CHEMANEX PLC ANNUAL REPORT 2016/17 - … Chemanex PLC | Annual Report 2016/17 OUR VISION To be a globally recognised and responsible corporate leader in manufacturing and …

CHEMANEX PLC ANNUAL REPORT 2016/17

CHEM

AN

EX PLC | AN

NU

AL REPO

RT 2016/17

Name of the CompanyChemanex PlC

Legal Forma Public limited Company incorporated in Sri lanka on 8 august 1974 under the Companies’ ordinance and re-registered under Companies act no. 7 of 2007 on 6 august 2007.

Company Registration Numbernew no. of Company - PQ - 64.old no. of Company - PBS 751

Tax Payer Identification Number(tIn)124007518

Accounting Year End march 31

Parent CompanyCIC holdings PlCno. 199, Kew RoadColombo 2.

Principal Activities Manufacturing and marketing of value-added speciality compounds and intermediates. the Company also acts as agents and Distributors.

Stock Exchange Listingthe ordinary shares of the Company are listed with the Colombo Stock exchange from 16 December 1974.

Registered Office/Head OfficeP.o. Box 188no. 52, Galle Face Court 2,Colombo 3.telephone: 00 94-11-2326845-8Facsimile: 00 94-11-2445050, 2332568e-mail: [email protected]: www.chemanex.com

Auditorsernst & Young Chartered accountants 201, De Saram Place,Colombo 10.

Company Lawyersnithya PartnersAttorneys-at-law

BankersCommercial Bank of Ceylon PlCStandard Chartered Bank PlCHatton National Bank PLC

Company Secretaryt. Wegodapola

Board of DirectorsS. h. amarasekara (Chairman)S. P. S. RanatungaA. V. P. SilvaS. a. B. ekanayakeP. R. Saldinl. n. De S. Wijeyeratne

Corporate Information

Contents our Vision 1the Values 1Financial highlights 2Chairman’s Review 4CEO’s Review 6Board of Directors 8Management Committee Profiles 11Corporate Governance 13Report of the Audit Committee 21Report of the Related Party Review Committee 22Annual Report of the Board of Directors on the State of Affairs of Chemanex PLC 24Directors’ Responsibility for Financial Reporting 30Chief Executive Officer’s and Accountant’s Responsibility Statement 31Independent auditors’ Report 32Statements of Profit or Loss and Other Comprehensive Income 33Statements of Financial Position 34Statements of Changes in equity 36Statements of Cash Flows 38notes to the Financial Statements 40Decade at a Glance 88Group Structure 90Information to Shareholders and Investors 91Corporate Information Inner Back Cover

Design & Concept by: Optima Designs (Pvt) Ltd.Printed by: Printage (Pvt) Ltd.

1Chemanex PLC | Annual Report 2016/17

OUR VISION

To be a globally recognised andresponsible corporate leader inmanufacturing and exportingvalue-added speciality compoundsand intermediates.

THE VALUES THATDEFINE US…

Daring to Envision Innovation and Invention

Commitment towards Excellence One Family Unbroken A Deep-Rooted Culture of Professional Ethics

Pioneering Global Leadership Sustainability as Strength


Financial Highlights

Company Group Year ended 31, March 2017 2016 Change 2017 2016 Change % % Earnings Highlights & Ratios Revenue Rs.'000s 1,373,040 1,222,407 12.32 1,547,522 1,444,004 7.17 Profit before Tax Rs.'000s 223,586 107,645 107.71 99,918 79,208 26.15 Taxation Rs.'000s 27,346 22,447 21.82 31,943 27,056 18.06 Profit attributable to Equity Holders Rs.'000s 196,240 85,198 130.33 66,793 39,881 67.48 Total Comprehensive Income for the year Rs.'000s 265,495 193,493 37.21 144,127 147,451 (2.25) Dividends Rs.’000s 47,250 31,500 50 47,250 31,500 50 Earnings per Share Rs. 12.46 5.41 130.31 4.24 2.53 67.48Dividend Cover No. of Times 4.15 2.7 53.56 1.36 1.46 (7.1)Return on Shareholder's Equity % 12.09 6.07 99.35 3.44 2.59 32.49Pre-tax Return on Shareholder's Equity % 13.78 7.67 79.77 5.34 4.46 19.93Return on Assets % 11.85 5.92 100.07 3.28 2.48 32.62Interest Cover No. of Times 13.73 19.26 (28.74) 7.12 11.72 (39.27)Working Capital Cycle days 169 209 (18.80) 159 200 (20.48) Balance Sheet Highlights & Ratios Total Assets Rs.'000s 1,849,812 1,707,757 8.32 2,099,839 2,129,472 (1.39)Total Debts Rs.'000s 89 127,767 (99.93) 89 131,325 (99.93)Net Debt Rs.'000s (372,424) 125,880 (395.86) (549,033) 106,029 (617.81)Shareholder's Funds Rs.'000s 1,622,614 1,404,368 15.54 1,869,858 1,777,783 5.18 No. of Shares in Issue 000s 15,750 15,750 - 15,750 15,750 - Net Assets per Share Rs. 103.02 89.17 15.54 118.72 112.88 5.18 Debt/Equity % 0.01 9.10 (99.94) 0.005 7.39 (99.94)Debt/Total Assets % 0.005 7.48 (99.94) 0.004 6.17 (99.93)Current Ratio No. of Times 5.85 4.08 43.44 9.62 5.69 69.03


Company Group Year ended 31, March 2017 2016 Change 2017 2016 Change % %

Market/Shareholder InformationMarket Price per Share Rs. 55.00 63.00 (12.70) 55.00 63.00 (12.70)Market Capitalisation Rs.'000s 866,250 992,250 (12.70) 866,250 992,250 (12.70)Enterprise Value Rs.'000s 493,826 1,118,130 (55.83) 359,724 1,134,890 (68.30)Price Earnings Ratio No. of Times 4.41 11.65 (62.09) 13.48 21.5 (37.3)Dividend per Share Rs. 3 2 50 3 2 50 Dividend Payout % 24.08 36.97 (35) 73.53 68.32 8 Dividend Yield % 5.45 3.17 72 5.45 3.17 72 ROCE % 14.56 7.89 84 5.37 3.44 56 Value Addition Information Revenue Rs.’000s 1,378,689 1,233,600 12 1,553,290 1,455,576 7 Add : Other Income Rs.’000s 171,128 40,404 324 20,978 37,218 (44) Share of profits of equity accounted investees Rs.’000s - - 9,609 20,667 (54)Less : Cost of materials & services Rs.’000s (1,217,513) (1,078,811) 13 (1,339,070) (1,294,393) 3 Total value added Rs.’000s 332,304 195,193 70 244,807 219,068 12 Economic Value Added Rs.’000s 332,304 195,193 70 244,807 219,068 12 Distributed to Government Rs.’000s 33,285 29,374 13 38,336 34,518 11 Employees Rs.’000s 79,321 79,209 0.14 105,608 136,414 (23)Shareholders Rs.’000s 47,250 31,500 50 49,589 33,390 49 Others Rs.’000s 172,448 55,110 213 51,274 14,746 248 Total No. of Employees Nos. 100 99 1.01 126 132 (4.55)


Chairman’s Review

Mr. S. H. AmarasekeraChairman

On behalf of the Board of Directors I am pleased to present to you a review of your Company for the year ended 31st March 2017. The Annual Report together with the audited financial statement for the year ended 31st March 2017 of the Company and Group, provides our shareholders with an overview of our operations.

Chemanex Group has generated satisfactory results from its local and export operations for the year. Local trading operation managed to add significant contribution to the Group’s bottom line, subject to stringent provisioning measures introduced during the year on stocks and debtors. However, our export operations could not achieve targeted results due to the failure of some of our products in the export markets.

CAL Exports Lanka (Pvt) Ltd, our flagship export company, recorded a turnover of Rs. 178 Mn and a profit of Rs. 15 Mn for the year compared to the previous year recorded profit of Rs. 25.8 Mn. Chemanex Exports (Pvt) Ltd, a fully owned subsidiary of Chemanex PLC, could not reach its budgeted targets and generated a loss of Rs. 2 Mn from its operations.

Chemcel (Pvt) Ltd, in which Chemanex had 23% stake, as previously communicated ceased operations in the previous year, as the major shareholder ADM was not convinced of the project’s continued viability. ADM has fully withdrawn from Chemcel in January 2017. The Company will be liquidated after disposing the building to a prospective buyer, situated at Mirigama EPZ.

Commercial Insurance Brokers (Pvt) Limited in which Chemanex has a 40% stake, performed satisfactorily during the year. Rainforest Eco Lodge (Pvt) Ltd, in which Chemanex has 20% stake, continued making losses this year too.

Whilst local trading operations performed well during the year, our paints distribution operation failed to achieve the targeted results. The Company launched a new product range targeting the construction industry in Sri Lanka with the collaboration of KAO Japan, during the month of March 2017. It is expected the product to generate significant results in the coming year.

Chemanex PLC recorded a turnover of Rs. 1,373 Mn for the year and accordingly recorded a profit of Rs. 196 Mn against a Rs. 85 Mn profit made in the previous year. The profit of Chemanex PLC includes a sum of Rs. 145 Mn received from capital reduction exercise of Chemcel (Pvt) Ltd.

The Group turnover at Rs. 1,547 Mn. Recorded an increase of 7% in comparison to the previous year. Profit after tax stood at Rs. 70.5 Mn for the year compared to Rs. 45.9 Mn in the previous year which profit was arrived at after a provision of Rs. 81 Mn for the fall in value in the investment in Chemcel (Pvt) Ltd.

The Board declared an interim dividend of Rs. 2.00 per share during the year and now recommends a final dividend of Rs. 1 per share for the year 2016/17.


New appointments The Company was fortunate to have several leading personalities in the mercantile sector joining the Board during the course of the year. Dr. S A B Ekanayake was appointed on the 29th August 2016 as an Independent Non-Executive Director. Mr. L N De S Wijeyeratne as an Independent Non-Executive Director and Mr. P R Saldin as a Non-Executive Director were appointed to the Board on 8th February 2017.

Mr. M W R Malalasooriya appointed as CEO of the Company on 1st December 2016.

ResignationsMr. S S Kulatunga, who served the Board as an Independent Non-Executive Director resigned from the Board of Chemanex PLC with effect 12th November 2016, and I thank him for his contribution to the deliberations of the Board. I take this opportunity to thank our local and foreign customers for their continued support. I also wish to thank my colleagues on the Board for their valuable advice and guidance and look forward to their continued support in a challenging year ahead. Finally, I also take this opportunity to thank our employees and shareholders for the faith shown in the Company and look forward to their continued support in the future.

S. H. AmarasekeraChairman

22 June 2017


CEO’s Review

Mr. Randeewa MalalasooriyaChief Executive Officer

Penning down a few words of the company’s performance for its annual report is indeed a privilege and something that I have looked forward to since assuming office, for the mere fact that the annual report is the most potent form of communication regarding the company to both, our shareholders and the general public.

Chemanex PLC has over the past year witnessed sustained growth and increased its productivity and efficiency within the organization internalizing the process to be full proof irrespective of external factors that affect our performances.

In this endeavor of sustaining and continuing our commitment to excellence I am both proud and humbled by the dedication and determination shown by our team who have at all times - both good and bad, stood the test of time and continue to achieve greater heights while contributing to the bottom line and its vibrant culture.

Local OperationsChemanex PLC, recorded an increase in turnover of 12% compared to last year. The Company recorded a profit of Rs. 196 Mn for the year compared to Rs. 85 Mn as at last year supported by gain resulted by the capital reduction from one of it’s subsidiary, Chemcel (Pvt) Ltd.

The Estate Chemical department generated satisfactory results by expanding its turnover as well as the profitability during the year. Measures have been taken to further expand its operations in the coming year.

The Industrial Chemical department which is known for quality products has continued its performance from last year and expanded upon it. The department which provides speciality products for the detergent and skin care industry envisages much room for future growth.

The pigments we supply to the paint and printing ink industry have been recognised for its quality together with services provided by us. We are focused on becoming the market leader in this specialised area of supply. The industry is an expanding one, and we believe that we could achieve our set goals for the upcoming year which is to be the market leader in this area of business. We are more focused on training and development of the team members.

The adhesives department which specialises in the supply of adhesives for the corrugating industry has also witnessed a growth during the past year. The supplying of adhesives to the packaging and corrugated industry has shown progress and we believe that it is an area that has more scope for growth and improvement which will be another area of primary focus of the Company. Apart from the adhesives we also now supply packaging material to the industry and this also has shown potential in terms of growth and volumes.

In addition, we have been recognized as a leading supplier of chemicals for the Rubber Plantation Sector, Latex Industry and Dry Rubber Industry. Our associates with these industries last for the past many decades and the clientele includes all the leading manufacturing companies in the industry.


The revenue generated from these sectors has immensely contributed towards the greater performance of the local trading division and also in the path of expansion during coming years.

Our paint operations did not generate expected results due to overall drop in volumes witnessed in the industry. We have done a restructuring to get better profitability and it has shown better results in latter part of the year. .

Chemanex Group results for the year remained below the budget as exports continued to be adversely impacted with the turbulence and uncertainties in Global markets and issues faced in local operations as explained above. The Group turnover, at Rs. 1,547 Mn records an increase of 7% in comparison to the previous year. The profit after tax stood at Rs. 70.5 Mn for the year.

Our investment with Commercial Insurance Brokers (Pvt) Limited performed satisfactorily during the year.

Construction Chemical Business between Chemanex & KAO Japan The launching ceremony was held under the patronage of Prof. Anura Nanayakkara from the University of Moratuwa. Further strengthening of the new affiliation between Chemanex and KAO Japan a world renowned Group, will pave the way to elevate the country’s construction industry through the introduction of world class specialty compounds. There has been a growing demand for construction solutions since 2009. This is one of the main reasons why we conducted a comprehensive study on

the industry and identified the gaps in the market. We believe the partnership with KAO will not only create a niche in the new market segment for Chemanex, but also benefit the local construction chemical market with the introduction of high performance and superior quality products with global recognition.

I take this opportunity to thank the Chairman Mr. Harsha Amarasekera and Board of Directors for their support and valuable guidance. I believe I would be failing in my duty if I do not mention our valuable customers, shareholders and suppliers who have placed their trust in us, and our products and believe that they would continue to do so in the years to come.

I have no doubt that we would continue to do our best, by our values and by our talents to ensure that the business reaches its true potential in the coming years, and I look forward to the challenges it would present us with a sense of excitement.

Randeewa MalalasooriyaChief Executive Officer

22 June 2017


Board of Directors

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1. Mr. S. H. Amarasekera* - Chairman

Mr. Amarasekera, President’s Counsel was appointed to the Board of Chemanex PLC as Chairman on 1st April 2015.

Mr. Amarasekera has a wide practice in the original courts as well as in the appellate courts. He specializes in Commercial law, Business Law, Securities Law, Banking Law and Intellectual Property Law.

He also serves as an Independent Director in several leading listed companies in the Colombo Stock Exchange including CIC Holdings PLC (Chairman), Vallibel One PLC, Expo Lanka Holdings PLC, Royal Ceramics Lanka PLC, Amana Bank PLC, Chevron Lubricants Lanka PLC, Taprobane Holdings PLC and Amaya Leisure PLC. He is also the Chairman of CIC Agri Businesses (Private) Limited.

2. Mr. S. P. S. Ranatunga* - Director

Joined the Board of Chemanex PLC on 31st October 2005. Managing Director/CEO of CIC Holdings PLC. Holds a degree from the University of Delhi and a Masters in Business Administration, UK. Non Executive Director of a number of unlisted companies in the CIC Group including Akzo Nobel Paints Lanka (Pvt) Limited and an Independent Director of Seylan Bank PLC. He is the Chairman of the Ceylon Chamber of Commerce and has led Sri Lanka Chamber of Commerce delegation to various countries.

In addition, he had been a pioneer in coordinating and setting up of CIC Agribusinesses which is the premier agricultural company in Sri Lanka. He has helped in developing the seed to shelf concept where 20,000 farmer families are helped to bring produce to end consumers. He has also studied the agricultural measurement and productivity systems in many countries.

3. Mr. A. V. P. SILVA* - Director

Appointed to the Board of Directors of Chemanex PLC on 24th September 2001. Mr. A.V.P. Silva is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka (F.C.A.) and also a Fellow Member of the Association of Accounting Technicians of Sri Lanka (F.M.A.A.T.) In addition, he has the Certificate of Professional Study (Project Analysis) from Arthur De Little Management Education Institute, USA and the Executive Program on Corporate Management (EPCM) from the Association for Overseas Technical Scholarship (AOTS) Japan.

Mr. Silva is the Managing Director/Chief Executive Officer of CIC Feeds (Pvt) Limited, CIC Vetcare (Pvt) Limited, CIC Poultry Farms Limited and CIC Bio Security Breeder Farms Limited. He is a Director of Crop Management Services Limited, CAL Exports Lanka (Pvt) Limited and CIC Holdings PLC. He is also a Non-Executive Director of Asia Broadcasting Corporation Private Limited.

* Non-executive Director * * Independent Non-executive Director


4. Dr. S. A. B. Ekanayake** - Director

Dr. Ekanayake was appointed to the Chemanex Board on 29th August 2016. He is a former Chairman of the Ceylon Chamber of Commerce, the Industrial Association of Sri Lanka and International Natural Rubber Council. He has had an illustrious career in public service serving as a Senior Economist of the Mahaweli Authority, Director on the Boards of the State Plantations Corporation and JEDB, Director of Planning to the Ministry of Plantation Industries and Director General of the Ministry of Public Administration. He left his two decade long public service and joined Unilever Sri Lanka and served as Director – Human Resources and Corporate Relations for 8 years. He serves at present on a number of boards of listed companies and non-listed companies. Dr. Ekanayake holds a B.A. (Hons) and MSc (Agriculture) from the University of Peradeniya and a Ph.D in Economics from the Australian National University. He is also a Fellow Member of the Institute of Certified Professional Managers.

5. Mr. P. R. Saldin* - Director

Mr. Saldin was first appointed to the Board of Directors of Chemanex PLC in 1999 and served as a Non Executive Director till 2005. During this period he also served as a Director of CIC Holdings PLC. On leaving the CIC Group he functioned as Country Controller and Group Finance Director for Shell Sri Lanka and subsequently as Group Chief Operating Officer of Browns Group of Companies and Managing Director of Brown Investment PLC.

He currently is employed as Director of Paints & General Industries Ltd, the holding Company of CIC Holdings PLC and Director/Chief Executive Officer of Polypak Secco Ltd. He was re-appointed to the Board of Chemanex PLC on 8th February 2017. He also serves on the Board of Directors of CIC Holdings PLC.

Rimoe Saldin is a Fellow of the Institute of Chartered Accountants of Sri Lanka. He is also a Fellow of the Chartered Institute of Management Accountants in the United Kingdom and a Certified Management Accountant, Australia. He is an alumni of the Asian Institute of Management, Manila, with over 20 years of top management level experience. He has a career spanning the areas of Finance, Human Resource Development, General Management and Operations.

6. Mr. L. N. De S. Wijeyeratne** - Director

Mr. L. N. De S. Wijeyeratne is a fellow of the Institute of Chartered Accountants of Sri Lanka and counts over thirtyfive years of experience in Finance and General Management both in Sri Lanka and overseas. He was the former Group Finance Director of Richard Pieris PLC and also held senior management positions at Aitken Spence & Company, Brooke Bonds Ceylon Ltd and Zambia Consolidated Copper Mines Limited.

Mr. Wijeyeratne is a member of the Quality Assurance Board and the Corporate Governance Committee of the Institute of Chartered Accountants of Sri Lanka and was a former member of the Sri Lanka Accounting Standards Monitoring Board. He is presently an Independent Director and Audit Committee Chairman of several listed entities.

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7. Ms. Wegodapola - Company Secretary

Joined CIC Group in 2007 and appointed as the Company Secretary to Chemanex on 1 April 2016. An Attorney-at-Law and holds a Bachelor of Laws (LLB) degree from the University of Colombo. She is also the Company Secretary for many unquoted subsidiaries of CIC Group. Presently serves as the General Manger – Legal of CIC Holdings.

Board of Directors Contd.


