Hand in Hand going forward - DIPPED PRODUCTS PLC Reports/2012-2013/DPL-PLC-AR-2012-13.pdfHand in...

Hand in Hand going forwardS T A K E H O L D E R R E P O R T 2 0 1 2 / 1 3

This is our Stakeholder Report capturing economic, social and environmental performance

Dipped Products PLC

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S T A K E H O L D E R R E P O R T 2 0 1 2 / 1 3

( A N N U A L R E P O R T )

This Annual Report is published within three months of the date of the Statement of Financial Position. The web and mobile versions

are also published online on the same date as the date of issue of this Annual Report at http://dpl2012-13.annualreports.lk

This is DPL

Dipped Products PLC is one of the world’s leading manufacturers and

distributors of protective gloves. Now approaching its fourth decade

of active operation, DPL accounts for approximately 5% of the world’s

production of non-medical rubber gloves. A member of Hayley’s

Group, a leading Sri Lankan conglomerate, DPL owns and operates

seven manufacturing subsidiaries in its home country, a medical

glove manufacturing company in Thailand and a marketing company

based in Italy.

The Company’s business model emphasises mutually rewarding

partnerships and acknowledges specific responsibilities to

stakeholders - shareholders, customers, business partners,

employees and the communities in which DPL operates. This report

is thematically and structurally organised to reflect this emphasis on

partnership and commitment, with sections dedicated to operations

and impacts concerning various stakeholder groups. The content of

each section underlines the importance DPL places on shareholder

value, customer satisfaction, innovation and ethical business practice.

M I S S I O N

DPL strives to be the preferred global hand

protection provider. We are committed to

the continual improvement of our business

processes and systems.

We shall comply with environmental and

social obligations, meet the aspirations of

our employees, suppliers and shareholders

and build relationships of trust.

How to get the most out of our Integrated Stakeholder Report*

Online version of this Reporthttp://dpl2012-13.annualreports.lk

Video of this Report http://dpl2012-13.annualreports.lk/video.html

Audio of this Report http://dpl2012-13.annualreports.lk/audio.html

Hayleys PLChttp://dpl2012-13.annualreports.lk/hayleys.html

Our Parent Company Our Plantations Subsidiaries

Kelani Valley Plantations PLChttp://dpl2012-13.annualreports.lk/kvpl.html

Talawakelle Tea Estates PLChttp://dpl2012-13.annualreports.lk/ttel.html

Term explained in the Glossary on page 147

* Adopting ‘The Smart Media Methodology’

HAYLEYS KVPL

AR

TTEL

C O N T E N T S

01. Highlights ..................................................................................................................................................................................................................................................04

Financial Highlights ................................................................................................................................................................................................................................................... 04 Stakeholder Highlights (Hand Protection Sector) ................................................................................................................................................................................... 06

02. Joint Letter from the Chairman and the Managing Director ........................08

03. Management Discussion................................................................................................................................................................................12

A Review of the Operating Environment .................................................................................................................................................................................................... 12 Strategic Imperatives ............................................................................................................................................................................................................................................... 15 Customers ....................................................................................................................................................................................................................................................................... 16 Employees ...................................................................................................................................................................................................................................................................... 22 Suppliers .......................................................................................................................................................................................................................................................................... 28 Society .............................................................................................................................................................................................................................................................................. 32 Environment .................................................................................................................................................................................................................................................................. 36 Financial Value Creation ......................................................................................................................................................................................................................................... 40 Outlook and Prospects................................................................................................................................................................................. 41

04. Reports ...............................................................................................................................................................................................................................................................43

Annual Report of the Board of Directors on the Affairs of the Company ............................................................................................................................... 44 Corporate Governance ............................................................................................................................................................................................................................................ 47 Statement of Directors’ Responsibilities ...................................................................................................................................................................................................... 65 Audit Committee Report ........................................................................................................................................................................................................................................ 66 Independent Auditors’ Report ............................................................................................................................................................................................................................ 67 Income Statements .................................................................................................................................................................................................................................................. 68 Statements of Comprehensive Income ........................................................................................................................................................................................................ 69 Statements of Financial Position ...................................................................................................................................................................................................................... 70 Statements of Changes in Equity ..................................................................................................................................................................................................................... 71 Statements of Cash Flows .................................................................................................................................................................................................................................... 72 Notes to the Financial Statements .................................................................................................................................................................................................................. 74

05. Annexes ........................................................................................................................................................................................................................................................132

Ten Year Summary ................................................................................................................................................................................................................................................. 132 The Share ..................................................................................................................................................................................................................................................................... 136 Group Structure ........................................................................................................................................................................................................................................................ 140 Board of Directors ................................................................................................................................................................................................................................................... 142 Management Team ............................................................................................................................................................................................................................................... 144 Glossary......................................................................................................................................................................................................................................................................... 147 Notice of Meeting ................................................................................................................................................................................................................................................... 148 Form of Proxy ................................................................................................................................................................................................................................................. Enclosed Corporate Information ............................................................................................................................................................................................................. Inner Back Cover

DIPPED PRODUCTS PLC STAKEHOLDER REPORT 2012/13

01. Highlights 02. Joint Letter from the Chairman and the Managing Director 03. Management Discussion 04. Reports 05. Annexes

Financial Highlights

01. Highlights


2013 2012 Change

Rs. ’000 Rs. ’000 %

Group turnover 23,657,743 19,693,665 20

Group profit before tax 2,175,216 2,437,677 (11)

Tax on group profits 390,943 294,922 33

Group profit after tax 1,784,273 2,142,755 (17)

Profit attributable to equity holders of the parent 1,417,888 1,905,975 (26)

Gross dividend 419,031 359,169 17

Group net assets 6,844,722 5,801,049 18

Net foreign exchange earnings 6,649,098 5,899,075 13

Group value addition 8,494,314 5,796,566 47

Market capitalisation 6,644,628 5,992,137 11

Per Share (Rs.)

Earnings 23.69 31.85 (26)

Dividend 7.00 6.00 17

Market price (year end) 111.00 100.10 11

Net assets (year end) 114.34 96.91 18

Employment (Persons)

Hand protection 1,359 1,447 (6)

Plantations 23,660 24,895 (5)

DIPPED PRODUCTS PLC STAKEHOLDER REPORT 2012/13 Page 5



18%Net Assets Per Share Growth

13%Growth in Net Foreign

Exchange Earnings

2013

2011

2012

11

6

10

0

11

1

Market Price Per Share (Rs.)(Year End)

20%Turnover Growth

47%Growth in

Value Addition

Rs. 23.69Earnings Per Share



Stakeholder Highlights (Hand Protection Sector)

CUSTOMERS Being the leading ethical glove manufacturer,

integration of sustainability principles and our

uncompromising product quality serve us in enhancing

our value proposition to customers.

250 Different Products

70+ Countries Worldwide

EMPLOYEES We engage our people on the basis that employees

receive appropriate returns on their investment of time,

skill and labour - qualitative returns over and above

pecuniary terms.

16,500 Training

Hours

1,359

Employees

SUPPLIERS To ensure quality and a steady supply of inputs, DPL

teaches and nurtures its suppliers resulting in the

transfer of know-how.

Over Rs. 3 billion

worth latex purchased locally

3,143

Suppliers





SOCIETY DPL was honoured with the top award for

‘investment in people’ at the 2012 Asia Responsible

Entrepreneurship Awards, organised by the Enterprise

Asia, an internationally reputed NGO.

“License” to operate

ENVIRONMENT The proportion of energy usage derived from

renewable sources continues to increase with three

factories already switched on to biomass heating and

more factories being scheduled for conversion.

5,600 metric tons CO2e reduced

86 million litres of Water Recycled

FINANCIAL VALUE CREATION

Responsible partnerships with all other stakeholders

have enabled DPL to fulfil shareholder expectations

with an acceptable return through a combination of

dividends and appreciation of share price.

Our Value Addition Over the past decade exceeds Rs. 40 billion

2,278

Shareholders

02. Joint Letter from the Chairman and the Managing Director

Dear Shareholder,

DPL is proud to be a truly international company. While our ownership is

predominantly Sri Lankan, we have numerous overseas shareholders. Our

operations, too, have long since spread beyond our country of origin. Our

market is global - our products are sold and used on all six continents, and our

penetration into formerly untapped or marginal markets continues to increase.

We maintain international standards of quality and ethical manufacturing

practices and integrate principles of social and environmental sustainability

across our business.

CORPORATE RESULTS

In the year under review, we sought successfully to mitigate our exposure

to the global economic challenges, specially in the European markets. We

are responding to the changing needs of our customers whilst building new

business in our traditional as well as non-traditional markets. DPL Group

turnover increased by 20% to Rs. 23,658 million, delivering an attributable profit

of Rs. 1,418 million to our shareholders. Our hand-protection sector posted

PBT of Rs. 1.3 billion creating a new height in performance, while plantations

contributed PBT of Rs. 963 million.

These results were achieved in the face of stiff competition from Chinese,

Malaysian and other East Asian manufacturers. We held fast to our product quality

standards and did not allow any compromise to our global reputation. We also

continued to integrate sustainability practices into our businesses. It was in this

manner that we consolidated our market position against the competition.

…………………………………………

The contribution from Dipped Products (Thailand) Ltd. remained negative

despite the fall in rubber prices. This subsidiary’s margins were affected by

severe competition and a reduction in demand for natural-latex medical

examination gloves in favour of synthetic products. Steps were taken to

increase our production of synthetic-latex medical gloves, but this was not

sufficient to offset the negative pressure on profits.

More encouragingly, ICOGUANTI S.p.A., our marketing company based

in Italy, showed improved results despite the difficult market conditions

prevalent in the Eurozone.

Plantations registered their best-ever profitability, due mainly to good

results from both our rubber and tea business. The main contributor was

Kelani Valley Plantations PLC, which once again posted strong results.

Talawakelle Tea Estates PLC, also made a commendable turnaround this

year, converting last year’s loss into a healthy profit.

OPERATIONS IN 2012-13

We continued our ongoing drive to adopt leaner processes, driving up

productivity and reducing costs while improving throughput. To reduce

energy costs, we installed a biomass-fuelled heater at our Hanwella

facility and began work on the installation of a similar heater at our

facility in Thailand. Other plants underwent modification to improve their

performance and broaden the range of their manufacturing capability. We

also commenced developing new lines and processes that would meet the

growing demand for DPL Products of high quality.



Externally, we actively developed new business

in new areas, attending trade fairs around the

world, leveraging the internet to find potential

customers, and finding them in markets as far

apart as Russia and Australia. Fortunately, demand

has remained steady in markets outside Europe.

These efforts achieved a good degree of success

that we were able to transcend, not just the

external threats referred to above, but also the

many challenges we faced on the domestic front.

The most salient of these was a rise in input

costs across the board – imported material inputs,

wages and utility costs (particularly electricity

and fuel) all rose substantially in the year under

review. On the positive side, a steady decline in

the price of natural rubber, whose average price

year-on-year fell by Rs. 61.36/kg., helped us

hold down pricing. Passing these benefits on to

customer helped us build sales volumes, more

than offsetting the negative effect of the difficult

economic conditions prevailing in Europe.

TAxATION

The effective tax rate of the Group increased by

a third, to 18% in the current year. The previous

year’s effective rate was low due to tax exempt

capital gains on sale of shares. The full tax holiday

enjoyed by Texnil (Pvt) Ltd. also expired at the

end of the financial year. ICOGUANTI’s effective tax

rate, however, decreased to 37% from 40% in the

previous year.

DIVIDEND

Grossart (Pvt) Ltd., Venigros (Pvt) Ltd. and Neoprex

(Pvt) Ltd. paid respective interim dividends of

Rs. 35/-, Rs. 22/- and Rs. 27/50 per share during

the year. Feltex (Pvt) Ltd., Hanwella Rubber

Products Ltd. and DPL Plantations (Pvt) Ltd.

paid interim dividends of Rs. 10/50, Rs. 1/75

and Rs. 2/- per share respectively. Kelani Valley

Plantations PLC paid a dividend of Rs. 6/- per

share and ICOGUANTI distributed €444,000 as

dividend in 2012.

Your Company declared an interim dividend of

Rs. 4/- per share in March 2013 out of dividends

(less withholding tax paid at source) received

from subsidiaries in Sri Lanka.

Your Directors now propose a final dividend of

Rs. 3/- per share, representing a total dividend

payout of Rs. 7/- per share. This being entirely

from dividend received by the Company and will

be free of tax in your hands.

CHANgES ON THE BOARD

Two Non-Executive Directors resigned from

the Board at the end of the year under review,

consequent to their retirement from the Group.

Mr. J A G Anandarajah’s resignation took place on

March 31, while Mr. G K Seneviratne resigned

his seat with effect from April 7. Mr. Anandarajah

first joined the Company in January 1980, serving

as an Executive Director from 1989 onward and

as Managing Director of DPL from January 2007

until March 2011. Mr. G K Seneviratne joined the

Board in 1998 and has been serving as Managing

Director of Kelani Valley Plantations since 2004.

We thank them both for the valuable contributions

they made as members of the DPL Board.

Two new Directors, Mr. R M T Premaratna, Head of

Operations of DPL and Mr. Viraj Gunasekara have

been appointed to the Board with effect from

May 1, 2013 to fill the vacancies left by these

resignations. These two new Directors will be

serving in the capacity of Executive Director and

Non-Executive Director respectively.



PROSPECTS FOR THE NExT YEAR

Looking forward to 2013-14, we face a number

of challenges. The economic weather in our

traditional markets remain unsettled, and the

demand for lower-priced product alternatives

seems set to continue in some markets at least

albeit in the short term. The fall in natural rubber

prices seems to be bottoming out; it is likely

that they will begin to move up again possibly

towards the third quarter. We have also seen the

Sri Lanka Rupee appreciating considerably during

the current year so far, compared to the last year.

At the same time, domestic input costs are rising:

we have already experienced substantial revisions

to the minimum wage and to electricity tariffs.

Clearly, the year ahead is going to be a tough

one, but we remain undeterred in our efforts to

transcend these challenges and move forward

with planned investments in increased capacity

and redoubled marketing efforts including the

penetration of new markets.

New plant capacity is planned during the course

of the new financial year in order to cater to

demand growth specially for industrial hand

protection products. Several innovative products

that have been developed over the year under

review will be commercialised in the course of the

new financial year. Combining these with leaner

manufacturing efforts will, we believe, continue

to deliver growth and profits. DPTL is expected to

turnaround as its major infrastructure bottleneck

has been resolved with commissioning of an

additional bio-mass heater.

We also take this opportunity to thank sincerely all

DPL’s employees, customers and business partners

for their unstinting support, and our colleagues on

the Board of Directors for their valuable inputs and

guidance.

A M Pandithage

Chairman

Dr. K I M Ranasoma

Managing Director

May 14, 2013



A review of the Operating Environment

03. Management Discussion

A Review of the Operating Environment

468.182011-2012

406.822012-2013

Our uncompromising commitment to quality remains a differentiator of importance

The intrinsic strengths of DPL in its sector,

combined with a number of opportunities

that appeared and were leveraged during the

course of the year, enabled us to deliver growth

and increased profits in the face of serious

macroeconomic and market challenges.

In Europe, our largest market, EU countries

continued to struggle with difficult economic

conditions. This affected our performance, with

growth in southern European markets such as

Italy, Spain and France slowing down. Conditions

in the North and South American markets were

steadier, enabling us to consolidate our position in

these areas.

There were significant fluctuations in Sri Lankan

foreign exchange rates. Depreciation due to the

free float of the Rupee favoured exports briefly,

though rises in the cost of production inputs such

as electricity as well as fuel oil and other imported

inputs soon offset this. The year also saw a

steady decline in rubber prices, which helped us

hold our own prices down more effectively than

in previous years. This generated a significant

contribution to Group performance as most of our

customers were able to maintain sales volumes

through healthy pricing, resulting in a steady

stream of orders for DPL.

Natural Rubber Price Average (Rs./kg.)




Difficult economic conditions in many markets

drove most of our traditional customers to reduce

inventory levels in the face of sluggish demand.

Many adopted a two-tier sales strategy, offering

a premium product range manufactured by DPL

and other industry leaders as well as low-priced

gloves of lesser quality manufactured by other

suppliers.

Such challenges, while not easy to overcome,

revealed much that was positive regarding our

own capabilities. We were, for instance, able

to persuade niche players in difficult markets

to accept that hard times are the best times to

start building a brand’s reputation and value in

partnership with DPL. Seeking to compensate for

declining sales in Western Europe, we were able

to take bold steps into non-traditional markets in

Eastern Europe and Russia.

Somewhat more obliquely, a number of well-

publicised accidents (such as fires) at poorly-

run South Asian factories resulted in the tragic

deaths of workers and sullied the reputation

of South Asian manufacturing. Many of these

facilities were found to be in contravention of

pertinent regulations while allegedly engaged

in subcontractor work for respected international

brands. While these incidents have had an overall

negative impact, they have also prompted

buyers for these brands to take greater interest

in manufacturers like DPL, who not only comply




with all relevant laws and regulations but also

demonstrate commitment to the principles

of ethical manufacturing, ethical sourcing and

sustainability.

The year also saw increased market consolidation;

many smaller glove manufacturers and

distributors were bought up by larger industry

players. While the long-term implications of

these developments are still unclear, they reflect

investors’ confidence in the growth potential of

the hand protection industry, and we generally

view them as positive.

THE EVOLUTION OF OUR MARKETS

Available estimates show that the overall market

for hand protection continued to expand, driven

chiefly by the medical segment, in which the

demand for disposable gloves grew by 7% - 8%

year on year. Other segments registered much

lower growth.

DPL’s estimated global market share remained

steady at about 5% for non-medical gloves,

with minor growth in sales volumes across all

non-medical segments. In the medical market,

the demand for synthetic latex gloves continued

to rise, and several larger manufacturers invested

in additional capacity in expectation of strong

continued growth.

As mentioned above, we also took steps to

develop emerging and non-traditional markets.

While it takes some time to develop these to their

full potential, we are already seeing encouraging

growth, which gives us the confidence to further

invest in new market development.

MANUFACTURINg CHALLENgES

Our manufacturing operations were under

significant pressure this year to improve their

productivity and output in order to meet the

growing demand for our products. Meanwhile,

energy costs continued to rise rapidly. Some of

these costs, such as electricity, fuel and LP gas,

are controlled by the Government and pricing

dynamics do not necessarily follow global trends.

This was an important challenge in the year under

review, and one which we continue to face in the

current operating year.

Given the rapid development of the post-war

domestic economy, a new challenge was that

of retaining manual labour as employment

opportunities in the service sector rose.

We continue to rely on the ongoing transition

to lean manufacturing as our primary long-term

response to such challenges. Operational-

excellence programmes were augmented at all

our factories during the year, enabling us to cope

with cost challenges and improve productivity.

ONgOINg COMMITMENT TO QUALITY

Our focus on product quality remained firm

in the face of daunting low cost competition

in some of our most important markets. The

year’s results confirm that our uncompromising

commitment to quality remains a differentiator of

sufficient importance to customers that it justifies

paying a relatively higher price for it. The hand

protection sector’s newfound price sensitivity also

encouraged us to develop several new product

lines and process improvements permit more

economical pricing with no shortfall in quality.



…………………………………………Strategic Imperatives

Strategic Imperatives

Our position in the hand protection market is based on three

powerful principles:

Being the leading ethical glove manufacturer in the world

Integrating sustainability principles into our business

Uncompromising product quality.

These principles have served and continue to serve us well,

enhancing our value proposition to customers, cementing our

industry-leading reputation and driving business growth.

ETHICAL gLOVE MANUFACTURER

Our Firstlight integrated-supply-chain initiative,

launched several years ago, makes us the world’s

ethical glove manufacturer (see ‘Supplier’ Section).

Through this programme, we help do away with

the exploitation of small rubber farmers, who

form the first link in our supply chain. Structured

on fair trade principles and including smallholder

and community development, capacity-building

and entrepreneurship components, Firstlight has

not only built us a loyal supplier base among

smallholders in poor rural areas of Sri Lanka but

has also given us a unique brand discriminator

that is of recognised value to consumers in many

of our most profitable markets. Through Firstlight,

we aim to establish global fair trade standards for

natural latex gloves.

INTEgRATINg SUSTAINABILITY INTO OUR BUSINESS

We continued to invest in efforts to reduce

waste and energy consumption in our production

processes, reduce our carbon footprint and fresh

water use, comply or improve upon environmental

and social operating norms and take a stakeholder-

enrichment approach to running our factories.

PRODUCT QUALITY

Efforts to further improve our already high product

quality move forward hand-in-hand with the drive

for leaner manufacturing across the organisation.

The latter, whose various elements have been

dubbed the ‘DPL Operating System’ or DOS, now

forms the backbone of all our manufacturing

operations. An important component of DOS is

the transformation of our operational culture from

a hierarchical, departmental model to a cross-

functional, process-orientated one.

During the year, capital expenditure was allocated

to enhancing manufacturing capacity, improving

flexibility and increasing plant availability, all of

which collectively contribute to improved product

quality. We also invested in greater cost efficiency

with the conversion of the heating system at our

Hanwella Factory from furnace oil to biomass,

and added a third biomass heater at our medical

glove manufacturing facility in Thailand in order to

enhance its production throughput.

Despite the difficult economic and market

conditions, it was encouraging to see demand for

high-end products such as electrician’s insulating

gloves and ketone-resistant gloves rising rapidly.

We have taken steps to increase our capacity to

produce these gloves during the new financial year.



Customers

Customers

200+Customers

70+Countries



Customers

DPL continues to grow in scale and scope. Today we service

up to 5% of global demand for gloves in developed and emerging

markets and have reached 70 countries worldwide.

R SE V E N U E H A R E

Asia/Africa

Australia/NZ

Europe

North America

South America

15%

43%

7%

16%

19%

Among the World’s

Top 5Manufacturers

0

700

1,400

2,100

2,800

3,500

E V IX P O R T O L U M E N D E X

RB Y E G I O N

( B Y - 1 9 9 5 )A S E E A R

Nos.

Asia/Africa

Australasia

Europe

North America

South America

2009

2013

2010

2011

2012

C PA P A C I T Y A N D R O D U C T I O N

I - H PN D E X A N D R O T E C T I O N

( B - 1 9 9 1 C )A S E Y E A R A P A C I T Y

Nos.

0

150

300

450

600

750

Capacity

Production

2009

2013

2010

2011

2012



Customers

Customers

All our partnerships are critical to the success of

our business, but none more so than those we

forge with customers. This holds true no matter

which aspects of the triple bottom line are

used as the criteria of success. Though primarily

a manufacturing-based company supplying

other businesses rather than marketing direct

to consumers, the importance of customer

satisfaction, of meeting and exceeding the

expectations of those who buy our products, is

always uppermost in our minds.

The year under review was a challenging one for

many reasons, not least being trending changes

in customer perceptions of value and resultant

changes in the demand profile. DPL has a hard-won

reputation as a manufacturer of quality products.

We are also, thanks to our Firstlight programme

and similar commitments, perceived as an ethical

business. We are proud of these aspects of our

reputation, which have served us well in the past

and will undoubtedly do so in the future.

At present, unfortunately, economic tribulations in

Europe and other major markets have resulted in

customers seeking lower-priced products – even,

in some cases, at the expense of quality. This

negative development affected our performance

in a number of markets in 2011/12. Our response

was to redouble our efforts in marketing, product

development, quality assurance and promoting

customer satisfaction.

Approximately

5%Of the Non-medical glove share in the Global Market

250Different Products

MARKETINg

We made a significant number of customer visits

in the course of the year, soliciting feedback for

product development, discussing business matters,

advocating quality and value over price in product

selection, and consolidating already-established

relationships. We put a lot of effort into educating

our customers in 2012/13. We also forged links with

new customers, preferentially seeking out those for

whom price is not the sole issue of importance.

Our web site, www.dplgroup.com, was also

relaunched during the course of the year

with updated product, company and technical

information.



Customers



DEVELOPINg CUSTOMERS IN NEw MARKETS

Economic difficulties in the EU, which currently

accounts for the majority portion of our sales

prompted us to further strengthen our efforts

into Eastern Europe, Scandinavia and Southeast

Asia. Representation at medical trade fairs helped

business development for DPTL, generating orders

from Europe and the USA.

Despite the slowdown in Europe, we retained

our 5% share of the world market in rubber

gloves. Business remained steady in the US, South

America, Australia and New Zealand. The year

under review also saw our efforts contributing

to growth of the Russian market. We anticipate

further volume growth from these operations in

the near and long-term.

TOgETHER THROUgH CHANgES

Clearly, we are entering an era where customers

everywhere are becoming more price conscious.

At the same time, production costs - particularly

energy and labour costs - are rising. These

opposing tensions place strain on margins and

make it harder to fulfil, let alone exceed, customer

expectations. Doing so will require not only new

efforts but new thinking.

Quality and Service are long term competitive

advantages, not to be abandoned in the face

of present exigencies. Rather we shall strive to

reduce waste and invest in leaner technologies

to complement the current efforts to embed lean

manufacturing processes. New, market-driven

product development will be pursued with vigour,

leading to a stream of new product innovations

whose lead time to market will fall considerably.

We will continue striving to understand our

customers’ needs better and provide ever-

increasing levels of satisfaction.

PRODUCT DEVELOPMENT

The development of new products is largely

based on our anticipation of what customers

will demand in the future. Customer feedback

obtained by our marketing team is a primary

source of this information. We also monitor

various sources of consumer, product, market

and industry information in order to identify new

segments and product-development opportunities.

Conversely, the adoption of a new manufacturing

process or capability may give rise to new product

ideas whose market potential must then be

tested. Such cases also demonstrate how a focus

on product development gives us an important

edge over our competitors.

Customer feedback and new product ideas from

the marketing team are presented to the R&D

and technical teams, who assess the feasibility

of putting them into active production. DPL has

developed several new products that are currently

being launched into the market. These include:

- Electrostatic Dissipation Glove

- Skin Care Glove Range

- Extension to Chemical Resistant Ketohandler

Glove Range

- Extension to Metal Detectable Glove Range

CHANgINg CUSTOMERS, NEw DIRECTIONS

A continuing stream of product innovations

has made DPL an acknowledged leading glove

manufacturer in the industry. This competitive

advantage has grown ever more important as

change sweeps through markets, transforming

customer-behaviour patterns and altering demand.

Customers

On the whole, customers have become more

discerning, better-informed technically and

generally more demanding. Changes in health-

and-safety legislation in many countries have

resulted in greater demand for protective gloves

as well as to the establishment of personal and

environmental safety standards these products

must meet. Such developments have increased

the scope for growth and development in terms

of product range and functionality.

Roughly, half of our customers are distributors in the

retail sector, whose own customers are direct end-

users of our products. Such retailers, report that their

customers increasingly wish to buy products that

have been ethically manufactured. This is especially

the case in more developed markets.

Customers



QUALITY ASSURANCE

DPL’s quality policy, which is based on ISO

certification, was first formally documented in

1995. Initially, quality assurance procedures varied

among facilities and departments, but these were

gradually integrated into a unified, company-wide

Quality Management System. The existence of

this system has greatly facilitated the process of

systems certification. DPL today holds a number of

important quality certificates, as listed below:

ISO 9001:2008 Quality Management Systems

Requirements. This standard enables internal

and external parties, including certification

bodies to assess DPL’s ability to meet customer,

statutory and regulatory requirements (as well

as its own internal requirements) in relation to

both products and procedures.

BRC (British Retail Consortium) Global Standard

for Consumer Products (Issue February 3,

2010) sets out requirements to which a factory

should adhere in order to be able consistently

to produce safe, legal consumer products of

the quality required by its customers. DPL has

achieved a BRC rating of Grade A.

Article 11B of Personal Protective Equipment

(PPE) Directive 89/686/EEC sets out

requirements for the monitoring of production

processes by a ‘Notified Body’ (as defined in

the same Directive) to ensure that articles

being made for sale in the EEC comply with an

original EC-type examination, also conducted

by a Notified Body as prescribed in Article 10

of the Directive.

Forest Stewardship Council (FSC) Chain of

Custody Certification empowers DPL to market

its products as ‘FSC 100%’, a legend which

assures consumers that raw materials for the

product in question originated in FSC certified

forests or plantations and have not been

mixed with material from other sources at any

point in the supply chain.

ISO 17025:2005 accreditation enjoyed by our

Physical Testing Laboratory assures customers

that the tests performed on finished products

are conducted in accordance with the

stipulated international standards and that

the results produced are consistent with

those emanating from any other accredited

laboratory.

ISO 14001:2004 Environmental Systems

Standard certification for our company-wide

environmental management system gives us

and our customers confidence that we have

taken every measure to mitigate harmful

impacts upon the environment from our

operations.

CUSTOMER SATISFACTION

DPL has in place a well-defined standard sales

operating procedure which prescribes actions

and responses in most working situations. For

example, all customer inquiries must be dealt

with within 24 hours. Complaints are also handled

according to a standard procedure that outlines

steps to take with respect to investigation and our

response to customers.

Our annual 14-point customer survey garners

a 30% to 50% response, which is sufficiently

representative. We address the substance of

negative comments promptly with fact-finding,

analysis and management review followed by

action. We also actively seek informal feedback

from customers, and many issues have been

detected and resolved through this process.

Customers



Employees

Employees

157Strong R & D/ Technical Team

1,359Employees



Employees

Health and Safety

16,500Training Hours



Employees

Employees

Good human-resources practice recognises that

employees and employers have interests that

coincide as well as interests that diverge. Its

object is always to enhance and maximise the

first kind of interest, while mitigating, as far as

possible, the second. In other words, the object

of good HR practice is to turn employee and

employer into partners in a mutual enterprise -

partners who recognise that what is good for

one must also be good for the other. This is the

basis on which DPL engages its people, seeing to

it that employees receive appropriate returns on

their investment of time, skill and labour – returns

measured not only in pecuniary terms but in

job satisfaction and security, health and safety,

personal and professional development, a sense

of belonging, and quality of life.



Employees

MAKINg OUR OPERATIONS LEANER

At a time when customers are becoming more

cost-conscious pressure on our margins can be

relieved in only two ways namely developing new

products and continuous reduction of cost.

This was the road we travelled in 2012/13, new

products and achieving leaner operations. Our lean

initiative dubbed DOS (for ‘DPL Operating System’),

replaces the previous functional structure. It

has helped us reduce production timelines and

reduce waste along the entire process cycle, from

receiving a customer order to delivery.

Largely as a result of the DOS initiative, downtime

has decreased and reject rates have fallen. Overall

equipment effectiveness at our plants have

improved by more than 10% through the year.

The DOS concept, originally implemented to

reduce waste and slim down our operations,

offers a good opportunity to help build stronger

ties between employees with different skill

sets and functions. It integrates workflow and

processes, helping our people see one another

as fellow team members with shared goals.

This, further integrates individual efforts into

Sri Lanka

Executive

Clerical and Supervisory

Manual

10%

8%

82%

26%

11%63%

Overseas

E M P L O Y E E B Y G R A D E

Female

Male

10%

90%

54%

46%

Sri Lanka Overseas

E M P L O Y E E B Y G E N D E R



Employees

Our lean initiative - ‘DPL Operating System’, replaces previous functional structures

Employees



Employees

a seamless whole, creating a more effective

process flow that not only saves time and money

but also improves productivity. Just as important,

it ensures that the partnerships we build with

employees are stronger and more fulfilling.

In the workplace, we strive for equality of

partnership and opportunity. Our HR policy is

explicitly non-discriminatory with respect to

ethnicity, creed and gender. Due to the nature

of operations in our factories, however, most

applicants for manual positions are male, and this

is represented in the male: female balance of our

Sri Lankan workforce. In Thailand, where some

operations involve less ‘heavy’ work, the ratio of

female employees to male is higher.

The members of the Inter Company Employees

Union staged a strike at our Venigros (Pvt) Ltd.,

factory premises at Weliveriya with no prior notice

to the Management. This was in violation of the

collective agreement dated July 20, 2012. The

illegality of the strike was immediately brought

to the notice of the Employees’ Union and the

Commissioner General of Labour. Since some

of the employees failed to return to work and

continued to engage in the illegal strike, despite

requests from the Management, steps were taken

to terminate their services. The matter has been

referred to the Commissioner General of Labour

and is currently under discussion.



Suppliers

Suppliers

Integrated Latex Supply Chain

L A T E X S O U R C I N G B Y V O L U M E

Direct (Small Holders)

Plantations (Own and Others)

Commercial Suppliers

30%

40%

30%

420Firstlight Farmers

3,000Suppliers



Suppliers

DPL follows a model - one more appropriate

for a developing country in which suppliers’

know-how, quality standards and ability to

deliver the goods as contracted cannot always

be taken for granted. Our approach to supplier

relationships has, perhaps, something in common

with the plantation ‘agency houses’ of yesteryear,

such as DPL’s Parent Company, Hayleys, used

to be. To ensure quality and a steady supply of

the commodities (such as rubber) in which they

traded, agency houses undertook the transfer of

agriculture know-how and technology. Suppliers

were not simply contracted; they were taught and

nurtured. DPL has found that such an approach

still pays well with suppliers of its primary raw

material, natural latex. By providing technical

knowledge and practical assistance to latex

suppliers, particularly those in the smallholder

sector, we not only secure our sources of supply

but also improve quality and improve reliability

of supply.

This tradition of nurturing and developing

suppliers finds its fullest expression in Firstlight, a

programme that integrates sustainability initiatives

and support for smallholder latex suppliers.

Among the objectives of the programme are a fair

price for labour and the ongoing education and

empowerment of suppliers, together with support

for the communities to which they belong. The

programme has been active since mid 2006 and

currently boasts of over four hundred participating

farmers. The benefits extended to farmers and

their communities via Firstlight are various

(see ‘Society’ section); most recently, in March

2013, we held a series of presentations and

workshops on rubber harvest techniques, financial

management and microfinance with the help of a

leading bank of the country.

Firstlight apart, we are committed to a policy of

fair pricing based on current prices at the Colombo

rubber auctions. This, together with accurate

measurement and quality assessment, prompt

payment and technical support, has helped us

retain the trust and respect of suppliers for more

than thirty years. These policies, and particularly

the effects of the Firstlight programme, have also

helped increase the number of smallholder rubber

growers in recent years.

420Farmers Trained

17Firstlight Community

Projects



Suppliers

Suppliers

SUPPLIER RELATIONSHIPS (DURATION)

Average Length of RelationshipCategory No. of Suppliers Over 20 years 10-20 years Below 10 years

Latex

Natural 3,000 800 850 1,350

Synthetic 4 1 2 1

Chemicals 100 25 35 40

Liners 7 3 4

Packing materials 32 4 16 12

Total 3,143 830 906 1,407



90%Locally sourced

packaging material

Suppliers

OTHER INPUTS

Besides latex supplies, DPL also depends on

outside suppliers for a number of other inputs,

such as liners, packing materials and chemicals.

Packing materials are another area in which

domestic suppliers are gradually replacing

overseas ones. We have maintained long-standing

relationships with more than thirty suppliers;

thanks to our assistance, many local suppliers

can match the quality of materials formerly

imported from China, Malaysia and elsewhere.

This was in large measure due to our help and

encouragement, particularly in the matter of

embracing quality standards, ISO certifications and

the like.

