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Lanka Phosphate Limited
jdrAIsl jdrA;dj 2011/12 Mz;L mwpf;if 2011/12 ANNUAL REPORT 2011/12
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Ministry of State Resources and Enterprise Development
MISSION
“To
Fulfill the National Requirement
of Phosphate Fertilizer by being Self-Sufficient in
Phosphorus
Through
an Environment friendly and State of the art process”
1
CONTENTS Mission 01
Contents 02
Board of Directors 03
Corporate Information 04
Financial Highlights 05
Chairman’s Statement 06-07
Corporate Management 08
Report of the Directors 09-12
Audit & Management Committee Report 13
Report of the Auditors 14 Income Statement 15 Balance Sheet 16-17 Statement of Changes in Equity 18 Cash flow Statement 19-20 Significant Accounting Policies 21-24 Notes to the Financial Statements 25-30
Review of Operations 31-34
Notice of Meeting 35
Form of Proxy 36
2
BOARD OF DIRECTORS
Admiral Daya Sandagiri Chairman & Managing Director
Mr. R.R.M.N.Rajapaksha Mrs. B.M.D.M.Balasooriya Executive Director Director
Mr. P.Dinuka J. Jayawardana Mr. Amarapala Gamage Director Director
Mr. D.M Wijepala Mr. D.D.Amarathunga Director Ministry Observer
3
CORPORATE INFORMATION Company Name
Lanka Phosphate Ltd
Domicile and Legal Form Lanka Phosphate Ltd was incorporated on July 10, 1992 as a Limited Liability Company under the Companies Act No. 17 of 1982 in terms of the conversion of Public Corporations or Government Owned Business undertakings in to Public Companies Act No. 23 of 1987 to take over the Eppawala Phosphate project of the State Mining and Mineral Development Corporation. However, subsequently the Company has re-register under the Companies Act No. 07 of 2007 Principal Activities and Nature of Operations The principal activities of the company are excavating, processing and selling of Rock Phosphate, which is used as a fertilizer for perennial agricultural crops.
Ultimate Parent Company
The company’s issued shares are fully owned by the
Secretary to the Treasury on behalf of the
Government of Sri Lanka
Line Ministry
Ministry of State Resources & Enterprise
Development
No 561/3, Elvitigala Mawatha
Colombo 05
Registered Office
73 1/1, New Kelani Bridge Rd Colombo 14
Tel: 94112459906/7
Fax:94112459908
Registration No
PB 308
Board of Directors
Admiral Daya Sandagiri (Chairman & MD)
Mr. R.R.M.N.Rajapaksha (Executive Director)
Mrs. B.M.D.M. Balasooriya
Mr. P.Dinuka J. Jayawardana
Mr. Amarapala Gamage
Mr. D.M.Wijepala
Mr. D.D.Amarathunga (Ministry Observer)
Company Secretary
Financial Services and Commercial Agencies (Pvt)
Ltd, Attorney – at – Law
28, Rosmead Place, Colombo 07
Auditors
SJMS Associates
Chartered Accountants
No 02, Castle Lane
Colombo 04
Tax Consultants
Amerasekara & Co.
Chartered Accountants
12, Rotunda Gardens
Colombo 03
Bankers
Bank of Ceylon
Peoples Bank
Hatton National Bank PLC
4
FINANCIAL HIGHLIGHTS SUMMARY OF RESULTS FOR THE YEAR (Rs. ‘000)
2011/12 2010/11 2009/10 Revenue 491,280 393,068 351,301 Net Profit before Income Tax 201,418 126,000 106,474 Income Tax Expenses 58,655 43,033 43,154 Net Profit after Taxation 142,763 82,968 63,320 SUMMARY AT THE YEAR END (Rs. ‘000)
2011/12 2010/11 2009/10
Share holder’s Funds 534,705 411,942 338,974 Working Capital 462,171 395,228 325,583 Total Assets 617,632 498,864 435,357 Staff Cost 161,143 145,638 141,082 No of Employees (No) 294 307 294 PER SHARE (Rs.)
2011/12 2010/11 2009/10 Earnings 19.69 11.44 8.73 Net Assets 73.74 56.81 46.47 RATIOS
2011/12 2010/11 2009/10 Current Ratio (Times) 12.67 12.28 7.8 Return on Shareholders Funds (%) 26.7 20.1 18.7
5
Lanka Phosphate Ltd (LPL) was incorporated on 10th July, 1992 in terms of the conversion of public corporations or government owned business undertaking into Public Companies Act, No 23 of 1987 to take over the Eppawala Phosphate Project of the State Mining & Mineral Development Corporation. It is fully owned by the Secretary to the Treasury on behalf of the Government of Sri Lanka. LPL becomes a fully independent organization with the separation from Bogala Graphite Ltd in November 1998. Company has exclusive exploration rights over 450 hectares of land at Eppawala in Anuradhapura district on which a large Rock Phosphate deposit is located. The ore is currently estimated at 60 million tones containing 33-40% of P2O5 and is considered to be one of the richest and unique phosphate deposit in the world. Currently LPL produces two types of rock phosphate fertilizers namely Eppawala Rock Phosphate (ERP) and High-Grade Eppawala Rock Phosphate
(HERP) which are used as fertilizer for perennial crops in Sri Lanka. However, there is a big potential to expand our activities to give the maximum benefit to the nation from this valuable deposit. At present we are producing about 55,000 mt Eppawala Rock Phosphate annually and marketing the same for plantation crop sector. Our fertilizers are used for perennial crops such as Tea, Rubber, Coconut, export cash crops and fruit crops. Tea plantations dominate 60 percent of the use of Eppawala Rock phosphate, whereas rubber and coconut sectors share 30 percent of the use. The export cash crops and the fruit crops mainly share the balance. Because of the use of our own Phosphate fertilizer there is a saving of substantial foreign exchange over Rs. 500 million annually. The financial year 2011/2012 ended achieving a gross turnover of Rs.491.3 Million. I wish to place on record that Lanka Phosphate Ltd achieved a sales level of 47,112.55 mt of Eppawala Rock Phosphate (ERP) and 8972.35 mt of High-Grade Eppawala Rock Phosphate (HERP) respectively. It is with concern to note that an increase of company profit before taxation to Rs. 201.4 Million as compared to the previous year of Rs.126.0 Million. There is more to be done in the years ahead both in planning and organizing to enhance the Company profitability to a further higher level. During the period under review the LPL was able to purchase and install new Grinding Mill which has the capacity of producing 10mt. of
