI
and are never reclassified to profit or loss.
Ceylon Grain Elevators PLC | Annual Report 2018122
Financial assets - Policy applicable prior to 1 January 2018
The Group classified its financial assets into one of the following categories:
� loans and receivables;
� held to maturity;
� available for sale; and
� at FVTPL, and within this category as:
- held for trading
- derivative hedging instruments; or
- designated as at FVTPL
Financial assets - Subsequent measurement and gains and losses: Policy applicable prior to 1 January 2018
Financial assets at
FVTPL
Measured at fair value and changes therein, including any
interest or dividend income, were recognised in profit or loss.
Held-to-maturity
financial assets
Measured at amortised cost using the effective interest
method.
Loans and
receivables
Measured at amortised cost using the effective interest
method.
Available-for-sale
financial assets
Measured at fair value and changes therein, other than
impairment losses, interest income and foreign currency
differences on debt instruments, were recognised in OCI and
accumulated in the fair value reserve. When these assets were
derecognised, the gain or loss accumulated in equity was
reclassified to profit or loss.
Financial liabilities - Classification, subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial
liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it
is designated as such on initial recognition. Financial liabilities at FVTPL are measured
at fair value and net gains and losses, including any interest expense, are recognised
in profit or loss. Other financial liabilities are subsequently measured at amortised
cost using the effective interest method. Interest expense and foreign exchange gains
and losses are recognised in profit or loss. Any gain or loss on derecognition is also
recognised in profit or loss.
(c) Derecognition
Financial assets
The Group derecognises
a financial asset when the
contractual rights to the cash
flows from the financial asset
expire, or it transfers the rights
to receive the contractual cash
flows in a transaction in which
substantially all of the risks and
rewards of ownership of the
financial asset are transferred
or in which the Group neither
transfers nor retains substantially
all of the risks and rewards of
ownership and it does not retain
control of the financial asset.
The Group enters into
transactions whereby it
transfers assets recognised
in its statement of financial
position, but retains either all or
substantially all of the risks and
rewards of the transferred assets.
In these cases, the transferred
assets are not derecognised.
Financial liabilities
The Group derecognises a
financial liability when its
contractual obligations are
discharged or cancelled,
or expire. The Group also
derecognises a financial liability
when its terms are modified and
the cash flows of the modified
liability are substantially
different, in which case a new
financial liability based on the
modified terms is recognised at
fair value.
NOTES TO THE FINANCIAL STATEMENTS
123
On derecognition of a
financial liability, the difference
between the carrying
amount extinguished and the
consideration paid (including
any non-cash assets transferred
or liabilities assumed) is
recognised in profit or loss.
Offsetting
Financial assets and financial
liabilities are offset and the
net amount presented in the
statement of financial position
when, and only when, the
Group currently has a legally
enforceable right to set off the
amounts and it intends either to
settle them on a net basis or to
realise the asset and settle the
liability simultaneously.
(d) Impairment
Impairment policy: applicable from 1 January 2018
Non-derivative financial assets
Financial instruments and contract assets
Loss allowances for trade
receivables is always
measured at an amount
equal to lifetime ECLs. When
determining whether the
credit risk of a financial asset
has increased significantly
since initial recognition and
when estimating ECLs, the
Group considers reasonable
and supportable information
that is relevant and available
without undue cost or effort.
This includes both quantitative
and qualitative information
and analysis, based on the
Group’s historical experience
and informed credit assessment
and including forward-looking
information.
The Group assumes that the
credit risk on a financial asset
has increased significantly if it is
more than 30 days past due.
The Group considers a financial
asset to be in default when:
� the borrower is unlikely to pay its
credit obligations to the Group
in full, without recourse by the
Group to actions such as realising
security (if any is held); or
� the financial asset is more than
180 days past due.
Lifetime ECLs are the ECLs that result
from all possible default events
over the expected life of a financial
instrument.
12-month ECLs are the portion of
ECLs that result from default events
that are possible within the 12
months after the reporting date (or
a shorter period if the expected life
of the instrument is less than 12
months).
The maximum period considered
when estimating ECLs is the
maximum contractual period over
which the Group is exposed to
credit risk.
Measurement of ECLs
ECLs are a probability-weighted
estimate of credit losses. Credit
losses are measured as the present
value of all cash shortfalls (i.e. the
difference between the cash flows
due to the entity in accordance with
the contract and the cash flows
that the Group expects to receive).
ECLs are discounted at the effective
interest rate of the financial asset.
Credit-impaired financial assets
At each reporting date, the Group
assesses whether financial assets
carried at amortised cost and debt
securities at FVOCI are credit-
impaired. A financial asset is ‘credit-
impaired’ when one or more events
that have a detrimental impact on
the estimated future cash flows of
the financial asset have occurred.
Evidence that a financial asset
is credit-impaired includes the
following observable data:
� significant financial difficulty of
the borrower or issuer;
� a breach of contract such as a
default or being more than 180
days past due;
� the restructuring of a loan or
advance by the Group on terms
that the Group would not
consider otherwise;
� it is probable that the borrower
will enter bankruptcy or other
financial reorganisation; or
� the disappearance of an active
market to a security because of
financial difficulties.
Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial assets
measured at amortised cost are
deducted from the gross carrying
amount of the assets.
Ceylon Grain Elevators PLC | Annual Report 2018124
Write-off
The gross carrying amount of a
financial asset is written off when
the Group has no reasonable
expectations of recovering a
financial asset in its entirety or
a portion thereof. For individual
customers, the Group has a policy
of writing off the gross carrying
amount when the financial asset
is 180 days past due based on
historical experience of recoveries
of similar assets. For corporate
customers, the Group individually
makes an assessment with respect
to the timing and amount of write-
off based on whether there is a
reasonable expectation of recovery.
The Group expects no significant
recovery from the amount written
off. However, financial assets that
are written off could still be subject
to enforcement activities in order to
comply with the Group’s procedures
to recovery of amounts due.
Impairment Policy: applicable prior to 1 January 2018
Financial assets (including receivables)
A financial asset not carried at
fair value through profit or loss
is assessed at each reporting
date to determine whether
there is objective evidence that
it is impaired. A financial asset is
impaired if objective evidence
indicates that a loss event has
occurred after the initial recognition
of the asset, and that the loss
event had a negative effect on the
estimated future cash flows of that
asset that can be estimated reliably.
Objective evidence that financial
assets (including equity securities)
are impaired can include default
or delinquency by a debtor,
restructuring of an amount due to
the Group on terms that the Group
would not consider otherwise,
indications that a debtor or issuer
will enter bankruptcy, or the
disappearance of an active market
for a security. In addition, for an
investment in an equity security,
a significant or prolonged decline
in its fair value below its cost is
objective evidence of impairment.
The Group considers evidence
of impairment for receivables at
both a specific asset and collective
level. All individually significant
receivables are assessed for specific
impairment. All individually
significant receivables found not
to be specifically impaired are
then collectively assessed for any
impairment that has been incurred
but not yet identified. Receivables
that are not individually significant
are collectively assessed for
impairment by grouping together
receivables with similar risk
characteristics.
In assessing collective impairment
the Group uses historical trends of
the probability of default, timing of
recoveries and the amount of loss
incurred, adjusted for management’s
judgment as to whether current
economic and credit conditions are
such that the actual losses are likely
to be greater or less than suggested
by historical trends.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss
Impairment Policy: Non-financial assets
The carrying amounts of the Group’s
non-financial assets, other than
deferred tax assets, are reviewed at
each reporting date to determine
whether there is any indication of
impairment. If any such indication
exists, then the asset’s recoverable
amount is estimated. For intangible
assets that have indefinite useful
lives or that are not yet available
for use, the recoverable amount is
estimated each year at the same
time.
The recoverable amount of an asset
is the greater of its value in use and
its fair value less costs to sell. In
assessing value in use, the estimated
future cash flows are discounted to
their present value using a pre-tax
discount rate that reflects current
market assessments of the time
value of money and the risks specific
to the asset. For the purpose of
impairment testing, assets that
cannot be tested individually are
grouped together into the smallest
NOTES TO THE FINANCIAL STATEMENTS
125
group of assets that generates cash
inflows from continuing use that
are largely independent of the cash
inflows of other assets.
An impairment loss is recognised
if the carrying amount of an asset
exceeds its estimated recoverable
amount. Impairment losses are
recognised in profit or loss.
An impairment loss in respect of other assets, recognised in prior periods is assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
3.4 Property, plant and equipment
Property, plant and equipment are
tangible items that are held for use
in the production or supply of goods
or services, for rental to others, or
for administrative purposes and are
expected to be used during more
than one period.
3.4.1 Recognition and measurement
Items of property, plant and
equipment are measured at cost
less accumulated depreciation and
accumulated impairment losses.
Cost includes expenditure that
is directly attributable to the
acquisition of the asset. The cost of
self-constructed assets include the
cost of materials and direct labour,
any other costs directly attributable
to bringing the asset to the working
condition for its intended use
and the cost of dismantling and
removing the items and restoring
the site on which they are located
and capitalised borrowing cost.
Purchased software that is integral
to the functionality of the related
equipment is capitalised as part of
that equipment.
When parts of an item of property,
plant and equipment have different
useful lives, they are accounted
for as separate items (major
components) of property, plant and
equipment.
3.4.2 Gains and losses on disposal
Gains and losses on disposal of
an item of property, plant and
equipment are determined by
comparing the proceeds from
disposal with the carrying amount
of property, plant and equipment
and are recognised net within ‘other
income / other expenses’ in profit
or loss.
3.4.3 Subsequent costs
The cost of replacing a part of
an item of property, plant and
equipment is recognised in the
carrying amount of the item if it is
probable that the future economic
benefits embodied within the
part will flow to the Group and its
cost can be measured reliably. The
carrying amount of the replaced
part is derecognised. The costs of
the day-to-day servicing of property,
plant and equipment are recognised
in profit or loss as incurred.
3.4.4 Derecognition
The carrying amount of an item
of property, plant and equipment
is derecognised on disposal or
when no future economic benefits
are expected from its use or
disposal. The gain or loss arising
from derecognition of an item of
property, plant and equipment
is included in profit or loss when
the item is derecognised. When
replacement costs are recognised in
the carrying amount of an item of
property, plant and equipment, the
remaining carrying amount of the
replaced part is derecognised. Major
inspection costs are capitalised.
At each such capitalisation, the
remaining carrying amount of
the previous cost of inspections is
derecognised.
3.4.5 Depreciation
Depreciation is based on the cost or
other amount substituted for cost,
less its residual value. Significant
components of individual assets
are assessed, and if a component
has a useful life that is different
from the remainder of that asset,
that component is depreciated
separately.
Depreciation is recognised in profit
or loss on a straight-line basis over
the estimated useful lives of each
part of an item of property, plant
and equipment. Leased assets are
depreciated over the shorter of the
lease term and their useful lives
unless it is reasonably certain that
the Group will obtain ownership
by the end of the lease term. No
depreciation is provided on assets
under construction.
Ceylon Grain Elevators PLC | Annual Report 2018126
The estimated useful lives for the
current and comparative years are
as follows:
Freehold building 20 - 50 years
Plant and
machinery
10 - 16 2/3
years
Electrical and
factory equipment
2 - 5 - 10 - 20
years
Farm equipment 5 - 20 years
Furniture and
fittings and office
equipment
10 years
Motor vehicles 5 - 10 years
Land is not depreciated as it is
deemed to have indefinite life.
Depreciation of an asset begins
when it is available for use and
ceases at the earlier of the date that
the asset is classified as held-for-
sale and the date that the asset
is derecognised. Depreciation
methods, useful lives and residual
values are reviewed at each
reporting date and adjusted, if
appropriate. Where the carrying
amount of an asset is greater than
its estimated recoverable amount, it
is written down immediately to its
recoverable amount.
3.4.6 Capital work-in-progress
Capital expenses incurred during
the year which are not completed
as at the reporting date are shown
as capital work-in-progress, while
the capital assets which have been
completed during the year and put
to use are transferred to property,
plant and equipment.
3.4.7 Leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased assets are measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.
Other leases are operating leases and any prepayments are recognised in the consolidated Statement of Financial Position as lease hold rights. The leasehold rights under operating leases are charged to profit or loss on a straight-line basis over the period of the lease.
When an operating lease is
terminated before the lease period
has expired, any payment required
to be made to the lessor by way of
penalty is recognised as an expense
in the period in which termination
takes place.
The cost of improvements to or on
leased property is capitalised and
depreciated over the unexpired
period of the lease or the estimated
useful lives of improvements,
whichever is shorter.
3.5 Intangible assets
3.5.1 Basis of recognition
An intangible asset is recognised if
it is probable that future economic
benefits that are attributable to the
assets will flow to the entity and the
cost of the assets can be measured
reliably.
3.5.2 Basis of measurement
Intangible assets acquired separately
are measured on initial recognition
at cost. Subsequent measurement
is carried at cost less accumulated
amortisation and accumulated
impairment losses, if any.
3.5.3 Subsequent expenditure
Subsequent expenditure is
capitalised only when it increases
the future economic benefits
embodied in the specific asset
to which it relates. All other
expenditure, including expenditure
on internally generated goodwill
and brands are recognised in profit
or loss as incurred.
3.5.4 Amortisation
Amortisation is recognised in profit
or loss on a straight- line basis
over the estimated useful lives
of intangible assets, other than
goodwill, from the date that they
are available for use. The estimated
useful lives for the current and
comparative years are as follows:
Computer software 10 years
Amortisation methods, useful lives
and residual values are reviewed at
each reporting date and adjusted if
appropriate.
3.6 Biological assets
A biological asset is a living
animal. Biological assets consist of
grandparent and parent livestock,
used to breed Hatchable eggs
and commercial Day Old Chicks.
Grandparent and parent birds
include the growing birds and the
laying birds.
Consumable biological assets are
NOTES TO THE FINANCIAL STATEMENTS
127
those that are to be harvested as
agricultural produce or sold as
biological assets. Hatchable eggs
and commercial Day Old Chicks
have been identified as Consumable
biological assets.
Bearer biological assets are those
other than Consumable biological
assets. Bearer biological assets are
not agricultural produce but, rather,
are self-regenerating.
Company has identified grandparent
and parent and livestock as Bearer
biological assets.
Biological assets are measured at
fair value less cost to sell within any
changes therein recognised in profit
or loss for the period in which it
arises.
3.7 Inventories
Inventories are measured at the
lower of cost and net realisable
value.
Net realisable value is the estimated
selling price in the ordinary course
of business, less the estimated costs
of completion and selling expenses.
The general basis on which cost is
determined is as follows:
a) All inventory items except
finished goods and working
progress at purchased cost.
b) Manufactured goods and work-
in-progress at factory cost which
include all direct expenditure
and production overhead at
normal level of activity.
