watawala plantations 2011.2012.pdf

8/14/2019 Watawala Plantations 2011.2012.pdf

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TOUGH TIMES DON’T LAST...



TOUGH

COMPANIES DO!

2 0 1 1 - 2 0 1 2

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



Corporate Governance. 48Remuneration Committee Report. 60

Audit Committee Report. 61

Risk Management. 63

CONTENTSMANAGEMENT REPORTS

MANAGEMENT DISCUSSION AND ANALYSIS

CORPORATE GOVERNANCE

Financial Highlights. 06 Chairman’s Review. 08

Managing Director’s Review. 14

Board of Directors. 22

Executive Committee. 25

Management Team. 25

Our People. 30Financial Review. 36

Financial Calendar. 45

Watawala Plantations PLC

2



Value Added Statement. 142Sources and Utilisation of Income. 143

Estate Hectarage Statement. 144

Crops & Yields. 145

Historical Financial Information 10- Years

summary. 146

SUSTAINABILITY REPORT

FINANCIAL INFORMATION

SUPPLEMENTARY INFORMATION

Sustainability Report. 70GRI Content Index. 90

Annual Report of the Board of Directors on the Affairs of the Company. 100

Managing Director’s and Chief Financial

Ofcer’s Responsibility Statement. 103

Statement of Directors’ Responsibility. 104

Report of the Auditors. 105

Balance Sheet. 106Income Statement. 107

Statement of Changes in Equity. 108

Cash Flow Statement. 109

Accounting Policies & Notes to the

Financial Statements. 110

Shareholders’ & Investors’ Information. 150Glossary. 152

Notice of Meeting. 154

Form of Proxy. 155

annual report 2011 | 20annual report 2011 | 20



IMPROVING

INFRASTRUCTURE



Financial Highlights - Year at a Glance

Chairman’s Review

Group Managing Director’s Review

Board of Directors

Group Executive Committee

Management Team

MANAGEMENT

REPORTS



FinancialHighlights 2011/12

In Rs. Millions 2011/2012 2010/2011 YoY - %

OperationsRevenue 4,532 4,664 -2.8%

Gross Prot 246 683 -63.9%

Operating Prot 610 612 -0.2%

Prot before Tax 525 527 -0.3%

Net Prot for the year 521 532 -2.2%

EBITDA 493 900 -45.2%

Balance SheetNon Current Assets 4,337 4,327 0.2%

Current Assets 1,308 896 46.9%

Equity 2,830 2,511 12.7%

Non Current Liabilities 1,662 1,590 4.5%

Current Liabilities 1,153 1,122 2.8%

Per Share dataEarning per Share (Rs.) 2.20 2.25 -2.2%

Dividend per Share (Rs.) 0.35 0.85 -58.8%

Dividend Cover (Times) 6.29 6.43 -2.2%

Shareholders’ InterestStated Capital 310 310 0.0%

Shareholders’ Funds 2,830 2,511 12.7%

Shareholders’ Funds per Share (Rs) 11.96 10.61 12.7%

Return on Shareholders’ Funds (%) 18% 21% -13.2%

LeverageInterest cost 85 85 -

Interest Cover (Times) 7.1 7.2 -1%

Non Current Borrowings 211 305 -31%

Current Borrowings 546 437 25%

Borrowings as a % of Equity 27% 30% -9%

The Sri Lankan plantation

sector is paramount

to the economy with a

contribution of 18% to the

national export revenue.

However in 2011 the

major commercial crops

tea, rubber and coconut

showed a sluggish

performance. The tea

industry was under severe

pressure due to European

crisis and Middle East

political conicts. The

future of Ceylon tea

comes with the challenge

of productivity and facing

competition that will likely

to be imposed by China,

Kenya and north east Indiawith low cost production.

We at Watawala

plantations have set

our vision on taking a

path which no other

would have walked in

and contemporaneously

looking forward to

re-shape the future of the

company grasping fruitful

opportunities lying ahead

to remain as the best

plantation company while

diversifying and building

up on our key strengths

‘people’ and ultimately

safe guarding the planet.

Future Trends

Segmental Revenue

Management ReportsWatawala Plantations PLC

6



Company ata glance 2011/12




Chairman’s Review

Global Economy

The world economy faced several signicant challenges during the year, due to

higher oil prices, a down turn in the Euro zone and an escalation of the geo political

tensions in the Middle East.

As per IMF’s latest estimates, world output is likely to grow by 3.25% in 2012compared to a 3.8% growth in 2011, whilst output in the Euro area is forecast to

decline by 0.5% in 2012 compared with a 1.6% increase in 2011. The strains felt by

the Euro economies began to intensify in the last quarter of 2011 and the area is

forecasted to be in mild recession in 2012, thus indicating that the demand from one

of Sri Lanka’s key export destinations would continue to remain inhibited. Economic

activity in the United States is seen as improving although factors such as a high

rate of unemployment and other downside risks indicate that recovery remains

fragile.

The economic meltdown is mostly forecasted to affect the Euro Zone but would

have signicant impact on developing nations due to their dependence on trade

and capital and credit inows from the Euro. According to IMF data, Asian regional

growth has already started to slow due to weaker export demand and 2012 is likely

to be a difcult year , although domestic factors such as tighter macroeconomic

policy stances have also played a role, especially in India and China. Asia is one of

the world’s most trade-dependent regions, exporting everything from commodities

such as metals and rice to sophisticated electronic products and cars; and external

demand will hence play a crucial role in determining Asia’s performance as a whole.

Domestic Economy

Sri Lanka’s economy sustained its post war growth momentum, surpassing last

year’s record high to grow by 8.3% in 2011. This was amidst several political andeconomic challenges on the world stage. Low interest rates and low ination-at

4.9% during the year also provided a growth facilitating environment. Per Capita

income increased to US Dollars 2,836 from previous year’s 2,400, whilst a further

decline in the unemployment rate, to reach the lowest level of 4.3% was another

positive indicator.

The downturn in Euro economies, higher energy prices, and the geo political

turbulence in the Middle Eastern region adversely impacted Sri Lanka during the

year, whilst an escalation in energy prices and a surge in imports placed signicant

strain on Sri Lanka’s Balance of Payments.

Your Company’s outlook on the potential of the Oil Palm

crop is buoyant. The crop’s productivity vis a vis other competing cooking oils, such as Coconut, Corn and Soya Bean, is

signicantly higher. Furthermore, harvesting is considerably

less labour intensive compared to...


8



World oil prices are expected to remain high in 2012

and hence likely to continue to strain Sri Lanka’s

Balance of Payments. Estimate for Sri Lanka’s GDP

growth in 2012 has been revised downward to 7.2%

from an earlier projected 8%. The possibility of a

spread of global geo political hostilities is also a factor

which could impact Sri Lanka’s exports in 2012-2013.

Ination is projected to remain in single digit levels this

year despite the expected rise in commodity, fuel and

energy prices and the impact of the rupee depreciation

in 2012.

The Rupee depreciated at a sharper than expected rate

during the rst three months of 2012 resulting in marketvolatilities and adversely impacting importers. Although

the near term impact has been one of market volatility

and uncertainty, we are of the view that these recent

adjustment measures adopted by the government to

address the widening current account decit and the

decline in external reserves such as the tightening of

monetary and credit policy, and abolishment of the

rupee trading band to allow the exchange rate to adjust

more exibly should place the economy on a more

sustainable track in the medium to long term.

Sri Lanka’s agricultural sector grew marginally by 1.5%

in 2011 compared with a growth of 7% in 2010. This

was due to severe crop damage resulting in adverse

weather conditions during the rst half of the year;

but the sector made a remarkable recovery during the

second half of the year. The Tea sub sector declined

marginally whilst Rubber and Coconut both expanded

during the year.

In the External Sector, the growth of Exports which was

at 22.7 % was far outpaced by the growth of Imports

which was at 50.7% leading to an unprecedented risein the Trade Decit in 2011.

Sri Lanka’s high growth level has taken the country to a

higher growth trajectory and placed it amongst “Middle

Income” countries. As rightly suggested by the

Central Bank, improving demand for exports through

diversication of markets and products, strengthening

foreign inows and Foreign Direct Investments (FDIs)

through appropriate policies and a macroeconomic

environment, and improving labour productivity and

addressing structural rigidities in the labour market

would play a key role in overcoming some of the

challenges that Sri Lanka faces in maintaining its

high growth. Moreover, curtailing fuel expenses by

promoting energy efcient production technologies,

increasing the use of renewable energy sources and

energy conservation are other factors which are crucial

to sustaining the level of high growth.

Tea

Several economic, social and ecological factors

pose many challenges to hinder the growth andsustainability of the tea industry worldwide today.

However, a recognition of the critical need and

urgency to address these issues seem alarmingly low.

Amongst the issues that challenge the industry is one

of over supply as demand has failed to keep pace

with production increases. World production over the

last three decades has doubled. It is also noteworthy

that almost 56 percent of all tea produced worldwide is

consumed locally.

Global tea production reached 3,447.57 Mn. Kgs. in

2011 . While tea is produced in more than 35 countries,

only a handful - China, India, Sri Lanka and Kenya -

account for almost three-quarters of production. China

and India are today the world’s top tea producing as

well as consuming nations and as noted by the United

Nations Food and Agriculture Organisation (FAO), with

tea consumption in these two countries rising by 5.6%,

the global tea industry is being driven by these two

giants. China heads the list of producers contributing

33% of world production with an annual production of

1.4 million tonnes whilst India is expected to produce

around 1.1 Mn. Tonnes in 2011/12.

Sri Lanka’s tea production in 2011 fell by 0.19% to 328.37

Mn. Kgs. from 329 Mn. kgs. in 2010. Sri Lanka now

occupies fourth place in terms of production volumes

but remains the second largest exporter with Kenya

being the rst. However, Sri Lanka’s importance in the

world tea trade has declined considerably since 1970,

with share of world trade dropping from 40% in 1970 to


10



27.9% in 2000 and to 21.6% in 2011. Furthermore, its

production volume increase of 7.5% in the last 11 year

period is far below those of its competitors in Asia and

Africa which stand at 21% in India and 60% in Kenya.

The continuing downturn in the Euro economies

will continue to inhibit demand for tea imports into

the region. The turbulence in the Middle East could

continue impact demand for Sri Lanka’s Low Grown

teas in particular. In addition, FAO’s projections that

British, who are the world’s largest consumer of tea

per capita would reduce their consumption by 15%

compared with 15 years ago also exacerbates the

threat of reduced demand in the world for tea.

Rubber

Asia continued to be the world’s largest supplier of

natural rubber in 2011 with its share increasing to 93%

out of a total world production of 10.9 Mn. Tonnes in

2011. Indonesia, Thailand and Malayasia continued

to hold the top three producer slots respectively

accounting for 69% of total world production.

According to the February 2012 Report of the Association

of Natural Rubber Producing Countries’, the NaturalRubber market benetted from seasonal shortages of

supply and a marginal fall in the commodity’s stock in

China, and a rise in prices is being further supported

by the rise in crude oil prices, the depreciation of

Japanese Yen and an appreciation of the currencies of

some of the natural rubber exporting countries . Thus,

the current environment of short supply with expected

increase in demand augures well for natural rubber

prices in the year ahead.

Oil Palm According to Global Industry Analysts, world trade in

Palm Oil has seen a sharp increase over the last two

decades and the world market for Palm Oil is expected

to increase to 100 Mn. Tonnes by 2015. World production

volumes have been on the rise over the past few years as

a result of increases in extent of land cultivated, as well

as higher yields resulting from increased investments

in research and development. Moreover, the countries

which are at present the highest consumers of Palm Oil

such as India and China are not its key producers and

hence largely dependent on imports.

Your company’s outlook on the potential of the Oil

Palm crop is buoyant. The crop’s productivity vis a vis

other competing cooking oils, such as Coconut, Corn

and Soya Bean, is signicantly higher. Furthermore,

harvesting is considerably less labour intensive

compared to Tea and Rubber. These supply side factors

combined with an increasing demand for the product’s

value as a cooking oil, and as a raw material input in

soaps, detergents, cosmetics and pharmaceuticals as

well as a source for biofuel, underscore the viabilityand the immense potential for expansion of this crop

stream. Around 80% of the global palm oil output

at present is used by the food sector, but its use in

the above non food areas is increasing and would

contribute to a higher demand and prices worldwide in

the next few years.

Our Performance

Your Company’s Prots After Tax declined by 2.17% to

Rs. 520 Mn. compared with Rs. 532 Mn. in the previous

year and this was mainly due to a downturn in the tea

sector. Protability of the rubber and oil palm sectors

however, helped to more than offset the loss in the tea

sub sector.