Today, almost 75% of our packaging is locally

sourced. The limited number of competent local

suppliers remains a problem, however.



Society

Society

Ethical Glove Manufacturer of the World



Society

FIRSTLIgHT AND THE FAIR TRADE gLOVE

The tapping of rubber trees begins at firstlight;

the Firstlight programme takes its name from this

tradition. Its genesis was in a simple idea: rubber

smallholders should receive a fair price for their

goods and labour.

Over time, the Firstlight programme has grown to

embrace the following components:

A fair price for field labour

Education and empowerment to maximise the

income of smallholders

Technical and material inputs to increase yields

and protect crops

Farmer, Empowerment and Community Development



Society

Society

Winner of Asia Responsible Entrepreneurship Awards 2012 - South Asia

Sustainable management of rubber properties

and preservation of forest cover

Community capacity-building

Originally, the geographical focus of the

programme was Moneragala, one of the least-

developed districts in Sri Lanka and an area to

which the rubber industry is a relative newcomer.

The programme has now been expanded to other

rubber-growing areas.

An important objective of Firstlight is to increase

the supply of latex, DPL’s main raw material,

obtained directly from smallholder rubber farmers

in economically disadvantaged localities. Direct

sourcing eliminates the middleman, allowing

farmers to enjoy the full profit potential of their

labour. Our goal was to procure at least 30% of

our total intake from these smallholders by the

end of 2012. We achieved 32%, a rise of 12%

over the figure for 2011. Our target for the end of

2013 is 50% and we are confident that it will be

achieved.

One of the year’s highlights was our receipt of

the top award for ‘investment in people’ at the

2012 Asia Responsible Entrepreneurship Awards,

organised by the Enterprise Asia, an internationally

reputed NGO. Dedicated farmers were honoured

at the ViruGovi Upahara, held at the Weheragoda

temple in Monaragala.



Society

Firstlight helps make rubber production viable for

small farmers, whose output accounts for 65%

of Sri Lanka’s national crop. It is also a green

initiative, since it helps sustain rubber lands,

commonly regarded as man made forest, and

contains a component aim.

Since there is as yet no international fair-trade

policy for glove manufacturing, DPL had to devise

its own fair-trading/sustainability framework to

accomplish its objective. We recognised that,

to make the programme truly sustainable, it

would be necessary to invest in smallholder and

community development. To this end, all DPL’s

own-brand packaging promotes Firstlight, and

several private-label customers have joined hands

with us in this effort. Fair-trade gloves marked

with the Firstlight are marketed at a premium and

the premium is channelled back to smallholders

through Firstlight community societies founded

to implement the programme. These funds

are invested in a variety of educational and

community-development programmes. Farmers

also receive a benefit in the forms of new

implements, fertilizer at subsidised rates, etc.



Environment

Environment

5,600 metric tons

CO2e Reduced

86 million litres

Water Recycled



Environment

Savings of approximately2 million litres of Fuel oil

At times, our relationship with the Earth is the

most important one of all. DPL strives to make it a

beneficent and sustainable one. In the year under

review, we continued our efforts to reduce energy

usage and costs save precious water and reduce

our carbon footprint.

The proportion of our energy usage derived from

renewable sources such as biomass continued to

increase. Following successful biomass projects

at Venigros and Texnil in 2008 and 2011, we

completed a similar project in 2012 at the

Hanwella Rubber Products Ltd. We are now

planning to use renewable resources at Dipped

Products and at the Neoprex site.



Environment

Environment

By integrating Sustainability into our Business, it is the norm for us to continuously reduce our Carbon Footprint by reducing material and energy consumption as well as resorting to renewables



Environment

The conversion of the Hanwella Plant from

furnace oil to biomass also helped reduce

the Company’s carbon footprint. The project,

implemented between November 2011 to May

2012, has resulted in a reduction of greenhouse

gas emissions by 5,589 metric tons per annum

compared to the previous year. The conversion

programme is ongoing, with another factory

scheduled to switch to biomass heating in the

coming year.

Approximately half the water used in our

production processes is recycled and reused by

means of recycling plants established at each of

our production locations.

STRATEgIC IMPERATIVES

Looking forward, we foresee an ongoing effort to

reduce energy use and costs, reduce our reliance

on fossil fuels and make greater use of renewable

resources. Currently, we are undertaking a

fuel-gas heat-capture project at Dipped Products

Thailand Ltd., together with the installation of a

third heater and other energy-saving measures.



Financial Value Creation

Financial Value Creation

To employees as remuneration

To Government of Sri Lanka and overseas as taxes

To shareholders as dividends

To lenders of capital

Retained in the business

65%4%

6%

16%

9%

63%

20%

4%

5%

8%

2012 2013

V A L U E A D D I T I O N

2004Rs. billion

2005Rs. billion

2006Rs. billion

2007Rs. billion

2008Rs. billion

2009Rs. billion

2010Rs. billion

2011Rs. billion

2012Rs. billion

2013Rs. billion

1,880 2,354 2,529 3,308 3,815 4,064 4,085 4,457 5,796 8,494

2013 2012% %

To employees as remuneration 63 65

To Government of Sri Lanka and overseas as taxes 4 4

To shareholders as dividends 5 6

To lenders of capital 8 9

Retained in the business 20 16

100 100

2013 2012Rs. ’000 Rs. ’000

To employees as remuneration 5,415,709 3,787,513

To Government of Sri Lanka and overseas as taxes 312,151 248,285

To shareholders as dividends 419,031 359,169

To lenders of capital 714,482 517,694

Retained in the business* 1,632,941 883,904

8,494,314 5,796,566

*Excluding capital gains

Our Value Addition over the past decade

exceeds 40 billion



Outlook and Prospects

The challenging economic uncertainties of our

traditional markets haven’t fully faded yet. The

natural rubber prices seem to be bottoming

out and we do not expect to see further drops

in prices. On the contrary, probability for prices

to move up is higher. Domestic input costs are

increasing and we have already experienced

revisions to minimum wages and increase of

electricity cost. Clearly, the year forward is a

challenging one and our undeterred efforts to

manage challenges in all fronts and move the

business forward remains our commitment

across the organisation. We plan to invest in

capacity enhancements and continue our market

expansion activities. These combined with our

drive to set in lean manufacturing processes and

product innovation will be the key drivers of our

business forward.

Demand for DPL’s high end products such as

Electrician’s Insulation Gloves and Ketone Resistant

Gloves is rising rapidly. DPL’s customers have

clearly placed a high level of confidence on

the capability of its manufacturing processes

to conform to highest quality and performance

standards in relation these types of specialised

hand protection solutions. Further enhancements

to capacity for speciality products are being

planned in the new Financial Year.

DPL’s Management Team has the unified vision

to grow the business assertively to double its

market share. This vision is fully shared by all

our employees and our long term strategies

are devised to support this vision. The past year

where the business was able to create clear and

historical milestones for the business has laid

the foundation for us to be confident about our

aptitude to withstand difficult conditions and

deliver robust performance. We commit to build

our future on this foundation of confidence in our

capabilities.

Outlook and Prospects


04. Reports

Annual Report of the Board of Directors on the Affairs of the Company 44

Corporate Governance 47

Statement of Directors’ Responsibilities 65

Audit Committee Report 66

Independent Auditors’ Report 67

Income Statements 68

Statements of Comprehensive Income 69

Statements of Financial Position 70

Statements of Changes in Equity 71

Statements of Cash Flows 72

Notes to the Financial Statements 74

FINANCIAL CALENDAR 2012/13

Interim Reports

Quarter ended June 30, 2012 August 2, 2012

Quarter ended September 30, 2012 October 31, 2012

Quarter ended December 31, 2012 February 6, 2013

Quarter ended March 31, 2013 May 15, 2013

Annual Report - 2012/13 June 4, 2013

Thirty-seventh Annual General Meeting June 27, 2013

Interim dividend paid February 26, 2013

Final dividend proposed June 27, 2013

Final dividend payable July 8, 2013



Annual Report of the Board of Directors on the Affairs of the Company

The Directors of Dipped Products PLC present

their report together with the Audited Financial

Statements of the Company and of the Group for

the year ended March 31, 2013.

The details set out herein provide the pertinent

information required by the Companies Act

No. 07 of 2007, the Colombo Stock Exchange

Listing Rules and are guided by recommended

best accounting practices.

PRINCIPAL ACtIvItIEs AND BusINEss REvIEw oF tHE yEAR

The principal activities of the Group and its

management team are shown on pages 140 to

141 and 144 to 145 in this report. The joint letter

from the Chairman and the Managing Director

describe the Group’s affairs and mention important

events of the year. The results for the year are set

out in the Income Statement on page 68.

FINANCIAL stAtEMENts

The Financial Statements of the Company and the

Group are given on pages 68 to 131.

INDEPENDENt AuDItoR’s REPoRt

Independent Auditor’s Report on the Financial

Statements is given on page 67.

ACCouNtINg PoLICIEs

The accounting policies adopted by the Company

and its subsidiaries in the preparation of the

Financial Statements are given on pages 74 to 86.

INtEREst REgIstER

Directors’ Interest in Transactions: Directors of

the Company and its subsidiaries have made the

general disclosures provided for in Section 192

(2) of the Companies Act No. 07 of 2007. Note 32

to the Financial Statements dealing with related

party disclosures include details of their interests

in transactions.

Directors’ Remuneration: The Executive Directors’

remuneration is determined within an established

framework. The total remuneration of Executive

Directors of the Company for the year ended

March 31, 2013 is Rs. 18,330,350/- (2012 -

Rs. 16,625,600/-) which includes the value of

perquisites granted to them as part of their

terms of service. The total remuneration of

Non-Executive Directors for the year ended

March 31, 2013 is Rs. 2,080,000/- (2012 -

Rs. 1,560,000/-) determined according to scales of

payment decided upon by the Board. The Board is

satisfied that the payment of this remuneration is

fair to the Company.

Remuneration paid to the Directors of the

subsidiary companies for the financial year ended

March 31, 2013 is Rs. 61,957,205/- (2012 -

Rs. 34,510,600/-).

Details of Directors’ shareholdings as defined in

Colombo Stock Exchange Rules.

No of SharesAs at

March 31, 2013As at

April 1, 2012

Mr. J A G Anandarajah (Retired on March 31, 2013)

219,474 219,474

Mr. G K Seneviratne (Retired on April 8, 2013)

5,000 5,000

Mr. N Y Fernando 10,288 10,288

Mr. K A L S Fernando 56,264 56,264

Dr. K I M Ranasoma 300 300

Mr. K D D Perera* 1,000 1,000 * Mr. K D D Perera holds directly and indirectly 48.38% of the total issued shares of Hayleys PLC which in return holds 41.60% of shares in Dipped Products PLC.

DoNAtIoNs

The donations made by the Company and the

Group are disclosed in Note 7 on Page 105.

The total amount of donations was Rs. 68,708/-

(2012 - Rs. 232,423/-). This has not exceeded

the amount of Rs. 250,000/- approved by the

shareholders at the last Annual General Meeting.

No donations were made for political purposes.

DIRECtoRAtE

The names of the Directors who served during

the year are given on pages 142 and 143 in this

Report.



01. Highlights 02. Joint Letter from the Chairman and the Managing Director 03. Management Discussion 04. Reports 05. AnnexesAnnual Report of the Board of Directors on the Affairs of the Company

Messrs R M T Premarathna and V R Gunasekara

were appointed to the Board with effect from May

1, 2013. In terms of the Article No. 27 (2) of the

Articles of Association, the shareholders are required

to re-elect them at the Annual General Meeting.

In terms of Article No. 29 (1) of the Articles

of Association of the Company, Messrs

L G S Gunawardena, A M Pandithage and

R Seevaratnam retire by rotation and being

eligible offer themselves for re-election.

Messrs J A G Anandarajah and G K Seniviratne retired

on March 31, 2013 and April 8, 2013 respectively.

The Directors of the subsidiaries are given on

pages 140 and 141.

AuDItoRs

The Auditors, Messrs Ernst & Young, Chartered

Accountants, will be paid Rs. 852,000/- (2012 -

Rs. 710,000/-) and Rs. 9,307,430/- (2012 -

Rs. 3,543,016/-) as audit fees by the Company and

its subsidiaries respectively. Messrs Ernst & Young,

Chartered Accountants will be paid Rs. 470,600/-

(2012 - Rs. 125,000/-) and Rs. 1,477,192/-

(2012 - Rs. 497,906/-) by the Company and the

Group, for non-audit related work, which consisted

mainly of tax consultancy services.

In addition to the above, Rs. 5,219,535/-

(2012 - Rs. 4,763,619/-), and Rs. 748,411/-

(2012 - Rs. 247,075/-) were paid as audit fees by

ICOGUANTI S.p.A. and Dipped Products (Thailand)

Ltd. respectively.

As far as the Directors are aware, the Auditors of

the Company and of the subsidiaries do not have

any relationships (other than that of an Auditor)

with the Company or any of its subsidiaries other

than those disclosed above. The Auditors also do

not have any interests in the Company or any of

its Group Companies.

Messrs Ernst & Young, Chartered Accountants, are

deemed reappointed, in terms of Section 158 of

the Companies Act No. 07 of 2007, as Auditors of

the Company.

tuRNovER

The gross turnover of the Group during the year was

Rs. 23,657,743,324/- (2012 - Rs. 19,693,665,405/-).

The Group turnover from international trade in Hand

PRoFIts

2013 2012Rs. ‘000 Rs. ‘000

After making provisions for all known liabilities and depreciation on property, plant & equipment the profit earned by the Group before taxation was 2,175,216 2,437,677

And taxation on Group profits amounting to were deducted (390,943) (294,922)

The Group was left with a profit of 1,784,273 2,142,755

And the amount attributable to non-controlling interest of (366,385) (236,780)

And the balance of the previous year net of final dividend and appropriations were adjusted 3,079,632 1,684,961

The profit before appropriation was 1,417,888 1,905,975

APPRoPRIAtIoNs

Your Directors have made appropriations as follows:

Interim dividend of Rs. 4/- per share (2012 - Nil) 239,446 Nil

Proposed final dividend of Rs. 3/- per share (2012 - Rs. 6/- per share) 179,585 359,169

Total appropriations 419,031 359,169

Protection Sector amounted to Rs. 14,674,542,811/-

(2012 - Rs. 13,499,024,705/-). Further information

on Group turnover is detailed in Note 3 to the

Financial Statements.

REsERvEs

The total Group reserves as at March 31,

2013 amount to Rs. 6,246,107,122/- (2012 -

Rs. 5,202,434,256/-) comprising capital reserves

of Rs. 452,877,980/- (2012 - Rs. 236,836,303/-),

available-for-sale reserve of Rs. 13,716/- (2012 -

Rs. 16,192/-) and revenue reserves of

Rs. 5,793,215,426/- (2012 - Rs. 4,965,581,761/-).



01. Highlights 02. Joint Letter from the Chairman and the Managing Director 03. Management Discussion 04. Reports 05. AnnexesAnnual Report of the Board of Directors on the Affairs of the Company

DIvIDEND

An interim dividend of Rs. 4/- per share was

declared and paid to the shareholders on February

26, 2013.

The Board of Directors has recommended the

payment of a final dividend of Rs. 3/- per share

payable on July 8, 2013 to the shareholders of the

issued ordinary shares of the Company as at close

of business on June 27, 2013.

The Directors have confirmed that the Company

satisfies the solvency test requirement under

Section 56 of the Companies Act No. 07 of 2007

for both interim dividend paid and final dividend

proposed. A solvency certificate was obtained from

the Auditors in respect of the interim dividend paid

and one has been sought in respect of the final

dividend proposed.

stAtutoRy PAyMENts

The Directors are satisfied that all statutory

payments in relation to Employees and the

Government have been made up to date.

tAxAtIoN

The Company has entered into an agreement

with the Board of Investment of Sri Lanka and

has been granted a 10-year tax holiday as

‘Thrust Industries’ up to March 31, 2009 and after

completion of tax exemption period Company is

liable to income tax at concessionary rate for a

further period of ten years on its business activity.

Concessionary rate applied for this year is 12%

and other income of the Company is liable to

taxation at corporate tax rate.

CAPItAL ExPENDItuRE

Group expenditure on Property, Plant and

Equipment during the year amounted to

Rs. 1,033,891,000/- (2012 - Rs. 984,078,000/-).

The movement in Property, Plant and Equipment

during the year is set out in Note 11 to the


MARkEt vALuE oF PRoPERtIEs

The value of land owned by the Group is stated

at cost or valuation. Information on valuation

of land is explained in Note 11 to the Financial

Statements.

EvENts AFtER tHE REPoRtINg PERIoD

No circumstances have arisen since the reporting

period end which would require adjustment to

or disclosure in, other than those disclosed in

Note 35 to the Financial Statements.

goINg CoNCERN

The Directors’ after making necessary inquiries

and reviews including review of the Group’s

budget for the ensuing year, capital expenditure

requirements, future prospects and risks, cash

flows and borrowing facilities have a reasonable

expectation that the Company and the Group have

adequate resources to continue in operational

existence for the foreseeable future. Therefore,

the going concern basis has been adopted in the

preparation of the Financial Statements.

stoCk MARkEt INFoRMAtIoN

Information relating to earnings, dividend, net

assets per share and share trading are given on

pages 136 to 139.

MAJoR sHAREHoLDINgs

The twenty major shareholders as at March 31,

2013 are given on page 137 in this Report.

ANNuAL gENERAL MEEtINg

The Annual General Meeting will be held at the

Registered Office, No. 400, Deans Road, Colombo

10, Sri Lanka on June 27, 2013 at 3.00 p.m. The

Notice of the Annual General Meeting appears on

page 147.

For and on behalf of the Board,

A M Pandithage

Chairman

Dr. k I M Ranasoma

Managing Director

Hayleys group services (Pvt) Ltd.

Secretaries

400, Deans Road,

Colombo 10

May 14, 2013



01. Highlights 02. Joint Letter from the Chairman and the Managing Director 03. Management Discussion 04. Reports 05. AnnexesCorporate governance

Corporate governance

Dipped Products PLC (DPL) continues to be

committed to conducting the Company’s business

ethically and in accordance with high standards of

good corporate governance.

The Board believes that a comprehensive

corporate governance framework enables DPL to

achieve ethical and stewardship obligations while

supporting the creation of long term sustainable

stakeholder value.

The Company is a subsidiary of Hayleys PLC. The

principal business of the Company are shown on

the inner back cover.

DPL Governance Guidelines provide Directors and

management with a road map of their respective

responsibilities. These guidelines, which will be

updated periodically, detail clearly those matters

requiring Board and Committee approval, advice

or review. The DPL governance framework is

depicted in the below diagram.

The Company adopts the Code of Best Practice

on Corporate Governance issued jointly by The

Securities and Exchange Commission of Sri Lanka

and The Institute of Chartered Accountants of

Sri Lanka (Code), which are applicable to listed

companies via the Colombo Stock Exchange

Listing Rules. While we are adhering to the legal

framework for corporate governance provided

by listing rules, the Code is used as a guideline

for operational structures and processes for

discharging corporate governance.

BoARD oF DIRECtoRs

The Board of Directors is responsible for setting up

the governance framework within the Company.

Composition and Attendance at Meetings

As at the end of the year under review, the Board

consisted of twelve Directors; six Non-Executive

Directors and six Executive Directors. These

Directors are named below and their profiles are

available on pages 142 to 143 of this Report.

Details of Directors shareholding in DPL and

directorates in subsidiary companies are given on

pages 44, 140 and 141 respectively.

The Board meets quarterly as a matter of routine.

Ad hoc meetings are held as and when necessary.

During the year under review, the Board met on

four occasions. The attendance at these meetings

were:

Name of Director Attendance

A M Pandithage - Chairman 4/4

Dr. K I M Ranasoma - Managing Director

4/4

J A G Anandarajah* 4/4

G K Seneviratne* 4/4

N Y Fernando 4/4

R Seevaratnam** 3/4

Faiz Mohideen** 4/4

K A L S Fernando 4/4

L G S Gunawardena 3/4

S C Ganegoda* 3/4

K D D Perera* 0/4

M Bottino 2/4

* Non-Executive

** Independent Non-Executive

SHAREHOLDERS

AP

PO

INT

E L E C T

AP

PO

INT

RE

CO

MM

EN

D

A P P O I N T

BOARD OFDIRECTORS

REMUNERATIONCOMMITTEE

SECTORMANAGEMENT

SECTORMANAGEMENT

SECTORMANAGEMENT

AUDITORS

AUDIT COMMITTEE


01. Highlights 02. Joint Letter from the Chairman and the Managing Director 03. Management Discussion 04. Reports 05. AnnexesCorporate governance


Reference to CA sri Lanka & sEC Code

Requirement Compliance Details of Compliance

sECtIoN 1: tHE CoMPANy

A. Directors

Principle: A.1. the Board

As at the end of the year under review, the Board consisted of twelve Directors, six Non-Executive Directors and six Executive Directors including the Chairman.

The Board considered that the present composition and expertise is sufficient to meet the needs of the Group. The Non-Executive Directors contribute with

their knowledge and experience collectively gained from experience in serving a variety of public and private organisations. The profiles of the Directors are

found on pages 142 to 143 of this Annual Report. Details of Directors’ shareholdings in DPL and the directorates they hold in subsidiary companies are given

on pages 44, 140 and 141.

A.1.1 Board meetings Complied The Board meets quarterly. Ad hoc meetings are held as and when required. During the

year under review, the Board met on four occasions. The attendance at these meetings

was depicted in the table given in this section.

A.1.2 Responsibilities of the Board Complied The Board of Directors is responsible for setting up the governance framework within the

company.

The Board is responsible to:

a. Enhance shareholder value.

b. Ensure all stakeholder interests are considered in corporate decisions.

c. Formulate and communicate business policy and strategy to ensure sustained growth,

and monitor its implementation.

d. Approve any change in the Group’s business portfolio and sanction major investments

and disinvestments in accordance with parameters set.

e. Ensure Executive Directors have the skills/knowledge to implement strategy

effectively, with proper succession arrangements in place.

f. Ensure effective remuneration, reward and recognition policies are in place to ensure

employee commitment and motivation.

g. Set and communicate values/standards, with adequate attention being paid to

accounting policies/practices.

h. Ensure effective information, control, risk management and audit systems are in place.





i. Ensure compliance with laws.

j. Ensure that ethical standards are in place.

k. Approve annual budgets and monitor performance.

l. Approve annual and interim results before those are published.

m. Consult and consider inputs from ‘experts’ in relevant areas.

n. Approve key appointments within the Company and ensure all senior management

staff receives appropriate training.

A.1.3 Compliance with the laws

of the country and agreed

to obtain independent

professional advice

Complied The Board collectively, and Directors individually act in accordance with the laws and

regulations of the country, and to the Group policies. At any time, all the members of the

Board are allowed to obtain independent professional advice where necessary, at the

Company's expense.

A.1.4 Access to the advice and

services of the Company

Secretary

Complied The services and advice of the Company Secretary are available to all the Directors as

necessary. The Company Secretary is kept informed and is the responsible person to

the Board in ensuring that Board procedures are followed and that applicable rules and

regulations are complied with.

A.1.5 Independent judgment of the

Directors

Complied Non-Executive Directors are independent of the management and free from any business

and other relations. None of other Directors are related to each other. This enables all

members of the Board to bring independent judgment to bear on issues of strategy,

performance, resources and standards of business conduct.

A.1.6 Dedication of adequate time

and effort of the Directors

Complied The Board of Directors allocate adequate time and effort before a meeting to review

Board papers and call for additional information and clarification, and to follow up on

issues consequent to the meeting.

They are therefore able to familiarise with the business changes, operations, risks and

controls which ultimately help to satisfactorily discharge the duties and responsibilities

owed to the Company.







A.1.7 Training for new and existing

Directors

Complied Every new Director and current Directors are given a training if necessary. This training

curriculum encompasses both general aspects of directorship and matters specific to the

industry. The Board is of the view that continuous training and development of skills are vital

when effectively performing duties.

Principle: A.2. Chairman and Chief Executive officer (CEo)

Chairman and the Chief Executive Officer of the Company are two different positions which clearly distinguishes the power and authority when conducting the

business of the Board and facilitating executive responsibility for the management. The Managing Director acts as the Chief Executive Officer of the Company,

Ensuring that no person has unfettered from decision-making powers.

A.2.1 Division of responsibilities of

Chairman and CEO

Complied The Chairman and the Chief Executive Officer of the Company are two different personnel

where it clearly distinguishes the power and authority. The Chairman of the Company is

also the Chairman of Hayleys PLC. Chief Executive Authority is vested in the Managing

Director of the Company. The separation between the position of the Chairman and

officers with executive powers in the Company ensures a balance of power and authority.

Principle: A.3. Chairman’s Role

The Chairman is the most responsible person for guiding the Board in formulating the appropriate business strategies and gives direction to the Company. He

preserves good corporate governance in the Company.

A.3.1 Chairman’s role Complied The Chairman is responsible for the efficient conduct of Board meetings and ensures,

inter alia, that:

a. The effective participation of both Executive and Non-Executive Directors is secured;

b. All Directors are encouraged to make an effective contribution for the benefit of the

Company;

c. A balance of power between Executive and Non-Executive Directors is maintained;

d. The view of Directors on issues under consideration are ascertained; and

e. The Board is in complete control of the Company’s affairs and alert to its obligations to

all shareholders and other stakeholders.

The Chairman maintains close contact with all Directors and, where necessary, holds

meetings with Non-Executive Directors without Executive Directors being present.







Principle: A.4. Financial Acumen

A.4.1 Financial acumen Complied The Board includes two senior Chartered Accountants, who possess the necessary

knowledge and competence to offer the Board guidance on matters of finance. One of

them serves as Chairman of the Audit Committee and the other as a Director of Hayleys

PLC. Other members of the Board are having ample experience in handling matters of

finance by serving in different organisations. Hence the Board is with sufficient financial

acumen and knowledge to offer guidance on matters of finance.

Principle: A.5. Board Balance

A.5.1 Non-Executive Directors Complied Six out of twelve Directors on the Board are Non-Executive Directors. The composition

of the Executive and Non-Executive Directors (the latter are over one-third of the total

number of Directors) satisfies the requirements laid down in the Listing Rules of the

Colombo Stock Exchange. The Chairman and the Managing Director is not the same

person.

A.5.2 Independence of Non-Executive

Directors

Complied Two of six Non-Executive Directors are independent. The Board has determined that two

Non-Executive Directors satisfy the criteria for ‘independence’ set out in the Listing Rules.

A.5.3 Independence of Non-Executive

Directors

Complied Non-Executive Directors’ profiles reflect their calibre and the weight their views carry in

Board deliberations. Each is independent of management and free from any relationship

that can interfere with independent judgment. The balance of Executive, Non-Executive

and Independent Non-Executive Directors on the Board ensures that no individual Director

or a small group of Directors dominates Board discussion and decision-making.

A.5.4 Annual declaration of

Independence Non-Executive

Directors

Complied Each Non-Executive Director has submitted a declaration stating the Independence

or Non-Independence in a prescribed format. This information is made available to

the Board.

A.5.5 Board determination of

Independence of Non-Executive

Directors and disclosure in

Annual Report

Complied The Board considered the declaration of independence submitted by each Non-Executive

Director with the basis for determination given in the Code of Best Practices as a fair

representation and will continue to evaluate their independence on this basis annually.

Brief résumé of all Directors is available on pages 142 and 143.







A.5.6, A.5.7 Requirement to appoint Senior

Independent Director

Not Applicable This is not applicable as the Chairman and the Managing Director is not the same person.

A.5.8 Chairman’s meetings with Non-

Executive Directors

Complied The Chairman holds meetings with the Non-Executive Directors, without Executive

Directors, at least once in each year and at any other time where necessary.

A.5.9 Record in the Board minutes

of concerns not unanimously

resolved

Complied All matters of the Company which cannot be unanimously resolved are recorded in the

Board minutes, if applicable.

Principle: A.6. supply of Information

A.6.1 Timely information to the Board Complied Directors are provided with quarterly reports on performance and such other reports and

documents as necessary. The Chairman ensures all Directors are adequately briefed on

issues arising at meetings.

A.6.2 Information provided in

advance to the Board meetings

Complied The Board meetings are arranged in advance and all Directors are informed. The Directors

are provided with minutes, the agenda and the Board papers in advance to prepare and

clearly comprehend with the matters discussed or consent.

Principle: A.7. Appointments to the Board

A.7.1, A.7.2 Appointment to the Board Complied The Nominations Committee makes recommendations to the Board on all new Board

appointments.

Nominations Committee consists of two Independent Non-Executive Directors.

The Senior Independent Director, Mr. R Seevaratnam is the Chairman and

Mr. F Mohideen is a member of the Committee.

The Board annually assesses the Board composition to ascertain whether the combined

knowledge and experience of the Board matches the strategic demands facing

the Company.







A.7.3 Disclosure of new appointments Complied A brief resume of the Director, nature of his experience and names of the companies he

holds the directorship and the independency is informed to the Colombo Stock Exchange

and disclosed in the Annual Report.

Principle: A.8. Re-election

A.8.1, A.8.2 Re-election of Directors Complied The provisions of the Company’s Articles require a new Director appointed by the Board

to hold office until the next Annual General Meeting, and seek re-election by the

shareholders at that meeting.

The articles call for one-third of the Directors in office to retire at each Annual General

Meeting. The Directors who retire are those who have served the longest period after

their appointment/reappointment. Retiring Directors are generally eligible for re-election.

The Managing Director does not retire by rotation.

Principle: A.9. Appraisal of Board Performance

A.9.1, A.9.2, A.9.3

Appraisal of Board performance Complied The performance of the Board and Subcommittees is evaluated annually on self-

assessment basis.

Principle: A.10. Disclosure of Information in Respect of Directors

A.10.1 Disclosures about Directors Complied Name, qualification, brief profile and nature of expertise are given on pages 142 and 143

of this Annual Report.

Directors’ interest in contracts is given on page 124 of this Report.

The number of Board meetings attended by the Directors is available on page 47 of this

Report.







Principle: A.11. Appraisal of Chief Executive officer

A.11.1, A.11.2

Evaluation the performance of

the CEO

Complied The short, medium and long term objectives including financial and non-financial targets

that should be met by the CEO are set and evaluated at the commencement of each fiscal

year. The performances were evaluated in each quarter to ascertain whether the targets

were achieved or achievement is reasonable in the circumstances.

B. Directors’ Remuneration

Principle: B.1. Remuneration Procedure

B.1.1, B.1.2, B.1.3, B.1.4, B.1.5

Establishment of Remuneration

Committee.

Complied The Remuneration Committee consists of two Non-Executive Directors and the Chairman

of this committee is appointed by the Board. The Senior Independent Director,

Mr. R Seevaratnam is the Chairman and Mr. F Mohideen is a member of the Committee.

The Remuneration Committee recommends the remuneration payable to the Managing

Director and Executive Director(s) and sets guidelines for the remuneration of

management staff within the Company. The Board makes the final determination after

considering such recommendations.

Payment of remuneration to Directors is disclosed on page 44 of this Report.

No Directors are involved in deciding his/her own remuneration.

Principle: B.2. the Level and Make-up of Remuneration

B.2.1, B.2.2, B.2.3, B.2.4

Levels of remuneration Complied The Remuneration Committee structures the remuneration package to attract, retain

and motivate the Directors needed to run the Company successfully but avoid paying

more than is necessary for this purpose. The remuneration levels relative to other

companies and performance of the Directors are taken into account when considering the

remuneration levels of the Directors.

Principle: B.3. Disclosure of the Remuneration

B.3.1 Disclosure of remuneration Complied The total of Directors’ remuneration is reported in Note 7 to the Financial Statements.







C. Relations with shareholders

Principle: C.1. Constructive use of the AgM and Conduct of general Meetings

C.1.1 Use of proxy Complied The Company ensures that all proxy votes are counted and the level of proxies are lodged

for each resolution and are conveyed to the Chairman.

C.1.2 Separate resolution for

substantially separate issues

Complied A separate resolution is proposed at an Annual General Meeting on each substantially

separate issue.

Adoption of the Annual Report of the Board of Directors on the affairs of the Company,

Statement of Compliance and the Financial Statements with the Independent Auditors’

Report are considered in a separate resolution.

C.1.3 Answer questions at the AGM Complied The active participation of shareholders at the Annual General Meeting is encouraged.

The Board believes that the AGM is a means of continuing an effective dialogue with

shareholders.

The Board offers clarifications and responds to concerns shareholders have over the

content of the Annual Report as well as other matters which are important to them.

The AGM is also used to adopt the Financial Statements for the year.

C.1.4, C.1.5 Notice of Annual General

Meeting and General Meetings

Complied The Notice of Meeting is included in the Annual Report. The Notice contains the Agenda

for the AGM as well as instructions on voting for shareholders, including the appointment

of proxies. A Form of Proxy is enclosed with the Annual Report. The period of notice

prescribed by the Companies Act No. 07 of 2007 has been met.

The Notice and the Agenda of the Annual General Meeting together with the Annual

Report with all other relevant documents are sent to shareholders 15 working days prior

to the meeting.







Principle: C.2. Major transactions

C.2.1 Disclosure of major transactions

to shareholders

Complied There have been no transactions during the year under review which fall within the

definition of ‘Major Transactions’ as set out in the Companies Act No. 07 of 2007.

D. Accountability and Audit

Principle: D.1. Financial Reporting

D.1.1 Balance and understandable

information to shareholders

Complied The Board places great emphasis on complete disclosure of financial and non-financial

information within the bounds of commercial reality, and on the adoption of sound

reporting practices. Financial information is disclosed in accordance with the new

Sri Lanka Accounting Standards. Revisions to existing accounting standards and adoption

of new standards are carefully monitored.

The Annual Report includes descriptive, non-financial content through which an attempt is

made to provide stakeholders with information to assist them in making more informed

decisions.

Communication with

shareholders

The Quarterly Financial Statements are posted to the CSE website for public dissemination.

Shareholders are provided with the Annual Report, which the Company considers as

its principal communication with them and other stakeholders. The Company has duly

complied with all requirements prescribed by the regulatory authorities including the

Colombo Stock Exchange and the Registrar of Companies. These reports are also provided

to the Colombo Stock Exchange.

Shareholders may bring up concerns they may have, with the Chairman, the Managing

Director or the Secretaries, as appropriate.

Price sensitive information Due care is exercised with respect to share price sensitive information.

Shareholder value and return The Board strives to enhance shareholder value and provide a total return in excess of

the market. It has been the policy of the Board to distribute a reasonable dividend to the

shareholders whilst retaining sufficient resources for capital needs.







D.1.2 Statement of Directors’

Responsibility

Complied The Statement of Directors’ Responsibilities for the Financial Statements is given on page

65 of this Report.

D.1.3 Auditors’ Report Complied The Auditors’ Report for the year ended March 31, 2013 is available on page 67 of this

Report.