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ERP/HERP per hour. The introduction of the new Mill will enhance the total production capacity to meet the ever growing demand owing to His Excellency the Presidents’ fertilizer subsidy for the Agriculture sector. Workshops have been conducted together with Coconut Research Institute and Lak Pohora Ltd to enhance the knowledge on the use of fertilizer on annual & perennial crops. We have great challenges ahead of us. Company Board is committed to work out solutions to develop the existing as well as new business opportunities for the optimal utilization of Eppawala Phosphate Deposit. We have recognized the importance and national need of a more soluble type of phosphate fertilizer in the form of Triple Super Phosphate (TSP) or Single Super Phosphate (SSP) fertilizer for short-term crops to cater to the total requirement of the country. New venture of the Company for the manufacture of TSP/SSP fertilizer with the setting-up of a local plant will be a boon to Sri Lanka Agriculture field thus, preventing the large annual out flow of foreign exchange on the import of Triple Supper Phosphate (TSP). I have no doubt that LPL as a responsible State organization we will
support to enrich soil fertility of the Motherland while enhancing Agricultural productivity to dedicate the national economy. I wish the company to achieve its bench marks while providing much needed service to the people of the country. I consider the development of human resources, information technology and infrastructure of the company are necessary for better productivity, competitiveness, profitability and stability. We have given priority to staff training programs to develop the necessary skills at all levels to be conversant with the new developments in their respective fields. In conclusion, I greatly appreciate the guidance, encouragement and support extend by the Minister of State Resources & Enterprises Development Hon. Dayasritha Tissera, Deputy Minister Hon. Sarath kumara Gunarathna, Secretary to the Ministry Dr. Willie Gamage and the staff in this regard.
Chairman & Managing Director Lanka Phosphate Ltd
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CORPORATE MANAGEMENT
Capt. (Rtd) Eng Upul Kumarasena H.R.U.D. Bandara General Manager Deputy General Manager
U.S.P.G. Sooriyarachchi D.G.U. Chamara G.A.Chandradasa D.A.M. Munasinghe Maintenance Manager Finance Manager Production Manager Admin. & HR Manager
Capt. K.G.R.P.Kiriella S.D. Rupasinghe M.M.D.Thilakerathna S.A. Abeysiri
Security Officer Accountant Internal Auditor Supplies Officer
W.R.Illangasinghe D.R.K.Thilakerathn S.M.A.R.K.Manchanayake R.A.A.P. Ranasinghe Transport Officer Finance Officer Admin & HR Officer Marketing Officer
8
REPORT OF THE DIRECTORS
The Directors of Lanka Phosphate Limited, (the Company) present herewith the Audited Accounts
for the year ended 31st March 2012 and the Annual Report for the year ended 31st March 2012.
1.0 Company Name
Lanka Phosphate Ltd (Reg. no PB 308)
2.0 Domicile and Legal Form
Lanka Phosphate Ltd was incorporated on
July 10, 1992 as a Limited Liability
Company under the Companies Act No. 17 of
1982 in terms of the conversion of Public
Corporations or Government Owned
Business undertakings in to Public
Companies Act No. 23 of 1987 to take over
the Eppawala Phosphate project of the State
Mining and Mineral Development
Corporation. However, subsequently the
Company has re-register under the
Companies Act No. 07 of 2007
3.0 Principal Activities and Nature of
Operations
The principal activities of the company are
excavating, processing and selling of Rock
Phosphate, which is used as a fertilizer for
perennial agricultural crops.
4.0 Financial Statement
Directors are satisfied that the financial
statement attached hereto gives a true and fair
view of the state of affairs of the Company as
at the Balance Sheet date.
The Directors consider that in preparing these
Financial Statements, suitable accounting
policies have been followed, which are
applied consistently and supported by
reasonable and prudent judgment and
estimates. They are of the opinion that there
been no significant change in the accounting
policies which warrant disclosure in this
report. The Directors have taken such steps as
are responsibly open to them to Safeguard the
assets of the Company and to prevent and
detect fraud or other irregularities.
5.0 Financial Statements and
Accounting Policies
The Directors consider that in preparing these
Financial Statements, suitable Accounting
Policies have been selected which are applied
consistently while reasonable and prudent
judgments and estimates have been made so
that the form and substance of transaction are
properly reflected. There was no change in
accounting policies made during the
accounting period.
6.0 Property, Plant & Equipment,
their Valuation and Depreciation
Capital Expenditure during the year on
property plant and equipment by the
company amounted Rs. 62,186,308.65
Details of the status and movements of
Property plant and Equipment, their
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Valuation and Deprecation are given in Note
9.0 of Note to the Financial Statements.
7.0 Taxation
The company was taxable at 28% on the
taxable income for the year under review.
8.0 Dividends
Rs. 30.0 million interim dividend was
declared for the year under review.
9.0 Stated Capital
The Stated Capital of the Company altogether
Rs. 72,510,000.00 consisting of 7,251,000
ordinary shares. There was no change in the
Stated Capital for the year under review.
10.0 Shareholding
Interms of Section 2(3) of the Conversion of
Public Corporations or Government Owned
Business Undertakings into Public
Companies Act No. 23 of 1987 the sole
shareholder is the Company is Secretary to
the Treasury (in his official capacity) for on
behalf of the state.