Tea

The Tea sector made a loss Rs. 500 Mn compared

to a loss of 25 Mn. the previous year, and this was a

result of certain demand as well as supply side factors.

Protability reduced due to a lower National Sales

Average, and a 27% wage increase that came into

effect on 1st April 2011 which signicantly impacted

costs of production (COP).

Rubber

The rubber sector recorded a prot of Rs. 60 Mn

compared with a signicant prot of Rs. 139 Mn.

achieved during the previous year. This decline in prots

was mainly due to a fall in the National Sales Average

(NSA), by around 10% over the previous year; a decline




in output, as well an increase in COP due to a wage

increase.

Oil Palm

The Oil Palm sector achieved excellent results during

the year and was the largest contributor to the sector,

with the highest ever after tax prot of Rs. 373 Mn.,

compared to Rs. 195 Mn. in 2010/11. A 28% increase

in crop output as a result of improved agricultural

practices, an increase in the extent cultivated and

a higher NSA, were factors which contributed to this

sharp increase in prots.

Issues and Strategies

The tea sector accounts for 70% of your Company’s

revenue and its rich asset base abounds with potential,

for your Company, the sector and the economy.

However a multitude of issues currently burden the

competitiveness of the industry and challenge the

sustainability of the industry for all its stakeholders.

Most signicant amongst them has been an increased

costs of production. This has mainly been due to the

successive wage increases mandated by the government

over the past seven years which have followed a

regressive model. The wage increase in 2011 resulted

in a Rs. 220Mn. increase on the Gratuity provision by

the company and increased costs of production by

Rs.100Mn. and was particularly regressive as it

contained no productivity component. We hope that a

model for wage increases that incorporates productivity

mind and has the sustainability of the industry in mind

will replace the current biennial ad hoc ones. A long

term strategy formulated with the involvement of all

stakeholders and mediated by the government is now

paramount and urgent.

Another factor that hinders the growth of the tea sector

is a reduction in the supply of labour at levels of middle

management as well as at a level of crop plucking.

The number of tea workers per family living on an

estate has reduced from 2.6% to 1.9% , and of a one

million population who live on estates only 400,000 are

engaged in estate employment. A difculty in attracting

the best managerial talent also challenges the industry.

A shortage of labour is also a factor which hinders

growth of the rubber sector, and the social disparity vis

a vis other sectors has been found to be a factor that

has made this sector relatively less attractive.

Another that the Plantations sector as a whole faces

is the vulnerability to world market conditions that is

characteristic of primary commodities. Business cycles

in major importing countries, developments in the

markets of competing products such as for exampleSoya Bean oil in the case of Oil Palm and Synthetic

rubber vis a vis Natural Rubber; and exogenous factors

such as wars and climatic changes impact commodity

markets.

Whilst we highlight the need for collective action to

address some of these issues and look at innovative

ways to address some of the exogenous factors, we

will also continue to develop strategies and invest in

measures that improve the efciency of production

factors such as land and labour which are within our

control. This year the Oil Palm crop became the main

stay of your company - the pioneers of this crop in Sri

Lanka. Crop diversication has proven to be a valuable

measure for regional plantation companies to improve

protability when exogenous factors have impacted

protability of the traditional crops. Thus, it is also

important that the government encourages practices

such crop diversication; and where traditional crops

cannot be cultivated- diversication into areas such as

forestry cultivation in order to maximize plantation land

productivity and facilitate sustainability.


12



Acknowledgement

I wish to express my sincere appreciation to our

Shareholders, the Managing Agents and Employees of

Watawala Plantations PLC, for their loyalty and utmost

co-operation.

I also wish to express my gratitude to our Buyers, our

Brokers and Suppliers for their unstinted support and

to my colleagues on the Board for their able guidance

and direction.

G. Sathasivam

Chairman

17/05/2012




The Plantation Sector in Sri Lanka

The Plantation sector, albeit reducing in signicance

over the past three decades, still remains an important

sector in Sri Lanka’s socio-economic fabric, contributing

3.4% to the country’s GDP. Tea was Sri Lanka’s largest

export until it was replaced by garments in 1986,

and as early as 1950, plantation crops accounted

for about 70% of the country’s agricultural output,

declining to 51% in 1986 and to 25% by the late 80’s.

The importance and the potential of the sector in Sri

Lanka is also underscored by the large asset base of

both land and human, for which the Plantation sector

is the custodian. The total land extent utilized by this

sector in 2011 was in the region of 800,000 hectares,

whilst the number of direct and indirect employment

opportunities generated stands at about 1.5 million.

These reect the potential of the sector to be a key

contributor to achieving some of Sri Lanka’s key

economic objectives such as food security, employment

generation, environmental conservation and bridging of

the geographic disparities in income distribution in

the country. Thus, despite the down turn during the

year, your company remains buoyant on the potential

of its plantations, and because of the expertise and the

experience that the company possesses.

Sri Lanka’s Plantation sector faced a challenging year

due to a downturn in tea . Adverse weather conditions

during the rst half of the year resulted in a decline in

crop output whilst a 27% wage increase during the

year impacted costs of production. The impact of these

supply side factors were exacerbated by a reduced

demand from some of Sri Lanka’s key export markets

the Middle East, due to political turmoil in the region;

and the Euro zone due to an economic downturn that

intensied during the latter half of the year.

Company Performance

Your Company achieved a Prot After Tax of Rs. 520 Mn.

during the year which was a decline of 2.17%,compared with a Prot After Tax of Rs. 532 Mn. the

previous year. The prot made during the year includes

the net income of Rs. 387 Mn. earned on the disposal

of the fully owned subsidiary, Watawala Marketing

Ltd. The balance of Rs. 133 Mn. is the prots from the

company’s normal operations. The protability of the

Rubber and Oil Palm sectors helped to more than offset

the loss in the Tea sub sector, and Oil Palm became

the main stay of your Company during the year under

review.

Tea

Your Company’s tea crop production of 9.4 kg. mn

during the year reduced marginally by 4.4 % over the

previous year. The key contributor to this was the

reduction in the intake of bought leaf. Our own leaf

production increased by a marginal 0.34% despite a

climatic change that led to a prolonged drought during

the early part of the year; worker agitation for higher

Managing Director’s Review

...in the land extent as well as an increase in land/crop productivity. An output of2,858 Ha. by your company amounted to a productivity level in the region of 3,156

Kgs. of Oil per Ha; And this was a very commendable achievement surpassing last year’s

yield by 32.2%

30%Palm oil prod:


14



wages and the lagged impact of the work disruption that

took place in mid and late 2011. Tea land productivity

remained almost constant with a yield of 1,345 Kg. per

Ha being the highest reported in the last seven years.

The Net Sales Average (NSA) received by the Company

also declined by 6.8 % in the reporting period, and

this was despite your company’s continuing focus on

quality.

The company continued to invest in best practices,

advanced scientic methodologies and technology

to boost protability in the tea sector. Some of the

measures include, soil management practices such as

recycling of pruning and other farm waste for compost,

company and eld specic fertilizer programmes,

“Shear Harvesting” and partial mechanized pruning.

Most of these are measures which will yield benets

with a time lag of two to three years, and hence reect

the long term perspective we adopt, and the focus on

investing in the sustainability of our business.

The Waltrim tea factory, your Company’s show piece

and one of the most modern tea factories in the country,

continued to perform exceptionally well. The most

salient feature during the year was the improvement itachieved in performance rankings- to 4th position, from

13th position the previous season. Securing 88 Top

Prices at the Colombo auctions, during the reporting

period, reected the uniqueness of Waltrim’s quality

assurance practices.

Your company’s majority of the estates in the Hatton/

Watawala region were placed within the top 10

rankings in the Western/ Medium Grown tea category.

Kenilworth secured the 5th position in overall rankings

and the highest average in John Keells catalogue,

Carolina secured 3rd highest average, whilst Strathdon

was ranked the 5th highest in the same catalogue.

Additionally, Kenilworth secured the highest number

of top prices of 98 in the Medium Grown category,

Carolina and Strathdon achieved the 2nd highest and

the 3rd highest number of top prices of, 25 and 20

respectively, in the same category.

Rubber

Despite the industry’s impressive progress over the last

few years, the Sri Lankan rubber industry, continues

to be challenged by a multitude of issues. A decline

in the extent cultivated, low land productivity, high

costs of production, a shortage of labour; low labour

productivity due to factors such as the age of workers;inadequacy of resources; wide social disparity vis a

vis other industries, and factors beyond our control

such as erratic weather patterns. Some of the above

mentioned issues adversely impacted your Company’s

as well, and made it difcult for us to sustain the

positive trend recorded elsewhere in the country. Your

Company’s Crop production, decreased by 4%, to

reach 0.64 mn. kg compared to a crop of 0.67 mn. kg.

recorded in the previous period. This amounted to an

decrease of 26,049 kg in terms of volume.

The land productivity improved during the year with

the company reporting a yield of 705 Kg per Ha., 9.3%

above last year’s yield but still below the yields of other

regional plantation companies. This productivity level

was achieved despite the fact that a signicant extent of

rubber trees are due for uprooting in the next few years.

The company also lost over 4,000 rubber trees during

the mini cyclone during the 3rd quarter of the nancial

year. The extent of unproductive rubber uprooted this

year amounted to around 185 Ha. Recognising the

need for substantial improvements to land and crop

productivity your company is making a concerted

effort to address this issue, such as via the adoption

of site specic agricultural technologies that would

ensure consistent and enhanced output despite erratic

weather patterns that have an increasing tendency to

disrupt eld agricultural practices. The NSA received

by your company during the year was on par with

domestic and international prices, but below what the

company achieved during the previous year. However,

9.3%Yield


16



skillful handling of processing and manufacturing

technologies by the company, enabled the prices to

remain remunerative to its natural rubber business.

The short-term outlook for the natural rubber

market has been weakened by signicant economic

uncertainty and risks regards the United States and

Euro economies, however the long term outlook is one

of protability for the business.

Oil Palm

Palm Oil - seen as a humble source of edible oil, and

heavily criticized for being unhealthy and un-t for

human consumption merely a few years ago has

transformed markets and its image at a pace few

would’ve foreseen, and is today substantiated to be

one of the most nutritious edible oils in the world.

Furthermore, Palm oil is also the least expensive in the

vegetable oil market whilst its value also extends beyond

the use as a cooking oil, as one of the few sources of

Bio-diesel – a renewable substitute for Petroleum driven

diesel. This is in addition to the demand for Palm Oil as

a raw material for soaps, detergents, Pharmaceuticals

and Nutraceutical products.

During the year under review, your Company’s Palm

oil production rose signicantly by 30% to 6.5 Mn

Kgs of CPO from 5 Mn. Kg in the previous year. This

is attributable to an increase in the land extent as wellas an increase in land/crop productivity. An output of

2,858 Ha. by your Company amounted to a productivity

level in the region of 3,156 Kg. of Oil per Ha; and this

was a very commendable achievement surpassing last

year’s yield by 32.2%. We intend further enhancing

productivity to 3,500kg/ha, in the near future.

The company also achieved a commendable NSA,

which saw an increase of 2.81% over the previous

year’s. The infusion of innovative and effective

agricultural and processing technologies, acquired

from global pioneers in the oil palm business, would

strengthen our operations and yield dividends in the

years to come. Your company who pioneered the oil

palm processing facility in Sri Lanka, looks to build on

its current market leadership position and to expand the

crop to harness the vast potential in the industry. WPL

also envisages playing an active role in supporting the

ambitious plans of the Ministry of Plantation Industries,

to expand Sri Lanka’s land extend under Oil Palm from

its current levels of 6,000 ha. to 25,000 ha.

Capital Investments

During the year under review, the Company implemented

a modernization programme of its Nakiyadeniya Palm

Oil Renery with a total investment of Rs 20.3 Mn. and

new machinery for the Renery constituted Rs. 17.8 Mn.

of that investment. The quality of the output from the

renery has improved since, enabling the marketing of

a better quality product.

Tea-Hatton/ Watawala

The company made two investments during the year to

increase the manufacturing capacities at two of its tea

factories. One was an investment of Rs 62.3 Mn in the

Carolina Tea Factory to increase production from 16,000

kg to 24,000 kgs of green leaf per day. The other was

an investment of approx 17.8 Mn in the Company’s

Dickoya estate, to increase the capacity from 15,000kg

to about 20,000Kg of green leaf. The company’s capital

investments during the year amounted to Rs. 573 Mn.

and this includes re planting, factory modernization,

buildings and vehicles amongst others. A more detailed

report on capital investment will appear elsewhere in

this report.