D.1.4 Management Discussion &

Analysis

Complied Management structure

DPL Group comprises Dipped Products PLC and subsidiary companies. The Group is

effectively divided into two divisions to achieve the strategic objectives. The Hand

Protection Division includes the production operation of Dipped Products PLC and eight

subsidiary companies and the Italian marketing company ICOGUANTI S.p.A. The division

is managed by Managing Director and four functional units supervised by Executive

Directors. The Plantation Division is managed by Managing Director of Kelani Valley

Plantations PLC and Talawakelle Tea Estates PLC who is also a Director of DPL Plantations

(Pvt) Ltd. (Plantations Holding Company).

The authority is exercised within the ethical framework and business practices established

by the Board which demands compliance with existing laws and regulation as well as

best practices in dealing with employees, customers, suppliers and the community at

large. These are further described elsewhere in this Report.

The Group structure and the Management Team are given on pages 140 and 144.

The Executive Directors, General Managers and Key Managers of both divisions meet

separately on a monthly basis to review progress and discuss strategic issues and other

important developments that require consideration. Minutes are kept of decisions made

and of major issues discussed.

The Managing Director of Dipped Products PLC and Managing Director of Kelani Valley

Plantations PLC and Talawakelle Tea Estates PLC attend the monthly meetings of the Group

Management Committee of Hayleys PLC and report on progress and important issues.







Management Report

The Joint Letter from the Chairman and the Managing Director (page 8) in this Report

provides an analysis of the Group’s performance during the financial year.

The Board confirms that there is an ongoing process for identifying, evaluating and

managing significant risks. This process has been in place through the year under review.

The potential risks, both internal as well as external, faced by the Company and actions

instituted for mitigating the same are reported in the Joint Letter from the Chairman’s and

the Managing Director.

D.1.5 Declaration of going concern Complied The Directors, after making necessary inquiries and reviews including reviews of budgets

for the ensuing year, capital expenditure requirements, future prospects and risks, cash

flows and borrowing facilities, have a reasonable expectation that the Company has

resources to continue in operational existence for the foreseeable future. Therefore, the

going concern basis has been adopted in the preparation of the Financial Statements.

D.1.6 Summon an EGM to notify

serious loss of capital

Complied In the event the net assets of the Company falls below 50% of the value of the

Company’s shareholders’ funds, the Directors will forthwith summon an Extraordinary

General Meeting to notify shareholders of the remedial action being taken. However,

such an event has not taken place since the adoption of the New Companies Act No. 07

of 2007.







Principle: D.2. Internal Control

D.2.1, D.2.2 Requirement of sound system

of internal control

Complied The Board is responsible for the Group’s internal control and its effectiveness. Internal

control is established with emphasis on safeguarding assets, making available accurate

and timely information and imposing greater discipline on decision-making. It covers

all controls required, including financial, operational and compliance controls, and risk

management.

The important procedures in place to discharge this responsibility are as follows:

The Directors are responsible for the establishment and monitoring of financial

controls appropriate for the operation within the overall Group policies.

The Board reviews the strategies of the divisions and constituent companies.

Annual budgeting and regular forecasting processes are in place and the Directors

review performance.

The Board has established policies in areas of investment and Treasury management

and does not permit employment of complex risk management mechanisms.

The Group is subjected to regular internal audits and system reviews.

The Audit Committee reviews the plans and activities of the internal audits and the

management letters of External Auditors.

The Group carefully selects and trains employees and provides appropriate channels of

communication to foster a control conscious environment.

The Board has reviewed the effectiveness of the system of financial control for the period

up to the date of signing the accounts. The Directors’ responsibilities for the Financial

Statements are described on page 65.







Principle: D.3. Audit Committee

D.3.1, D.3.2 Composition of Audit

Committee

Complied An Audit Committee was established in 2007. The Committee consists of three

Non-Executive Directors, of which two are Independent Non-Executive Directors.

The Chairman of the Audit Committee is an Independent Non-Executive Director, a Fellow

Member of The Institute of Chartered Accountants of Sri Lanka.

The Company Secretary serves as Committee Secretary.

The Chairman, Managing Director and the Group CFO of Hayleys PLC are invited to attend

the meetings, and other Directors and Senior Managers attend meetings as required. The

input of the External Auditors is obtained where necessary.

The Audit Committee helps the Group achieve a balance between conformance and

performance.

D.3.3 Committees’ purpose, duties

and responsibilities

Complied The Committee is empowered to examine any matters relating to the financial reporting

systems of DPL, and its external and internal audits. Its duties include the detailed review

of Financial Statements, internal control procedures and risk management framework,

accounting policies and compliance with applicable accounting standards and other rules

and regulations.

It reviews the adequacy of systems in place for compliance with relevant legal, regulatory

and ethical requirements and Company policies.

The Audit Committee makes recommendations to the Board pertaining to appointment,

reappointment of External Auditors after assessing the independence and performance,

and approves the remuneration and terms of engagement of the External Auditors.







D.3.4 Disclosures of names of the

members of Audit Committee

Complied During the year under review, the Committee met on four occasions, the attendance at

these meetings are reported in ‘Audit Committee Report’ on page 66 of this Report.

Principle: D.4. Code of Business Conduct and Ethics

D.4.1 Disclosure on presence of Code

of Business Conduct and Ethics

Complied The Directors and members of the Senior Management team are bound with a Code of

Business Conduct and Ethics which is developed by the Hayleys Group. The Code consists

of important topics like conflict of interest, corporate opportunities, confidentiality, fair

dealing, protection and proper use of Company assets, compliance of laws, rules and

regulations etc. The Board ensures compliance with the Code and non-compliance may

become reasons to go for disciplinary actions.

D.4.2 Affirmation of Code in the

Annual Report by the Chairman

Complied The Chairman affirms that he is not aware of any violation of provisions of the Code of

Business Conduct and Ethics in the Annual Report. Please refer the Joint Letter from the

Chairman and the Managing Director on page 8 of this Report.

Principle: D.5. Corporate governance Disclosures

D.5.1 Disclosure of adherence to

corporate governance

Complied The extent to which the Company adheres to established principles and practices of good

corporate governance is disclosed in this Report.

It governance

The Company continues to give attention to bringing DPL’s IT systems in line with its

strategies and objectives. Dedicated staff is deployed to support this.

DPL’s investment in IT covers resources operated and managed centrally and resources

deployed on the various manufacturing locations and estates. The former includes an ERP

system and internet and email services catering to most parts of the business.

It value and Alignment

Investments in IT projects and systems are made after consideration of their suitability

for the related projects. Further aspects such as cost savings, the provision of timely

information and the balance between cost and benefits/needs are also considered when

decisions are taken.







It Risk Management

Risks associated with IT are assessed in the process of risk management. Use of licensed

software, close monitoring of internet usage (for compliance with the IT Use Policy) and

mail server operations and the use of anti-virus and firewall software, are some practices

in place.

sECtIoN 2: sHAREHoLDERs

E. Institutional Investors

Principle: E.1. shareholder voting, E.2. Evaluation of governance Disclosures

E.1, E.2 Use of the vote of Institutional

Investors

Complied All the investors are welcome to the Annual General Meeting and all the comments,

suggestions are opened to them. The Company believes that the institutional investors have

more understanding and awareness about the matters including corporate governance, hence

conduct structured dialogues with them to raise the matters. The Company appreciates the

way of using the votes at AGM on the weight they had regarding all relevant factors noted.

F. other Investors

Principle F.1. Investing/Divesting decisions, F.2. shareholder voting

F.1, F.2 Adequate analysis for

investment/divestment

decisions and using of the

voting right

Complied All shareholders are encouraged to actively participate in the AGM and they have the

independence of using their votes as they wish. The Company believes that the rational

investors remain with the Company without divesting. There are no restrictions for

investing or divesting in the Company shares.

Levels of compliance with the CSE’s Listing Rules - Section 7.10, Rules on Corporate Governance are given in the following table.

Rule No. subject Applicable Requirement Compliance status

Applicable section in the Annual Report

7.10.1(a) Non-Executive

Directors

At least one-third of the total number of Directors should be

Non-Executive Directors

Compliant Corporate Governance A.5.1

7.10.2(a) Independent

Directors

Two or one-third of Non-Executive Directors, whichever is higher,

should be independent


7.10.2(b) Independent

Directors

Each Non-Executive Director should submit a declaration of

independence/non-independence in the prescribed format








7.10.3(a) Disclosure relating

to Directors

Names of Independent Directors should be disclosed in the

Annual Report


7.10.3(b) Disclosure relating

to Directors

The basis for the Board to determine a Director is independent,

if criteria specified for independence is not met


7.10.3(c) Disclosure relating

to Directors

A brief résumé of each Director should be included in the Annual

Report and should include the Director’s areas of expertise


7.10.3(d) Disclosure relating

to Directors

Forthwith provide a brief résumé of new Directors appointed to

the Board with details specified in 7.10.3(a), (b) and (c) to the

exchange


7.10.5 Remuneration

Committee

A listed company shall have a Remuneration Committee Compliant Corporate Governance B.1.1,

B.1.2, B.1.3, B.1.4, B.1.5

7.10.5(a) Composition of

Remuneration

Committee

Shall comprise Non-Executive Directors a majority of whom will

be independent

Compliant Corporate Governance B.1.1,

B.1.2, B.1.3, B.1.4, B.1.5

7.10.5(b) Functions of

Remuneration

Committee

The Remuneration Committee shall recommend the

remuneration of Chief Executive Officer and Executive Directors


B.1.2, B.1.3, B.1.4, B.1.5

7.10.5(c) Disclosure in

the Annual

Report relating

to Remuneration

Committee

The Annual Report should set out:

Names of Directors comprising the Remuneration Committee

Statement of remuneration policy

Aggregated remuneration paid to Executive &

Non-Executive Directors


B.1.2, B.1.3, B.1.4, B.1.5

7.10.6 Audit Committee The Company shall have an Audit Committee Compliant Corporate Governance D.3.1,

D.3.2







7.10.6(a) Composition of

Audit Committee

Shall comprise of Non-Executive Directors a majority of

whom will be independent

Non-Executive Directors shall be appointed as the Chairman

of the committee

Chief Executive Officer and Chief Financial Officer should

attend Audit Committee meetings

The Chairman of the Audit Committee or one member should

be a member of a professional accounting body

Compliant Corporate Governance D.3.1,

D.3.2

7.10.6(b) Audit Committee

Functions

Functions shall include:

Overseeing the preparation, presentation and adequacy of

disclosures in the Financial Statements in accordance with

Sri Lanka Accounting Standards

Overseeing the compliance with financial reporting

requirements, information requirements of the Companies

Act and other relevant financial reporting related regulations

and requirements.

Overseeing the processes to ensure that the internal

controls and risk management are adequate to meet the

requirements of the Sri Lanka Auditing Standards

Assessment of the independence and performance of the

External Auditors

Make recommendations to the Board pertaining to

appointment, reappointment and removal of External

Auditors, and approve the remuneration and terms of

engagement of the External Auditors.

Compliant Corporate Governance D.3.3

7.10.6(c) Disclosure in the

Annual Report

relating to Audit

Committee

a. Names of Directors comprising the Audit Committee

b. The Audit Committee shall make a determination of the

independence of the Auditors and disclose the basis for such

determination

c. The Annual Report shall contain a Report of the Audit

Committee setting out of the manner of compliance with

their functions

Compliant Corporate Governance D.3.4





statement of Directors’ Responsibilities

The Directors are responsible, under section

150 (1), 151, 152 (1), 153 (1) & 153 (2) of

the Companies Act No. 7 of 2007, to ensure

compliance with the requirements set out therein

to prepare Financial Statements for each financial

year giving a true and fair view of the state of

affairs of the Company and the Group as at the

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

the Company and the Group for the financial year.

The Directors are also responsible, under section

148 for ensuring that proper accounting records

are kept to disclose, with reasonable accuracy, the

financial position and enable preparation of the


The Board accepts responsibility for the integrity

and objectivity of the Financial Statements

presented. The Directors confirm that in

preparing the Financial Statements, appropriate

accounting policies have been selected and

applied consistently while reasonable and prudent

judgments have been made so that the form and

substance of transactions are properly reflected.

They also confirm that the Financial Statements

have been prepared and presented in accordance

with the Sri Lanka Accounting Standards. The

Financial Statements provide the information

required by the Companies Act and the listing

rules of the Colombo Stock Exchange.

The Directors have taken reasonable measures

to safeguard the assets of the Group and, in that

context, have instituted appropriate systems of

internal control with a view to preventing and

detecting fraud and other irregularities.

As required by section 56 (2) of the Companies

Act, the Board of Directors has authorised

distribution of the dividends paid and now

proposed, being satisfied based on information

available to it that the Company would satisfy the

solvency test after such distributions in accordance

with section 57 of the Companies Act No. 7 of

2007, and have obtained in respect of dividends

paid and sought in respect of the dividend now

proposed, Certificates of Solvency from its Auditors.

The External Auditors, Messrs Ernst & Young

are deemed re-appointed in terms of Section

158 of the Companies Act No. 7 of 2007 were

provided with every opportunity to undertake

the inspections they considered appropriate to

enable them to form their opinion on the Financial

Statements. The report of the Auditors, shown on

page 67 sets out their responsibilities in relation

to the Financial Statements.

CoMPLIANCE REPoRt

The Directors confirm that to the best of their

knowledge, all statutory payments relating to

employees and the Government that were due in

respect of the Company and its Subsidiaries as at

the end of the reporting period have been paid or

where relevant, provided for.

By order of the Board,

Hayleys group services (Pvt) Ltd.

Secretaries

400, Deans Road, Colombo 10

May 14, 2013

statement of Directors’ Responsibilities



Audit Committee Report

CoMPosItIoN AND RoLE The Audit Committee, appointed by and responsible to the Board of Directors, comprises three Non-Executive Directors. The Chairman, Finance Director and Chief Financial Officer of Hayleys PLC, and the Managing Director attend meetings of the Committee by invitation. The Chairman of the Audit Committee is a senior Chartered Accountant.

The role of the Committee, which has specific terms of reference, is described in the Corporate Governance Report on page 64. The names of the members and brief profiles of each member are given on pages 142 and 143 & Inner Back Cover of this report. Their individual and collective financial knowledge and business acumen and the independence of the Committee, are brought to bear on their deliberations and judgments on matters that come within the Committee’s purview.

Kelani Valley Plantations PLC and Talawakelle Tea Estates PLC the other quoted companies in the Group, that have independent Non-Executive Directors constituted its own Audit Committee to review their activities. Their terms of reference will be similar to the terms of the DPL Group Audit Committee and reports from these committees will be forwarded to the DPL Group Audit Committee.

MEEtINgsThe Audit Committee met 4 times during the year. The attendance of the members at these meetings is as follows:

Mr. R Seevaratnam (Chairman) 3/4

Mr. F Mohideen 2/4

Mr. K D D Perera 0/4

ACtIvItIEs

The Committee carried out the following activities

during the year:

The Committee reviewed the financial reporting system adopted by the Group in the preparation of its quarterly and annual Financial Statements to ensure reliability of the process and consistency of the accounting policies and methods adopted and their compliance with the Sri Lanka Accounting Standards (SLFRS’s and LKAS’s) promulgated by the Institute of Chartered Accountants of Sri Lanka. The methodology included obtaining statements of compliance from Heads of Finance. The Committee recommended the Financial Statements to the Board for its deliberations and issuance. The Committee, in its evaluation of the financial reporting system, also recognised the adequacy of the content and quality of routine management information reports forwarded to its members.

The Committee reviewed the process to assess the effectiveness of the internal financial controls that have been designed to provide reasonable assurance to the Directors that assets are safeguarded and that the financial reporting system can be relied upon in preparation and presentation of the Financial Statements. The internal audit function of local manufacturing companies is carried out by an independent firm of chartered accountants. Procedures relating to continuous monitoring and reporting of key control elements in Group companies were brought to the notice of the Internal Auditors and the Hayleys Group Management Audit & Systems Review Department in order to formulate the action plans for the ensuing year.

The Committee obtained and reviewed statements on major business risks, mitigatory action taken or contemplated.

The Committee reviewed reports tabled by Group companies certifying their compliance with relevant revenue regulations.

The Committee held meetings with the External Auditors Messrs Ernst & Young to review the scope of the audit and the Audit Management Letters of Group companies. Actions taken by the management in response to the issues raised, as well as the effectiveness of the internal controls in place, were discussed. Remedial action was recommended wherever necessary.

The Committee reviewed the nature and value of non-audit work the External Auditors had undertaken, to ensure that it did not compromise their independence.

The Audit Committee recommended to the Board

of Directors that Messrs Ernst & Young be re-

appointed as Auditors for the financial year ending

March 31, 2014.

R seevaratnam

Chairman

Audit Committee

May 8, 2013

Audit Committee Report


Independent Auditors’ Report

to tHE sHAREHoLDERs oF DIPPED PRoDuCts PLC

Report on the Financial statements

We have audited the accompanying financial

statements of Dipped Products PLC (“Company”),

the consolidated financial statements of the

Company and its subsidiaries, which comprise the

statements of financial position as at 31 March

2013, and the income statements and statements

of comprehensive income, statements of changes

in equity and cash flow statements 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. This responsibility includes: designing,

implementing and maintaining internal control

relevant to the preparation and fair presentation

of financial statements that are free from material

misstatement, whether due to fraud or error;

selecting and applying appropriate accounting

policies; and making accounting estimates that

are reasonable in the circumstances.

scope of Audit and Basis of opinion

Our responsibility is to express an opinion on

these financial statements based on our audit.

We conducted our audit in accordance with

Sri Lanka Auditing Standards. Those standards

require that we plan and perform the audit to

obtain reasonable assurance whether the financial

statements are free from material misstatement.

An audit includes examining, on a test basis,

evidence supporting the amounts and disclosures

in the financial statements. An audit also includes

assessing the accounting policies used and

significant estimates made by management, as

well as evaluating the overall financial statement

presentation.

We have obtained all the information and

explanations which to the best of our knowledge

and belief were necessary for the purposes of our

audit. We therefore believe that our audit provides

a reasonable basis for our opinion.

opinion

In our opinion, so far as appears from our

examination, the Company maintained proper

accounting records for the year ended 31 March

2013 and the financial statements give a true and

fair view of the Company’s financial position as at

31 March 2013 and its financial performance and

cash flows for the year then ended in accordance

with Sri Lanka Accounting Standards.

In our opinion, the consolidated financial

statements give a true and fair view of the

financial position as at 31 March 2013 and its

financial performance and cash flows for the

year then ended, in accordance with Sri Lanka

Accounting Standards, of the Company and its

subsidiaries dealt with thereby, so far as concerns

the shareholders of the Company.

Report on other Legal and Regulatory Requirements

These financial statements also comply with the

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

153(7) of the Companies Act No. 07 of 2007.

14 May 2013

Colombo

E YRNST& OUNG201 De Saram PlaceP.O. Box 101Colombo 10Sri Lanka

Chartered Accountants

TelFax Gen

[email protected]

: +94 11 2463500: +94 11 2697369: +94 11 5578180

Partners: A D B Talwatte FCA FCMA M P D Cooray FCA FCMA R N de Saram ACA FCMA Ms. N A De Silva ACA Ms. Y A de Silva ACA W R H Fernando FCA FCMAW K B S P Fernando FCA FCMA A P A Gunasekera FCA FCMA A Herath FCA D K Hulangamuwa FCA FCMA LLB (Lond) H M A Jayasinghe FCA FCMAMs. A A Ludowyke FCA FCMA Ms. G G S Manatunga ACA N M Sulaiman ACA ACMA B E Wijesuriya ACA ACMA


Income statements

Group Company Year ended March 31, 2013 2012 2013 2012

Note Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Revenue 3 23,657,743 19,693,665 2,018,710 1,798,644

Cost of sales (19,079,931) (16,195,264) (1,524,208) (1,451,393)

gross profit 4,577,812 3,498,401 494,502 347,251

Other income and gains 4 126,808 1,246,069 592,994 1,235,203

Distribution costs (489,042) (453,411) (15,502) (15,993)

Administrative expenses (1,777,854) (1,565,787) (304,665) (285,052)

Other expenses 5 (21,350) (12,935) (16,075) (2,686)

Provision for diminution in value of investments 16 – – – (150,000)

Finance costs 6.1 (348,097) (329,840) (28,422) (98,250)

Finance income 6.2 106,939 75,412 60,542 41,046

Share of loss of equity accounted investee (net of tax) – (20,232) – –

Profit before tax 7 2,175,216 2,437,677 783,374 1,071,519

Tax expense 8 (390,943) (294,922) (29,537) (6,195)

Profit for the year 1,784,273 2,142,755 753,837 1,065,324

Attributable to:

Equity holders of the parent 1,417,888 1,905,975 753,837 1,065,324

Non-controlling interests 366,385 236,780 – –

1,784,273 2,142,755 753,837 1,065,324

Earnings per share (Rs.) - Basic 9 23.69 31.84 12.59 17.80

Dividends per share (Rs.) 10 7.00 6.00 7.00 6.00

The Notes on pages 74 to 131 form an integral part of these Financial Statements.


statements of Comprehensive Income


Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Profit for the year 1,784,273 2,142,755 753,837 1,065,324

other Comprehensive Income

Net exchange differences on translation of foreign operations 190,398 (23,578) – –

Net loss on available-for-sale financial assets (3) (9) – –

Reclassification adjustment for gains on disposal of available-for-sale financial assets included in the Income Statement – (1,156,710) – (1,156,710)

Revaluation of land 69,591 – 45,297 –

other comprehensive income for the period, net of tax 259,986 (1,180,297) 45,297 (1,156,710)

Attributable to:

Equity holders of the parent 1,643,574 728,761 799,134 (91,386)

Non-controlling interest 400,685 233,697 – –

total comprehensive income for the period, net of tax 2,044,259 962,458 799,134 (91,386)



statements of Financial Position

Group Company As at March 31, 2013 2012 As at April 1, 2011 2013 2012 As at April 1, 2011

Note Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

AssEts

Non-Current AssetsTangible assets

Property, plant and equipment 11 10,119,322 9,451,513 6,246,770 478,171 384,402 409,410 Formers (moulds) 12 190,647 188,731 167,020 55,934 44,281 28,686Investment property 13 221,896 228,331 – 221,896 228,331 – Biological assets 14 235,021 192,113 40,394 – – –

Intangible assets 15 178,611 181,308 34,694 – – – Investments in subsidiaries 16 – – – 2,352,684 2,013,900 1,843,280 Investments in equity accounted investee 16 – – 329,945 – – – Other non-current financial assets 17.1 22 2,575 1,353,751 – – 1,351,166 Deferred tax assets 18.1 20,647 19,161 14,260 20,360 18,549 14,260

10,966,166 10,263,732 8,186,834 3,129,045 2,689,463 3,646,802

Current AssetsInventories 19 3,267,185 3,123,708 2,536,390 372,090 352,309 302,841 Trade and other receivables 20 4,162,919 3,995,668 3,428,132 308,031 345,249 270,165Advances and prepayments 359,767 365,670 278,933 58,434 106,627 70,550Amounts due from related parties 21 – – – 324,823 386,646 397,499Other current financial assets 17.1 6,137 11,303 27,990 – 3,004 17,214 Cash and short term deposits 746,381 1,004,220 531,847 92,569 448,132 25,485

8,542,389 8,500,569 6,803,292 1,155,948 1,641,967 1,083,755total assets 19,508,555 18,764,301 14,990,126 4,284,993 4,331,430 4,730,557

EQuIty AND LIABILItIEsEquityStated capital 22 598,615 598,615 598,615 598,615 598,615 598,615 Capital reserves 452,878 236,836 233,499 179,085 133,788 133,788 Available-for-sale (AFS) reserve 14 16 1,156,732 – – 1,156,710 Revenue reserves 5,793,215 4,965,582 3,153,487 2,291,824 2,136,602 1,161,070 Equity attributable to equity holders of the parent

6,844,722 5,801,049 5,142,333 3,069,524 2,869,005 3,050,183

Non-controlling interests 2,068,640 1,750,494 840,397 – – – total equity 8,913,362 7,551,543 5,982,730 3,069,524 2,869,005 3,050,183

Non-Current Liabilities Interest-bearing loans and borrowings 23.1 1,642,681 1,899,973 1,238,387 – – – Deferred revenue 24 699,054 703,369 480,877 – – – Defined benefit obligations 25 2,324,356 2,174,357 1,160,230 290,448 262,188 217,411 Agents’ indemnity fund 26 52,900 42,610 41,328 – – – Deferred tax liabilities 18.2 370,723 290,486 210,707 – – –

5,089,714 5,110,795 3,131,529 290,448 262,188 217,411

Current Liabilities Trade and other payables 27 2,725,100 2,231,576 2,113,310 260,431 210,837 170,859Interest-bearing loans and borrowings 23.2 2,686,940 3,774,416 3,705,525 320,792 372,980 977,628 Other current financial liabilities 17.2 – 9,215 1,930 – – 1,930 Amounts due to related parties 28 8,666 18,597 26,622 316,696 605,762 302,372Income tax payable 84,773 68,159 28,480 27,102 10,658 10,174

5,505,479 6,101,963 5,875,867 925,021 1,200,237 1,462,963 total liabilities 10,595,195 11,212,758 9,007,396 1,215,469 1,462,425 1,680,374 total equity and liabilities 19,508,555 18,764,301 14,990,126 4,284,993 4,331,430 4,730,557


The Financial Statements have been prepared in compliance with the requirements of the Companies Act No. 07 of 2007.

N A R R s NanayakkaraGeneral Manager Finance

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

A M Pandithage Dr. k I M RanasomaChairman Managing Director

May 14, 2013Colombo


statements of Changes in EquityYear ended March 31, 2013

gRouP Attributable to Equityholders of the Parent Non-

ControllingInterest

TotalEquityStated

CapitalCapital Reserves Other

Components of Equity

Revenue Reserves Total

Reserve on Revaluation Other Capital Available-for- General Timber Retained Exchange

Scrip Issue Reserve Reserves sale Reserve Reserve Reserve Earnings Fluctuation

Reserve

Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000

As at April 1, 2011 598,615 25,384 189,517 18,598 1,156,732 817,359 17,620 2,207,082 111,426 5,142,333 840,397 5,982,730

Profit for the year – – – – – – 12,225 1,893,750 – 1,905,975 236,780 2,142,755

Other comprehensive income – – – – (1,156,716) – – – (20,498) (1,177,214) (3,083) (1,180,297)

Dividends – – – – – – – (89,792) – (89,792) (59,532) (149,324)

Adjustments due to changes in holdings in HPSL and HRPL – – – – – – – 19,747 – 19,747 735,932 755,679

Transfers – – – 3,837 – 110,329 – (113,666) – – – –

Balance as at March 31, 2012 598,615 25,384 189,517 21,935 16 927,688 29,845 3,917,121 90,928 5,801,049 1,750,494 7,551,543

Profit for the year – – – – – – 17,386 1,400,502 – 1,417,888 366,385 1,784,273

Other comprehensive income – – 69,591 – (2) – – – 156,097 225,686 34,300 259,986

Transfers – 142,025 – 4,426 – 242,012 – (388,463) – – – –

Dividends – – – – – – – (598,615) – (598,615) (89,281) (687,896)

Adjustments due to changes in holding in DPTL – – – – – – – (1,395) 109 (1,286) 6,742 5,456

Balance as at March 31, 2013 598,615 167,409 259,108 26,361 14 1,169,700 47,231 4,329,150 247,134 6,844,722 2,068,640 8,913,362

CoMPANy

Stated Capital

Capital Reserves Other Components

of Equity

Revenue Reserve

TotalEquity

RevaluationReserve

Other capitalReserves

Available-for-sale Reserve

Retained Earnings

Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000

As at April 1, 2011 598,615 133,608 180 1,156,710 1,161,070 3,050,183

Profit for the year – – – – 1,065,324 1,065,324

Other comprehensive income – – – (1,156,710) – (1,156,710)

Dividends – – – – (89,792) (89,792)

Balance as at March 31, 2012 598,615 133,608 180 – 2,136,602 2,869,005

Profit for the year – – – – 753,837 753,837

Other comprehensive income – 45,297 – – – 45,297

Dividends – – – – (598,615) (598,615)

Balance as at March 31, 2013 598,615 178,905 180 – 2,291,824 3,069,524

The Notes on pages 74 to 131 form an integral part of the Financial Statements.


statements of Cash Flows


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cash flows from operating activities

Cash generated from operations (Note A) 3,632,169 1,150,018 172,828 300,415

Interest paid (348,097) (281,473) (28,422) (24,366)

Income taxes paid (328,216) (147,550) (14,903) (10,001)

Retiring gratuity paid (219,532) (108,811) (27,102) (11,778)

Agents' indemnity paid (518) (2,999) – –

Net cash flow from operating activities 2,735,806 609,185 102,401 254,270

Cash flows from investing activities

Purchase & construction of property, plant and equipment (1,022,154) (749,031) (95,540) (13,902)

Purchase of formers (moulds) (34,160) (39,177) (16,792) (20,114)

Purchase of investment property – (230,999) – (230,999)

Grants received 32,808 17,451 – –

Proceeds from disposal of property, plant and equipment 45,069 39,345 8,909 994

Proceeds from disposal of investment – 1,335,510 – 1,335,510

Development cost incurred on biological assets (11,737) – – –

Investments in group companies – – (338,784) (320,620)

Cash paid on investment in Hayleys Plantation Services (Pvt) Ltd. – (280,000) – –

Net of short-term borrowings, cash & cash equivalents on acquisition of Hayleys Plantation Services (Pvt) Ltd.

– (87,452) – –

Interest received 94,968 70,478 52,189 31,162

Dividend received from non-group companies – 14,145 – 14,145

Dividend received from associate/subsidiary companies – 14,296 581,344 72,887

Net payments to non-controlling interest (89,281) (17,152) – –

Net cash flows from investing activities (984,487) 87,414 191,326 869,063

Cash flows from financing activities

Long term loans obtained 17,171 126,424 – –

Repayment of long term loans (329,768) (406,555) – (110,460)

Capital payment on finance lease (2,662) (6,698) – –

Dividend paid (597,102) (96,038) (597,102) (96,038)

Net cash flows from financing activities (912,361) (382,867) (597,102) (206,498)

Net increase/(decrease) in cash & cash equivalents 838,958 313,732 (303,375) 916,835

Cash & cash equivalents at the beginning of the year (2,442,978) (2,756,710) 75,152 (841,683)

Cash & cash equivalents at the end of the year (1,604,020) (2,442,978) (228,223) 75,152


statements of Cash Flows


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

A CAsH gENERAtED FRoM oPERAtIoNsProfit before tax 2,175,216 2,437,678 783,374 1,071,519

Adjustments for:

Interest cost 348,097 286,266 28,422 24,366

Share of loss of equity accounted investees – 20,232 – –

Gain on fair value change in biological assets (31,171) (14,955) – –

Depreciation on property, plant and equipment 628,747 474,482 38,636 38,153

Depreciation on investment property 5,335 2,668 5,335 2,668

Impairment of formers 32,244 17,467 5,139 4,519

Amortisation of intangible assets 2,697 400 – –

Net (gain)/loss on other current financial assets and liabilities (4,049) 23,379 – 12,281

Gain on disposal of property, plant and equipment (30,722) (30,378) (478) (237)

Gain on disposal of available-for-sale investments – (1,141,053) – (1,141,053)

Amortisation of grants (37,123) (44,534) – –

Provision for/(reversal) of bad & doubtful debts (79,061) 5,563 102 122

Provision for retiring gratuity 363,677 291,481 55,362 56,555

Provision for agents' indemnity fund 4,798 4,434 – –

Provision for diminution in value of unquoted equity shares 2,550 – – 150,000

Provision for/(reversal) of slow moving/obsolete inventories (17,824) 38,960 (2,968) 12,358

Interest and dividend income (94,968) (84,623) (633,533) (123,144)

Differences of exchange on translation of foreign entities 54,445 (15,223) – –

3,322,888 2,272,244 279,391 108,107

(Increase)/decrease in trade and other receivables (54,149) (510,840) 101,942 (59,403)

(Increase)/decrease in advances and prepayments 5,903 (86,737) 48,193 (36,077)

(Increase)/decrease in inventories (125,653) (336,359) (16,813) (61,426)

Increase/(decrease) in trade and other payables 483,180 (188,290) (239,885) 349,614

309,281 (1,122,226) (106,563) 192,308

3,632,169 1,150,018 172,828 300,415

B ANALysIs oF CAsH & CAsH EQuIvALENts At END oF tHE PERIoD

Cash at bank and in hand 273,846 210,383 92,569 22,455

Short term deposits 472,535 793,837 – 425,677

Short term loans and overdraft (2,350,401) (3,447,198) (320,792) (372,980)

(1,604,020) (2,442,978) (228,223) 75,152



Notes to the Financial statements

1. REPoRtINg ENtIty

1.1 general

Dipped Products PLC, is a Company incorporated

and domiciled in Sri Lanka. The ordinary shares

of the Company are listed on the Colombo

Stock Exchange of Sri Lanka. The address of the

Company’s registered office is given on the Back

Inner Cover of the Annual Report.

The Consolidated Financial Statements of Dipped

Products PLC, as at and for the year ended

March 31, 2013 encompass the Company and its

Subsidiaries (together referred to as the ‘Group’)

and the Group’s interest in Equity Accounted

Investees. All subsidiaries in the Group are limited

liability companies incorporated and domiciled in

Sri Lanka other than Dipped Products (Thailand)

Ltd. and ICOGUANTI S.p.A which are incorporated

and domiciled in Thailand and Italy respectively.

Descriptions of the nature of the operations

and principal activities of the Company and its

Subsidiaries are given on the Back Inner Cover

of the Annual Report. There were no significant

changes in the nature of the principle activities of

the Company and the Group during the financial

year under review. During the year Palma Ltd. was

non-operating.

In the opinion of the Directors, the Company’s

ultimate Parent undertaking and controlling party

is Hayleys PLC which is incorporated in Sri Lanka.

The Financial Statements of all companies in the

Group other than those mentioned in Note 2.2.5

to the Financial Statements are prepared for a

common financial year which ends on March 31.

The Consolidated Financial Statements of the Group

for the year ended March 31, 2013 were authorised

for issue by the Directors on May 14, 2013.

1.2 BAsIs oF PREPARAtIoN

1.2.1 statement of Compliance

The Consolidated 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 promulgated by The Institute of Chartered

Accountants of Sri Lanka (CA Sri Lanka) and with the

requirements of the Companies Act No. 07 of 2007.

For all periods up to and including year ended

March 31, 2012 the Group prepared its Financial

Statements in accordance with Sri Lanka

Accounting Standards applicable as at March 31,

2012 (‘SLAS’). These Financial Statements for the

year ended March 31, 2013 are the first set of

Financial Statements, the Group has prepared in

accordance with Sri Lanka Accounting Standards

effective from January 1, 2012 comprising

SLFRS and LKAS (‘SLFRS’). (Refer Note 2.23 for

explanation of the transition).

The Group has consistently applied the accounting

policies used in the preparation of its opening

SLFRS Statement of Financial Position as at April

1, 2011 through all periods presented, as if these

policies always been in effect.

1.2.2 Basis of Measurement

The Consolidated Financial Statements have been

prepared on a historical cost basis, except for

the following items in the Statement of Financial

Position.

Land is measured at cost at the time of the

acquisition and subsequently lands is carried at

valuation

Investment property is measured at cost at the

time of the acquisition and subsequently land

is revalued.