As at 31st March 2012, the shareholding
details of the company are as follows;
Secretary to the Treasury (in his official
capacity) 7,251,000 ordinary shares
Lanka Phosphate Limited is a Shareholder of
GSMB Technical Services (Private) Limited
and holding 100,000 of ordinary shares (Rs.
10/- each).
The Percentage of said shareholding is
16.66%.
11.0 Changes in Shareholdings
There have been no changes to the
Shareholding of the Company as at
31.03.2012.
12.0 Donations
The Company has contributed Rs.
2,712,914.00 for charitable purposes & CSR
during the year under review.
13.0 Employees
The total cost of personnel during the year
was Rs. 161,143,086.20
The number of persons employed by the
Company at the end of the year was 294.
14.0 Directors
The following Directors held office during
the year under review.
Admiral Daya Sandagiri - Chairman & MD
Mr. R.R.M.N Rajapaksha – Executive
Director
Mrs. B.M.D.N Balasooriya - Director
Mr. A. Gamage - Director
Mr. P.D.J Jayawardana - Director
Mr. D.M.Wijepala – Director
15.0 Resignation and Appointment of
Directors
Mr. K.W.Bandula (10.05.2011), Mr.
A.G.D.D Gunasekara (07.06.2011), Mr.
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M.M.C.P Mohottegedara (09.01.2012) were
resigned during the year of 2011/12.
16.0 Director’s remuneration
Rs. 596,500.00 was paid as Directors
Remuneration & Expenses in the year under
review.
17.0 Statutory Payments
The Directors, to their best of their
knowledge and the belief are satisfied that all
statutory payments due to the Government
and to Employment Provident Fund and
Employees Trust Fund have been paid
accurately and on time.
18.0 Compliance
The company has not engaged in activities
that contravene the laws or regulations that
are applicable in Sri Lanka or elsewhere.
19.0 Going Concern
The Directors are satisfied that the company
has adequate resources to continue their
operations in the foreseeable future and
accordingly all finance statements of the
company is prepared on the going concern
basis.
20.0 Corporate Governance
The Board of Directors ensures good
corporate Governance. It is the duty of the
Board of Directors to ensure that the
performance is in line with the company
objectives as a public enterprise as well as the
objectives and expectations of the
stakeholders.
21.0 Risk Management
The Company consciously fulfills its
statutory and legal requirement to ensure that
its exposure to legal risk is eliminated or
minimized.
22.0 Auditors
Messrs SJMS Associates, Chartered
Accountant are the present Auditors of the
Company.
As the present Auditors of Lanka Phosphate
Limited, M/s. SJMS Associates, Chartered
Accountants have completed their 1st year of
service and retire at the Annual General
Meeting Scheduled to be held on 24th
September 2012.
Therefore the Directors of Lanka Phosphate
Limited have decided to recommend to the
Shareholders of the Company to re-appoint
the retiring Auditors M/s. SJMS Associates
subject to the procedure imposed by the
Companies Act No. 07 of 2007 at the Annual
General Meeting scheduled to be held on 24th
September 2012 at 5.30pm at Head Office,
Lanka Phosphate Ltd, No 73 1/1, New Kelani
Bridge Rd, Colombo 14.
A resolution proposing that the Directors be
authorized to determine the remuneration of
new Auditors will be tabled at the Annual
General Meeting.
Total audit fees paid by the company to
Messrs SJMS Associates Amount to Rs.
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371,280.00 for the year under review. Fees
paid for tax consultation services to Messer.
Ameresekara & Company for the year is Rs.
171,432.00.
As far as the Directors are aware, the
Auditors did not have any relationship with
the Company or its subsidiaries that would
have an impact on their independence.
FOR AND BEHALF OF THE BOARD OF
DIRECTORS
Chairman
Executive Director
Company Secretaries
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AUDIT & MANAGEMENT COMMITTEE REPORT COMPOSITION The Audit & Management Committee is appointed by the Board of Directors and it is responsible to the Board. The Chairman of the Committee was the Director who represents the Secretary to the Treasury on behalf of the Government of Sri Lanka and also the General Manager, Deputy General Manager, Finance Manager, Admin & Human Resource Manager and Internal Auditor represent the committee as members who represent the Management of the company. MEETINGS The Audit & Management Committee was able to meet four occasions during the year to discuss the issues and evaluate the existing controls in order to make recommendations to the Board of Directors of the company. ACTIVITIES & RESPONSIBILITIES Financial Reporting The committee reviewed and discussed the financial reporting system adopted by the company in the preparation of its quarterly and annual financial statements with the Management & the External Auditors to ensure reliability of the processes and the consistency of the accounting policies adopted and its compliance with the Sri Lanka Accounting Standards and the provision of the Companies Act No 07 of 2007. Internal Audit An Internal Audit Division is established in the company with the aiming of strengthening & enhancing the overall controls and performances of the company. COMPLIANCE WITH LAWS AND REGULATIONS The Committee reviewed the monthly/quarterly compliance reports submitted by the relevant officers to ensure that the company has complied with all statutory requirements. CONCLUSION The Audit & Management Committee is satisfied that the Company’s accounting policies, operational controls and risk management processes provided reasonable assurance that the affairs of the Company are managed in accordance with Company policies and that the Company assets are properly accounted for and adequately safeguarded.
Chairman Audit & Management Committee
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REPORT OF THE AUDITORS INDEPENDENTS AUDITOR’S REPORT TO THE SHAREHOLDERS OF LANKA PHOSPHATE LTD Report on the Financial Statements We have audited the accompanying financial statements of Lanka Phosphate Ltd., which comprise the Balance Sheet as at 31st March 2012, and the Income Statement, the Statement of Changes in Equity and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory notes . Management’s Responsibility for the Financial Statements. Management is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. The responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are responsible in the circumstances. Scope of Audit and Basis of Opinion Our responsibility is to express an opinion on these financial statements based on our audit. we conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. We therefore believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended March 31, 2012 and the financial statements give a true and fair view of the Company’s state of affairs as at March 31, 2012 and of its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards. Report on Other Legal and Regulatory Requirements In our opinion these financial statements also comply with the requirements of section 151 (2) of the Companies Act No 07 of 2007.