Accolades

We are pleased to have been honored for the best

presented accounts in South Asia, in the Agriculture

Sector, by the South Asian Federation of Accountants

(SAFA) in the year 2010, at a function held in Dhaka.

this was a very commendable

achievement surpassing last year’s yield by 32.2%. We intend further

enhancing productivity to 3,500kg/ha, in the near future.




SAFA is an organization founded by the Institutes of

Chartered Accountants in India, Pakistan, Sri Lanka,

Bangladesh and Nepal and a few other accounting

bodies.

WPL also won the Gold Award for the 4th successiveyear for the Best Annual Report in the Plantation

sector category awarded by the Institute of Chartered

Accountants of Sri Lanka.

Lonach Dairy Farm

The dairy business, launched on Lonach Estate, as

part of the Group’s diversication strategy now has a

herd strength of 150 animals, and the milk production

capacity stands at 1,100 liters per day.

The cattle waste from the farm, continued to provideraw material for the manufacture of compost, a very

valuable source of fertiliser material, to re-develop the

degraded soil and to partially replace the chemical

fertilisers used on our plantations.

A Bio Gas generation system that is able to generate

140 units of electricity per day, and produce organic

slurry at a rate of 20,000liters per day, developed on the

farm are now being used by your Company’s estates.

Subsidiaries

The Board of Directors at an Extra Ordinary General

Meeting held on the 29th of February 2012 obtained

the approval of shareholders to divest its subsidiary

Watawala Marketing Ltd. The decision was taken as

a measure to address the difcult period that the

company underwent during the year, as a result of the

downturn in the tea sector. Rising interest costs and

the negative margins in the tea sector did not permit

the company to secure additional borrowings. The

Directors now intend using the funds raised from this

transaction to develop the company’s core business of

Tea and Palm Oil. A decision made by the Directors to

fund the gratuity provision has already resulted in an

unencumbered deposit of Rs. 46 Mn.

Energy Management

The escalation of world oil prices in the year under

review has further emphasized the need for energy

conservation and made more urgent the search for

alternate sources of energy.

It is also a key focus area for us as we see our costs

of production increasing due to higher energy prices.

The company has identied the opportunity to reduce

its energy costs by twenty percent via the adoption

of certain systems and substitute sources of energy.

Some of these initiatives carried out during the year

include the conversion of all fossil fuel powered tea

dryers to rewood ones; and the launch of an initiative

to replace rewood with the environmentally friendly

briquettes made out of refuse tea which is now being

implemented in the Lindula factories. An initiative

planned for next year include the implementation of the

ISO 50001 standards on energy management .

Issues and future Strategies

Rising costs of input, combined with rising costs of

labour due to ad hoc wage increases that have failed

to consider the nancial viability of the industry, remain

issues of critical concern to all stakeholders of the

industry.

These factors, when combined with price volatility

and market uctuations which are characteristic of

all primary commodities; pose signicant challenges

to the plantations business. Your company will look at

innovative ways in which it can reduce the vulnerability

of these primary commodities to global market

conditions. The year was one in which your Company’s

diversication helped it to benet from a “boom” in the

Oil Palm sector to offset the cyclical “bust” in Tea and

achieve a considerable prot.

The effects of climate change is making harvests

The year was one in which your

Company’s diversication helped it to

benet from a “boom” in the Oil Palm

sector to offset the cyclical “bust” in Tea

and achieve a considerable prot.


18



less predictable than ever and hence, developing

technologies to offset some of the harvest losses that

result from these erratic weather patterns would also

be a priority for WPL.

Your company will continue to expand its business

using the wealth of expertise and experience it

possesses. We would seek avenues to increase

protability via diversication both concentric as well

as conglomerate diversication; whilst investing in

harnessing the potential of our asset rich core business

of plantations.

Sustainable Growth

Sustainable Development, albeit a concept much

heard of , is an essential value that enlightens us that a

business cannot sustain its success in isolation and of

the need for a business entity to integrate its economic

objectives with those of the environment and society at

large. For instance, at your Company the development

of higher yielding crops is intertwined with measures to

sustain the environment. The Company’s sustainability

framework continues to cover Productivity and

Innovation, Care of the environment, Investing in

People and Returning to the community. Our initiatives

thus carried out during the year, for the upliftment of

communities and the environment, are presented

comprehensively in this report under the section on

Sustainability, which I am happy to note is presented

this year, in accordance with the prescribed framework

of the Global Reporting Initiatives (GRI) and reports on

our social, environmental and economic performance

using to the GRI indicators.

Commitment to quality, employee health and safety,

environmental responsibility and care, and ethical

behavior in all our dealings will continue to be priorities

and a part of your company’s ethos. The international

certications we have obtained and will continue

to seek for our many processes and locations are a

reection of our commitment to these values. These

certications are an outcome of stringent audits and

evaluations by globally reputed independent third

parties, and are hence endorsements that benet all

stakeholders of our company.

The certications obtained by Watawala Plantations

are as follows, Fair Trade certication by seven of our

tea gardens, The Ethical Tea Partnership certication

of twelve tea factories, and the Food Safety standardcertication - ISO 22000 by seven of our tea factories.

HACCP certication which is another on Food safety

has been obtained by seven of our factories; whilst

CQUi Certication has been obtained by Kenilworth

factory.

Appreciation

I would like to express my sincere appreciation to

the corporate and estate management teams, and

to all our Associates for their hard work, dedication

and commitment without which your company could

not have thrived during a challenging year. I would

also like to express my gratitude to the Board of

Directors for the condence placed in me and for

their unstinted guidance and support and to our

shareholders, customers, business associates and all

other stakeholders for their inspiration, and support.

V Govindasamy

Managing Director

17/05/2012

The Company’s sustainability framework

continues to cover Productivity and

Innovation, Care of the environment,

Investing in People and Returning to the

community.




L a n d m a r k

sEstate Management Services

(Pvt) Ltd took over the

management following an offer

for sale.

96

New dawning with a payoff to years

of consecutive losses

97

98Successfully overcame the economic

downturn whichwhich adversely affected

Asian region

Created new benchmark

blending traditions with

technology

9900

Recorded highest ever turnover of

Rs. 1.86 bn and highest ever tea

production of 12 mn kg.

Poor attendance, low productivity and

limited agricultural activity affected the

financial results

01/02

02/03 Won Taiki Akimoto 5S award

which is globally renowned as a

technique for setting benchmark

quality standards

Reached a turnover of Rs. the first time in

03/0

92

Birth of WPL on 18 June 1992 under

Companies Act No. 17 of 1982

following the government decision toprivatize the management of 22 RPCs

Strategic joint venture with Tata

Tea Ltd of India

93/95

Repeated losses on cards20



04/05Collaboration with Tata Tetly in

the UK to spread the art of pure

Ceylon tea across the globe

Tea sourcing and supply chain to Tata Tea

and Tetley Group. Awarded the Silver at the Annual Reportcompetition held by the ICASL.

05/06

06/07First Runner -up in the best annual

reports awards competition held by

ICASL 2005/06

07/08 Achieved Business Super brand

status

Diversified in to Dairy Farming

Gold award for the best annual report in the plantation sector by ICASL

Recognized as an autho rized supplier to the ‘Ethical Tea Partnership’

08/09

09/10Gold award for the best annual report

in the plantation sector by ICASL for

the second time

Gold Award for Business Excellence in

the Agriculture and Plantations Sector

10/11Gold Award for the Annual

Report of the Plantation Sector

2009/10 by ICASL third time

in a row

Won National Quality Merit

Award, by Sri Lanka Standard

Institute in the medium scale

manufacturing company

11/12Won the Gold Award for the Be

Presented Accounts for 2010 in

Agriculture sector by South Asia

Federation of Accountants (SAF

held in Dhaka, Bangladesh

Bagged the Gold award for Ann

report in plantation sector 2010

by CA Sri Lanka for the 4th

consecutive year

Won National level awards pres

by National Agro Business Coun

Ceylon Chamber of Industries



Name & Address Age Qualications/BusinessExperience Directorships & Other Positions

Mr.G.Sathasivam 65 Forty Six years experience in Director

No. 94/1, Pharmaceutical Industry Sunshine Holdings PLC

Lauries Road, Estate Management Services (Pvt) Ltd

Colombo 04. Initiated & spearheaded joint venture Watawala Marketing Ltd

with Tata Group SBL Ltd

Alternate Director -Manages the pharmaceuticalbusiness.

Sunshine Energy Ltd

Mr.S.G. Sathasivam Sunshine Travels & Tours Ltd

Mr.R.K.Krishnakumar 74 Holds a Masters Degree from the Vice Chairman

Tata Global Beverage Group Presidency College University of Tata Global Beverages Ltd-India

Bombay House Madras Indian Hotels Co. Ltd-India

24,Homi Mody StreetFort Mumbai 400001 Nearly 41 years experience in the Director

India management at Tata Group Estate Management Services (Pvt) Ltd

Tata Sons’ Ltd-India

Trustee of Several Tata Trusts

Mr. V. Govindasamy 48 Bachelor of Electrical Engineering Group Managing Director

No.12, University of Hartford, USA. Sunshine Holdings PLC

Sir Marcus Fernando

Mawatha, Master of Business Administration Chairman

Apt 6/1, Premier Pacic University of Hartford, USA. Watawala Tea-Australia Pty Ltd- Australia

2001 Apartments, Managing Director

Colombo 07. Fellow Member of the Institute of Sunshine Packaging (Pvt) Ltd

Certied Professional Managers of Estate Management Services (Pvt) LtdSri Lanka Watawala Marketing Ltd

Director

TAL Lanka Hotels PLC

Tata Communication Lanka Ltd

Secretaries & Financial Services (Pvt)

Ltd

Sunshine Tea (Pvt) Ltd

Sunshine Travels & Tours Ltd

Healthguard Pharmacy Ltd

Sunshine Energy Ltd

Consultative Committees

Ceylon Tea Traders AssociationCeylon Planters Association- Executive

and Finance Committee

Ceylon Planters’ Association-General

Committee

President-Indo Lanka Chamber of

Commerce and Industry

President-Sri Lanka Chamber of

Pharmaceutical Industry

Board of Directors


22




Mr.P.T.Siganporia 61 Holds a Bachelors Degree from Chairman

Tata Global Beverage Loyola College-Madras Mount Everest Mineral Water Ltd-India

Group

1,Bishop Lefroy Road Holds a Postgraduate Diploma in Managing Director

Kolkata- 700020 Business Marketing from XLRI- Tata Global Beverages Ltd-India

India Jamshedpur

Director

Tetly GB Limited-India

Estate Management Services (Pvt) Ltd

Watawala Marketing Ltd

Tata Coffee Ltd-India

Dr.D.V.Seevaratnam 64 Doctor of Science (Honoris Causa) Director

No11, Wayamba University -Sri Lanka Tea Research Board of Sri Lanka

Sangamitta Avenue, Plantation Human Development Trust

off Dharmapala Mawatha, Fellow member of Australian

Mt.Lavinia. Institute of Management Chairman

Ceylon Planters Provident Society

Fellow member of National Institute Consultative Committee on Estates

of Plantation Management and Advisory (Tea Research Institute)

Over 36 years of experience in Member of the Board of Governors

Plantations Sector - National Institute of Plantation

Management- Coconut Research Institute

Member

Standing Committee on Agriculture,

Veterinary,Medicine & Animal Sciences

Sciences of the University Grant

Commission

Consultative Committee on Research

(Tea Research Institute)

CARE International Advisory Board

A Representative of the Medical Wants

Committee





Mr.D.S.Ratnasingham 56 Holds a Science degree from Director

No.248/218 University of Madras Watawala Marketing Ltd

Lotus Grove, Gorden Frazer & Co. Ltd

Hill Street, Began his career at Harrison’s &

Crosseld Export division in 1978.