Available-for-sale financial assets are

measured at fair value.

Certain biological assets are measured at fair

value.

Where appropriate, the specific policies are

explained in the succeeding Notes.

No adjustments have been made for inflationary

factors in the Consolidated Financial Statements.

1.2.3 Functional and Presentation Currency

The Financial Statements are presented in

Sri Lankan Rupee which is the Group’s functional

currency except for certain subsidiaries whose

functional currencies are different as they operate

in different economic environments. All financial

information presented in Sri Lankan Rupees have

been given to the nearest thousand (Rs. ‘000),

unless stated otherwise.

1.2.4 Materiality and Aggregation

Each material class of similar items is presented

separately in the Consolidated Financial Statements.

Items of a dissimilar nature or function are

presented separately unless they are immaterial.

2. sIgNIFICANt ACCouNtINg PoLICIEs

2.1 significant Accounting Judgments, Estimates and Assumptions

In the process of applying the Group’s accounting

policies, management has exercised judgment

and estimates in determining the amounts

recognised in the Financial Statements. Use of

available information, estimates and assumptions

and application of judgment is inherent in the

preparation of the Financial Statements as they

affect the application of accounting policies and

the recorded amounts in the Financial Statements.

The Group believes its estimates including the

valuation of assets and liabilities are appropriate.

Estimates and underlying assumptions are

reviewed on a continuous basis. However, the

actual results may differ from those estimates.

The most significant uses of judgments and

estimates are as follows:



2.1.1 going Concern

The Directors have made an assessment of the

Group’s ability to continue as a going concern and

is satisfied that it has the resources to continue in

business for the foreseeable future. Furthermore,

management is not aware of any material

uncertainties that may cast significant doubt upon

the Group’s ability to continue as a going concern.

Therefore, the Financial Statements continue to be

prepared on the going concern basis.

2.1.2 taxation

The Group is subject to income tax. Significant

judgment was required to determine the total

provision for current and deferred taxes pending

the issue of tax guidelines on the treatment of the

adoption of SLFRS in the Financial Statements and

the taxable profit for the purpose of imposition

of taxes. Uncertainties exist, with respect to the

interpretation of the applicability of tax laws, at

the time of the preparation of these Financial

Statements.

The Group recognised assets and liabilities for

current and deferred taxes based on estimates of

whether additional taxes will be due. Where the

final tax outcome of these matters is different

from the amounts that were initially recorded,

such differences will impact the income and

deferred tax amounts in the period in which the

determination is made.

2.1.3 Employee Benefit Liability - gratuity

The cost of the defined benefit plan - gratuity,

is determined using an actuarial valuation.

Actuarial valuation involve making assumptions

about inter alia discount rates, future salary

increases, remaining working life of employees

and mortality rates. Due to the long term nature

of these obligations such estimates are subject to

significant uncertainty. Description of employee

benefits is given in Note 25.

2.1.4 Measurement of the Recoverable Amount of Cash-generating units Containing goodwill

The Group tests annually whether goodwill has

suffered any impairment in accordance with the

accounting policy stated in Note 2.6 The basis of

determining the recoverable amounts of cash-

generating units and key assumptions used are

given in Note 15.

2.1.5 Revaluation of Land

The Group measures land at revalued amount

with change in value being recognised in the

Statement of Other Comprehensive Income. The

valuer has used valuation techniques such as

open market value. Refer Note 11.

2.2 Basis of Consolidation

The Consolidated Financial Statements (referred to

as the ‘Group’) comprise the Financial Statements

of the Company and its Subsidiaries and the

Group’s interest in equity accounted investees.

Subsidiaries and equity accounted investees are

disclosed in Note 16 to the Financial Statements.

2.2.1 subsidiaries

Subsidiaries are those entities controlled by the

Group. Control exists when the Group has the

power to govern the financial and operating

policies of an entity so as to obtain benefits from

its activities which is evident when the Group

controls the composition of the Board of Directors

of the entity or holds more than 50% of the

issued shares of the entity or 50% of the voting

rights of the entity or entitled to receive more

than half of every dividend from shares carrying

unlimited right to participate in distribution of

profits or capital.

Entities that are subsidiaries of another entity

which is a subsidiary of the Company are also

treated as Subsidiaries of the Company.

The results of subsidiaries acquired or incorporated

during the period have been consolidated

from the date of acquisition or incorporation,

while the results of subsidiaries disposed, have

been accounted up to the date of disposal.

Non-Controlling Interest is measured at the

proportionate share of the acquiree’s identifiable

net assets. A change in the ownership interest of

a subsidiary without a loss of control is accounted

for as an equity transaction.

2.2.2 transactions with Non-Controlling Interests

The profit or loss and net assets of a subsidiary

attributable to equity interests that are not owned

by the Parent, directly or indirectly through

subsidiaries, is disclosed separately under the

heading ‘Non-controlling Interest’.

The Group applies a policy of treating transactions

with non-controlling interests as transactions with

parties external to the Group.

Losses within a subsidiary are attributed to the

non-controlling interest even if that results in a

deficit balance.

2.2.3 Equity Accounted Investees

Equity accounted investees are those entities in

which the Group has significant influence but not

control over the financial and operating policies.

Significant influence is presumed to exist when the

Group holds between 20% and 50% of the voting

power of another entity. Equity accounted investees

are accounted for using the equity method.


Under the equity method, the investment in

the equity accounted investee is carried on the

Statement of Financial Position at cost plus post

acquisition changes in the Group’s share of net

assets of the equity accounted investee. Goodwill

relating to the equity accounted investee is

included in the carrying amount of the investment

and is neither amortised nor individually tested for

impairment.

The Income Statement reflects the Group’s

share of the results of operations of the equity

accounted investee. When there has been a

change recognised directly in the equity of the

equity accounted investee, the Group recognises

its share of any changes and discloses this

when applicable in the Statement of Changes in

Equity. Unrealised gains and losses resulting from

transactions between the Group and the equity

accounted investee are eliminated to the extent of

the interest in the equity accounted investee.

2.2.4 transactions Eliminated on Consolidation

Intra-group balances and transactions and any

unrealised income and expenses arising from intra-

group transactions are eliminated in preparing

the Consolidated Financial Statements. Unrealised

gains arising from transactions with equity

accounted investees are eliminated against the

investment to the extent of the Group’s interest in

the investee. Unrealised losses are eliminated in

the same way as unrealised gains but only to the

extent that there is no evidence of impairment.

2.2.5 Companies with Different Accounting years

Kelani Valley Plantations PLC (KVPL), Dipped

Products (Thailand) Ltd. (DPTL), ICOGUANTI S.p.A.

(ICO) and Hayleys Plantation Services (Pvt) Ltd.

(HPSL) prepare their annual Financial Statements

on calendar year basis. The Financial Statements of

KVPL, DPTL, ICO and HPSL drawn up to December

31, 2012 have been consolidated.

2.3. Foreign Currency translation

The Group’s Consolidated Financial Statements

are presented in Sri Lanka Rupees, which is also

the Parent Company’s functional currency. Each

entity in the Group determines its own functional

currency and items included in the Financial

Statements of each entity are measured using

that functional currency.

2.3.1 transactions and Balances

Transactions in foreign currencies are initially

recorded by the Group entities at their respective

functional currency spot rates at the date the

transaction first qualifies for recognition.

Monetary assets and liabilities denominated

in foreign currencies are retranslated at the

functional currency spot rate of exchange at

the reporting date. All differences arising on

settlement or translation of monetary items are

taken to the Income Statement.

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.

2.3.2 Foreign operations

The results and financial position of all Group

entities that have a functional currency other than

the Sri Lanka Rupee are translated into Sri Lanka

Rupees as follows:

- assets and liabilities of foreign operations,

including goodwill and fair value adjustments

arising on the acquisition, are translated to

Sri Lanka Rupees at the exchange rate at the

reporting date;

- income and expenses are translated at the

average exchange rates for the period.

Foreign currency differences are recognised in

other comprehensive income.

When a foreign operation is disposed off, the

relevant amount in the translation reserve is

transferred to profit or loss as part of the profit

or loss on disposal. On the partial disposal of a

subsidiary that includes a foreign operation, the

relevant proportion of such cumulative amount is

re-attributed to non-controlling interest. In any

other partial disposal of a foreign operation, the

relevant proportion is reclassified to profit or loss.

Foreign exchange gains or losses arising from

a monetary item receivable from or payable to

a foreign operation, the settlement of which

is neither planned nor likely to occur in the

foreseeable future and which in substance is

considered to form part of the net investment

in the foreign operation, are recognised in other

comprehensive income in the translation reserve.

Any goodwill arising on the acquisition of a foreign

operation subsequent to April 1, 2011 and any

fair value adjustments to the carrying amounts

of assets and liabilities arising on the acquisition

are treated as assets and liabilities of the foreign

operation and translated at the closing rate.

Prior to April 1, 2011, the date of transition to

SLFRS, the Group treated goodwill and any fair

value adjustments to the carrying amounts of

assets and liabilities arising on the acquisition

as assets and liabilities of the Parent. Therefore,

those assets and liabilities are non-monetary

items already expressed in the functional

currency of the Parent and no further translation

differences occur.

2.4 Property, Plant and Equipment

2.4.1 Recognition and Measurement

Items of Property, Plant and Equipment are

measured at cost less accumulated depreciation

and accumulated impairment losses, if any, whilst

land is measured at fair value.



Owned Assets

The cost of Property, Plant and Equipment

includes expenditure that are directly attributable

to the acquisition of the asset. The cost of

self-constructed assets includes the cost of

materials and direct labour, any other costs

directly attributable to bringing the asset to a

working condition for its intended use, and the

costs of dismantling and removing the items and

restoring the site on which they are located, and

borrowing costs on qualifying assets for which the

commencement date for capitalisation is on or

after April 1, 2011.

Purchased software that is integral to the

functionality of the related equipment is

capitalised as a part of that equipment.

Revaluation of land is done with sufficient

frequency to ensure that the fair value of the

land dose not differ materially from its carrying

amount, and is undertaken by professionally

qualified valuers.

Any revaluation surplus is recorded in other

comprehensive income and credited to the

Reserve on Revaluation of Assets in equity,

except to the extent that it reverses a revaluation

decrease of the same asset previously recognised

in the Income Statement, in which case, the

increase is recognised in the Income Statement.

A revaluation deficit is recognised in the Income

Statement, except to the extent that it offsets an

existing surplus on the same asset recognised

in the Reserve on Revaluation of Assets. Upon

disposal, any revaluation reserve relating to

the particular asset being sold is transferred to

retained earnings.

The assets’ residual values, useful lives and

methods of depreciation are reviewed at each

financial year end and adjusted prospectively, if

appropriate.

Leased Assets

The determination of whether an arrangement

is, or contains, a lease is based on the substance

of the arrangement at inception date, whether

fulfilment of the arrangement is dependent

on the use of a specific asset or assets or the

arrangement conveys a right to use the asset,

even if that right is not explicitly specified in an

arrangement.

Group as a Lessee

Finance leases that transfer to the Group

substantially all the risks and benefits incidental

to ownership of the leased item are capitalised

at the commencement of the lease at the fair

value of the leased property or, if lower, at the

present value of the minimum lease payments.

Lease payments are apportioned between finance

charges and reduction of the lease liability so

as to achieve a constant rate of interest on the

remaining balance of the liability. Finance charges

are recognised in finance costs in the Income

Statement.

A leased asset is depreciated over the useful life

of the asset. However, if there is no reasonable

certainty that the Group will obtain ownership by

the end of the lease term, the asset is depreciated

over the shorter of the estimated useful life of the

asset and the lease term.

Operating lease payments are recognised as an

operating expense in the Income Statement on a

straight-line basis over the lease term.

Group as a Lessor

Leases in which the Group does not transfer

substantially all the risks and benefits of

ownership of an asset are classified as operating

leases. Initial direct costs incurred in negotiating

an operating lease are added to the carrying

amount of the leased asset and recognised

over the lease term on the same basis as rental

income.

Contingent rents are recognised as revenue in the

period in which they are earned.

2.4.2 subsequent Costs

The cost of replacing a component 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 in accordance with

the derecognition policy given below.

The costs of the day-to-day servicing of Property,

Plant and Equipment are recognised in profit and

loss as incurred.

2.4.3 Derecognition

The carrying amount of an item of Property, Plant

and Equipment is derecognised on disposal; or

when no future economic benefits are expected

from its use. Gains and losses on derecognition

are recognised in profit and loss and gains are not

classified as revenue. When revalued assets are

sold, any related amount included in the Reserve

on Revaluation of Assets is transferred to Retained

Earnings.

2.4.4 Depreciation

Depreciation is recognised in profit and 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.

Assets held under finance leases are depreciated

over the shorter of the lease term and the

useful lives of equivalent owned assets unless

it is reasonably certain that the Group will have

ownership by the end of the lease term. Freehold

land is not depreciated.



The Group reviews its residual values, useful lives

and method of depreciation at each reporting

date. Judgement by management is exercised in

the estimation of these values, rates and methods

and hence they are subject to uncertainity.

The depreciable life of the plants of the Group

were re-estimated and reassessed to be 10

years from the date of transition. Accordingly,

the depreciation of plants is based on the

re-estimation effective from April 1, 2011.

The estimated useful lives for the current and

comparative periods are as follows:

Leasehold right to Land Over the lease period

Buildings 20 years

Plant and Machinery 10 years

Furniture & Fittings 6-8 years

Office & Other Equipment

6-8 years

Motor Vehicles 4 years

Stores Equipment 5 years

Laboratory Equipment 5 years

Depreciation of an asset begins when it is

available for use and ceases at the earlier of the

dates on which the asset is classified as held for

sale or is derecognised.

2.5 Formers (Moulds)

In respect of formers, a 10% provision on the

written down value is recognised as impairment

in profit and loss.

2.6 Intangible Assets

Intangible assets acquired separately are

measured on initial recognition at cost. The

cost of intangible assets acquired in a business

combination is their fair value as at the date of

acquisition. Following initial recognition, intangible

assets are carried at cost less accumulated

amortisation and accumulated impairment losses,

if any. Internally generated intangible assets,

excluding capitalised development costs, are

not capitalised and expenditure is reflected in

the Income Statement in the year in which the

expenditure is incurred.

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.

Intangible assets with indefinite useful lives are

not amortised, but are tested for impairment

annually, either individually or at the cash-

generating unit level.

The amortisation period and method are reviewed

annually.

2.6.1 Research and Development

Research costs are expensed as incurred.

Development expenditures on an individual

project are recognised as an intangible asset

when the Group can demonstrate:

The technical feasibility of completing the

intangible asset so that it will be available for

use or sale

Its intention to complete and its ability to use

or sell the asset

How the asset will generate future economic

benefits

The availability of resources to complete the

asset

The ability to measure reliably the expenditure

during development.

Following initial recognition of the development

expenditure as an asset, the asset is carried

at cost less any accumulated amortisation and

accumulated impairment losses. Amortisation of

the asset begins when development is complete

and the asset is available for use. It is amortised

over the period of expected future benefit.

Amortisation is recorded in profit and loss. During

the period of development, the asset is tested for

impairment annually.

2.6.2 subsequent Expenditure

Subsequent expenditure is capitalised only

when it increases the future economic benefits

embodied in the specific asset to which it relates.

All other expenditure including expenditure on

internally generated goodwill is recognised in

profit and loss as incurred.

2.6.3 Amortisation

Amortisation is recognised in profit and loss on

a straight-line basis over the estimated useful

lives of intangible assets, other than goodwill

and brand name, from the date on which they

are available for use. The estimated useful lives

for the current and comparative periods are as

follows:

Development Cost - 15 years

2.7 Investment Property

Investment property is property held either to

earn rental income or for capital appreciation

or 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.

Investment property is measured at its cost

less accumulated depreciation and accumulated

impairment losses, if any. 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

either they have been disposed off or when the

investment property is permanently withdrawn

from use and no future economic benefit is

expected from its disposal.

The difference between the net disposal

proceeds and the carrying amount of the asset is

recognised in the Income Statement in the period

of derecognition.

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 fair value 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.

2.8 Financial Instruments

2.8.1 Financial Assets - Initial Recognition and subsequent Measurement

Financial assets within the scope of LKAS 39 are

classified as loans and receivables, derivatives and

available-for-sale financial assets as appropriate.

The Group determines the classification of its

financial assets at initial recognition.

All financial assets are recognised initially at fair

value plus transaction costs.

Purchases or sales of financial assets that require

delivery of assets within a time frame established

by regulation or convention in the market place

(regular way trades) are recognised on the trade

date, i.e., the date that the Group commits to

purchase or sell the asset.

The Group’s financial assets include cash and short

term deposits, trade and other receivables, quoted

and unquoted financial instruments and derivative

financial instruments.

Subsequent Measurement

The subsequent measurement of financial assets

depends on their classification as described below:

Loans and Receivables

Loans and receivables are non-derivative financial

assets with fixed or determinable payments

that are not quoted in an active market. After

initial measurement, such financial assets are

subsequently measured at 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 finance income in the Income Statement. The

losses arising from impairment are recognised

in the Income Statement in other operating

expenses for trade and receivables.

Available-For-sale Financial Investments

Available-for-sale financial investments include

equity investments.

After initial measurement, available-for-sale

financial investments 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 Income Statement in finance costs.

The Group evaluates whether the ability and

intention to sell its available-for-sale financial

assets in the near term is still appropriate. When,

in rare circumstances, the Group is unable to trade

these financial assets due to inactive markets and

management’s intention to do so significantly

changes in the foreseeable future, the Group may

elect to reclassify these financial assets.

Derecognition

Financial Assets

A 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 substantially all the

risks and rewards of the asset.

Impairment of Financial Assets

The Group assesses, at each reporting date,

whether there is any objective evidence that a

financial asset or a group of financial assets is

impaired. A financial asset or a group of financial

assets is deemed to be impaired if, and only if,

there is objective evidence of impairment as a

result of one or more events that has occurred

after the initial recognition of the asset (an

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

impact on the estimated future cash flows of the

financial asset or the Group of financial assets 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 payments, the probability

that they will enter bankruptcy or other financial

reorganisation 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 Cost

For financial assets carried at amortised cost, the

Group first assesses whether objective evidence of

impairment exists at each reporting date.

If there is objective evidence that an impairment

loss has been incurred, the amount of the 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 Income

Statement. 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. If a future

write-off is later recovered, the recovery is credited

to finance costs in the Income Statement.

Available-For-sale Financial Investments

The Group assesses at each reporting date

whether there is objective evidence that an

investment or a group of investments is impaired.

In the case of equity investments classified as

available-for-sale, objective evidence would

include a significant or prolonged decline in

the fair value of the investment below its cost.

‘Significant’ is evaluated against the original

cost of the investment and ‘prolonged’ against

the period in which the fair value has been

below its original cost. 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 the Income Statement is removed from

other comprehensive income and recognised in

the Income Statement. Impairment losses on

equity investments are not reversed through the

Income Statement; increases in their fair value

after impairment are recognised directly in other

comprehensive income.

2.8.2 Financial Liabilities

Initial Recognition and Measurement

Financial liabilities within the scope of LKAS 39

are classified as financial liabilities at fair value

through profit or loss or loans and borrowings as

appropriate. The Group determines the classification

of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair

value plus in the case of loans and borrowings

directly attributable transaction costs.

The Group’s financial liabilities include trade

and other payables, bank overdrafts, loans and

derivative financial instruments.

Subsequent Measurement

The measurement of financial liabilities depends

on their classification as described below:

Loans and Borrowings

After initial recognition, interest bearing loans

and borrowings are subsequently measured at

amortised cost using the EIR method. Gains and

losses are recognised in the Income Statement

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 finance costs in the

Income Statement.

Financial guarantee Contracts

Dipped Products PLC provides corporate

guarantees to banks in respect of banking

facilities obtained by its subsidiaries. Fair value of

such guarantees are measured on a periodic basis

and the same is recognised as finance income

through inter-company current accounts.

Derecognition

A financial liability is derecognised when the

obligation under the liability is discharged or

cancelled or expires. When an existing financial

liability is replaced by another from the same

lender on substantially different terms or the

terms of an existing liability are substantially

modified, such an exchange or modification

is treated as the derecognition of the original

liability and the recognition of a new liability. The

difference in the respective carrying amounts is

recognised in the Income Statement.

2.8.3 offsetting of Financial Instruments

Financial assets and financial liabilities are offset

and the net amount reported in the Consolidated

Statement of Financial Position if, and only if;

There is a currently enforceable legal right to

offset the recognised amounts, and

There is an intention to settle on a net basis,

or to realise the assets and settle the liabilities

simultaneously.

2.8.4 Fair value of Financial Instruments

The fair value of financial instruments that are

traded in active markets at each reporting date is

determined by reference to quoted market prices

or dealer price quotations without any deduction

for transaction costs.

An analysis of fair values of financial instruments

and further details as to how they are measured

are provided in Note 33.



2.8.5 Derivative Financial Instruments

Initial Recognition and Subsequent Measurement

The Group uses derivative financial instruments

such as forward currency contracts, to hedge its

foreign currency risks. Such derivative financial

instruments are initially recognised at fair value on

the date on which a derivative contract is entered

into and are subsequently remeasured at fair

value. Derivatives are carried as financial assets

when the fair value is positive and as financial

liabilities when the fair value is negative.

Any gains or losses arising from changes in the

fair value of derivatives are taken directly to the

Income Statement.

2.9 Inventories

Inventories are measured at the lower of cost and

net realisable value.

Costs incurred in bringing each product to its

present location and condition are accounted for

as follows:

All inventory items, except manufactured

inventories and work-in-progress are

measured at weighted average directly

attributable cost

Manufactured inventories and work-in-progress

are measured at weighted-average factory

cost which includes all direct expenditure and

appropriate shares of production overhead

based on normal operating capacity but

excluding borrowing costs.

Net realisable value is the estimated selling price

in the ordinary course of business, less estimated

costs of completion and the estimated costs

necessary to make the sale.

2.10 Impairment of Non-Financial Assets

The carrying amounts of the Group’s non-financial

assets are reviewed at each reporting date to

determine whether there is any indication of

impairment. If any such indication exists, then

the asset’s recoverable amount is estimated. For

goodwill and intangible assets that have indefinite

lives or that are not yet available-for-use, the

recoverable amount is estimated at each reporting

date or more frequently, if events or changes

in circumstances indicate that they might be

impaired.

2.10.1 Calculation of Recoverable Amount

The recoverable amount of an asset or cash-

generating unit is the greater of its value in use

and its fair value less costs to sell. In assessing

value in use, 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. A cash-generating

unit is the smallest identifiable asset group that

generates cash flows that largely are independent

from other assets and groups.

2.10.2 Impairment/Reversal of Impairment

An impairment loss is recognised if the carrying

amount of an asset or its cash-generating unit

exceeds its recoverable amount. Impairment

losses are recognised in profit and loss.

Impairment losses recognised in respect of cash-

generating units are allocated first to reduce the

carrying amount of any goodwill allocated to the

units and then to reduce the carrying amount of

the other assets in the unit on a pro rata basis.

An impairment loss in respect of goodwill is not

reversed. In respect of other assets, impairment

losses recognised in prior periods are assessed

at each reporting date for any indications that

the loss has decreased or no longer exists. An

impairment loss is reversed if there has been

a change in the estimates used to determine

the recoverable amount. An impairment loss

is reversed only to the extent that the asset’s

carrying amount does not exceed the carrying

amount that would have been determined, net of

depreciation or amortisation, if no impairment loss

had been recognised.

2.11 Cash and short term Deposits

Cash 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

Statement of Cash Flows, cash and cash equivalents

consist of cash and short term deposits as defined

above, net of outstanding bank overdrafts and short

term borrowings.

2.12 Employee Benefits

2.12.1 Defined Contribution Plans

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 legal or constructive obligation to pay

further amounts. Obligations for contributions to

Provident and Trust Funds covering all employees

are recognised as an employee benefit expense in

profit or loss in the periods during which services

are rendered by employees.

The Group contributes 12% and 3% of gross

emoluments to employees as Provident Fund and

Trust Fund respectively.

2.12.2 Defined Benefit Plan

A defined benefit plan is a post-employment

benefit plan other than a defined contribution plan.

The defined benefit is calculated by independent

actuaries using Projected Unit Credit (PUC) method

as recommended by LKAS 19 on ‘Employee Benefits’.



The present value of the defined benefit obligation

is determined by discounting the estimated

future cash outflows using interest rates that are

denominated in the currency in which the benefits

will be paid, and that have terms to maturity

approximating to the terms of the related liability.

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 25 Any changes

in these assumptions will impact the carrying

amount of defined benefit obligations.

Provision has been made for retirement gratuities

from the first year of service for all employees, in

conformity with LKAS 19 on ‘Employee Benefits’.

However, under 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 liability is not externally funded. This liability

is computed on the following basis:

Length of service (Years) No. of months salary for each completed year of service

up to 20 1/2

20 up to 25 3/4

25 up to 30 1

30 up to 35 1 1/4

over 35 1 1/2

2.12.3 short term Benefits

Short term employee benefit obligations are

measured on an undiscounted basis and are

expensed as the related service is provided.

2.13 Provisions

Provisions are recognised when the Group has

a present obligation (legal or constructive) as

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

outflow of resources embodying economic

benefits will be required to settle the obligation

and a reliable estimate can be made of the

amount of the obligation. When the Group

expects some or all of a provision to be

reimbursed, for example, under an insurance

contract, the reimbursement is recognised as a

separate asset, but only when the reimbursement

is virtually certain. The expense relating to any

provision is presented in the Income Statement

net of any reimbursement.

2.14 taxation

Current Tax

Current income tax assets and liabilities for the

current and prior periods 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 by the

reporting date.

The provision for income tax is based on the

elements of income and expenditure as reported

in the Financial Statements and computed in

accordance with the provisions of the Inland

Revenue Act No. 10 of 2006 and subsequent

amendments thereto.

Current income tax relating to items recognised

directly in equity is recognised in equity and not in

the Income Statement.

Tax withheld on dividend income from

Subsidiaries and Equity Accounted Investees is

recognised as an expense in the Consolidated

Income Statement at the same time as the

liability to pay the related dividend is recognised.

Deferred Taxation

Deferred tax is provided, using the liability

method on temporary differences at the reporting

date between the tax bases of assets and

liabilities and their carrying amounts for financial

reporting purposes.

Deferred tax liabilities are recognised for all

taxable temporary differences except in

respect of taxable temporary differences

associated with investments in subsidiary when

the timing of the reversal of the temporary

differences can be controlled and it is probable

that the temporary differences will not reverse in

the foreseeable future.

Deferred income tax assets are recognised for all

deductible temporary differences, carry-forward of

unused tax assets and unused tax losses, to the

extent that it is probable that taxable profit will be

available against which the deductible temporary

differences, and the carry-forward of unused tax

assets and unused tax losses can be utilised.

The carrying amount of deferred income 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 income tax

asset to be utilised. Unrecognised deferred tax

assets are reassessed at each reporting date and

are recognised to the extent that it has become

probable that future taxable profits will allow the

deferred tax assets to be recovered.

Deferred income 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 other

comprehensive income or directly in equity.



Deferred tax assets and deferred tax liabilities are

offset if a legally enforceable right exists to set

off current tax assets against current tax liabilities

and the deferred taxes relate to the same taxable

entity and the same taxation authority.

Turnover Based Taxes

Turnover based taxes include Value Added

Tax. Companies in the Group pay such taxes in

accordance with respective statues.

2.15 Capital Commitments and Contingencies

Capital commitments and contingent liabilities of

the Group are disclosed in the respective Notes 30

and 31 to the Financial Statements.

2.16 Income statements

For the purpose of presentation of the Income

Statement, the function of expenses method is

adopted.

2.16.1 Revenue

Revenue is recognised to the extent that it is

probable that the economic benefits will flow

to the Group and the revenue can be reliably

measured, regardless of when the payment is

being made.

The specific recognition criteria described below

must also be met before revenue is recognised.

Revenue from sale of goods is measured at

the fair value of the consideration received or

receivable, net of returns and allowances, trade

discounts and taxes. Revenue from the sale of

goods is recognised when the significant risks and

rewards of ownership of the goods have passed

to the buyer, usually on delivery of the goods.

Dividend income is recognised in profit and loss

on the date the entity’s right to receive payment

is established, which in the case of quoted

securities is the ex-dividend date.

Gains and losses on disposal of an item of

Property, Plant and Equipment are determined

by comparing the net sales proceeds with

the carrying amounts of Property, Plant and

Equipment and are recognised net within ‘other

operating income’ in profit and loss.

Other income is recognised on an accrual basis.

2.16.2 Expenses

All expenditure incurred in the operation of the

business and in maintaining the capital assets in a

state of efficiency has been charged to revenue in

arriving at the Group’s profit for the year.

Operating Leases

Leases where the lessor effectively retains

substantially all the risk and rewards of ownership

over the leased term are classified as operating

leases. Payments made under operating leases

are recognised in the Income Statement on a

straight-line basis over the term of the lease.

Borrowing Costs

Borrowing costs are recognised as an expense in

the period in which they are incurred, except to

the extent that they are directly attributable to

the acquisition, construction or production of a

qualifying asset, in which case they are capitalised

as part of the cost of that asset.

Finance Income and Finance Costs

Finance income comprises interest income on

funds invested (including available-for-sale financial

assets) and gains on the disposal of available-for-

sale financial assets. Interest income is recognised

as it accrues in profit or loss.

Finance costs comprise interest expense on

borrowings. Borrowing costs that are not directly

attributable to the acquisition, construction or

production of a qualifying asset are recognised in

profit or loss using the effective interest method.

The interest expense component of finance lease

payments is allocated to each period during the

lease term so as to produce a constant periodic rate

of interest on the remaining balance of the liability.

Foreign currency gains and losses are reported on

a net basis.

2.17 Cash Flow statement

The Cash Flow Statement has been prepared

using the ‘indirect method’.

Interest paid is classified as an operating cash

flow. Grants received, which are related to

purchase and construction of Property, Plant and

Equipment are classified as investing cash flows.

Dividend and interest income are classified as

cash flows from investing activities.

2.18 segment Reporting

An operating segment is a component of the

Group that engages in business activities from

which it may earn revenues and incur expenses,

including revenues and expenses that relate

to transactions with any of the Group’s other

components. All operating segments’ operating

results are reviewed regularly by the Chairman to

make decisions about resources to be allocated to

the segment and assess its performance, and for

which discrete financial information is available.

Segment results that are reported to the Chairman

include items directly attributable to a segment

as well as those that can be allocated on a

reasonable basis.

Segment capital expenditure is the total cost

incurred during the period to acquire Property,

Plant and Equipment.

2.19 Events after the Reporting Period

All material events after the reporting period

have been considered and where appropriate

adjustments or disclosures have been made in the

respective Notes to the Financial Statements.



2.20 Earnings Per share

The Group presents basic earnings per share (EPS)

for its ordinary shares. Basic EPS is calculated

by dividing the profit attributable to ordinary

shareholders of the Company by the weighted-

average number of ordinary shares outstanding

during the period.

2.21 Plantations

The plantation companies in the Group adopt

certain accounting policies which differ from that

of the Group, since their nature of operations is

significantly different from that of the rest of the

Group. The accounting policies adopted are in

accordance LKAS 41 Agriculture.

Those accounting policies that significantly vary

from the rest of the Group are given below.

2.21.1 Property, Plant and Equipment

Land Development Costs

Land development costs are those costs incurred

in major infrastructure development and building

new access roads on leased land.

The costs have been capitalised and amortised

over the remaining lease periods.

Permanent impairments to land development

costs are charged to the Income Statement in full

or reduced to the net carrying amounts of such

assets in the year of occurrence after ascertaining

the loss.

Biological Assets

Biological assets are classified in to mature

biological assets and immature biological assets.

Mature biological assets are those that have

attained harvestable specifications or are able to

sustain regular harvests. Immature biological assets

are those that have not yet attained harvestable

specifications. Tea, rubber, other plantations and

nurseries are classified as biological assets.


Biological assets are further classified as bearer

biological assets and consumable biological assets.

Bearer biological asset includes tea and rubber

trees, those that are not intended to be sold or

harvested, however used to grow for harvesting

agricultural produce from such biological assets.

Consumable biological assets includes managed

timber trees those that are to be harvested as

agricultural produce or sold as biological assets.

The entity recognises the biological assets when,

and only when, the entity controls the assets as

a result of past event, it is probable that future

economic benefits associated with the assets will

flow to the entity and the fair value or cost of the

assets can be measured reliably.

The bearer biological assets are measured at cost

less accumulated depreciation and accumulated

impairment losses, if any, in terms of LKAS 16 -

Property Plant & Equipment as per the ruling

issued by CA Sri Lanka.

The managed timber trees are measured on initial

recognition and at the end of each reporting

period at its fair value less cost to sell in terms

of LKAS 41. The cost is treated as approximation

to fair value of young plants as the impact on

biological transformation of such plants to price

during this period is immaterial. The fair value

of timber trees are measured using DCF method

taking in to consideration the current market prices

of timber, applied to expected timber content

of a tree at the maturity by an independent

professional valuer.

The main variables in DCF model concerns -

Variable Comment

Currency valuation Rs.

Timber content Estimate based on physical verification of girth, height and considering the growth of the each spices in different geographical regions. Factor all the prevailing statutory regulations enforced against harvesting of timber coupled with forestry plan of the Group.

Economic useful life Estimate based on the normal life span of each spices by factoring the forestry plan of the Group.

Selling price Estimated based on prevailing Sri Lankan market price. Factor all the conditions to be fulfil in bringing the trees in to saleable condition.

Planting cost Estimated costs for the further development of immature areas are deducted.

Discount rate Future cash flows are discounted at following discount rates: Timber trees 17.5%.


Nursery cost includes the cost of direct materials,

direct labour and an appropriate proportion of

directly attributable overheads, less provision for

overgrown plants.

The gain or loss arising on initial recognition of

biological assets at fair value less cost to sell and

from a change in fair value less cost to sell of

biological assets are included in profit or loss for

the period in which it arises.

Immature and Mature Plantations

The cost of land preparation, rehabilitation,

new planting, replanting, crop diversification,

interplanting and fertilizing, etc., incurred between

the time of planting and harvesting (when the

planted area attains maturity), are classified as

immature plantations. These immature plantations

are shown at direct costs plus attributable

overheads, including interest attributable to

long term loans used for financing immature

plantations. The expenditure incurred on bearer

biological assets (Tea, Rubber, Timber fields) which

comes into bearing during the year, is transferred

to mature plantations. Expenditure incurred on

consumable biological assets is recorded at cost

at initial recognition and thereafter at fair value at

the end of each reporting period.

Permanent impairments to biological asset are

charged to the Income Statement in full and

reduced to the net carrying amounts of such asset

in the year of occurrence after ascertaining the loss.

Infilling Cost on Bearer Biological Assets

The land development costs incurred in the form

of infilling have been capitalised to the relevant

mature field, only where the number of plants

per hectare exceeded 3,000 plants and, also if

it increases the expected future benefits from

that field, beyond its pre-infilling performance

assessment. Infilling costs so capitalised are

depreciated over the newly assessed remaining

useful economic life of the relevant mature

plantation, or the unexpired lease period,

whichever is lower.