08th August 2012
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LANKA PHOSPHATE LIMITED INCOME STATEMENT
FOR THE YEAR ENDED 31ST MARCH 2012
2011/2012 2010/2011 Note Rs. Rs.
Revenue 3 491,279,533.00 393,067,483.46
Cost of sales (192,287,311.72) (171,421,962.84) Gross profit 298,992,221.28 221,645,920.62
Other income 4 49,908,731.15 29,785,480.64 348,900,952.43 251,431,401.26
Distribution costs (7,114,844.48) (4,665,326.97) Administrative expenses (140,359,075.63) (119,592,834.83) Profit from operation 5 201,427,032.31 127,173,239.46
Finance costs 6 (8,932.68) (1,172,459.20) Profit before taxation 201,418,099.63 126,000,780.26
Tax expense 7 (58,655,361.93) (43,032,618.63)
Net profit for the year 142,762,737.70 82,968,161.63
Earnings per share 8 19.69 11.44
The accounting policies and notes from 1 to 23 to the financial statements form an integral part of these financial statements.
15
LANKA PHOSPHATE LIMITED BALANCE SHEET AS AT 31ST MARCH 2012
31.03.2012 31.03.2011
Note Rs. Rs. Assets Non-Current Assets Property, plant and equipment 9 100,064,624.84 46,043,415.27 Investment in equity 10 1,000,000.00 1,000,000.00 Investment in treasury bonds 956,167.97 887,207.89 Long term loan 11 1,522,037.53 3,931,257.53 Goodwill 12 4,953,880.00 6,192,052.00 Deferred taxation 7,353,957.49 10,542,400.49
115,850,667.83 68,596,333.18 Current Assets Inventories 13 69,042,402.25 40,653,986.05 Trade receivables 33,175,324.86 31,198,224.86 Deposits, prepayments and other receivables 14 66,279,410.43 65,318,940.72 Long term loan receivable within one year 11 2,628,240.00 2,628,240.00 Short term deposits 285,000,000.30 240,190,026.67 Cash and cash equivalent 15 45,656,280.99 50,278,309.54
501,781,658.83 430,267,727.84 Total Assets 617,632,326.65 498,864,061.02
Equity and Liabilities Capital and Reserves Stated capital 16 72,510,000.00 72,510,000.00 Retained profit 462,194,841.23 339,432,103.53 Total Equity 534,704,841.23 411,942,103.53
Non-Current Liabilities Retirement benefit obligations 17 43,316,874.15 51,882,087.32 Current Liabilities Trade payable 2,702,575.66 3,928,609.00 Commissioner general of inland revenue 24,838,297.94 13,783,745.58 Other payables and accrued expenses 18 12,069,737.67 11,218,847.71 Bank overdrafts - 6,108,667.88
39,610,611.27 35,039,870.17 Total Equity and Liabilities 617,632,326.65 498,864,061.02
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I certify that the financial statements also comply with the requirements of the Companies Act No 07 of 2007.
Finance Manager
The Board of Directors is responsible for the preparation and presentation of these financial statements.
Approved and signed for and on behalf of the Board
Director Director Date: 08th August 2012
The accounting policies and notes from 1 to 23 to the financial statements form an integral part of these financial statements.
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LANKA PHOSPHATE LIMITED
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31ST MARCH 2012
Stated Capital Retained Profit Total Equity
Rs. Rs. Rs. Balance as at 01.04.2010 72,510,000.00 266,463,941.90 338,973,941.90
Net profit for the year - 82,968,161.63 82,968,161.63
Dividend paid - (10,000,000.00)
(10,000,000.00)
Balance as at 31.03.2011 72,510,000.00 339,432,103.53 411,942,103.53
Net profit for the year - 142,762,737.70 142,762,737.70
Dividend paid - (20,000,000.00)
(20,000,000.00)
Balance as at 31.03.2012 72,510,000.00 462,194,841.23 534,704,841.23
The accounting policies and notes from 1 to 23 to the financial statements form an integral part of these financial statements.
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LANKA PHOSPHATE LIMITED
CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2011
31.03.2012 31.03.2011
Note Rs. Rs. Cash Flow from Operating Activities Profit before taxation 201,418,099.63 126,000,780.26
Adjustments for ; Depreciation 8,165,099.08 5,994,451.28 Retiring Benefit Obligations 8,507,722.47 7,884,149.85 Amortization of goodwill 1,238,172.00 1,238,172.00 Recognized actuarial loss (14,195,732.84) 3,509,604.06 Interest income (35,095,526.81) (31,812,781.89) Dividend income (450,000.00) (450,000.00) Operating profit before working capital changes 169,587,833.54 112,364,375.56
Working Capital Changes (Increase)/decrease inventories (28,388,416.20) 14,800,401.95 (Increase)/decrease in trade receivables (1,977,100.00) 2,719,661.14 (Increase)/decrease in deposits, prepayments and other receivables 857,209.42
(10,792,825.53)
Increase/(decrease) in trade payables (1,226,033.34) 1,040,156.00 Increase/(decrease) in other payables and accrued expenses 850,889.57 2,870,204.97 Cash generated from operations 139,704,382.99 123,001,974.09
Income tax/ESC/WHT paid (44,412,366.57)
(66,658,201.23) Payment of retirement benefit obligation (2,877,202.50) (8,826,212.00) Net cash flow from operating activities 92,414,813.92 47,517,560.86
Cash Flow from Investing Activities
Purchase of property, plant and equipment (25,903,905.63)
(9,357,106.95) Additions in capital work-in-progress (36,282,403.02) (2,089,431.98) Additions in investment - (862,080.00) Additions in short term deposits (44,809,973.63) (40,013,196.64) Interest received 33,208,887.69 36,405,955.37 Dividend received 450,000.00 450,000.00 Loan capital recovered 2,409,220.00 2,628,240.00
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Net cash flow from investing activities (70,928,174.59)
(12,837,620.20)
Cash Flow from Financing Activities
Dividend paid (20,000,000.00)
(10,000,000.00)
Net cash used in financing activities (20,000,000.00)
(10,000,000.00)
Net changes in cash and cash equivalents 1,486,639.33 24,679,940.66
Cash and cash equivalents at beginning of the year 19.1 44,169,641.66 19,489,701.00
Cash and cash equivalents at the end of the year 19.2 45,169,641.66 44,169,641.66
The accounting policies and notes from 1 to 23 to the financial statements form an integral part of these financial statements.