Joined Kahawatta Plantations in1992

and moved to Watawala Plantations

in 1996, Over 30 years experience in

Export & Plantation Industries

Bosenquet & Skrine Ltd

Dehiwela,

Managing Director

Sunshine Tea (Pvt) Ltd

Mr.K.Venkataramanan 51 Fellow Member of the Institue of Director

Tata Global Beverage Group Chartered Accountants of India Watawala Marketing LtdKirloskar Business Park

Block “C’-2nd Floor Over 21 years experience in the

Near Columbia Asia Hospital eld of Finance Vice President-Finance

Hebbal Tata Global Beverages Ltd

Bangalore-560024

India

Mr.A.N.Fernando Holds a MBA from IMD (Lausanne) Former Senior Partner

No. 10/2, KPMG Ford Rhodes Thorntonand Co,

Gower Street, Fellow Member of the Institute of Chartered Accountants

Havelock Town, Chartered Accountants of Sri Lanka

Colombo 05. Committee Member

Council of the Institute of Chartered Accountants, Sri Lanka

The Employers’ Federation

Fair Trading Commission

Central Cultural Fund

Mr.B.A.Hulangamuwa 55 Holds a MBA from University of Director

No. 70/2, Colombo

Hulangamuwa Road, Sunshine Holdings PLC

Matale. Fellow Member of the Institute of Sunshine Tea (Pvt) Ltd

Chartered Accountants of Sri Lanka Secretaries & Financial Services (Pvt)

Ltd

Sunshine Travels & Tours Ltd

Healthguard Pharmacy LtdSunshine Energy Ltd

SBL Ltd

Company Secretaries’

Secretaries and Financial Services (Pvt) Ltd

Jt. Secretary - Ms. Samanthi Haddegoda (LLB, Attorney-at-Law)


24



V Govindasamy - Managing Director (Page 22)

D V Seevaratnam - Director/CEO (Page 23)

D S Ratnasingham - Director (Page 24)

Lalith Cooray - Chief Financial Ofcer

A Fellow of the Institute of Chartered Accountants of Sr i Lanka

and a Fellow of the Institute of Certied Management Accountants

Sri Lanka. Counts almost 30 years of post qualifying experience

in Sri Lanka and overseas.

Ronnie Almeida - General Manager - Plantations

A Fellow Member of the National Institute of Plantation

Management with a Diploma in Plantation Management and

counts over 41 years experience in the industry. Served as the Asian representative in the Standards Committee of the Fairtrade

Labeling Organization of Germany.

Binesh Pananwala - Deputy General Manager, Plantations

Counts 20 years of experience in planting, joined JEDB and

continued with WPPLC, holds a MBA from Manipal ( Sikkim)

University.

Yajith de Silva - General Manager – South

Counts 31 years experience in the plantation sector, holds a

Degree in Plantation Management from Wayamba University of

Sri Lanka and a Diploma on Human Rights and Peace studiesfrom the Colombo University. Former regional Director of the

PHDT.

Ajantha Nugawela - General Manager - HR & Administration

Ajantha counts over 21 years of experience in Management and

Human Resources/ Administration both in Sri Lanka and overseas

and holds an MBA from the University of Delaware, USA. He

also has a Degree in Textile Technology from the University of

Moratuwa with many years of experience in the apparel industry.

B V Sinthaka Ruwan - Deputy General Manager - Finance

Sinthaka joined as the Finance Manager in 2008. He holds aBSc Special Degree in Finance and an Associate Member of the

Institute of Chartered Accountants of Sri Lanka. He has over 12

years of experience in a vide spectrum of organizations.

N. Vige Bede Johnpillai - General Manager – Marketing

Has over 39 years of experience in the Tea Plantations in Sri

Lanka working on plantations in the Uva and Western Regions.

Viji also served overseas as free-lance consultant to Gtz.

Management Team

Corporate Management Team

Rexy R Perera Manager – Internal Audit

Ms. Badra Jayadeva Manager – Exports & Sales

Gamini Wanasekara Manager – Purchasing

Estate Management Team

Watawala Region

Kenilworth Dinesh A S J Perera - Actg. Senior Manag

Carolina Alex C Samuel - Group Manager

Wigton K D Prasanjith Wetthewe - Manager

Lonach A Jayaram - Manager

Shannon Shameera Rathnayake - Manager

Hatton Region

Vellai Oya Madura H Medagamage - Actg. Senior Manag

Dickoya Gershon P Thevathason - Actg. Senior Manag

Abbotsleigh Robin Winter - Senior Manager

Strathdon P Udeni Wanigatunge - Senior Manager

Lindula Region

Henfold Chaminda Oliver - Manager(Resigned w.e.f 28/04/2012)

Waltrim M S A Akber - Senior Manager

Tangakelle Kapila Sumanarathne - Manager

Agrakande Channa D Ikiriwatte - Manager

Ouvahkelle Harsha P T Hulangamuwa - Manager

Lippakelle A P Premachandra - Actg. Manager

Udugama Region

Nakiyadeniya Rubber N P Chamika Naranapitiya - Actg.Senior Manage

Nakiyadeniya Oil Palm Ruwan Gunaratne - Actg. Manager

Talangaha Dhanushka Daswatte - Manager

Homadola Gamini N Ratnayake - Senior Manager

Palm Oil Mill H Milton Wijepala - General Manager

Prole of theExecutive Committee




Dr D V SeevaratnamDirector/CEO

V Govindasamy Managing Director

D S RatnasinghamDirector

Lalith Cooray Chief Financial Ofcer

Executive Committee


26



MANUFACTURINGBRIQUETTES OUT OF

REFUSE TEAPROTECTING THE ENVIRONMENT BY REDUCING THE FELLING OF TREES



Our People

Our people’s competencies of talent and

dedication have been a mainstay in our success

and have helped to make Watawala Plantations

one of the best Plantation Companies in Sri

Lanka. We always believe in creating a better

future for our employees. We value each one of

them and we make every effort to engage with

them. Those on our plantations referred to ascoolies during the colonial era are now being

treated as Associates. These Associates are the

reason for what we are today and one of our

main objectives is to uplift the quality of their

lives by catering to their needs.

Associates with the CEO on the International Women’s Day 2011 In Colombo

Our people are our key asset. We make good people brilliant

and brilliant people even better.

Conducting training programs on areas such

as Leadership is one of the integral parts in

developing our employees’ competencies. Such

programs are conducted in association with

many local and foreign NGO’s such as Care

Foundation, Berendina and WUSC. We make

sure that we create action plans after surveying

the feedback of every employee followed by thetraining. And through our climate surveys, we

respond meaningfully and efciently, work to

create an environment where our employees feel

valued and condent.


30

Management Discussion & Analysis



Knowledge Inventory

To survive in this volatile industry, having adequate

paper qualications is a must. We have clearly dened

the career path of the executives starting from the

trainee level to Chief Executive Level. Our company

strongly persuades and encourages our team to follow

professional courses. Reimbursement of course fees

in full on successful completion of these courses

embarked upon is introduced as a motivating factor.

Knowledge Inventory - 2011/2012

2011/2012 2010/2011 2009/2010 2008/2009 2007/2008

Senior Management 8 17 10 10 10

Head Ofce Executives 26 27 54 69 55

Estate Managers & Executives 63 93 54 53 53

Head Ofce Staff and other Ofcers 21 37 88 79 86

Estate Staff and other ofcers 632 698 668 655 654

Sub Total 750 872 874 866 858

Associates 11,418 11,744 12,167 12,357 13,403

Total Employees 12,168 12,616 13,041 13,223 14,261

Turnover per Employee Rs.’000’ 372.74 488.13 430.31 309.25 302.48

Prot per Employee Rs.‘000’ 33.91 32.48 32.48 6.04 28.36

Assets per Employee Rs.’000’ 464.17 354.56 354.56 291.84 256.01

Human Resources

Staff Strength




Age Analysis Of The Employees

Service Analysis Of The Employees

Age

Group

Senior

Mgt.

Head Ofce

Executives

Estate

Managers &

Executives

HeadOfce

Staff &

others

Estate

Staff &

others Associates

Total

2012

Total

2011

Above 55 4 5 3 3 84 865 964 1,222

45-54 2 4 7 6 204 2,769 2,992 3,361

35-44 2 8 18 7 147 3,362 3,544 3,442

25-34 - 9 34 5 165 3,464 3,677 3,478

Below 24 - - 1 - 32 958 991 1,113

Total 8 26 63 21 632 11,418 12,168 12,616

Age

Group

Senior

Mgt.

Head Ofce

Executives

Estate

Managers &

Executives

Head

Ofce

Staff &

others

Estate

Staff &

others Associates

Total

2012

Total

2011

Above 20 - 1 - - 165 3,402 3,568 3,688

16-20 2 2 3 1 60 982 1,051 1,131

11-15 - 1 1 - 84 2,001 2,086 2,062

06 -10 1 7 18 9 96 2,009 2,140 1,973

Below 05 5 15 41 11 227 3,024 3,323 3,762

Total 8 26 63 21 632 11,418 12,168 12,616

Knowledge Hub

Our knowledge Hub has the capability to

innovate and create new concepts and

ideas. The major functions also include

transferring the concepts to sites of

application and to transmit knowledge

to other people through training and

development. We have strong internal

knowledge assets and we also seek

consultancy services externally to acquire

and use new knowledge.

Knowledge Integration Hub at Watawala Plantations Plc.


32




Performance Management

We strongly believe that the success of delivering good

results in the company depends on having the right

people at right place. Our performance management

process adopted by the management ensures that the

performance driven culture is inculcated at each level

of the company. To strengthen their competencies, we

facilitate and monitor their performance and process,

then reward them based on their performance.

Performance management approach determined

would result in:

• Agreement and commitment - On goals, on

internal / external customer needs

• Alignment -All levels of functions in the

organization, teams and individuals in the teams

• Accountability and responsibility - Clear Team

and individual measurable goals

• Adjustment -quick cascading response within a

fast changing business environment & changes

taking place in the industry

Performance Management Model - the Process

Review Processes and

Performances

We consistently measure the performance and provide

ongoing feedback to employees on their progress

towards reaching their goals. The monitoring takes

place as follows in the company.

• Regional Plantation Review Meetings – Conducted

by the respective head of the region monthly

• Monthly Review Meetings – Conducted by the CEO

• Group Review Meetings – Conducted by the

Chairman

• Review by the Audit Committee

• Review of Financial statements by the Board of

Directors

Rewards and Recognition

Our “performance based pay system” and our new

initiative the Employee Recognition Scheme (ERS)

reinforce and reward the most important outcomes

employees create for our business. In ERS Individuals

and teams are selected for their exceptional

performance and we acknowledge their contribution tothe company’s mission in areas such as:

• Signicant Contribution towards Business

Growth

• Process or Productivity Improvement

• CSR / Safety / Health / Environment

• Exceptional work beyond line of duty

• Innovation




Industrial Relations

Our company’s practices enhance the capacity of

workers and management to improve communication

and labor relations in the plantation sector. One suchproject is in collaboration with World University Service

of Canada (WUSC) which brings together workers and

management to discuss ongoing issues and understand

the interdependency between increased productivity

and improved working conditions. The project has

assisted estate management, estate staff, trade union

leaders, and workers to increase their knowledge on

• Labor Law

• Non-Violent Communication and Negotiation

• Positive Thinking

• Stress Management

• Team Building

Our practices are also adapted to the conventions

and recommendations of ILO (International Labor

Organization) and are also in line with the Labor

Standards of Sri Lanka that can be outlined as social

security, industrial safety etc.Our Harvesting Associate Krishnaveni (1st From Right) at

the Association for Women’s Rights In Development (AWID)

Conference In Istanbul, Turkey In April 2012

Gender Equality

We raise awareness on the importance of gender

equality and address key issues in collaboration with

male and female estate residents, workers, staff, andmanagement. The project with WUSC aims to recognize

women’s contribution to the plantation sector by

encouraging leadership of women in decision-making

roles, promoting women’s participation and reducing


34




gender based violence.The main areas of focus include:

• Assisting Neighborhood Women’s Groups

(NWGs) as support system for Women

• Addressing gender based Violence

• Supporting Alcohol Harm Reduction

• Improving Women’s Health

The key goal of this is to support women to take up

leadership positions on the estate based community

and organizations.

Employer-Employee Relationship

The Community Development Forum (CDF) is yet

another of our innovations in the empowerment of

our associates. These we have established in 3 of our

estates and due to its success we are in the process

of extending this initiative in a further 3 of our estates.

Through the CDF the Management and Associates

meet at monthly intervals and put their heads together

to solve day today issues that occur in the estate.

Unlike in the otherwise considered conventional way

of problem solving, here each and every person is

given an opportunity to take part in the process of

solving matters by which they take pride not only by

contributing for decision making, but also are being

given due recognition. Apart from that there are a few

other benets that the community enjoys as a result

of being able to attract the operations and services of

government and other service providers, transparency

of welfare activities on the estate, channeling all the

welfare and operations by NGOs if any through the

CDF so that overlapping of activities would not occur,

discussion of productivity parameters, estate village

integration and training on various aspects.




Financial Review

Global outlook

The world economy showed aftershock symptoms

of 2008 global economic crisis with the Euro zone

calamity which hindered the nancial health of member

countries. The never ending Middle East uprisings

culminated with the Libyan and Syrian power conicts

as well as the economic sanctions posed on Iran fuelled

the amassing uncertainty. Furthermore environmental

catastrophes all around the globe such as earthquakes

and Tsunami waves which devastated a part of Japan.

All these and more, made the outlook for businesses

further challenging and ambiguous during the year

under consideration.