Infilling costs that are not capitalised have been

charged to the Income Statement in the year in

which they are incurred.

Depreciation

Depreciation is recognised in profit and loss on a

straight-line basis over the estimated useful lives

of each item of Property, Plant and Equipment as

follows:

Mature Plantations (Replanting and New Planting)

Description Years

Mature plantations - Tea 33 1/3

- Rubber 20

Sanitation, water and electricity supply 20

Depreciation methods, useful lives and residual

values are reassessed at the reporting date. Mature

plantations are depreciated over their useful lives

or unexpired lease period, whichever is less.

No depreciation is provided for immature

plantations.

Leased Assets

The leasehold rights of assets taken over from

JEDB/SLSPC are amortised in equal amounts over

the shorter of the remaining lease periods and the

useful lives as follows:

Description Year

Bare land 53

Improvements to land 30

Mature plantations (Tea & Rubber) 30

Buildings 25

Machinery 20

2.21.2 Borrowing Costs

Borrowing costs incurred in respect loans that are

utilised for field development activities have been

capitalised as a part of the cost of the relevant

immature plantation. The capitalisation will cease

when the crops are ready for commercial harvest.

2.21.3 Inventories

Finished Good Manufactured from Agricultural Produce of Biological Assets

These are valued at the lower of cost and

estimated net realisable value, after making due

allowance for obsolete and slow moving items.

Net realisable value is the estimated selling price

at which stocks can be sold in the ordinary course

of business after allowing for cost of realisation

and/or cost of conversion from their existing state

to saleable condition.

Input Material, Spares and Consumables

At actual cost on weighted average basis.

Agricultural Produce Harvested from Biological Assets

Agricultural produce harvested from its biological

assets are measured at their fair value less cost

to sell at the point of harvest. The finished and

semi-finished inventories from agriculture produce

are valued by adding the cost of conversion to the

fair value of the agricultural produce.

2.21.4 grants and subsidies

Government Grants are recognised at their fair

value where there is a reasonable assurance the

grant will be received and all attached conditions

will be complied with. When the grant relates to

an expense item is recognised as income over

the periods necessary to match grant to the

costs to which it is intended to compensate on a

systematic basis.



Where the grant relates to an asset, it is

recognised as deferred income and released

to income in equal amounts over the expected

useful life of the related asset.

Where the Group receives non-monetory grants,

the asset and grant are recorded gross at nominal

amounts and released to the Income Statement

over the expected useful life and pattern of

consumption of benefit of the underlying asset by

equal annual instalments.

2.22 standards Issued but Not yet Effective

Standards issued but not yet effective up to the

date of issuance of the Financial Statements are

given below. The Group will adopt these standards

when they become effective. Pending a detailed

review the financial impact is not reasonably

estimable as at the date of publication of these


SLFRS 9 - Financial Instruments:

Classification and Measurement

SLFRS 10 - Consolidated Financial Statements

SLFRS 11 - Joint Arrangements

SLFRS 12 - Disclosure of Interest in Other Entities

SLFRS 13 - Fair Value measurement

SLFRS 9 will be effective for financial periods

beginning on or after January 1, 2015 whilst SLFRS

10, 11, 12 and 13 will be effective for financial

periods beginning on or after January 1, 2014.

2.23 Explanation to the transition of sLFRs

To comply with the SLFRS 1, the Group provides

explanations to the transition to SLFRS from SLAS.

The explanations includes a background and

quantification of the change. This also includes

reconciliation of Group’s equity as at the date

of transition April 1, 2011 and end of latest

comparative reporting period March 31, 2012.

Reconciliation for total comprehensive income

includes only for the latest comparative financial

year ended March 31, 2012.




Reconciliation of total Comprehensive Income for the year ended March 31, 2012

Group Company SLAS Remeasurements SLFRS SLAS Remeasurements SLFRS

Note Rs. '000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Revenue A 19,786,485 (92,820) 19,693,665 1,798,644 – 1,798,644

Cost of sales B (16,344,796) 149,532 (16,195,264) (1,449,966) (1,427) (1,451,393)

gross profit 3,441,689 56,712 3,498,401 348,678 (1,427) 347,251

Other income and gains C 1,216,969 29,100 1,246,069 1,148,171 87,032 1,235,203

Distribution costs (453,411) – (453,411) (15,993) – (15,993)

Administrative expenses D (1,568,983) 3,196 (1,565,787) (285,052) – (285,052)

Other expenses (12,935) – (12,935) (2,686) – (2,686)

Provision for diminution value of investments – – – (150,000) – (150,000)

Net finance income E (212,111) (42,317) (254,428) 37,159 (94,363) (57,204)

Share of loss of equity accounted investee (net of tax) F (27,067) 6,835 (20,232) – – –

Profit before tax 2,384,151 53,526 2,437,677 1,080,277 (8,758) 1,071,519

Tax (expenses)/reversals G (290,170) (4,753) (294,922) 2,416 (8,612) (6,196)

Profit for the year 2,093,982 48,773 2,142,755 1,082,693 (17,370) 1,065,323

Attributable to:

Equity holders of the parent 1,866,628 39,347 1,905,975 1,082,693 (17,370) 1,065,323

Non-controlling interest H 227,354 9,426 236,780 – – –

Profit for the year 2,093,982 48,773 2,142,755 1,082,693 (17,370) 1,065,323

2.23 Explanation to the Transition of SLFRS (Contd.)



Reconciliation of equity as at March 31, 2012

Group Company SLAS Reclassifications Remeasurements SLFRS SLAS Reclassifications Remeasurements SLFRS

Note Rs. '000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Assets

Non-Current Assets

Property, plant and equipment I 8,808,301 (76,304) 719,516 9,451,513 321,732 – 62,670 384,402

Formers (moulds) N – 188,731 – 188,731 – 44,281 – 44,281

Investment property 228,331 – – 228,331 228,331 – – 228,331

Intangible assets J 195,843 1,149 (15,684) 181,308 – – – –

Biological assets K – 75,898 116,215 192,113 – – – –

Investment in subsidiaries – – – – 2,013,900 – – 2,013,900

Other non-current financial assets L – 2,553 22 2,575 – – – –

Other long term investments M 2,553 (2,553) – – – – – –

Deferred tax asset V 31,435 – (12,274) 19,161 30,823 – (12,274) 18,549

9,266,463 189,474 807,795 10,263,732 2,594,786 44,281 50,396 2,689,463

Current Assets

Inventories N 3,374,760 (188,731) (62,321) 3,123,708 396,590 (44,281) – 352,309

Trade and other receivables O 4,362,081 (366,413) – 3,995,668 437,485 (92,236) – 345,249

Advances and prepayments P – 365,670 – 365,670 – 106,627 – 106,627

Amounts due from related parties – – – – 392,302 (14,391) 8,735 386,646

Other current financial assets Q – 8,299 3,004 11,303 – – 3,004 3,004

Short term investments R 8,299 (8,299) – – – – – –

Short term deposits 793,837 – – 793,837 425,677 – – 425,677

Cash and cash equivalents 210,383 – – 210,383 22,455 – – 22,455

8,749,360 (189,474) (59,317) 8,500,569 1,674,509 (44,281) 11,739 1,641,967

total assets 18,015,823 – 748,479 18,764,301 4,269,295 – 62,135 4,331,430

Equity and Liabilities

Equity

Stated capital 598,615 – – 598,615 598,615 – – 598,615

Reserves 236,836 – – 236,836 133,788 – – 133,788

Available-for-sale (AFS) reserve S – – 16 16 – – – –

Revenue reserves T 4,459,936 – 505,646 4,965,582 2,074,467 – 62,135 2,136,602

5,295,387 – 505,662 5,801,049 2,806,870 – 62,135 2,869,005

Non-controlling interests U 1,676,148 – 74,346 1,750,494 – – – –

total equity 6,971,535 – 580,008 7,551,543 2,806,870 – 62,135 2,869,005

Non-Current Liabilities

Deferred tax liability V 243,259 – 47,227 290,486 – – – –

Retirement benefit obligations 2,174,357 – – 2,174,357 262,188 – – 262,188

Agents’ indemnity fund 42,610 – – 42,610 – – – –

Interest-bearing loans and borrowings W 1,781,894 – 118,080 1,899,974 – – – –

Deferred income 703,369 – – 703,369 – – – –

4,945,489 – 165,307 5,110,796 262,188 – – 262,188

Current Liabilities

Trade and other payables Y 2,231,576 – – 2,231,576 151,856 58,981 – 210,837

Interest-bearing loans and borrowings W 3,780,467 – (6,051) 3,774,416 372,980 – – 372,980

Other current financial liabilities X – – 9,215 9,215 – – – –

Amounts due to related parties Y – 18,597 – 18,597 605,762 – 605,762

Amounts due to subsidiaries Y – – – – 654,220 (654,220) – –

Amounts due to Hayleys PLC Z 18,597 (18,597) – – 10,523 (10,523) – –

Income tax payables 68,159 – – 68,159 10,658 – – 10,658

6,098,799 – 3,164 6,101,963 1,200,237 – – 1,200,237

total liabilities 11,044,288 – 168,470 11,212,758 1,462,425 – – 1,462,425

total equity and liabilities 18,015,823 – 748,479 18,764,301 4,269,295 – 62,135 4,331,430




Reconciliation of Equity as at April 1, 2011 (date of transition to sLFRs)

Group Company SLAS Reclassifications Remeasurements SLFRS SLAS Reclassifications Remeasurements SLFRS

Note Rs. '000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

AssetsNon-Current Assets

Property, plant and equipment I 5,713,251 (51,499) 585,018 6,246,769 345,313 – 64,097 409,410

Formers (moulds) N – 167,020 – 167,020 – 28,686 – 28,686

Intangible assets J 48,993 1,385 (15,684) 34,694 – – –

Biological assets K – 50,857 (10,462) 40,395 – – – –

Investment in subsidiaries – – – – 1,843,280 – – 1,843,280

Investments in equity accounted investees 308,879 – 21,066 329,945 – – – –

Other non-current financial assets L – 197,010 1,156,741 1,353,751 – 194,457 1,156,710 1,351,166

Other long term investments M 197,010 (197,010) – – 194,457 (194,457) – –

Deferred tax asset V 17,922 – (3,662) 14,260 17,922 – (3,662) 14,260

6,286,055 167,763 1,733,016 8,186,834 2,400,972 28,686 1,217,145 3,646,803

Current Assets

Inventories N 2,733,672 (167,030) (30,262) 2,536,390 331,527 (28,686) – 302,841

Trade and other receivables O 3,707,808 (279,676) – 3,428,132 295,510 (25,345) – 270,165

Advances and prepayments P – 278,933 – 278,933 – 70,550 – 70,550

Amounts due from related parties – – – – 438,919 (45,205) 3,785 397,499

Other current financial assets Q – 8,893 19,097 27,990 – – 17,214 17,214

Short term investments R 8,893 (8,893) – – – – – –

Short term deposits 323,316 – – 323,316 – – – –

Cash and cash equivalents 208,531 – – 208,531 25,485 – – 25,485

6,982,220 (167,773) (11,165) 6,803,293 1,091,441 (33,686) 20,999 1,083,754

total assets 13,268,275 – 1,721,851 14,990,126 3,492,413 – 1,238,144 4,730,557

Equity and Liabilities

Equity

Stated capital 598,615 – – 598,615 598,615 – – 598,615

Capital reserves 233,499 – – 233,499 133,788 – – 133,788

Available-for-sale (AFS) reserve S – – 1,156,732 1,156,732 – – 1,156,710 1,156,710

Revenue reserves T 2,715,088 – 438,399 3,153,487 1,081,566 – 79,505 1,161,071

3,547,202 – 1,595,131 5,142,333 1,813,969 – 1,236,214 3,050,183

Non-controlling interests U 831,677 – 8,720 840,397 – – – –

total equity 4,378,879 – 1,603,851 5,982,730 1,813,969 – 1,236,214 3,050,183

Non-Current Liabilities

Deferred tax liability V 162,540 – 48,167 210,707 – – – –

Retirement benefit obligations 1,160,230 – – 1,160,230 217,411 – – 217,411

Agents’ indemnity fund 41,328 – – 41,328 – – – –

Interest-bearing loans and borrowings W 1,166,211 – 72,176 1,238,387 – – – –

Deferred revenue 480,877 – – 480,877 – – – –

3,011,186 – 120,343 3,131,529 217,411 – – 217,411

Current Liabilities

Trade and other payables Y 2,113,310 – – 2,113,310 169,300 1,559 – 170,859

Interest-bearing loans and borrowings W 3,709,798 – (4,272) 3,705,526 977,628 – – 977,628

Other current financial liabilities X – – 1,930 1,930 – – 1,930 1,930

Amounts due to related parties Y – 26,622 26,622 – 302,372 – 302,372

Amounts due to subsidiaries Y – – – – 292,795 (292,795) – –

Amounts due to Hayleys PLC Z 26,622 (26,622) – – 11,136 (11,136) – –

Income tax payables 28,480 – – 28,480 10,174 – – 10,174

5,878,210 – (2,343) 5,875,867 1,461,033 – 1,930 1,462,963

total liabilities 8,889,396 – 118,000 9,007,396 1,678,444 – 1,930 1,680,374

total equity and liabilities 13,268,275 – 1,721,851 14,990,126 3,492,413 – 1,238,144 4,730,557



A. Revenue

Profit & loss of the perennial crop in plantations has been recognised in the financial period of harvesting in terms of SLAS 32. Thus the unsold stocks were

treated as a part of revenue. The scope of revenue recognition was changed to LKAS 18. Accordingly, revenue is recognised based on the date of auction where

the revenue recognition criteria is met and therefore quantity which is sold at auction is treated as sales.

For the Year endedMarch 31, 2012

Rs. ’000

subsidiaries

Reclassification of the unsold perennial crop (refer Note B) (92,820)

group total (92,820)

B. Cost of sales


Rs. ’000

Company

Effect of depreciation of plant & machinery due to reassessment of useful lives (refer Note I) (1,427)

(1,427)

subsidiaries

Effect of depreciation of plant & machinery due to reassessment of useful lives (refer Note I) 64,045

Reclassification of the unsold perennial crop (refer Note A) 92,820

Amortisation of leasehold property (2,325)

Effect of recognition of stock at lower of cost or NRV (3,581)

group total 149,532

C. other Income and gains


Rs. ’000

Company

Reclassifying dividends under other income (refer Note E) 87,032

87,032

subsidiaries

Elimination of inter-company dividends (72,888)

Fair value gain on biological asset 14,956

group total 29,100




D. Administrative Expense


Rs. ’000

subsidiaries

Reversal of loss on Property, Plant and Equipment written off during 2011/12, since recognised as at April 1, 2011 (refer Note I) 3,196

group total 3,196

E. Finance Cost and Finance Income

1. Gain/Loss on Foreign Exchange Forward Contracts

As per LKAS 39, foreign exchange forward contracts were measured at fair value and recognised as a derivative financial asset/derivative financial liability and

resulting gain/loss is recognised in the Income Statement.

2. Interest on Finance Lease

As per Statement of Recommended Practice (SoRP) for right-to-use land, as issued by The Institute of Chartered Accountants of Sri Lanka, the Group has

reassessed the lease liability. Refer Note W.


Rs. ’000

Finance Income

Company

Gain on foreign exchange forward contracts (refer Note Q) 3,004

Reversal of gain on foreign exchange forward contract recognised in previous year (15,284)

Reclassifying dividends under other income (refer Note C) (87,032)

Financial guarantee income 4,950

(94,363)

subsidiaries

Elimination of inter-company dividend and financial guarantee income 67,938

Reversal of gain on foreign exchange forward contract recognised in previous year (1,883)

group total - Finance Income (28,308)

Finance Expense

subsidiaries

Increase in interest on finance lease (4,794)

Loss on foreign exchange forward contracts (refer Note X) (9,215)

group total - Finance Expense (14,009)

group total - Net Finance Income (42,317)

F. share of Profit of Equity Accounted Investee (Net of tax)


Rs. ’000

Change in net assets as at August 31, 2011 in HPSL 20,504

Share of profit of equity accounted investee (net of tax) at 33 1/3% 6,835




g. tax Expense

Deferred tax provision was reassessed due to the change in accounting base of the Property, Plant and Equipment and Biological assets. Refer Note V.


Rs. ’000

Company

Under provision of deferred tax (8,612)

(8,612)

subsidiaries

Over provision of deferred tax 3,859

group total (4,753)

H. Non-Controlling Interest

Changes in non-controlling interest comprise as follows:


Rs. ’000

Effect of depreciation of plant and machinery due to re-assessment of useful lives 8,299

Reversal of loss on disposal of plant and machinery written off during 2011/12, which was recognised as at April 1, 2011 762

Under provision of deferred tax 921

Gain on fair value change in biological asset 5,495

Amortisation of leasehold property (748)

Valuation of stock at lower of cost or NRV (612)

Interest on finance lease (1,493)

Loss on foreign exchange forward contract (3,198)

group total 9,426




I. Property, Plant and Equipment

1. Reassessment of Useful Lives

The remaining useful life of plant and machinery are re-estimated and reassessed to be 10 years from the date of transition. Accordingly, the depreciation of plant

and machinery is based on the re-estimation effective April 1, 2011.

2. Reclassification of Biological Assets

The value of mature, immature tea, rubber and other plantation included under leasehold property has been reclassified to Biological assets in line with LKAS 41.

3. Reclassification of Computer Software

The cost of software previously recognised under property, plant and equipment has been reclassified as intangible assets.

4. Reversal of Loss on Property, Plant and Equipment Written off

Assets written off during 2011/12 have been reassessed and such loss has been recognised to the transition date.

5. Change in Right-to-Use Land

As per SoRP for right-to-use land as issued by The Institute of Chartered Accountants of Sri Lanka, the Group has reassessed the lease liability. Accordingly,

amortisation charge is also revised.

Net Asset as atMarch 31, 2012

Rs. ’000April 1, 2011

Rs. ’000

Reclassification Change

subsidiaries

Cost transferred to biological assets (refer Note K) (75,155) (50,114)

Reclassification of computer software to intangible asset (refer Note J)

- As at April 1, 2011 (1,385) (1,385)

- For the year ended March 31, 2012 236 –

group total (76,304) (51,499)

Remeasurement Change

Company

Effect of depreciation of plant and machinery due to reassessment of useful lives

- As at April 1, 2011 64,097 64,097

- For the year ended March 31, 2012 (refer Notes B & T) (1,427) –

62,670 64,097

subsidiaries

Effect of depreciation of plant and machinery due to reassessment of useful lives

- As at April 1, 2011 456,212 456,212

- As at April 1, 2011 at HPSL 24,134 –

- For the year ended March 31, 2012 73,365 –

553,711 456,212

Loss on Property, Plant and Equipment written-off during 2011/12 recognised as at April 1, 2011 (3,196) (3,196)

Reversal of loss on Property, Plant and Equipment written-off during 2011/12 3,196 –

Net change in right-to-use land 106,189 67,905

Amortisation of leasehold property (3,054) –

group total 719,516 585,018




J. Intangible Asset

Write-off of Goodwill

Goodwill that arose as a result of business combinations that took place prior to the date of transition was determined to be impaired and derecognised.


Rs. ’000April 1, 2011

Rs. ’000

Computer software


subsidiaries

Reclassification of computer software from Property, Plant and Equipment (refer Note I)

- As at April 1, 2011 1,385 1,385

- For the year ended March 31, 2012 (236) –

group total 1,149 1,385

goodwill

Remeasurement

Written off of goodwill arose as a result of business combination (refer Note T) (15,684) (15,684)

group total (15,684) (15,684)

k. Biological Assets

Fair Value of Biological Assets

The tea, rubber and other plantations were measured at cost less depreciation/amortisation and impairment if any, under SLAS. The requirement of recognition of

biological assets at its fair value under LKAS 41 has been not effected due to the ruling issued on March 2, 2012, by The Institute of Chartered Accountants of Sri

Lanka. Accordingly, the Company has elected to measure the bearer biological assets i.e. tea and rubber using LKAS 16 and continued the cost model of recording

them. However, LKAS 41 applied for consumable biological assets and thus the fair value of managed trees was ascertained by professionally qualified valuers.


Rs. ’000April 1, 2011

Rs. ’000


subsidiaries

Cost transferred from improvement to lease hold property (refer Note I) 75,155 50,114

Write-off of deferred expense incurred on forestry (refer Note O) 743 743



subsidiaries

Gain/(loss) on fair value change

- As at April 1, 2011 (10,462) (10,462)



group total 116,215 (10,462)




L. Non-Current Financial Assets

1. Reclassification of Available-for-Sale Financial Assets

Investment in shares previously classified as long term investments were reclassified as available-for-sale financial assets as per LKAS 32.

2. Fair Value Change of Available-for-Sale Financial Investments

As per LKAS 39, available-for-sale financial assets were valued at fair value and the change in fair value was recognised in other comprehensive income. After the

disposal of those shares, cumulative gain or loss previously recognised in other comprehensive income was reclassified from equity to profit or loss.


Rs. ’000April 1, 2011

Rs. ’000


Company

Reclassification of available-for-sale financial asset from other long term investments (refer Note M) – 194,457

– 194,457

subsidiaries

Reclassification of available-for-sale financial asset from other long term investments (refer Note M) 2,553 2,553


Remeasurement

Company

Change in fair value of available-for-sale financial asset

- As at April 1, 2011 1,156,710 1,156,710

- For the year ended March 31, 2012 (15,656) –

Transfer to Income Statement due to the disposal of investment (1,141,053) –

– 1,156,710

subsidiaries

Change in fair value of available-for-sale financial asset

- As at April 1, 2011 32 32


group total 22 1,156,742

M. other Long term Investment


Rs. ’000April 1, 2011

Rs. ’000


Company

Reclassification of other long term investments to available-for-sale financial asset (refer Note L) – (194,457)

– (194,457)

subsidiaries

Reclassification of other long term investments to available-for-sale financial assets (refer Note L) (2,553) (2,553)

group total (2,553) (197,010)




N. Inventory

The produce stock of biological assets i.e., tea and rubber were valued at their actual or estimated realisable values, net of direct selling expenses in terms of

SLAS 32. With the adoption of new accounting standards, the agricultural products that are harvested from biological assets i.e., green leaf and latex are required to

measure at its fair value less cost to sell at the point of harvest. Thereafter, as per LKAS 2 the said fair value was determined at the date of applying this standard. The

cost of semi-finished and finished products was estimated through attributing the direct manufacturing cost into the fair value of biological products. Accordingly, the

measurement of inventory is carried at the lower of cost and estimated net realisable value in accordance with LKAS 2. Refer Notes B & T for more details.


Rs. ’000April 1, 2011

Rs. ’000


Company

Reclassification of formers (moulds) under non-current asset (44,281) (28,686)

(44,281) (28,686)

subsidiaries

Reclassification of formers (moulds) under non-current asset (144,450) (138,334)

group total (188,731) (167,020)

Remeasurement

subsidiaries

Valuation of tea and rubber stock at lower of cost or NRV

- As at April 1, 2011 (30,262) (30,262)

- As at April 1, 2011 at HPSL (32,414) –


group total (62,321) (30,262)

o. trade and other Receivables

Reclassification of Advances & Prepayments and Related Party Trade Receivables

Reclassified advances & prepayments and related party receivables under trade and other receivables.


Rs. ’000April 1, 2011

Rs. ’000


Company

Reclassification of advances and prepayments (refer Note P) (106,627) (70,550)

Reclassification of related party receivables 14,391 45,205

(92,236) (25,345)

subsidiaries

Reclassification of advances and prepayments (refer Note P) (259,043) (208,382)

Write-off of deferred expense incurred on forestry (refer Note K) (743) (743)

Elimination of inter-company balances (14,391) (45,205)

group total (366,413) (279,676)




P. Advance and Prepayments


Rs. ’000April 1, 2011

Rs. ’000


Company

Reclassification of advance and prepayments from trade and other receivable (refer Note O) 106,627 70,550

106,627 70,550

subsidiaries

Reclassification of advance and prepayments from trade and other receivable (refer Note O) 259,043 208,382

group total 365,670 278,933

Q. other Current Financial Assets


Rs. ’000April 1, 2011

Rs. ’000

Reclassification

subsidiaries

Reclassification of short term investments to other current financial assets (refer Note R) 8,299 8,893


Remeasurement

Company

Foreign exchange forward contracts (refer Notes T & E) 3,004 17,214

3,004 17,214

subsidiaries

Foreign exchange forward contracts – 1,883





R. short term Investment


Rs. ’000April 1, 2011

Rs. ’000


subsidiaries

Reclassification of short term investments to other current financial assets (refer Note Q) (8,299) (8,893)

group total (8,299) (8,893)

s. Available-for-sale (AFs) Reserve


Rs. ’000April 1, 2011

Rs. ’000

Remeasurement Changes

Company

Fair value change of available-for-sale financial asset

- As at April 1, 2011 – 1,156,710

– 1,156,710

subsidiaries

Fair value change of available-for-sale financial asset

- As at April 1, 2011 22 22


group total 16 1,156,732




t. Retained Earnings


Rs. ’000April 1, 2011

Rs. ’000

Company

Over/(under) depreciation of plant & machinery (refer Note I)

- As at April 1, 2011 64,097 64,097


Gain in fair value change in forward contract (refer Note Q)

- As at April 1, 2011 – 15,285


Deferred tax under provision (refer Note V)

- As at April 1, 2011 (3,662) (3,662)


Financial guarantee income

- As at April 1, 2011 3,785 3,785

- For the period ended March 31, 2012 4,950 –

62,135 79,505

subsidiariesOver/(under) depreciation of plant & machinery

- As at April 1, 2011 428,269 428,269



Gain/(loss) in fair value change in forward contract (refer Note Q)

- As at April 1, 2011 – 1,340


Deferred tax effect for the year by restatement of depreciation policy (refer Note V)

- As at April 1, 2011 (39,002) (39,002)



Loss on disposal of Property, Plant and Equipment disposed during 2011/12, recognised as at April 1, 2011 (2,361) (2,361)

Reversal of Loss on disposal of Property, Plant and Equipment disposed during 2011/12, since the loss was recognised as at April 1, 2011 2,434 –

Gain/(loss) on fair value change in biological assets (refer Note K)

- As at April 1, 2011 (7,447) (7,447)



Write-off of tea and rubber stock at lower of cost or NRV

- As at April 1, 2011 (21,541) (21,541)



Deferred tax effect on revaluation of biological asset (refer Note V)

- As at April 1, 2011 (2,875) (2,875)


Amortisation of goodwill acquired on business combination (refer Note J) (15,683) (15,683)

Increase in amortisation due to reassessment of right-to-use land (1,759) –

Increase in interest on finance lease (refer Note W) (3,561) –

Profit share on investment in associate (HPSL) – 21,066

Effect of change in holdings 28,815 –

Eliminations of inter-company adjustments (8,735) (3,785)

group total 505,646 437,485




u. Non-Controlling Interest


Rs. ’000April 1, 2011

Rs. ’000

subsidiaries

Loss on disposal of Property, Plant and Equipment disposed during 2011/12, recognised as at April 1, 2011 (762) (762)

Reversal of Loss on disposal of Property, Plant and Equipment disposed during 2011/12, since the loss was recognised as at April 1, 2011 762 –

Over/(under) depreciation of plant and machinery

- As at April 1, 2011 26,675 26,675



Fair value gain on financial asset Available-for-Sale

- As at April 1, 2011 9 9


Deferred tax effect for the year by restatement of accounting base

- As at April 1, 2011 (6,008) (6,008)



Gain/(loss) on fair value change in biological asset

- As at April 1, 2011 (3,015) (3,015)



Write-off of tea and rubber stock at lower of cost or NRV

- As at April 1, 2011 (8,722) (8,722)



Gain in fair value change of foreign exchange forward contract

- As at April 1, 2011 543 543


Increase in amortisation due to reassessment of right-to-use land (1,116) –

Increase in interest on finance lease (2,017) –





v. Deferred tax

The deferred tax effect arises due to the increase of the taxable temporary difference as a result of changing depreciation policy and fair valuation of biological

asset.


Rs. ’000April 1, 2011

Rs. ’000

Deferred tax Asset

Remeasurement

Company

Under provision due the change in accumulated depreciation (refer Note T)

- As at April 1, 2011 (3,662) (3,662)


(12,274) (3,662)

subsidiaries

group total (12,274) (3,662)

Deferred tax Liability

subsidiaries

Over/under provision due to the change in accumulated depreciation

- As at April 1, 2011 44,128 44,128



Deferred tax effect for the year on revaluation of biological asset

- As at April 1, 2011 4,039 4,039



w. Interest-Bearing Loans and Borrowings

As per the provisions of SoRP for right-to-use land, the Group has reassessed the liability to make lease payments.


Rs. ’000April 1, 2011

Rs. ’000


subsidiaries

Non-Current

Changes to gross liability 1,248,396 1,240,422

Changes to interest in suspense (1,130,316) (1,168,246)

Non-current total 118,080 72,176

Current

Changes to gross liability 31,879 40,769

Changes to interest in suspense ( 37,930) (45,041)

Current total (6,051) (4,272)

total

Changes to gross liability 1,280,274 1,281,191

Changes to interest in suspense (1,168,246) (1,213,287)

total 112,029 67,904




x. other Current Financial Liability

As per LKAS 39, foreign exchange forward contracts were valued at fair value and recognised the fair value gain in profit and loss.


Rs. ’000April 1, 2011

Rs. ’000

Remeasurement

Company

Foreign exchange forward contracts – 1,930

– 1,930

subsidiaries

Foreign exchange forward contracts (refer Note E) 9,215 –

9,215 1,930

y. Amounts due to Related Parties

Reclassification

Amount due to Hayleys PLC was reclassified as Amount Due to Related Parties.


Rs. ’000April 1, 2011

Rs. ’000


Company

Reclassification of amounts due to Hayleys PLC under amounts due to related parties (refer Note Z) 10,523 11,136

Reclassification of amounts due to subsidiaries 654,220 292,795

Reclassification of amounts due to subsidiaries under trade and other payable (58,981) (1,559)

605,762 302,372

subsidiaries

Elimination of inter-company balances (595,239) (291,236)

Reclassification of amounts due to Hayleys PLC under amounts due to related parties (refer Note Z) 8,074 15,486


Z. Amounts due to Hayleys PLC

Amount due to Hayleys PLC was reclassified as amount due to related parties.


Rs. ’000April 1, 2011

Rs. ’000


Company

Reclassification of amounts due to Hayleys PLC under amounts due to related parties (refer Note Y) (10,523) (11,136)

(10,523) (11,136)

subsidiaries

Reclassification of amounts due to Hayleys PLC under amounts due to related parties (refer Note Y) (8,074) (15,486)

(18,597) (26,622)





Group2013 2012

Rs. ’000 Rs. ’000

3. REvENuEHand Protection (Note 3.1) 14,674,543 13,499,025

Plantations (Note 3.2) 9,836,401 6,959,168

24,510,944 20,458,193

Inter-group sales/services (853,201) (764,528)

23,657,743 19,693,665

3.1 Hand Protection

Dipped Products PLC 2,018,710 1,798,644

Grossart (Pvt) Ltd. 2,064,610 1,903,425

Venigros (Pvt) Ltd. 2,203,028 2,012,164

Neoprex (Pvt) Ltd. 854,842 752,145

Texnil (Pvt) Ltd. 228,152 203,700

Dipped Products (Thailand) Ltd. 2,530,283 2,282,042

ICOGUANTI S.p.A. 4,071,536 3,918,865

Feltex (Pvt) Ltd. 65,392 46,064

Hanwella Rubber Products Ltd. 1,354,752 1,372,429

15,391,305 14,289,478

Intra-group sales/services (716,762) (790,453)

14,674,543 13,499,025

3.2 Plantations

DPL Plantations (Pvt) Ltd. 996 959

Kelani Valley Plantations PLC (KVPL)* 6,518,253 6,033,498

Hayleys Plantation Services (Pvt) Ltd. (HPSL)* 3,318,148 925,670

9,837,397 6,960,127

Intra-group sales/services (996) (959)

9,836,401 6,959,168

* Represents Group figures of KVPL and HPSL.

Segment information on turnover is given in Note 29.



4. otHER INCoME AND gAINs

Group Company2013 2012 2013 2012

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Gain on disposal of property, plant and equipment 30,722 27,182 478 237

Amortisation of Government grants – 44,534 – –

Lease rental income 8,400 4,200 11,172 6,881

Deferred income amortised 37,123 – – –

Gains on fair value change in biological assets 31,171 14,955 – –

Dividend income – 14,145 581,344 87,032

Gain on disposal of investments – 1,141,053 – 1,141,053

Sundry income 19,392 – – –

126,808 1,246,069 592,994 1,235,203

5. otHER ExPENsEs

Group Company2013 2012 2013 2012

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Research expenses 21,350 12,935 16,075 2,686

21,350 12,935 16,075 2,686

6. FINANCE Costs/INCoME

6.1 Finance Costs

Group Company2013 2012 2013 2012

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Interest on short term borrowings 145,574 141,363 28,422 21,906

Interest on long term borrowings 125,675 87,650 – 2,460

Finance charges payable under finance leases 76,848 57,253 – –

Total interest expense 348,097 286,266 28,422 24,366

Loss on foreign exchange forward contracts – 28,313 – 17,215

Exchange loss – 15,261 – 56,669

348,097 329,840 28,422 98,250

6.2 Finance Income

Group Company2013 2012 2013 2012

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Interest income 94,968 70,478 46,681 31,162

Guarantee income – – 5,507 4,950

Gain on foreign exchange forward contracts – 4,934 – 4,934

Exchange gain 11,972 – 8,354 –

106,940 75,412 60,542 41,046



7. PRoFIt BEFoRE tAx

Profit before tax is stated after charging all expenses including the following:

Group Company2013 2012 2013 2012

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Directors' emoluments 61,957 52,696 20,410 18,186

Auditors' remuneration-

Audit services 15,275 11,457 852 710

Non-audit services 1,477 1,710 471 462

Depreciation and amortisation of property, plant and equipment 628,747 474,482 38,636 38,153

Provision for impairment of formers 32,244 17,467 5,139 4,519

Depreciation of investment property 5,335 2,668 5,335 2,668

Staff costs (Note 7.1) 5,415,707 3,787,513 272,964 235,259

Provision/(reversal) for impairment of trade receivables (79,061) 5,563 102 122

Provision/(reversal) for slow-moving inventories (17,824) 38,959 (2,968) 12,358

Legal fees 13,417 11,345 1,837 1,219

Donations 1,320 1,380 69 232

7.1 staff Costs

Group Company2013 2012 2013 2012

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Defined contribution plan costs 505,253 391,369 33,747 26,849

Defined benefit plan costs 363,677 291,481 55,362 56,555

Staff costs others 4,546,777 3,104,663 183,855 151,855

5,415,707 3,787,513 272,964 235,259

No. of employees at year-end 25,019 26,342 329 328

8. tAx ExPENsE

Group Company2013 2012 2013 2012

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Income tax on current year profits 277,163 236,916 37,122 9,794

(Over)/under provision in respect of previous years (31,984) (8,186) (5,775) 691

245,179 228,730 31,347 10,485

Deferred tax expense/(income) 78,751 46,637 (1,811) (4,289)

Withholding tax on dividends 67,013 19,555 – –

390,943 294,922 29,536 6,196



Reconciliation of accounting profit to income tax expense

Group Company2013 2012 2013 2012

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Profit before tax 2,175,216 2,437,677 783,374 1,071,519

Share of profit associate – 20,232 – –

Intra-group eliminations 829,872 20,896 – –

3,005,088 2,478,805 783,374 1,071,519

Disallowable expenses 999,663 894,256 122,167 274,588

Tax deductible expenses (1,362,987) (823,357) (78,573) (54,767)

Tax exempt income (863,037) (1,328,266) (587,091) (1,228,116)

Tax loss brought forward (2,721,775) (1,721,680) – –

Adjustments for tax loss brought forward 161,132 29,526 – –

Tax loss carried forward 2,520,758 2,721,775 – –

Taxable income 1,738,842 2,251,059 239,877 63,226

Income tax @ 28% 23,461 538 14,590 35

Income tax @ 27.5% 66,827 77,889 – –

Income tax @ 12% (2012 - 15%) 117,596 106,320 22,532 9,759

Income tax @ 10% 51,491 22,983 – –

Income tax @ other tax rates 17,788 29,186 – –

Income tax on current year profits 277,163 236,916 37,122 9,794

Dipped Products PLC, Grossart (Pvt) Ltd., Venigros (Pvt) Ltd., Neoprex (Pvt) Ltd., Texnil (Pvt) Ltd., Feltex (Pvt) Ltd. and Hanwella Rubber Products Ltd. have entered

into an agreement with the Board of Investment of Sri Lanka (BOI) as ‘Thrust Industries’.