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LANKA PHOSPHATE LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2012 1 CORPORATE INFORMATION 1.1 Domicile and Legal Form
Lanka Phosphate Ltd was incorporated on July 10, 1992 as a Limited Liability Company under the Companies Act No. 17 of 1982 in terms of the conversion of Public Corporations or Government Owned Business undertakings in to Public Companies Act No. 23 of 1987 to take over the Eppawala Phosphate project of the State Mining and Mineral Development Corporation. However, subsequently the Company has re-register under the Companies Act No. 07 of 2007
The registered office of the company is located at No. 73 1/1 New Kelani Bridge Road, Colombo-14 and Rock Phosphate (Apatite) deposit is located at Eppawala.
1.2 Principal Activities and Nature of Operations
The principal activities of the company are excavating, processing and selling of Rock Phosphate, which is used as a fertilizer for perennial agricultural crops.
1.3 Parent and Ultimate Parent Company The company’s issued shares are fully owned by the Secretary to the Treasury on behalf of the Government of Sri Lanka.
1.4 Number of Employees The number of employees at the end of the year was 294 (2011-307)
2. SUMMARY OF SIGNIFICANT FINDINGS
2.1 ACCOUNTING CONVENTION
The Financial Statements of the Company are prepared in accordance with Generally Accepted Accounting Principles and the applicable Sri Lanka Accounting Standards lay down by the Institute of Chartered Accountants of Sri Lanka. The Accounting Policies have been applied by the company consistent with that of the previous year, and previous year figures and phrases have been rearranged where necessary to confirm to the current year’s presentation.
These Financial Statements presented in Sri Lanka Rupees have been prepared on the historical cost basis.
2.2 ASSETS AND BASES OF THEIR VALUATION 2.2.1 Property Plant, and Equipment
Items of Property, Plant and Equipment are stated at cost or valuation less accumulated depreciation, which is provided on a Straight-Line Basis.
Cost The cost of Property, Plant and Equipment is the cost of acquisition or construction together with any expenses incurred in bringing the assets to its working condition for its intended use.
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Expenditure incurred for the purpose of acquiring, extending or improving assets of a permanent nature by means of which to carry on the business or to increase the earning capacity of the business has been treated as capital expenditure.
Depreciation The principal annual rates used for Depreciation are as follows;
Building 04% Plant and Machinery 10% Laboratory Equipment 10% Electrical Equipment 10% Miscellaneous Assets 10% Motor Vehicle 20% Office Equipment 20% Furniture and Fittings 20%
Computer Hardware and Software 20% 2.2.2 Operating Lease
The Operating lease is for a period of 30 Years. The rentals paid are charged to Income Statement.
2.2.3 Inventories
Stocks of Phosphate are valued on a weighted average basis, based on the cost of production. It has been the practice to apportion 40% of the costs of the Mine to “crushed” production (Unprocessed) and to apportion the balance 60% to “ground” production (Processed) when valuing the Phosphate stocks.
General stocks are stated at the lower of cost and net realizable value. In general, cost is determined on a weighted average basis. Net realizable value is the price at which stock can be sold in the ordinary course of business after allowing for the cost of realization. Provision is made where necessary for obsolete, slow- moving and defective stocks.
2.2.4 Short Term Investments Short-term investments are stated at lower of cost and market value. 2.2.5 Trade and Other Receivables
Trade and Other Receivables are stated at the value estimated to be realized after providing for bad and doubtful debts.
2.2.6 Cash and Cash Equivalents
Cash and Cash Equivalents comprise cash balances, stamp float and demand deposits.
2.3 LIABILITIES AND PROVISIONS 2.3.1 Provision for Taxation Income Tax
Income Tax on the profit or loss for the Year comprises current and deferred tax. Income Tax is recognized in the Income Statement.
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Current tax is the profit tax payable on the taxable income for the year, using tax rates enacted at the Balance Sheet date, and any adjustment to tax payable in respect of previous years.
Deferred Tax
Deferred Tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amount of assets and liabilities for financial reporting purpose and the amounts used for Taxation purposes.
2.3.2 Retiring Gratuity The liability recognized in the balance sheet is the present value of the defined benefit obligation at the balance sheet date using the projected unit credit method. However, according to the payment of Gratuity Act, No. 12 of 1983, the liability arises only on the completion of 5 years of continued service. The gratuity liability is not externally funded.
2.3.3 Payables and Provisions
Trade and Other Payables are stated at their cost.
A Provision is recognized in the Balance sheet when the Company has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefit will be required to settle the obligation.
2.4 INCOME STATEMENT 2.4.1 Turnover
The company’s turnover comprises of sale of Eppawela Rock Phosphate (ERP) and, High grade Eppawala Rock Phosphate (HERP)
2.4.2 Revenue and Expenses Revenue from the sale of Phosphate is recognized in the Income Statement when the significant risks rewards of ownership have been transferred to the buyer.
Gain and Losses of revenue nature on the disposal of property, plant and equipment have been accounted for in the Income Statement. All expenditures incurred in running of the business and maintaining the capital assets in a state of efficiency has been charged to revenue in arriving the profit for the year.