Sri Lankan economy

The nancial year started with loosened monetary and

scal policy decisions which facilitated funding at lower

cost for constructions and other capital investments.

With brighter post war prospects the government

inaugurated massive development projects on

infrastructure network to anchor the upcoming

business ventures.

The foreign direct investments to the country showed

positive momentum with major ventures into tourism

and service sector. Throughout the year the country

has been able to maintain economic growth at 8.3% on

average to be considered as a top economic gainer in

the region by Wall Street Journal. However towards the

second half with widened gap in BOP the government

allowed free oat of Rupee which resulted in hiking

local ination and cost of production. The prime lending

rates pushed to double digits followed by the high

demand for borrowings during the rst 2 quarters. The

high demand and inadequate production of energy has

been pressing the country towards an energy crisis. The

invention of sustainable energy source has become the

need of the hour for the survival of Sri Lankan economy.

The Company had a tough year with the biennial wage increase mandated for estate associates

coupled with a falling Net Sales Average of tea. Driven by the demonstrated resilience to strive

towards success the company managed to sail through the rough sea with tight cost controls and...

Agro sector

The Agro sector had mixed results during the year

following the Euro zone and Gulf crises and changes in

world climatic conditions. However towards the second

half with rupee depreciation the export of agro produce

showed positive momentum.

During the year the shareholders equity

aggregates up to 50% of the total asset base of

the company.

%


36




Segmental performance

Revenue

The Company recorded revenue of Rs.4.5bn during the

nancial year 2011/12 from tea, rubber, palm oil and

export segments. This has been a drop of 3% from the

previous year in comparison.

Tea segment contributed to 70% of the total revenue

where it has dropped by 11% from the previous year.

The slight drop in the production quantities and drop inNSA has caused the reduction in revenue. However the

company has been able to secure NSA above market

average of the relevant elevations at Colombo Tea

Auction during majority of the months. Further it could

be observed that Watawala has maintained the tea

sales trend in line with the market throughout the year.

Rubber segment has given 6% contribution to therevenue with a 14% drop from previous year following

the fall in NSA by 9% compared to 2010/11. European

debt concerns which lead to cut down in automobile

production has resulted in lowering the demand for

natural rubber during the year.


38




Palm Oil segment boosted its contribution with 20.2%

slice of revenue which is an increase of 31% from last

year being the only segment with a positive movement

from 2010/11. Increase in production by 28% with

better agricultural practices, improved processing

facilities at Nakiadeniya Mill and better prices achieved

has caused this positive outcome.

Protability

The Company completed a year with mixed results

following heavy cost and squeezed margins. The wage

increase had been the headline for the year in theplantation sector which had a net impact of 27% over

the pay in previous year.

On a quarterly basis the revenue and protability

showed an analogous trend except for Quarter 4, and

only Q3 and Q4 showing positive net results.

Prot before tax (PBT)

Tea segment ended up with a loss of Rs.501mn as a

consequence of additional cost tied to the wage hike.

This has been 20 times increase in the loss from the

previous year which recorded loss of Rs.25mn.

Rubber segment recorded a prot before tax of Rs.60mn

which has been a drop of 57% from the previous year.

This was as a result of lower prices in the market and




the drop in rubber exposure during the year with more

emphasis given on palm oil segment.

Palm oil segment being the premier gainer of the year

was able to achieve Rs.373mn prot before tax. This

was an increase of 90% from the prior year. Extending

the palm oil cultivation land , better agricultural

practices and improved mill facilities followed by better

prices in the market tr iggered the improved protability.

Palm oil has contributed 71% of the total prots made

by the Company during the year.

Export segment had a sluggish outlook throughout theyear with adverse impact posed due to the crisis in

Euro zone and uncertainty in gulf region. The segment

showed a drop of almost 100% in protability with a

marginal loss reported during the year.

Return on equity (ROE)

The Group generated a return on equity of 15% for the

nancial year which has been 10% drop from the prior

year. Decline in the prots and increase in total equity

impelled the dip in ROE.

Return on assets (ROA)

The Group has been able to generate a return of 7%

using the total asset base during the nancial year. This

has been a drop of 4% compared to the previous year

due to lower protability.

Earnings per share (EPS)During the nancial year the Group has generated

Rs.1.74 prot for each unit of shares. (Total Ordinary

shares: 236.67mn). This has been a drop of 36%

compared to the previous year.

Moreover the cash generated from operations per

share was Rs.2.67 for the year where the same has

been Rs.3.64 in 2010/11.

Price earnings ratio (PER)

The nancial year ended 31/03/2012 recorded a PER of

5.74 for Watawala share. During the previous year this

has been 9.21. The year closed with a market price of

Rs.10 per share of the company traded on Colombo

Stocks Exchange. (Rs.24.50 as at 31/03/2011)


40




Administrative expenditure

The administrative expenditure of the Group for theyear has been Rs.211mn which was an 38% drop from

the previous year which recorded Rs.342mn.

Management fee

The Management fee is paid to Messrs Estate

Management Services (Private) Ltd (EMSPL) in

accordance with the agreement entered between

The Ministry of Plantation Industries, SLSPC/JEDB &

Watawala Plantations PLC. The basis for the calculation

of the Management fees has been 10% of the Earnings

before Interest, Tax, Depreciation and Amortization

(EBITDA). Total management fees payable for the

nancial year 2011/12 is Rs.49.3mn in comparison to

Rs.90.3mn paid in the preceding year.

Finance expenses

The Group’s nance expenditure during the year has

been 26% on the operating prot. During the previous

year the same has been 12%. Despite the marginal

drop in the nance cost (though the interest rates have

increased during the latter part of the year), the lower

protability has caused the interest cover to decline by

53% to 3.92 from 8.43 recorded in 2010/11.

Taxation

Group income tax for the FY 2011/12 amounted to

Rs.0.64mn liable as for the provisions of the Inland

Revenue Act No.10 of 2006. From the periods starting

April 2011 the agricultural undertakings are taxed at10% and other activities at 28%. Over provision of the

deferred tax amounting to Rs.4.1mn also included in

the tax liability for the year.

Equity

The shareholders equity ratio reects the movement

of shareholders’ funds invested in the company along

with the asset base. During the year the shareholders

equity aggregates up to 50% of the total asset base of

the company.




Market value added (MVA)

MVA is an indication of the value addition ability of a

Company to the shareholders’ funds invested. MVA is

arrived at by subtracting the shareholder funds from

the market value of shares. During the nancial year

2011/12 the market value addition has deteriorated by

Rs.465mn following the drop in market price of share

to Rs.10 from Rs.24.5 recorded the year before. This

has been 114% drop in MVA from Rs.3.3bn recorded

in 2010/11.

Enterprise value (EV)

Enterprise value is considered as potential takeover

price of company hence it is derived from the market

capitalization. During the year EV of the company has

dropped substantially to Rs.3.05bn from Rs.6.6bn

recorded in 2010/11. This was as a consequence of

drop in market price of a share by 59%.

Enterprise multiple (EM)

Enterprise Multiple is arrived at by dividing the

Enterprise value by EBITDA of the Company where it

could be used to compare value across companies.

During the year EM has dropped to 6.2 times in

comparison to 7.34 times marked in 2010/11. This was

as a result of lower earnings and lower market price of

shares traded.

Dividends

The Board of Directors have recommended a rst

and nal dividend of Rs.0.35 per share amounting to

Rs. 82.8mn out of the prot arising from the nancial

year 2011/12 (FY 2010/11 – Rs. 201mn), which is to be

approved by the shareholders at the Annual General

Meeting to be held on 6 July 2012.

The Cumulative Average Dividend Payout (DPO) of

the company from 1996 to nancial year 2011/12 is

approximately 18%.

Borrowings


42




Total borrowings of the Company stood at Rs.757mn.

Long term borrowings have declined to Rs.211mn from

Rs.305mn in 2010/11 however the short term borrowing

have increased by Rs.100 over the period.

Debt Ratio (Debt to Assets) of the Company increased

to 32% during the year from lowest ever 13% recorded

prior year. This has been as a result of drop in market

capitalization following low share price.

Debt to equity ratio further declined due to repayment

of long term borrowings. At the year end the ratio

touched the lowest ever of 7% which indicates strong

equity base of the Company.

Asset base

The asset base of the Company at the end of FY

2011/12 stood at Rs.5.6bn with non-current assets of

77% and 23% of current assets.

Capital expenditure

During the year the Company has spent Rs.573mn on

capital expenditure which includes massive replanting

phase of palm oil amounting to Rs.225mn and Tea

factory developments of Rs.106mn. Total capital

expenditure incurred has been 13% of the Revenue

generated for the year.

Cash ow

Financial year 2011/12 ended with a positive net cash

inow of Rs.312mn compared to negative Rs.132mn in

last year.

The Group’s operating cash ow generated for the

year was Rs.630mn which has been a decline of 26%

compared to Rs.856mn inow of previous year. The

main reason has been the additional cash own out

with the wage increase. The net cash generated byinvesting activities was Rs.169mn against the outow

of Rs.694mn recorded in 2010/11.Group has paid out

Rs.308mn net cash on nancing activities compared to

Rs.124mn paid in previous year. The dividend payment

of Rs.201mn has been the main reason for this increase.

At the end of the year Group is at a positive cash

position of Rs.67mn as against the negative Rs.245mn

recorded in 2010/11.




Free cash ow (FCF)

The free cash ow is the net cash generated by a

company after providing funds for enhancement of

the asset base by way of capital expenditure. For the

nancial year 2011/12 the FCF for the Group is negative

Rs.122mn in comparison to net outow of Rs.70mn

in the previous year. In spite of the decline in capital

expenditure by 24% the FCF has got weakened during

the period. This has been due to the drop in cash

generated from the operations as a consequence of

the wage impact.

Working capital

During the year the working capital cycle has speeded

up by 33% with improved inventory and cash ow

management. The average cycle is recorded as 20days

in comparison to 33 days in the previous year. Group

has been able to reduce the days tied in inventory

to 44 which is a 25% improvement from 59 days in

comparison.

31/Mar/12 31/Mar/11

Total current assets 1,312,040 1,326,548

Less: Total current liabilities 1,153,964 1,198,267

Working capital 158,076 128,281

Current ratio (times) 1.14 1.11

Followed by the improvement in WC cycle, Group

recorded a current ratio of 1.14 times during the year in

comparison to 1.11 times in 2010/11.

In to the future

The Sri Lankan plantation sector is paramount to the

economy with a contribution of 18% to the national

export revenue. However in 2011 the major commercial

crops tea, rubber and coconut showed sluggish

performance. The tea industry was under severe

pressure due to European crisis and Middle East

political conicts.

The future of Ceylon tea comes with the challenge of

productivity and facing competition that will likely to be

imposed by China, Kenya and north east India with low

cost of production.

The rubber market is expected to pick up as the Asian

manufacturers of automobile will increase demand

for natural rubber such as China and India. However

the margins will be thinner compared to US and EU

markets.

The future of local plantation sector will be reshaped

with increased importance of growing oil palm as a

commercial crop. Currently only 4 RPCs have invested

on Oil palm however in time to come this sector is

expected to replace the traditional coconut sector with

government sustenance.

Further the government is looking forward to self-

sufciency in Milk requirement of the country where

the investments in to Dairy production is expected to

incline.

Above all the challenges, inventing a sustainable

energy source has become critical and will be of equal

importance to all the sectors in the economy. With

crude oil prices swelling across nding substitute

energy sources and investing in to mini hydro projects

are becoming increasingly important.

We at Watawala plantations have set our vision on

taking a path which no other would have walked in and

contemporaneously looking forward to re-shape the

future of the company grasping fruitful opportunities

lying ahead to remain as the best plantation company

while diversifying and building up on our key strengths

‘people’ and ultimately safe guarding the planet.


44




MECHANIZATION -MACHINE PRUNINGIMPROVE EFFICIENCY & REDUCE COST



Corporate Governance

Remuneration Committee Report

Audit Committee Report

Risk Management

CORPORATEGOVERNANCE



Chairman’s Statement

Well-dened and enforced corporate governance system

provides a structure that works for the benet of everyone

concerned by ensuring that the enterprise adheres to an

accepted ethical standards and best practices as well as

to formal laws. In recent years, corporate governance has

received increased attention in the corporate world.

Watawala Plantations PLC perceives good governance and

is conscious of the responsibilities placed on the Board of

Directors. The presence of three board members from the

Indian Business Conglomerate, The Tata Group has further

enhanced the emphasis paid on its importance.

Our compliance with the Code of Best Practices of Corporate

Governance is reported in the next few pages for the readers

to obtain a comprehensive view of the Governance System in

the Company.