Management Committee Profiles

1. Mr. Randeewa Malalasooriya

Appointed to Chemanex PLC in December 2016. He was serving as Managing Director, Lafarge Maldives (Pvt) Limited and General Manager –Geocycle at Holcim (Lanka) Limited. Graduated with a Bachelor of Science degree in the University of Sri Jayewardenepura and has a MBA from the Cardiff Metropolitan University, UK. Also he is a lead auditor and a certified trainer for ISO 9001, ISO 14001, OHSAS 18001. He is a Charted Environmentalist and serves as Council Member the Institute of Environmental Professionals Sri Lanka (IEPSL) & also a National Council Member of Lanka Responsible Care Council.

2. Mr. A. N. Sugathapala

Joined the Company in 2005 and presently functions as Chief Operating Officer. Holds a B.Sc. Administration (Econ.) (Honours) Degree from the University of Sri Jayewardenepura. A Fellow of The Institute of Chartered Accountants of Sri Lanka and holds a Master’s Degree in Business Administration (Marketing) from Charles Stuart University, Australia. Also an Associate Member of the Institute of Chartered Ship Brokers, U.K.

3. Mr. W. J. Y. P. De Mel

Joined the Company in 1988 and presently functions as Asst. Manager – Exports. Accounts for more than 20 years of extensive exposure in International Marketing & Logistics Management. He holds an Advance Diploma in Logistics Management from NIBM and Diploma in International Trade, Shipping and Logistics from the Institute of Commercial Studies validated by the Institute of Chartered Shipbrokers, London.

4. Mr. B. M. C. D. Sarathchandra

Joined the Company in 2005 and presently functions as Engineering Manager. An Associate Member of the Institution of Engineers Sri Lanka and holds a B. Sc. Engineering Degree specialized in Production Engineering from the University of Peradeniya. Also holds Masters Degree in Business Administration from the University of Colombo.

5. Mr. G. G. Wellala

Joined the Company in 1992 and presently functions as the Marketing Manager. Holds a B.Sc. (Agriculture) Degree from the University of Peradeniya. Accounts for more than 17 years of extensive experience in Industrial Chemicals, especially Estate Chemicals.

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6. Mr. S. Abeyrathne

Joined the Company in 2013 and presently functions as Deputy Marketing Manager. Holds a B.Sc (Agriculture) Degree from the University of Peradeniya and holds a Masters Degree in Business Administration (marketing) from the University of Peradeniya.

7. Mr. D. N. Maithripala

Joined the company in 1995 and presently functions as Assistant Factory Manager CAL Exports Lanka (Pvt) Ltd. Accounts for more than 20 years of extensive exposure in manufacturing and quality management. He holds an Advance Diploma in Industrial Engineering from NIBM ,Diploma in Laboratory Technology in chemistry from the Institute of Chemistry Ceylon and the Quality Management from the Sri Lanka Standards Institution.He has undergone Technical Training at AOTS Japan.

8. Ms. M. Eshani

Joined the company in 1994 and presently functions as a Product Manager. During her career of 22 years she obtained extensive exposure in sales and marketing especially in rubber industry related chemicals.

9. Mr. Panchama Pannilarathne

Joined CIC Group in 2016 and presently serves as the Accountant. He is an Associate Member of Institute of Chartered Accountants of Sri Lanka. And also is a Member of the Association of Accounting Technicians of Sri Lanka. He holds a B.Sc in Accountancy from the University of Sri Jayewardenepura. He has nearly 7 years of experience in the fields of Finance, Auditing & Risk Management. He also serves as a Governing Council member for Young Chartered Accountants Forum of Sri Lanka

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Management Committee Profiles Contd.


Corporate Governance

POSITION STATEMENTChemanex PLC and its Subsidiaries endorse and are fully committed to the Code of Best Practices on Corporate Governance. Transparent governance certainly contributes to value creation and improves results of the organisation, which would in turn build trust among stakeholders.

Chemanex PLC has taken all feasible steps to adhere to the Code of Best Practice on Corporate Governance issued by the Institute of Chartered Accountants of Sri Lanka, together with the Securities and Exchange Commission of Sri Lanka. Further, the Company adheres to the Corporate Governance Requirements under the Listing Rules published by the Colombo Stock Exchange.

Following is a complete disclosure of our adherence to the Code of Best Practice on Corporate Governance by Chemanex Group.

CODE OF BEST PRACTICE ON CORPORATE GOVERNANCE

SECTION 1 - THE COMPANY

A. DIRECTORSA.1. THE BOARD Principle A.1Every public company should be headed by an effective Board, which should lead and control the Company.

A.1 The Company AdherenceThe Board comprises of a Non-Executive Chairman and five Directors.

A.1.1The Board meets on a quarterly basis or even more frequently if the necessity arises and the Board has met five (5) times during the year under review.

Name of Director Type Attendance (%)

S. H. Amarasekera Non-Executive Chairman 100

S. P. S. Ranatunga Non-Executive Director 100

A. V. P. Silva Non-Executive Director 100

S. S. Kulatunga Independent Non-Executive Director (Appointed on 11/08/2015 and resigned with effect from 11/11/2016 )

100

S. A. B. Ekanayake Independent Non-Executive Director (appointed on 29/08/2016)

100

P. R. Saldin Non-Executive Director(Appointed on 08/02/2017)

100

L. N. De S. Wijeyeratne Independent Non-Executive Director (Appointed on 08/02/2017)

50

A.1.2The Company is managed by a competent Board of Directors who formulates, reviews and monitors the implementation of sound business strategies.

The Board is responsible for the shareholders for creating and delivering sustainable shareholder value. The Board reviews the performance of the Senior Management periodically and ascertains whether the targets set out at the beginning of the review period have been achieved. The Board also ensures the competence of the CEO and Senior Managers of the Company while ensuring succession strategies. The Board periodically reviews the effectiveness of internal controls, compliance with legal and ethical standards and management of risk. The Board has ensured that all stakeholder interests are considered in corporate decisions, whilst ensuring that the Company’s values and standards are set with emphasis on adopting appropriate accounting policies and fostering compliance with financial regulations.

A.1.3The Board collectively and Directors individually act in accordance with the laws of the country as applicable to the business enterprise and the Board obtains independent, professional advice from external parties at the expense of the Company as and when required.


A.1.4The Company has appointed an Attorney-at-Law to function as the Secretary of the Board who ensures that proper Board procedures are followed. A.1.5All Directors bring an independent judgment to bear on issues of strategy, performance, resources and standards of conduct. The Board promotes a conducive environment whereby a demanding contribution from the Non-Executive Directors are welcomed and encouraged. A.1.6Every Director dedicates adequate time and effort in order to ensure that the duties and responsibilities owed by him to the Company are satisfactorily discharged. In addition to attending Board meetings, the relevant Board Members attend Board Sub Committee Meetings as and when required. A.1.7Every Director is satisfactorily aware of matters specific to the industry that the Company is operating in.

A.2 CHAIRMAN AND CHIEF EXECUTIVE OFFICERPrinciple A.2There are two key tasks at the top of every public company, conducting the businessof the Board, and facilitating executive responsibility for management of the Company’s business. There should be a clear division of responsibilities at the head of the Company, which will ensure a balance of power and authority, such that no one individual has unfettered power of decision making.

The Company AdherenceA.2.1The Chairman of Chemanex PLC is a Non-Executive Director who conducts Board proceedings in his capacity as head of the Board of Directors. The CEO is responsible for running the Company’s day-to-day business activities.

A.3 CHAIRMAN’S ROLEPrincipal A.3The Chairman’s role in preserving Good Corporate Governance is crucial. As the person responsible for running the Board, the Chairman should preserve order and facilitate the effective discharge of Board functions.

The Company AdherenceA.3.1The Chairman conducts Board proceedings in an appropriate manner and ensures effective participation of both Executive and Non-Executive Directors, whilst encouraging to make an effective contribution within their respective capabilities for the benefit of the Company.

The Chairman of the Board possesses a wealth of professional and academic qualifications with experience. He ensures good governance and effective discharge of Board functions.

He also maintains the balance of power in the Board, whilst ensuring the Board is incomplete control of the Company’s affairs and obligations towards shareholders andother stakeholders.

A.4 FINANCIAL ACUMENPrinciple A.4The Board should ensure the availability amongst its members of those with sufficient financial acumen and knowledge to be able to offer guidance on matters of finance.

A.4 The Company AdherenceThe Board consists of three senior Chartered Accountants, whose financial acumen and expertise are available on matters relating to finance.

A.5 BOARD BALANCE Principle A.5It is preferable for the Board to have a balance of Executive and Non-Executive Directors.

A.5 The Company AdherenceThe Board consists of six Non-Executive Directors out of which , two are independent.

Corporate Governance Contd.


Board Composition and Directors’ Independence

Name of Director Type Shareholding

S. H. Amarasekera Non-Independent Non-Executive Chairman Yes

S. P. S. Ranatunga Non-Independent Non-Executive Director No

A. V. P. Silva Non-Independent Non-Executive Director No

S. S. Kulatunga Independent Non-Executive Director (Appointed on 11/08/2015 and resigned with effect from 11/11/2016)

No

S. A. B. Ekanayake Independent Non-Executive Director (appointed on 29/08/2016)

No

P. R. Saldin Non-Independent Non-Executive Director (Appointed with effect from 08/02/2017)

No

L. N. De S. Wijeyeratne Independent Non-Executive Director (Appointed with effect from 08/02/2017)

No

A.5.1All six Directors of the Board are Non-Executives including the Chairman of the Company.

A.5.2Two of the six Non-Executive Directors are independent, which amounts to 25% of the Non-Executive Directors appointed to the Board.

A.5.3All Independent Non-Executive Directors are independent of management and free of any business or other relationship that could materially interfere with or could reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgment.

A.5.4Each Non-Executive Director has submitted a signed and dated declaration for the year ended 31 March 2017 of his independence against the specified criteria set out by Schedule H of the Code.

The Board has determined as to the independence of each Non-Executive Director based on annual declaration made by each Non-Executive Director.

A.5.5 & A.5.6The requirement to appoint a Senior Independent Director does not arise as the roles of Chairman and CEO are separated.

A.5.7Chairman meets with the Non–Executive Directors as and when required.

A.5.8There were no concerns raised by the Directors during the year, which need to be recorded in the Board Meeting Minutes.

A.6 SUPPLY OF INFORMATION Principle A.6The Board should be provided in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties.

The Company Adherence A.6The Board is provided with required information in a timely and comprehensive manner. Directors make further inquiries where necessary from the management.

A.6.1The Board of Directors is provided with timely and accurate management information as and when required. The Board is fully aware of all the important developments within the Group and further enquires are made by them where necessary.

A.6.2The Minutes, Agenda and papers required for Board Meetings are provided to the Directors before the meeting, to facilitate its effective conduct.



A.7 APPOINTMENTS TO THE BOARDA.7The Company has a formal and transparent procedure for the appointment of new Directors to the Board.

Principle A.7There should be a formal and transparent procedure for the appointment of new Directors to the Board.

The Company Adherence A.7.1 & A.7.2

The Nominations Committee of CIC Holdings PLC (Parent Company of Chemanex PLC) is effective for Chemanex PLC.

A.7.3Profiles of the Directors is set out on page 08 to 10 giving their qualifications and experience. Upon the appointment of a new Director to the Board, the Company forwards a brief description of the Director to the CSE, who in turn informs the shareholders of the Company.

A.8 RE-ELECTION Principle A.8All Directors should be required to offer themselves for re-election at regular intervals and at least once in every three years.

The Company Adherence A.8.1 & A.8.2As per the Articles of Association of the Company, one third of the Directors excluding Chairman and Managing Director shall retire from office by rotation, once in three years, and are eligible for re-election at each Annual General Meeting.

A.9 APPRAISAL OF BOARD PERFORMANCE Principle A.9Board should periodically appraise their own performance in order to ensure that prime Board responsibilities are satisfactorily discharged.

The Company AdherenceA.9.1, A.9.2 & A.9.3The Board is accountable for the proper stewardship of the Company’s affairs to the shareholders of the Company.

The Board has independent self-assessment procedure, which covers the following basic areas:

Review of the strategy setting process of the Company and the effectiveness of such strategies.

Review the budgetary targets and the progress made in achieving such targets.

Periodic review of the Company’s accounting and financial reporting to assess integrity.

Periodic evaluation of risk exposure to the Company from its operations and measures taken to mitigate such risks.

Periodic review of compliances by the Company with legal and regulatory requirements.

Evaluation of the performance of the CEO, the Management Committee on an annual basis.

To formulate a clear succession plan for senior managerial positions of the Company.

Periodic evaluation of performance of Board Committees.

Monitoring and managing conflicts of interest of management, Board Members and shareholders including misuse of corporate assets and abuse in related party transactions.

A.10 DISCLOSURE OF INFORMATION IN RESPECT OF DIRECTORS Principle A.10Shareholders should be kept advised of relevant details in respect of Directors.

The Company Adherence A.10.1A brief profile including the name, qualifications, experience and other relevant information of the Board members are set out on page 08 to 10.

Related party transactions, which also disclose material business relationships with Directors of the Company are given on page 82 to 87

A.11 APPRAISAL OF CHIEF EXECUTIVE OFFICER Principle A.11The Board should be required, at least on an annual basis to assess the performance of the Chief Executive Officer. The Company Adherence A.11.1 & A.11.2The Board sets long-term and short-term financial and non-financial targets to the CEO and reviews his achievements annually. These targets are set as per the short, medium and long-term goals and objectives of the Company.

B. DIRECTORS’ REMUNERATION Principle B.1Companies should establish a formal and transparent procedure for developing a policy


framework on executive remuneration and for fixing the remuneration packages of individual Directors. No Director should be involved in deciding his or her own remuneration.

B.1.4The remuneration of the Board in total is disclosed in Notes to the financial statements, in page 59.

The Remuneration Committee of CIC Holdings PLC (Parent Company of Chemanex PLC) is effective for Chemanex PLC.

B.1.5The CEO of the Company attends the meetings by invitation and discusses and agrees with the Committee proposals relating to the remuneration of the management staff.

B.2 THE LEVEL AND MAKE UP OF REMUNERATION Principle B.2Levels of remuneration of both Executive and Non-Executive Director should be sufficient to attract and retain the Directors needed to run the Company successfully, but companies should avoid paying more than is necessary for this purpose. A proportion of Executive Directors’ remuneration should be structured so as to link rewards to corporate and individual performance.

The Company Adherence B.2.1 to B.2.9The Committee decides the packages to attract, retain and motivate Executive Directors of the Company. They judge the position of the Company in line with other similar companies. They also take into

consideration the Group policy on annual increments etc., and more concern on the performance of each member.

There are no executive share options available and the gratuity payments are in a uniform manner available to all the employees of the Company.

B.3 DISCLOSURES OF REMUNERATION Principle B.3The Company’s Annual Report should contain a statement of remuneration policy and details of remuneration of the Board as a whole. The Company AdherenceB.3.1

Total of the remuneration paid to the Directors and rest of the staff is set out in Note 11 (b) to the financial statements on page 59.

C. RELATIONS WITH SHAREHOLDERS

C.1 CONSTRUCTIVE USE OF THE AGM AND CONDUCT OF GENERAL MEETINGS.Principle C.1The Board should use the AGM to communicate with shareholders and should encourage their participation.

The Company Adherence C.1.1All proxy votes are counted and if a poll is called the level of proxies lodged on each resolution.

C.1.2A separate resolution is proposed at the AGM on each substantially separate issue, such as adoption of the report and accounts, etc.

C.1.3Chairman of the Audit, Remuneration and Nominations Committees are available to answer questions at the AGM.

C.1.4As per the Companies Act No. 07 of 2007, Notice of the AGM and related papers are sent to shareholders before 15 working days.

C.1.5With every Notice of General Meeting, a summary of the procedures governing voting at General Meetings are circulated to the shareholders.

C.2 MAJOR TRANSACTIONSPrinciple C.2Further to compliance with the requirements under the Companies Act No 07 of 2007, Directors should disclose to shareholders all proposed corporate transactions, which if entered into, would materially alter/vary the Company’s net asset base or in the case of a company with subsidiaries, the consolidated group net asset base.

The Company Adherence C.2.1Company would take steps to appraise the shareholders any ‘Major Transactions’ as and when such transaction is taking place.



D.1 FINANCIAL REPORTINGPrinciple D.1The Board should present a balanced and understandable assessment of the Company’s position and prospects.

The Company AdherenceD.1.1The Board acknowledges its responsibility and takes all the necessary steps to present a balanced and understandable assessment of the Company’s financial statements and other public reports for regulators and to fulfill all statutory requirements.

D.1.2Annual Report of the Board of Directors on the state of affairs of Chemanex PLC is given on pages 24 to 29 contains the declarations made by the Directors in respect of the Corporate Governance requirements.

D.1.3Statement of Directors’ responsibility for the preparation of financial statements is given on page 30.

Auditors Report on the financial statements of the Company for the year ended 31 March 2017 is given on page 32 containing a statement about their reporting responsibilities.

D.2 INTERNAL CONTROL Principle D.2The Board should maintain a sound system of internal controls to safeguard shareholders’ investment and the Company’s assets.

The Company Adherence D.2.1The Directors of the Company review the internal controls of the Company periodically and have reported in the Annual Report of the Board of Directors on the state of affairs of the Company on pages 24 to 29 to the financial statements.

D.3 AUDIT COMMITTEE Principle D.3The Board should establish formal and transparent arrangements for considering how they should apply the financial reporting and internal control principles and for maintaining an appropriate relationship with the Company’s Auditors.

The Company Adherence D.3.1 & D.3.2The Chairman of the Audit Committee is an Independent Non-Executive Director with relevant professional background and experience.

The Chief Executive Officer and the Chief Operating Officer attend the meetings by invitation. During the year, the participation of the members of the Audit Committee Meetings was as follows:Number of Meetings held – 04


L. N. De S. Wijeyeratne (Chairman)

Independent Non-Executive Director -

S. S. Kulatunga Independent Non-Executive Director (resigned with effect from 11/11/2016)

100

P. R. Saldin Non-Independent Non-Executive Director 100

A. V. P. Silva Non-Independent Non-Executive Director 100

S. A. B. Ekanayake Independent Non-Executive Director 100


The Board Secretary functions as the Secretary to the Audit Committee. The Internal Auditors participated for the relevant meetings where their reports were discussed and their attendance was 100%.

The report of the Audit Committee is set out on page 21 of the Annual Report.

D.3.3The Audit Committee has written terms of reference dealing clearly with its authority and duties.

D.4 CODE OF BUSINESS CONDUCT AND ETHICSPrinciple D.4Companies must adopt a Code of Business Conduct and Ethics for Directors, and members of the senior management team and must promptly disclose any waivers of the Code, for Directors or others.

The Company Adherence D.4.1A Code of Business Conduct & Ethics is in place for Directors and members of the senior management team and they have complied with the same.

D.4.2The Chairman has affirmed in his statement non-violation of the provisions of the Code of Business Conduct and Ethics adopted by the Company in accordance with the Best Practice on Corporate Governance issued by The Institute of Chartered Accountants of Sri Lanka.

D.5 CORPORATE GOVERNANCE DISCLOSURESPrinciple D.5The Directors should be required to disclose the extent to which the Company adheres to established principles and practices of good Corporate Governance.

The Company Adherence D.5.1This report address this requirement.

SECTION 2 - SHAREHOLDERS

E. INSTITUTIONAL INVENTORS

E.1 SHAREHOLDER VOTING Principle E.1Institutional shareholders have a responsibility to make considered use of their votes and should be encouraged to ensure their voting intentions are translated into practice.

The Company Adherence E.1.1The Annual General Meeting is used to have an effective dialogue with the shareholders on matters, which are relevant and of concern to the general membership.

E.2 EVALUATION OF GOVERNANCE DISCLOSURESPrinciple E.2When evaluating companies’ governance arrangements, particularly those relating to Board structure and composition, institutional investors should be encouraged to give due weight to all relevant factors drawn to their attention.

The Company Adherence E.2Institutional investors are encouraged to give due weight to all relevant factors drawn to their attention, in relation to the Company’s governance arrangements particularly those relating to Board structure and composition.

F. OTHER INVESTORS Principle F.1Individual shareholders, investing directly in shares of companies should be encouraged to



carry out adequate analysis or seek in independent advice in investing or divesting decisions.

F.1 The Company AdherenceIndividual shareholders are encouraged to carry out adequate analysis or seek independent advice in investing or divesting decisions.

Principle F.2Individual shareholders should be encouraged to participate in General Meetings of companies and exercise their voting rights.

F.2 The Company AdherenceIndividual shareholders are encouraged to participate in the Annual General Meeting and exercise their voting rights.