Kelani Valley Green Tea (Pvt) Ltd. and Kalupahana Power Company (Pvt) Ltd. have entered into agreements with BOI for tax exemption on its business activities.

The tax exemption granted on its business activities of these Companies are as follows:

Name of the Company tax holiday period Expired/expires as at March 31

Dipped Products PLC 10 Years 2009

Venigros (Pvt) Ltd. 10 Years 2009

Grossart (Pvt) Ltd. 10 Years 2010

Feltex (Pvt) Ltd. 05 Years 2011

Hanwella Rubber Products Ltd. 10 Years 2011

Texnil (Pvt) Ltd. 10 Years 2013

Kelani Valley Instant Tea (Pvt) Ltd. 3 Years 2011

Dipped Products (Thailand) Ltd. (December 31) 8 Years 2012


After completion of tax exemption periods, the business income of above companies are liable for income tax at a concessionary rate of 12% (2012 - 15%)

except Feltex (Pvt) Ltd. and Kalupahana Power Company (Pvt) Ltd. which are liable to income tax rate at 10%.

ICOGUANTI S.p.A., Italy is liable to a corporate tax rate of 27.5% and a regional tax of 3.9% on its taxable income.

Trading income of all other companies in the Group are liable for income tax at 12% whilst other income is taxed at normal tax rate.

9. EARNINgs PER sHARE

Basic Earnings Per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average

number of ordinary shares outstanding during the year.

The following reflects the income and share data used in the basic earnings per share computations:

Group Company2013 2012 2013 2012

Amount used as the numerator:

Net profit attributable to the equity holders of the Company (Rs. '000) 1,417,888 1,905,975 753,838 1,065,323

Number of ordinary shares used as the denominator:

Weighted average number of ordinary shares in issue 59,861,512 59,861,512 59,861,512 59,861,512

Earnings per ordinary share - basic (Rs.) 23.69 31.84 12.59 17.80

Diluted Earnings Per share

There are no potentially dilutive ordinary shares of the Company and as a result the diluted earnings per share is the same as the basic earnings per share shown

above.

10. DIvIDENDs PER sHARE

Company2013 2012

Interim dividend - Rs. 4.00 (2012 - Rs. nil per share) (Rs. ‘000) 239,446 –

Final dividend proposed Rs. 3.00 per share (2012 - Rs. 6.00 per share) (Note 35) (Rs. ‘000) 179,585 359,169

Gross dividend (Rs. ‘000) 419,031 359,169

Number of shares 59,861,512 59,861,512

Dividend (inclusive of proposed dividend) per share Rs. 7.00 6.00

Dividends of Rs. 7.00 per share (2012 - Rs. 6.00 per share) distributed to shareholders comprise redistribution of dividends received by the Company.

Proposed final dividend for 2013 has not been recognised as a liability as at March 31, 2013.




11. PRoPERty, PLANt AND EQuIPMENt

11.1 group

Land Mature/Immature

Plantations

Buildings Plant &Machinery

StoresEquipment

LaboratoryEquipment

Office andCanteen

Equipment

Furniture andFittings

Vehicles 2013

total

2012

Total

As at April 1,2011Total

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Freehold

Cost/valuation

At beginning of the year 283,153 1,953,406 1,953,362 4,544,438 269,336 48,967 308,125 55,262 411,765 9,827,814 5,937,458

On acquisition of subsidiary – – – – – – – – – – 3,457,109

Exchange translation difference 9,902 – 64,901 234,817 20,286 1,940 3,668 4,645 2,905 343,064 (49,769)

Additions 513 71,541 136,665 312,824 29,690 1,993 14,004 7,041 80,161 654,432 617,026

Revalued by 69,591 – – – – – – – – 69,591 –

Disposals – – – (13,489) (9,148) (5,801) (5,347) (3,014) (49,528) (86,327) (134,010)

At end of the year 363,159 2,024,947 2,154,928 5,078,590 310,164 47,099 320,450 63,934 445,303 10,808,574 9,827,814 5,937,458

Depreciation and Impairment Losses

At beginning of the year – 309,807 423,776 1,677,138 226,425 41,678 194,202 40,529 274,850 3,188,405 2,115,691

On acquisition of subsidiary – – – – – – – – – – 825,456

Exchange translation difference – – 12,105 85,814 16,218 1,907 3,122 3,290 2,276 124,732 (22,596)

Charge for the year – 62,937 73,844 313,237 17,489 2,640 12,168 6,508 41,824 530,647 395,140

On disposals – – – (12,128) (9,148) (5,801) (5,400) (3,014) (36,489) (71,980) (125,286)

At end of the year – 372,744 509,725 2,064,061 250,984 40,424 204,092 47,313 282,461 3,771,804 3,188,405 2,115,691

Net book value 363,159 1,652,203 1,645,203 3,014,528 59,180 6,675 116,358 16,621 162,842 7,036,769 6,639,409 3,821,767

Capital work-in-progress 249,619 218,340 345,990

Carrying amount 7,286,388 6,857,749 4,167,757

Land Mature/Immature

Plantations

Buildings Plant &Machinery

StoresEquipment

LaboratoryEquipment

Office andCanteen

Equipment


Vehicles 2013

total

2012

Total


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Leasehold

Cost/valuation

At beginning of the year 440,925 2,766,004 148,425 48,501 – – – – 11,709 3,415,564 2,616,945


Additions – 336,443 – – – – – – – 336,443 287,825

Exchange translation difference – – – – – – – – 1,860 1,860 (329)

Disposals – – – – – – – – – – (14)

At end of the year 440,925 3,102,447 148,425 48,501 – – – – 13,569 3,753,867 3,415,564 2,616,945

Amortisation and Impairment Losses

At beginning of the year 20,346 631,859 114,631 48,501 – – – – 6,463 821,800 537,932


Charge for the year 14,999 74,450 5,936 – – – – – 2,715 98,100 79,341

Exchange translation difference – – – – – – – – 1,033 1,033 (134)

On disposals – – – – – – – – – – (5)

At end of the year 35,345 706,309 120,567 48,501 – – – – 10,211 920,933 821,800 537,932

Net book value 405,580 2,396,138 27,858 – – – – – 3,358 2,832,934 2,593,764 2,079,013

total Carrying amount 10,119,322 9,451,513 6,246,770


11.2 Company

Land Buildings Plant &Machinery

StoresEquipment

LaboratoryEquipment

Office andCanteen

Equipment


Vehicles 2013

total

2012

Total


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Freehold

Cost/valuation

At beginning of the year 151,985 103,080 267,715 35,476 32,476 59,141 9,546 64,457 723,876 710,242

Additions/transfers – 725 6,592 9,808 1,673 6,286 3,246 – 28,330 16,712

Revaluation 45,296 – – – – – – – 45,296 –

Disposals – – – (5,633) (4,955) (2,580) – (17,030) (30,198) (3,078)

At end of the year 197,281 103,805 274,307 39,651 29,194 62,847 12,792 47,427 767,304 723,876 710,242

Depreciation

At beginning of the year – 64,832 136,730 30,747 25,885 49,869 8,282 30,817 347,162 311,330

Charge for the year – 4,035 14,736 2,410 2,367 3,723 446 10,919 38,636 38,153

On disposals – – – (5,633) (4,955) (2,580) – (8,599) (21,767) (2,321)

At end of the year – 68,867 151,466 27,524 23,297 51,012 8,728 33,137 364,031 347,162 311,330

Net book value 197,281 34,938 122,841 12,127 5,897 11,835 4,064 14,290 403,273 376,714 398,912

Capital work-in-progress 74,898 7,688 10,498

Carrying amount 478,171 384,402 409,410

(I) The value of land which has been revalued by independently qualified valuers is indicated below together with the last date of revaluation.

Written up as atCompany Location Extent March 31, 2013 March 31, 2012

Dipped Products PLC Brahmanagama, Kottawa (March 31, 2013) 9A-4R-26.27P 107,633 80,105

Dipped Products PLC Nedungamuwa, Weliveriya (March 31, 2013) 7A-3R-15.20P 70,973 53,204

Palma Ltd. Gonawala, Kelaniya (March 31, 2013) 1A-3R-10.7P 35,224 27,957

Venigros (Pvt) Ltd. Nedungamuwa, Weliveriya (March 31, 2013) 7A-0R-15.10P 50,925 33,899

264,755 195,165

(ii) Leasehold property, plant and equipment include the leasehold rights to bare land on all estates of Kelani Valley Plantation PLC and Talawakelle Tea Estates

PLC, the immovable leased assets standing there on at the inception of the Company and improvements to leasehold property since the formation of the

Company. Unexpired lease period of Kelani Valley Plantations PLC and Talawakelle Tea Estates PLC is 33 years.

(iii) The cost of fully depreciated property, plant and equipment of the Group which are still in use as at March 31, 2013 is Rs. 923,968,543/-.

(2012 - Rs. 1,184,465,032/-)

(iv) The cost of revalued land given above, would amount to Rs. 25,620,108/- and Rs. 18,676,416/- respectively for the Group and the Company.

12. FoRMERs (MouLDs)

Group Company

2013 2012 As at April 1, 2011 2013 2012 As at April 1, 2011 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cost 371,608 337,448 298,270 99,123 82,331 62,217

Provision for impairment (180,961) (148,717) (131,250) (43,189) (38,050) (33,531)

190,647 188,731 167,020 55,934 44,281 28,686




13. INvEstMENt PRoPERty

Group/Company2013 2012

Land Building total Land Building TotalRs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cost

At beginning of the year 124,289 106,710 230,999 – – –

Additions – – – 124,289 106,710 230,999

Adjustments (1,100) – (1,100) – – –

At end of the year 123,189 106,710 229,899 124,289 106,710 230,999

Depreciation

At beginning of the year – 2,668 2,668 – – –

Charge for the year – 5,336 5,335 – 2,668 2,668

At end of the year – 8,004 8,003 – 2,668 2,668

Net book value 123,189 98,706 221,896 124,289 104,042 228,331

13.1 Rental Income

2013 2012Rs. ’000 Rs. ’000

Rental income derived from investment property 8,400 4,200

13.2 Investment property is stated at Cost. The fair value of investment property as at March 31, 2013 based on a valuation performed by Mr. P B Kalugalagedara

(Chartered Valuation Surveyor - UK), an accredited independent, industry specialist.

The fair value of the properties have been determined based on transactions observable in the market.

The details of fair value of Investment property of the Company is disclosed below:

LocationBuilding - Area

SQFTLand in Acres Value of Building

Rs. ’000Value of Land

Rs. ‘000Total

Rs. ‘000

No. 59, Potuarawa Road, Malabe 57,595 2.26 77,100 171,700 248,800

14. BIoLogICAL AssEts

Group

Immature Mature 2013 2012 As at April 1, 2011Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

At beginning of the year 142,308 49,805 192,113 40,394

On acquisition of subsidiary – – – 135,169

Increase due to development 11,697 – 11,697 1,595

Gain/(loss) arising from changes in fair value less cost to sell 22,476 8,695 31,171 14,955

Other changes – 40 40 –

At end of the year 176,481 58,540 235,021 192,113 40,394


Managed trees include commercial timber plantations cultivated on estates. The cost of immature trees is treated as approximate fair value particularly on the

ground of little biological transformation has taken place and impact of the biological transformation on price is not material. When such plantations become

mature, the additional investments since taken over to bring them to maturity are transferred from Immature to Mature.

The fair value of managed trees was ascertained since the LKAS 41 is only applicable for managed agricultural activities in terms of the ruling issued by The

Institute of Chartered Accountants of Sri Lanka. The valuation was carried by Messrs Sunil Fernando Associates, chartered valuers, using Discounted Cash Flow

(DCF) methods. In ascertaining the fair value of timber, a physical verification was carried covering all the estates.

Key assumptions used in valuation:

1. The harvesting is approved by the Plantation Management Monitoring Division (PMMD) and Forest Department based on the forestry development plan

2. The price adopted are net of expenditure

3. Discount rate is 17.5%

4. Though the replanting is a condition precedent for harvesting, yet the cost are not taken in to consideration.

The valuations, as presented in the external valuation models based on net present values, take into account the long term exploitation of the timber plantations.

Because of the inherent uncertainty associated with the valuation of biological assets due to the volatility of the variables, their carrying value may differ from their

realisable value. The Board of Directors retains their view that commodity markets are inherently volatile and that long term price projections are highly unpredictable.

Hence, the sensitivity analysis regarding selling price and discount rate variations as included in this note allows every investor to reasonably challenge the

financial impact of the assumptions used in the LKAS 41 against his/her own assumptions.

sensitivity Analysis

sensitivity variation - sales Price

Values of biological assets are very sensitive to price changes with regard to the average sales prices applied. Simulations made for timber show that a rise or

decrease by 10% of the estimated future selling price has the following effect on the net present value of biological assets:

Group-10% – +10%

As at March 31, 2013

Rs. ’000 Rs. ’000 Rs. ’000

Managed Timber 207,504 225,384 245,052

total 207,504 225,384 245,052

sensitivity variation - Discount Rate

Values of biological assets are very sensitive to changes of the discount rate applied. Simulations made timber trees show that a rise or decrease by 1.5% of the

estimated future selling price has the following effect on the net present value of biological assets:

Group-1.5% – +1.5%

As at March 31, 2013

Rs. ’000 Rs. ’000 Rs. ’000

Managed Timber 234,115 225,384 218,345

total 234,115 225,384 218,345



15. INtANgIBLE AssEts

Group

Goodwill Development Cost Computer Software TotalRs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cost

As at April 1, 2011 33,310 – 3,273 36,583

On acquisition of subsidiary 134,311 18,297 – 152,608

As at March 31, 2012 167,621 18,297 3,273 189,191

As at March 31, 2013 167,621 18,297 3,273 189,191

Amortisation

As at April 1, 2011 – – 1,889 1,889

On acquisition of subsidiary – 5,358 – 5,358

Charge for the year – 400 236 636

As at March 31, 2012 – 5,758 2,125 7,883

Charge for the year – 1,959 738 2,697

As at March 31, 2013 – 7,717 2,863 10,580

Net book value

As at April 1, 2011 33,310 – 1,384 34,694

As at March 31, 2012 167,621 12,539 1,148 181,308

As at March 31, 2013 167,621 10,580 410 178,611

Goodwill acquired through business combinations have been allocated to the following cash generating units (CGU’s) for impairment testing.

2013 2012 2011Rs. ’000 Rs. ’000 Rs. ’000

Mabroc Teas (Pvt) Ltd. 33,310 33,310 33,310

Talawakelle Tea Estates PLC 134,311 134,311 –

167,621 167,621 33,310

The recoverable value of Goodwill for all CGU’s have been based on Value In Use (VIU) calculations which have been determined by discounting the future cash

flows generated from the continuing use of the CGU’s. Key assumptions used are given below:

Business Growth - Based on historical growth rate and business plan

Inflation - Based on the current inflation rate

Discount Rate - Average market borrowing rate adjusted for risk premium

Margin - Based on current margin and business plan



16. INvEstMENts IN suBsIDIARIEs/EQuIty ACCouNtED INvEstEE

16.1 Investments in subsidiaries (at cost) - unquoted Investments

Company % Holding No of Shares ValueAs at As at As at

2013 2012 April 1, 2011 2013 2012 April 1, 2011 2013Rs. ‘000

2012Rs. ‘000

April 1, 2011Rs. ‘000

Palma Ltd. 100% 100% 100% 4,000,000 4,000,000 4,000,000 40,000 40,000 40,000

Grossart (Pvt) Ltd. 100% 100% 100% 4,200,000 4,200,000 4,200,000 42,000 42,000 42,000

DPL Plantation (Pvt) Ltd. 100% 100% 100% 55,000,000 55,000,000 35,000,000 550,000 550,000 350,000

Venigros (Pvt) Ltd. 100% 100% 100% 8,000,000 8,000,000 8,000,000 202,450 202,450 202,450

Neoprex (Pvt) Ltd. 100% 100% 100% 4,000,000 4,000,000 4,000,000 40,000 40,000 40,000

Texnil (Pvt) Ltd. 100% 100% 100% 7,500,000 7,500,000 7,500,000 75,000 75,000 75,000

Dipped Products (Thailand) Ltd. 99% 99% 99% 4,516,248 3,700,290 3,700,290 1,466,742 1,127,958 1,127,958

ICOGUANTI S.p.A. 61% 61% 61% 1,100,000 1,100,000 1,100,000 89,872 89,872 89,872

Feltex (Pvt) Ltd. 100% 100% 100% 1,500,000 1,500,000 1,500,000 15,000 15,000 15,000

Hanwella Rubber Products Ltd. 73% 73% 70% 18,152,000 18,152,000 6,090,000 151,620 151,620 31,000

2,672,684 2,333,900 2,013,280

Provision for diminution in value of investments (Note 16.1.1) (320,000) (320,000) (170,000)

2,352,684 2,013,900 1,843,280

16.1.1 Provision for Diminution in value of Investments

Palma Ltd. Dipped Products(Thailand) Ltd.

Texnil (Pvt) Ltd.

2013total

2012 2011

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

At beginning of the year 20,000 250,000 50,000 320,000 170,000 170,000

Provision for the year – – – – 150,000 –

At end of the year 20,000 250,000 50,000 320,000 320,000 170,000

The Company invested Rs. 338,784,309/- in Dipped Products (Thailand) Ltd., during the year. 2012 - Rs. 200,000,000/- in DPL Plantations (Pvt) Ltd., and

Rs. 120,620,000/- in Hanwella Rubber Products Ltd.

16.2 Investments in Equity Accounted Investee

% Holdings Net Assets

Investor Investee 2013 2012 2011 2013 2012 2011

Rs. ’000 Rs. ’000 Rs. ’000

DPL Plantations (Pvt) Ltd. Hayleys Plantation Services (Pvt) Ltd. – – 33 1/3 – – 329,945



DPL Plantations (Pvt) Ltd., acquired further 33 1/3% shares of Hayleys Plantation Services (Pvt) Ltd., (HPSL), in September 2011 for Rs. 280,000,000/- thus making

HPSL a 66 2/3% owned subsidiary. Details of net assets acquired and net cash outflow on the acquisition are stated below:

Acquisition of subsidiary - Hayleys Plantation services (Pvt) Ltd.

TotalRs.’000

Property, plant and equipment 2,967,886

Biological assets 135,169

Intangible assets 147,250

Deferred tax asset 765

Inventories 289,919

Trade and other receivables 122,158

Cash and cash equivalents 45,390

Deferred tax liability (29,007)

Defined benefit obligations (831,866)

Interest-bearing borrowings (803,497)

Deferred income (249,575)

Trade and other payables (299,823)

Current portion of Interest-bearing borrowings (66,718)

Short-term interest-bearing borrowings (132,842)

Amounts due to Hayleys PLC (4,954)

Income tax payable (1,536)

Non-controlling interest - Talawakelle Teas Estates PLC (402,798)

885,921

Non-controlling interest (295,307)

total net assets acquired 590,614

Value of net-assets over the purchase consideration (15,197)

total 575,417

Satisfied by:

Cash consideration 280,000

Investment in equity accounted investee - HPSL 295,417

total 575,417

Analysis of net outflow of cash and cash equivalents in respect of the purchase of subsidiary

Cash consideration (280,000)

Net of short-term borrowings and cash and cash equivalents on acquisition of HPSL (87,452)

Net cash outflow on acquisition (367,452)



17. otHER FINANCIAL AssEts AND LIABILItIEs

17.1 other Financial Assets

Group Company 2013 2012 As at April 1, 2011 2013 2012 As at April 1, 2011

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Derivative financial assets

Foreign exchange forward contracts 838 3,004 19,097 – 3,004 17,214

total derivative financial assets 838 3,004 19,097 – 3,004 17,214

Available-for-sale investments

Quoted equity shares (Note 17.1.1) 22 25 1,351,201 – – 1,351,166

Unquoted equity shares (Note 17.1.2) – 2,550 2,550 – – –

total available-for-sale investments 22 2,575 1,353,751 – – 1,351,166

short term investments

In quoted companies

Sampath Bank PLC – – 34 – – –

In unqoted companies

Cambron Exports (Pvt) Ltd. – – 500 – – –

Mabroc International (Pvt) Ltd. 732 732 732 – – –

Mabroc Japan 4,567 4,567 4,567 – – –

Investment in Debentures

Seylan Bank PLC – 3,000 3,000 – – –

Vanik Incorporation Ltd. – – 60 – – –

total short term investments 5,299 8,299 8,893 – – –

total other financial assets 6,159 13,878 1,381,741 – 3,004 1,368,380

total current 6,137 11,303 27,990 – 3,004 17,214

total non-current 22 2,575 1,353,751 – – 1,351,166

17.1.1 Quoted Equity shares

Group Company


Hayleys PLC

[No. of shares - Nil (2012 - Nil and 2011 - 3,536,159)] – – 1,351,166 – – 1,351,166

Royal Ceramic Lanka PLC

[No. of shares - 220 (2012 - 220 and 2011 - 110)] 22 25 35 – – –

22 25 1,351,201 – – 1,351,166



17.1.2 unquoted Equity shares


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Wellassa Rubber Company Ltd.

(No. of shares 2013, 2012 and 2011 - 255,000) 2,550 2,550 2,550 – – –

Provision for the year (2,550) – – – – –

– 2,550 2,550 – – –

17.2 other Current Financial Liabilities


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Derivative financial liabilities

Foreign exchange forward contracts – 9,215 1,930 – – 1,930

– 9,215 1,930 – – 1,930

18. DEFERRED tAx AssEts AND LIABILItIEs


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

18.1 Deferred tax Asset

At end of the year (Note 18.2) 20,647 19,161 14,260 20,360 18,549 14,260

18.2 Deferred tax Liability

At beginning of the year 271,325 196,447 118,014 (18,549) (14,260) (17,922)

Charge/(reversals) during the year 78,751 46,637 75,971 (1,811) (4,289) 3,662

On acquisition of subsidiary – 28,241 2,462 – – –

At end of the year 350,076 271,325 196,447 (20,360) (18,549) (14,260)

Deferred tax asset 20,647 19,161 14,260 20,360 18,549 14,260

Deferred tax liability 370,723 290,486 210,707 – – –

18.3 Recognised Deferred tax Assets and Liabilities


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Deferred tax relates to the following:

Accelerated depreciation for tax purposes 865,613 798,880 399,313 14,493 12,913 11,829

Biological assets 23,502 19,211 4,039 – – –

Defined benefit obligation (342,512) (320,912) (164,304) (34,853) (31,462) (26,089)

Losses available for offset against future taxable income (160,504) (190,151) (45,063) – – –

Others (36,023) (35,703) 2,462 – – –

Net deferred tax liability/(asset) 350,076 271,325 196,447 (20,360) (18,549) (14,260)



19. INvENtoRIEs


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Raw materials and consumables 925,080 998,447 794,845 313,194 302,382 229,706

Finished goods 1,267,826 1,316,121 1,113,887 64,077 57,278 70,623

Work-in-progress 144,472 128,204 130,423 19,488 20,286 17,791

Produce stock 1,011,492 780,467 443,316 – – –

Goods-in-transit 22 – 114,490 – – –

3,348,892 3,223,239 2,596,961 396,759 379,946 318,120

Less-provision for slow moving items (81,707) (99,531) (60,571) (24,669) (27,637) (15,279)

3,267,185 3,123,708 2,536,390 372,090 352,309 302,841

20. tRADE AND otHER RECEIvABLEs

Group Company


Trade receivables - Related parties – – – 21,535 14,391 45,205

- Others 3,907,447 3,797,744 3,195,284 283,691 326,919 200,401

Impairment provision of bad and doubtful debts (50,715) (129,776) (124,213) (305) (203) (81)

3,856,732 3,667,968 3,071,071 304,921 341,107 245,525

Income tax recoverable 60,811 26,770 87,263 – – –

Other receivables 245,376 300,930 269,798 3,110 4,142 24,640

4,162,919 3,995,668 3,428,132 308,031 345,249 270,165

Age analysis of the Company’s trade receivables is as follows:

Total Neither pastdue nor

impaired

past due but not impaired<30

days30 - 60

days61 - 90

days>91

daysRs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

March 31, 2013 305,226 281,590 22,444 784 103 305

March 31, 2012 341,310 323,556 15,320 – 2,231 203

21. AMouNts DuE FRoM RELAtED PARtIEs

Company

2013 2012 As at April 1, 2011 Rs. ’000 Rs. ’000 Rs. ’000

Fully-owned subsidiaries 192,468 165,172 226,216

Partly-owned subsidiaries 132,355 221,474 171,283

324,823 386,646 397,499

22. stAtED CAPItALordinary shares

Group/Company

2013 2012Number Rs. ’000 Number Rs. ’000

Issued and fully-paid

At beginning of the year 59,861,512 598,615 59,861,512 598,615

At end of the year 59,861,512 598,615 59,861,512 598,615



23. INtEREst-BEARINg BoRRowINgs

23.1 Interest-Bearing Borrowings - Non-Current

Group


Long term loans (Note 23.1.1) 1,042,411 1,297,419 805,142

Finance lease obligations net of Interest (Note 23.1.2) 600,270 602,554 433,245

1,642,681 1,899,973 1,238,387

23.1.1 Long term Loans

At beginning of the year 1,622,165 1,219,980 1,019,360

On acquisition of subsidiary – 698,241 –

Obtained during the year 17,171 126,424 702,521

Repayments during the year (329,768) (406,555) (537,246)

Exchange translation difference 66,767 (15,925) 35,345

1,376,335 1,622,165 1,219,980

Repayments due within one year of reporting date

(included under current liabilities - Note 23.2) (333,924) (324,746) (414,838)

Repayment due after one year 1,042,411 1,297,419 805,142

Analysis of long term loans by the year of repayment

Group


Long term loans repayable within one year from the reporting date 333,925 324,744 414,838

Long term loans repayable between 2-5 years from the reporting date 903,786 1,033,759 687,001

Long term loans repayable after 5 years from the reporting date 138,627 263,661 118,141

1,376,338 1,622,164 1,219,980

23.1.2 Finance Lease obligations Net of Interest

Group

2013 2012Rs. ’000 Rs. ’000

At beginning of the year 2,611,957 2,688,160

Repayments during the year (28,387) (27,846)

Exchange translation difference 584 (123)

Gross liability - At the end of the year 2,584,154 2,660,191

Finance cost allocated for future periods (1,981,270) (2,055,165)

Net liability - At the end of the year 602,884 605,026




Analysis of finance lease obligation net of interest by the year of repayment

Payable within one year

Gross liability 79,911 77,131 61,758

Finance cost allocated for future periods (77,297) (74,659) (59,628)

Net liability transferred to current liabilities (Note 23.2) 2,614 2,472 2,130

Payable within two to five years

Gross liability 319,755 319,718 226,472

Finance cost allocated for future periods (310,194) (310,335) (218,542)

Net liability 9,561 9,383 7,930

Payable after five years

Gross liability 2,184,489 2,263,341 1,674,288

Finance cost allocated for future periods (1,593,780) (1,670,170) (1,248,973)

Net liability 590,709 593,171 425,315

Net liability payable after one year 600,270 602,554 433,245

23.2 Interest-Bearing Borrowings - Current

Group Company


Long term loans (Note 23.1.1) 333,924 324,746 414,838 – – 110,460

Finance lease obligations net of interest (Note 23.1.1) 2,614 2,472 2,130 – – –

Short term loans and bank overdrafts 2,350,402 3,447,198 3,288,557 320,792 372,980 867,168

2,686,940 3,774,416 3,705,525 320,792 372,980 977,628

23.3 Details of term Loans

Company Lender/rate of March 31 ,2013 March 31 ,2012 Repayment Security interest (p.a.) Rs. ’000 Rs. ’000 Rs. ’000

Venigros (Pvt) Ltd. NDB Bank 6.5% – 4,624 941 x 36 inst. Monthly ended 31.08.2012 Mortgage over Heater at Weliweriya

Kelani Valley Plantations PLC

NDB Bank 9.51% 3,008 7,515 376 x 120 inst. Monthly ending 31.08.2013 Primary mortgage of Rs. 255 million over the lease-hold rights of Panawatta and Pedro Estates have been pledged and a letter of undertaking from DPL Plantations (Pvt) Ltd., was given to subordinate management fee and dividends in a default situation of Term Loan.

NDB Bank 9.51% 6,300 10,747 370 x 120 inst. Monthly ending 31.05.2014

NDB Bank 6.5% 1,500 6,000 375 x 48 inst. Monthly ending 30.04.2013

DFCC Bank 9.42% 45,733 56,933 933 x 90 inst. Monthly ending 31.01.2017 Primary mortgage of Rs. 348 million over the leasehold rights of Halgolla, We Oya, Polatagama and Ederapola Estates and letter of undertakings from DPL Plantations (Pvt) Ltd., was given to subordinate management fee and dividends in a default situation of Term Loan.

DFCC Bank 6.50% 8,706 13,250 379 x 84 inst. Monthly ending 30.11.2014







Company Lender/rate of March 31 ,2013 March 31 ,2012 Repayment Security interest (p.a.) Rs. ’000 Rs. ’000 Rs. ’000

MABROC Teas (Pvt) Ltd.

Union Bank 5% 17,171 22,000 954 x 18 inst. Monthly ending 10.06.2014 Primary mortgage over blending machine

ICOGUANTI S.p.A. Alessandria Financing 1.95 % (EURO 1 million)

143,274 134,550 Repayment over 2 years as per agreed

schedule

Monthly 30.06.2025 –

Dipped Products (Thailand) Ltd.

Thai Military BankPublic Company Ltd. MLR - 0.75%(Baht 150 million)

– 138,808 Baht 150 x 8 inst. Monthly ended 31.12.2012 Mortgage over land, building & machinery.Baht 500 x 12 inst.

Baht 1,500 x 12 inst.



Baht 700 x 1 inst.

HSBC - Thailand Minimum of 4.25% 1 month LIBOR +2%(USD 4 million)

441,008 457,106 USD 111,111 x 36 inst.

Monthly ending 30.09.2015 Mortgage over land, building & machinery and corporate guarantee by Parent Company.

Thalawakelle Tea Estates PLC

NDB Bank 9.42% 70,203 81,908 975 x 96 Inst. Monthly ending 31.12.2018 Primary mortgage over leasehold rights of Somerset, Great Western, Holyrood, Logie and Dessford Estates.

NDB Bank 13.25% 144,705 147,157 2,453 x 60 Inst. Monthly ending 30.11.2017

NDB Bank 13.07% 96,497 96,496 1,608 x 60 Inst. Monthly ending 30.06.2023

NDB Bank 13.07% 15,000 15,000 250 x 60 Inst. Monthly ending 30.09.2023

Sampath Bank 10.24%

77,173 90,217 1,087 x 92 Inst. Monthly ending 30.11.2018 Primary mortgage bond for Rs. 100 million over leasehold rights of Mattakelle Estate.

Sampath Bank 10.76%

50,000 50,000 1,050 x 48 Inst. Monthly ending 30.09.2018 Primary mortgage bond for Rs. 30 million over leasehold rights of Clarendon Estate. Secondary mortgage over leasehold right to the value of Rs. 20 million of Deniyaya Estate.

Sampath Bank AWDR+5%

110,588 119,070 1,103 x 96 Inst. Monthly ending 31.12.2017 Primary mortgage bond over leasehold rights for Rs. 132.3 million over Land & building, power generating plant, civil structure and machinery & equipment of the project at Palmerston and Somerset Estates.

Hatton National Bank AWDR+4%

73,894 74,825 1,750 x 96 Inst. Monthly ending 30.01.2018 Primary floating mortgage for Rs. 109 million over leasehold rights of Radella, Palmerstone and Handford Estates.

Commercial Bank 6.5%

– 1,732 220 x 60 inst. Monthly ended 30.09.2012 Primary mortgage bond for Rs. 13 million over 2 numbers of hot water generators Radella and Wattegoda Estates.

Commercial Bank 6.5%

– 2,383 217 x 60 inst. Monthly ended 31.12.2012 Primary mortgage bond for Rs. 14 million over 2 numbers of hot water generators Logie and Dessford Estates.

1,376,338 1,622,165



24. DEFERRED REvENuE

government grants

Group


grants

At beginning of the year 833,129 565,204

On acquisition of subsidiary – 250,474

Received during the year 32,808 17,451

At end of the year 865,937 833,129 565,204

Amortisation


On acquisition of subsidiary – 899

Amortised during the year 37,123 44,534

At end of the year 166,883 129,760 84,327

Carrying amount 699,054 703,369 480,877

25. DEFINED BENEFIt oBLIgAtIoNs

The Group measures the Present Value of Defined Benefit Obligation (PVDBO) which is a defined benefit plan with the advice of an actuary using the Projected

Unit Credit Method.

The actuarial valuation involves making assumptions about discount rate, expected rates of return on assets, future salary increases and mortality rates.

Due to the long term nature of these plans, such estimates are subject to significant uncertainty. All assumptions are reviewed at each reporting date.

Accordingly, the employee benefit obligation is based on the actuarial valuation as of March 31, 2013, carried out by Messrs Actuarial and Management

Consultants (Private) Ltd., actuaries.

The key assumptions used by the actuary include the following:

Assumptions regarding future mortality are based on a 67/70 mortality table, issued by the Institute of Actuaries, London.

The demographic assumptions underlying the valuation with respect to retirement age, early withdrawals from service and retirement on medical grounds were

considered.