G. Sathasivam

Chairman


Watawala Plantations PLC upholds good

governance practices whilst striving to achieve sustainable growth and being

fully compliant with the relevant laws and

regulations. The ultimate responsibility

rests with the Board of Directors who

monitors the progress through committees

appointed by the Board. Values and

Business Ethics which adds on to the

process makes a conscious effort to

continually improve the governance

framework. The Company adopts the

Code of Best Practices, issued by the

Institute of Chartered Accountants of

Sri Lanka, Listing Rules of the Colombo

Stock Exchange and also complies with

the Country’s Legislative and Regulatory

requirements.

Our Ownership


48




stakeholders’ requirements as important in taking

corporate decisions. Diversication into Exports,

Dairy Farming etc. has been carried out to have

sustainable prots and to enhance the stake holder

value. The Company has also embarked on several

cost reduction methods which are highlighted in

the “Sector Separators” of this Annual Report.

• Values and standards of the Company are

set with emphasis on adopting appropriate

accounting policies and complying with

nancial regulations.

The accounting policies are reviewed regularly

and the Audit Committee keeps abreast with the

new pronouncements of accounting standards

and nancial regulations. The Company has been

adopting Sri Lanka Accounting Standards (SLAS)

throughout the years which is also certied by the

Auditors PriceWaterhouseCoopers. The Company

is also now geared to migrate to International

Financial Reporting Standard (IFRS) in the current

period.

• Fullling other Board Functions as relevant to

the Organization

Board makes every endeavor to fulll their

obligation to the stakeholders.

(ii) Need to act in accordance with the relevant

laws and seek Independent Professional

Advice.

Board ensures compliance with the applicable laws

wherever required obtains professional advise from

outside parties. The Company’s legal consultants

are F. J. & G De Saram. The company also obtains

advice on other issues such as taxation, product

development and technology development

from local and overseas consultants, wherever

necessary. Any Director may obtain independent

professional advice that may be required in

discharging his responsibilities effectively, at

Company’s expense.

(iii) Company Secretary

The Company Secretaries are Secretaries and

Financial Services (Private) Ltd who acts as

Secretaries to the Board and make their presence

at every board meeting. The Company Secretaries

advises the board on all regulatory matters

pertaining to Colombo Stock Exchange, Securities

& Exchange Commission. The Secretaries also

record minutes which are tabled for approval at the

next meeting for effective follow-up on decisions

taken.

(iv) Independent Judgment of Directors

The Directors use their independent judgments

in making decisions. Six of the nine Directors are

non-executive and two are independent.

(v) Directors dedication of time and effort

In addition to the attendance and participation at

the Board Meetings, the Board Members make

their time available for consultation if and whenever

it becomes necessary. All Board papers are sent

to the Members of the Board well in advance and

all queries raised by them are answered before or

even after the meetings.

(vi) Training for Directors

The Executive Directors participated in several

study tours of Plantations outside Sri Lanka.

2A. Chariman and Chief Executive Ofcer

The Chairman is a non-executive member of the

Board. The Chief Executive Ofcer is responsible for

the management of the plantations and the nancial

responsibility is with the Chief Finanacial Ofcer, both

of whom report to the Managing Director thus enabling

the Board to have a clear segregation of duties between

the Chairman and Managing Director.

3A. Chairman’s Role

The Chairman conducts all board meetings and the

Managing Director presents all detail operating results

to the board along with other Executive Directors and

the Chief Financial Ofcer.

The board comprises of nine directors of whom six are

non-executive. Three of the non-executive directors are




physically present at this meeting.

The adoption of the Audited Financial Statementsforms a part of the Agenda.

The Company also maintains a website for information

of the shareholders and other parties addressed as

www.zestatea.com

1C. Major Transactions and Price Sensitive

Information

There were no Major Transactions during the year as

specied by Sec. 185 of the Companies Act No. 7 of

2007.

D. Accountability and Audit

1D. Financial Reporting

In the preparation of the annual and quarterly nancial

statements, the company complies to the requirements

of the

• Companies Act No. 07 of 2007.

• Sri Lanka Accounting Standards.

• Listing rules of the Colombo Stock Exchange.

The table below depicts the dates the quarterly

accounts were published within the prescribed time of

the listing rules.

1st Quarter 01 August 2011

2nd Quarter 20 October 2011

3rd Quarter 26 January 2012

4th Quarter 29 May 2012

This Annual Report covers the following areas in

detail.

• The Chairman’s Review along with the Managing

Director’s report gives a full overview of the

company.

• Directors Report is presented on pages 100 to 102

of this report.

• Statement of Directors Responsibilities as given by

the Company Secretaries is on page 104.

• Auditors report is appended on page 105 of this

report.

• Management discussion and analysis is presented

on pages 30 to 44 of this report.

• Directors report on going concern is given on page

100 to 102 of this report.

• Risk Assessment on pages 63 to 67.

• Sustainability Report on pages 70 to 97.

• Audit Committee Report 61.

2D. Internal Control

The Board is overall responsible in establishing a

good system of internal control in the company and

delegated much of it to the Audit Committee. Thiscommittee in turn reviews all management accounts,

directs the Internal Audit Team to carry out checks on

areas of verication other than their normal checks.

The Audit Committee reviews all Internal Audit

Reports which are circulated to them quarterly and

discusses the salient features at the Audit Committee

Meeting with the Internal Auditor the CFO and the

Finance Manager. At the end of the second quarter a

limited review is carried out by the external auditors

M/s PriceWaterhouseCoopers and their reports are

discussed in length at the Audit Committee Meetings.

The year end Management Letter submitted by the

External Auditor is also discussed at the nal Audit

Committee Meeting during the Financial year.

3D. Audit Committee

The Audit Committee of the company consists of three

Non-executive Directors :

Mr. B.A. Hulangamuwa, Mr. K. Venkataramanan and Mr.

A.N. Fernando.

Mr. Hulangamuwa is a Fellow Member of the Institute

of Chartered Accountants of Sri Lanka and Mr.

Venkataramanan who is a Vice President of Tata Global

Beverages Ltd. of India is a Fellow Member of the

Insitute of Chartered Accountsnts of India.Mr. A. N.

Fernando who joined the Audit Committee in May

this year is also a Fellow Member of the Institute of

Chartered Accountants of Sri Lanka.

The Audit Committee views at different intervals the


54




independence of the External Auditors. The External

Auditors on the other hand discusses with the

Management before taking up any other assignment in

the company and would take over such assignments if

it relates to work involving Assurance.

The Audit Committee functions on clear guidelines

given to them by the Board of Directors.

• Reviews the accounts whether they are prepared

in accordance with the Sri Lanka Accounting

Standards and in accordance with the Companies

Act.

• Asses Controls by reviewing Internal Audit Reports.

• Make recommendations to the Board on the re

appointing of the External Auditors.

• Recommends quarterly and annual accounts to

the Board for adoption.

• Reviews Risk Assessments and its mitigation

process.

The Report of the Audit Committee is on page 61 & 62

of this report.

4D. Code of Business Conduct and Ethics

Although there is no inhouse written code of conduct of

the Directors, they are conscious of the duties required

of them. Where ever there are transactions with

connected companies such transactions are disclosed

under the related party transactions. The Company is

compliant with the Code of Best Practice on Corporate

Governance jointly issued by the Securities and

Exchange Commission of Sri Lanka and the Institute of

Chartered Accountants of Sri Lanka.

The company has published the best businesses

practices and ethics in the form of an employee hand

book and have distributed to all the employees of

the organization. This covers a wide area of activity

including policies and business ethics of the company.

These policies are regularly reviewed and updated by

the Human Resource Division of the organization.

5D. Corporate Governance Disclosures

The Company has been publishing quarterly nancial

statements with the necessary explanatory notes as

required by the Rules of the Colombo Stock Exchange

and the Securities and Exchange Commission of Sri

Lanka to all stakeholders. Any other nancial and

non-nancial information, which is price sensitive or

warrants the shareholders and stakeholders’ attention

and consideration, is promptly disclosed to the

Colombo Stock Exchange.

Shareholders

The Company through company Secretary, Secretarial

& Financial Services maintains an active dialog with the

shareholders, potential investors, investment banks

etc.

The Shareholders are encouraged to attend Annual

General Meetings and clarify doubts with the Board

of Directors. The Annual Report of the Company is

circulate among all the shareholders giving them the

stipulated number of days as recommended in the

company’s articles of association ahead of the AGM

for the Investors to study the companied performance

prior to attending the meeting.




Finance compliance -2011/12

Payment of taxes/remittances

Item Description Frequency Due dateCompliance

status

01 Income Tax (self assessment

and nal payment)

Quarterly/Annually Q1-15th Aug / Q2 -15th Dec

/ Q3-15th Feb (Final-30th

September)

Complied

02 Social Responsibility Levy

(SRL)

Quarterly/Annually Q1-15th Aug / Q2 -15th Dec

/ Q3-15th Feb

Complied

03 Deemed Dividend Tax (D D T) Annually 30 th October Complied

04 Value added Tax Monthly 20th of the following month Complied

05 Economic Service Charge

(ESC)

Quarterly Q1-20th Jul/ Q2-20th Oct/

Q3- 20th Jan/ Q4- 20th Apr.

Complied

06 Nation Building Tax (NBT)- Monthly Q1-20th Jul/ Q2-20th Oct/

Q3- 20th Jan/ Q4- 20th Apr.

Complied

07 Pay As You Earn (PAYE) Monthly 15th of the following month Complied

08 Employees Provident Fund Monthly 30th of the following Month Complied

09 Employees Trust Fund Monthly 30th of the following Month Complied

10 Estate Staff Provident Soci-

ety Contributions (ESPS)

Monthly 30th of the following Month Complied

11 Stamp Duty Quarterly 15th July/Oct/Jan/Apr Complied

12 Terminal Gratuity As and when

required

Within 30 days of discon-

tinuation of service.

Complied

Filing return

Item Description Frequency Due dateCompliance

status

01 Income Tax Annually 30th November of the fol-

lowing year

Complied

02 Value added Tax (VAT) Quarterly 20th of the following month Complied

03 Economic Service Charge

(ESC)

Quarterly 20th of the following month Complied

04 Nation Building Tax (NBT) Quarterly 20th of the following month Complied

05 Pay As You Earn (PAYE) Annually Annually 30th April Complied


56




Operational Compliance

Description Act/ Ordinance Compliance / Non compliance

Tea Controllers’ Act

Renewal of Registration of registered tea

Manufacturers

Tea Controllers’ Act No.

51 of 1957

Complied where applicable

Sri Lanka Tea Board Law

Disposal of Refuse Tea Sri Lanka Tea Board Complied where applicable

Law 14 of 1957

Collection of Bough leaf and payment Sri Lanka Tea Board Complied where applicable

Law 14 of 1957

Submission of Monthly production data TC

5 form

Complied.

Municipality Laws

Payment of assessment tax to Municipality

and Urban Councils


Factories Ordinance

Provision for safety and welfare

of workers in factories Ordinance 45 of 1942 Complied where applicable

Ordinance 22 of 1946 Complied where applicable

Act 54 of 1961 Complied where applicable



Registration and licensing of factories

and approval for factory building


Health Complied where applicable

Safety Complied where applicable

Health Safety and Welfare ( special provi-

sions)


Notication and Investigation of accidents

and industrial diseases


Employment of workers Hours and Holidays Factory Ord.Chapter 144 Complied.

Employment related laws

Payment of EPF / ETF EPF Act No 15 of 1958 Complied

Payment of Gratuity as per the law Compliance

to the

Collective agrement

Complied

Salaries Complied

Other benets Complied




Rule

No.

Subject Applicable RequirementCompliance

Status

Details

7.10.1 Non-Executive

Directors

At least one third of the total number

of Directors should be Non-Executive

Directors

Complied Six out of Nine Directors

are Non-Executive

Directors

7.10.2

(a)

Independent

Directors

Two or one-third of Non- Executive

Directors, whichever is higher should be

independent

Complied Two Non-Executive

Director are independent

7.10.2

(b)

Independent

Directors

Each Non-Executive Director should

submit a declaration of independence

/ non-independence in the prescribed

format

Complied Non- Executive Directors

have submitted these

declaration

7.10.3(a)

Disclosurerelating to

Directors

Name of independent Directors shouldbe disclosed in the Annual Report

Complied Please refer page 52

7.10.3

(b)

Disclosure

relating to

Directors

The basis for the Board to determine

a director is independent, if criteria

specied for independence is not met

Complied Given in page 52 under

the heading of Board

balance

7.10.3

(c)

Disclosure

relating to

Directors

A brief resume of each director should

be included in the Annual Report and

should include the Director’s areas of

expertise

Complied Please refer page 22 & 23

7.10.3

(d)

Disclosure

relating to

Directors

Forthwith provide a brief resume of new

Directors appointed to the Board with

details specied in 7.10.3 (d) to the CSE

Complied Brief resumes have been

provided to the Colombo

Stock Exchange

7.10.5 Remuneration

Committee

A listed company shall have a

Remuneration Committee

Complied Remuneration Committee

comprises of Mr. G.