Report of the Audit Committee

Name of Director

Type No. of meetings

held - 4Attendance

%


S. S. Kulatunga Independent Non-Executive Director (Appointed with effect from 11/08/2015 and resigned with effect from 11/11/2016)

100

S. A. B. Ekanayake

Independent Non-Executive Director 100

P. R. Saldin Non-Executive Director (Appointed with effect from 08/02/2017)

100

L. N. De S. Wijeyeratne

Independent Non-Executive Director (Appointed with effect from 08/02/2017)

-

The Audit Committee assists the Board of Directors in the oversight of the effectiveness of the internal controls over financial reporting, including the integrity of the financial statements of the Company and the Group. The Committee also ensures qualifications and independence of the External Auditors and monitor the performance of the Internal Auditors. Another primary task of the Committee is to ensure the Company’s and the Group’s compliance with legal and regulatory requirements.

The Committee is also responsible for internal audit functions of the Company as well as annual independent audit of the Company’s financial statements. The Committee reviews the future plans and activities of the Internal Audit functions with the Management and the Internal Auditors also ensures that there are no unjustified restrictions or limitations on the Internal Audit functions. The Committee also reviews and approves the appointment of External Auditors. On a regular basis the Committee summons the senior corporate officers to report on the Company’s adherence to the relevant procedures, rules and regulations. Consequently, the Committee reports to the Board regularly regarding the effectiveness of the Company’s internal controls over financial reporting. After reviewing the Internal Financial Statements, the Committee recommends the same to the Board to be published. The Committee also concentrates on the adequacy of disclosure in the Financial Statements as required by the Sri Lanka Accounting Standards, the Companies Act and other relevant financial reporting regulations.

After analysing the internal controls, the Committee is of the view that adequate controls and procedures are in place to provide reasonable assurance that the Company’s investments and assets are protected. Monitoring of Compliance Reports were carried out to ensure the required compliance with statutory requirements. The Committee also noted that the internal controls within the Company are designed to provide reasonable but not concrete assurance to the Directors, in order to monitor the Group’s financial position.

L. N. De S. WijeyeratneChairman – Audit Committee

22 June 2017


Report of the Related Party Review Committee

Composition of the CommitteeIn accordance with the Code of Best Practice on Related Party Transactions, issued by the Colombo Stock Exchange, the Board appointed Related Party Transactions Review Committee comprises of Dr. S A B Ekanayake, Independent Non-executive Director and Mr. A V P Silva, Non-Executive Director. Dr. S A B Ekanayake functions as the Chairman of the Committee.

Terms of Reference of the CommitteeRelated Party Transactions Review Committee was formed by the Board during the year ended 31st March 2017 to assist the Board in reviewing all related party transactions of the Group. The Committee is responsible for,

Developing and recommending the RPT policy consistent with guidelines of CSE for adoption by the Board of Directors of the Company and its subsidiaries.

Making immediate market disclosures on applicable RPT as required by Section 9 of the continuing listing requirement of CSE.

Providing information to the Board of Directors on the RPT of each of the Group Companies.

Making appropriate disclosures on RPT in the Annual Report of the Company as required by the continuing listing requirement of CSE.

The Committee will be scheduling quarterly meetings to review and report to the Board on matters involving RPT falling under its terms of reference.

Activities during the year

Name of Director Type Number of Meetings held – 02 Attendance %

S. A. B. Ekanayake Independent Non-Executive Director (appointed w.e.f 08/02/2017)

100


Two committee meetings were held during the year to identify, review and recommend the related parties and the policy to the Board. The Board of Directors was updated on the related party transactions of the Group companies on a quarterly basis.

Any member of the Committee who has an interest in a RPT under discussion shall refrain from participating in the review discussion. Upon completion of its review of the transaction the Committee may determine to permit or prohibit the RPT. A RPT entered into without pre-approval of the Committee shall not be deemed to violate this policy or be invalid or unenforceable so long as the transaction is brought to the Committee within a reasonable and practical time period. Thereafter it is entered into or after it becomes reasonable apparent that the transaction is covered by this policy. As such all RPT other than the exempted transactions will be reviewed either prior to the transaction being entered into or if the transaction is expressed to be conditional on such review prior to the completion of the transaction.

Dr. S. A. B. Ekanayake ChairmanRelated Party Transaction Committee 22 June 2017


FINANCIAL REPORTSAnnual Report of the Board of Directors on the State of Affairs of Chemanex PLC 24Directors’ Responsibility for Financial Reporting 30Chief Executive Officer’s and Accountant’s Responsibility Statement 31Independent Auditors’ Report 32Statements of Profit or Loss and Other Comprehensive Income 33Statements of Financial Position 34Statements of Changes in Equity 36Statements of Cash Flows 38Notes to the Financial Statements 40Decade at a Glance 88Group Structure 90Information to Shareholders and Investors 91


Annual Report of the Board of Directors on the State of Affairs of Chemanex PLC

GENERALThe Board of Directors has pleasure in presenting to the members, the 44th Annual Report of Chemanex PLC together with the Audited statement of accounts for the year ended 31 March 2017, Auditors Report on such financial statements, conforming to the requirements of the Companies Act. The Report also includes disclosures required to be made under the Listing Rules of the Colombo Stock Exchange as a listed company and are guided by the recommended Best Practice on Corporate Governance of the Institute of Chartered Accountants of Sri Lanka. Chemanex PLC, a public limited liability Company, was incorporated in Sri Lanka on the 28 August 1974 under the Companies’ Ordinance, Chapter 145 of the Revised Legislature Enactments - 1956, quoted in the Colombo Stock Exchange from 16 December 1974 and was re-registered under the Companies Act No. 7 of 2007 on 6 August 2007, with the registration No. PQ 64. REVIEW OF THE YEARThe statement of accounts was accepted and approved by the Board of Directors on June 22nd 2017. The Chairman’s Review (pages 04 to 05 ), and the Chief Executive Officer’s Review (pages 06 to 07 ), in the Annual Report set out the state of affairs and performance of the Company and the Group during the year and incorporate events subsequent to the date of the Balance Sheet. PRINCIPAL ACTIVITIESChemanex PLC, the Group’s holding Company, manages its subsidiaries consisting of a range of business operations which together

constitute the Chemanex Group. The Group is engaged with the manufacturing and marketing of value added specialty compounds and intermediates for the local as well as international markets. Chemanex PLC also acts as agents and distributors in the domestic market. There were no significant changes in the activities of the Company and the Group during the year under review.

PARENT COMPANY AND ULTIMATE PARENT COMPANYThe Parent Company of the Group is CIC Holdings PLC. The ultimate holding Company is Paints and General Industries Limited. SUBSIDIARIESThe Subsidiaries and their activities within the Group and their business activities are described in the Group Structure on page 90 . YASUI LANKA (PVT) LTDYasui Lanka (Pvt) Ltd which is a subsidiary which has been categorized as discontinued operations during the financial year ended 31st March 2017 is under liquidation.

CHEMCEL (PRIVATE) LIMITEDChemcel (Private) Limited which is a subsidiary has been categorized as discontinued operations during the financial year ended 31st March 2017. The Board of Directors are in the process of discussing the commercial viability of the operation of the Company. Provided such discussion leads to the determination that the project is not viable, it is likely that the Company would be subject to liquidation.

EQUITY ACCOUNTED INVESTEES AND THEIR ACTIVITIESThe Equity Accounted Investees within the Group and their business activities are described in the Group Structure on page 90 of this Report. FUTURE DEVELOPMENTSThe Group is in the process of restructuring its export business and the paints operation.

FINANCIAL STATEMENTSThe financial statements of the Company and the Group for the year ended 31 March 2017 which have been prepared in accordance with the Sections 150 and 152 of the Companies Act No. 7 of 2007 and duly signed, are presented on pages 33 to 87 of the Annual Report. ACCOUNTING POLICIESThe accounting policies adopted in the preparation of the financial statements of the Company and the Group are given on pages 40 to 55 of the Annual Report. The accounting policies adopted of the Company and the Group are consistent with those of the previous financial year.

EFFECT OF NEW ACCOUNTING STANDARDSThe financial statements for the year ended 31st March 2017 prepared and presented in this annual report have been prepared based on Sri Lanka Accounting Standard (LKAS/SLFRS) which came to effect from 1st January 2012.


FINANCIAL RESULTS AND APPROPRIATIONS

2017 2016

Company Group Company Group

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

Profit for the year after charging depreciation & Provision 223,586 99,918 107,645 79,208

Of which a deduction is made for tax expenses amounting to (27,346) (31,943) (22,447) (27,056)

196,240 67,975 85,198 52,152

Profit/ Loss from discontinued operation (net of tax) - 2,537 - (6,229)

Other comprehensive income for the year, (net of tax) 69,255 73,615 108,295 101,527

Total Comprehensive Income for the year 265,495 144,127 193,493 147,451

Adjustment for non-controlling interest - 4,922 - 4,052

Profit attributable to Equity Holders 265,495 139,205 193,493 143,399

After adding the un-appropriated profit brought forward from the previous year, amounting to

674,769 1,032,395 631,530 1,037,836

Making available for appropriation an amount, out of which, an interim dividend of

857,575 1,087,769 690,519 1,048,145

Interim Dividend 2016/2017 Rs.2/- per share (31,500) (31,500) (15,750) (15,750)

Leaving a balance of 826,075 1,056,269 674,769 1,032,395

Of which your directors have recommended a final dividend of Rs.1/- per share

(15,750) (15,750) (15,750) (15,750)

Leaving an un-appropriated & carried forward balance of 810,325 1,040,519 659,019 1,016,645

GROUP INVESTMENTDetails of the Investments held by the Company and the Group are given in Notes 17,18,19,26 and 27 to the financial statements. CAPITAL EXPENDITUREExpenditure on the acquisition of Property, Plant and Equipment of the Company and the Group amounted to Rs.3.68 Mn and Rs. 4.24 Mn., respectively. Information relating to the movement in Property, Plant and Equipment is given in Note 15 to the financial statements, on page 63 to 66. MARKET VALUE OF FREEHOLD PROPERTIESFreehold land of the Group acquired in 1975, was valued by a qualified valuer in April 2016. The revaluation of the land was reflected in the books as at that date. Details of the revaluation are provided in Note 15.6 to the financial statements.


Annual Report of the Board of Directors on the State of Affairs of Chemanex PLC Contd.

ENVIRONMENT PROTECTIONThe Company has not engaged in any activity that is harmful to the environment. DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTINGThe Directors are responsible for the preparation of financial statements to reflect a true and fair view of the state of the company affairs. The Directors are of the view that these financial statements have been prepared in conformity with the requirements of the Sri Lanka Accounting Standards, Companies Act No. 7 of 2007, Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 and the Listing Rules of the Colombo Stock Exchange. The Directors’ Responsibility in relation to the financial reporting is given on page 30 which forms an integral part of the Annual Report of the Board of Directors. DIRECTORS’ SHAREHOLDINGThe Directors of the Company, together with their spouses, held 30,777 shares as at 31 March 2017. This amounted to 0.22% of the total number of shares issued by the Company. Shareholding of the Directors together with their spouses are as follows:

As at 31 March Designation 2017 2016

S. H. Amarasekera Chairman (Appointed w.e.f. 01/04/2015) 30,777 30,777

Total 30,777 30,777

RELATED PARTY TRANSACTIONSDirectors’ Interests in transactions or proposed transactions if any, with the Company have been declared and are detailed in Note 40 to the financial statements. The Directors have no direct or indirect interest in any other transaction or proposed transaction with the Company. DIRECTORS’ INTEREST REGISTERThe Directors’ Interest Register is maintained by the Company as per the Companies Act No. 7 of 2007. All Directors have made general disclosures and declarations as provided in Section 192 (2) of the said Act. Each Non-Executive Director has submitted signed and dated declaration of his independence and non-independence against the specified criteria as provided in the Section 7 of Rules on Corporate governance published by the Colombo Stock Exchange. The related entries were made in the Interest Register during the year under review.

DIRECTOR S’ REMUNERATIONDirectors’ remuneration in respect of the Company and the Group, for the financial year ended 31 March 2017 is given in Note 11(B) of the financial statements on page 59 of the Annual Report. APPOINTMENTS AND RESIGNATIONSMr. S. S. Kulatunga resigned from the Board of Chemanex PLC with effect 11 November 2016. Dr. S. A. B. Ekanayake joined the board of Chemanex PLC with effect from 29 August 2016.

Mr. P. R. Saldin joined the board of Chemanex PLC with effect from 08 February 2017Mr. L. N. De S. Wijeyeratne joined the board of Chemanex PLC with effect from 08 February 2017.

DIRECTORSThe names of the Directors as at the end of the accounting period of the Company are as follows:


Name of Director Type

S. H. Amarasekera Non-Executive Chairman

S. P. S. Ranatunga Non-Executive Director

A. V. P. Silva Non-Executive Director

S. S. Kulatunga Independent Non-Executive Director (Appointed on 11/08/2015 and resigned with effect from 11/11/2016 )

S. A. B. Ekanayake Independent Non-Executive Director (Appointed on 29/08/2016)

P. R. Saldin Non-Executive Director(Appointed on 08/02/2017)

L. N. De S. Wijeyeratne Independent Non-Executive Director (Appointed on 08/02/2017)

RETIREMENT BY ROTATION AND RE-ELECTION(a) (i) To re-elect Dr. S. A. B. Ekanayake who retires in pursuant to Article 24(2) of the Articles of Association of the Company. (ii) To re-elect Mr. L. N. De S. Wijeyeratne who retires in pursuant to Article 24(2) of the Articles of Association of the Company. (iii) To re-elect Mr. P. R. Saldin who retires in pursuant to Article 24(2) of the Articles of Association of the Company. (b) To re-elect Mr. A. V. P. Silva who retires in pursuant to Article 24(6) of the Articles of Association of the Company. DIRECTORS’ MEETINGS AND BOARD COMMITTEE MEETINGSThe Board while assuming the overall responsibility and accountability in managing of the Company, has also appointed Board Committees conforming to the Corporate Governance Rules of the Colombo Stock Exchange and Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka.

The number of Directors’ meetings, including Board Committee meetings and the attendance of the Directors at those meetings are as follows:

Number of Board Meetings held during the year – 04


S. H. Amarasekera Non-Executive Chairman 100

S. P. S. Ranatunga Non-Executive Director 100


S. S. Kulatunga Independent Non-Executive Director (Appointed on 11.08.2015 and resigned with effect from 11/11/2016 )

100

S. A. B. Ekanayake Independent Non-Executive Director (Appointed on 29/08/2016) 100

P. R. Saldin Non-Executive Director (Appointed on 08/02/2017) 100

L. N. De S. Wijeyeratne Independent Non-Executive Director (Appointed on 08/02/2017) 50


Annual Report of the Board of Directors on the State of Affairs of Chemanex PLC Contd.

Audit CommitteeNumber of Board Meetings held during the year – 03


L. N. De S. Wijeyeratne (Chairman)

Independent Non-Executive Director 50

S. S. Kulatunga Independent Non-Executive Director (Resigned with effect from 11/11/2016)

100

P. R. Saldin Non-Independent Non-Executive Director 100

A. V. P. Silva Non-Independent Non-Executive Director 100

S. A. B. Ekanayake Independent Non-Executive Director 100

During the Board meeting of Chemanex PLC held on 19th May 2015 it was resolved that Remuneration Committee and the Nominations Committee of CIC Holdings PLC (parent company of Chemanex PLC) will be applicable for Chemanex PLC, with immediate effect.

DIVIDENDSThe Directors have recommended the payment of a final dividend of Rs.1 per share amounting to Rs. 15,750,000/- for the year ended 31 March 2017. Further, as required by the Section 56 (2) of the Companies Act No. 7 of 2007, the Board of Directors confirms that the Company, based on the information available as at present, satisfies the Solvency test immediately after the distribution, and in accordance with the Section 57 of the Companies Act No. 7 of 2007 has obtained a certificate from the Auditors. REVENUEThe revenue generated by the Company amounted to Rs 1,373 Mn. (2015/16 - Rs. 1,222 Mn.) whilst Group revenue amounted to Rs. 1,547 Mn. (2015/16 - Rs. 1,444 Mn). Contribution to Group revenue from different business segments is provided in Note 6 to the financial statements on page 56. TAXATIONTaxation has been computed at the rates, given in Note 12 to the financial statements on page 60 to 61. INDEPENDENT AUDITORSThe financial statements of the Company for the year have been audited by Messrs Ernst and Young, Chartered Accountants. The Report of the Independent Auditors’ on the financial statements of the Company and the consolidated financial statements of the Group is given on page 32 Audit fees, audit-related services and non-audit fees for the current financial year are

Rs. 980,000/- and Rs. 1,772,000/- respectively. The Auditors do not have any relationship other than that of Auditors or interests, in the Company or any of its subsidiaries for the year ended 31 March 2016. Professional services in relation to tax compliance are provided by BDO Partners, Chartered Accountants. CORPORATE GOVERNANCESystems and Procedures are in place as good Corporate Governance is an integral part in today’s corporate culture. The practices in this regard are given in Corporate Governance section of this Report on page 13 to 20.

VISION AND CORPORATE CONDUCTThe vision, mission and the corporate values of the Group are given on the page 1 the business activities of the group are conducted with the highest level of ethical standards in line with the Company vision. EQUITABLE TREATMENT TO SHAREHOLDERSThe Company has made all endeavours to ensure equitable treatment to all shareholders. RISK MANAGEMENTThe Board of Directors and the Management of the Company have put in place a comprehensive risk identification, measurement and mitigation processes. SYSTEMS AND INTERNAL CONTROLSThe Board periodically reviews and ensures that the comprehensive systems of internal controls are in place that require to carry on the business in an orderly manner, to


safeguard assets and secure as far as possible the accuracy and reliability of the financial records of the Group. The Company has outsourced the internal audit function to a firm of Chartered Accountants who reviews and reports on the effectiveness of financial, operational, and compliance controls and risk management of the Group on a regular basis. STATED CAPITALThe Stated Capital of the Company was Rs. 126,250,000/- comprising 15,750,000 ordinary shares as at 31 March 2017. SHARE INFORMATIONInformation relating to earnings, dividends, net assets and market price per share is given in the ten-year summary on page 89 of the Annual Report.

SHAREHOLDINGThere were 1259 registered shareholders holding 15,750,000 ordinary shares of the Company as at 31 March 2017. The distribution of shareholdings is given on page 92 of this Report.

SUBSTANTIAL SHAREHOLDINGA list of the substantial shareholders is given on page 94 of the Annual Report. ANNUAL REPORTThe Board of Directors approved the consolidated financial statements on 31st May 2017. The appropriate number of copies of this Report will be submitted to the Colombo Stock Exchange and the Sri Lanka Accounting and Auditing Standards Monitoring Board. As required by the Section 170 (1) of the Companies Act No. 07 of 2007, duly signed

financial statement of the Company and the group together with Auditor’s Report will also be delivered to the Registrar of Companies for registration on 5 July 2017. COMPLIANCE WITH LAWS AND REGULATIONSThe Company has not engaged in any activity against the prevailing laws and regulations of the country. Compliance in provisions in law and regulations is confirmed to the Board at all Board Meetings of the Company and its subsidiaries.

STATUTORY PAYMENTSThe Directors confirm that to the best of their knowledge, all statutory payments to the government and other Statutory Institutions including employee-related payments have been made on time. Compliance with statutory payments is confirmed to the Board at all Board Meetings of the Company as well as its subsidiaries. HUMAN RESOURCEThe Company’s human resource management policies and practices are designed to retain and develop its employees to ensure their optimum contribution towards the achievement of the Company goals and objectives. GOING CONCERNThe Board of Directors is satisfied that the Company, its subsidiaries and Equity Accounted Investees have adequate resources to continue its operations in the foreseeable future to justify the going concern basis adopted in preparing these financial statements.

EVENTS AFTER THE BALANCE SHEET DATEThere were no material events that occurred subsequent to the Balance Sheet date other than disclosed in Note 37 to the Financial Statements that require adjustment to or disclosure in the Financial Statements. NOTICE OF MEETINGNotice of Meeting of the 44th Annual General Meeting is enclosed. ACKNOWLEDGEMENT OF THECONTENTS OF THE REPORTAs required by Section 168 (1) (k) of the Companies Act No. 7 of 2007, the Board of Directors does hereby acknowledge the contents of this Annual Report. Signed in accordance with the resolution adopted by the Directors. For and on behalf of the Board.