3.8 Employee benefits
3.8.1 Short-term employee benefits
Short-term employee benefit
obligations are measured on
an undiscounted basis and are
expensed as the related service is
provided. A liability is recognised
for the amount expected to be
paid under short-term cash bonus
or profit-sharing plans if the Group
has a present legal or constructive
obligation to pay this amount as a
result of past service provided by the
employee and the obligation can be
estimated reliably.
3.8.2 Defined contribution plan
A defined contribution plan is a
post-employment benefit plan
under which an entity pays fixed
contributions into a separate entity
and has no legal or constructive
obligation to pay further amounts.
Obligations for contributions
to defined contribution plans
are recognised as an employee
benefit expense in profit or loss in
the periods during which related
services are rendered by employees.
Prepaid contributions are recognised
as an asset to the extent that a
cash refund or a reduction in future
payments is available.
(a) Employees’ Provident Fund
The Group and employees
contribute 12% and 8%,
respectively, on the salary
of each employee to the
Employees’ Provident Fund
(EPF).
(b) Employees’ Trust Fund
The Group contributes 3 % of
the salary of each employee
to the Employees’ Trust Fund
(ETF). These obligations come
within the scope of a defined
contribution plan as per LKAS
-19 on ‘’Employee Benefits’’.
Obligations for contributions to
defined contribution plans are
recognised in profit or loss as
the related service is provided.
3.8.3 Defined benefit plan - Gratuity
A defined benefit plan is a post
employment benefit plan other
than a defined contribution plan.
The Group’s net obligation in
respect of defined benefit plans
is calculated separately for each
plan by estimating the amount of
future benefit that employees have
earned in return for their service in
the current and prior periods. That
benefit is discounted to determine
its present value. Any unrecognised
past service costs and the fair value
of any plan assets are deducted.
The calculation is performed
annually by a qualified actuary
using the Projected Unit Credit
(PUC) method as recommended
by LKAS 19 - ‘Employee Benefits’.
When the calculation results in a
benefit to the Group, the recognised
asset is limited to the total of any
unrecognised past service costs
and the present value of economic
benefits available in the form of
any future refunds from the plan or
reductions in future contributions
to the plan. In order to calculate
the present value of economic
benefits, consideration is given to
any minimum funding requirements
that apply to any plan in the Group.
Ceylon Grain Elevators PLC | Annual Report 2018128
An economic benefit is available to
the Group if it is realisable during
the life of the plan, or on settlement
of the plan liabilities. When the
benefits of a plan are improved, the
portion of the increased benefits
related to past service by employees
are recognised in profit or loss
on a straight-line basis over the
average period until the benefits
become vested. To the extent that
the benefits vest immediately, the
expense is recognised immediately
in profit or loss.
The assumptions based on which
the results of actuarial valuation was
determined, are included in Note 25
- Employee Benefits, to the Financial
Statements.
The Company recognises all
actuarial gains and losses arising
from defined benefit plan
immediately in other comprehensive
income and all expenses related to
defined benefit plan in employee
benefit expense in profit or loss.
The Company recognises gains
and losses on the curtailment or
settlement of a defined benefit plan
when the curtailment or settlement
occurs. The gain or loss on
curtailment or settlement comprises
any resulting change in the fair value
of plan assets, any change in the
present value of the defined benefit
obligation, any related actuarial
gains and losses and past service
cost that had not previously been
recognised. However, according
to the Payment of Gratuity Act
No.12 of 1983, the liability for the
gratuity payment to an employee
arises only on the completion of 5
years of continued service with the
Company.
3.9 Provisions
A provision is recognised if, as a
result of a past event, the Group
has a present legal or constructive
obligation that can be estimated
reliably and it is probable that an
outflow, of economic benefits will
be required to settle the obligation.
3.10 Revenue
Revenue from contract with customers Accounting policy - Applicable from 1st January 2018
Sales of Goods
Revenue is recognised when the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured reliably.
Revenue is measured net of returns, trade discounts and volume rebates. The Group expects the revenue recognition to occur at a point in time when control of the asset is transferred to the customer, generally on delivery of the goods.
Rendering of Services
The Group recognises revenue from rendering of services in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed based on surveys of work performed. If the services under a single arrangement are rendered in different reporting periods, then the consideration is allocated on a relative fair value basis between the different services.
Rental Income
The Group earns revenue from renting of its warehouse facilities. Rental income is recognised on a straight-line basis over the period of rental contracts. When the customer initially enters into a rental contract, the Group usually receives an advance or a deposit or both which is recognised as a liability. The advance is recognised as revenue with the passage of time while deposit is refunded to the customer in accordance with the rental contract on termination.
Other income
Gains/losses on the disposal of
investments held by the Group have
been accounted for as other income
in profit or loss. Gains / losses on
the disposal of property, plant and
equipment determined by reference
to the carrying amount and related
expenses, have been accounted for
as other income in profit or loss.
Dividend income
Dividend income is recognised in
profit or loss on the date that the
Group’s right to receive payment is
established.
Accounting policy applicable prior to 1 January 2018
Sale of Goods
Revenue from the sale of goods in the course of ordinary activities are measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that
NOTES TO THE FINANCIAL STATEMENTS
129
the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable,the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods,and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised. Revenue excludes value added taxes or other sales taxes.
Rental income
Rental income received or receivable
in the course of ordinary activities
is recognised as revenue in profit
or loss on a straight-line basis
over the term of the lease. Lease
incentives granted are recognised
as an integral part of the total rental
income.
Dividend income
Dividend income is recognised in
profit or loss on the date that the
Group’s right to receive payment is
established.
Other income
Gains / losses on the disposal of
investments held by the Group have
been accounted for as other income
in profit or loss. Gains / losses on
the disposal of property, plant and
equipment determined by reference
to the carrying amount and related
expenses, have been accounted for
as other income in profit or loss.
Finance income
Finance income comprises
interest income on funds invested
(including available-for-sale financial
assets),gains on the disposal of
available for-sale financial assets and
fair value gains on financial assets
at fair value through profit or loss.
Interest income is recognised as it
accrues in profit or loss, using the
effective interest method.
3.11 Expenses
Operating lease payments
Where the Company has the use
of assets under operating leases,
payments made under the leases
are recognised in the statement of
profit or loss on a straight-line basis
over the term of the lease. Lease
incentives received are recognised
in the statement of profit or loss as
an integral part of the total lease
expense over the term of the lease.
Contingent rentals are charged
to profit or loss in the accounting
period in which they are incurred.
Finance cost
Finance costs comprise interest
expense on borrowings, unwinding
of discounts on provisions and
losses on disposal of available-
for-sale financial assets, fair value
losses on financial assets at fair
value through profit or loss and
impairment losses recognised on
financial assets (other than trade
receivables). Borrowing costs that
are not directly attributable to
the acquisition, construction or
production of a qualifying asset are
recognised in profit or loss using
the effective interest method.
Foreign currency gains and losses
on financial assets and financial
liabilities are reported on a net basis
as either finance income or finance
cost depending on whether foreign
currency movements are in a net
gain or net loss position.
3.12 Deferred taxation
Income tax expense comprises
current and deferred tax. Income tax
is recognised in profit or loss, except
to the extent that it relates to items
recognised directly in equity, in
which case it is recognised in equity.
Current tax
Current tax is the expected tax
payable on the taxable income for
the year, using tax rates enacted
at the reporting date, and any
adjustment to tax payable in respect
of previous years.
Deferred tax
Deferred tax is recognised in respect
of temporary differences between
the carrying amounts of assets and
liabilities for financial reporting
purposes and the amounts
used for taxation purposes. The
following temporary differences
are not provided for goodwill
not deductible for tax purposes,
the initial recognition of assets
or liabilities that affect neither
accounting nor taxable profit, nor
differences relating to investments
in subsidiaries to the extent that
they will probably not reverse
in the foreseeable future. The
amount of deferred tax provided
is based on the expected manner
of realisation or settlement of the
carrying amount of assets and
liabilities, using tax rates enacted
or substantively enacted at the
reporting date.
Ceylon Grain Elevators PLC | Annual Report 2018130
The principal temporary differences
arise from depreciation on property,
plant and equipment, tax losses
carried forward, biological assets
and provisions for defined benefit
obligations. Deferred tax assets
relating to the carrying forward of
unused tax losses are recognised to
the extent that it is probable that
future taxable profit will be available
against which the unused tax losses
can be utilised.
A deferred tax asset is recognised
only to the extent that it is probable
that future taxable profits will be
available against which the asset can
be utilised. Deferred tax assets are
reviewed at reporting date and are
reduced to the extent that it is no
longer probable that the related tax
benefit will be realised.
Deferred tax assets and liabilities are
offset if there is a legally enforceable
right to offset current tax liabilities
and assets, and they relate to
income taxes levied by the same tax
authority on the same taxable entity,
or on different tax entities, but they
intend to settle current tax liabilities
and assets on a net basis or their tax
assets and liabilities will be realised
simultaneously.
Additional income taxes that arise
from the distribution of dividends
are recognised at the same time
as the liability to pay the related
dividend is recognised.
3.13 Segment reporting
A segment is a distinguishable
component of the Group that
is engaged either in providing
products or services (business
segment), or in providing
products and services within a
particular economic environment
(geographical segment), which is
subject to risks and rewards that
are different from those of other
segments.
3.14 Earnings per share
The Group presents Earnings per
share (EPS) data for its ordinary
shares. EPS is calculated by dividing
the profit attributable to ordinary
shareholders of the Company by
the weighted average number of
ordinary shares outstanding during
the period.
3.15 Events after the Reporting Period
All material post reporting period
events have been considered and
where appropriate adjustments
or disclosures have been made in
respective notes to the Financial
Statements.
3.16 Comparative figures
Where necessary, the comparative
figures have been reclassified
to conform to the current year’s
presentation.
3.17 Commitments and contingencies
Contingencies are possible assets
or obligations that arise from a past
event and would be confirmed
only on the occurrence or non-
occurrence of uncertain future
events, which are beyond the
Company’s control. Contingent
liabilities are disclosed in Note
26 - Contingent Liabilities,
to the Financial Statements.
Commitments are disclosed in Note
27 - Commitments, to the Financial
Statements.
3.18 New standards and interpretations not yet adopted as at reporting date
Standard issued but not yet effective
up to the date of issuance of the
Group’s financial statements are
listed below.
This listing is of standards issued,
which the Group reasonably expects
to be applicable at a future date.
The group intends to adopt this
standard when they become
effective.
NOTES TO THE FINANCIAL STATEMENTS
131
SLFRS 16 Leases
SLFRS 16 replaces LKAS 17 Leases
and related interpretations
(IFRIC 4 Determining whether an
Arrangement contains a Lease,
SIC-15 Operating Leases-Incentives
and SIC-27 Evaluating the Substance
of Transactions Involving the Legal
Form of a Lease) with effect from 1st
January 2019.
SLFRS 16 sets out the principles
for the recognition, measurement,
presentation and disclosure of leases
and requires lessees to account
for all leases under a single on-
balance sheet model similar to the
accounting for finance leases under
LKAS 17. The standard includes
two recognition exemptions for
lessees- leases of ‘low-value’ assets
(e.g., personal computers) and
short-term leases (i.e., leases with a
lease term of 12 months or less). At
the commencement date of a lease,
a lessee will recognise a liability to
make lease payments (i.e., the lease
liability) and an asset representing
the right to use the underlying
asset during the lease term (i.e., the
right-of-use asset). Lessees will be
required to separately recognise the
interest expense on the lease liability
and the depreciation expense on
the right-of-use asset.
Lessees will be also required to re-
measure the lease liability upon the
occurrence of certain events (e.g., a
change in the lease term, a change
in future lease payments resu1ting
from a change in an index or rate
used to determine those payments).
The lessee will generally recognise
the amount of the re measurement
of the lease liability as an adjustment
to the right-of-use asset.
Lessor accounting under SLFRS 16
is substantially unchanged from
the current requirements under
LKAS 17. Lessors will continue to
classify all leases using the same
classification principle as in LKAS 17
and distinguish between two types
of leases: operating and finance
leases.
The Group is assessing the potential
impact on its financial statements
resulting from the application of
these new standards.
Ceylon Grain Elevators PLC | Annual Report 2018132
All amounts in Sri Lankan Rupees thousandsFor the year ended 31 December
04. REVENUE
(a) Business Segments
The Group has three main business segments which offers different products and services and are managed separately since it requires
different technology and resources.
Business Segments Operations
Milling and farming Manufacturing and selling of poultry feed, other animal feed, poultry
processing, importing and selling of drugs and vaccines.
Poultry breeding and commercial Breeding of commercial Day Old Chicks and broiler farming and
provision of hatchery services
Others Provision of warehouse facilities (rental) and trading
There are varying levels of integration between segments which includes transfer of raw materials and shared services. The inter-
segment pricing is determined on an arm's length basis.
The Group's operating environment that affect the segments are discussed under the Management Discussion and Analysis -
Operating Environment (pages 36 to 39).
The information relevant to each business segment is set out below and it is used to measure performance since management believes
that this information is the most relevant in evaluating the results of the respective segments relative to other entities that operate in
the same industry.
Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, receivables and operating cash and
exclude investments in subsidiaries. Segment liabilities comprise of current and non-current liabilities. Capital expenditure comprises
additions to property, plant and equipment.