Sathasivam and Mr.

P. Siganporia (Non-

Executive Directors)

7.10.5

(a)

Composition of

Remuneration

Committee

Shall comprise Non-Executive directors

a majority of whom will be independent

Complied As above

7.10.5

(b)

Remuneration

Committee

Functions

Shall recommend the remuneration

of the Chief Executive Ofcer and the

Executive Directors

Complied As above

7.10.5

(c)

Disclosure in

the Annual

Report relating

to Remuneration

Committee

The Annual Report should set out

Name of Directors comprising the

Remuneration Committee.


Statement of Remuneration Policy. Complied Please refer page 60

Aggregated remuneration paid to

Executive and Non-Executive Directos.


Levels of Compliance with the CSE’s Listing Rules Section 07 - Rules on Corporate

Governance are given in the following table.

Corporate GovernanceWatawala Plantations PLC

58



Rule

No.

Subject Applicable Requirement Compliance

Status

Details

7.10.6 Audit Committee The Company shall have an Audit

Committee

Complied please refer Report of

the Audit Committee on

pages 49 to 55

7.10.6

(a)

Composition

of Audit

Committee

Shall comprise of Non-Executive

Directors, majority of whom will be

independent

Complied Audit Committee consists

of 2 independent Non-

Executive Directors

Non-Executive Directors shall be

appointed as the Chairman of the

Committee

Complied Chairman of the

Committee is an

independent Non-

Executive Director

Chief Executive Ofcer and ChiefFinancial Ofcer should attend Audit

Committee Meetings

Complied Chief Executive Ofcerand Chief Financial

Ofcer attend meetings

by invitation

The Chairman of the Audit Committee or

one member should be a member of a

professional Accounting body

Complied All members of the Audit

Committee are Chartered

Accountants

7.10.6

(b)

Audit Committee

functions

Should be as outlined in the section 7.10

of the listing rules

Complied The terms of reference

of the Audit Committee

have been ratied by the

Board

7.10.6

(c)

Disclosure in the

Annual Report

relating to Audit

Committee

a. Names of the 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.

Complied Please refer Audit

Committee Report on

pages 61 & 62

c. The Annual Report shall contain a

Report of the Audit Committee setting

out of the manner of compliance with

their functions.

Complied Please refer Audit

Committee Report on

pages 61 & 62




Report of the Audit Committee

The Audit Committee was established in 2004. The

Committee consists entirely of three Non Executive

Directors who are senior Chartered Accountants and

the Committee is chaired by Mr. K. Venkataramanan.

Secretaries and Financial Services (Pvt) Ltd, the

Company Secretaries functions as the Secretaries

to the Audit Committee. The Managing Director and

Chief Executive Ofcer attend meetings by invitation.

The Charter for the Audit Committee is in line with

the international best practices frame work. The Audit

Committee reviews the charter quarterly and updates

to reect the views that the members of the audit

committee express in the independent discharge of

their duties. As specied in rule 7. 10. 06 of the listing

rules of the Colombo Stock Exchange, the board is of

the opinion that the members of the Audit Committee

are independent. Mr. A.N. Fernando, a non Executive,

Independatent Director was appointed to the committee

w.e.f 17 May 2012.

Meetings

The Audit Committee met four times during the year.

Attendances by the Committee members at each of

these meetings are as follows. The Head of Internal Audit also attended as and when required by the

Committee.

Mr. K. Venkataramanan - Chairman

Attended 4 of 4 meetings

Mr. B. A. Hulangamuwa - Director

Attended 4 of 4 meetings

The Audit Committee and it’s

ResponsibilitiesThe main objective of the Audit Committee is to ensure

that the Company complies with applicable nancial

standards and laws and execute the responsibilities

given in the Audit Committee Charter. It sets out

high standards of corporate disclosure, corporate

responsibility, integrity and accountability to the

shareholders.

The Audit Committee obtained representations from

the Chief Financial Ofcer on the adequacy and

effectiveness of internal control systems. That review

the statutory accounts and publish nancial statements,

assess compliance with regulatory requirements,

considered the contents of Internal Audit Reports and

recommend the appointment and remuneration of the

external auditors.

The Report of the Audit Committee to the Board of

Directors of Watawala Plantations PLC

Watawala Plantations PLC management is responsible

for it’s internal control and nancial reporting including

the preparation of consolidated nancial statements.

Independent Auditors are responsible for auditing

the annual consolidated nancial statements in

accordance with generally accepted auditing standards

and ensuring that the nancial statements are truly and

fairly present the results of operations and nancial

position of the Company. The independent auditors

are also responsible for issuing a report on those

nancial statements. The Audit Committee monitors

and oversee these processes. The Audit Committee

annually recommends to the Board for its approval an

independent accounting rm to be appointed as the

Company’s independent auditors.

To full its obligations the Audit Committee carried out

the following activities.

- Reviewed and discussed with the Company’s

management and the independent auditors,

the consolidated nancial statements for the

accounting year ended 31 March 2012.

- Reviewed management’s representations that the

consolidated nancial statements are prepared in

accordance with generally accepted accounting

principals truly and fairly present the results of

operations and nancial position of the Company.

- Recommended that the Board select

PriceWaterhouse Coopers, Chartered Accountants

as independent auditors to audit and report on the

annual consolidated nancial statements of the

company and forward copies of the Annual Report

to the Colombo Stock Exchange prior to the Annual

General Meeting.




- Reviewed the procedures for identifying business

risks and management of the impact on the group.

- Reviewed the policies, procedures and internal

controls for detecting and preventing fraud.

- Reviewed the operational effectiveness and internal

controls of the policies, systems and procedures.

- Reviewed, and discussed with the Management, the

annual and the quarterly nancial statements prior

to their release, including the extent of compliance

with the Sri Lanka Accounting Standards and the

Com panies Act, No.7 of 2007.

- Reviewed the procedures established by

Management for compliance with the requirements

of regulatory bodies. Chief Financial Ofcer

submitted to the Audit Committee on a quarterly

basis, a report on the extent to which the Company

was in compliance with mandatory statutory

requirements.

Conclusion

The Committee is of the view that adequate controls

and procedures are in place to provide reasonable

assurance that the Company’s assets are safeguarded

and the nancial position of the Company is well

monitored. The Audit Committee concurs that

the adoption of the going concern premise in the

preparation of the Financial Statement is appropriate.

The Audit Committee recommends to the Board of

Directors that the nancial statements as submitted be

approved.

On behalf of the Audit Committee;

K.Venkataramanan B. A. Hulangamuwa

17/05/2012


62



The Company operates in an evolving environment

which exposes it to different types of risks especially

being in the Agricultural Sector which is very sensitive

to weather patterns. An effective Risk Management

system is an Important Area of Business Management

which would attempt to prevent many events which

would otherwise have adverse effects on the business.

At Watawala Plantations Plc with the guidance of the

Audit Committee the Management has identied the

several areas of activity in assessing and mitigation of

risks. The main areas of business of Watawala Group

are appended below.

Risk Management


• Cultivation and Manufacture of Tea

• Cultivation and Manufacture of Rubber

• Cultivation and Manufacture of Crude Palm Oil

• Export of bulk and value added tea

• Extraction of Olein from Crude Palm Oil

• Dairy Farming

Risk Category Risk Rating Risk Assessment Risk Mitigating Strategies

Changes due to Global

Recession or change in

International Markets

Moderate Would lead to loss in

Prots.

Spread the risk by attempting to

market the teas in different global

markets.

Every attempt is being made to

spread the company’s dependence

on a range of products rather than

a few.

Adverse Action by foreign

governments such as

sanctions on Iran

Moderate Would lead to loss of

prots

Continues attempt in nding new

markets

Major natural or Man

made disasters

Low Such as destruction of a

factory which would lead to

Revenue and Capital loss

Adequate Insurance Cover on

Capital items, loss of prots etc.

Economic Risk





T E A

Upcountry tea is our

main business and a

fall in tea prices at the

Colombo auction may

have an adverse effect on

Company’s performance.

High Since 69% of the recorded

turnover in the current

year is from tea, the

impact on the company’s

performance would be

heavy.

Spread the risk by investing in

other crops such as Palm Oil,

Dairy Farming Attempt to obtain

international standards such as

Fair Trade, Ethical Tea Partnership

etc

Change in demand pattern

due to competition from

other beverages such as

coffee etc.

Low This would affect long-

term fall in sales which

would have a bearing on

the protability.

Move with the market trends and

develop different beverages of tea

such as avored tea, ice tea, green

tea etc.

RUBBER

A drop in Rubber prices in

the international market.

Low The Company owns a very

low extent of rubber. some

of the rubber area has now

been planted with oil palm

Reduce overheads by reduction

in tapping and transfering the

workforce to other areas such as

oil palm and tea.

OIL PALM

Fall in market prices of

crude palm oil.

High Since the year under

review the highest prot

of the company has been

achieved in the Palm Oil

segment, small impact

may have a major bearing

on the protability.

The chart below depicts

how a 5%, 10%, and a

15% drop in Palm Oil

prices would impact the

nal protability.

Crude Palm Oil which was once

exported to India under the Indo

Lanka FTA. At present Palm Oil

is being sold locally as it fetches

a better price now. The export

markets are still available.

Further, the Company has now

taken steps to rene Crude Palm

Oil and sell Palm Oleine

Market and Market Prices


64




T E A / RUBBER / OIL PALM

Migration of works to

others areas

Moderate Migration of skilled, semiskilled

and unskilled workers to the

non plantation sector would

effect productivity of the

organization.

Recognize efciency with

reward, mechanization of certain

activities such as pruning, holing,

plucking etc.

Labour disruptions and

outside interferences

Moderate Work stoppages and trade

union action could result in a

loss of production, overgrowing

of tea bushes, untapped rubber

trees, unplucked palm oil

bunches which could reduce

production and even slowdown

on out put.

Entering in to a collective

agreement with the trade unions

,also the company maintains a

good rapport with trade unions.

Migration of Managers

and executives to other

industries.

Low Disruption of the smooth ow

of activities which has an

impact on the performance of

the company

Need to have a good succession

plan. Regular training sessions

and motivation programmes

would have an impact on the staff

turnover.

Inability to attract and retain

skilled staff at Middle andSenior Management Level.

Low/ Moderate Possibility of the High

Performing Executives tomove to companies within the

same industry, migrate.

Have a development path for all

employees.Performance based remuneration

schems.

Finance and Liquidity

The plantation sector

rests on several external

uncontrollable factors such

as erratic weather patterns

etc. Liquidity problems are

bound to arise under these

circumstances.

Moderate The company may be

compelled to go in to

additional borrowings or draw

up of reserves.

Efcient cash management and

building up of reserves would be a

crucial area. Assistance was made

available from the Sri Lanka Tea

Board and the Plantations Trust

Fund with regard to borrowings at

nominal interest rates at a time of

need.

High Interest rates levied

by lending institutions

Moderate High interest levied by banks

would erode the protability of

the company. The graph below

depicts the Interest Spread

offered to the company.

Attempt to negotiate the

best interest rate with (i) Own

credibility (ii) Using the reputation

of the Foreign Partners (iii) With

the assistance of Govt Agencies.

Human Resources


66




T E A / RUBBER / OIL PALM

Non availability of the latest

Information Technology

low The company presently

operates on a fully

computerized accounting

and MIS system. Since this

software is over 13 years

old it would have an impact

on performance. The staff

in estates and head ofce

are quite conversant with

the present system thus

the security has become a

concern.

The Management is now

implementing a new software

package developed on Dot Net

platform providing better security

and faster response.

Since the Company

operates in a fully

computerized environment

and any break down

would cause a loss of data

which would disrupt the

ow of information

low Loss of information would

lead to delays in decision

making and result in

nancial losses.

The Company makes two daily

backups which are stored outside

the ofce premises.

Weekly and monthly backups are

taken and stored in the bank wallet

Other Risks

Compliance with laws and

other statutory obligations

and risks arising from

litigation -

low Law suits against the

company may lead to loss

of reputation and penalties

being imposed

Statutory obligations are regularly

reviewed by the Head of Finance

and reported to the Audit

Committee. The company also has

its legal consultants in FJ & G De

Saram

Credit Risks - low Company is exposed to

a large amount of credit

given out in sale of tea,

rubber, retail marketingand exports.