2013 2012

kvPL HPsL other* KVPL HPSL Other*

Rate of interest (%) 10 10 11 10 10 11

Rate of salary increase (%)

Workers (%) 22 20 10 22 18.5 10

Executive and clerical (%) 10 10 10 10 10 10

Retirement age

Workers 60 60 55 60 60 55

Executive and clerical 60 55 60 60 55 60



25.1 Net Benefit Expense Categorised under Administrative Expenses

Group Company

2013 2012 2013 2012Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Current service cost 168,026 106,225 14,101 12,950

Interest cost 217,091 126,137 29,478 25,455

Actuarial loss/(gain) (21,439) 59,119 11,783 18,150

363,678 291,481 55,362 56,555

* Other - refers to companies in the Hand Protection sector excluding Dipped Products (Thailand) Ltd. and ICOGUANTI S.p.A.

25.2 Movement in the Present value of the Retirement Benefit Plan are as Follows:Group Company

2013 2012 2013 2012Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

At beginning of the year 2,174,357 1,160,230 262,188 217,411

Exchange translation difference 5,853 (409) – –

Benefit paid by the plan (219,532) (108,811) (27,102) (11,778)

Current service cost 168,026 106,225 14,101 12,950

Interest cost 217,091 126,137 29,478 25,455

On acquisition of subsidiary – 831,866 – –

Actuarial loss/(gain) (21,439) 59,119 11,783 18,150

At end of the year 2,324,356 2,174,357 290,448 262,188

The liability as per Payment of Gratuity Act for Group and Company as at March 31, 2013 are Rs. 1,985,349,143/- and Rs. 234,483,268/- respectively.

26. AgENts’ INDEMNIty FuND

Group

2013 2012Rs. ’000 Rs. ’000


Provision for the year 4,798 4,434

Exchange translation difference 6,010 (153)

Payments during the year (518) (2,999)

At end of the year 52,900 42,610

27. tRADE AND otHER PAyABLEs

Group Company


Trade payables - Related parties – – – 54,620 58,981 1,559

- Others 1,422,482 1,156,844 1,195,219 151,409 101,143 112,741

Total trade payables 1,422,482 1,156,844 1,195,219 206,029 160,124 114,300

Other payables including accrued expenses 1,297,106 1,070,733 907,846 48,890 46,714 46,314

Unclaimed dividends 5,512 3,999 10,245 5,512 3,999 10,245

2,725,100 2,231,576 2,113,310 260,431 210,837 170,859



28. AMouNts DuE to RELAtED PARtIEs

Group Company


Amounts due to subsidiaries

Fully-owned subsidiaries – – – 312,821 595,240 200,775

Partly-owned subsidiaries – – – 172 – 90,461

– – – 312,993 595,240 291,236

Amounts due to Parent Entity

Hayleys PLC 8,666 18,597 26,622 3,703 10,552 11,136

8,666 18,597 26,622 316,696 605,762 302,372

29. sEgMENt INFoRMAtIoN

a. geographical segment Information

2013 2012% %

Asia/Africa 6.02 5.30

South America 6.81 6.64

Australia/New Zealand 2.74 2.74

Europe 36.46 43.72

North America 9.75 9.43

61.79 67.83

Indirect exports 37.97 31.78

Sri Lanka 0.24 0.39

100.00 100.00

b. Business segment Information

Hand Protection Plantations Inter-Segment Total

2013 2012 2013 2012 2013 2012 2013 2012Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Turnover 14,674,543 13,499,025 9,836,401 6,959,168 (853,201) (764,528) 23,657,743 19,693,665

Profit before tax 1,322,300 1,904,903 962,916 532,774 (110,000) – 2,175,216 2,437,677

Non-cash expenses – Depreciation & amortisation of leased assets 312,788 282,475 315,959 192,007 – – 628,747 474,482

Depreciation of investment property 5,335 2,668 – – – – 5,335 2,668

Retiring gratuity 74,236 70,590 289,441 220,891 – – 363,677 291,481

Provision for agents indemnity fund 4,798 4,434 – – – – 4,798 4,434

Capital expenditure 596,480 469,584 437,411 510,446 – – 1,033,891 980,030

Total assets 9,505,935 9,579,860 10,167,054 9,318,942 (164,434) (134,501) 19,508,555 18,764,301

Non-interest-bearing liabilities 2,561,640 1,555,878 3,866,074 4,103,390 (162,141) (120,899) 6,265,573 5,538,369

Cash flows

- Cash flows from operating activities 1,782,120 228,968 953,686 380,217 – – 2,735,806 609,185

- Cash flows from investing activities (324,065) 665,990 (550,422) (778,576) (110,000) 200,000 (984,487) 87,414

- Cash flows from financing activities (858,132) (424,352) (164,229) 241,485 110,000 (200,000) (912,361) (382,867)

30. CAPItAL CoMMItMENts

The approximate amount of capital expenditure approved by the Directors and not contracted for as at March 31, 2013 amount to Rs. 1,235,178,217/-

(2012 - Rs. 509,657,699/-). The approximate capital expenditure approved by the Directors and contracted for which no provision is made in the Financial

Statements as at March 31, 2013 amount to Rs. 36,831,757/- (2012 - Rs. 66,262,127/-).



31. CoNtINgENt LIABILItIEs

The contingent liabilities as at March 31, 2013 on guarantees given by the Group to third parties amounted to Rs. 866,780,931/- (2012 - 726,301,460/-).

Total of this sum relates to facilities obtained by subsidiaries.

32. RELAtED PARty DIsCLosuREs

Key Management Personnel (KMP) comprise the Directors of the Company. Directors’ remuneration in respect of the Company and the Group for the financial year

ended March 31, 2013 are given in Note 7 to the Financial Statements. The remuneration to the Managing Director is paid by the parent and included within the

services-related expenses below:

During the year, the Company has transferred a vehicle to one of the Directors of DPL at its carrying value of Rs. 6,297,833/-.

Mr. B A Mahipala who is a Director of Hanwella Rubber Products Ltd., is also a Director of Hanwella Estate Development (Pvt) Ltd. During the year, Hanwella

Rubber Products Ltd., has paid Rs. 202,500/- (2012 - Rs. 195,000/-) and Rs. 405,000/- (2012 - Rs. 390,000/-) to Mr. B A Mahipala and Hanwella Estate

Development (Pvt) Ltd., respectively for leasing of factory land.

Group Company

2013 2012 2013 2012Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

transactions with Related Parties

subsidiaries

Inventory transferred to – – 458,402 268,239

Purchase of latex – – (214,910) (329,360)

Skim sales – – 10,995 13,416

Export sales – – 110,364 113,206

Services-related expenses – – 276,684 252,183

Rental income earned – – 2,772 2,681

Dividend income – – 581,344 87,032

Fund transfers – – (837,191) (743,077)

Processing-related expenses incurred – – (48,150) (40,778)

Current account interest earned/(paid) – – (12,128) 5,341

Flock purchases – – (29,403) (20,097)

Parent

Services-related expenses paid (175,407) (137,498) (47,894) (32,025)

Consideration paid for purchase of investment – (280,000) – –

Short term deposits placed – 425,677 – 425,677

Interest earned on short term deposits 43,650 30,053 43,650 30,053

Affiliates

Sales of scrap gloves 1,211 2,020 668 719

Services-related expenses (64,893) (56,949) (40,006) (25,135)

Rental income 8,400 4,200 8,400 4,200

Purchase of goods (173,544) (300,630) (2,884) (3,864)

Purchase of investment property – (220,000) – (220,000)

Interest earned on short term deposits 2,127 – 2,127 –



Transactions with Agility Logistics (Pvt) Ltd., Agro Technica Ltd., Alumex (Pvt) Ltd., Civaro Lanka (Pvt) Ltd., Clarion Shipping (Pvt) Ltd., CMA CGM Lanka (Pvt) Ltd.,

Delmege Forsyth & Co. (Shipping) Ltd., Delmege Freight Services (Pvt) Ltd., Diesel & Motor Engineering Co. PLC., Expelogix (Pvt) Ltd., Haychem Ltd., Hayleys

Agriculture Holdings Ltd., Hayleys Agro Biotech (Pvt) Ltd., Hayleys Agro Fertilizers (Pvt) Ltd., Hayleys Business Solutions International (Pvt) Ltd., Hayleys Consumer

Products Ltd., Hayleys Electronics Lighting (Pvt) Ltd., Hayleys Industrial Solutions (Pvt) Ltd., Hayleys MGT Knitting Mills PLC, Hayleys Power Ltd., Hayleys Travels &

Tours (Pvt) Ltd., Hotel Services (Ceylon) PLC., Lewis Shipping (Pvt) Ltd., Logiventures (Pvt) Ltd., Logiwiz Ltd., MIT Cargo (Pvt) Ltd., Moceti Lanka (Pvt) Ltd., Puritas

(Pvt) Ltd., Quality Seed Co. (Pvt) Ltd., Sri Lanka Insurance Corporation Ltd. and Star Packaging (Pvt) Ltd. are given above under details of related party transactions

with affiliates.

33. FAIR vALuE oF FINANCIAL INstRuMENts

Set out below is a comparison by class of the carrying amounts and fair value of the Group’s financial instruments that are carried in the Financial Statements. This

table does not include the fair values of non–financial assets and non–financial liabilities.

Company

Carrying Amount Fair Value

2013 Rs. ’000

2012Rs. ’000

As at April 1, 2011Rs. ’000

2013 Rs. ’000

2012Rs. ’000


Financial Assets

Other financial assets

Financial instruments at fair value through profit or loss

- Foreign exchange forward contracts – 3,004 17,214 – 3,004 17,214

Available-for-sale financial investments

- Quoted equity shares – – 1,351,166 – – 1,351,166

Trade and other receivables 308,031 345,249 270,165 308,031 345,249 270,165

Cash and short term deposits 92,569 448,132 25,485 92,569 448,132 25,485

total 400,600 796,385 1,664,030 400,600 796,385 1,664,030

Financial Liabilities

Interest-bearing loans and borrowings

- Long term loans – – 110,460 – – 110,460

- Short term loans and bank overdrafts 2,350,402 3,447,198 3,288,557 2,350,402 3,447,198 3,288,557

Trade and other payables 260,431 210,837 170,859 260,431 210,837 170,859

Other financial liabilities

Derivative financial liabilities at fair value through profit or loss

- Foreign exchange forward contracts – – 1,930 – – 1,930

total 2,610,833 3,658,035 3,571,806 2,610,833 3,658,035 3,571,806



Group

Carrying Amount Fair Value

2013 Rs. ’000

2012Rs. ’000


2013 Rs. ’000

2012Rs. ’000


Financial Assets

Other financial assets

Financial instruments at fair value through profit or loss

- Foreign exchange forward contracts 838 3,004 19,097 838 3,004 19,097

Available-for-sale financial investments

- Quoted equity shares 22 3,025 1,354,201 22 3,025 1,354,201

- Unquoted equity shares 5,299 7,849 8,443 5,299 7,849 8,443

Trade and other receivables 4,162,919 3,995,668 3,428,132 4,162,919 3,995,668 3,428,132

Cash and short term deposits 746,381 1,004,220 531,847 746,381 1,004,220 531,847

total 4,915,459 5,013,766 5,341,720 4,915,459 5,013,766 5,341,720

Financial Liabilities

Interest-bearing loans and borrowings

- Obligations under finance leases 602,884 605,026 435,375 602,884 605,026 435,375

- Long term loans 1,376,338 1,622,165 1,219,980 1,376,338 1,622,165 1,219,980

- Short term loans and Bank overdraft 2,350,402 3,447,198 3,288,557 2,350,402 3,447,198 3,288,557

Trade and other payables 2,725,100 2,231,576 2,113,310 2,725,100 2,231,576 2,113,310

Other financial liabilities

Derivative financial liabilities at fair value through profit or loss

- Foreign exchange forward contracts – 9,215 1,930 – 9,215 1,930

total 7,054,724 7,405,965 7,059,152 7,054,724 7,905,965 7,059,152

The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing

parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

- Cash and short term deposits, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short term

maturities of these instruments.

- Fair value of quoted equity shares is based on price quotations at the reporting date.

The Group enters into derivative financial instruments with various counterparties, principally financial institutions in Sri Lanka. Derivatives valued using valuation

techniques with market observable inputs are mainly foreign exchange forward contracts. The most frequently applied valuation techniques include forward

pricing. The models incorporate various inputs including the foreign exchange spot and forward rates.



Fair value Hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: Other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: Techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

As at March 31, 2013, the Group/Company held the following financial instruments carried at fair value in the Statement of Financial Position:

Group Company

2013 Level 1 Level 2 Level 3 2013 Level 1 Level 2 Level 3

Assets Measured at Fair value

Financial assets at fair value through profit or loss:

Foreign exchange forward contracts 838 – 838 – – – – –

Available-for-sale financial assets:

Equity shares 5,321 22 – 5,299 – – – –

During the reporting period ended March 31, 2013, there were no transfers between Level 1 and Level 2 fair value measurements.

As at March 31, 2012, the Group/Company held the following financial instruments measured at fair value:

Group Company

2012 Level 1 Level 2 Level 3 2012 Level 1 Level 2 Level 3

Assets Measured at Fair value

Financial assets at fair value through profit or loss:

Foreign exchange forward contracts 3,004 – 3,004 – 3,004 – 3,004 –

Available-for-sale financial assets:

Equity shares 10,874 25 – 10,849 – – – –

Liabilities Measured at Fair value

Financial liabilities at fair value through profit or loss:

Foreign exchange forward contracts 9,215 – 9,215 – – – – –

During the reporting period ended March 31, 2012, there were no transfers between Level 1 and Level 2 fair value measurements.

34. FINANCIAL RIsk MANAgEMENt

The Company has exposure to the following risks from financial instruments:

1. Credit risk

2. Liquidity risk

3. Market 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 FRAMEwoRk

The Board of Directors have the overall responsibility for the establishment and oversight of the Group’s risk management framework, which includes developing

and monitoring the Group’s risk management policies.



CREDIt RIsk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is

exposed to credit risk from its operating activities (primarily from trade receivables) and from its financing activities, including deposits with banks and financial

institutions, foreign exchange transactions and other financial instruments.

trade and other Receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables.

The maximum exposure to credit risk for trade and other receivables at the reporting date by currency-wise was as follows:

2013Group Company

Rs. ’000 Rs. ’000

Rupees 361,952 29,734

United States Dollar 2,003,836 262,843

Euro 1,797,131 15,454

4,162,919 308,031

Investments

Credit risk from invested balances with the financial institutions are managed by the Hayleys Group Treasury Department in accordance with the Group’s policy.

Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. The limits are set to minimise

the concentration of risks and therefore, mitigate financial loss through potential counterparty’s failure.

Cash and Cash Equivalents

The Group held cash and cash equivalents of Rs. 746 million as at March 31, 2013 which represents its maximum credit exposure on these assets.

Respective credit ratings of banks which group cash balances held are as follows:

People’s Bank - AAA(lka)

Standard Chartered Bank - AAA(lka)

Hong Kong and Shanghai Banking Corporation Ltd. - AAA(lka)

Sampath Bank PLC - AA(lka)

Hatton National Bank PLC - AA-(lka)

Bank of Ceylon - AA+(lka)

Deutsche Bank - A+

LIQuIDIty RIsk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering

cash or another financial asset. The Group’s approach to managing liquidity 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.



The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, and finance leases.

Access to sources of funding is sufficiently available and debt maturing within 12 months can be rolled over with existing lenders.

The liquidity requirements of business units and subsidiaries are met through short term loans to cover any short term fluctuations and longer term funding to address

any structural liquidity requirements. The Group monitors the cash flows of its group companies and obtains adequate bank facilities to meet the funding requirements.

The Group does not concentrate on a single financial institution, thereby minimising the expose to liquidity risk. The Group aims to fund investment activities of its

group companies by funding the long term investment with long term financial sources. Short term investments are funded using short term loans.

The monthly liquidity position is monitored by the Hayleys Group Treasury. All liquidity policies and procedures are subject to review and approval by the Hayleys

Group Treasury.

The table below summarises the maturity profile of financial liabilities based on contractual undiscounted payments:

group

Year ended March 31, 2013(Rs. ’000)

On Demand

Less than 3 Months

3 to 12 Months

1 to 5 Years

>5 Years

Total

Interest-bearing loans and borrowings 1,774,082 181,164 731,693 913,346 729,336 4,329,621

Trade and other payables 464 2,478,109 246,527 – – 2,725,100

1,774,546 2,659,273 978,220 913,346 729,336 7,054,721Company

Year ended March 31, 2013(Rs. ’000)

On Demand

Less than 3 Months

3 to 12 Months

1 to 5 Years

>5 Years

Total

Interest-bearing loans and borrowings 41,634 279,158 – – – 320,792

Trade and other payables – 260,431 – – – 260,431

41,634 539,589 – – – 581,223

MARkEt RIsk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise four

types of risk: interest rate risk, currency risk, commodity price risk and other price risk, such as equity price risk. Financial instruments affected by market risk include

loans and borrowings, deposits, available-for-sale investments and derivative financial instruments. The objective of market risk management is to manage and

control market risk exposures within acceptable parameters, while optimising the return.

INtEREst RAtE RIsk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group

mainly borrows in the short term to funds its working capital requirement which are linked to floating interest rates. For other funding needs the Group maintains a

proper mix of interest rate based on the basis of the predictability of future cashflows. The Hayleys Group Treasury closely monitors the interest rate fluctuations in

the market and advices the sectors on a daily basis.



The following table demonstrates the sensitivity to a reasonably possible change in interest rates. With all other variables held constant, the Group’s and Company’s

profit before tax is affected through the impact on rate of borrowings as follows:

Increase/decrease in

interest rate

Effect on profit before tax2013

GroupRs. ‘000

2013Company

Rs. ‘000

Sensitivity

Only using +1% (51,483) (3,995)

borrowings -1% 51,483 3,995

Sensitivity

Using borrowings +1% (42,484) (1,898)

and deposits -1% 42,484 1,898

FoREIgN CuRRENCy RIsk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The

Group is exposed to currency risk on sales, purchases and borrowings and net investments in foreign subsidiaries that are denominated in a currency other than

the respective functional currencies of the Group. These currencies primarily are: the Euro, US Dollars (USD), Pound Sterling (GBP) and Thailand (Baht).

The Group hedges its exposure to fluctuations on the translation of its foreign operations by holding net borrowings in foreign currencies and by using foreign

currency forwards contracts. Hayleys Group Treasury closely monitors the exchange rate fluctuations and advices to the sectors on a daily basis.

The following table demonstrate the sensitivity to a reasonably possible change in the US Dollar and Euro exchange rate, with all other variables held constant.

The impact on the Group’s and Company’s profit before tax due to the change in exchange rate is as follows:

2013Group Company

USD Euro USD EuroRs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Long term borrowings 270,974 133,022 – –

Short term borrowings 1,007,275 794,988 281,029 –

Trade and other payables 436,240 745,651 33,888 –

Trade and other receivables (2,003,836) (1,797,131) (262,843) (15,454)

Net borrowing/(receivable) - (Rs.) (289,347) (123,470) 52,074 (15,454)

Closing exchange rate (Rs.) 126.89 162.13 126.89 162.13

Net borrowing (functional currency) (2,280) (762) 410 (95)

Increase exchange rate in 5% (Rs.) 133.23 170.24 133.23 170.24

Impact to the PBT 14,455 6,180 (2,599) 770

Decrease exchange rate in 5% (Rs.) 120.55 154.02 120.55 154.02

Impact to the PBT (14,455) (6,180) 2,599 (770)




CAPItAL MANAgEMENt

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the

business. Capital consists of share capital, reserves, retained earnings and non-controlling interests of the Group. The Board of Directors monitors the return on

capital as well as the level of dividends to ordinary shareholders.

The Group’s net debt to adjusted equity ratio at the reporting date was as follows:

2013Group Company

Rs. ‘000 Rs. ‘000

Interest-Bearing borrowing 1,642,681 –

Current portion of long term interest-bearing borrowings

336,538 –

Short term interest-bearing borrowings 2,350,402 320,792

Total borrowings 4,329,621 320,792

Equity 8,913,362 3,069,524

Equity and debts 13,242,983 3,390,316

Gearing Ratio 33% 9%

35. EvENts AFtER tHE REPoRtINg PERIoD

Proposed Dividend

Directors have proposed the payment of final dividend of Rs. 3.00 per share for the year ended March 31, 2013 which will be declared at the Annual General

Meeting to be held on June 27, 2013. In accordance with Sri Lanka Accounting Standard - LKAS 10 on ‘Events after the Reporting Period’, the proposed final

dividend has not been recognised as a liability as at the end of reporting period.

No other circumstances have arisen since the reporting period end which would require adjustments to, or disclosure in the Financial Statements.



Ten Year Summary2013 2012 2011 2010 2009 2008 2007 2006 2005 2004

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Trading Results Trading Results

Gross turnover 23,657,743 19,693,665 14,869,245 11,823,707 11,895,985 11,152,895 9,412,610 7,109,400 6,138,827 4,928,955 Gross turnover

Profit before tax 2,175,216 2,437,677 748,110 737,609 616,437 615,969 774,530 415,013 670,826 427,111 Profit before tax

Taxation (390,943) (294,922) (162,527) (173,332) (113,709) (100,627) (106,242) (66,128) (72,345) (66,948) Taxation

Profit after tax 1,784,273 2,142,755 585,583 564,277 502,728 515,342 668,288 348,885 598,481 360,163 Profit after tax

Non-controlling interest (366,385) (236,780) (138,969) (83,391) (139,858) (144,220) (111,487) (62,422) (111,296) (65,672) Non-controlling interest

Profit attributable to equity holders of the Parent 1,417,888 1,905,975 446,614 480,886 362,870 371,122 556,801 286,463 487,185 294,491 Profit attributable to equity holders of the Parent

Non-Current Assets Non-Current Assets

Property, plant & equipment 10,119,322 9,451,513 6,246,770 4,899,811 4,826,977 4,402,997 4,014,111 3,465,853 3,018,582 2,249,809 Property, plant & equipment

Investments 22 2,575 1,353,751 289,211 287,307 295,619 277,299 167,829 163,379 152,078 Investments

Other non-current assets 846,822 809,644 586,313 39,700 37,276 27,617 20,212 16,452 28,914 31,470 Other non-current assets

10,966,166 10,263,732 8,186,834 5,228,722 5,151,560 4,726,233 4,311,622 3,650,134 3,210,875 2,433,357

Current assets 8,542,389 8,500,569 6,803,292 5,548,561 5,275,073 4,871,990 4,528,946 3,501,056 3,671,383 2,950,906 Current assets

Total assets 19,508,555 18,764,301 14,990,126 10,777,283 10,426,633 9,598,223 8,840,568 7,151,190 6,882,258 5,384,263 Total assets

Capital & Reserves Capital & Reserves

Stated capital 598,615 598,615 598,615 598,615 598,615 598,615 598,615 598,615 598,615 249,423 Stated capital

Capital reserves 452,892 236,852 1,390,231 228,505 174,223 172,018 170,121 105,493 78,325 175,611 Capital reserves

Revenue reserves 5,793,215 4,965,582 3,153,487 2,483,243 2,306,312 2,039,771 1,876,993 1,474,928 1,470,855 1,356,672 Revenue reserves

Shareholders’ funds 6,844,722 5,801,049 5,142,333 3,310,363 3,079,150 2,810,404 2,645,729 2,179,036 2,147,795 1,781,706 Shareholders’ funds

Non-controlling interest 2,068,640 1,750,494 840,397 758,047 785,912 710,504 593,048 457,459 429,630 461,204 Non-controlling interest

Total equity 8,913,362 7,551,543 5,982,730 4,068,410 3,865,062 3,520,908 3,238,777 2,636,495 2,577,425 2,242,910 Total equity

Non-Current Liabilities Non-Current Liabilities

Deferred tax liability 370,723 290,486 210,707 135,956 140,385 133,120 107,428 87,587 104,232 105,151 Deferred tax liability

Interest-bearing borrowings 1,642,681 1,899,973 1,238,387 1,049,654 1,219,073 1,360,252 1,448,435 1,420,147 1,119,965 595,795 Interest-bearing borrowings

Other non-current liabilities 3,076,310 2,920,336 1,682,435 1,461,311 1,192,936 1,021,749 840,581 698,647 612,581 559,182 Other non-current liabilities

5,089,714 5,110,795 3,131,529 2,646,921 2,552,394 2,515,121 2,396,444 2,206,381 1,836,778 1,260,128

Current Liabilities Current Liabilities

Current portion of interest- Current portion of interest-

bearing borrowings 336,539 327,218 416,968 337,519 311,742 256,454 325,049 383,863 274,509 23,333 bearing borrowings

Other current liabilities 5,168,940 5,774,745 5,458,899 3,724,433 3,697,435 3,305,740 2,880,298 1,924,451 2,193,546 1,857,892 Other current liabilities

5,505,479 6,101,963 5,875,867 4,061,952 4,009,177 3,562,194 3,205,347 2,308,314 2,468,055 1,881,225

Total equity and liabilities 19,508,555 18,764,301 14,990,126 10,777,283 10,426,633 9,598,223 8,840,568 7,151,190 6,882,258 5,384,263 Total equity and liabilities

Ratios & Other Information Ratios & Other Information

Earnings per share (Rs.) 23.69 31.84 7.46 8.03 6.06 6.20 9.30 4.79 8.14 11.81 Earnings per share (Rs.)

Return on equity (%) 20.72 32.86 8.69 14.50 11.80 13.20 21.00 13.10 22.70 16.50 Return on equity (%)

Market price per share (Rs.) 111.00 100.10 116.10 103.75 55.25 79.50 109.25 82.00 92.00 85.00 Market price per share (Rs.)

Price earnings ratio (times) 4.70 3.10 15.60 12.90 9.10 12.80 11.70 17.10 11.30 7.20 Price earnings ratio (times)

Dividend per share (Rs.) 7.00 6.00 3.00 3.75 3.00 3.00 4.50 3.00 4.00 4.00 Dividend per share (Rs.)

Net assets per share (Rs.)** 114.34 96.91 85.90 55.30 51.44 46.95 44.20 36.40 35.88 29.76 Net assets per share (Rs.)**

Effective rate of dividend (%) 70.00 60.00 30.00 37.50 30.00 30.00 45.00 30.00 40.00 40.00 Effective rate of dividend (%)

Dividend yield (%) 6.3 6.0 2.6 3.60 5.40 3.80 4.10 3.70 4.30 4.70 Dividend yield (%)

Dividend cover (times) 3.4 5.3 2.5 2.10 2.00 2.10 2.10 1.60 2.00 3.00 Dividend cover (times)

Debt equity ratio 0.29 0.38 0.32 0.42 0.50 0.58 0.67 0.83 0.65 0.35 Debt equity ratio

Current ratio (times) 1.55 1.39 1.16 1.37 1.32 1.37 1.41 1.52 1.49 1.57 Current ratio (times)

Figures in brackets indicate deductions.

** Computed based on 59,861,512 shares on issue as at March 31, 2013

05. Annexes

Ten Year Summary



Ten Year Summary2013 2012 2011 2010 2009 2008 2007 2006 2005 2004

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Trading Results Trading Results

Gross turnover 23,657,743 19,693,665 14,869,245 11,823,707 11,895,985 11,152,895 9,412,610 7,109,400 6,138,827 4,928,955 Gross turnover

Profit before tax 2,175,216 2,437,677 748,110 737,609 616,437 615,969 774,530 415,013 670,826 427,111 Profit before tax

Taxation (390,943) (294,922) (162,527) (173,332) (113,709) (100,627) (106,242) (66,128) (72,345) (66,948) Taxation

Profit after tax 1,784,273 2,142,755 585,583 564,277 502,728 515,342 668,288 348,885 598,481 360,163 Profit after tax

Non-controlling interest (366,385) (236,780) (138,969) (83,391) (139,858) (144,220) (111,487) (62,422) (111,296) (65,672) Non-controlling interest

Profit attributable to equity holders of the Parent 1,417,888 1,905,975 446,614 480,886 362,870 371,122 556,801 286,463 487,185 294,491 Profit attributable to equity holders of the Parent

Non-Current Assets Non-Current Assets

Property, plant & equipment 10,119,322 9,451,513 6,246,770 4,899,811 4,826,977 4,402,997 4,014,111 3,465,853 3,018,582 2,249,809 Property, plant & equipment

Investments 22 2,575 1,353,751 289,211 287,307 295,619 277,299 167,829 163,379 152,078 Investments

Other non-current assets 846,822 809,644 586,313 39,700 37,276 27,617 20,212 16,452 28,914 31,470 Other non-current assets

10,966,166 10,263,732 8,186,834 5,228,722 5,151,560 4,726,233 4,311,622 3,650,134 3,210,875 2,433,357

Current assets 8,542,389 8,500,569 6,803,292 5,548,561 5,275,073 4,871,990 4,528,946 3,501,056 3,671,383 2,950,906 Current assets

Total assets 19,508,555 18,764,301 14,990,126 10,777,283 10,426,633 9,598,223 8,840,568 7,151,190 6,882,258 5,384,263 Total assets

Capital & Reserves Capital & Reserves

Stated capital 598,615 598,615 598,615 598,615 598,615 598,615 598,615 598,615 598,615 249,423 Stated capital

Capital reserves 452,892 236,852 1,390,231 228,505 174,223 172,018 170,121 105,493 78,325 175,611 Capital reserves

Revenue reserves 5,793,215 4,965,582 3,153,487 2,483,243 2,306,312 2,039,771 1,876,993 1,474,928 1,470,855 1,356,672 Revenue reserves

Shareholders’ funds 6,844,722 5,801,049 5,142,333 3,310,363 3,079,150 2,810,404 2,645,729 2,179,036 2,147,795 1,781,706 Shareholders’ funds

Non-controlling interest 2,068,640 1,750,494 840,397 758,047 785,912 710,504 593,048 457,459 429,630 461,204 Non-controlling interest

Total equity 8,913,362 7,551,543 5,982,730 4,068,410 3,865,062 3,520,908 3,238,777 2,636,495 2,577,425 2,242,910 Total equity

Non-Current Liabilities Non-Current Liabilities

Deferred tax liability 370,723 290,486 210,707 135,956 140,385 133,120 107,428 87,587 104,232 105,151 Deferred tax liability

Interest-bearing borrowings 1,642,681 1,899,973 1,238,387 1,049,654 1,219,073 1,360,252 1,448,435 1,420,147 1,119,965 595,795 Interest-bearing borrowings

Other non-current liabilities 3,076,310 2,920,336 1,682,435 1,461,311 1,192,936 1,021,749 840,581 698,647 612,581 559,182 Other non-current liabilities

5,089,714 5,110,795 3,131,529 2,646,921 2,552,394 2,515,121 2,396,444 2,206,381 1,836,778 1,260,128

Current Liabilities Current Liabilities

Current portion of interest- Current portion of interest-

bearing borrowings 336,539 327,218 416,968 337,519 311,742 256,454 325,049 383,863 274,509 23,333 bearing borrowings

Other current liabilities 5,168,940 5,774,745 5,458,899 3,724,433 3,697,435 3,305,740 2,880,298 1,924,451 2,193,546 1,857,892 Other current liabilities

5,505,479 6,101,963 5,875,867 4,061,952 4,009,177 3,562,194 3,205,347 2,308,314 2,468,055 1,881,225

Total equity and liabilities 19,508,555 18,764,301 14,990,126 10,777,283 10,426,633 9,598,223 8,840,568 7,151,190 6,882,258 5,384,263 Total equity and liabilities

Ratios & Other Information Ratios & Other Information

Earnings per share (Rs.) 23.69 31.84 7.46 8.03 6.06 6.20 9.30 4.79 8.14 11.81 Earnings per share (Rs.)

Return on equity (%) 20.72 32.86 8.69 14.50 11.80 13.20 21.00 13.10 22.70 16.50 Return on equity (%)

Market price per share (Rs.) 111.00 100.10 116.10 103.75 55.25 79.50 109.25 82.00 92.00 85.00 Market price per share (Rs.)

Price earnings ratio (times) 4.70 3.10 15.60 12.90 9.10 12.80 11.70 17.10 11.30 7.20 Price earnings ratio (times)

Dividend per share (Rs.) 7.00 6.00 3.00 3.75 3.00 3.00 4.50 3.00 4.00 4.00 Dividend per share (Rs.)

Net assets per share (Rs.)** 114.34 96.91 85.90 55.30 51.44 46.95 44.20 36.40 35.88 29.76 Net assets per share (Rs.)**

Effective rate of dividend (%) 70.00 60.00 30.00 37.50 30.00 30.00 45.00 30.00 40.00 40.00 Effective rate of dividend (%)

Dividend yield (%) 6.3 6.0 2.6 3.60 5.40 3.80 4.10 3.70 4.30 4.70 Dividend yield (%)

Dividend cover (times) 3.4 5.3 2.5 2.10 2.00 2.10 2.10 1.60 2.00 3.00 Dividend cover (times)

Debt equity ratio 0.29 0.38 0.32 0.42 0.50 0.58 0.67 0.83 0.65 0.35 Debt equity ratio

Current ratio (times) 1.55 1.39 1.16 1.37 1.32 1.37 1.41 1.52 1.49 1.57 Current ratio (times)

Figures in brackets indicate deductions.

** Computed based on 59,861,512 shares on issue as at March 31, 2013

Ten Year Summary



Ten Year Summary

Ten Year Summary

S ’ FH A R E H O L D E R S U N D SRs. million

17

81

, 21

47

,

21

79

, 26

45

,

2,8

10

30

79

,

32

99

,

51,

42

58,

01

68

45

,

2004

2008

2005

2006

2007

2009

2010

2011

2012

2013

2004

2008

2005

2006

2007

2009

2010

2011

2012

2013

E P SA R N I N G S E R H A R ERs.

11

.81

8.1

4

4.7

9 9.3

0

6.2

0

6.0

6

8.0

3

7.4

6

31

.84

23

.69

P B TR O F I T E F O R E A XRs. million

42

7 67

1

41

5 77

5

61

6

61

6

73

8

74

8

2,4

38

2,1

75

2004

2008

2005

2006

2007

2009

2010

2011

2012

2013

N A P SE T S S E T S E R H A R ERs.

30 36

36 44

47 51

55

86

97 1

14

2004

2008

2005

2006

2007

2009

2010

2011

2012

2013

P E RR I C E A R N I N G S A T I OTimes

7.2

0 11

.30

17

.10

11

.70

12

.82

9.1

2 12

.92

15

.60

3.1

0

4.7

0

2004

2008

2005

2006

2007

2009

2010

2011

2012

2013

R O EE T U R N N Q U I T Y%

16

.50

22

.70

13

.10 21

.00

13

.21

11

.78

14

.55

8.6

9

32

.86

20

.72

2004

2008

2005

2006

2007

2009

2010

2011

2012

2013



Ten Year Summary

Ten Year Summary

W O R K I N G C A P I T A L

Rs. million

1,0

70

1,2

03

1,1

93

1,3

24

1,3

10

1,2

66

1,4

87

92

7

2,3

99 3,0

37

2004

2008

2005

2006

2007

2009

2010

2011

2012

2013

V AA L U E D D I T I O N

Rs. million

1,8

80

2,3

54

2,5

29

3,3

08

3,8

15

4,0

64

4,0

85

4,4

57

5,7

96

8,4

94

2004

2008

2005

2006

2007

2009

2010

2011

2012

2013

G D D RR O S S I V I D E N D A N D I V I D E N D A T E

Rs. million

0

100

200

300

400

500

0

15

30

45

60

75

Gross Dividend (Rs. million)

Dividend Rate (%)

%

2004

2008

2005

2006

2007

2009

2010

2011

2012

2013

M A R K E T P R I C E P E R S H A R E A N D

A L L S H A R E P R I C E I N D E X

Rs.