NOTES TO THE FINANCIAL STATEMENTS
133
(b) Sales are made up on follows :
Group Company
Notes 2018 2017 2018 2017
Milling and farming 19,433,396 17,366,918 19,433,396 17,366,918
Poultry breeding and commercial 3,073,787 2,797,389 - -
Others 147,412 166,235 - -
22,654,595 20,330,542 19,433,396 17,366,918
Elimination / adjustment (2,721,075) (2,648,030) - -
19,933,520 17,682,512 19,433,396 17,366,918
Sales taxes 4 (c) (2,847,943) (2,527,646) (2,807,038) (2,518,873)
17,085,577 15,154,866 16,626,358 14,848,045
(c) Sales taxes
Group Company
2018 2017 2018 2017
Nation Building Tax 325,055 283,497 343,272 301,180
Value Added Tax 2,522,888 2,244,149 2,463,766 2,217,693
2,847,943 2,527,646 2,807,038 2,518,873
Ceylon Grain Elevators PLC | Annual Report 2018134
All amounts in Sri Lankan Rupees thousands
(d) Business segments
For the year ended 31 December 2018 Poultry
Milling and breeding and Elimination /
farming commercial Others adjustment Group
Sales to outsiders 15,725,847 1,345,794 13,936 - 17,085,577Inter segmental sales 900,511 1,279,780 111,843 (2,292,134) -Total revenue 16,626,358 2,625,574 125,779 (2,292,134) 17,085,577
Operating income 757,656 698,819 55,487 (186,228) 1,325,734Finance income 151,900 189,697 32,292 - 373,889Finance costs (130,499) 7,488 (152) - (123,163)Share of profit of associate company - - - 9,779 9,779Profit before tax 779,057 896,004 87,627 (176,449) 1,586,239
Taxation (202,972) (147,195) (25,162) - (375,329)Profit for the year 576,085 748,809 62,465 (176,449) 1,210,910
Other comprehensive expenseActuarial loss arising from defined benefit
obligation - net of tax (3,120) (724) (22) - (3,866)
Total comprehensive income for the year 572,965 748,085 62,443 (176,449) 1,207,044
For the year ended 31 December 2017 Poultry
Milling and breeding and Elimination /
farming commercial Others adjustment Group
Sales to outsiders 13,950,205 1,177,189 27,472 - 15,154,866Inter segmental sales 897,840 1,226,931 114,310 (2,239,081) -Total revenue 14,848,045 2,404,120 141,782 (2,239,081) 15,154,866
Operating income 415,593 675,740 69,977 (59,348) 1,101,962Finance income 173,444 103,713 16,153 - 293,310Finance costs (4,829) 805 (30) - (4,054)Share of profit of associate company - - - 8,406 8,406Profit before tax 584,208 780,258 86,100 (50,942) 1,399,624
Taxation (133,564) (126,467) (69,657) - (329,688)Profit for the year 450,644 653,791 16,443 (50,942) 1,069,936
Other comprehensive incomeActuarial gain arising from defined benefit
obligation - net of tax
4,532 2,219 6 - 6,757
Total comprehensive income for the year 455,176 656,010 16,449 (50,942) 1,076,693
NOTES TO THE FINANCIAL STATEMENTS
135
(e) Business segments
As at 31 December 2018 Poultry
Milling and breeding and Elimination /
farming commercial Others adjustment Group
Segment assets 6,996,012 4,155,397 679,655 (301,625) 11,529,439Associate 33 - - 41,697 41,730Inter segment assets 2,067 207,282 7,718 (217,067) -Total assets 6,998,112 4,362,679 687,373 (476,995) 11,571,169
Segment liabilities 2,693,331 718,635 123,176 - 3,535,142Inter segment liabilities 209,615 6,209 90,677 (306,501) -Total liabilities 2,902,946 724,844 213,853 (306,501) 3,535,142
Capital expenditure 226,930 35,726 - - 262,656Depreciation / amortisation 128,579 103,043 15,557 - 247,179Amortisation of intangible assets 15,647 - - - 15,647
As at 31 December 2017 Poultry
Milling and breeding and Elimination /
farming commercial Others adjustment Group
Segment assets 6,234,950 3,557,126 677,644 (330,920) 10,138,800
Associate 33 - - 31,918 31,951
Inter segment assets 837 - 7,587 (8,424) -
Total assets 6,235,820 3,557,126 685,231 (307,426) 10,170,751
Segment liabilities 2,557,974 523,674 109,895 - 3,191,543
Inter segment liabilities 35,645 73,067 89,767 (198,479) -
Total liabilities 2,593,619 596,741 199,662 (198,479) 3,191,543
Capital expenditure 527,826 21,201 - - 549,027
Depreciation / amortisation 109,035 107,897 15,537 - 232,469
Amortisation of intangible assets 13,944 - - - 13,944
Ceylon Grain Elevators PLC | Annual Report 2018136
All amounts in Sri Lankan Rupees thousandsFor the year ended 31 December
5. OPERATING PROFIT
The following items have been charged / (credited) in arriving at operating profit:
Group Company
Notes 2018 2017 2018 2017
Directors’ emoluments 31.1 2,200 2,400 1,100 1,200
Auditors’ remuneration - Audit service 7,222 6,601 4,378 3,985
- Other services 1,109 304 973 110
Legal fees 4,010 2,641 3,532 2,152
Depreciation on property, plant and equipment 12 238,614 224,149 120,714 101,415
Amortisation of leasehold right over land and buildings 13 8,565 8,320 7,865 7,620
Amortisation of intangible assets 14 15,647 13,944 15,647 13,944
Usage of biological assets 17 519,461 482,139 - -
Operating lease rentals - property 74,399 74,399 62,399 62,399
Staff expenses 7 1,452,683 1,047,240 912,309 715,024
6. TEMPORARY CESSATION OF OPERATION
On 1 November 2004 the directors temporarily ceased the operation of breeding, hatching and growing of shrimp and sea cucumber
of Ceylon Aquatech (Private) Limited, a subsidiary of the Company.
The Management of the Company is of the view that the commercial operations of the Chilaw Farm could be recommenced. The
assets and liabilities as at the reporting date of the division were as follows:
As at 31 December
2018 2017
Property, plant and equipment 56,275 57,697
Total assets 56,375 57,795
Total liabilities (89,654) (89,179)
Net assets / (Liabilities) (33,279) (31,384)
NOTES TO THE FINANCIAL STATEMENTS
137
7. STAFF EXPENSES
Group Company
Notes 2018 2017 2018 2017
Salaries and wages 1,380,020 982,644 855,545 664,491
Social security costs 6 89 - 82
Defined contribution plans 54,186 47,795 42,206 37,916
Employee benefits 25 18,471 16,712 14,558 12,535
1,452,683 1,047,240 912,309 715,024
The number of employees as at 31 December :
- Full time 736 640 482 430
- Part time 744 738 217 236
1,480 1,378 699 666
Part time employees include out sourced workers hired from third parties.
8. OTHER OPERATING INCOME
Group Company
2018 2017 2018 2017
Sundry income 42,937 44,267 59,547 53,816
Dividend income - - 114,903 60,990
Impairment provision on investment in subsidiaries - - (29,295) -
Reversal / (provision) of impairment on amount due from
Related companies
- - 100,620 (1,642)
Change in fair value less cost to sell 16,814 203 - -
(Loss) / Profit on disposal of property, plant and equipment (9,026) (2,667) (938) 783
50,725 41,803 244,837 113,947
9. NET FINANCE INCOME
Group Company
2018 2017 2018 2017
Finance income
- Interest income on short-term investments 373,889 293,310 151,900 173,444
Finance costs
- Foreign exchange transaction losses (121,941) (1,041) (129,355) (1,848)
- Interest expense on bank borrowings (1,222) (3,013) (1,144) (2,981)
(123,163) (4,054) (130,499) (4,829)
250,726 289,256 21,401 168,615
Ceylon Grain Elevators PLC | Annual Report 2018138
All amounts in Sri Lankan Rupees thousandsFor the year ended 31 December
10. TAXATION
Group Company
Notes 2018 2017 2018 2017
Current tax 337,063 202,768 160,584 94,670
(Over) / Under provision in respect of previous year (434) (29,323) 525 (2,191)
Dividend tax on inter company dividend 17,070 6,731 15,256 5,567
Deferred tax charge recognised in profit or loss 24 21,630 149,512 26,607 35,518
375,329 329,688 202,972 133,564
Current tax has been computed in accordance with the provisions of Inland Revenue Act No. 24 of 2017.
Company Source of income Category Tax rate (%) Tax loss carried forward (Rs.)
2018 2017 2018 2017
Ceylon Grain Elevators PLC Feed Manufacturing
28
12
Nil NilChicken Poultry farming 10
Interest income and
other sources
Other sources 28
Ceylon Livestock and
Agrobusiness Services (Private)
Limited
Poultry Equipment Trading
2828
Nil NilInterest income Other sources 28
Ceylon Warehouse Complex
(Private) Limited
Rent Storage facility28
10Nil Nil
Interest income Other sources 28
Ceylon Aquatech (Private) Limited Other income Other sources 28 12 19,969,373 20,445,351
Three Acre Farms PLC Poultry breeder farming Poultry farming
14
10
Nil NilRearing Agriculture 12
Interest income Other sources 28
Millennium Multibreeder Farms
(Private) Limited
Poultry breeder farming Poultry farming
14
10
Nil NilHatchery service Service fee 28
Interest income Other sources 28
Ceylon Pioneer Poultry Breeders
Limited
Rent Other sources 28 28 224,125,571 224,755,755
NOTES TO THE FINANCIAL STATEMENTS
139
Reconciliation of the accounting profit to income tax expense
The tax on the results of the Group’s operations and the Company’s profit before tax differs from the theoretical amount that would
arise using the basic tax rate as follows:
Group Company
2018 2017 2018 2017
Profit before tax 1,586,239 1,399,624 779,057 584,208 Share of profit of associate (9,779) (8,406) - -
1,576,460 1,391,218 779,057 584,208 Add: disallowable expenses 1,034,598 912,498 233,537 181,516 Deduct: allowable expenses (1,326,118) (1,099,385) (590,980) (442,598)Profit from trade or business 1,284,940 1,204,331 421,614 323,126
Add: interest income 373,889 293,310 151,900 173,444 Deduct: Interest income from FCBU - (713) - (26)Deduct: tax loss claimed (629) (28,311) - - Deduct: qualifying payments - - - - Taxable income 1,658,200 1,468,617 573,514 496,544
Income tax using the domestic corporate tax rateat 10% - 66,558 - 7,207 at 12% - 43,593 - 23,543 at 14% 147,336 - - - at 28% 189,727 92,617 160,584 63,920 Current tax 337,063 202,768 160,584 94,670
(Over) / Under provision in respect of previous year (434) (29,323) 525 (2,191)Deferred tax charge / recognised in Profit or Loss 21,630 149,512 26,607 35,518 Dividend tax on intercompany dividend 17,070 6,731 15,256 5,567
375,329 329,688 202,972 133,564
Further information about deferred tax is presented in Note 24 - Deferred Taxation.
11. EARNINGS PER SHARE - BASIC AND DILUTED
Earnings per share is calculated by dividing the net profit attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the year.
Group Company
2018 2017 2018 2017
Net profit attributable to ordinary shareholders 890,495 790,179 576,085 450,644 Weighted average number of ordinary shares (thousands) 60,000 60,000 60,000 60,000 Basic earnings per share (Rs.) 14.84 13.17 9.60 7.51
There were no potentially dilutive ordinary shares outstanding at any time during the year / previous year, hence diluted earnings per
share is equal to the basic earnings per share.
Ceylon Grain Elevators PLC | Annual Report 2018140
All amounts in Sri Lankan Rupees thousandsAs at 31 December 2018
12. PROPERTY, PLANT AND EQUIPMENT
(a) Group
As at Additions / Disposals/ As at
01.01.2018 WIP transfer write off 31.12.2018
CostLand 346,659 71,641 - 418,300Building 1,167,672 2,717 (10,028) 1,160,361Leasehold buildings and improvements 551,840 25,408 - 577,248Plant and machinery, electrical and farm equipment 1,682,373 189,189 (17,201) 1,854,361Furniture and fittings and office equipment 166,084 15,795 (2,733) 179,146Motor vehicles 198,779 3,898 (7,632) 195,045Capital work-in-progress 155,032 38,011 (37,302) 155,741
4,268,439 346,659 (74,896) 4,540,202
As at Charge for Disposals/ As at
01.01.2018 the year write off 31.12.2018
DepreciationBuilding 185,987 28,850 (1,517) 213,320Leasehold buildings and improvements 215,480 15,547 - 231,027Plant and machinery, electrical and farm equipment 1,011,542 152,398 (16,241) 1,147,699Furniture and fittings and office equipment 124,800 13,931 (2,505) 136,226Motor vehicles 139,358 27,888 (7,273) 159,973
1,677,167 238,614 (27,536) 1,888,245
As at As at
01.01.2018 31.12.2018
Carrying amountLand 346,659 418,300Building 981,685 947,041Leasehold buildings and improvements 336,360 346,221Plant and machinery, electrical and farm equipment 670,831 706,662Furniture and fittings and office equipment 41,284 42,920Motor vehicles 59,421 35,072Capital work-in-progress 155,032 155,741
2,591,272 2,651,957
NOTES TO THE FINANCIAL STATEMENTS
141
(b) Company
As at Additions / Disposals / As at
01.01.2018 WIP transfer write off 31.12.2018
CostLand 40,314 - - 40,314Building 38,636 482 - 39,118Leasehold buildings and improvements 25,631 25,408 - 51,039Plant and machinery, electrical and farm equipment 836,101 180,634 (17,021) 999,714Furniture and fittings and office equipment 156,279 15,748 (2,733) 169,294Motor vehicles 104,877 3,898 (4,142) 104,633Capital work-in-progress 142,668 12,988 (29,504) 126,152
1,344,506 239,158 (53,400) 1,530,264
As at Charge for Disposals/ As at
01.01.2018 the year write off 31.12.2018
DepreciationBuilding 4,683 982 5,665Leasehold buildings and improvements 2,002 3,019 - 5,021Plant and machinery, electrical and farm equipment 350,821 87,212 (16,231) 421,802Furniture and fittings and office equipment 115,721 13,844 (2,505) 127,060Motor vehicles 65,565 15,657 (4,109) 77,113
538,792 120,714 (22,845) 636,661
As at As at
01.01.2018 31.12.2018
Carrying amountLand 40,314 40,314Building 33,953 33,453Leasehold buildings and improvements 23,629 46,018Plant and machinery, electrical and farm equipment 485,280 577,912Furniture and fittings and office equipment 40,558 42,234Motor vehicles 39,312 27,520Capital work-in-progress 142,668 126,152
805,714 893,603
Ceylon Grain Elevators PLC | Annual Report 2018142
All amounts in Sri Lankan Rupees thousandsAs at 31 December 2018
(c) Freehold land carried at cost (Rs.) :
Location Land extent Cost
Ceylon Grain Elevators PLC Attanagalla Farm, Attanagalla 12 A - 2 R - 15.7 P 40,314,00040,314,000
Three Acre Farms PLC Meegoda Farm, Meegoda 24 A - 0 R - 3.17 P 19,215,850Kosgama Farm, Aluthambalama, Kosgama 20 A - 3 R - 27.05 P 10,041,150Halwathura Farm, Halwathura 54 A - 0 R - 3.76 P 29,796,324Bulathsinhala Farm, Agaloya, Bulathsinhala 60 A - 3 R - 27.00 P 56,045,250Hijra Farm - A, Pagoda, Beruwala 41 A - 3 R - 13.42 P 41,034,200Hijra Farm - B, Beruwala 8 A - 3 R - 3.71 P 74,829,300Makuluwatta Farm, Waga 12 A - 2 R - 18.90 P 6,098,235Ittapana Farm, Mahagoda, Ittapana 31 A - 1 R - 28.10 P 71,640,983
308,701,292
Ceylon Pioneer Poultry Breeders Limited Nillambe Farm, Office Junction, Galaha 33 A - 0 R - 28.82 P 39,541,310Aswatta Farm, Kosgama 5 A - 3 R - 18.19 P 7,522,838Wewelpanawa Farm, Wewelpanawa 27 A - 3 R - 20.47 P 11,151,175
58,215,323
Ceylon Aquatech (Private) Limited Chilaw Farm 54 A - 1 R - 36.18 P 11,068,86511,068,865
Total 418,299,480
The Group has done an assessment on the market value of land by an independent professional valuer Mr. J.C. Leuke Bandara Incorporated valuer (Graduate member of the Institute of Valuers) and identified that there were no substantial differences between the market value and the book value.