2.4.3 Net Financing Income
Net Financing Income comprises of interest income from Fixed Deposits, Treasury Bills, Treasury Bonds, Loan given to Bogala Graphite Lanka Limited and Staff Loans. Interest income is recognized in the Income Statement as it accrues, taking in to account the effective yield on the asset.
2.4.4 Borrowing Cost
Borrowing Cost are recognized as an expense in the period in which they are incurred, expect to the extent that they are directly attributable to the acquisition construction or production of a qualifying asset, in which case they are capitalized as part of the cost of that asset.
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2.5 CASH FLOW
The Cash Flow Statement has been prepared using the “Indirect Method”. Interest paid are classified as operating cash flow, interest and dividend received are classified as investing cash flows while dividends paid are classified as Financing cash flows for the purpose of presenting of cash flow statement.
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9. Property, Plant and Equipment
Buildings
Plant & Machinery
Motor Vehicles
Office Equipment
Electrical Equipment
Furniture & Fittings
Laboratory Equipment
Computer Hardware &
Software Miscellaneous WIP Total Cost Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Balance at the beginning of the year 32,838,447.65
32,411,419.00
33,853,221.00
1,996,007.00
2,230,155.00
3,488,510.70 407,463.00 8,408,100.40 8,649,111.81 6,589,652.08
130,872,087.64
Additions
1,869,744.58 13,000.00 18,800,000.00 44,800.00
1,278,213.50
476,968.05 -
2,907,999.50 513,180.00
36,282,403.02 62,186,308.65
Balance at the end of the year 34,708,192.23
32,424,419.00
52,653,221.00
2,040,807.00
3,508,368.50
3,965,478.75 407,463.00
11,316,099.90 9,162,291.81
42,872,055.10
193,058,396.29
Accumulated Depreciation Balance at the beginning of the
year-Restated 16,106,671.02
24,182,742.18
25,621,138.13
1,568,383.68
1,550,316.87
3,007,862.11 389,983.10 6,910,807.21 5,490,768.07 -
84,828,672.37
Charge for the year
1,313,537.40
1,798,485.28
3,240,416.97
118,121.34
151,972.46
204,603.00 4,370.04 745,153.46 588,438.70 - 8,165,099.08
Balance at the end of the year 17,420,208.42
25,981,227.46
28,861,554.91
1,686,505.65
1,702,289.33
3,212,465.11 394,353.14 7,655,960.67 6,079,206.77 -
92,993,771.45
Written Down Value
Balance at the end of the year 17,287,983.81
6,443,191.54
23,791,666.09
354,301.35
1,806,079.17
753,013.64 13,109.86 3,660,139.23 3,083,085.04
42,872,055.10
100,064,624.84
Balance at the beginning of the year (Restated)
16,731,777
8,228,677
8,232,083
427,623
679,838
480,649 17,480 1,497,293 3,158,344 6,589,652 46,043,415
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2011/2012 2010/2011 Rs. Rs.
3. Revenue
ERP -Eppawala Rock Phosphate 393,480,918.00
340,940,268.46 HERP - High Grade Eppawala Rock Phosphate 97,798,615.00 52,127,615.00
491,279,533.00 393,067,883.46 4. Other Income
Interest income 35,095,526.81
31,812,781.89 Dividend income 450,000.00 450,000.00 Miscellaneous income 167,471.50 1,032,302.81 Actuarial gain 14,195,732.84 (3,509,604.06)
49,908,731.15 33,295,084.70
5. Profit from operation is stated after charging the following:
Staff costs 161,143,086.20 145,638,083.78 Directors fees 356,500.00 84,000.00 Directors expenses 240,000.00 218,333.00 Depreciation 8,165,099.08 5,994,451.28 Audit fee 336,739.20 337,348.40
6. Finance Costs Debit tax 8,932.68 1,172,459.20
8,932.68 1,172,459.20 7. Income Tax
Income tax on profit for the year (Note-10.1) 55,466,918.93
46,450,229.12 Transferred from deferred tax 3,188,443.00 (3,417,610.49)
58,655,361.93 43,032,618.63 7.1 Reconciliation of Income Tax
Profit before taxation 201,418,099.63 126,000,780.26 Non business income (46,862,092.05) (32,262,781.89) Aggregate disallowable items 41,915,846.64 38,079,823.02 Aggregate allowable expenses (35,042,875.11) (32,289,773.40) Interest income/profit on disposal of fixed assets 32,720,449.21 32,047,771.00 Taxable profit 194,149,428.33 131,575,818.99
Income tax at 28% 54,361,839.93 46,051,536.65 Social responsibility levy 1.5% - 690,773.05 Notional tax credit (504,090.00) (234,988.78) Over provision in the prior year 1,609,169.00 (57,091.80)
55,466,918.93 46,450,229.12
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8.0 Earnings per share The calculation of the basic earnings per share is based on the profit attributable to ordinary shareholders of the company and the weighted average number of ordinary shares outstanding during the year as follows:
2011/2012 2010/2011 Rs. Rs. Profit attributable to ordinary shareholders 142,762,737.70 82,968,161.63 Weighted average number of ordinary shares outstanding during the year
7,251,000 7,251,000
Basic earnings per share 19.69 11.44
31.03.2012 31.03.2011
Rs. Rs. 10. Investment in GSMB Technical Services (Pvt) Ltd
100,000 Ordinary shares, Rs.10 each 17% 1,000,000.00 1,000,000
11. Long Term Loan -Bogala Graphite Lanka Limited
Balance at the beginning of the year 7,446,611.00
10,074,851.00 Installments received during the year (2,409,220.00) (2,628,240.00)
5,037,391.00 7,446,611.00 Installments received in advance (887,113.47) (887,113.47)
4,150,277.53 6,559,497.53 Amount receivable within one year (2,628,240.00) (2,628,240.00) Balance at the end of the year 1,522,037.53 3,931,257.53
12. Goodwill The excess of issued share capital of the Company over the net identifiable assets of the business converted to a company at the date of conversion is the balance sheet as goodwill, arising on conversion. The goodwill so recognized, is amortized over a period of 20 years on a straight line basis, commencing from the year ended 31.03.1997.