S. H. AmarasekeraChairman

Randeewa Malalasooriya Chief Executive Officer

Thilini WegodapolaCompany Secretary

22 June 2017


Directors’ Responsibility for Financial Reporting

The responsibility of the Directors, in relation to the financial statements of the Company and its subsidiaries, is set out in the following statement.

As per the provisions of the Companies Act No 7 of 2007, the Directors are required to prepare the financial statements for each financial year and present them to a general meeting of the Company. These financial statements consist of the following;

i). An Income Statement, which presents a true and fair view of the profit or loss of the Company and its subsidiaries for the financial year.

ii). A Balance Sheet, which presents a true and fair view of the state of affairs of the Company and its Subsidiaries as at the end of the financial year. Which comply with the requirements of the companies Act.

As per the Act the Directors of the Company are required to ensure, in preparing these financial statements that;

i) the appropriate Accounting Policies have been selected and adopted in a consistent manner and material departures thereof, if any, have been disclosed and explained;

ii) all applicable Accounting Standards, as relevant, have been followed;

iii) judgments and estimates have been made which are reasonable and prudent;

iv) that the Company has adequate resources to continue in operation to justify the application of going concern basis in preparing these financial statements;

v) the Company maintains sufficient accounting records to disclose, with reasonable accuracy, the financial position of the Company and of the Group, and

to ensure that the financial statements presented, comply with the requirements of the Companies Act.

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

The Directors are required to prepare the financial statements and to provide the Auditors with every opportunity to take whatever steps and undertake whatever inspections they may consider to be appropriate to enable them to give their Audit Opinion. The Directors are of the view that they have discharged their responsibilities as set out in this statement.

COMPLIANCE REPORTThe Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company and its subsidiaries, all contributions, levies and taxes payable on behalf of and in respect of the employees of the Company and its subsidiaries , and all other known statutory dues as were due and payable by the Company and its subsidiaries as at the Balance Sheet date have been paid or, where relevant provided for, except as specified in Note 45 to the financial statements covering contingent liabilities. Further, as required by Section 56 (2) of the Companies Act No. 7 of 2007, the Board of Directors confirms that the Company, based on the information available as at present,

satisfies the solvency test immediately after the distribution and in accordance with Section 57 of the Companies Act No. 7 of 2007, have obtained a certificate from the Auditors, prior to recommending the final dividend of Rs. 1 per share for this year, which is to be approved by the shareholders at the Annual General Meeting to be held on 27th July 2017.

By Order of the Board,

Thilini WegodapolaCompany Secretary

22 June 2017


Chief Executive Officer’s and Accountant’s Responsibility Statement

The financial statements are prepared in conformity with the requirements of the Sri Lanka Accounting Standards issued by the Institute of Chartered Accountants of Sri Lanka, Companies Act No. 7 of 2007, Sri Lanka Auditing Standards, the Listing Rules of the Colombo Stock Exchange and Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and Securities and Exchange Commission of Sri Lanka.

The Board of Directors and the Management of the Company accept responsibility for the integrity and objectivity of these financial statements. The estimates and judgments relating to the financial statements were made on a prudent and reasonable basis, in order that the financial statements reflect in a true and fair manner, the form and substance of transactions, and reasonably present the Company’s state of affairs.

To ensure this, the Company has taken proper and sufficient care in installing a system of internal controls and accounting records, for safeguarding assets, and for preventing and detecting frauds as well as other irregularities, which is reviewed, evaluated and updated on an ongoing basis. Internal Auditors have conducted periodic audits to provide reasonable assurance that the established policies and procedures of the Company were consistently followed. However, there are inherent limitations that should be recognised in weighing the assurances provided by any system of internal control and accounting.

The financial statements were audited by the Independent Auditors Messrs Ernst & Young, Chartered Accountants.

The Audit Committee of the Company meets periodically with the Internal Auditors and the Independent Auditors to review the manner in which these Auditors are performing their responsibilities, and to discuss auditing, internal control and reporting issues. To ensure complete independence, the Independent Auditors and the Internal Auditors have full and free access to the members of the Audit Committee to discuss any matter of substance.

Randeewa MalalasooriyaChief Executive Officer

Panchama PannilarathneAccountant

22 June 2017


Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORTTO THE SHAREHOLDERS OF CHEMANEXPLC

Report on the Financial StatementsWe have audited the accompanying financial statements of Chemanex PLC, (“the Company”), and the consolidated financial statements of the Company and its subsidiaries (“Group”), which comprise the statements of financial position as at March 31, 2017, and the statements of profit or loss and other comprehensive income, statements of changes in equity and, statements of cash flow for the year then ended, and a summary of significant accounting policies and other explanatory information.

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

Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we comply with ethical requirements and plan and

perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

OpinionIn our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as at March 31, 2017, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on Other Legal and Regulatory RequirementsAs required by section 163 (2) of the Companies Act No. 07 of 2007, we state the following:

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

b) In our opinion: 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,

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

the financial statements of the Company, and the Group comply with the requirements of sections 151 and 153 of the Companies Act No. 07 of 2007.

22 June 2017Colombo


Statements of Profit or Loss and Other Comprehensive Income

Company GroupFOR THE YEAR ENDED 31 MARCH 2017 2016 2017 2016 Note Rs ‘000 Rs ‘000 Rs ‘000 Rs ‘000

Revenue 6 1,373,040 1,222,407 1,547,522 1,444,004 Cost of Sales (1,104,032) (990,143) (1,250,741) (1,178,813) Gross profit 269,008 232,264 296,781 265,191 Other income 7 171,128 40,404 20,978 37,218 Administrative expenses (85,053) (75,540) (97,172) (91,904)Distribution expenses (122,490) (73,645) (137,820) (76,052)Other expenses 8 (1,969) (10,044) (2,151) (83,359) Results from operating activities 230,624 113,440 80,616 51,092 Finance income 9.1 10,532 101 24,460 12,913 Finance expenses 9.2 (17,570) (5,895) (14,767) (5,463)Net Finance income/ (expenses) (7,038) (5,794) 9,693 7,450 Profit after financing activities 223,586 107,645 90,309 58,542 Share of profit of equity accounted investees, net of income tax 10 - - 9,609 20,667

Profit before tax from continuing operations 11 223,586 107,645 99,918 79,208 Tax expense 12 (27,346) (22,447) (31,943) (27,056)Profit for the year from continuing operations 196,240 85,198 67,975 52,152 Profit/ (Loss) from discontinued operations, net of tax 25 - - 2,537 (6,229)Profit for the year 196,240 85,198 70,512 45,923

Other Comprehensive Income/(Loss)Items that are or may be reclassified to profit or loss; Net gain on fair value of available-for-sale financial assets 66,940 12,546 68,422 10,882 Items that will not be reclassified to profit or loss; Actuarial gain / (loss) on defined benefit plan 31.3 3,215 (14,527) 6,486 (20,326) Tax effect on actuarial gain/(loss) recognised (900) 4,068 (1,293) 4,763 2,315 (10,459) 5,193 (15,563)Gain on revaluation on land - 106,208 - 106,208 Other comprehensive income for the year from continuing operations, net of tax 69,255 108,295 73,615 101,527 Total Comprehensive Income for the Year 265,495 193,493 144,127 147,451 Profit attributable to : Equity Holders of the Company - - 66,793 39,881 Non Controlling interest - - 3,719 6,042 - - 70,512 45,923 Total comprehensive income attributable to : Equity holders of the Company - - 139,205 143,399 Non controlling interest - - 4,922 4,052 - - 144,127 147,451 Basic/Diluted earnings per share from continuing operations (Rs.) 13 12.46 5.41 4.08 2.93 Basic/ Diluted earnings per share (Rs.) 13 12.46 5.41 4.24 2.53 Dividend per share (Rs.) 14 3.00 2.00 3.00 2.00 (Inclusive of proposed dividend)* * Interim dividends paid and final dividends proposed are taken into consideration for the computation of dividend per share. Final Dividend of Rs. 1.00 per share proposed is to be approved at the Annual General Meeting. The Accounting Policies and Notes from pages 40 to 87 form an integral part of these Financial Statements. Figures in brackets indicate deductions.


Statements of Financial Position

Company GroupAS AT 31 MARCH 2017 2016 2017 2016 Note Rs’000 Rs’000 Rs’000 Rs’000

ASSETSNon-Current AssetsProperty, Plant & Equipment 15 237,232 237,194 232,412 233,998Investment Property 16 40,247 - 40,247 -Investments in subsidiaries 17 76,572 76,400 - -Investments in Equity Accounted Investees 18 69,508 69,508 154,040 144,430Available-for-sale financial assets - long term 19 281,578 215,045 281,578 215,045Deferred tax assets 20 10,580 10,949 12,277 13,073Total Non-Current Assets 715,717 609,096 720,554 606,545

Current AssetsInventories 21 291,426 301,367 317,623 347,668Trade & other receivables 22 350,491 369,369 372,818 424,650Staff receivable 23 3,026 3,977 3,337 4,326Due from related companies 24 85,403 69,861 1,121 69,861Assets held for sale from discontinued operations 25 - - 92,580 445Equity accounted investees held for distribution 18.1 - 272,353 - 420,444Assets held for sale - Other 26 - 40,247 - 40,247Available for sale financial assets - short term 27 31,236 39,601 42,684 49,566Short term Investments 28 - - - 140,423Cash and Cash Equivalents 28 372,513 1,887 549,122 25,296Total Current Assets 1,134,095 1,098,662 1,379,285 1,522,927Total Assets 1,849,812 1,707,757 2,099,839 2,129,472

EQUITY & LIABILITIESEquityStated Capital 29 126,250 126,250 126,250 126,250Capital Reserves 30 220,965 220,965 238,170 238,170Revenue Reserves 1,275,399 1,057,153 1,505,438 1,413,363Total equity attributable to equity holders of the Company 1,622,614 1,404,368 1,869,858 1,777,783Non Controlling interest - - 42,507 36,611Total Equity 1,622,614 1,404,368 1,912,365 1,814,394


Company GroupAS AT 31 MARCH 2017 2016 2017 2016 Note Rs’000 Rs’000 Rs’000 Rs’000

Non-Current LiabilitiesEmployment benefit liability 31 33,323 33,976 44,150 47,582Total Non-Current Liabilities 33,323 33,976 44,150 47,582

Current LiabilitiesTrade and other payables 32 60,623 34,400 74,594 49,120Income tax payable 11,100 9,181 9,965 8,237Liabilities relating to discontinued operation 25 - - 1,508 773Due to related companies 33 122,063 98,065 57,168 78,042Bank Overdraft 34 89 127,767 89 131,325Total Current Liabilities 193,875 269,413 143,324 267,496Total Liabilities 227,198 303,389 187,474 315,078Total Equity and Liabilities 1,849,812 1,707,757 2,099,839 2,129,472

Net Assets per share 103.02 89.17 118.72 112.88

The Accounting Policies and Notes from pages 40 to 87 form an integral part of these Financial Statements.It is certified that the Financial Statements have been prepared in compliance with the requirements of the Companies Act No. 7 of 2007.

Panchama PannilarathneAccountant

The Board of Directors is responsible for the preparation and presentation of these Financial Statements.Signed for and on behalf of the board by;

S. H. Amarasekera S. P. S. Ranathunga T. WegodapolaChairman Director Company Secretary

Colombo22 June 2017


FOR THE YEAR ENDED 31 MARCH Capital Reserves Revenue Reserves Other Available- Stated Capital Capital General for-sale Retained Total Capital Reserve Reserve Reserve Reserve Earnings EquityCompany Rs’000 Rs’000 Rs’000 Rs'000 Rs'000 Rs'000 Rs'000

Balance as at 1 April 2015 126,250 356 114,401 232,841 136,997 631,530 1,242,375

Profit for the year - - - - - 85,198 85,198

Other Comprehensive IncomeNet gain on fair value of available-for-sale financial assets - - - - 12,546 - 12,546Revaluation gain of land - - 106,208 - - - 106,208Actuarial loss on defined benefit plans - - - - - (14,527) (14,527)Tax Effect on Actuarial loss recognised - - - - - 4,068 4,068

Dividends to ShareholdersFinal -Dividend (2014/15) - - - - - (15,750) (15,750)Interim -Dividend (2015/16) - - - - - (15,750) (15,750)

Balance as at 31 March 2016 126,250 356 220,609 232,841 149,543 674,769 1,404,368

Balance as at 1 April 2016 126,250 356 220,609 232,841 149,543 674,769 1,404,368

Profit for the year - - - - - 196,240 196,240

Other Comprehensive IncomeNet gain on fair value of available-for-sale financial assets - - - - 66,940 - 66,940Actuarial gain on defined benefit plans - - - - - 3,215 3,215Tax Effect on Actuarial gain recognised - - - - - (900) (900)

Dividends to ShareholdersFinal - Dividend (2015/16) - - - - - (15,750) (15,750)Interim -Dividend (2016/17) - - - - - (31,500) (31,500)

Balance as at 31 March 2017 126,250 356 220,609 232,841 216,483 826,075 1,622,614

Statements of Changes in Equity


Capital Reserves Revenue Reserves Reserve Other Available- Non Stated on Scrip Revaluation Capital for-sale General Retained Controlling Total Capital Issue Reserve Reserve Reserve Reserve Earnings Total Interest EquityGroup Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000 Rs'000

Balance as at 1 April 2015 126,250 3,000 128,606 356 136,997 232,841 1,037,836 1,665,887 34,448 1,700,335Profit for the year - - - - - - 39,881 39,881 6,042 45,923

Other Comprehensive IncomeNet gain/(loss) on fair value of available-for-sale financial assets - - - - 11,132 - - 11,132 (250) 10,882Revaluation gain of land - - 106,208 - - - - 106,208 - 106,208Actuarial loss on defined benefit plans - - - - - - (18,377) (18,377) (1,949) (20,326)Tax Effect on Acturial loss recognised - - - - - - 4,554 4,554 209 4,763

Dividends to ShareholdersFinal -Dividend (2014/15) - - - - - - (15,750) (15,750) - (15,750)Interim -Dividend (2015/16) - - - - - - (15,750) (15,750) - (15,750)Subsidiary dividend to Non Controlling Interest - - - - - - - - (1,890) (1,890)

Balance as at 31 March 2016 126,250 3,000 234,814 356 148,129 232,841 1,032,395 1,777,783 36,611 1,814,394

Balance as at 1 April 2016 126,250 3,000 234,814 356 148,129 232,841 1,032,395 1,777,783 36,611 1,814,394Profit for the year - - - - - - 66,793 66,793 3,719 70,512

Other Comprehensive IncomeNet gain/(loss) on fair value of available-for-sale financial assets - - - - 68,199 - - 68,199 222 68,422Actuarial gain on defined benefit plans - - - - - - 5,505 5,505 981 6,486Tax Effect on Actuarial gain recognised - - - - - - (1,175) (1,175) (118) (1,293)

Dividends to ShareholdersFinal -Dividend (2015/16) - - - - - - (15,750) (15,750) - (15,750)Interim -Dividend (2016/17) - - - - - - (31,500) (31,500) - (31,500)Subsidiary dividend to Non Controlling Interest - - - - - - - - (2,339) (2,339)

Recognition of NCI on acquisition of Chemcel (Pvt) Ltd - - - - - - - - 3,431 3,431

Balance as at 31 March 2017 126,250 3,000 234,814 356 216,328 232,841 1,056,269 1,869,858 42,507 1,912,365


Statements of Cash Flows

Company Group AS AT 31 MARCH 2017 2016 2017 2016 Note Rs.’000 Rs.’000 Rs.’000 Rs.’000

Cash Flow from Operating ActivitiesProfit before taxation 223,586 107,645 99,918 79,208Profit/ (Loss) from discontinued operations 25 - - 2,537 (6,229) 223,586 107,645 102,455 72,979

Adjustments for ;Depreciation on Property, Plant & Equipment 15 3,572 5,976 5,753 10,673Gain on disposal of Property Plant & Equipment 7 - (12,840) - (15,080)Write off of Property Plant & Equipment 7 74 - 74 -Impairment of Investment in Subsidiary 8 - 4,648 - -(Gain)/ Loss from Capital reduction of Assets held for distribution in Chemcel (Pvt) Limited 7 (145,373) - 5,543 -Impairment on investment in equity accounted investees 8 - 3,894 - 81,857Share of profits of equity accounted investees 10 - - (9,609) (20,667)(Gain)/loss on translation of foreign currencies 9.1 (372) 51 (4,497) (5,127)Profit on disposal of investment 7 (1,029) (86) (1,029) (86)Profit on deemed disposal of subsidiary 7 - - - (2,233)Interest expenses 9.2 17,570 5,895 14,767 5,463Interest income 9.1 (10,160) (152) (19,963) (7,975)Dividend income 7 (23,821) (27,478) (19,044) (19,714)Impairment of receivables 19,211 7,439 26,242 8,077Written back impairment receivables - (3,427) - (3,427)Impairment of inventory 21.1 30,028 761 36,359 761Provision for defined benefit plans 31.2 5,579 5,816 7,626 7,720Operating profit before working capital changes 118,865 98,141 144,677 113,222


Company Group AS AT 31 MARCH 2017 2016 2017 2016 Note Rs.’000 Rs.’000 Rs.’000 Rs.’000

Increase in Inventories (20,087) (103,374) (6,314) (81,269)(Increase)/decrease in trade & other receivables (5,990) (72,081) 12,118 (69,406)Increase/( decrease) in trade & other payables 50,221 (12,581) 5,335 (14,109)Cash generated from/ (used in) operations 143,009 (89,895) 155,816 (51,563)Interest paid (17,570) (5,895) (14,767) (5,463)Income tax paid (25,958) (8,917) (29,930) (15,336)Employment benefit paid 31.1 (3,016) (19,457) (4,572) (23,565)Net cash inflow/(outflow) from operating activities 96,465 (124,162) 106,547 (95,929)

Cash Flows from Investing ActivitiesProceeds from disposal of property, plant & equipment - 22,589 - 24,830Proceeds from Capital Reduction of Chemcel 417,555 - 417,555 -Proceeds from disposal of investment 25,221 1,594 25,221 1,594Dividends received from equity accounted investees 3,240 3,240 3,240 3,240Dividends income from other Companies 20,329 24,238 15,552 16,474Interest received 1,478 152 11,281 7,975Acquisition of property, plant & equipment 15 (3,685) (1,661) (4,243) (2,012)Acquisition of Investments (15,421) (3,045) (15,421) (14,675)Subsidiary dividend to non-controlling interest - - (2,339) (1,890)Net cash inflow from inveseting activities 448,717 47,107 450,846 35,536

Cash Flows from Financing ActivitiesDividend Paid 14 (47,250) (31,500) (47,250) (31,500)Net cash outflow from financing activities (47,250) (31,500) (47,250) (31,500)

Net change in cash & cash equivalents 497,932 (108,555) 510,142 (91,892)Cash & cash equivalents at the beginning of the period (125,880) (17,274) 34,394 121,159Effect of exchange rate fluctuations 9.1 372 (51) 4,497 5,127Cash & cash equivalents at the end of the period 372,424 (125,880) 549,033 34,394

Analysis of cash & cash equivalents at the end of the periodCash & Bank balances 372,513 1,887 549,122 165,719Bank Overdraft (89) (127,767) (89) (131,325) 372,424 (125,880) 549,033 34,394

The Accounting Policies and Notes from pages 40 to 87 form an integral part of these Financial Statements.Figures in brackets indicate deductions.


Notes to the Financial Statements

1. REPORTING ENTITY1.1 Domicile and Legal FormChemanex PLC is a limited liability Company incorporated and domiciled in Sri Lanka. The ordinary shares of the Company are listed on the Colombo Stock Exchange of Sri Lanka. The Company’s registered office and the principal place of business is located at No.52, Galle Face Court 2, Colombo 03.

1.2 Principal Activities and Nature of OperationsThe principal activities of the Company is provided in the inner back cover of this Annual Report.

The principal activities of the Subsidiaries and equity accounted investees are provided on page 86.

1.3 Parent and Ultimate Parent EnterpriseThe parent company of Chemanex PLC is CIC Holdings PLC, a Company incorporated and domiciled in Sri Lanka. In the opinion of the directors’ the Company’s ultimate parent undertaking and controlling party is Paints and General Industries Limited, also incorporated and domiciled in Sri Lanka.

1.4 Authorisation for IssueThe Board of Directors of the Company is responsible for the preparation and presentation of the financial statements. The financial statements were authorised for issue in accordance with a resolution of the Board of Directors on 22 June 2017.