(d) Freehold building carried at cost (Rs.) :
Location Number of Buildings Cost
Ceylon Grain Elevators PLC Attanagalla Farm, Attanagalla 56 39,117,70639,117,706
Three Acre Farms PLC Meegoda Farm, Meegoda 75 174,495,552Kosgama Farm, Aluthambalama, Kosgama 52 57,741,461Halwathura Farm, Halwathura 60 74,409,186Bulathsinhala Farm, Agaloya, Bulathsinhala 95 196,112,750Hijra Farm - A, Pagoda, Beruwala 66 186,172,952Hijra Farm - B, Beruwala 40 22,633,749Makuluwatta Farm, Waga 36 69,447,700
781,013,350
Ceylon Pioneer Poultry Breeders Limited Nillambe Farm, Office Junction, Galaha 2 1,205,030Aswatta Farm, Kosgama 45 51,085,000
52,290,030
Millennium Multibreeder Farms (Private) Limited
Wewelpanawa Farm, Wewelpanawa 45 231,565,950
231,565,950
Ceylon Aquatech (Private) Limited Chilaw Farm 32 56,374,60056,374,600
Total 1,160,361,636
NOTES TO THE FINANCIAL STATEMENTS
143
(e) Capital work-in-progress
Capital work-in-progress includes the construction of capital assets which mainly consists of buildings and plant and machinery.
(f) Capitalised borrowing costs
There were no capitalised borrowing costs related to the acquisition of property, plant and equipment during the year 2018 (2017 – Nil).
(g) Fully depreciated but still in use
The cost of fully depreciated property, plant and equipment of the Group and the Company which are still in use amounted to,
Group Company
2018 2017 2018 2017
Fully depreciated property, plant and equipment 861,371,026 536,815,384 301,866,792 236,518,244
(h) Property, plant and equipment pledged as security for liabilities
There were no items of property, plant and equipment pledged as securities for liabilities as at the reporting date (2017 - Rs. Nil).
(i) Title restriction on property, plant and equipment
There were no restrictions existed on the title of the property, plant and equipment of the Group as at the reporting date.
(j) Permanent fall in value of property, plant and equipment
There was no permanent fall in the value of property, plant and equipment which recognises provision for impairment as at reporting date.
13. LEASEHOLD RIGHT OVER LAND AND BUILDINGS
Group Company
2018 2017 2018 2017
Balance at the beginning of the year 227,625 176,712 159,049 107,936
(Transfer) / addition during the year (67,876) 59,233 - 58,733
Amortisation for the year (8,565) (8,320) (7,865) (7,620)
Balance at the end of the year 151,184 227,625 151,184 159,049
Company
Head Office Premises - Colombo 15
The Company has an agreement to mortgage for Rs. 495 Million over leasehold land and buildings at No.15, Rock House Lane, Colombo-15 as security for credit facilities.
The leasehold land and buildings are recognised as Operating Lease based on the substance of lease agreement.
The lease period of the leasehold land expired on 19 September 2012 and the Board of Directors has taken necessary action to renew the lease for a further period of 30 years (the current status of the lease agreement disclosed in Note 27 - Commitments, to the Financial Statements).
Seeduwa Sub-Lease Premises
The Company entered into the agreement with Ceylon Agro-Industries Limited for Sub-lease of land and premises of poultry
processing plant for Rs. 57,000,000/- for a period of twenty years on 17 January 2017 and recognised as operating lease based on
substance of lease agreement
Ceylon Grain Elevators PLC | Annual Report 2018144
All amounts in Sri Lankan Rupees thousandsAs at 31 December 2018
Group
Ittapana - Beruwela
Leasehold right over land on Ittapana farm situated in Ittapana, Mahagoda, Ittapana for unexpired lease period of 99 years. In consideration of the amendment made to the Land (Restrictions on Alienation) Act, No. 38 of 2014 by the Land (Restrictions on Alienation) (amendment) Act No. 21of 2018, the Group has acquired the ownership of Ittapana land on December 2018 on outright basis, which was earlier under 99 year lease basis.
14. INTANGIBLE ASSETS
(a) The intangible assets consists with computer software and server software which purchased from associated company, Prima Management Services (Private) Limited.
Group Company
2018 2017 2018 2017
CostBalance at the beginning of the year 138,602 131,034 138,602 131,034
Additions during the year 760 7,568 760 7,568
Balance at the end of the year 139,362 138,602 139,362 138,602
AmortisationBalance at the beginning of the year (99,157) (85,213) (99,157) (85,213)
Amortisation for the year (15,647) (13,944) (15,647) (13,944)
Balance at the end of the year (114,804) (99,157) (114,804) (99,157)
Carrying amount 24,558 39,445 24,558 39,445
(b) Fully amortised but still in use
There were no fully amortised intangible assets as at the reporting date (2017 - Rs. Nil).
(c) Intangible assets pledged as security for liabilities
There were no items of intangible assets pledged as securities for liabilities as at the reporting date (2017 - Rs. Nil).
(d) Title restriction on intangible assets
The Company has perpetual copyright to use these computer software.
(e) There are no significant intangible assets controlled by the entity but not recognised as assets because they did not meet
recognition criteria or because they were acquired or generated before SLFRS 3 - Business Combinations, was effective.
NOTES TO THE FINANCIAL STATEMENTS
145
15. INVESTMENT IN ASSOCIATE COMPANY
Group Company
2018 2017 2018 2017
Prima Management Services (Private) Limited 41,730 31,951 33 33
41,730 31,951 33 33
(a) Prima Management Services (Private) Limited
Group
2018 2017
Balance at the beginning of the year 31,951 24,145
Share of profit after tax 9,779 8,406
(-) Share of dividend distributed - (600)
Balance at the end of the year 41,730 31,951
(b) Summarised financial information of Prima Management Services (Private) Limited
The following table summarises the financial information of Prima Management Services (Private) Limited as included in its own
financial statements adjusted for fair value adjustments at the acquisition and differences in accounting policies. The table also
reconciles the summarised financial information to the carrying amount of the Group's interest in Prima Management Services (Private)
Limited.
2018 2017
Statement of financial positionTotal assets 207,433 128,040
Total liabilities (82,245) (32,188)
Net assets 125,188 95,852
Statement of comprehensive incomeRevenue 236,946 242,898
Profit 29,337 25,218
(c) Share of profit of associate company
Group’s share of profit after tax
2018 2017
Prima Management Services (Private) Limited 9,779 8,406
9,779 8,406
Ceylon Grain Elevators PLC | Annual Report 2018146
All amounts in Sri Lankan Rupees thousandsAs at 31 December 2018
(d) Investment in associate company - unquoted
Group Company
No. of No. of
shares Holding % 2018 2017 shares Holding % 2018 2017
Prima Management Services
(Private) Limited 3,334 33 41,730 31,951 3,334 33 33 33
Net book value as at 31 December - - 41,730 31,951 - - 33 33
Share of movement in equity value - - - - - - - -
Equity value in investments - - 41,730 31,951 - - 33 33
The Company has invested Rs. 33,334/- in Prima Management Services (Private) Limited, acquiring 33% stake during the year 2006.
16 INVESTMENT IN SUBSIDIARY COMPANIES
Notes 2018 2017
Investment in subsidiary companies - quoted 16 (a) 148,625 148,625
Investment in subsidiary companies - unquoted 16 (b) 213,000 213,000
Investment in subsidiary companies - cost 361,625 361,625
Provision for impairment (60,000) (30,705)
301,625 330,920
An impairment assessment was carried out as at 31 December 2018 and it was concluded that net realisable value of all the investment
included under unquoted investments exceed its carrying value except for Ceylon Aquatech (Private) Limited. Based on an assessment
made for impairment, the provision provided as above considered to be adequate as at the reporting date.
(a) Investment in subsidiary company- quoted
No. of shares Company Group holding
holding % %
2018 2017
Three Acre Farms PLC 13,469,980 57.21 57.21
Net book value as at 31 December 148,625 148,625
Market value as at 31 December 1,365,856 1,522,108
(b) Investment in subsidiary companies - unquoted
No. of Company Group
shares holding % holding % 2018 2017
Ceylon Warehouse Complex (Private) Limited 15,000,002 100 100 150,000 150,000
Ceylon Aquatech (Private) Limited 6,000,002 100 100 60,000 60,000
Ceylon Livestock and Agrobusiness Services
(Private) Limited 300,002 100 100 3,000 3,000
Net book value as at 31 December 213,000 213,000
NOTES TO THE FINANCIAL STATEMENTS
147
(c) Details of the companies incorporated in Sri Lanka, in which the Company held an interest of 50% or more are set out below:
Name of the Company Proportion of ordinary shares held
2018 Movement 2017
Ceylon Livestock and Agrobusiness Services (Private) Limited
100% - 100% Import and sale of poultry equipment, drugs and vaccines.
Ceylon Warehouse Complex (Private) Limited 100% - 100% Provide storage facilitiesCeylon Aquatech (Private) Limited 100% - 100% Integrated shrimp operation including
breeding, processing and culture of shrimp
Three Acre Farms PLC 57.21% - 57.21% Poultry breeder farms, hatcheries and commercial broiler farms
Ceylon Pioneer Poultry Breeders Limited 57.21% - 57.21% Renting of farm operationMillennium Multibreeder Farms (Private) Limited 57.21% - 57.21% Poultry breeder farming and hatchery
All the above companies, the financial year of which end on 31 December are audited by KPMG.
17. BIOLOGICAL ASSETS
Group Company
2018 2017 2018 2017
Fair value less cost to sell at the beginning of the year 528,759 491,782 -Additions during the year 547,704 518,913 - -
Usage for the year (519,461) (482,139) - -
Change in fair value less cost to sell 16,814 203 - -
Fair value less cost to sell at the end of the year 573,816 528,759 - -
Non-current 555,918 501,110 - -
Current 17,898 27,649 - -
573,816 528,759 - -
(a) Biological assets
A biological assets is a living animal . Biological assets consist of parent and grandparent livestock, used to breed commercial Day Old
Chicks, hatchable eggs and broiler birds. Parent and grandparent birds include the growing birds and the laying birds.
Biological assets - Non-current
Bearer biological assets are those other than consumable biological assets and recognised as “Biological assets - Non-current”. Bearer
biological assets are not agricultural produce but, rather, are self generating. Parent and grandparent livestock have been identified as
bearer biological assets.
Biological assets - Current
Consumable biological assets are those that are to be harvested as agricultural produce or sold as biological assets. Hatchable eggs and
Commercial Day Old Chicks have been identified as consumable biological assets.
Ceylon Grain Elevators PLC | Annual Report 2018148
All amounts in Sri Lankan Rupees thousandsAs at 31 December 2018
(b) Measurement of fair value
(i) Fair value hierarchy
The fair value measurement of livestock have been categorised as level 3 fair values based on the inputs to the valuation technique
used.
(ii) Level 3 fair values
The following table shows a breakdown of the total gains / (losses) recognised in respect of level 3 fair values.
Group Company
2018 2017 2018 2017
Change in fair value less cost to sell included in ‘Other Income’
Biological assets - non-current 18,004 (983) - -
Biological assets - current (1,190) 1,186 - -
16,814 203 - -
(iii) Valuation technique and significant unobservable inputs
Following table shows the valuation technique used in measuring level 3 fair value as well as the significant unobservable inputs used.
Type Valuation technique Significant unobservable inputs
Inter-relationship between key unobservable inputs and fair value measurements
Biological assets
Bearer biological assets comprises
Broiler Grandparent, Broiler Parent
and Layer parent
Discounted Cash Flows
The valuation model
considers the present
value of the net cash flows
expected to be generated
by breeder farming. The
expected net cash flows
are discounted using a risk
adjusted discount rate.
DOC yield The FV will;
- increase when DOC yield increased
- decrease when DOC yield decreased
DOC selling
price
- increase when selling price increased
- decreased when selling price decreased
Discounting
rate
- increase when discounting rate decreased
- decreased when discounting rate increased
Mortality - Increase when mortality rate decreased
- decrease when mortality rate increased
Consumable Biological Assets
Consumable biological assets comprise of Hatchable Eggs and Commercial Day Old Chicks (DOCs). DOCs are fair valued at the market
price and cost is approximated as fair value for Hatchable Eggs as no or only little biological change was observed as at the year end.
NOTES TO THE FINANCIAL STATEMENTS
149
(c) Risk management strategy related to the biological assets
(i) Regulatory and environmental risks
The Group is subject to laws and regulations in various countries in which it operates. The Group has established environmental
policies and procedures aimed at compliance with local environmental and other laws.
(ii) Supply and demand risks
The Group is exposed to risks arising from fluctuations in the price and sales volume of commercial Day Old Chicks. When possible,
the Group manages this risk by aligning its harvest volume to market supply and demand. Management performs regular industry
trend analyses for projected harvest volumes and pricing.
(iii) Climate and other risks
The group’s biological assets are exposed to the risk of damage from climatic changes, diseases, and other natural forces. The Group
has extensive processes in place aimed at monitoring and mitigating those risks, including regular health inspection, implementing
disease control policies and procedures. The Group is also insured against natural disasters such as floods and hurricanes.
18. AMOUNT DUE FROM RELATED COMPANIES
Group Company
2018 2017 2018 2017
Ceylon Livestock and Agrobusiness services (Private) Limited - - 1,243 -
Ceylon Aquatech (Private) Limited - - 89,434 88,930
Ceylon Pioneer Poultry Breeders Limited - - 824 101,124
Ceylon Warehouse Complex (Private) Limited - - - 837
- - 91,501 190,891
Less: Provision for receivables - - (89,434) (190,054)
- - 2,067 837
Provision has been made for receivables from Ceylon Aquatech (Private) Limited amounting to Rs. 89,434,028/- and the provision made
for Ceylon Pioneer Poultry Breeders Limited Rs. 101,124,000/- has been reversed during the year due to the settlement of receivables.
The movement in provision for receivables disclosed in Note 30.1 - Financial instruments.
Ceylon Grain Elevators PLC | Annual Report 2018150
All amounts in Sri Lankan Rupees thousandsAs at 31 December 2018
19. INVENTORIES
Group Company
2018 2017 2018 2017
Raw materials and consumables 3,276,166 2,570,986 3,154,242 2,491,688
Goods in transit 546,134 414,556 546,134 414,556
Finished goods
- Feeds 134,526 112,139 134,526 112,139
- Chicken 155,537 41,550 155,537 41,550
Out grower stock (Work-in-progress) 181,302 148,971 181,302 148,971
4,293,665 3,288,202 4,171,741 3,208,904
Less: provision for slow moving and obsolete items (47,860) (41,381) (44,519) (38,383)
Total inventories at the lower of cost and net realisable value 4,245,805 3,246,821 4,127,222 3,170,521
Inventories are on an "agreed to mortgage" condition, against short term bank borrowings .