Balance at the beginning of the year 6,192,052.00
7,430,224.00
Amortization for the year (1,238,172.00) (1,238,172.00) Balance at the end of the year 4,953,880.00 6,192,052.00
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13. Inventories
Trade stocks 16,151,045.03
5,576,908.39 General stocks 53,479,194.74 35,664,915.18
69,630,239.77 41,241,823.57 Provision for obsolete general stocks (587,837.52) (587,837.52)
69,042,402.25 40,653,986.05
14. Deposits, Prepayments and Other Receivables
Staff loans and advances 48,911,215.05
51,958,276.64 Deposit and prepayments 5,554,484.42 3,364,632.25 Interest receivables 11,813,710.96 9,996,031.83
66,279,410.43 65,318,940.72 15. Cash and Cash Equivalent
Repo -Bank of Ceylon 26,000,000.00
44,600,000.00 Stamp float 15,272.00 23,702.00 Cash at bank 19,556,008.99 5,569,607.54 Cash in hand 85,000.00 85,000.00
45,656,280.99 50,278,309.54
16. Stated Capital Issued and fully paid 7,251,000 Ordinary shares 72,510,000.00 72,510,000.00
17. Retirement Benefit Obligations Balance at the beginning of the year 51,882,087.02
49,314,545.41
Charged for the year 2,800,692.90 3,199,268.04 Interest cost 5,707,029.57 4,684,881.81
60,389,809.49 57,198,695.26 Gratuity payments during the year (2,877,202.50) (8,826,212.00) Effect in changes of assumptions (14,195,732.84) 3,509,604.06 Balance at the end of the year 43,316,874.15 51,882,087.32
The following assumptions have been taken in the computation of gratuity as per SLAS No.16.
Expected annual average salary increment 10% 10% Discount Rate 11% 9.50%
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18. Other Payables and Accrued Expenses WHT payables
201,133.00
Accrued expenses 9,804,154.90 10,162,670.87 Other Payables 2,265,582.77 855,043.84 12,069,737.67 11,218,847.71 19. Note to the Cash Flow Statement 19.1 Cash & Cash Equivalent at the beginning of the year Stamp float 15,272.00 23,702.00 Cash at bank 19,556,008.99 5,569,607.54 Bank overdraft - (6,108,667.88) Cash in hand 85,000.00 85,000.00 19,656,280.99 (430,358.34) 19.2 Cash & Cash Equivalent at the End of the year Repo – Bank of Ceylon 26,000,000.00 44,600,000.00
Stamp float 15,272.00 24,062.00 Cash at bank 19,556,008.99 21,220,643.00 Bank overdraft - (1,840,004.00) Cash in hand 85,000.00 85,000.00 45,656,280.99 19,489,701.00 20. Contingent liabilities/Contingent Assets
The company has no material contingent liabilities/assets except the outcome on following pending cases as at the balance sheet date. i. Case No.’s LPL/COU/03-1 & LPL/COU/03-02 have been filed by third parties
claiming damages Rs. 2.5 mn for the accident met. ii. Two labour cases are pending against the company; outcome of those not known
21. Commitments
Financial commitments There were no material financial commitments outstanding at the balance sheet date. Capital commitment Capital expenditure contracted for, at the balance sheet date but not recognized in the financial statements is as follows;
31.03.2012 31.03.2011 Rs. Rs.
Unpaid capital expenditure for new mill
construction in progress 18,201,526.00 -
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22. Event after the balance sheet date
No circumstances have arisen since the balance sheet date which requires adjustments to or disclosure in the financial statements.
23. Related Party Transactions 23.1 Transaction with Key Management Personnel
Related party includes key management personnel defined as those persons having authority & responsibility for planning, directing & controlling the activities of the company. Key management personnel include the directors of the Company. Compensation to key management personnel for the year was as follows.
2011/2012 2010/2011 Rs. Rs.
Short term benefits 596,500.00 302,333.00 23.2 Transaction with other related parties
During the financial year, no parties and transaction were identified as related parties defined under the Sri lanka Accounting Standards No 30.
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REVIEW OF OPERATIONS A brief review of operations and operational results for the year 2011/12 and the future plans of the company are presented as follows. 01. PROFITABILITY
Profit before taxation for the year 2011/12 is Rs. 201.41 millions. It is an over 59.8% increase when compare to the previous year of Rs. 126.00 million. The profit after tax too for the year has gone up by 59.80 million which is a significant growth of over 72%.
02. NET ASSETS
The company is being able to maintain a healthy Net Assets position continuously. The value of net assets at the end of the last year of Rs.412 million had been increased up to Rs. 535 million by the end of current year.
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03. REVENUE
Company achieved gross revenue of Rs. 491.3 million which includes the sale of 47112.55 mt of ERP and 8972.35 mt of HERP for the year. It is over 8% achievement against the targets for the year.
04. CAPITAL EXPENDITURE The capital expenditures incurred during the last five years are as follows;
Acquisition & Capital Work-In-Progress 2007/08- Rs. 12,651,515/= 2008/09- Rs. 1,078,048/= 2009/10- Rs. 1,720,805/= 2010/11- Rs. 11,446,539/= 2011/12- Rs. 62,186,309/= The Company has planned to increase the capital expenditure in the coming years also by way of enhancing the existing storage facilities, production capacities , replacement of old vehicles etc.