2. BASIS OF PREPARATIONThese financial statements, comprising both the Company’s separate financial statements and the consolidated financial statements of the Company and its Subsidiaries (“Group”) and the Group’s interest in equity accounted investees; comprise the Statements of Financial Position, Statements of Profit or Loss and other Comprehensive Income, Statements of Changes in Equity and Statements of Cash Flows together with the Accounting Policies and Notes to the Financial Statements.

2.1 Statement of ComplianceThese financial statements have been prepared in accordance with the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 which requires compliance with Sri Lanka Accounting Standards (SLFRS/LKAS) promulgated by the Institute of Chartered Accountants of Sri Lanka and the requirements of the Companies Act No. 7 of 2007.

2.2 Basis of MeasurementThe financial statements have been prepared on the historical cost basis, except for available-for-sale investments and items of property, plant and equipment - at valuation that have been measured at fair value.

2.3 Functional and Presentation CurrencyThe financial statements are presented inSri Lanka Rupees, which is the Group’s functional currency. The Sri Lanka Rupee remains the common functional and presentation currency for all entities in the Group.

All financial information presented in Sri Lanka Rupees has been rounded to the nearest thousand (Rs. ‘000), unless stated otherwise.

2.4 Use of Estimates and JudgmentsThe preparation of the Group’s consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of income, expenses, assets, liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Judgments and estimates are based on historical experience and other factors, including expectations that are believed to be reasonable under the circumstances. Hence actual experience and results may differ from these judgments and estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period and any future periods.

In the process of applying the group’s accounting policies, the key assumptions made relating to the future and the sources of estimation at the reporting date together with the related judgments that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Fair Value determination on available-for-sale financial assetsWhen the fair value of financial assets recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using valuation techniques.


The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

Depreciation of Property, Plant and EquipmentManagement assigns useful lives and residual values to property, plant and equipment based on the intended use of assets and the economic lives of these assets. Subsequent changes in circumstances such as technological advances or utilisation of the assets concerned could result in the actual useful lives or residual values differing from initial estimates. Management reviews annually the residual values and useful lives of major items of property, plant and equipment. Refer Note 3.11 for useful lives used in depreciating Property, Plant and Equipment in the Company and the Group.

Revaluation of Property, Plant and EquipmentThe Group carries its land at revalued amounts with changes in fair value being recognised in other comprehensive income. The Group engaged independent valuation specialists to determine fair value as at 31 March 2016. The key assumptions used to determine the fair value of the land are further explained in Notes 15.5 and 15.6.

Retirement Benefit obligation The cost of the defined benefit plan is determined using an actuarial valuation. An actuarial valuation involves making various assumptions that may differ from actual

developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. In determining the appropriate discount rate, management considers the weighted average cost of capital. The mortality rate is based on publicly available mortality tables. Future salary increases and pension increases are based on expected future inflation rates.

Further details about the assumptions used are provided in Note 31.

TaxationThe Company is subject to income taxes and other taxes including transfer pricing regulations. Management has used its judgment on the application of tax laws relating to transfer pricing regulations involving identification of associated undertakings, estimation of the respective arm’s length prices and selection of appropriate pricing mechanisms. The current tax charge is subject to such judgments. Differences between the estimated income tax charge and actual payable may arise as a result of management’s interpretation and application of transfer pricing regulations.

3. SIGNIFICANT ACCOUNTING POLICIESThe accounting policies set out below have been applied consistently by the group entities to all periods presented in these consolidated financial statements.

3.1 Going ConcernThe Directors have made an assessment of the Group’s ability to continue as a going concern in the foreseeable future, and they do not intend either to liquidate or to cease trading.

In relation to the operations of Yasui Lanka (Pvt) Ltd, a subsidiary of the group; a special resolution was passed at an Extraordinary General Meeting of the subsidiary held on 20 March 2014 to commence the process of liquidation with effect from the same date.

Chemanex PLC holds 69.5% of equity in Chemcel (Pvt) Ltd. The Board of Directors are in the process of discussing commercial viability of the operation of the Company. Provided such discussion leads to the determination that the project is not viable, it is likely that the Company would be subject to liquidation.

The assets relating to Yasui Lanka (Pvt) Ltd and Chemcel (Pvt) Ltd, have therefore been designated as Assets held for sale in the preparation of the consolidated financial statements. Liabilities pertaining to Yasui Lanka (Pvt) Ltd and Chemcel (Pvt) Ltd have been presented separately within current liabilities as liabilities relating to discontinued operations. The operational results of YYasui Lanka (Pvt) Ltd and Chemcel (Pvt) Ltd has been presented as ‘Discontinued Operations’ in the Statement of Profit or Loss and Other Comprehensive Income.


Notes to the Financial Statements Contd.

3.2 Basis of ConsolidationThe Consolidated Financial Statements (referred to as the ‘Group’) comprise the financial statements of the Company, its Subsidiaries and the Group’s interest in Equity Accounted Investees. Subsidiaries and Equity Accounted Investees are disclosed in Notes 17 and 18 to the financial statements.

3.3 Investment SubsidiariesSubsidiaries are entities controlled by the Group.

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee)

Exposure, or rights, to variable returns from its involvement with the investee

The ability to use its power over the investee to affect its returns

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

The contractual arrangement with the other vote holders of the investee

Rights arising from other contractual arrangements

The Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group losses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in profit or loss. If the Group retains any interest in the previous subsidiary then such interest is accounted for as an equity-accounted investee

or in accordance with the Group’s accounting policy for financial instruments depending on the level of influence retained.

Investments in Subsidiaries are recognised at cost less impairment in the separate financial statements of the Company.

3.4 Equity Accounted InvesteesAn associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not in control or joint control over those policies. The Group’s investments in its associates are accounted for using the equity method.

Under the equity method, the investment in an associate is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate since the acquisition date.

The statement of profit or loss reflects the Group’s share of the results of operations of the associate. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.


The aggregate of the Group’s share of profit or loss of associates is shown on the face of the statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate.

The financial statements of the associates are prepared for the same reporting period. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in associates. At each reporting date, the Group determines whether there is objective evidence that the investment in an associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value, and then recognises the loss as ‘Share of profit of an associate’ in the statement of profit or loss.

Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

Investments in Associates are recognised at cost less impairment in the separate financial statements of the Company.

3.5 Current/Non-Current ClassificationThe Group presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:

Expected to be realised or intended to sold or consumed in normal operating cycle

Held primarily for the purpose of trading Expected to be realised within twelve

months after the reporting period or Cash or cash equivalent unless restricted

from being exchanged or used to settle a liability for at least twelve months after the reporting period

All other assets are classified as non-current.

A liability is current when: It is expected to be settled in normal

operating cycle It is held primarily for the purpose of

trading It is due to be settled within twelve

months after the reporting period or There is no unconditional right to defer

the settlement of the liability for at least twelve months after the reporting period

The Group classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

3.6 Fair Value MeasurementThe Group measures financial instruments such as Available-for-sale financial assets and revalued items of property, plant and equipment, at fair value at each reporting date.

Fair value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values are disclosed, are summarised in the following notes:

Disclosures for valuation methods, significant estimates and assumptions - Note 2.4.

Quantitative disclosures of fair value measurement hierarchy - Note 35.

Investment in unquoted equity shares- Note 35.2

Property, plant and equipment under revaluation model - Notes 15.5 & 15.6

Disclosure of Fair Value for Financial instruments carried at amortised cost - Note 35.1

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability or

In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.



A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

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

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

External valuers are involved for valuation of significant assets, such as property, plant and equipment carried at revalued amounts. The Company has developed fair value models internally in relation to the valuation of Available-for-sale financial assets, which are evaluated on each reporting date by the Company’s Audit Committee and Board of Directors.

Involvement of external valuers is decided upon annually by the Audit Committee, where selection criteria would include market knowledge, reputation, independence and whether professional standards are maintained.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

3.7 Foreign Currency TransactionsTransactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. All differences are taken to the statement of profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

3.8 RevenueRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Group, and the revenue and associated

costs incurred or to be incurred can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and value added taxes, after eliminating sales within the Group.

Except in relation to Commission Income earned described in ‘ii’ below, the Group has concluded that it is the principal in all of its revenue arrangements, since the Company has pricing latitude and is also exposed to inventory and credit risks.

The specific recognition criteria described below must also be met before revenue is recognised.

(i) Sale of goodsRevenue from the sale of goods is recognised when the significant risk and rewards of ownership of the goods have passed to the buyer with the Group retaining neither a continuing managerial involvement to the degree usually associated with ownership, nor an effective control over the goods sold. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates. The Group does not provide any extended warranties on products sold.

(ii) Commission Received When the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue is recognised on accrual basis for the net amount of commission made by the Group.


(iii) Interest IncomeFor all financial instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the statement of profit or loss.

(iv) DividendsDividend income is recognised in the Statement of Profit or Loss on the date that the Group’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

(v) Rental IncomeRental income arising from operating leases is accounted for on a straight-line basis over the lease terms and is included in revenue in the profit or loss due to its operating nature.

(vi) Other IncomeOther income is recognised on an accrual basis.

3.9 Taxesi) Current income taxCurrent income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.

Current income tax relating to items recognised directly in equity is recognised in equity and not in the Statement of Profit

or Loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

ii) Deferred taxDeferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except

When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

In respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to

allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.

3.10 Non-current assets held for saleThe Group classifies non-current assets and disposal groups as held for sale or for distribution to equity holders of the parent if their carrying amounts will be recovered principally through a sale or distribution rather than through continuing use.

Such non-current assets and disposal groups classified as held for sale or as held for distribution are measured at the lower of their carrying amount and fair value less costs to sell or to distribute. Costs to distribute are the incremental costs directly attributable to the distribution, excluding the finance costs and income tax expense.

The criteria for held for distribution classification is regarded as met only when the distribution is highly probable and the asset or disposal group is available



for immediate distribution in its present condition. Actions required to complete the distribution should indicate that it is unlikely that significant changes to the distribution will be made or that the distribution will be withdrawn. Management must be committed to the distribution expected within one year from the date of the classification.

Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale or as held for distribution.

Assets and liabilities classified as held for sale or for distribution are presented separately as current items in the statement of financial position.

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit or loss. Additional disclosures are provided in Note 25. All other notes to the financial statements mainly include amounts for continuing operations, unless otherwise mentioned.

3.11 Property, Plant and EquipmentBasis of RecognitionProperty, plant and equipment, excluding land are stated at cost net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes cost that is directly attributable to the acquisition of the asset and the cost of replacing component parts of the plant and equipment and borrowing costs for long-term construction projects, if the recognition criteria are met. When significant parts of plant and

equipment are required to be replaced at intervals, the Group de-recognises the replaced part, and recognises the new part with its own associated useful life and depreciation. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement, if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

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 Statement of Comprehensive Income as incurred.

Land is measured at revalued amounts. Valuations are performed with sufficient frequency to ensure that the carrying amount of a revalued asset does not differ materially from its fair value. Where land is subsequently revalued, the entire class of such assets is revalued at fair value on the date of revaluation. The Group has adopted a policy of revaluing land by a professional valuer at least every 3 years.

A surplus on revaluation is recorded in Other Comprehensive Income and credited to the revaluation reserve in equity. However, to the extent that it reverses a revaluation deficit of the same asset previously recognised in profit or loss, the increase is recognised in profit

and loss. A revaluation deficit is recognised in the statement of profit or loss, except to the extent that it offsets an existing surplus on the same asset recognised in the revaluation reserve.

The carrying values of property, plant and equipment are reviewed for impairment, when events or changes in circumstances indicate that the carrying value may not be recoverable.

De-recognitionAn item of property, plant and equipment is de-recognised upon replacement, disposal or when no future economic benefits are expected from its use. Net gains and losses arising from the disposal of property, plant & equipment are accounted for in the Statement of Profit or Loss after deducting the carrying amount of such assets and the related selling expenses from the proceeds from disposal.

DepreciationDepreciation is recognised in the Statement of Profit or Loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Land is not depreciated.

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


The estimated useful life of assets is as follows:

Buildings 10 – 20 yearsPlant & machinery 6 yearsFurniture & fittings 4 yearsData processing equipments 3 yearsMotor vehicles 4 yearsEquipment 3 years

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted, if appropriate.

3.12 Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

3.13 Investment propertiesInvestment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. For property which contain characteristics of both investment property and property, plant and equipment, the group policy is to recognise the asset as investment property, only if the utilisation of such property by outsiders is more than 80%. Otherwise it is regarded immaterial, which means that the whole property is presented as property, plant & equipment.

Investment properties are stated at cost, including transaction costs.

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs.

Investment properties are derecognised, when disposed of or permanently withdrawn from use and no future economic benefit is expected. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in Statement of Profit or Loss in the year of retirement or disposal.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the cost at the date of change in use. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use.

3.14 Intangible AssetsIntangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.

Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in the Comprehensive income in the period in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit or loss in the expense category that is consistent with the function of the intangible assets.

The Group’s financial statements do not contain intangible assets with an indefinite useful life.

Gains or losses arising from de-recognition of an intangible asset is measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit or Loss when the asset is derecognised.



3.15 Financial Instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

3.15.1 Financial Assetsa) Initial recognition and measurementFinancial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, AFS financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.

The Group’s financial assets do not include financial assets at fair value through profit or loss, held to maturity investments and derivatives designated as hedging instruments in an effective hedge. Financial assets of the group include cash and short-term deposits, trade and other receivables and available for sale financial assets.

b) Subsequent measurementLoans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the Effective Interest Rate (EIR) method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees

or costs that are an integral part of the EIR. The EIR amortisation is included in the Statement of Profit or Loss as finance income. The losses arising from impairment are recognised in the Statement of Profit or Loss.

Available-for-sale financial assetsAvailable-for-sale financial assets include equity investments that are neither classified as held for trading nor designated at fair value through profit or loss. After initial measurement, available-for-sale financial assets are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the available-for-sale reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified from the available-for sale reserve to the Statement of Profit or Loss and removed from the available-for-sale reserve.

c) DerecognitionA financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

The rights to receive cash flows from the asset have expired, or

The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of

the asset, but has transferred control of the asset

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

d) Impairment of financial assetsThe Group assesses, at each reporting date, whether there is any objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred ‘loss event’), has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest


or principal payments, the probability that they will enter bankruptcy or other financial re-organisation and when observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial Assets carried at Amortised CostFor financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

The amount of any impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the Statement of Profit or Loss. If, in a subsequent

year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account in the Statement of Profit or Loss.

Available for Sale Financial AssetsFor available-for-sale financial assets, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.

In the case of equity investments classified as Available for Sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. ‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost. When there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in other Comprehensive income – is removed from other comprehensive income and recognised in the Statement of Profit or Loss. Impairment losses on equity investments are not reversed through profit or loss; increases in their fair value after impairment are recognised in other Comprehensive Income.

The determination of what is ‘significant’ or ‘prolonged’ requires judgment. In making this judgment, the Group evaluates, among other factors, the duration or extent to which the fair value of an investment is less than its cost.

3.15.2 Financial Liabilitiesa) Initial recognition and measurementFinancial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables and loans and borrowings including bank overdrafts.

b) Subsequent measurementThe measurement of financial liabilities depends on their classification as described below.

Financial liabilities of the Company do not include financial liabilities at fair value through profit or loss or derivatives designated as hedging instruments in an effective hedge.

Loans and borrowingsAfter initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an



integral part of the EIR. The EIR amortisation is included in the Statement of Profit or Loss as finance costs.

c) DerecognitionA financial liability is derecognised when its contractual obligations under the liability are discharged, canceled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.

3.16 InventoriesInventories are measured at the lower of cost or net realisable value.

The cost of finished goods is computed, based on the weighted average cost method and includes material, labour and an appropriate share of production overheads, based on normal operating capacity. In the case of purchased inventories, cost includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their existing location and condition. The cost of raw material is computed at weighted average cost.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

3.17 Impairment of non-financial assetsThe Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating units (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.

The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated.

Impairment losses of continuing operations, including impairment on inventories, are recognised in the statement of profit or loss in expense categories consistent with the function of the impaired asset, except

for properties previously revalued with the revaluation taken to OCI. For such properties, the impairment is recognised in OCI up to the amount of any previous revaluation.

3.18 Cash and short-term depositsCash and short-term deposits in the statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and Short term deposits, as defined above, net of outstanding bank overdrafts.

3.19 Employment benefitsa) Defined Benefit PlansA 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 pension 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, discounted thereon to determine its present value. Any unrecognised past service costs are deducted.

The calculation is performed annually by a qualified actuary using the projected unit credit method.

The Group recognises all actuarial gains and losses arising from defined benefit plans immediately in other comprehensive income and all expenses related to defined benefit plans in personnel expenses in the Statement of Profit or Loss.


The Group makes gratuity payments to its employees on the following basis:

Length of Service (years) No. of Months Salary

0 – 9 ½ a month salary for each completed year

10 – 14 ¾ a month salary for each completed year

15 – 16 15 months salary in total






over 41 ½ a month salary for each completed year

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

The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Key assumptions used in determining the defined retirement benefit obligations are given in Note 31. Any changes in these assumptions will impact the carrying amount of defined benefit obligations.

b) Defined Contribution Plan - Employees’ Provident Fund/ Mercantile Services Provident Society and Employees’ Trust Fund A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no further legal or constructive obligation to pay further amounts.

The Group contributes 12%, 12% and 3% of gross emoluments of employees to the Employees’ Provident Fund, Mercantile Services Provident Society and the Employees’ Trust Fund respectively. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in the Statement of Profit or Loss in the periods during which services are rendered by employees.

3.20 Earnings Per ShareThe Group presents Basic and Diluted Earnings Per Share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

3.21 Cash Flow StatementThe cash flow statement has been prepared using the indirect method.

3.22 Segment ReportingSegment results that are reported include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated expenses comprise mainly corporate assets, head office expenses and tax assets and liabilities.

3.23 Events Occurring after the Reporting DateAll material events occurring after the reporting date have been considered and where appropriate adjustment or disclosures have been made in these financial statements.

4 NEW ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVEThe standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s financial statements are disclosed below. The Group intends to adopt these standards, if applicable,when they become effective. SLFRS 9 Financial Instruments SLFRS 9 replaces the existing guidance in LKAS 39 Financial Instruments: Recognition and Measurement. SLFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from LKAS 39.



SLFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.

The Group is assessing the potential impact on its Consolidated Financial Statements resulting from the application of SLFRS 9

SLFRS 15 – Revenue from Contracts with CustomersSLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including LKAS 18 Revenue, LKAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes.

SLFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.


SLFRS 16 LeasesSLFRS 16 provides a single lessee accounting model, requiring leases to recognise assets and liabilities for all leases un less the lease term is 12 months or less or the underlying asset has a low value even though lessor accounting remains similar to current practice. This supersedes: LKAS 17 Leases, IFRIC 4 determining whether an arrangement contains a Lease, SIC 15 Operating Leases- Incentives; and SIC 27 Evaluating the substance of Transactions Involving the Legal form of a Lease. Earlier application is permitted for entities that apply SLFRS 15 Revenue from Contracts with customers.

SLFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019.


The following amendments and improvements are not expected to have a significant impact on the Company’s/Group’s consolidated financial statements.

LKAS 7 Disclosure Initiative – Amendments to LKAS 7 The amendments to LKAS 7 Statement of Cash Flows are part of the IASB’s Disclosure Initiative and require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. On initial application of the amendment, entities are not required to provide comparative information for preceding periods. These amendments are effective for annual periods beginning on or after 1 January 2017, with early application permitted. Application of amendments will result in additional disclosure provided by the Group. LKAS 12 Recognition of Deferred Tax Assets for Unrealised Losses – Amendments to LKAS 12The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits

and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount.

The Company will adopt these standards when they become effective. Pending the completion of a detailed review, the financial impact is not reasonably estimable.

5 FINANCIAL RISK MANAGEMENTOverviewThe Company & the Group have exposure to the following risks from its use of financial instruments, which includes trade and other receivables, available for sale financial assets, trade and other payables and loans and borrowings.1 Credit risk2 Liquidity risk3 Market risk 4 Operational risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

Risk management frameworkThe Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has established the Risk Management Committee, which is responsible for developing and monitoring the Group’s risk management policies. The committee reports 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 market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

5.1 Credit riskCredit risk is the risk of financial loss to the Group if a customer or counter party to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers.

Trade and other receivablesAll credit customers are analysed individually for credit worthiness before approving credit terms and their payment histories are regularly monitored and relevant revisions of credit terms are made. The Group’s review includes external ratings, when available, and in some cases bank references. Customers that fail to meet the Group’s benchmark

credit worthiness may transact with the Group only on a prepayment basis.