20. TRADE AND OTHER RECEIVABLES
Group Company
Notes 2018 2017 2018 2017
Trade receivables 669,086 564,278 638,251 538,139
Less: provision for doubtful debts (182,952) (216,501) (177,365) (206,477)
486,134 347,777 460,886 331,662
Prepayments 52,697 35,912 41,282 23,822
Other receivables 20 (a) 282,683 235,370 177,079 189,542
821,514 619,059 679,247 545,026
The movement in provision for doubtful debt disclosed in Note 30.1 - Financial instruments.
(a) Other receivables
Group Company
2018 2017 2018 2017
Deposits and advances 49,412 52,353 36,562 39,958
Staff loans 718 718 180 180
Other receivables 232,553 182,299 140,337 149,404
282,683 235,370 177,079 189,542
NOTES TO THE FINANCIAL STATEMENTS
151
21. CASH AND CASH EQUIVALENTS
Group Company
2018 2017 2018 2017
Cash at bank 210,014 207,269 232,683 81,273Short term bank deposits 2,251,068 1,641,522 558,462 718,029Investment in short term securities 567,942 1,001,300 - 354,000Cash in hand 4,304 7,353 3,278 6,823
3,033,328 2,857,444 794,423 1,160,125
The Group’s weighted average effective interest rate on short term bank deposits was on AWDR.
Bank overdrafts that are repayable on demand and forming an integral part of the Group’s cash management as included as a component cash and cash equivalents for the purpose of the Statement of Cash Flows.
22. TRADE AND OTHER PAYABLES
Group Company
Notes 2018 2017 2018 2017
Trade payables 142,998 177,073 116,285 108,248Accrued expenses 433,577 225,682 240,244 173,153Dividend payable 514 514 514 514Other payables 22 (a) 893,963 633,545 587,590 438,606
1,471,052 1,036,814 944,633 720,521
(a) Other payables
Group Company
2018 2017 2018 2017
Deposit and advances 100,732 81,880 64,269 54,671Government taxes 448,107 307,265 263,422 199,862Staff related expenses 345,124 233,848 259,899 179,247Other payables - 10,552 - 4,826
893,963 633,545 587,590 438,606
23. AMOUNT DUE TO RELATED COMPANIES
Group Company
2018 2017 2018 2017
Ceylon Agro-Industries Limited 8,972 9,196 8,972 9,112Prima Ceylon (Private) Limited 353,832 254,116 353,832 254,116Prima Management Services (Private) Limited 4,797 5,651 4,797 4,925Hapiways Management Services Pte Limited 1,216,242 1,443,287 1,216,242 1,443,287Three Acre Farms PLC - - 147,653 28,901Millennium Multibreeder Farms (Private) Limited - - 60,453 2,661Ceylon Livestock and Agrobusiness Services (Private) Limited - - - 4,083Ceylon Warehouse Complex (Private) Limited - - 1,509 -
1,583,843 1,712,250 1,793,458 1,747,085
Ceylon Grain Elevators PLC | Annual Report 2018152
All amounts in Sri Lankan Rupees thousandsAs at 31 December 2018
24. DEFERRED TAXATION
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against tax liabilities and
when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:
24.1 Deferred tax liability
The gross movement on the deferred income tax account is as follows:
Group Company
Notes 2018 2017 2018 2017
Balance at the beginning of the year 358,781 207,475 59,354 22,405
Deferred tax charge recognised in profit or loss 10 21,630 149,512 26,607 35,518
Deferred tax (release) / charge recognised in other
comprehensive income
(1,340) 1,794 (1,213) 1,431
Balance at the end of the year 379,071 358,781 84,748 59,354
24.2 Movement in deferred tax assets and liabilities
The movement in deferred tax assets and liabilities during the year, without taking into consideration the off setting of balances within
the same tax jurisdiction, is as follows:
2018 2017
Temporary Tax effect on Temporary Tax effect on
difference temporary difference temporary
difference difference
GroupProperty, plant and equipment 1,669,365 345,177 1,623,926 326,590
Biological assets 555,917 77,828 501,110 70,155
Defined benefit obligation (101,176) (25,410) (83,698) (21,070)
Tax loss (19,969) (5,591) (20,455) (5,727)
Provision for slow moving and obsolete items (47,860) (12,933) (41,381) (11,167)
2,056,277 379,071 1,979,502 358,781
2018 2017
Temporary Tax effect on Temporary Tax effect on
difference temporary difference temporary
difference difference
CompanyProperty, plant and equipment 427,298 119,643 317,021 88,766
Defined benefit obligation (80,107) (22,430) (66,659) (18,665)
Provision for slow moving and obsolete items (44,519) (12,465) (38,383) (10,747)
302,672 84,748 211,979 59,354
NOTES TO THE FINANCIAL STATEMENTS
153
Deferred tax of the Group companies have been computed by applying future tax rate at the reporting date as follows:
2018 2017
Ceylon Grain Elevators PLC 28% 28%
Three Acre Farms PLC 14% 14%
Millennium Multibreeder Farms (Private) Limited 14% 14%
Ceylon Warehouse Complex (Private) Limited 28% 28%
Ceylon Aquatech (Private) Limited 28% 28%
Ceylon Pioneer Poultry Breeders Limited (CPPBL) 28% 28%
24.3 Unrecognised deferred tax assets
Deferred tax assets have not been recognised on tax losses carried forward for following company, since it is not probable that future
taxable profit will be available against which the Company can utilise the benefit there on.
2018 2017
Ceylon Pioneer Poultry Breeders LimitedTax losses carried forward 224,126 224,756
Tax effect there at 28% 62,755 62,932
Ceylon Grain Elevators PLC | Annual Report 2018154
All amounts in Sri Lankan Rupees thousandsAs at 31 December 2018
25. EMPLOYEE BENEFITS
Group Company
2018 2017 2018 2017
Employee benefit obligation as at 1 January 83,698 76,970 66,659 57,753
Provisions made during the year 23,677 8,161 18,891 6,572
Provisions transfer from related company - 6,689 - 6,689
Benefits paid by the plan (6,199) (8,122) (5,443) (4,355)
Employee benefit obligation as at 31 December 101,176 83,698 80,107 66,659
Movement in the present value of the defined benefit obligationsEmployee benefits as at 1 January 83,698 76,970 66,659 57,753
Benefits paid by the plan (6,199) (8,122) (5,443) (4,355)
Provisions transfer from related company - 6,689 - 6,689
Current service cost 8,846 8,245 6,892 6,182
Interest on obligation 9,625 8,467 7,666 6,353
Actuarial loss / (gain) during the year 2,126 (5,497) 1,937 (3,814)
Change in actuarial assumption 3,080 (3,054) 2,396 (2,149)
Defined benefit obligations at the end of the year 101,176 83,698 80,107 66,659
The amounts recognised in the consolidated statement of financial positionPresent value of unfunded obligations 101,176 83,698 80,107 66,659
Recognised liability for defined benefit obligations 101,176 83,698 80,107 66,659
Expense recognised in the consolidated statement of profit or lossCurrent service cost 8,846 8,245 6,892 6,182
Interest on obligation 9,625 8,467 7,666 6,353
18,471 16,712 14,558 12,535
Expense recognised in the consolidated statement of other comprehensive income / (expenses)Actuarial loss / (gain) during the year 2,126 (5,497) 1,937 (3,814)
Change in actuarial assumption 3,080 (3,054) 2,396 (2,149)
5,206 (8,551) 4,333 (5,963)
The provision for retiring gratuity for the year is based on the actuarial valuation made on 31 December 2018.
The actuarial valuation was carried out by professionally qualified actuary Mr. Piyal S Goonetilleke of Piyal S Goonetilleke Associates for
retiring gratuity for employees as at 31 December 2018.
The liability was not externally funded.
NOTES TO THE FINANCIAL STATEMENTS
155
Actuarial assumptions
Principal actuarial assumptions at the reporting date (expressed as weighted averages) :
Group / Company
2018 2017
Discount rate 11.0% 11.5%
Future salary increases 10.0% 10.0%
Actuarial assumptions
Future mortality is based on published statistics and mortality tables.
The average life expectancy of an individual retiring at age 55
Staff turnover sliding scale by the age of employee retiring from 10%-1%
Sensitivity analysis
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant,
would have affected the defined benefit obligation by the amounts shown below.
Group 2018 2017
Increase Decrease Increase Decrease
Movement by 1%
Discount Rate (5,995) 6,707 (4,660) 5,213
Future salary scale (3,117) 3,689 4,937 (4,493)
Company 2018 2017
Increase Decrease Increase Decrease
Movement by 1%
Discount Rate (4,666) 5,211 (3,555) 3,972
Future salary scale (4,504) 4,939 3,758 (3,425)
Ceylon Grain Elevators PLC | Annual Report 2018156
All amounts in Sri Lankan Rupees thousandsAs at 31 December
26. CONTINGENT LIABILITIES
(a) 284 / 2008 MR- Green Valley Farm (Private) Limited Vs. Ceylon Grain Elevators PLC
Green Valley Farm (Private) Limited filed the above case against CGE claiming Rs. 195,775,306/- as losses resulted from the business
affairs, it had with CGE. The judgement of the case was delivered on 21 November 2014.
It was decided that Green Valley Farm (Private) Limited is entitled to recover only a sum of Rs. 47,223,869/- from CGE and that amount
be set off against the amount due to be paid by Green Valley Farm (Private) Limited to CGE.
The Company has filed an appeal against the said judgement and case is pending before the Supreme court.
(b) A 3175 - Inter Company Employees Union Vs. CGE and Subsidiaries (‘the Group’)Court of Appeal case No. CA (Writ) 134/18
Employees of the Group went on strike on 20 March 2006 and those who went on strike were terminated. The dispute was referred to
the Commissioner of Labour and the reference was gazetted by the Minister dated 26 May 2006 referring the case for hearing at the
Industrial Court.
At the Industrial Court the Group took up a preliminary objection that Composite reference is bad in law as they are separate legal
entities and cannot be referred in one dispute. The Industrial Court gave its verdict rejecting the preliminary objection and thereafter
the Company made an appeal against the interim order in the Court of Appeal (C/A796/2007). Court of Appeal delivered its judgment
on 18 May 2010 rejecting the appeal filed by the Group. Accordingly the case was taken up for hearing before the Industrial Court.
After a lengthy trial at the industrial Court, the Award was gazetted on 16 January 2018 directing the Group to reinstate the employees
with back-wages. The Company has filed a writ application under case number CA (Writ) 134/18 in the Court of Appeal to quash the
said award.
Case is coming for arguments on 2 August 2019.
( c ) A 3174 - Inter Company Employees Union Vs. CGE and Global Engineering & Supplies
Employees who worked under Labour Contractor, Global Engineering & Supplies were also involved in the strike.
This case was also referred to the Commissioner of Labour and reference was gazetted by the Minister dated 26 May 2006 referring the
case for hearing at the Industrial Court.
This dispute was referred as 'Non offer of employment'. Lawyers appearing for CGE took up an objection in the Industrial Court that
there is no such dispute called 'Non offer of employment'. The Industrial Court in its preliminary order rejected the said objection and
thereafter CGE made an appeal to the Court of Appeal. Court of Appeal delivered its judgment by rejecting the appeal filed by CGE and
referring the case back to the Industrial Court for hearing.
This matter is coming on 21 May 2019, before the Industrial Court for further evidence of the Second Respondent, Global Engineering
& Supplies.
NOTES TO THE FINANCIAL STATEMENTS
157
27. COMMITMENTS
(a) Capital commitments
No capital commitments outstanding as at the reporting date.
(b) Operating commitments
Within Within More than
one year 1-5 years 5 years Total
Ceylon Grain Elevators PLC 118,577 474,308 2,134,386 2,727,271
Ceylon Warehouse Complex (Private) Limited 13,500 54,000 243,000 310,500
132,077 528,308 2,377,386 3,037,771
(c) The Agreement has been inked for another period of 30 years effective from 12 September 2012 between the Company and
Divisional Secretariat at Colombo for use of land and buildings at No. 15, Rock House Lane, Colombo 15.
The Agreement for related leases with Sri Lanka Ports Authority yet to be finalised as at the reporting date.
(d) The Company is the Parent Company of Ceylon Aquatech (Private) Limited and confirms their commitment, in present
circumstances to continue financial support in the business operations and to meet financial obligations. As the ultimate Parent
Company of the above company, CGE has no intention or inclination of withdrawing their support or reducing the scale of
operations of the above company in the forthcoming 12 months.
28. STATED CAPITAL
Company
2018 2017
Ordinary shares - issued and fully paid (Nos.) 60,000,000 60,000,000
Issued and fully paid (Rs.) 1,017,996 1,017,996
None of the shares held by neither the Company on its own nor its subsidiaries or associate.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share per
individual present at meeting of the shareholders or one vote per share in the case of a poll.
Ceylon Grain Elevators PLC | Annual Report 2018158
All amounts in Sri Lankan Rupees thousandsAs at 31 December
29. NON - CONTROLLING INTERESTS
(a) Movements in non-controlling interest (NCI) during the period ended 31 December
Group
2018 2017
As at the beginning of the year 1,266,750 1,026,343
Share of net profit of subsidiaries 320,415 279,757
Share of other comprehensive income of subsidiaries (309) 950
Dividend paid (30,225) (40,300)
As at the end of the year 1,556,631 1,266,750
(b) NCI Percentage for the period ended 31 December
Principal place Operating
of business Segment Ownership interest held by NCI
2018 2017
Three Acre Farms PLC Sri Lanka Poultry
breeding and
commercial
42.79% 42.79%
(c) Summarised Financial Statements of Three Acre Farms PLC
Statement of financial positionNon-current assets 1,953,020 1,974,535
Current assets 2,409,659 1,582,591
Non-current liabilities (229,839) (227,015)
Current liabilities (495,005) (369,726)
Net assets 3,637,835 2,960,385
Net assets attributable to NCI 1,556,631 1,266,750
Statement of profit or loss and other comprehensive incomeRevenue 2,625,574 2,404,120
Profit for the year 748,809 653,791
Other comprehensive (expenses) / income for the year, net of tax (724) 2,219
Total Comprehensive Income 748,085 656,010
Profit attributable to NCI 320,415 279,757
Other comprehensive (expenses) / income attributable to NCI, net of tax (309) 950
Total comprehensive income attributable to NCI 320,106 280,707
Net cash generated from operating activities 507,207 524,626
Net cash used in investing activities (249,256) (230,627)
Net cash used in financing activities (30,225) (40,300)
Net increase in cash and cash equivalent 227,726 253,699
NOTES TO THE FINANCIAL STATEMENTS
159
30. FINANCIAL INSTRUMENTS
The Group has an exposure to the following risks arising from financial instruments;
� Credit risk
� Liquidity risk
� Currency risk
� Interest rate risk
� Market risk
Risk management framework
The Group’s Board of Directors have overall responsibility for the establishment and oversight of the Group’s risk management framework, developing and monitoring the Group’s risk management policies and report regularly to the Board of Directors on its activities.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in the market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Board of Directors of Ceylon Grain Elevators PLC, oversee how management monitors compliance with the Company’s risk management policies and procedures, and review the adequacy of the risk management framework in relation to the risks faced by the Group. The Group Audit Committee assists the Board in its oversight role by internal audit which undertakes both regular and ad-hoc reviews of risk management policies and procedures and the results of which are reported to the Audit Committee.