05. PAYMENTS TO GENERAL TRESURY & GOVERNMENT INSTITUTIONS
Being a state company & having 100% ownership of shares, the total dividend declared by
LPL is entitled to the General Treasury of Sri lanka. The dividend declared and paid for the
year is Rs. 40.0 million. In addition to income tax, the company is liable to pay other taxes
and levies such as royality, mineral taxes, ESC etc. The Royality is calculated at 4% on
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sales value of the production to and paid to Geological Survey & Mining Bureau on
quarterly basis. The royality payment for the current year is Rs. 23.30 millions.
Summary of such payments for last eight years are as follows.
FUTURE PLANS FOR LANKA PHOSPHATE LTD Having achieved one of the major objectives prescribed in “Mahinda Chinthana – Vision for the future”, that is meeting the entire local requirement of rock phosphate, Lanka Phosphate Limited has now stepped into the major path of increasing the value addition. Triple Super Phosphate (TSP) being the fertilizer currently favored in the agriculture and plantation sectors for its superior solubility, LPL always encourage reliable investors to submit their proposals considering the market potential on TSP fertilizer. One such investor, M/S Fortune Fertilizer has already submitted a proposal to put up a TSP/ DAP Production plant and evaluation of the proposal will be done by a committee of high level government officials for which, LPL is expected to commit on supply of powdered ERP. Subject to receipt of approval for above project, LPL is looking forward to expand its production, storage and the infrastructure development. New TGM 160 Grinding Mill. New grinding Mill of Capacity 10 Metric tons per hour has been procured and installed in the new mill building. Total contract price was Rs. 56 million. With this, the production capacity of LPL has been doubled and soon, the company will be able to meet the national requirement of Rock Phosphate. Agency Results Frame work Based on guidelines given in “Mahinda Chinthana Vision for the future”, Agency Results Framework (ARF) was formulated and submitted to the Ministry of State Resources & Enterprise Development for scrutiny. The expansion and development of infrastructure are
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keyed with anticipated value addition project where, LPL is positively heading towards. Accordingly, the target years will be finalized.
AGENCY RESULTS FRAMEWORK MAIN
THRUST AREAS
STRATEGIES KEY POINT INDICATORS
PRESENT STATUS
TARGET YEAR
2011/12 2012/13 2013/14 2014/15 2015/16 Meet National Requirement of Rock Phosphate
Increase Production
New Grinding Mill (10TPH) (56Mn)
New Mill Installed (90%)
100% Increase Crusher output
New crusher Old crusher capacity insufficient
Improve Transportation
New Tipper 2XTippers One every old
Rehabilitate internal Roads
Gravel Roads
Store yard construction
10000MT capacity Limited storage
(5000MT)
Expand raw material storage 30000MT
Limited Capacity (15000MT)
Provide Loading Equipt. (New Forklift+ pallet Trucks)
2Xfork Lifts one very old
Value addition through SSP/TSP DAP Fertilizer development
Identify Resourceful and reliable investor.
Carry out due diligence MOU signed
100% Enter into contract
100% Produce fertilizer for local market
Investors Production strategy
25% 50% 100% Explore feasibility to export
Develop Infrastructure to be in par with new developments
Through investor funding
Gear up to meet the demand
Insufficient
100% HR Management and Employment opportunity
Recruitment Recruitment Insufficient 100%
Training & Development 100%
Develop the traditional Industry sector
R & D Increase Publicity Limited Develop in house infrastructure
Non
General Manager Lanka Phosphate Ltd
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NOTICE OF THE MEETING
NOTICE IS HEREBY GIVEN to the shareholders of Lanka Phosphate Limited that the Annual General Meeting of the Shareholders of Lanka Phosphate Limited would be held on 24th September 2012 at 5.30pm at the Head Office of Lanka Phosphate Limited at No. 73 1/1, New Kelani Bridge Road, Colombo 14 for the following purposes:
1. Tabling of written consent by the Secretary to the Treasury (as the registered owner of all the shares in the Company) to have an Annual General Meeting at ‘Short Notice’ in terms of the Articles of Association of the Company.
2. To confirm the Minutes of the Annual General Meeting held on 23rd September 2011.
3. To receive, consider and adopt the Audited Statement of Accounts for the year ended 31.03.2012 and the Balance Sheet as at 31.03.2012 and the Report of the Auditors thereon all of which are sent herewith.
4. To receive, consider and adopt the Annual Report sent herewith. 5. To distribute a dividend of Rs. 10 million as final dividend for the year
2011/2012 to the Treasury as the sole Shareholder of the Company. 6. To re-elect Directors, Mr. P.D J.Jayawardena and Admiral Daya Sandagiri who
retire (at the Annual General Meeting) in terms of the Article 93 of the Articles of Association of the Company.
7. To re-appoint the retiring Auditors ‘SJMS Associates’ Chartered Accountants for the year 2012/2013 and to authorize the Directors to determine their remuneration for the year.
8. To consider and take action as many be through fit on any motion of which due notice has been given.
By Order of the Board,
FINANCIAL SERVICES AND COMMERCIAL AGENCIES (PRIVATE) LIMITED Company Secretaries to Lanka Phosphate Limited
Notes: A shareholder who is entitled to attend and vote at a General Meeting is entitled to appoint a proxy to attend and vote instead of him/her and the proxy need not be a member of the company. A form of proxy is attached for this purpose.
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FORM OF PROXY
Lanka Phosphate Ltd
P R O X Y I/We ……………………………………………………………………………………
Of ……………………………………………………………………………………….
Being a member of the above named Company hereby appoint …….................. ………………………………………….of …………………………………………………………......or
Failing him …………………………………………………………………………………………….....
Of ………………………………………………………………………………………………………….
As my/our proxy to vote for me/us an on my/our behalf at the Annual General Meeting of the
company to be held on 24th September 2012 and at any adjournment thereof and at every poll which
may be taken in consequence thereof.
Signed this ………………………………...day of …………………………..two thousand and twelve
Signature ……………………………..
NOTE
A Proxy may vote as he thinks fit on any resolution brought before the Meeting
A Proxy need not to be a Member of the Company
Instructions as to completion are noted on the reverse hereof
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