However a total impairment of Rs. 24.2 Mn has been made in the profit or loss during the year under review. The Movement of impairment for doubtful debts is given below;

2017 (Rs. ‘000)

2016 (Rs. ‘000)

Provision as of 1 April 64,084 60,787Specific provisions made 13,741 -Collective provision made 11,328 8,076Write back - (3,445)Write off (844) (1,323)Provision as of 31 March 88,310 64,084

The collective impairment is determined based on historical data of payment statistics for similar financial assets. Specific loss allowance is separately identified based on the recoverability of the credits.

The aging of trade receivables at the reporting date were as follows ;2017

(Rs. ‘000)2016

(Rs. ‘000)From Local SalesDue within 60 days 240,698 203,805Due within 60-90 days 51,147 71,818Due after 90 days 107,881 112,828

From Export SalesDue within 60 days 12,542 20,261Due within 60-90 days - 2,211Due after 90 days 8,825 15,057Provision for doubtful debts (88,310) (64,084)Trade receivables as of 31 March 332,783 361,896

5.2 Liquidity riskLiquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.



A Risk Management policy is set so as to limit the net financial liabilities to a pre-approved amount. The Group maintains the net financial liabilities to these specified upper limits and any deviation to these upper limits requires prior approvals.

The Group’s short term financial liabilities and trade payables as at 31 March 2017 amount to Rs.76 Mn which are due within a period of 6 months.

The group has a total cash and cash equivalent amounting to Rs. 549 Mn as of 31 March 2017 (2016 – Rs. 166 Mn).

5.3 Market RiskMarket risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices which will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

a) Currency riskThe Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies (Sri Lanka Rupee) of the Group, which are in general, US Dollar, Australian Dollar, Great Britain Pound and Japanese Yen.

Effects of currency rate fluctuations of imported materials and ex-stock items are transferred in a reasonable manner keeping in line with the prices in the market. Subsidiary companies of the Group settle all import bills and other financial liabilities denominated

in a currency other than functional currency, out of US Dollar receipts from their overseas customers.

Due to the above reasons, the Group does not have a material impact from import and export activities, from changes in the exchange rates. On this basis, the following table demonstrates the sensitivity to a reasonably possible change in United States Dollars exchange rates on foreign exchange deposits and borrowings with all other variables held constant.

Increase/Decrease in

Exchange Rate (Rs.)

Effect on profit before tax

2017(Rs. ‘000)

2016(Rs. ‘000)

Exposure to an increase in exchange rate +1.00 +119 +264

Exposure to a decrease in exchange rate -1.00 -119 -264 Exchange Rate Comparison

2017 2016

Selling Rate

Buying Rate

Average Selling Rate

Buying Rate

Average

US Dollar 153.91 150.06 147.29 146.77 142.59 138.75

Euro 165.43 159.28 161.60 167.26 160.63 153.19

Australian Dollar 118.81 113.67 110.89 113.48 108.25 102.10

Japanese Yen 1.38 1.33 1.36 1.32 1.26 1.16

Sterling Pound 193.18 186.73 192.46 211.66 204.13 209.18 b) Interest rate riskGroup treasury monitors the exposure of the Group to the interest rate risk on a continuous basis and makes necessary decisions to hedge such risk. The Group adopts a policy of ensuring that between 50 and 60 percent of its exposure to changes in interest rates on borrowings is on a fixed rate basis.

The Group has current financial assets as well as current financial liabilities in the Statement of Financial Position. During the past, the Group was able to maintain the effective interest rate of the current financial assets on par or above the annual effective interest rate of current financial liabilities. The following table demonstrates the sensitivity to a reasonably possible change in interest rates on net current financial liabilities( i.e. current financial assets less current financial liabilities) with all other variables held constant.


Increase/Decrease in

Basis Point (Rs.)

Effect on profit before tax

2017(Rs. ‘000)

2016(Rs. ‘000)

Exposure to an increase in interest rate +1.00 +762 +1,813

Exposure to a decrease in interest rate -1.00 -762 -1,813

c) Other Market price riskEquity price risk arises from available-for-sale equity securities held. Management of the Group monitors the mix of debt and equity securities in its investment portfolio based on market indices.

The primary goal of the Group’s investment strategy is to maximise investment returns. Management is assisted by the group treasury in this regard. In accordance with this strategy, performance of the investment made is actively monitored and they are managed on a fair value basis.



6. REVENUE Company Group For the year ended 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

(A) Industry Segment RevenueChemicals 750,015 552,227 940,400 789,888Paints 517,748 564,639 517,748 564,639Consumer 74,724 72,553 74,724 72,553Rent 28,592 28,736 28,592 28,736Services 1,961 4,252 1,961 4,776 1,373,040 1,222,407 1,563,425 1,460,593Intra-group Revenue - - (15,903) (16,589)Total Revenue 1,373,040 1,222,407 1,547,522 1,444,004

7. OTHER INCOME Company Group For the year ended 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Dividend Income - Quoted 939 3,060 1,872 3,135 - Unquoted 22,882 24,418 17,172 16,579Profit on deemed disposal of an equity accounted investees - - - 2,233Income from investments in Treasury Bills 979 - 979 -Gain on disposal of Property Plant & Equipment - 12,840 - 15,080Write-off of Property Plant & Equipment (74) - (74) -Gain from capital reduction of assets held for distribution in Chemcel (Pvt) Limited 145,373 - - -Profit on sale of investment 1,029 86 1,029 86Sundry income - - - 105 171,128 40,404 20,978 37,218


8. OTHER EXPENSES Company Group For the year ended 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Expenses incurred on investment property 1,969 - 1,969 -Expenses incurred on held for sale asset - 1,502 - 1,502Impairment loss on receivable from a subsidiary - 4,648 - -Impairment of investment in associate - 3,894 - 81,857Loss from Capital reduction of Assets held for distribution in Chemcel (Pvt) Limited - - 182 - 1,969 10,044 2,151 83,359

9. NET FINANCE INCOME/(EXPENSES)9.1 FINANCE INCOME Company Group For the year ended 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Interest Income 10,073 2 19,864 7,811Interest income on staff loan 87 150 99 164Exchange gain/(loss) 372 (51) 4,497 4,938 10,532 101 24,460 12,913

9.2 FINANCE EXPENSES

Interest on short-term loans & overdrafts 17,570 5,895 14,767 5,463 17,570 5,895 14,767 5,463

Net Finance Income/(expenses) (7,038) (5,794) 9,693 7,450



10 SHARE OF PROFIT/(LOSS) OF EQUITY ACCOUNTED INVESTEES - NET OF INCOME TAX Group For the year ended 31 March 2017 2016 Rs.’000 Rs.’000

Rainforest Ecolodge (Pvt) Ltd (1,138) (7,143)Commercial Insurance Brokers (Pvt) Ltd 10,747 4,037Chemcel (Pvt) Ltd - 23,773 9,609 20,667

11 PROFIT/(LOSS) BEFORE TAX Company Group For the year ended 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

(A) Industry SegmentChemicals 49,235 34,417 49,559 62,429Paints (23,641) 18,604 (23,641) 18,824Consumer 5,629 3,886 5,629 3,538Rent 28,281 23,676 28,281 7,718Services 1,961 2,496 1,961 4,723 61,465 83,079 61,789 97,232

Other income 171,128 40,404 20,978 37,218Net finance income/(expenses) (7,038) (5,794) 9,693 7,450Other expenses (1,969) (10,044) (2,151) (83,359)Share of profit of equity accounted investees - net of tax - - 9,609 20,667Profit before tax from continuing operations 223,586 107,645 99,918 79,208


(B) Profit before tax is stated after charging all expenses/(reversals) including the following Company Group For the year ended 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Directors' Emoluments - 5,700 679 8,079Directors' Fees 4,032 1,783 4,932 2,683Audit Fees 690 642 980 919Non Audit Fees 1,772 1,069 1,772 1,069Professional Fees 465 191 587 245Depreciation of property, plant & equipment 3,572 5,976 5,753 10,673Donations 50 - 100 -Legal fees 546 917 548 917Impairment of receivables 17,192 7,439 24,223 8,077Bad debts written off 2,019 1,323 2,019 1,323Impairment of inventories 30,028 1,972 36,359 1,972Reversal of provision for inventory - (1,211) - (1,211)Impairment of equity accounted investees - 3,892 - -Impairment of receivable from subsidiary - 4,649 - -Staff training cost 337 169 396 209

Personnel CostSalaries & Wages 57,970 55,144 78,721 103,525E.P.F- defined contribution plan 6,432 6,475 7,720 9,202E.T.F- defined contribution plan 1,832 1,722 2,153 2,402Defined benefit plan cost 5,579 5,309 7,625 9,350Ex-Gratia 7,509 10,559 9,389 11,935 79,321 79,209 105,608 136,414Total number of employees as at the end of the year 100 99 126 132



12 TAX EXPENSE Company Group For the year ended 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

(a) Income tax on current year profitsChemanex PLC 27,877 18,181 27,877 18,181Subsidiaries - - 4,562 4,443 27,877 18,181 32,439 22,624

(b) Provision for deferred taxChemanex PLC (531) 4,266 (531) 4,266Subsidiaries - - 35 166 (531) 4,266 (496) 4,432Tax expense 27,346 22,447 31,943 27,056

(c) As per the Inland Revenue Act No. 10 of 2006 and subsequent amendments there to, Chemanex PLC is liable for income tax at 28% of the adjusted taxable profits for the year.

In terms of Sections 51 and 52 of the Inland Revenue Act, profits from qualifying exports of Chemanex Exports (Pvt) Limited, enjoy a concessionary rate of tax of 12%.

The profits of Yasui Lanka (Pvt) Limited are taxable at a concessionary rate of 15% up to and including the year of assessment 2016/2017, in terms of the agreement entered into with the Board of Investment. However, in accordance with the Inland Revenue (Amendment) Act, No. 18 of 2013, the profits of the Company are liable for Income Tax only at 12% effective from 1 April 2013, irrespective of the terms stated in the BOI agreement.

In accordance with the Inland Revenue (Amendment) Act, No. 18 of 2013, the profits of the CAL Exports Lanka (Pvt) Ltd is liable for Income Tax only at 12% effective from 1 April 2013.

The profit of Chemcel (Pvt) Ltd is liable for Income Tax at 28%.

The Group tax expense is based on the taxable profit of each Company in the Group. At present, the tax laws of Sri Lanka do not provide for Group Taxation.


(d) Reconciliation of the accounting profit & income tax expense Company Group For the year ended 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Profit before tax 223,586 107,645 99,918 79,208Share of profit of equity accounted investees - - (9,609) (20,667)Intra-group adjustments - - 145,373 76,186Income not subject to tax (171,578) (40,404) (179,466) (30,024)Disallowable expenses 55,223 33,425 70,689 41,397Capital allowances (5,399) (5,126) (10,439) (10,141)Allowable expenses (3,132) (20,668) (4,688) (25,283)Tax losses utilized during the year (Note 12.1) - (9,945) (1,997) (11,180)Taxable Income 98,700 64,927 109,781 99,497

Tax @ 12% - - 1,789 3,486Tax @ 28% 27,636 18,181 30,898 19,839Income tax on current year profits 27,636 18,181 32,687 23,325

Adjustment to Last year 241 - 180 -Total Income tax on Current year Profits 27,877 18,181 32,867 23,325

12.1 Tax Loss analysisTax losses brought forward - 9,945 131,346 142,526Current year tax losses - - 2,126 -Tax losses utilised during the year - (9,945) (1,997) (11,180)Tax losses carried forward - - 131,475 131,346 12% 17% 32% * 29%

* Effective tax rate of the Group has been calculated taking in to consideration the total tax liability and the taxable income for the period.



13 EARNINGS PER SHARE13.1 BASIC EARNINGS PER SHAREThe calculation of basic and diluted earnings per share (EPS) is based on the profit attributable to the ordinary shareholders divided by the weighted average number of shares outstanding during the year. Company Group For the year ended 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Profit attributable to ordinary shareholders (Rs. '000) 196,240 85,198 66,793 39,881Weighted Average Number of Shares ('000) 15,750 15,750 15,750 15,750Basic/Diluted Earnings per ordinary share (Rs.) 12.46 5.41 4.24 2.53Basic/Diluted Earnings per share from continuing operations (Rs.) 12.46 5.41 4.08 2.93

The Company does not have any dilutive potential ordinary shares in issue.

14 DIVIDENDS PER SHARE Company /Group For the year ended 31 March 2017 2016 Rs.’000 Rs.’000

Interim paid Rs. 2/- per share (Rs.'000) 31,500 15,750Final proposed Rs.1/- per share (2015/16 - Rs.1/- per share) (Rs.'000) 15,750 15,750 47,250 31,500Weighted average number of ordinary shares ('000) 15,750 15,750Dividend per ordinary share 3.00 2.00

14.1 The Directors have recommended Rs. 1/- per share final dividend payment for the year ended 31st March 2017 to be approved at the Annual General Meeting on 27 July 2017. This proposed dividend has not been recognised as a liability as at 31st March 2017.


15 PROPERTY, PLANT & EQUIPMENT

(a) Company Land Building Plant & Equipments Furniture Motor Computers Total Machinery & Fittings Vehicle Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

As at 1 April 2015 123,292 44,762 9,012 9,770 6,368 79,379 24,655 297,238Gain on revaluation on land 106,208 - - - - - - 106,208Additions - - - 915 10 - 736 1,661Disposals - - - - - (49,435) (714) (50,149)As at 31 March 2016 229,500 44,762 9,012 10,685 6,378 29,944 24,677 354,957As at 1 April 2016 229,500 44,762 9,012 10,685 6,378 29,944 24,677 354,957Additions - - 1,409 389 6 - 1,881 3,685Disposals - - - - - - (1,043) (1,043)As at 31 March 2017 229,500 44,762 10,421 11,074 6,384 29,944 25,515 357,599

(b) Depreciation and ImpairmentAs at 1 April 2015 - 38,806 7,886 9,007 6,049 67,812 22,627 152,187Depreciation charge for the year - 1,282 913 597 128 1,966 1,090 5,976Disposals - - - - - (39,834) (566) (40,400)As at 31 March 2016 - 40,088 8,799 9,604 6,177 29,944 23,151 117,763As at 1 April 2016 - 40,088 8,799 9,604 6,177 29,944 23,151 117,763Depreciation charge for the year - 1,282 389 593 123 - 1,185 3,572Disposals - - - - - - (968) (968)As at 31 March 2017 - 41,370 9,188 10,197 6,300 29,944 23,368 120,367

Net Book Value

As at 31 March 2017 229,500 3,392 1,233 877 84 - 2,147 237,232As at 31 March 2016 229,500 4,674 213 1,081 201 - 1,526 237,194



(b) Group Land Building Plant & Equipments Computers Furniture Motor Total Machinery & Fittings Vehicle (a) At Cost or Revaluation Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000

As at 1 April 2015 123,292 42,733 56,093 13,484 25,828 6,903 91,068 359,402Additions - - - 1,266 736 10 - 2,012Adjustment on Revaluation 106,208 - - - - - - 106,208Disposals - - (2,266) - (784) - (56,318) (59,368)As at 31 March 2016 229,500 42,733 53,827 14,750 25,780 6,913 34,750 408,254As at 1 April 2016 229,500 42,733 53,827 14,750 25,780 6,913 34,750 408,254Additions - - 1,836 430 1,971 6 - 4,243Disposals - - - - (1,043) - - (1,043)As at 31 March 2017 229,500 42,733 55,663 15,180 26,708 6,919 34,750 411,453

(b) Depreciation and ImpairmentAs at 1 April 2015 - 42,733 47,153 12,810 24,366 6,640 79,499 213,201Depreciation charge for the year - - 6,714 715 1,148 128 1,968 10,673Disposals - - (2,266) - (636) - (46,716) (49,618)As at 31 March 2016 - 42,733 51,601 13,525 24,878 6,768 34,751 174,256As at 1 April 2016 - 42,733 51,601 13,525 24,878 6,768 34,751 174,256Depreciation charge for the year - - 3,642 737 1,250 124 - 5,753Disposals - - - - (968) - - (968)As at 31 March 2017 - 42,733 55,243 14,262 25,160 6,892 34,751 179,041

Net Book Value

As at 31 March 2017 229,500 - 402 918 1,548 27 - 232,412As at 31 March 2016 229,500 - 2,226 1,225 902 145 - 223,998

15.1 There has been no impairment loss on property plant & equipment.

15.2 No borrowing cost was capitalised during the year.


15.3 Cost of fully depreciated property, plant & equipment still in use : Company Group For the year ended 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Buildings 31,943 10,302 31,943 42,733Plant & Machinery 9,065 4,018 58,973 23,940Motor Vehicles 32,612 29,943 37,420 34,750Other Equipment 9,164 8,898 11,756 11,342Furniture & Fittings 5,952 5,858 6,082 5,982Data Processing Equipment 21,638 21,364 22,270 21,860

15.4 Carrying Value of Property, Plant & Equipment

Net book value of the items at cost 7,732 7,694 2,912 4,498Net book value of the items at valuation 229,500 229,500 229,500 229,500 237,232 237,194 232,412 233,998

15.5 Details of the Valuation of the Land and their ownership

Ownership & Location Description Extent

Chemanex PLC Land & Building 3 Acres600, Sri Sasanajothi Mawatha, Ratmalana

15.6 Details of Revaluation

Property Method of Effective date Property valuer valuation of valuation

Land - Chemanex PLC Open market 30 April 2016 Perera, Sivaskantha & Company value method

The fair value of land as reflected above was determined using an open market valuation approach. The value is based on market prices, adjusted as appropriate for difference in the nature an location of the specific property.

Being a level 3 Valuation, the fair value of land has been estimated using significant unobservable inputs. The significant unobservable input used for valuation of land is the estimated price of a perch of land which was estimated ranging from Rs. 500,000/- to Rs. 600,000/- for the purpose of revaluation. Significant increases / (decreases) in the estimated price per perch in isolation would result in a significantly higher/ (lower) fair value.

A valuation was not carried out by the Group as at the reporting date as management believes that there is no significant change in the valuation compared to the value reflected in the Financial Statements.



15.7 Cost of Freehold LandThe purchase price of the above land was Rs.6.1 Mn

15.8 Title restriction on Property, Plant & EquipmentThere were no restrictions on the title of Property, Plant & Equipment of the Company or the Group as at the reporting date.

15.9 Property, Plant & Equipment Pledged as Security for LiabilitiesThere were no items of Property, Plant & Equipment pledged as securities for liabilities.

16 Investment Property Company Group Balance as at 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Transferred from assets held for sale during the year (Note 16.2) 40,247 - 40,247 - 40,247 - 40,247 -

16.1 Details of Investment Property

Company / Group

Ownership Location Land Fair 2017 2016 extent Value Rs.’000 Rs.’000

Chemanex PLC Nugape, Pillagasowita, 8 acres 1 rood Uswetakeiyawa, Kandana 15 perches 125 Mn 40,247 -

16.2 The mentioned investment property was classified as “Assets held for sale” in the prior year


Location Method of Effective date Property valuer valuation

Nugape, Pillagasowita, Open market 24 April 2016 Perera Sivaskantha & Company Uswetakeiyawa, Kandana. value method


17 INVESTMENTS IN SUBSIDIARIES CompanyAs at 31 March No. of Percentage 2017 2016 Shares Holding Rs. 000 Rs. 000

Unquoted InvestmentsCal Export Lanka (Pvt) Ltd 3,675,000 70.0% 29,400 29,400Chemanex Exports (Pvt) Ltd 860,000 100.0% 47,000 47,000Yasui Lanka (Pvt) Ltd 2,286,000 69.2% 23,485 23,485Chemcel (Pvt) Ltd 82,041 69.5% 172 - 100,057 99,885Impairment of Investment in Subsidiary (23,485) (23,485) 76,572 76,400

17.1 All Subsidiaries of the Group are incorporated and domiciled in Sri Lanka.

17.2 The group has evaluated each subsidiary that has non-controlling interests based on contributions made to the group Revenue, Total Assets and Net Assets and have determined that such non-controlling interests are not material to the group. Profit attributed to non-controlling interest of Rs. 3,719 arise from profit of Rs. 4,554 made by CAL Exports Lanka (Pvt) Ltd, loss of Rs. (224) recorded by Yasui Lanka (Pvt) Ltd and loss of Rs. (611) recorded by Chemcel (Pvt) Ltd.