Financial Instruments - Statement of financial position
Group Company
Notes 2018 2017 2018 2017
Financial AssetsLoans and receivables
Trade and other receivables 20 768,817 583,147 637,965 521,204
Amount due from related companies 18 - - 2,067 837
768,817 583,147 640,032 522,041
Cash and cash equivalents 21 3,033,328 2,857,444 794,423 1,160,125
3,802,145 3,440,591 1,434,455 1,682,166
Group Company
Notes 2018 2017 2018 2017
Financial LiabilitiesOther financial liabilities
Amount due to related companies 23 1,583,843 1,712,250 1,793,458 1,747,085
Trade and other payables 22 589,368 503,867 440,967 347,506
2,173,211 2,216,117 2,234,425 2,094,591
Ceylon Grain Elevators PLC | Annual Report 2018160
All amounts in Sri Lankan Rupees thousandsAs at 31 December
Financial Instruments - Statement of profit or loss
2018 2017
Gain / Losses / Gain / Losses /
income expenses income expenses
GroupOther financial liabilities
Interest bearing instruments 373,890 1,222 293,310 3,013
Total 373,890 1,222 293,310 3,013
CompanyOther financial liabilities
Interest bearing instruments 151,900 1,144 173,444 2,981
Total 151,900 1,144 173,444 2,981
30.1 Credit risk
Credit risk is the risk of financial loss to the Group, if a customer or counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group’s receivables from customers, placements with banking institutions and in
government securities.
(a) Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting
date was;
Group Company
Notes 2018 2017 2018 2017
Amount due from related companies 18 - - 91,501 190,891
Trade and other receivables 20 768,817 583,147 637,965 521,204
Cash and cash equivalents 21 3,033,328 2,857,444 794,423 1,160,125
3,802,145 3,440,591 1,523,889 1,872,220
(b) Impairment losses
(i) The aging of trade and other receivables at the reporting date was;
Group 2018 2017
Gross Impairment Gross Impairment
Not past due 102,646 - 61,835 -
Past due 0 - 30 days 338,119 - 279,168 -
Past due 31 - 365 days 278,696 - 191,805 -
More than one year 227,972 182,952 266,840 216,501
947,433 182,952 799,648 216,501
NOTES TO THE FINANCIAL STATEMENTS
161
Company 2018 2017
Gross Impairment Gross Impairment
Not past due 38,455 - 47,314 -
Past due 0 - 30 days 306,519 - 262,250 -
Past due 31 - 365 days 227,574 - 171,675 -
More than one year 237,768 177,365 246,442 206,477
810,316 177,365 727,681 206,477
The movements in the allowance for impairment in respect of loans and receivables during the year was as follows:
Group Company
2018 2017 2018 2017
Balance as at 1 January 216,501 254,889 206,477 244,865
Impairment loss reversed (33,549) (38,388) (29,112) (38,388)
Balance as at 31 December 182,952 216,501 177,365 206,477
(ii) The aging of amount due from related companies at the reporting date was;
Company 2018 2017
Gross Impairment Gross Impairment
Not past due 2,067 837 -
Past due 0 - 365 days 89,434 (89,434) 190,054 (190,054)
More than 365 days - - - -
91,501 (89,434) 190,891 (190,054)
The movement in the allowance for impairment in respect of amount due from related companies during the year was as follows;
Group Company
2018 2017 2018 2017
Balance as at 1 January - - 190,054 188,412
Impairment loss (reversed) / recognised - - (100,620) 1,642
Balance as at 31 December - - 89,434 190,054
Ceylon Grain Elevators PLC | Annual Report 2018162
All amounts in Sri Lankan Rupees thousandsAs at 31 December
30.2 Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligation associated with its financial liabilities that are
settled by delivering cash or another financial asset. To measure and mitigate liquidity risk, Group will closely monitor its net operating
cash flow, maintained a level of cash and cash equivalent and secured committed funding facilities from financial institutions.
Group
As at 31 December 2018 Carrying Contractual 6 months 6 - 12 1 - 2 2 - 5 More than
amount cash flows or less months years Years 5 years
Non-derivative financial liabilitiesTrade and other payables 589,368 (589,368) (589,368) - - - -Amount due to related companies 1,583,843 (1,583,843) (1,583,843) - - - -
2,173,211 (2,173,211) (2,173,211) - - - -
Company
As at 31 December 2018 Carrying Contractual 6 months 6 - 12 1 - 2 2 - 5 More than
amount cash flows or less months years Years 5 years
Non-derivative financial liabilitiesTrade and other payables 440,967 (440,967) (440,967) - - - -Amount due to related companies 1,793,458 (1,793,458) (1,793,458) - - - -
2,234,425 (2,234,425) (2,234,425) - - - -
Group
As at 31 December 2017 Carrying Contractual 6 months 6 - 12 1 - 2 2 - 5 More than
amount cash flows or less months years Years 5 years
Non-derivative financial liabilitiesTrade and other payables 503,867 (503,867) (503,867) - - - -Amount due to related companies 1,712,250 (1,712,250) (1,712,250) - - - -
2,216,117 (2,216,117) (2,216,117) - - - -
Company
As at 31 December 2017 Carrying Contractual 6 months 6 - 12 1 - 2 2 - 5 More than
amount cash flows or less months years Years 5 years
Non-derivative financial liabilitiesTrade and other payables 347,506 (347,506) (347,506) - - - -
Amount due to related companies 1,747,085 (1,747,085) (1,747,085) - - - -
2,094,591 (2,094,591) (2,094,591) - - - -
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amount.
NOTES TO THE FINANCIAL STATEMENTS
163
30.3 Market risk
Market risk is the risk that changes in market price, such as foreign exchange rates and interest rates affecting to the Company’s income
or the value of its holding of financial instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters , while optimising the return.
Market risk comprise of the following types of risk:
� Currency risk � Interest Rate Risk � Commodity price risk � Equity Price Risk
(a) Currency risk
Currency risk is the risk that the fair value of future cash flows of a financial instrument of fluctuating due to changes in foreign
exchange rate. The Group is exposed to currency risk on sales, purchase and investments that are denominated in a currency other
than functional currency which is Sri Lankan Rupees (LKR).
Exposure to currency risk
The Group’s exposure to foreign currency risk was as follows based on notional amounts;
Group 2018 2017
USD EUR USD EUR
Cash and cash equivalents 256,585 - 806,240 -
Trade payables 18,906 15,235 (215,713) 24,628
Amount due to related company (6,655,219) - (9,407,598) -
(6,379,728) 15,235 (8,817,071) 24,628
Company 2018 2017
USD EUR USD EUR
Cash and cash equivalents 80,309 - 16,742 -
Trade payables 18,906 15,235 (17,242) 23,859
Amount due to related company (6,655,219) - (9,407,598) -
(6,556,004) 15,235 (9,408,098) 23,859
The principal exchange rates used by the Group for conversion of foreign currency balances and transactions for the year ended 31
December are as follows:
Average rate Reporting date spot rate
2018 2017 2018 2017
USD 164.04 153.19 182.75 153.42
EUR 193.03 172.88 208.99 182.49
Ceylon Grain Elevators PLC | Annual Report 2018164
All amounts in Sri Lankan Rupees thousandsAs at 31 December
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Group is exposed to the risk of changes in market interest rates relates primarily to the Group’s Investments with
variable interest rates. The Group does not have any variable rate long term borrowing as at the reporting date, which results material
interest rate. At the reporting date the interest rate profile of the Group’s interest bearing financial instruments were:
Group Company
2018 2017 2018 2017
Fixed rate instrumentsFinancial assets - - - -
Financial liabilities - - - -
- - - -
Variable rate instrumentsFinancial assets 2,819,010 2,642,822 623,710 1,072,029
Financial liabilities - - - -
2,819,010 2,642,822 623,710 1,072,029
Capital management
The board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and sustain future
development of the business. Capital consist of ordinary share, retained earnings and non- controlling interest of the Group. The Board
of Directors monitors the return on capital as well as the level of dividends to ordinary shareholders.
31. RELATED PARTY TRANSACTIONS
31.1 Key management personnel information
Key management personnel include all the members of the Board of Directors of the Company having authority and responsibility for planning, directing and controlling the activities of the Company as well as the subsidiaries, directly or indirectly. Compensation paid to key management personnel on behalf of the companies are as follows:
Group Company
2018 2017 2018 2017
Short-term employee benefits 2,200 2,400 1,100 1,200
Post employment benefits - - - -
2,200 2,400 1,100 1,200
NOTES TO THE FINANCIAL STATEMENTS
165
There were no loans given to the Directors of the company during the financial year or as at the reporting date.
Mr. Wickrema Senaka Weerasooria, Mr. Cheng Chih Kwong, Primus, Mr. Tan Beng Chuan, Mr. Cheng Koh Chuen, Bernard, Mr. Cheng Eng Loong and Dr. Prathap Ramanujam, the directors of the Company are also the directors of the following companies as set out below and with transaction in Note 31.2 have been carried out.
Name of the related party Name of the Director Nature of transaction
Three Acre Farms PLC (TAF)Subsidiary
Mr. Wickrema Senaka Weerasooria CGE sells feeds to TAF. Also company purchases broiler DOC and culled birds from TAF.Mr. Cheng Chih Kwong, Primus
Mr. Tan Beng Chuan
Mr. Cheng Koh Chuen, Bernard
Dr. Prathap Ramanujam
Ceylon Pioneer Poultry Breeders Limited (CPPBL)Subsidiary
Mr. Cheng Chih Kwong, Primus No inter-company transactions have been carried out during the year.Mr. Tan Beng Chuan
Ceylon Aquatech (Private) Limited (CAT)Subsidiary
Mr. Cheng Chih Kwong, Primus No inter-company transactions have been carried out during the year.Mr. Tan Beng Chuan
Ceylon Livestock and Agrobusiness Mr. Cheng Chih Kwong, Primus CLAS supplies veterinary drugs, medicine and
Services (Private) Limited (CLAS)Subsidiary
Mr. Tan Beng Chuan poultry equipment to the Company’s outgrower farms.
Ceylon Warehouse Complex(Private) Limited (CWCL)Subsidiary
Mr. Cheng Chih Kwong, Primus CWCL provides storage facilities to the Company.Mr. Tan Beng Chuan
Millennium Multibreeder Farms(Private) Limited (MMF)Subsidiary
Mr. Cheng Chih Kwong, Primus CGE sells feeds to MMFL. Also company purchases broiler DOC and culled birds from MMFL.
Mr. Tan Beng Chuan
Prima Ceylon (Private) Limited (PCL)Group Company
Mr. Cheng Chih Kwong, Primus CGE purchases raw materials from PCL. Also the Company sells processed chicken to PCL.Mr. Cheng Koh Chuen, Bernard
Prima Management Services (Private) Limited PMS)Associate Company
Mr. Cheng Chih Kwong, Primus PMS provides ICT solutions and services to the Company
Hapiways Management ServicesPte Limited (HMS)Group Company
Mr. Cheng Chih Kwong, Primus Purchase of all kind of imported raw materials, feed additives, spare parts and other significant imports from HMS.
Ceylon Agro-Industries Limited (CAI)Group Company
Mr. Wickrema Senaka Weerasooria CGE Sells processed chicken to CAI. Also the Company purchases Value Added Products (VAP) from CAI.
Mr. Cheng Chih Kwong, Primus
Mr. Tan Beng Chuan
Mr. Cheng Koh Chuen, Bernard
Dr. Prathap Ramanujam
Ceylon Grain Elevators PLC | Annual Report 2018166
All amounts in Sri Lankan Rupees thousandsFor the year ended 31 December
31.2 Recurrent related party transactions
The Group has a related party relationship with its subsidiaries, associates and related group companies as disclosed in Note 31.1.Key
Management Personnel Information.
Companies within the Group engage in trading transactions. The following transactions were carried out with related parties during the
year ended 31 December 2018.
(a) Transaction with Subsidiaries
Company CWCL CLAS CAT TAF MMF CPPBL Total 2018 Total 2017
Sale of goods - - - 656,994 243,517 - 900,511 897,840
Purchase of goods - (339) - (448,978) (266,402) - (715,719) (667,849)
Sale of services 13,562 300 - 12,141 3,038 - 29,041 29,572
Purchase of services (109,152) - - (564,400) - - (673,552) (670,735)
Recovery of expenses 254 170 - 17,825 5,745 - 23,994 23,730
Settlement of third party dues 14,471 5,678 564 172,845 6,593 1,058 201,209 209,197
Funds (received) / paid 95,100 (484) (59) 86,395 (52,483) (234) 128,235 164,706
(b) Transaction with Other Related Companies
Group HMS CAI PCL Total 2018 Total 2017
Sale of goods - 67,681 5,019 72,700 90,799
Purchase of goods (8,629,817) (8,148) (1,580,712) (10,218,677) (8,466,466)
Sale of services - 7,311 - 7,311 6,011
Purchase of services (39,288) (2,036) (15,718) (57,042) (54,877)
Interest income received - - - 373,889 6,811
Recovery of expenses (15) (76,662) - (76,677) (80,345)
Funds paid 8,896,167 739 1,764,656 10,661,562 8,004,290
Company HMS CAI PCL Total 2018 Total 2017
Sale of goods - 67,681 5,019 72,700 90,799
Purchase of goods (8,611,082) (7,590) (1,580,712) (10,199,384) (8,452,894)
Sale of services - 7,311 - 7,311 6,011
Purchase of services (39,288) (2,036) (15,718) (57,042) (54,877)
Interest income received - - - 373,889 6,811
Recovery of expenses (15) (76,662) - (76,677) (80,345)
Funds paid 8,877,431 - 1,764,656 10,642,087 7,990,802
NOTES TO THE FINANCIAL STATEMENTS
167
(c) Transaction with Associate
Group PMS Total 2018 Total 2017
Purchase of services (57,723) (57,723) (55,905)
Funds / paid 68,336 68,336 60,567
Company PMS Total 2018 Total 2017
Purchase of service (57,723) (57,723) (54,355)
Funds paid 67,610 67,610 59,482
(d) The receivables from related companies and payables to related companies on sale / purchase of goods / services are set out in
Note 18 and Note 23 respectively. These receivables and payables are unsecured, interest free and have no fixed repayment terms.
(e) The subsidiary companies utilise certain facilities of the Company free of charge and part of the accounting and administrative
functions of the subsidiary companies are also performed by the Company for which no charges are made.
(f) Terms and Conditions for recurrent transactions with related parties
All related party transactions are carried out in the ordinary course of business and transacted at normal business terms. The sales to
and purchases from related parties are made in terms of equivalent to those that prevail in arm’s length transactions and comparable
with those that would have been charged from unrelated companies. All related party outstanding balances at the year-end are
unsecured and are to be settled in cash. The Group does not have any material commitments to related parties.