Market Price Per Share (Rs.)

All Share Price Index

All Share Price Index

0

30

60

90

120

150

0

1,600

3,200

4,800

6,400

8,000

2004

2008

2005

2006

2007

2009

2010

2011

2012

2013



The Share

1. STOCk ExCHANgE LISTINg

The ordinary shares of Dipped Products PLC, are listed with the Colombo Stock Exchange of Sri Lanka. Interim Financial Statements of the 4th quarter for the year

ended March 31, 2013 have been submitted to the Colombo Stock Exchange as required by the Listing Rules.

2. ORDINARY SHAREHOLDERS

Number of shareholders as at March 31, 2013 - 2,278 (as at March 31, 2012 - 2,333).

Resident Non-Resident TotalNumber of Shares held No. of No. of No. of No. of No. of No. of

Share- Shares % Share- Shares % Share- Shares %holders holders holders

1 - 1,000 1,478 358,208 0.60 10 5,670 0.01 1,488 363,878 0.61

1,001 - 10,000 572 1,961,786 3.28 14 52,832 0.09 586 2,014,618 3.37

10,001 - 100,000 170 4,620,266 7.72 9 225,298 0.38 179 4,845,564 8.09

100,001 - 1,000,000 17 6,573,423 10.98 3 525,818 0.88 20 7,099,241 11.86

Over 1,000,000 4 41,664,715 69.60 1 3,873,496 6.47 5 45,538,211 76.07

Total 2,241 55,178,398 92.18 37 4,683,114 7.82 2,278 59,861,512 100.00

Of the issued Share Capital over 90% is held by residents of Sri Lanka.

March 31, 2013 March 31, 2012Categories of Shareholders No. of No. of No. of No. of

Shares Shareholders Shares Shareholders

Individuals 8,368,681 2,118 4,009,548 2,158

Institutions 51,492,831 160 55,851,964 175

Total 59,861,512 2,278 59,861,512 2,333

3. SHARE VALuATION

The market value of an ordinary share of Dipped Products PLC-

2012/13 2011/12

Highest Rs. 120.00 (March 8, 2013) Rs. 127.00 (September 1, 2011)

Lowest Rs. 84.00 ( July 24,2012) Rs. 80.00 (February 27, 2012)

Year end Rs. 111.00 Rs. 100.10

4. DIVIDEND PAYMENTS

Proposed final dividend of Rs. 3.00 per share is to be declared on June 27, 2013 and will be payable on July 8, 2013. In accordance with the Rules of the Colombo

Stock Exchange the shares of the Company will be quoted ex-dividend with effect from June 28, 2013.

The Share



The Share

5. SHARE TRADINg

2013 2012

Number of transactions 1,339 1,964

Number of shares traded 2,346,207 5,553,492

Value of shares traded (Rs.) 249,780,146 598,854,317

6. FIRST TwENTY SHAREHOLDERS AS AT MARCH 31, 2013

2013 2012Shareholder No. of No. of

Shares % Shares %

1. Hayleys PLC 24,902,073 41.60 24,776,080 41.39

2. Employees’ Provident Fund 7,820,256 13.06 7,524,352 12.57

3. Volanka (Pvt) Ltd. 4,873,640 8.14 4,873,640 8.14

4. Haycarb PLC 4,068,746 6.80 4,068,746 6.80

5. Promar Overseas SA 3,873,496 6.47 3,373,496 5.64

6. National Savings Bank 1,000,000 1.67 1,000,000 1.67

7. Mr. H A Pieris 805,426 1.35 401,264 0.67

8. Bank of Ceylon No. 1 account 792,400 1.32 1,292,400 2.16

9. Ravi Industries Ltd. 567,000 0.95 567,000 0.95

10. Seylan Bank PLC/Symphony Capital Ltd. 562,935 0.95 474,890 0.80

Waldock Mackenzie Ltd./Symphony Capital Ltd. 4,000 4,000

11. E W Balasuriya & Co. (Pvt) Ltd. 453,501 0.76 425,100 0.71

12. Dr. D Jayanntha 415,000 0.69 415,000 0.69

13. Mr. N G Wickremeratne 393,204 0.66 393,204 0.66

14. Renuka Properties Ltd. 324,934 0.54 300,034 0.50

15. Mr. J A G Anandarajah 219,474 0.37 219,474 0.37

16. Mr. D F G Dalpethado 205,743 0.34 184,300 0.31

17. HSBC International Nominees Ltd. - SSBT Deustche Bank 200,044 0.33 200,044 0.33

18. Commercial Bank of Ceylon PLC A/c No. 04 200,000 0.33 200,000 0.33

19. Hallaville Trading Group INC. 200,000 0.33 200,000 0.33

20. Mr. S Krishnananthan 163,044 0.27 163,044 0.27

Total 52,044,916 86.94 51,056,068 85.29

The Share



7. SHARES HELD bY THE PubLIC

As at March 31, 2013, public held 28.96% of the share capital of the Company.

History of Dividend and Scrip Issues (Last 23 years)

Year No. of Cumulative Dividend Dividend ended Issue Basis shares No. of shares per Share paid March 31 ‘000 ’000 Rs. Rs. ’000

1991 Bonus 1:05 1,000 6,000 3.30 19,800

1992 6,000 2.60 15,600

1993 6,000 2.60 15,600

1994 Share Trust (at Rs. 41.00) 600 6,600 3.00 19,800

1995 6,600 3.50 23,100

1996 Bonus 1:05 1,320 7,920 1.75 13,860

Rights (at Rs. 60.00) 1:05 1,584 9,504 1.75 16,632

1997 Bonus 1:05 1,901 11,405 3.50 39,917

1998 Bonus 1:05 2,281 13,686 4.00 54,743

1999 Bonus 1:05 2,737 16,423 3.50 57,480

2000 Bonus 1:08 2,053 18,476 3.00 55,427

2001 18,476 4.00 73,903

2002 18,476 3.50 64,665

2003 Bonus 1:08 2,309 20,785 3.50 72,748

2004 Bonus 1:05 4,157 24,942 4.00 99,769

2005 Bonus 1:05 4,988 29,931 – –

Bonus 1:01 29,931 59,861 4.00 239,446

2006 59,861 3.00 179,585

2007 59,861 4.50 269,377

2008 59,861 3.00 179,585

2009 59,861 3.00 179,585

2010 59,861 3.75 224,480

2011 59,861 3.00 179,585

2012 59,861 6.00 359,169

2013 59,861 7.00 419,031

The Share

The Share



Market Capitalisation (Last 23 years)

Year ended March 31 Market capitalisation Net assets Rs. million Rs. million

1991 690 178

1992 618 210

1993 537 223

1994 574 284

1995 574 340

1996 893 492

1997 984 611

1998 1,505 794

1999 854 961

2000 905 1,032

2001 859 1,179

2002 1,109 1,312

2003 1,143 1,498

2004 2,120 1,782

2005 5,507 2,148

2006 4,909 2,179

2007 6,540 2,646

2008 4,759 2,810

2009 3,307 3,079

2010 6,211 3,310

2011 6,950 5,142

2012 5,992 5,801

2013 6,645 6,845

The Share

The Share



group Structure

Hol

ding

Com

pany

Directors:A M Pandithage - Chairman L G S Gunawardena Dr. K I M Ranasoma - Managing Director S C Ganegoda J A G Anandarajah ∆ K D D PereraG K Seneviratne ∞ M BottinoN Y Fernando L D E A De Silva € - Alternate Director to F MohideenR Seevaratnam R M T Premarathna α

F MohideenK A L S Fernando

V R Gunasekara α

Dipped Products PLC

Manufacture and marketing of industrial and general purpose rubber gloves, Management of tea and rubber plantations.

Incorporated in 1976 in Sri LankaStated capital - Rs. 598,615,120/-

Han

d Pr

otec

tion

Palma Ltd. Directors:A M Pandithage - Chairman N A R R S NanayakkaraDr. K I M Ranasoma S C GanegodaJ A G Anandarajah ∆

L G S Gunawardena

Manufacture and export of latex thread.

Incorporated in 1990 in Sri LankaStated capital - Rs. 40,000,000/-Group interest - 100%

grossart (Pvt) Ltd. Directors:A M Pandithage - Chairman N A R R S NanayakkaraDr. K I M Ranasoma D B K Pathirage Ω

J A G Anandarajah ∆ S C GanegodaN Y Fernando

Manufacture and export of fabric supported and unsupported gloves.


Venigros (Pvt) Ltd. Directors:A M Pandithage - Chairman M BottinoDr. K I M Ranasoma R M T PremarathnaJ A G Anandarajah ∆ S C GanegodaM Orlando Ms. M V Fildier β


Incorporated in 1994 in Sri LankaStated capital - Rs. 80,000,000Group interest - 100%

Neoprex (Pvt) Ltd. Directors:A M Pandithage - Chairman D B K Pathirage Ω

Dr. K I M Ranasoma S C GanegodaJ A G Anandarajah ∆

K A L S Fernando

Manufacture and export of household and industrial gloves.


Texnil (Pvt) Ltd. Directors:A M Pandithage - Chairman R M T PremarathnaDr. K I M Ranasoma S C GanegodaJ A G Anandarajah ∆

Manufacture and export of fabric supported gloves.

Incorporated in 2001 in Sri LankaStated capital - Rs 75,000,000/-Group interest - 100%

Plan

tati

ons

DPL Plantations (Pvt) Ltd. Directors:A M Pandithage - Chairman S C Ganegoda J A G Anandarajah ∆ - Managing Director S T Gunatilleke π

G K Seneviratne ∞ Dr. K I M RanasomaS Siriwardana W G R Rajadurai µ

N Y Fernando

Plantation management.


Hayleys Plantation Services (Pvt) Ltd. Directors:A M Pandithage - Chairman D S SeneviratneS T Gunatilleke π M M M de SilvaMerrill J Fernando S C Ganegoda (Alternate to A M Pandithage)Malik J Fernando J A G Anandarajah ∆

D C Fernando (Alternate to Merrill J Fernando) G K Seneviratne ∞

Ms. M Perera (Alternate to Malik J Fernando) W G R Rajadurai µ


Incorporated in 1992 in Sri LankaStated capital - Rs. 408,030,000/-Group interest - 66.6%

π Retired December 31, 2012 Ω Retired March 05, 2013 ∆ Retired March 31, 2013 β Resigned September 12, 2012 ∞ Retired April 08, 2013 µ Appointed January 01, 2013 × Appointed January 09, 2013 € Appointed August 29, 2012 and Resigned October 23, 2012 α Appointed May 1, 2013

group Structure



Hol

ding

Com

pany

Directors:A M Pandithage - Chairman L G S Gunawardena Dr. K I M Ranasoma - Managing Director S C Ganegoda J A G Anandarajah ∆ K D D PereraG K Seneviratne ∞ M BottinoN Y Fernando L D E A De Silva € - Alternate Director to F MohideenR Seevaratnam R M T Premarathna α

F MohideenK A L S Fernando

V R Gunasekara α

Dipped Products PLC

Manufacture and marketing of industrial and general purpose rubber gloves, Management of tea and rubber plantations.

Incorporated in 1976 in Sri LankaStated capital - Rs. 598,615,120/-

Han

d Pr

otec

tion

Palma Ltd. Directors:A M Pandithage - Chairman N A R R S NanayakkaraDr. K I M Ranasoma S C GanegodaJ A G Anandarajah ∆

L G S Gunawardena

Manufacture and export of latex thread.


grossart (Pvt) Ltd. Directors:A M Pandithage - Chairman N A R R S NanayakkaraDr. K I M Ranasoma D B K Pathirage Ω

J A G Anandarajah ∆ S C GanegodaN Y Fernando



Venigros (Pvt) Ltd. Directors:A M Pandithage - Chairman M BottinoDr. K I M Ranasoma R M T PremarathnaJ A G Anandarajah ∆ S C GanegodaM Orlando Ms. M V Fildier β


Incorporated in 1994 in Sri LankaStated capital - Rs. 80,000,000Group interest - 100%

Neoprex (Pvt) Ltd. Directors:A M Pandithage - Chairman D B K Pathirage Ω

Dr. K I M Ranasoma S C GanegodaJ A G Anandarajah ∆

K A L S Fernando

Manufacture and export of household and industrial gloves.


Texnil (Pvt) Ltd. Directors:A M Pandithage - Chairman R M T PremarathnaDr. K I M Ranasoma S C GanegodaJ A G Anandarajah ∆

Manufacture and export of fabric supported gloves.

Incorporated in 2001 in Sri LankaStated capital - Rs 75,000,000/-Group interest - 100%

Plan

tati

ons

DPL Plantations (Pvt) Ltd. Directors:A M Pandithage - Chairman S C Ganegoda J A G Anandarajah ∆ - Managing Director S T Gunatilleke π

G K Seneviratne ∞ Dr. K I M RanasomaS Siriwardana W G R Rajadurai µ

N Y Fernando



Hayleys Plantation Services (Pvt) Ltd. Directors:A M Pandithage - Chairman D S SeneviratneS T Gunatilleke π M M M de SilvaMerrill J Fernando S C Ganegoda (Alternate to A M Pandithage)Malik J Fernando J A G Anandarajah ∆

D C Fernando (Alternate to Merrill J Fernando) G K Seneviratne ∞

Ms. M Perera (Alternate to Malik J Fernando) W G R Rajadurai µ



Dipped Products (Thailand) Ltd. Directors:A M Pandithage - Chairman N Y Fernando Dr. K I M Ranasoma N A R R S Nanayakkara J A G Anandarajah ∆ S C GanegodaL G S Gunawardena - Managing Director T G Thoradeniya

Manufacture and export of examination gloves.

Incorporated in 2002 in ThailandShare capital - THB 455,000,000Group interest - 99%

ICOguANTI SpA Directors:V Rocchetti - PresidentM Bottino - Joint Managing DirectorM OrlandoA M PandithageDr. K I M Ranasoma - Joint Managing Director

Marketing and distribution of household, industrial and medical gloves and personal protective wear.

Registered in Milan and successors to ICO Sri LankaIncorporated in 1968 in GenoaShare capital - Euro 3,500,000Group interest - 61.1%

Feltex (Pvt) Ltd. Directors:A M Pandithage - Chairman K A L S FernandoDr. K I M Ranasoma N A R R S NanayakkaraJ A G Anandarajah ∆ S C GanegodaN Y Fernando

Manufacture of cotton and synthetic flock.


Hanwella Rubber Products Ltd. Directors:A M Pandithage - Chairman D B K Pathirage Ω

Dr. K I M Ranasoma N Y Fernando J A G Anandarajah ∆

B A Mahipala

Manufacture and export of household, industrial and examination gloves.

Incorporated in 1988 in Sri LankaStated capital - Rs. 250,000,000/- Group interest - 72.6%

kelani Valley Plantations PLC Directors:

A M Pandithage - Chairman S Siriwardana

J A G Anandarajah ∆ S C Ganegoda

G K Seneviratne - Managing Director (resigned as Managing Director on 01.01.2013, resigned as Director on.09.01.2013, and appointed as Alternate Director to A M Pandithage w.e.f. 09.01.2013, resigned as Alternate Director on 08.04.2013 following his retirement)

L T Samarawickrama

S T Gunatilleke π

Dr. K I M Ranasoma

C V Cabraal ×

W G R Rajadurai µ - Managing Director

R Seevaratnam

F Mohideen

Tea and rubber plantations.


group Structure



board of Directors

A M PANDITHAgE

Chairman

Appointed to the DPL Board in 2007 and its

Chairman from July 2009. Joined Hayleys in

1969. Chairman and Chief Executive of Hayleys

PLC since July 2009. Honorary Consul of United

Mexican States (Mexico) to Sri Lanka. Fellow of

the Chartered Institute of Logistics & Transport.

Member of the Presidential Committee on

Maritime Matters. Committee Member of the

Ceylon Chamber of Commerce. Council Member

of the Employers’ Federation of Ceylon. Member

of the Monetary Policy Consultative Committee of

the Central Bank of Sri Lanka. Serves as a Board

Director of Diesel & Motor Engineering Company

PLC, the Delmage Group and Sri Lanka Port

Management and Consultancy Services Ltd.

DR. k I M RANASOMA

Managing Director

Joined in August 2010 as an Executive Director and

took over as Managing Director of DPL from April

2011. Appointed to Hayleys Group Management

Committee in January 2011 and to the Board in

April 2011. Former Country Chairman/Managing

Director of Shell Gas Lanka Ltd. and Shell Terminal

Lanka Ltd. Holds First Class Honours Degree in

Engineering from the University of Peradeniya,

Sri Lanka, a Doctorate from Cambridge University,

UK and an MBA with Distinction from Wales

University, UK. Has overall responsibility for the

DPL Group with specific accountability for the

Hand Protection Sector and Mabroc Teas.

J A g ANANDARAJAH*

(Until March 31, 2013)

Joined DPL in 1980. Appointed to the Board

in 1989 and Managing Director from January

2007 until March 2011. Managing Director of

DPL Plantations (Pvt) Ltd. from February 2011

to March 2013. Appointed to the Hayleys Group

Management Committee in 2001 and to the

Board of Hayleys in January 2007. Chemistry

(Honours) Graduate, University of Peradeniya,

Sri Lanka. Member of the Board of Management,

Industrial Technology Institute, Sri Lanka.

g k SENEVIRATNE*

(Until April 08, 2013)

Plantations

Joined DPL Plantations (Pvt) Ltd. in 1992 and

appointed to its Board in 1995. Chief Executive

of Kelani Valley Plantations PLC since 1994

and appointed to its Board in 1996. Managing

Director of Kelani Valley Plantations PLC from

2004 until March 2013. Appointed to the

DPL Board in 1998 and to the Hayleys Group

Management Committee in January 2007. Past

Chairman of the Planters’ Association of Ceylon.

Served as a Member of Sri Lanka Tea Board,

Rubber Research Board, Plantation Trust Board

and the Tea Association of Sri Lanka. Joined the

plantation industry in 1970. Served as Consultant,

Investment Monitoring Board, JEDB/SLSPC Estates.

N Y FERNANDO

Projects

Joined DPL in 1985. Appointed to the Board in

2004. Mechanical Engineering (Honours) Graduate,

University of Moratuwa, Sri Lanka. Member/

Chartered Engineer of the Institution of Engineers,

Sri Lanka. Member/Chartered Professional

Engineer of the Institute of Engineers, Australia.

Postgraduate Diploma in Industrial Engineering,

NIBM.

R SEEVARATNAM**

Appointed to the Board in 2007. BSc General

Graduate, University of London. FCA, England and

Wales and FCA, Sri Lanka. Former Senior Partner of

KPMG Ford, Rhodes, Thornton & Co. Non-Executive

Independent Director of a number of public

quoted companies.

F MOHIDEEN**

Appointed to the Board in 2008. Holds a Degree

in BSc Mathematics from the University of London

and a MSc in Econometrics from the London

School of Economics. Served as the Deputy

Secretary to the Treasury and Director General,

External Resources Department of the Ministry of

Finance and Planning.

board of Directors



board of Directors

k A L S FERNANDO

Technical


April 2009. Holds a Joint Hons. BSc Degree in

Chemistry and Management from University of

London and a Postgraduate Diploma in TQM.

L g S guNAwARDENA

Medical Gloves


June 2009. Managing Director of Dipped Products

(Thailand) Ltd. since 2009. Holds an MBA from the

Victoria University, Wellington, New Zealand.

S C gANEgODA*

Rejoined Hayleys in March 2007. Appointed to

the Hayleys Group Management Committee in

July 2007 and to the Board of Hayleys in October

2009. Appointed to the DPL Board in October

2009. FCA, Sri Lanka and a Member, Institute of

Certified Management Accountants, Australia.

Holds an MBA from the Postgraduate Institute of

Management, University of Sri Jayawardenapura,

Sri Lanka. Worked for Hayleys and Diesel &

Motor Engineering Co. between 1987 and 2002,

ultimately as an Executive Director of the latter.

Held several senior management positions in

large private sector entities in Sri Lanka and

overseas.

DAMMIkA PERERA*

Appointed to the Board in November 2010.

Secretary to the Ministry of Transport, Sri Lanka

and a well-known prominent entrepreneur

and investor whose business interests include

Hydropower Generation, Manufacturing,

Hospitality, Entertainment, Banking and Finance.

He serves as the Chairman of Sampath Bank PLC,

Vallibel One PLC, Vallibel Finance PLC, Vallibel

Power Erathna PLC, The Fortress Resorts PLC,

Delmage Group [formerly known as Lewis Brown

& Company (Pvt) Ltd.], Greener Water Ltd. Deputy

Chairman of Hayleys PLC, Royal Ceramics Lanka

PLC and LB Finance PLC. Holds directorships in

Amaya Leisure PLC, Haycarb PLC, Hayleys MGT

Knitting Mills PLC, Hotel Services (Ceylon) PLC, Orit

Apparels Lanka (Pvt) Ltd. and Sri Lanka Insurance

Corporation Ltd. Member of the Board of Directors

of Strategic Enterprise Management Agency

(SEMA).

M bOTTINO

ICoGuanTI

Appointed to the Board in November 2010. Joined

ICOGUANTI S.p.A., in 1994 and functions to date as

its Managing Director. Holds a First Class Degree

in Mechanical Engineering from the University of

Genova and an MBA from SOGEA, Italy. Previously

held Executive and Senior Management positions

in several large private sector entities in Italy over

a period of 27 years including Ansaldo, Morteo

Soprefin and ILVA Steel.

R M T PREMARATHNA

operations

Joined DPL in July 1995. Appointed to the Board

in May 2013. Applied Science Graduate from

the University of Sri Jayawardenapura, Sri Lanka.

General Manager of Dipped Products PLC since

January 2007.

V R guNASEkARA**

Appointed to the Board in May 2013. Holds a

Degree in BSc Eng. (Hons.) - Electrical and Power

Engineering from the University of Moratuwa.

Vice-President of Marketing and Sales, Holcim

(Lanka) Ltd. and held management positions in

Ceylinco Securities & Financial Services Ltd. and

Vanik Incorporation Ltd.

* - Non-Executive

** - Independent Non-Executive

board of Directors



Management Team

HAND PROTECTION

A M Pandithage

Chairman

Dr. k I M Ranasoma

Managing Director

N Y Fernando

Director (Projects)

k A L S Fernando

Director (Technical)

L g S gunawardana

Director (Medical Gloves)

Managing Director DPTL

M bottino

Managing Director ICOGUANTI

R M T Premarathna

Director (Operations)

General Managers

N A R R S Nanayakkara - Finance

Dr. L P Nethsinghe - Technical

Ms. L A Kumarasiri - Systems

C Ratnasiri - Engineering

Divisional Managers

A Muthukuda - Factory Manager (DL/GL/NL)

K N N Dharmaratne - Factory Manager (VL)

K Jinadasa - Factory Manager (HRPL)

S A N Pushpakumara - Factory Manager (DPTL)

M K Gammudali - Factory Manager (TL)

K U Senaratne - Group Operating Systems

R Dassanayake - Group Logistics

I P Kulatunga - Group Marketing

Ms. H Randiligama - Group Procurement

D N Dias - Business Development

K K D P Senanayake - Technical (DPTL)

M Bin-Sadoon - Commercial (DPTL)

B M A S K Jinadasa - Quality Systems

C N Mallikaratchi - Group Process

M Sivapalan - Production Planning

S W A Premachandra - Project Implementation

H M A Kumara - Finance

P Sutthirat - Human Resources (DPTL)

Ms. Jitinun Chokhaw - Finance (DPTL)

G Karunarathne - Compounding (HRPL)

K M C S K Perera - Production (DL)

K A G G Kularatne - Product Technologist

A J M K B Jayasundara - Finance

P H G P Chandanarathna - Operating Systems

K D P Suranga - Information Technology\ERP

W A A K Wijesinghe - Production (HRPL)

P P Guruge - Production (VL)

K D A Jayanada - Process Development Engineer

N Samolee - Operations (DPTL)

S D P R Silva - Engineering Maintenance (DL)

Dr. M Badathuruge - R&D

N P Baddage - Centrifuging

Ms. R C Dias - Human Resources

Management Team



Management Team

Management Team

PLANTATIONSA M Pandithage

Chairman

w g R Rajadurai

Managing Director - KVPL/TTEL

kelani Valley Plantations PLCS Siriwardena

Director (Finance)

General Managers

Y U S Premathilake - Low Country

A B Stembo - Up Country

J A Rodrigo - Marketing & Corporate Affairs

Deputy General Managers

D I Gallearachchi - Nuwara Eliya Group

C S Amarathunga - Tea Group – Low Country

K de J Seneviratne - Regional Administration

B C Gunasekera - Low Country - Rubber Group I

S F Fernando - Low Country - Rubber Group II

R G D Fernando - Rubber Marketing & Administration

A Nissanka - Finance

Talawakelle Tea Estates PLCD S Seneviratne

Deputy Chief Executive Officer

General Managers

L H Munasinghe - Plantations

T Dharmaratne - HR & Quality Management

Development

Deputy General Managers

Ms. A R Wijesekera - Finance

S B Alawattegame - Bearwell Estate

N P Abeysinghe - Dessford Estate

S D Samaradiwakara - Logie Estate



glossary

glossary

ACCOuNTINg POLICIES

Specific principles, bases, conventions, rules and

practices adopted by an enterprise in preparing

and presenting Financial Statements.

bORROwINgS

Bank loans, overdrafts and finance lease

obligations.

CAPITAL EMPLOYED

Total assets less interest free liabilities.

CAPITAL RESERVES

Reserves identified for specific purposes and

considered not available for distribution.

CASH EquIVALENTS

Liquid investments with original maturities of

three months or less.

CONTINgENT LIAbILITIES

Conditions or situations at the Balance Sheet date,

the financial effect of which are to be determined

by future events which may or may not occur.

CuRRENT RATIO

Current assets divided by current liabilities.

DIVIDEND COVER

Post-tax profit divided by gross dividend.

Measures the number of times dividend is

covered by distributable profit.

DIVIDEND YIELD

Gross dividend per share as a percentage of the

market price.

EARNINgS PER SHARE

Profit attributable to ordinary shareholders divided

by a weighted average number of ordinary shares

in issue and ranking for dividend.

gROSS DIVIDEND

Portion of profits inclusive of tax withheld

distributed to shareholders.

NET ASSETS PER SHARE

Shareholders’ funds divided by the number of

ordinary shares issued.

OPERATINg PROFIT MARgIN

Operating profit divided by Group turnover.

PRICE EARNINgS RATIO

Market price of a share divided by earnings

per share.

RELATED PARTIES

Parties who could control or significantly influence

the financial and operating policies of the

business.

RETuRN ON EquITY

Attributable profits divided by average

shareholders’ funds.

REVENuE RESERVES

Reserves considered as being available for

distributions and investments.

SEgMENT

Constituent business units grouped in terms of

nature and similarity of operations.

SLFRS/LkAS

Sri Lanka Accounting Standards corresponding to

International Financial Reporting Standards.

TOTAL EquITY

Share capital, reserves and minority interest.

VALuE ADDITION

The quantum of wealth generated by the activities

of the Group and its distribution.

wORkINg CAPITAL

Capital required to finance the day-to-day

operations (current assets minus current

liabilities).



Notice of MeetingCompany Number PQ 60

NOTICE IS HEREBY GIVEN that the Thirty-Seventh Annual General Meeting of Dipped Products PLC will be held at the Registered Office of the Company, No. 400,

Deans Road, Colombo 10, Sri Lanka on Thursday, June 27, 2013 at 3.00 p.m. and the business to be brought before the Meeting will be:

1. To consider and adopt the Annual Report of the Board of Directors and the Statements of Accounts for the year ended March 31, 2013, with the Report of the

Auditors thereon.

2. To declare a dividend as recommended by the Directors.

3. To re-elect, Mr. R M T Premarathna, who has been appointed to the Board since the last Annual Genera Meeting, a Director.

4. To re-elect, Mr. V R Gunasekara, who has been appointed to the Board since the last Annual General Meeting, a Director.

5. To re-elect, Mr. L G S Gunawardena who retires by rotation at the Annual General Meeting, a Director.

6. To re-elect, Mr. A M Pandithage, who retires by rotation at the Annual General Meeting, a Director.

7. To re-elect, Mr. R Seevaratnam, who retires by rotation at the Annual General Meeting, a Director.

8. To authorise the Directors to determine contributions to charities for the financial year 2013/14.

9. To authorise the Directors to determine the remuneration of the Auditors, Messrs Ernst & Young, Chartered Accountants, who are deemed to have been

reappointed as Auditors in terms of Section 158 of the Companies Act No. 07 of 2007.

10. To consider any other business of which due notice has been given.

note:

(i) A Shareholder is entitled to appoint a proxy to attend and vote instead of himself/herself and a proxy need not be a Shareholder of the Company. A Form of Proxy is enclosed for this

purpose. The instrument appointing a proxy must be deposited at the Registered Office, No. 400, Deans Road, Colombo 10, Sri Lanka by 3.00 p.m. on June 25, 2013.

(ii) It is proposed to post the ordinary dividend warrants on July 8, 2013 and in accordance with the rules of the Colombo Stock Exchange the shares of the Company will be quoted ex-

dividend with effect from June 28, 2013.

By Order of the Board

DIPPED PRODuCTS PLC

Hayleys Group Services (Pvt) Ltd.

Secretaries

Colombo

May 27, 2013

Notice of Meeting



Notes


Form of ProxyDIPPED PRODuCTS PLC

Company Number PQ 60

I/We ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

of …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

being Shareholder/Shareholders* of DIPPED PRODUCTS PLC hereby appoint:

1. …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

of …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

or failing him/them

2. ABEYAKUMAR MOHAN PANDITHAGE (Chairman of the Company) of Colombo, or failing him, one of the Directors of the Company as my/our * proxy to attend

and vote as indicated hereunder for me/us* and on my/our* behalf at the Thirty-Seventh Annual General Meeting of the Company to be held on Thursday, June

27, 2013 and at every poll which may be taken in consequence of the aforesaid meeting and at any adjournment thereof.

For against

1. To adopt the Annual Report of the Directors and the Statements of Accounts for the year ended March 31, 2013 with the Report of the Auditors thereon.

2. To declare a dividend as recommended by the Directors.

3. To re-elect, Mr. R M T Premarathna, who has been appointed to the Board since the last Annual Genera Meeting, a Director.

4. To re-elect, Mr. V R Gunasekara, who has been appointed to the Board since the last Annual General Meeting, a Director.

5. To re-elect Mr. L G S Gunawardena, who retires by rotation at the Annual General Meeting, a Director.

6. To re-elect Mr. A M Pandithage, who retires by rotation at the Annual General Meeting, a Director.

7. To re-elect Mr. R Seevaratnam, who retires by rotation at the Annual General Meeting, a Director.

8. To authorise the Directors to determine contributions to charities for the financial year 2013/14.

9. To authorise the Directors to determine the remuneration of the Auditors, Messrs Ernst & Young, Chartered Accountants, who are deemed to have been reappointed as Auditors in terms of Section 158 of the Companies Act No. 07 of 2007.

(**) The proxy may vote as he thinks fit on any other resolution brought before the Meeting.

As witness my/our* hands this ………………………………………………… day of ……………………………………… 2013.

Witnesses: ………………………………

……………………………… ……………………………………….

……………………………… Signature of Shareholder

Note: * Please delete the inappropriate words.

1. A proxy need not be a Shareholder of the Company.

2. Instructions as to completion appear on the reverse.


INSTRuCTIONS AS TO COMPLETION:

1. To be valid, this Form of Proxy must be deposited at the Registered Office, No. 400, Deans Road, Colombo 10, Sri Lanka by 3.00 p.m. on June 25, 2013.

2. In perfecting the Form of Proxy, please ensure that all details are legible.

3. If you wish to appoint a person other than the Chairman of the Company (or failing him, one of the Directors of the Company) as your proxy, please insert the

relevant details at (1) overleaf and initial against this entry.

4. Please indicate with an X in the space provided how your proxy is to vote on each resolution. If no indication is given, the proxy in his discretion will vote as

he thinks fit. Please also delete (**) if you do not wish your proxy to vote as he thinks fit on any other resolution brought before the Meeting.

5. In the case of a Company/Corporation, the proxy must be under its Common Seal which should be affixed and attested in the manner prescribed by its Articles

of Association.

6. Where the Form of Proxy is signed under a Power of Attorney (POA) which has not been registered with the Company, the original (POA) together with a

photocopy of same or a copy certified by a Notary Public must be lodged with the Company along with the Form of Proxy.

Form of Proxy

Corporate Information

NAmE Of THE COmPANyDipped Products PLC

LEgAL fORmA Public Limited Company with limited liability.Incorporated in Sri Lanka in 1976

COmPANy NO.PQ 60

DIRECTORSA M Pandithage - Chairman

Dr. K I M Ranasoma - Managing Director J A G Anandarajah - Retired on March 31, 2013

G K Seneviratne - Retired on April 8, 2013

N Y Fernando

R Seevaratnam

F Mohideen

K A L S Fernando

L G S Gunawardena

S C Ganegoda

K D D Perera

M Bottino

R M T Premarathna - Appointed May 1, 2013

V R Gunasekara - Appointed May 1, 2013

L.D.E.A.De Silva (Alternate Director to F Mohideen - Appointed on August 29, 2012. Resigned on October 23, 2012)

NOmINATION COmmITTEER Seevaratnam - ChairmanF Mohideen

REmUNERATION COmmITTEER Seevaratnam - Chairman F Mohideen

AUDIT COmmITTEER Seevaratnam - ChairmanF MohideenK D D Perera

SECRETARIESHayleys Group Services (Pvt) Ltd.400, Deans RoadColombo 10Sri Lanka

BANKERSBank of CeylonCitibank N ADeutsche BankHatton National BankHongkong & Shanghai Banking CorporationNDB BankPeople’s BankSampath BankSeylan Bank PLCStandard Chartered Bank

AUDITORSErnst & YoungChartered Accountants201, De Saram PlaceColombo 10Sri Lanka

PRINCIPAL LINES Of BUSINESSManufacture and marketing of industrial and general purpose gloves, management of tea and rubber plantations

REgISTERED OffICE400, Deans Road, Colombo 10, Sri LankaTel: +94 - 11 - 2683964 Fax:+94 - 11 - 2699018E-mail: [email protected]: www.dplgroup.com

This Dipped Products PLC annual report has been produced by Smart Media The Annual Report Company, a certified carbon neutral organisation. Additionally, the greenhouse gas emissions resulting from activities outsourced by Smart Media in the production of this annual report, including the usage of paper and printing, are offset through verified sources.

Printed on FSC™ certified paper eliminating fiber from high conservation value forests and controversial sources.

Hand in Hand going forwardS T A K E H O L D E R R E P O R T 2 0 1 2 / 1 3

This is our Stakeholder Report capturing economic, social and environmental performance

Dipped Products PLC

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