18 INVESTMENTS IN EQUITY ACCOUNTED INVESTEES

Company GroupAs at 31 March No. of Percentage 2017 2016 2017 2016 Shares Holding Rs. 000 Rs. 000 Rs. 000 Rs. 000

Non- Current Unquoted Investments

Rainforest Ecolodge (Private) Limited 9,950,968 20.89% 99,510 99,510 87,448 68,290Commercial Insurance Brokers (Private) Limited 239,999 40.00% 200 200 66,592 76,140Provision for Impairment of investment in Associate (30,202) (30,202) - - 69,508 69,508 154,040 144,430

18.1 Equity Accounted investee held for distributionChemcel (Pvt) Limited 68,528,000 23.15% - 272,353 - 420,444 - 272,353 - 420,444

Chemcel (Pvt) Ltd has been accounted as an equity accounted investee during the previous financial year. The investment has been categorised and accounted as a subsidiary classified under discontinued operations. Following acquisition of the majority stake in the Company during the year by Chemanex PLC

18.2 The Equity accounted investees of the Company are incorporated in Sri Lanka.18.3 There are no unrecognised share of losses of equity accounted investees as at 31 March 2017.18.4 Company has neither contingent liabilities nor capital commitments in respect of equity accounted investees.18.5 The impairment has been recognised in relation to investments in associates relate to the Company's investment in Rainforest Ecolodge (Pvt) Ltd.

18.6 Summarized Information of Non Current Equity Accounted Investees 2017 2016 Rs.’000 Rs.’000

Revenue 331,275 279,701Total Expenses (309,658) (285,582)Net Profit 21,617 (5,881)

Non-Current Assets 529,197 538,454Current Assets 182,059 177,268Total Assets 711,256 715,722

Non-Current Liabilities 84,796 90,279Current Liabilities 82,943 97,287Total Liabilities 167,740 187,566


19 AVAILABLE FOR SALE FINANCIAL ASSETS - LONG TERM19.1 Long Term Investments No. of Company/ GroupAs at 31 March Shares 2017 2016 Rs. 000 Rs. 000

Unquoted Investments - at carrying valueCIC Agri Businesses (Pvt) Ltd 2,680,001 55,691 34,513CIC Feeds (Pvt) Ltd 500,000 225,737 180,382Equity investments Lanka (Pvt) Ltd 15,000 150 150 281,578 215,045

20 DEFERRED TAX ASSETS Company Group As at 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

At the beginning of the year 10,949 11,147 13,073 12,742Origination and reversal of temporary differences through :- the statement of profit or loss 531 (4,266) 496 (4,432)- the statement of other comprehensive income (900) 4,068 (1,293) 4,763At the end of the year 10,580 10,949 12,277 13,073

20.1 Temporary differences on deferred tax 2017 2016 Temporary Tax Temporary Tax As at 31 March Difference Effect Difference Effect Rs. 000 Rs. 000 Rs. 000 Rs. 000

CompanyOn temporary differences of property, plant & equipment 4,464 1,250 5,127 1,436On employment benefit liability 33,323 9,330 33,976 9,513 37,787 10,580 39,103 10,949

GroupOn temporary differences of property, plant & equipment 7,780 1,647 9,218 1,927On employment benefit liability 44,150 10,630 47,582 11,146 51,930 12,277 56,801 13,073



20.2 The management has recognised the above deferred tax assets, as they are confident that the deferred tax asset would be realised in future, due to the availability of taxable profits in future periods.

20.3 The effective tax rates used to calculate the deferred tax are as follows ;

Name of the Company 2017 2016

Chemanex PLC 28% 28%CAL Exports Lanka (Private) Limited 12% 12%

21 INVENTORIES Company Group As at 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Raw materials & consumables 22,780 20,917 22,780 56,013Finished goods 266,124 256,879 297,501 268,084Goods in Transit 34,845 25,866 35,996 25,866 323,749 303,663 356,277 349,963Impairment of Inventories (Note 21.1) (32,323) (2,295) (38,654) (2,295) 291,426 301,367 317,623 347,668

21.1 Impairment of Inventories Company Group As at 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

At the beginning of the year 2,295 1,534 2,295 1,534Provision during the year 30,028 761 36,359 761At the end of the year 32,323 2,295 38,654 2,295


22 TRADE & OTHER RECEIVABLES Company Group As at 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Trade Receivables 399,726 385,196 406,643 388,592Impairment of Receivables (77,363) (60,171) (88,310) (64,084)Net trade receivables 322,363 325,025 318,333 324,508Bills receivable - - 14,450 37,388Other receivables & prepayments 28,128 44,344 40,035 62,754 350,491 369,369 372,818 424,650

23 STAFF RECEIVABLES Company Group As at 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Loans to employees 776 2,928 1,026 3,252Prepaid staff cost 2,250 1,049 2,311 1,074 3,026 3,977 3,337 4,326

24 DUE FROM RELATED COMPANIES Company Group As at 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

CIC Holdings PLC 1,121 533 1,121 533Cal Exports Lanka (Private) Limited 1,554 - - -Commercial Insurance Brokers (Private) Limited - 196 - 196Chemcel (Private) Limited 82,728 69,132 - 69,132 85,403 69,861 1,121 69,861

24.1 All balances outstanding from related parties are repayable on demand with no interest being charged. Except for the current account balance which is due from CAL Exports Lanka (Private) Limited for the which interest is charged at a normal rate.



25 DISCONTINUED OPERATIONS

Chemanex PLC holds 69.24% of equity in Yasui Lanka (Pvt) Ltd. Yasui Lanka (Pvt) Ltd at its Extra Ordinary General Meeting held on 20th March 2014, passed a Special Resolution for a members’ voluntary winding up. Therefore, the operations of this company have been classified as a discontinued operation in the consolidated financial statements.

Chemanex PLC holds 69.5% of equity in Chemcel (Pvt) Ltd. The Board of Directors are in the process of discussing commercial viability of the operation of the company. Provided such discussion leads to the determination that the project is not viable, it is likely that the company would be subject to liquidation.

The results of Yasui Lanka (Pvt) Ltd and Chemcel (Pvt) Ltd for the year are presented below :

For the year ended 31 March Chemcel (Pvt) Yasui Lanka 2017 2016 Ltd (Pvt) Ltd Rs. 000 Rs. 000

Revenue - - - 2,570Cost of Sales - - - (9,575)Gross Loss - - - (7,005)Other Income - - - 13Administrative Expenses (2,785) (366) (3,151) (545)Distribution Expenses - (390) (390) 1,122Results from operating activities (2,785) (756) (3,541) (6,415)Finance Income 6,050 28 6,078 189Finance Costs - - - (3)Net finance Income 6,050 28 6,078 186

Profit/ (Loss) before taxation 3,265 (728) 2,537 (6,229)Tax Expense - - - -Profit/ (Loss) for the Year 3,265 (728) 2,537 (6,229)


The major classes of assets and liabilities of Yasui Lanka (Pvt) Ltd and Chemcel (Pvt) Ltd, as at 31 March are as follows; As at 31 March 2017 2016 Rs.’000 Rs.’000

Assets held for sale from discontinued operationsCapital work in progress 73,375 -Inventories - 391Trade and other receivables 17,775 53Cash & Cash Equivalents 1,430 -Total assets held for sale from discontinued operations 92,580 445

Liabilities relating to discontinued operations

Trade and other payables 1,398 663Income Tax Payable 110 110Total liabilities held for sale from discontinued operations 1,508 773

2017 2016 As at 31 March Rs. 000 Rs. 000

EquityStated Capital 33,000 33,000Retained Earnings (80,919) (80,919) (47,919) (47,919)

The net cash flows incurred by Yasui Lanka (Pvt) Ltd and Chemcel (Pvt) Ltd, are as follows :

For the year ended 31 March 2017 2016 Rs. 000 Rs. 000

Net cash flows from operating activities 14,192 (1,343)Net cash flows from investing activities - -Net cash flows from financing activities (1,764,133) -Net cash outflow (1,749,941) (1,343)

Cash and cash equivalents of discontinued operations 1,430 1,441

Earnings/(loss) per shareBasic earnings/(loss) per share for the year from discontinued operations 27.43 (1.89)



26 ASSETS HELD FOR SALE - OTHER Company/Group As at 31 March 2017 2016 Rs. 000 Rs. 000

Muthurajawela land (Note 26.1, 26.2, 26.3 & 26.4) - 40,247 - 40,247

26.1 This has been reclassified to Investment property during the period. Refer investment property Note 16

26.2 Value of Land & Ownership

Ownership & Location Description Extent Fair value Rs. Mn

Chemanex PLC Nugape, Pillagasowita, 8 acres 1 rood 125 Uswetakeiyawa, Kandana. 15 perches


Location Method of Effective date Property valuer valuation

Nugape, Pillagasowita, Open market 24 April 2016 Perera Sivaskantha & Company Uswetakeiyawa, Kandana. value method

26.4 Land classified under Assets held for sale in the previous year stated at cost in the financial statements.


27 AVAILABLE-FOR-SALE FINANCIAL ASSETS-SHORT TERM

As at 31 March No. of 2017 2016 Investments hold by chamanex PLC Shares Rs. 000 Rs. 000

Hatton National Bank PLC 77,760 17,519 15,250Lanka Orix Leasing Company PLC 11,000 671 2,894National Development Bank PLC 93,457 13,046 4Tokyo Cement Company (Lanka) PLC - - 808The Kingsbury PLC - - 5,250Lotus Hydro Power PLC - - 33John Keells Hotels PLC - - 5,400Laugfs Gas PLC - Voting - - 3,902Merchant Bank of Sri Lanka Finance PLC - - 3,060Odel PLC - - 54Richard Pieris and Company PLC - - 1,440Dialog Axiata PLC - - 1,020Hayleys PLC - - 486 31,236 39,601

Investments held by subsidiaries of Chemanex PLC

Hatton National Bank PLC 50,810 11,448 9,965 42,684 49,566

All Available-for-sale financial assets-short term are designated as level 1 in the fair value hierarchy as the mentioned investments are all quoted and actively traded in the Colombo Stock Exchange. There have been no transfers between level 1 and level 2 during the year.



28 CASH & CASH EQUIVALENTS & SHORT TERM INVESTMENTS Company Group As at 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

28.1 Short term InvestmentsFixed Deposits - - - 140,423

28.2 Cash & Cash EquivalentsCash & Bank - Local Currency (Note 28.2.a) 372,513 1,875 430,384 25,283Foreign Currency - 13 118,738 13 372,513 1,887 549,122 25,296

Cash & Cash Equivalents for Cash Flow purpose 372,513 1,887 549,122 165,719

28.2. a Company and Group Cash balances include 3 months fixed deposits amounting to 325 Mn.

29 STATED CAPITAL

As at 31 March 2017 2016 No. of Shares Rs. 000 No. of Shares Rs. 000

Fully paid ordinary shares 15,750,000 126,250 15,750,000 126,250

The Ordinary Share holders are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

30 CAPITAL RESERVES

Company Group As at 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Reserve on revaluation of land (Note 30.1) 220,609 220,609 234,814 234,814Sale of goodwill of EDP division 356 356 356 356Capital Reserve on Scrip issue (Note 30.2) - - 3,000 3,000 220,965 220,965 238,170 238,170


30.1 Revaluation reserve relates to revaluation of property, plant & equipment.

30.2 Capital reserve on Script issue represents post acquisition bonus issues made by Chemanex Export (Private) Limited.

31 EMPLOYMENT BENEFIT LIABILITY Company Group As at 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Present value of unfunded employment benefit liabilities 33,323 33,976 44,150 47,582

31.1 Movement in the Present Value of employment benefit obligations

Balance at the beginning of the year 33,976 33,088 47,582 43,099Provision for the year (Note 31.2) 2,363 20,345 1,139 28,048Benefits paid during the year (3,016) (19,457) (4,572) (23,565)Balance as at the end of the year 33,323 33,976 44,150 47,582

31.2 Provision for the year

Interest cost 3,398 3,309 4,759 4,310Current service cost 2,181 2,507 2,867 3,410Actuarial (gain)/loss (3,216) 14,529 (6,487) 20,328 2,363 20,345 1,139 28,048

31.3 The provision for the year is charged to the statement of comprehensive income as follows


Cost of sales 397 1,747 1,775 2,143Administration expenses 1,808 2,285 2,476 3,295Selling & distribution expenses 3,373 1,784 3,374 2,252Actuarial (gain)/loss on employment benefit plan (3,215) 14,527 (6,486) 20,326 2,363 20,345 1,139 28,048



31.4 An actuarial valuation of the retirement benefit obligations of the Company and the Group was carried out as at 31 March 2017, by Messers, Actuarial & Management Consultants (Pvt) Ltd, a firm of Professional Actuaries. The Valuation method used by the actuaries to value the fund is the “Projected Unit Credit Method”(PUC).

31.5 Actuarial Assumptions - DemographicMortality in service - A 67/70 Mortality table issued by the Institute of Actuaries, London.

WithdrawalThe withdrawal rate at an age represents the probability of an active employee leaving within one year of that age category due to reasons other than death, ill health and normal retirement. The withdrawal rate used in the valuation of liability in respect of the active employees are 14% upto age 49 and thereafter zero.

Normal Retirement Age55 years indicated as normal retirement age of employees.

31.6 Actuarial Assumptions - Financial

Rate of DiscountIn the absence of a deep market in long term bond in Sri Lanka, a long term rate of 12% p.a. has been used to discount future liabilities.

Salary Increases10% salary increment rate per annum has been used in respect of the active employees.

31.7 Sensitivity of Assumptions UsedA change in discount rate and in salary increase would change in the present value of the retirement benefit obligations as follows: Increase by 1% Decrease by 1% As at 31st March 2017 Discount Future Discount Future Rate Salary Rate Salary Growth Growth Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Company - the present value change in retirement benefit obligations (316) 1,414 1,327 (414)Group - the present value change in retirement benefit obligations (738) 1,884 1,780 (859)


32 TRADE AND OTHER PAYABLES


Trade payables 5,227 6,487 8,054 15,461Bills payable (Note 32.1) 13,406 5,674 13,406 5,674Other creditors and accruals 41,993 22,243 53,134 27,985 60,623 34,400 74,594 49,120

32.1 Currency wise Bills payableUS Dollars 13,406 5,674 13,406 5,674 13,406 5,674 13,406 5,674

33 DUE TO RELATED COMPANIES Company Group As at 31 March 2017 2016 2017 2016 Relationship Rs.’000 Rs.’000 Rs.’000 Rs.’000

Akzo Nobel Paints Lanka (Private) Limited Fellow Subsidiary 57,168 78,042 57,168 78,042Chemanex Export (Private) Limited Subsidiary 64,895 7,301 - -CAL Exports Lanka (Private) Limited Subsidiary - 12,722 - - 122,063 98,065 57,168 78,042

33.1 All balances outstanding from related parties are repayable on demand with no interest being charged.

34 BANK OVERDRAFT Company Group As at 31 March 2017 2016 2017 2016 Rs.’000 Rs.’000 Rs.’000 Rs.’000

Bank Overdraft 89 127,767 89 131,325 89 127,767 89 131,325

34.1 Bank facilities of Rs. 260 Mn (Commercial Bank of Ceylon PLC- 160 Mn & Hatton National Bank - 100 Mn) have been obtained on negative pledge over inventories and trade receivables.



35 FAIR VALUE MEASUREMENT

The following table provides the fair value measurement hierarchy of the Group's assets and liabilities Fair value measurement using Quoted Significant Significant prices in active observable unobservable markets inputs inputs Date of Valuation Total Level 1 Level 2 Level 3 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Assets measured at fair value

Avaliable for Sale Financial Assets - Long Term 31 March 2017 281,578 - 281,578 -Avaliable for Sale Financial Assets - Short Term 31 March 2017 31,236 31,236 - -Land - At Valuation 24 April 2016 229,500 - - 229,500

Assets for which fair value is disclosedInvestment Property 24 April 2016 125,000 - - 125,000

35.1 Other Financial Assets of the Company include cash and cash equivalents, trade receivables and other receivables, whilst financial liabilities include trade and other payables and short term borrowings.

The management assesses that the fair value of cash and cash equivalents, trade receivables, other receivables, trade and other payablesand short term borrowings approximate their carrying amounts largely due to the short term maturities of these instruments.

35.2 Available for sale financial assets - long term consists primarily of equity investments which are not traded in an active market. Such have been valued using valuation multiples of similar publicly quoted entities in Sri Lanka, adjusted for liquidity and gearing as applicable for the investees. The valuation resulted in a gain of Rs. 66.5 Mn being recorded in the Statement of Other Comprehensive Income.

35.3 Available for sale financial assets - short term consists equity investments traded in the Colombo Stock Exchange. Such have been valued using closing market values published by the Colombo Stock Exchange as at the date of valuation.

35.4 Details pertaining to the valuation of land and significant unobservable inputs used are reflected in Notes 15.5 and 15.6.


36 INDUSTRY SEGMENT INFORMATION

Capital Expenditure Depreciation Total Assets 2017 2016 2017 2016 2017 2016 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000

AssetsChemicals 3,985 1,037 5,154 10,026 436,879 454,104 Paints 258 111 312 472 171,472 249,623Consumer - 65 22 2 81,083 72,180Liners - - - - - 443Rent - 799 265 173 3,562 2,252Services - - - - 9,268 6,207Investments - - - - 1,397,575 1,344,663 4,243 2,012 5,753 10,673 2,099,839 2,129,472

Employment benefit Trade & other liabilities payablesLiabilities 2017 2016 2017 2016 Rs.'000 Rs.'000 Rs.'000 Rs.'000

Chemicals 31,087 28,678 41,439 43,957Paints 4,558 3,585 301 -Consumer 89 1,654 720 639Rent - - 1,070 1,550Services 2,664 9,498 - -Others 5,752 4,166 31,064 2,974 62,517 47,581 74,594 49,120



37 EVENTS OCCURRING AFTER THE REPORTING DATEThe Board of Directors has recommended a final dividend of Rs.1/- per existing ordinary share for 15,750,000 ordinary shares, subject to the approval of the shareholders at the Annual General Meeting.

No circumstances have arisen since the reporting date, other than disclosed above which require adjustment to or disclosure in the financial statements.

38 CAPITAL COMMITMENTSThere are no material capital commitments, which have been approved or contracted for as at the reporting date.

39 CONTINGENT LIABILITIESThe Group has received a claim of USD 668,154 on the alleged premise that a product supplied did not conform to technical specifications. The Group having sought legal advice has refuted the claim and no provision for any related liability has been made in these Financial Statements.

40 RELATED PARTY TRANSACTIONS

A. Parent and Ultimate Controlling PartyUltimate Parent Company of the Group is Paints & General Industries Limited and Parent Company of the Group is CIC Holdings PLC.

B. Transactions with Key Management Personnel(i) Loans to DirectorsNo Loans have been given to the Directors of the Company.

(ii) Key Management Personnel CompensationKey management personnel comprise of the Directors of the Company and key employees holding directorships in subsidiaries of the Company


Compensation paid to key management personnel Group 2017 2016 Rs. Mn Rs. Mn

Directors’ remuneration - 8.00Termination benefits - 18.80Provision for retiring gratuity - 8.90Directors’ fees 4.90 2.70 4.90 38.40

(iii) Other Transactions with Key Management Personnel

(a) The names of Directors of Chemanex PLC, who are also Directors of the subsidiary companies and equity accounted investees are stated on page 90.

(b) Details of Directors’ shareholdings are given in the Annual Report of the Directors on the Affairs of the Company on page 26.There were no other transactions with key management personnel other than those disclosed below.