31.3 Non-recurrent related party transactions
The Group entered into the non-recurrent related party transactions for the year 2018 as follows:
(a) Non-recurrent related party transactions
Related party Ceylon Pioneer Poultry Breeders Limited
Nature of the transaction Financial support for settlement of long outstanding balance due to CGE
Terms of transaction Not applicable
Total Value Rs. 101,124,000
As a % of Equity 1.44%
As a % of Total Assets 0.99%
(b) There were no any non-recurrent Related Party Transactions entered during the year, other than the transactions specified above as
per the CSE Listing Rule 9.3.2.
Ceylon Grain Elevators PLC | Annual Report 2018168
All amounts in Sri Lankan Rupees thousandsAs at 31 December
32. EVENTS AFTER THE REPORTING PERIOD
There are no events which require adjustment to, or disclosure in the Financial Statements except for the following.
The Directors propose for payment a First and Final dividend of Rs. 3.00 per share for the year ended 31 December 2018 on 8 April 2019.
Under the Inland Revenue Act No. 24 of 2017, a withholding tax of 14% will be imposed on dividends declared.
33 COMPARATIVE INFORMATION
33.1 Changes in Significant Accounting Policies
The Group has initially applied SLFRS 15 (3.10) and SLFRS 9 (3.3) from 01 January 2018. A number of other standards are also effective
from 01 January 2018 but they do not have a material effect on the Group’s financial statements.
Due to the transition methods chosen by the Group in applying these standards, comparative information throughout these
financial statements has not been restated to reflect the requirements of the new standards.
33.1.1 SLFRS 15 - Revenue from Contracts with Customers
SLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced
LKAS 18 Revenue, LKAS 11 Construction Contracts and related interpretations. Under SLFRS 15, revenue is recognised
when a customer obtains control of the goods or services. Determining the timing of the transfer of control - at a point in time or
over time - requires judgment.
The Group has adopted SLFRS 15 using the cumulative effect method (without practical expedients), with the effect of initially
applying this standard recognised at the date of initial application (i.e.1st January 2018). Accordingly the information presented
for 2017 has not been restated- i.e. it is presented, as previously reported, under LKAS 18, LKAS 11 and related interpretations.
Additionally, the disclosure requirements in SLFRS 15 have not generally been applied to comparative information.
There was no impact on the comparative figures presented in the Statement of Financial Position, Statement of Changes in Equity
and Statement in Cash Flows. Further the changes in accounting policy has no impact on the reported amount of accumulated
profits as at 1 January 2018.
33.1.2 SLFRS 9 - Financial Instruments
SLFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell
non-financial items. This standard replace LKAS 39 Financial Instruments: Recognition and Measurement.
33.1.2.1 Classification and measurement of Financial Assets and Financial Liabilities
SLFRS 9 contains three principal classification categories for financial assets: measured at amortised cost, FVOCI and FVTPL.
The classification of financial assets under SLFRS 9 is generally based on the business model in which a financial asset is managed
and its contractual cash flow characteristics. SLFRS 9 eliminates the previous LKAS 39 categories of held to maturity loans
and receivables and available for sale. SLFRS 9 largely retains the existing requirements in LKAS 39 for the classification
and measurement of financial liabilities.
NOTES TO THE FINANCIAL STATEMENTS
169
Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively, except as described below.
The Group has used an exemption not to restate comparative information for prior periods with respect to classification
and measurement (including impairment) requirements. Therefore, comparative periods have not been restated. Differences
in the carrying amounts of financial assets and financia1 liabilities resulting from the adoption of SLFRS 9 are recognised in retained
earnings and reserves as at 1st January 2018. Accordingly, the information presented for 2017 does not generally reflect
the requirements of SLFRS 9, but rather those of LKAS 39. However, the impact of adopting this standard has not been recognised
as a revision of opening reserves as it is considered immaterial.
The effect of adopting SLFRS 9 on the carrying amounts of financial assets at 01st January 2018 relates solely to the new impairment
requirements.
The following table and the accompanying notes below explain the original measurement categories under LKAS 39 and the new
measurement categories under SLFRS 9 for each class of the Group’s financial assets and financial liabilities as at 1st January 2018.
Carrying Carrying
amount under amount under
Note LKAS 39 SLFRS 9 LKAS 39 SLFRS 9
Rs.000 Rs.000
Financial assetsTrade and other receivables 20 Loans and receivables Amortised Cost 768,817 768,817
Amount due from related company 18 Loans and receivables Amortised Cost - -
Cash and cash equivalents 21 Loans and receivables Amortised Cost 3,033,328 3,033,328
Financial liabilitiesOther payables 22 Other Financial Liabilities Other Financial Liabilities 589,368 589,368
Amount due to related parties 23 Other Financial Liabilities Other Financial Liabilities 1,583,843 1,583,843
33.1.2.2 Impairment of financial assets
SLFRS 9 replaces the ‘incurred loss’ model in LKAS 39 with an ‘expected credit loss’ (ECL) model. The new impairment model applies
to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity
instruments. Under SLFRS 9, credit losses are recognised earlier than under LKAS 39.
For assets in the scope of the SLFRS 9 impairment model, impairment losses are generally expected to increase and become more
volatile. A simplified “lifetime expected loss model” has been used for balances arising as a result of revenue recognition, as permitted
by the standard, and the Group recognises impairment for only assets that are outstanding for a prolonged period of time and is
based on the management discretion.
Ceylon Grain Elevators PLC | Annual Report 2018170
All amounts in Sri Lankan Rupees thousandsAs at 31 December
34. DIRECTOR’S RESPONSIBILITY
The Board of Directors are responsible for the preparation and fair presentation of these financial statements.
35. NET ASSETS PER SHARE
Group Company
2018 2017 2018 2017
Net assets attributable to ordinary shareholders 6,479,396 5,712,458 4,095,166 3,642,201
Weighted average number of ordinary shares in issue (thousands) 60,000 60,000 60,000 60,000
Net assets per Share (Rs.) 107.99 95.21 68.25 60.70
NOTES TO THE FINANCIAL STATEMENTS
171
FIVE YEAR FINANCIAL SUMMARY
All amounts in Sri Lankan Rupees thousands
2018 2017 2016 2015 2014
Group Operating results for the periodRevenue 17,085,577 15,154,866 14,521,693 13,741,283 11,543,764
Operating profit 1,325,734 1,101,962 1,809,253 1,356,578 260,747
Finance income 373,889 293,310 151,187 27,308 1,253
Finance expense (123,163) (4,054) (8,526) (55,969) (81,673)
Share of results of associate 9,779 8,406 6,494 9,919 4,643
Profit before taxation 1,586,239 1,399,624 1,958,408 1,337,836 184,970
Taxation (375,329) (329,688) (276,692) (159,145) (34,679)
Profit from ordinary activities 1,210,910 1,069,936 1,681,716 1,178,691 150,291
Non - controlling interest 320,415 279,757 (347,807) (235,624) (70,739)
Profit attributable to the Company 890,495 790,179 1,333,909 943,067 79,552
Financial PositionStated capital 1,017,996 1,017,996 1,017,996 1,017,996 1,017,996
Retained earnings 5,461,400 4,694,462 4,048,476 2,776,136 1,833,562
Non-controlling interest 1,556,631 1,266,750 1,026,343 699,188 468,865
Non - current liabilities 480,247 442,479 284,445 228,709 194,500
8,516,274 7,421,687 6,377,260 4,722,029 3,514,923
Intangible assets 24,558 39,445 45,821 58,924 72,028
Property, plant and equipment and investments 2,803,141 2,818,897 2,515,194 2,518,892 2,650,252
Investment in an associate company 41,730 31,951 24,145 18,652 19,033
Biological assets 555,918 501,110 473,534 439,170 430,629
Current assets 8,145,822 6,779,348 5,386,832 3,940,667 3,244,126
Current liabilities (3,054,895) (2,749,064) (2,068,266) (2,254,276) (2,901,145)
8,516,274 7,421,687 6,377,260 4,722,029 3,514,923
CompanyKey ratios and other information Basic earnings / (loss) per share (Rs.) - (Basic / Diluted) 9.60 7.51 13.63 10.25 (0.81)
Dividends per share - propose (Rs.) 3.00 2.00 2.50 1.10 -
Dividends pay out ratio - propose (%) 31.25 26.63 18.34 10.74 -
Market price per share (Rs.) 59.50 66.10 82.90 91.60 41.00
Price earnings ratio (No. of times) 6.20 8.80 6.08 8.94 (50.62)
Debt / equity ratio (No. of times) - - - - 0.46
Interest cover (No. of times) 549.21 138.79 367.45 44.83 0.36
Net assets per share (Rs.) 68.25 60.70 55.62 43.02 32.78
Current ratio (No. of times) 2.06 1.99 2.40 1.82 1.39
Shares traded 7,039,013 12,946,790 32,287,273 33,983,884 13,246,893
US $ Exchange rate (average) 164.04 153.19 147.16 137.01 130.78
US $ Exchange rate (year end spot) 182.75 153.42 150.10 144.06 132.00
Ceylon Grain Elevators PLC | Annual Report 2018172
All amounts in Sri Lankan Rupees thousandsFor the year ended 31 December
VALUE ADDED STATEMENT
2018 2017 2016 2015 2014
Value AddedRevenue 19,912,971 17,682,512 16,919,727 15,778,015 13,286,671
Less: Cost of materials and services (14,300,355) (12,944,647) (11,442,542) (11,383,761) (10,428,035)
Value added by operations 5,612,616 4,737,865 5,477,185 4,394,254 2,858,636
Add:
Other income 33,911 41,600 29,738 13,659 11,770
Finance income 373,889 293,310 151,187 27,308 1,253
Share of profit of associate 9,779 8,406 6,494 9,919 4,643
Total value added 6,030,195 5,081,181 5,664,604 4,445,140 2,876,302
2018 % 2017 % 2016 % 2015 % 2014 %
Value Distribution to:EmployeesSalaries, wages and other benefits 1,452,683 24.09 1,047,240 20.61 1,146,070 20.23 919,156 20.68 707,883 24.61
GovernmentIncome tax 258,477 4.29 180,176 3.55 215,799 3.81 87,152 1.96 28,772 1.00
Sales tax 2,847,943 47.23 2,527,646 49.75 2,398,034 42.33 2,036,732 45.82 1,742,907 60.60
Capital providers and creditorsInterest expenses 1,222 0.02 3,013 0.06 2,356 0.04 30,471 0.69 68,928 2.40
NCI 320,106 5.31 280,707 5.52 348,312 6.15 235,562 5.30 69,784 2.42
ShareholdersDividend 180,000 2.98 120,000 2.36 150,000 2.65 66,000 1.48 - -
Value distributed 5,060,431 83.92 4,158,782 81.85 4,260,571 75.21 3,375,073 75.93 2,618,274 91.03
Value retainedAs depreciation and amortization 262,826 4.36 246,413 4.85 215,693 3.81 193,493 4.35 186,594 6.49
As reserves 706,938 11.72 675,986 13.30 1,188,340 20.98 876,574 19.72 71,434 2.48
Value retained within the business 969,764 16.08 922,399 18.15 1,404,033 24.79 1,070,067 24.07 258,028 8.97
173
All amounts in Sri Lankan Rupees thousands
SHAREHOLDER INFORMATION
1. Analysis of shareholders according to the number of shares as at 31 December 2018
Shareholding Resident Non Resident Total
Number of
shareholders
Number of
shares Percentage
Number of
shareholders
Number of
shares Percentage
Number of
shareholders
Number of
shares Percentage
1 - 1,000 3,433 858,160 1.43 25 12,895 0.02 3,458 871,055 1.45
1,001 - 10,000 1,026 3,628,203 6.05 28 126,661 0.21 1,054 3,754,864 6.26
10,001 - 100,000 207 5,945,051 9.91 10 300,612 0.50 217 6,245,663 10.41
100,001 - 1,000,000 31 7,423,487 12.37 3 1,638,532 2.73 34 9,062,019 15.10
Over 1,000,000 1 5,350,549 8.92 3 34,715,850 57.86 4 40,066,399 66.784,698 23,205,450 38.68 69 36,794,550 61.32 4,767 60,000,000 100.00
Categories of shareholders 2018 2017
Number of shareholders
Number of ordinary
shares PercentageNumber of
shareholders
Number of
ordinary
shares Percentage
Individual 4,487 9,500,022 15.83 4644 9,564,297 15.94
Institutional 280 50,499,978 84.17 314 50,435,703 84.06
4,767 60,000,000 100.00 4958 60,000,000 100.00
Less: Shares held by non public holders
Ultimate parent company (1) (27,270,800) (1) (27,270,800)
Directors (2) (3,197) (2) (3,197)
(3) (27,273,997) (45.46) (3) (27,273,997) (45.46)Total representing the public holding 4,764 32,726,003 54.54 4,955 32,726,003 54.54
Float Adjusted Market Capitalisation
The float adjusted market capitalisation as at 31 December 2018 was Rs. 1,947 Million under Option 5 of Section 7.13.1 (a) of the Listing Rules of
the Colombo Stock Exchange and the Company has complied with the minimum public holding requirement applicable under the said option.
Ceylon Grain Elevators PLC | Annual Report 2018174
All amounts in Sri Lankan Rupees thousandsFor the year ended 31 December
2. List of 20 major shareholders based on their shareholding
As at 31 December 2018 As at 31 December 2017
No. NameNumber of
SharesPercentage of Issued Capital
Number of Shares
Percentage of Issued Capital
1 Prima Limited, Singapore 27,270,800 45.45 27,270,800 45.45
2 Employees Provident Fund 5,350,549 8.92 5,350,549 8.92
3 Supra Limited, Hong Kong 5,179,797 8.63 5,179,797 8.63
4 Eka Limited 2,265,253 3.78 2,265,253 3.78
5 Laugfs Gas PLC 1,000,000 1.67 1,000,000 1.67
6 Mellon Bank N.A. -Commonwealth of Massachusetts 941,581 1.57 941,581 1.57
7 Bank of Ceylon No.1 Account 612,498 1.02 612,498 1.02
8 J.B. Cocoshell (Pvt) Ltd 572,139 0.95 432,403 0.72
9 Mellon Bank N.A - Acadian Frontier Markets Equity Fund 523,037 0.87 523,037 0.87
10 Commercial Bank of Ceylon PLC / Sithijaya Fund Limited 438,524 0.73 418,524 0.70
11 Timex Garments (Pvt) Ltd 400,000 0.67 400,000 0.67
12 E.W. Balasuriya & Co. (Pvt) Ltd 332,529 0.55 - -
13 Mr. B.L. Jayaratne / Dr. Y.S. Liyanage 279,300 0.47 279,300 0.47
14 Seylan Bank PLC / C.N. Rajahmoney 267,354 0.45 242,354 0.40
15 Commercial Bank of Ceylon PLC A/C No. 04 250,000 0.42 - -
16 Deutsche Bank AG as Trustee to Astrue Alpha Fund 236,451 0.39 - -
17 Guardian Fund Management Limited / The Aitken Spence and Associated Companies Executive Staff Provident Fund 202,417 0.34 - -
18 Deutsche Bank AG as Trustee for Guardian Acquity Equity Fund 192,796 0.31 - -
19 Mr. S.B.H. Wanduragala 192,673 0.31 194,573 0.32
20 Hallsville Trading Group Incorporation 173,914 0.28 - -
Total 46,681,612 77.80 45,110,669 75.18
SHAREHOLDER INFORMATION
175
GLOSSARY OF FINANCIAL TERMINOLOGY
Accrual Basis
Recording Revenues and Expenses in the
period in which they are earned or incurred
regardless of whether cash is received or
disbursed in that period.