C. Transactions with related entitiesTransactions with Parent Company and Ultimate Parent Company

(a) CIC Holdings PLC (Parent Company)Nature of transaction 2017 2016 Rs. Mn Rs. Mn

Sales 7.13 6.7Rent received 1.47 -Secretarial fee received 1.51 1.5Amount Receivable 1.12 0.5Dividend Paid 22.7 15.5

Transactions with subsidiaries



(a) Chemanex Exports (Pvt) Ltd

Nature of transaction 2017 2016 Rs. Mn Rs. Mn

Rent received 1.32 1.2Commission received 0.71 0.2Dividends received - 3.9Amount payable 4.89 7.3Loan 60.00 -Interest paid 3.55 -

(b) CAL Exports Lanka (Pvt) Ltd


Rent received 14.38 14.8Commission received 0.28 0.3Interest received 0.56 0.5Amount payable 0 12.7Dividend received 5.57 3.9Amount receivable 1.55 -

(c) Chemcel (Pvt) Ltd


Service Level Agreement Fee 0.12 3.7Amount receivable 82.73 73.5Amount Payable - 4.3


Transactions with Equity Accounted Investees

(a) Commercial Insurance Brokers (Pvt) Ltd


Dividend received 3.2 3.2Amount receivable - 0.2

Transactions with other Related Parties

(a) Akzo Nobel Paints Lanka (Pvt) Ltd


Purchases 437.00 615Amount receivable 0.11 -Amount payable 57.17 78

(b) CIC Feeds (Pvt) Ltd


Dividend received 6.7 8

(c) CIC Vetcare (Pvt) Ltd


Sales 10.8 9.8Amount receivable 0.024 1.4



(d) CIC Agri Businesses (Pvt) Ltd


Dividend received 7.3 7.3Dividend paid 1.28 0.87

(e) Link Natural Products (Pvt) Ltd


Sales 13.28 14.5Amount receivable 4.5 3.1

(f) CEI Plastics


Purchases 0.25 -

(g) Polypak Secco Limited


Purchases 0.75 -Amount Payable 0.25 -


(h) Cisco Speciality Packaging (Pvt) Ltd.


Purchases 0.16 -

(i) Paints & General Industries Ltd.


Sales 4.1 -Amount Receivable 1.7 -


Decade at a Glance

Group Financials

Year ended 31st March 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Operating results

Revenue 1,547,522 1,444,004 1,286,887 1,195,200 1,165,135 931,096 999,552 969,428 1,210,708 1,281,788Gross profit 296,781 265,191 207,672 215,096 188,902 160,158 180,792 215,855 210,566 219,429Financing cost (14,767) (5,463) (12,520) (42,594) (44,879) (21,699) (10,110) (19,285) (35,457) (17,569)Share of profits from equity accounted investees 9,609 20,667 (18,260) (9,399) (2,852) 262 3,729 3,247 32,697 127,067Profit before taxation 99,918 79,208 18,804 308,447 (2,818) (20,118) (60,059) 155,081 359,745 206,342Income tax expense (31,943) (27,056) (6,622) (17,316) (20,800) (21,602) (36,122) (35,251) (33,955) (19,413)Profit/(loss) from discontinued operation 2,537 (6,229) 7,684 (25,144) (23,604) - - - - -Profit after taxation 70,512 45,923 19,865 265,987 (47,222) (1,484) 23,937 119,830 325,790 186,929Non controlling Interest 3,719 6,042 7,927 -16,080 (27,703) (15,792) (6,165) (23,619) 1,175 (8,597)Profit attributable to equity holders of the Company 66,793 39,881 11,938 282,067 (19,519) 14,308 30,103 96,211 326,965 178,332

Net AssetsProperty, plant & equipment 232,412 233,998 146,201 154,302 471,899 488,633 419,977 299,390 225,839 144,985Investment property 40,247 - - - 707 86,977 87,066 83,731 - -Deposit on leasehold property - - - - 16,152 13,678 13,964 15,109 - -Intangible assets - - - - 32,686 32,686 32,686 32,686 30,748 567Investments 435,618 359,475 342,618 802,894 258,849 255,437 274,283 192,439 165,866 612,062Deferred tax asset 12,277 13,073 12,742 17,966 18,032 21,790 16,721 21,595 16,685 11,375Net current assets 1,235,961 1,255,431 1,241,892 722,136 647,398 588,605 655,693 826,043 919,752 329,342 1,956,515 1,861,976 1,743,453 1,697,298 1,445,723 1,487,806 1,500,390 1,470,993 1,358,890 1,098,331

Non-current liabilities 44,150 (47,582) (43,099) (62,517) (67,900) (61,029) (47,532) (48,607) (86,274) (39,289) 2,000,664 1,814,394 1,700,354 1,634,781 1,377,823 1,426,777 1,452,858 1,422,386 1,272,616 1,059,042

Stated Capital & ReservesStated Capital 126,250 126,250 126,250 126,250 126,250 126,250 126,250 126,250 126,250 126,250Capital reserves 238,170 238,170 268,959 225,538 145,330 160,698 161,453 101,026 56,630 85,376General reserves - - 232,841 232,841 232,841 232,841 232,841 232,841 232,841 232,841Revenue reserves 1,505,438 1,413,363 1,037,836 1,021,415 747,875 784,228 822,708 823,865 806,404 558,685Shareholders’ funds 1,869,858 1,777,782 1,665,886 1,606,044 1,252,296 1,304,017 1,343,252 1,283,982 1,222,125 1,003,152Non controlling interest 42,507 36,611 34,448 28,737 125,527 122,760 109,606 138,404 50,491 55,890Total equity 1,912,365 1,814,394 1,700,334 1,634,781 1,377,823 1,426,777 1,452,858 1,422,386 1,272,616 1,059,042


Group Financials

Year ended 31st March 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

RatiosReturn on shareholders Equity % 3.77 2.59 0.48 17.82 (1.56) 1.10 2.24 7.49 26.75 17.78Annual sales growth % 7.17 12.21 7.67 2.58 25.13 (5.78) 1.94 (19.93) (5.55) 6.17Return on Assets 3.36 2.16 0.42 13.29 (0.99) 0.75 1.59 5.32 19.29 12.32Current ratio Times 9.62 5.69 5.61 2.60 2.23 2.40 2.38 5.25 3.74 1.94

Share informationMarket value of a share Rs. 55.00 63.00 75.00 81.90 74.00 101.50 133.40 130.25 49.50 45.00Earnings per share Rs. 4.24 2.93 0.76 17.91 (1.24) 0.91 1.91 6.11 20.76 11.32Price earnings Ratio Times 12.97 21.50 98.68 4.85 (59.68) 111.73 69.80 21.32 2.38 3.97Net assets value per share Rs. 118.72 112.88 104.28 100.49 79.51 82.79 85.29 81.52 77.60 63.69Earnings Yield % 7.71 4.65 0.67 21.87 (1.67) 0.90 1.43 4.69 41.94 25.16Dividend Yield % 3.64 3.17 1.33 1.22 1.35 1.48 1.50 1.92 20.20 3.71Dividend Cover Times 2.24 2.93 0.50 17.91 (1.24) 0.61 0.96 2.44 2.08 6.79Dividend per share Rs. 3.00 2.00 1.00 1.00 1.00 1.50 2.00 2.50 10.00 1.67


Company PercentageHolding

PrincipalActivity

Directors 2017Stated Capital

Rs. ’000

SUBSIDIARIES

Chemanex Exports (Pvt) Limited52, Galle Face Court 2,Colombo 3.

100 Manufacture & export of sizing chemicals

M. P. JayawardenaA. N. Sugathapala

50,000

CAL Exports Lanka (Pvt) Limited52, Galle Face Court 2,Colombo 3.

70 Manufacture & export of industrial powderadhesives

M. P. JayawardenaA. V. P. SilvaR. SivagamiR. N. VeerappanS. K. Wickremesinghe

42,000

Yasui Lanka (Pvt) Limited52, Galle Face Court 2,Colombo 3.

69.24 Manufacture & export ofknitted liners

M. P. JayawardenaA. N . Sugathapala

33,000

Chemcel (Pvt) Limited52, Galle Face Court 2,Colombo 3.

69.5 Manufacture & exportof speciality chemicals

B. R. L. FernandoS. P. S. Ranatunga

723

EQUITY ACCOUNTED INVESTEES

Commercial Insurance Brokers (Pvt) Limited52, Galle Face Court 2,Colombo 3.Incorporated on 17 August 1987

40 Insurance brokering M.P. JayawardenaD. M. D. K. ThilakaratneR. A. M. SeneviratneS. P. S. RanatungaI. Tillakawardena

6,000

Rainforest Ecolodge (Pvt) LimitedC/o. Ceylon Chamber of Commerce50, Navam MawathaColombo 2.Incorporated on 26 June 2002

20.89 Eco tourism E. P. A. CoorayN. J. H. M. Cooray J. E. P. KehelpannalaS. M. HapugodaG. A. AloysiusM. P. Jayawardena S. AmaleanN. A. N. Jayasundara D. C. FernandoD. R. Nordmann

476,247

Group Structure


Information to Shareholders and Investors

1 STOCK EXCHANGE LISTING

Date of Listing in Colombo Stock Exchange (CSE) : 16 December 1974Abbreviation in Colombo Stock Exchange : "CHMX.N"Stated Capital - No. of Ordinary Shares : 15,750,000

2 CHEMANEX SHARES IN THE CSE

2017 2016

Highest Price (Rs.) 16.05.2016 69.5 19.08.2015 89.70Lowest Price (Rs.) 11.01.2017 53.1 08.03.2016 45.10Average Price (Rs.) 61.8 71.74Last traded Price (Rs.) 55.0 63.00No. of transactions 595 1,380No. of shares traded 777,606 1,003,912Value of shares traded (Rs. '000') 45,948 73,027Market Capitalization (Rs. '000') 866,250 992,250

3 Analysis of shareholders as at 31st March

2017 2016 No. of No. of % No. of No. of % Share- Shares Share- Shares Range of Shareholding holders holders

1 - 1,000 928 219,524 1.39% 928 223,608 1.42%1,001 - 10,000 255 880,504 5.59% 256 893,670 5.67%10,001 - 100,000 67 2,093,227 13.29% 67 2,001,121 12.71%100,001 - 1,000,000 7 2,989,989 18.98% 6 3,064,845 19.46%over -1,000,000 2 9,566,756 60.74% 2 9,566,756 60.74%Total 1259 15,750,000 100.00% 1259 15,750,000 100.00%


Information to Shareholders and Investors Contd.

2017 2016 No. of No. of % No. of No. of % Share- Shares Share- Shares Range of Shareholding holders holders

Individuals 1,198 4,349,419 27.62 1205 4,663,206 29.61Institutions 61 11,400,581 72.38 54 11,086,794 70.39Total 1,259 15,750,000 100.00 1,259 15,750,000 100.00

Resident 1,224 15,534,415 98.63 1,225 15,536,915 98.65Non-Resident 35 215,585 1.37 34 213,085 1.35Total 1,259 15,750,000 100.00 1,259 15,750,000 100.00

4 DISTRIBUTION OF SHARES AS AT 31 MARCHThe following table of Distribution of Shares as of 31 March 2017, has been furnished to Colombo Stock Exchange (CSE) and Securities & Exchange Commission (SEC) in accordance with CSE Listing Rule 7.13.

Non - public Shareholders

Name of the Non - public Shareholder 2017 2016

No. of shares held No. of shares as a percentage of the total no. of shares

in issue

No. of shares held No. of shares as a percentage of the total no. of shares

in issue

CIC Holdings PLC 7,939,373 50.41 7,939,373 50.41

CIC Holdings PLC/Trustees for Charitable & Educational Trust Fund

1,627,383 10.33 1,627,383 10.33

CIC Agribusinesses (Pvt) Limited 446,604 2.84 446,604 2.84

Commercial Insurance Brokers (Pvt) Limited 93 0.00 93 0.00

Mr. S. H. Amarasekera 801 0.01 801 0.01

Mr. B. M. Amarasekera 375 0.00 375 0.00

Estate of Late Mrs. B. H. Amarasekera 9,555 0.06 9,555 0.06

Mr. B. M. Amarasekera & Mrs. B. Amarasekera (Joint) 8,796 0.06 8,796 0.06

Miss. H. V. Amarasekera 11,250 0.07 11,250 0.07

Mr. G. G. Wellala 100 0.00 100 0.00

Mr. W. J. Y. P. De Mel 200 0.00 200 0.00

Total Shareholding of Non-Public Shareholders 10,044,530 63.78 10,044,530 63.78


Public Shareholders

Public Shareholder As at March 2017 2016

No. of public shareholders

public shareholding(%)

No. of public shareholders

public shareholding(%)

Public Shareholding 1,248 36.23 1,248 36.23

5 DIRECTORS’ SHAREHOLDING AS AT 31 MARCH

Name of the Director 2017 2016

No of Shares % of Holding No. of Shares % of Holding

Mr. S. H. Amarasekera 30,777 0.195 30,777 0.195


Information to Shareholders and Investors Contd.

6 TWENTY LARGEST SHAREHOLDERS

Name of the Non Public Shareholder 2017 2016

No. of Shares % No. of Shares %

CIC Holdings PLC 7,939,373 50.41 7,939,373 50.41

CIC Holdings PLC/Trustees for Charitable & Edu. Trust Fund 1,627,383 10.33 1,627,383 10.33

Seylan Bank PLC / Thirugnanasambandar Senthilverl 660,850 4.2 635,706 4.04

National Development Bank / Sakuvi Investment Trust (Pvt) Ltd. 538,366 3.42 538,366 3.42

Mr. S. K. Wickremesinghe 515,245 3.27 815,245 5.18

CIC Agri Businesses (Pvt) Ltd 446,604 2.84 446,604 2.84

Mr. S. Srikanthan 438,524 2.78 438,524 2.78

S. K. Wickremesinghe Trust (Guarantee) Limited 200,000 1.27 - -

Mr. D. A. De Zoysa 190,400 1.21 190,400 1.21

Bank of Ceylon Account No. 01 100,000 0.63 100,000 0.63

Bensons Limited 83,286 0.53 83,286 0.53

Mrs. M. C. Abeyasekera 81,546 0.52 81,546 0.52

Mr. H. R. Peiris 69,525 0.44 69,525 0.44

Dr. H. S. D. Soysa 68,429 0.43 68,429 0.43

Mr. Z. G. Carimjee 66,568 0.42 66,568 0.42

Mrs. H. G. S. Ansell 65,097 0.41 65,097 0.41

Shalsri Investments (Pvt) Ltd. 64,525 0.41 64,525 0.41

Dr. H. R. & Mr. V. K. Wickremasinghe Custodian 60,000 0.38 - -

People's Leasing & Finance PLC/L.P. Hapangama 59,771 0.38 52,536 0.33

Commercial Bank of Ceylon PLC/S.A.Gulamhusein 54,224 0.34 44,150 0.28

13,329,716 84.62 13,327,263 84.61


7 MOVEMENT IN SHARE CAPITAL

Type of Issue Year of Issue Ratio Number of Shares '000'

Initial Capital 1974 - 40

Bonus 1976 1:1 80

Bonus 1977 1:1 160

Rights 1983 1:1 320

Rights 1986 9:16 500

Rights 1989 1:2 750

Debenture 1990 1:2 1,125

Rights 1991 1:4:5 1,375

Rights 1992 1:2.75 1,875

Rights 1993 1:3 2,500

Rights 1995 1:5 3,000

Bonus 1998 1:6 3,500

Bonus/Rights 2005 1:6 / 1:5 5,250

Sub division 2008 1:3 15,750


Notes

Name of the CompanyChemanex PLC

Legal FormA Public Limited Company incorporated in Sri Lanka on 8 August 1974 under the Companies’ Ordinance and re-registered under Companies Act No. 7 of 2007 on 6 August 2007.

Company Registration NumberNew No. of Company - PQ - 64.Old No. of Company - PBS 751

Tax Payer Identification Number(TIN)124007518

Accounting Year End March 31

Parent CompanyCIC Holdings PLCNo. 199, Kew RoadColombo 2.

Principal Activities Manufacturing and marketing of value-added speciality compounds and intermediates. The Company also acts as Agents and Distributors.

Stock Exchange ListingThe ordinary shares of the Company are listed with the Colombo Stock Exchange from 16 December 1974.

Registered Office/Head OfficeP.O. Box 188No. 52, Galle Face Court 2,Colombo 3.Telephone: 00 94-11-2326845-8Facsimile: 00 94-11-2445050, 2332568E-mail: [email protected]: www.chemanex.com

AuditorsErnst & Young Chartered Accountants 201, De Saram Place,Colombo 10.

Company LawyersNithya PartnersAttorneys-at-law

BankersCommercial Bank of Ceylon PLCStandard Chartered Bank PLCHatton National Bank PLC

Company SecretaryT. Wegodapola

Board of DirectorsS. H. Amarasekara (Chairman)S. P. S. RanatungaA. V. P. SilvaS. A. B. EkanayakeP. R. SaldinL. N. De S. Wijeyeratne

Corporate Information

Contents Our Vision 1The Values 1Financial Highlights 2Chairman’s Review 4CEO’s Review 6Board of Directors 8Management Committee Profiles 11Corporate Governance 13Report of the Audit Committee 21Report of the Related Party Review Committee 22Annual Report of the Board of Directors on the State of Affairs of Chemanex PLC 24Directors’ Responsibility for Financial Reporting 30Chief Executive Officer’s and Accountant’s Responsibility Statement 31Independent Auditors’ Report 32Statements of Profit or Loss and Other Comprehensive Income 33Statements of Financial Position 34Statements of Changes in Equity 36Statements of Cash Flows 38Notes to the Financial Statements 40Decade at a Glance 88Group Structure 90Information to Shareholders and Investors 91Corporate Information Inner Back Cover

Design & Concept by: Optima Designs (Pvt) Ltd.

Notice of MeetingNotice is hereby given that the Forty Fourth Annual General Meeting of Chemanex PLC will be held at the 9th Floor, Commercial Bank Building, No. 1, Union Place, Colombo 2, on Thursday 27th July 2017 at 4.00 p.m. for the following purposes:

1. To receive and adopt the Annual Report of the Board of Directors on the State of Affairs of Chemanex PLC and the Statement of Accounts for the year ended 31st March 2017 with the Report of the Auditors thereon.

2. To declare a final dividend.

3. To vote a sum as donations.

4. To re-elect Directors;

(a) (i) To re-elect Dr. S A B Ekanayake who retires in pursuant to Article 24(2) of the Articles of Association of the Company.

(ii) To re-elect Mr. L N De S Wijeyeratne who retires in pursuant to Article 24(2) of the Articles of Association of the Company.

(iii) To re-elect Mr. P R Saldin who retires in pursuant to Article 24(2) of the Articles of Association of the Company.

(b) To re-elect Mr. A V P Silva who retires in pursuant to Article 24(6) of the Articles of Association of the Company.

5. To appoint Auditors and to authorise the Directors to determine their remuneration. By order of the Board

T. Wegodapola Company Secretary

22 June 2017

Notes1. A Member is entitled to attend and vote at the meeting or to appoint a proxy to attend and vote

in his/her place. 2. A proxy need not be a member of the Company.3. Members wishing to vote/attend by proxy at the meeting may use the proxy form enclosed.4. The completed form of proxy should be deposited at the Registered Office; 52, Galle Face Court

2, Colombo 3 not less than 48 hours before the time of holding the meeting.5. Provided the final dividend recommended is adopted, it is proposed that dividend warrants be

dispatched on 8th August 2017.

Dear Shareholder/s,

The Annual Report - Year 2016/2017

As you may be aware, in terms of the revised rules of the Colombo Stock Exchange (the ‘CSE’) a listed company may issue to its shareholders its Annual Report in a CD-ROM, provided that such company complies with the specified requirements listed in the said rules.

In pursuance of the said Rules, it was proposed that the Annual Report of Chemanex PLC (the ‘Company’) for year ended 31st March 2017 will be issued to its shareholders in a CD-ROM, unless a shareholder makes a written request for a printed copy thereof. Where such written request is received by the Company it will send within eight (08) Market Days of such receipt to any requesting shareholder, a printed copy of the Annual Report.

We enclose herewith the said Report for the financial year ended 31st March 2017 contained in a CD-ROM.

If you should, however, require a printed copy of the said Annual Report, please provide us with a written request therefor. You may for this purpose complete and forward to us the attached Request Form. We shall then, within eight (08) Market Days of the date of our receipt of your request forward to you, a printed copy of the said Annual Report.

In the event that you require assistance relating to the use of the enclosed CD-ROM, you may contact the following persons any time between 10.00 a.m. and 4.00 p.m. on any working day, on the following contact numbers.

Name Contact NumbersR. Thillainathan 011 5525525 Ext. 238Chaminda Kulathunga 011 5525525 Ext. 244Adisha Kumarasiri 011 5525525 Ext. 234

You may also send your queries via email to [email protected]

The Annual Report may also be accessed by shareholders at the Company’s web site www.chemanex.com

By order of the Board of Chemanex PLC

T. WegodapolaCompany Secretary

22 June 2017

Chemanex PLC – PQ 64Circular to Shareholders

Chemanex PlC annual RePoRt 2016/17

Chem

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Documents

CHEMANEX PLC ANNUAL REPORT 2016/17 - … Chemanex PLC | Annual Report 2016/17 OUR VISION To be a globally recognised and responsible corporate leader in manufacturing and …