Capital Employed
Shareholders’ Funds plus Debt.
Contingent Liabilities
A condition or situation existing at the end
of the reporting period due to past events,
where the financial effect is not recognised
because:
1. The obligation is crystallised by the
occurrence or non occurrence of one or
more future events or,
2. A probable outflow of economic
resources is not expected or,
3. It is unable to be measured with
sufficient reliability.
Current Ratio
Current Assets over Current Liabilities.
Quick Ratio
Cash plus Short Term Investments plus
Receivables over Current Liabilities.
Debt / Equity Ratio (Gearing)
Debt as a percentage of Shareholders’ Funds.
Dividend Cover
Earnings per share over dividend per share.
Dividend Payout Ratio
Total Dividend as a percentage of Company
profits.
Dividend Yield
Dividend per share as a percentage of
market price of share at the end of the
period.
Earnings Per Share (EPS)
Profit after tax attributable to Ordinary
Shareholders over weighted average number
of shares in issue during the period.
Enterprise value
Market capitalisation plus debt minus total
cash and cash equivalents.
Earnings Yield
Earnings per share as a percentage of Market
Price per share at the end of the period.
Effective Rate of Taxation
Income Tax including Deferred tax over Profit
Before Tax.
Interest Cover
Profit Before Interest and Tax over Finance
Expenses.
Market Capitalisation
Number of shares in issue at the end the of
period multiplied by the share price at the
end of the period.
Net Assets
Total Assets minus Current Liabilities minus
Long Term Liabilities minus Minority Interest.
Net Asset per Share
Net Assets divided by number of Ordinary
Shares in issue at the end of the period.
Net Debt
Debt minus Cash and Short Term Deposits.
Net Turnover per Employee
Net Turnover over average number of
employees.
Price Earnings Ratio
Market Price of Share over Earnings per
Share.
Return on Assets
Profit After Tax over Average Total Assets.
Return on Capital Employed
Earnings before interest and tax as a
percentage of average of shareholders’ funds
plus total debt.
Return on Equity
Profit after Tax as a Percentage of Average
Shareholders’ Funds.
Shareholders’ Funds
Stated Capital, Capital Reserves and Revenue
Reserves.
Shareholders’ Equity Ratio
Total Equity divided by Total Assets.
Earnings Before Interest and Taxes (EBIT)
Revenue minus Operating Expenses.
Profit Before Tax (PBT)
The amount of profit made by the Company
before tax is deducted.
Profit After Tax (PAT)
Net profit earned by the Company after
all taxation related expenses have been
deducted.
Total Assets (TA)
Non-Current Assets plus Current Assets.
Total Debt (TD)
Long Term Loans plus Short Term Loans and
Overdraft.
Total Debt / Total Assets
Total Debt divided by Total Assets.
Total Value Added
The difference between Revenue (including
Other Income) and Expenses, Cost of
Materials and Services purchased from
External Sources.
Ceylon Grain Elevators PLC | Annual Report 2018176
NOTICE IS HEREBY GIVEN that the 36th
Annual General Meeting of the Company will
be held on Wednesday, 8 May 2019 at the
Sri Lanka Foundation Institute Auditorium,
No.100, Sri Lanka Padanama Mawatha,
Independence Square, Colombo 7 at 10.45
a.m. and the business to be brought before
the Meeting will be:
1. To receive and consider the Report of
the Board of Directors on the State of
Affairs of the Company and the Financial
Statements for the year ended 31
December 2018, with the Report of the
Auditors’ thereon.
2. To declare a First and Final Dividend of
Rs. 3.00 per share for the year ended 31
December 2018.
3. To re-elect Mr. Cheng Koh Chuen,
Bernard, a Director who retires by
rotation at the Annual General Meeting
in terms of Article 87 of the Articles of
Association of the Company.
4. To re-elect Dr. Prathap Ramanujam,
a Director who retires at the Annual
General Meeting in terms of Article
95 of the Articles of Association of the
Company.
5. To consider and if thought fit to pass the
following Ordinary Resolution pertaining
to the re-appointment of Mr. Tan Beng
Chuan, as a Director who is over 70 years
of age, in compliance with Section 211
of the Companies Act No. 7 of 2007
and whose re-appointment has been
recommended by the Board of Directors.
Ordinary Resolution
“That the age limit of 70 years referred
to in Section 210 of the Companies Act,
No. 7 of 2007 shall not apply to Mr. Tan
Beng Chuan, a Director, who is 72 years
of age (having reached 70 years of age
on 14 October 2016) and accordingly
that Mr. Tan Beng Chuan be and is
hereby re-appointed as a Director of the
Company in terms of Section 211 of the
Companies Act No. 7 of 2007”.
6. To consider and if thought fit to pass the
following Ordinary Resolution pertaining
to the re-appointment of Mr. Cheng
Chih Kwong, Primus, as a Director, who is
over 70 years of age, in compliance with
Section 211 of the Companies Act No.
7 of 2007 and whose re-appointment
has been recommended by the Board of
Directors.
Ordinary Resolution
“That the age limit of 70 years referred
to in Section 210 of the Companies Act,
No.7 of 2007 shall not apply to
Mr. Cheng Chih Kwong, Primus, a
Director, who is 70 years of age (having
reached 70 years of age on 30 November
2018) and accordingly that Mr. Cheng
Chih Kwong, Primus be and is hereby
re-appointed as a Director of the
Company in terms of Section 211 of the
Companies Act No. 7 of 2007”.
7. To consider and if thought fit to pass the
following ordinary Resolution pertaining
to the appointment of Mr. Rajanayagam
Nalliah Asirwatham as a Director who is
over 70 years of age, in compliance with
Section 211 of the Companies Act No.
7 of 2007 and whose appointment has
been recommended by the Board of
Directors.
Ordinary Resolution
“That the age limit of 70 years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to Mr. Rajanayagam Nalliah Asirwatham, a Director, who is 76 years of age (having reached 70 years of age on 26 August 2012) and accordingly that Mr. Rajanayagam Nalliah Asirwatham be and is hereby appointed as a Director of the Company in terms of Section 211 of
the Companies Act No. 7 of 2007”.
8. To re-appoint Messrs KPMG, Chartered
Accountants as Auditors and to
authorise the Directors to determine
their remuneration.
9. To authorise the Directors to determine
contributions to charities and other
purposes.
BY ORDER OF THE BOARD
(Sgd.)S S P CORPORATE SERVICES (PRIVATE) LIMITEDSECRETARIES
Colombo, Sri Lanka
10 April 2019
Note:
(a) A member entitled to attend and vote
at the above mentioned meeting is
entitled to appoint a Proxy to attend
and vote instead of him/her. Such
Proxy needs not be a member of the
Company.
(b) A Form of Proxy is annexed to this notice.
(c) The completed Form of Proxy should
be deposited at the Registered Office
of the Company, No. 15, Rock House
Lane, Colombo 15 not later than 48
hours before the time appointed for the
holding of the meeting.
(d) Shareholders/proxy holders are
requested to bring with them their
National Identity Card or any other form
of clear/valid identification and present
same at the time of registration.
NOTICE OF MEETING
177
FORM OF PROXY
I/We...................................................................................................................................................................................................................(NIC No.............................................................................................)
of ...................................................................................................................................................................................................................................................................................... being a member/s of
Ceylon Grain Elevators PLC, hereby appoint ..........................................................................................................................................................................................................................................
(NIC No ........................................................................................) of........................................................................................ or failing him
Mr. Wickrema Senaka Weerasooria of Colombo or failing him
Mr. Cheng Chih Kwong, Primus of Singapore or failing him
Mr. Tan Beng Chuan of Colombo or failing him
Mr. Cheng Eng Loong of Singapore or failing him
Mr. Cheng Koh Chuen, Bernard of Singapore or failing him
Dr. Prathap Ramanujam of Colombo
as my/our Proxy to represent me/us and vote on my/our behalf at the Annual General Meeting of the Company to be held on Wednesday, 8 May 2019,
and at any adjournment thereof and at every poll which may be taken in consequence of the aforesaid Meeting and to VOTE as indicated below:
FOR AGAINST
1. To receive and consider the Report of the Board of Directors on the State of Affairs of the Company and the Financial
Statements for the year ended 31 December 2018, with the Report of the Auditors’ thereon.
2. To declare a First and Final Dividend of Rs. 3.00 per share for the year ended 31 December 2018.
3. To re-elect Mr. Cheng Koh Chuen, Bernard a Director who retires by rotation at the Annual General Meeting in terms
of Article 87 of the Articles of Association.
4. To re-elect Dr. Prathap Ramanujam, a Director who retires at the Annual General Meeting in terms of Article 95 of
the Articles of Association.
5. To re-appoint Mr. Tan Beng Chuan, who is over 70 years of age as a Director of the Company by passing the Ordinary
Resolution set out in the Notice of Meeting.
6. To re-appoint Mr. Cheng Chih Kwong, Primus, who is over 70 years of age as a Director of the Company by passing
the Ordinary Resolution set out in the Notice of Meeting.
7. To appoint Mr. Rajanayagam Nalliah Asirwatham who is over 70 years of age as a Director of the Company by
passing the Ordinary Resolution set out in the Notice of Meeting.
8. To re-appoint Messrs KPMG, Chartered Accountants as Auditors and to authorise the Directors to determine their
remuneration.
9. To authorise the Directors to determine contributions to charities and other purposes.
As witness my/our hand/this .......................................................... day of .......................................................... Two Thousand and Nineteen.
Signature: ..........................................................
Note : Please delete the inappropriate words.
1. Instructions for completion of proxy are noted on the next page
2. A proxy needs not be a member of the Company
3. Please mark ‘X’ in appropriate cages, to indicate your instructions as to voting
Ceylon Grain Elevators PLC | Annual Report 2018178
FORM OF PROXY
INSTRUCTIONS TO COMPLETION OF FORM OF PROXY
1. Kindly perfect the Form of Proxy by filling in legibly your full name and address, your
instructions as to voting, by signing in the space provided and filling in the date of
signature.
2. Please indicate with a ‘X’ in the cages provided how your proxy is to vote on the
Resolutions. If no indication is given the Proxy in his/her discretion may vote as he/she
thinks fit.
3. The completed Form of Proxy should be deposited at the Registered Office of the
Company at No. 15, Rock House Lane, Colombo 15, at least 48 hours before the time
appointed for holding of the Meeting.
4. If the form of proxy is signed by an attorney, the relative power of attorney should
accompany the completed form of proxy for registration, if such power of attorney has
not already been registered with the Company
Note:
If the shareholder is a Company or body corporate, Section 138 of the Companies Act No.7 of 2007 applies to Corporate Shareholders of Ceylon
Grain Elevators PLC. Section 138 provides for representation of Companies at meetings of other Companies. A Corporation, whether a Company
within the meaning of this act or not, may-where it is a member of another Corporation, being a Company within the meaning of this Act, by
resolution of its Directors or other governing body authorise such person as it thinks fit to act as its representative at any meeting of the Company.
A person authorised as aforesaid shall be entitled to exercise the same power on behalf of the Corporation which it represent as that Corporation
could exercise if it were an individual shareholder.
Company Name
Ceylon Grain Elevators PLC
Company Registration No.
PQ 161
Registered O�ce
No.15, Rock House Lane, Colombo 15,
Sri Lanka.
Tel : +94 11 2522556 or 8 / 2523580 /
2526378 to 2526383
Fax : +94 11 2524163
E-mail : [email protected]
Subsidiary Companies
Three Acre Farms PLC
Millennium Multibreeder Farms (Private)
Limited
Ceylon Pioneer Poultry Breeders Limited
Ceylon Livestock and Agrobusiness Services
(Private) Limited
Ceylon Warehouse Complex (Private) Limited
Ceylon Aquatech (Private) Limited
Associate Company
Prima Management Services (Private) Limited
Bankers
Hatton National Bank PLC
Nations Trust Bank PLC
National Development Bank PLC
Sampath Bank PLC
Union Bank of Colombo PLC
Bank of Ceylon
Commercial Bank of Ceylon PLC
Axis Bank Limited
DFCC Vardhana Bank PLC
Cargills Bank Limited
Pan Asia Banking Corporation PLC
CORPORATE INFORMATION
Lawyers
Varners Lanka Law office
D.L. & F. De Saram
Auditors
KPMG, Colombo, Sri Lanka
Company Secretary
S S P Corporate Services (Private) Limited
No. 101, Inner Flower Road, Colombo 3
Board of Directors
Mr. Wickrema Senaka WeerasooriaNon-Executive Independent Chairman
Mr. Cheng Chih Kwong, PrimusExecutive Director and Chief Executive
Officer
Mr. Tan Beng ChuanExecutive Director and Group General
Manager
Mr. Cheng Koh Chuen, BernardNon-Executive Director
Mr. Cheng Eng LoongNon-Executive Director
Mr. Sunil Karunanayake Non-Executive Independent Director
(Demised on 27 May 2018)
Dr. Prathap Ramanujam Non-Executive Independent Director
(Appointed w.e.f. 7 August 2018)
Management
Mr. K.A.R.S. PereraGeneral Manager
Mr. Chng Sun TickAGM (Farms)
Mr. Ang Kian HuatAGM (Farms)
Mr. Akram AnsarAGM (Finance)
Mr. Je� Li Zhen JieAGM (Technical)
Mr. Lalith AbeywardenaAGM (Sales)
Mr. M.C.M. De CostaAGM (Personnel, Security and General Affairs)
Mr. Sumith PeirisAGM (Material Management)
Mr. Neil JayaweeraAGM (Processing)
Mr. Waruna JayathilakaAGM (Human Resources)
CEYLON GRAIN ELEVATORS PLC | ANNUAL REPORT 2018
POWERING
CEYLON
GRAIN
ELEVATORS PLC | AN
NU
AL REPORT 2018
Ceylon Grain Elevators PLCNo. 15, Rock House Lane, Colombo 15, Sri Lanka.Tel : +94 11 2522556 or 8 / 2523580 / 2526378 to 2526383Fax : +94 11 2524163E-mail : [email protected]