Tea / Rubber – Sold via brokers

where one week is given for

settlement on the selling brokers

assurance.

Information Technology




EASY ACCESSTO WATERIMPROVE THE QUALITY OFLIFE OF OUR ASSOCIATESAND THEIR FAMILIES

68



SUSTAINABILITY REPORT

“The mutual dependence and reciprocal interest which man has upon

man, and all the parts of a civilized community upon each other,

create that great chain of connection which holds it together.”

-Thomas Paine



Message from the CEO

“WE WILL REMEMBER THIS SEASON FOR

THE FAR-REACHING SUSTAINABILITY

ACHIEVEMENTS WHICH WE MADE DURING

THE YEAR”

We are living in a time of unprecedented change. The global

risk landscape for agriculture and plantation crops is constantly

shifting as climate, economic, social and ecological factors

dynamically interact with each other. What distinguishes one

company from the next is its ability to adapt to the systemic risk

that arises from the interaction of these environmental, social

and governance changes. Our sustainability efforts therefore

become paramount for the continuation of responsible

corporate citizenship that began in our earliest days as a

Company. We have strived to identify and respond to risks,

we believe are relevant to our industry and we consistently

communicate the message of risk management to our stake

holders, being mindful that our Company can only be as

healthy as the people and communities we strive to serve. Th

report documents the actions we took in response to thes

challenges.

The impact of climate change brought to focus the importanc

of the process of not only allocating and using water as

resource in a sustainable and efcient manner but mo

importantly in developing and improving our resources throug

improved water retention techniques and the harvesting of ra

water that would enable us to tide through times of tradition

drought when water scarcity becomes a serious issue

contend with. This is so not only where our crops are concerne

but more importantly in serving the needs of our people. Henc

our focus has been to reduce ground temperatures as far a

possible, improve the permeability and water retention capaci

of our soils, and improve recharge structures so as to reduc

or eliminate the surface ow of water direct to the ravines an

rivers. The reduction brought about in the use of fossil fue

and agro chemicals has caused us to be more environment

The Global Reporting framework enables the evaluation of th

contribution that an enterprise makes towards its communitie

and the environment. For Watawala Plantations, it has provide

a structured framework to report on its social and environment

initiatives during the year under review and to see how thes

initiatives integrate into our long term strategy.

Our bottom line objectives have extended beyond Prots t

include People, and Planet. Sustaining prots we believe requi

the integration of social equity and environmental responsibilito economic growth. Thus, the initiatives carried out this ye

by our company have been structured under the Economi

Environmental and Social categories as illustrated in diagra

below. Sustainability underscores the importance of taking

longer-term perspective about our business, and about th

consequences of today’s activities and of global cooperatio

amongst countries to reach viable solutions.

‘You must be the change you wish to

see in the world’-

-Mahatma Gandhi

Sustainability Report


70




friendly. So has the establishment of Short Rotation

Coppice Plantations in our efforts to be self-sufcient in

our solid fuel requirement without the elimination of trees.

Our journey from good to great brought to focus our

People, Planet and Processes. Getting the right people

to the correct position and having the best for our

greatest opportunities has been our quest. Our workers

earlier referred to as coolies, then laborers came to be

recognized as our “Associates”. Through our performance

management system we were able to strengthen the

culture of the “Management by objectives” throughout

the organization. Appraisal of all our Executives and

Staff have and continue to be the order of the day

whereby measurable objectives, signicant performance

dimensions, management and supervisory performancedimensions, performance and training and development

for personal growth are discussed, evaluated and

implemented. Product and process development came

to be more and more customer oriented and from being

just a supplier and marketer of crude oil we did move to

producing and marketing rened oil.

Our pursuit of excellence brought us to adopt business

practices that go even beyond the best practices with

constant innovation.

We have continued with Fairtrade certication on seven

of our plantations by which people come to identify our

teas as meeting international environmental, labour and

development standards. We continueed with ISO 22000

Food Safety Management Systems. This assures our

valuable customers of the proper management of food

safety risks across the food supply chain and will continue

to do so till all gardens fall in line. Continuing to have our

gardens as members of the Ethical Tea Partnership gives

condence to the tea consumers of the world that the tea

in their cup has been produced in an environmentally and

socially sustainable way. ETP collaborates with a rangeof organizations to achieve these objectives. Productivity

Enhancement Teams, Small group activities and Quality

Circles come very much into play in all these certication

processes and the many awards we have achieved and

detailed in this report is a manifestation of all these efforts.

Our Human Capital has been our driving force and we

are engaged in creating a culture that respects, accepts

and recognizes employee contribution to the success

of the organization. The introduction of the two way

communication system has brought about yet another

paradigm shift that came to be strengthened by the

introduction of the Community Development Forum in

empowering our associates.

Our belief that the success of an organization depends

on the value created through the implementation of HR

policies, systems and processes brought to surface

many HR Strategies that were introduced throughout

the organization. These covered ‘Man power planning’,

‘Recruitment and Selection’, ‘Performance Management’,

Employee Reward Management’, Training and

Development’ and ‘Employee Relations and Industrial

Relations’. In doing so, we have not lost sight of ultimately

achieving our corporate objectives of being a LOW COST

HIGH QUALITY producer, thus satisfying the needs

of stakeholders, which necessarily includes all of its

employees as well.

In addressing our future challenges resulting from worker

shortages we have as detailed in this report taken steps to

improve productivity and reduce absenteeism through the

process of ‘Lean Management’, increasing mechanization

and automation of activities as far as practical, motivation

of our associates, increased social welfare activities and

the training and empowering of the associates.

We know that sustainability relates to our people and the

planet at every level of our company and that the long

term economic prosperity of our company is important.

Therefore, sustainability is valued and implemented across

the board.

I would personally like to thank and extend my gratitude

to the sustainability management teams for driving and

monitoring our sustainability strategy and the sustainability

issue owners for implementing our plans.

I also acknowledge the WPL associates at all levels

for their enthusiastic support of our initiatives. We will

remember this season for the far-reaching sustainability

achievements which we made during the year. Driven by

our talented and passionate associates, we will continue

turning challenges into opportunities in the year ahead.

Dr. Dan SeevaratnamDirector / Chief Executive Ofcer

17/05/2012




report, the Company plans to embark upon an annual

sustainability monitoring and reporting cycle. While

our Annual Report for the year ending 31st March

2011 included a sustainability supplement, this report

provided a brief overview of our practices with an

emphasis on community investment, and was not a

structured report based on the GRI Guidelines.

Being a key player in the agriculture industry, Watawala

Plantations has signicant impacts on the environment

in which it operates while in turn being intrinsically

dependent on favourable environmental conditions, not

least of which are climate conditions, for the survival

and growth of its business. Further, with its closeinterconnection with rural communities and extensive

workforce living and working on its plantations,

employee and estate community welfare is also a key

material aspect to be considered by the company.

It is for this reason that report content in this rst

structured Sustainability Report of Watawala Plantations

covers employee wellbeing including health and safety,

development, gender equity and empowerment, child

labour, and community investment and welfare, as

well as energy management, waste management, and

water conservation, together with practices in relation

to biodiversity and agricultural land productivity.

The boundary of this rst GRI based Sustainability

Report of Watawala Plantations is limited to all

operations of the Company across Sri Lanka, including

19 estates and the Company Headquarters in Colombo.

Operations arising from joint ventures, subsidiaries,

leased facilities or operations that are outsourced are

not included within the boundary of this report.

A signicant change from our previous report

applied in the current report is the structuring of our

reporting efforts in line with the GRI Guidelines. The

present scope and boundary of this report as well as

measurement methods applied in data monitoring, are

herein established in our sustainability reporting for the

rst time. There are no re-statements of information

provided in any previous reports.

Any questions on this Sustainability Report or

its content can be directed to:

Mr.Ajantha Nugawala

General Manager – HR & Administration

No 60, Dharmapala Mawatha, Colombo 03

[email protected] / Tel - 07773457967

Governance and StakeholderEngagement

Our company has given high priority to a strong

framework of corporate governance. For further

information on how it’s governed, please refer to the

page no 48.

Watawala Plantations recognizes the following groups

as being key stakeholders of the Company, and

engaged with these groups accordingly:

Shareholders, employees, customers, brokers,

suppliers, banks, Inland Revenue Department, Labour

Department, Employers Federation of Ceylon, trade

unions, and industry experts

These stakeholder groups in particular are engaged bythe company in order to:

• Ensure the sustainability of the business

• Create value to the shareholders and employees

of the Company

• Maintain a harmonious relationship

• Adhere & comply with legitimate standards

• Demonstrate professionalism and corporate

governance

Sustainability Performance

Economic

The Tea plantations business in the country faced

many challenges during the year under review, and the

envisaged loss prompted the forecast of a loss at the

beginning of the nancial year. However, your company

was able overcome the forecast loss to achieve a pretax




prot of Rs.520Mn. compared with a prot of Rs.532Mn.

during the previous year. Improved productivity, driven

by the effective and efcient utilization of resources

was a key factor that enabled us to make this prot

despite unfavorable market conditions that prevailed

during the year.

As per the plantation collective agreement, the wage

revisions which take place every 2 years have been

amongst the most signicant challenges to the

plantations industry. A wage increase that took place

during the year under review impacted your Company’s

bottom line by Rs.320Mn. Once again improved

productivity and our strategy of crop diversication

adopted several years ago yielded dividends in enabling

the company to offset this loss to end the year with a

prot of Rs.133Mn.

The total value generated by the Company for the

year 2011/12 is Rs.3.7Bn, compared to Rs.3.1Bn, in

the previous year. The summary of value addition for

the period is given below. The total value addition has

increased by 21% over the previous year of which the

largest share of 73% has been distributed among our

employees. We were able to re-invest 14% of the value

addition amounting to Rs.544Mn. The re-investment

will facilitate the future expansion and growth of the

company, and contribute to its sustainability.

Group Company

2011/2012 2010/2011 2011/2012 2010/2011

To Employees 75% 65% 73% 68%

To Providers of funds 2% 3% 2% 3%

To Government 5% 6% 5% 5%

To providers of capital 6% 2% 5% 2%

To Expansion and growth 12% 24% 16% 22%

100% 100% 100% 100%

Summary of value addition for the period is given below.

(Pleas refer page 142 for detailed analysis)


74




Gratuity is one of the company’s key liabilities, an

obligation towards employees for their service rendered

for the company. At the end of this nancial year, liability

that arose from the gratuity was around Rs.873Mn. The

forecast amount within a couple of years would be

Rs.1Bn. Henceforth, in order to minimize the potential

impact of gratuity payment on the nancial performance

of the Company, especially with regard to the cash ow

movements, the Company has made an initiative to

maintain a separate investment which will secure the

Contributions (In Rs.) 2011/12 2010/11

EPF (12%) 146,846,375 125,347,711

ETF (3%) 38,661,551 33,234,750

ESPS 8,851,797 8,474,785

Gratuity 93,653,000 60,826,000

gratuity payment for employees. The initial investment

made was Rs.46Mn. Company intends funding the

gratuity provision at a future date to ensure the payment

of employee claims and thus ultimately add to the value

generated by the company. The generated income will

be re-invested for future gratuity payments. An extra

ordinary resolution has been passed to invest more

funds and the proceeds earned during the year from

the sale of Watawala Marketing Ltd. would be invested.

Production

Company Volumes (kg) National Volumes (kg) Increase/

decrease

Company

Volumes

Increase/

decrease

National

Volumes2012/11 2010/11 2012/11 2010/11

High Grown 3,811,330 3,850,453 72,146,812 78,376,740 -1.0% -8.0%

Medium Grown 1,790,032 1,721,894 50,241,640 54,753,937 4.0% -8.2%

Low Grown 246,211 254,960 190,074,959 195,655,528 -3.4% -2.9%

5,847,573 5,827,307 312,463,411 328,786,205 0.3% -5.0%

Our Tea production recorded a better performance

in comparison to the national tea production. During

the concerned nancial year, national crop volume

declined from 328,786, 205 kg to 312,463,411 kg

by accounting for a 4.96% decrease in National Tea

Volume. Whereas our own tea crop production of

5,847,573 kg in the reporting period was 0.3% higher

than the previous year’s crop production of 5,827,307

Kg. The agricultural processes we have adopted made

a considerable contribution to this growth. National

volumes of high grown tea declined by 7.95% and we

were able to minimize the decrease in crop to 1%.

Our Medium grown tea volumes increased by 3.96%

compared with National Medium grown tea volumes

which decreased by 8.25 %.

EPF/ ETF Contributions




Our People

A vital contributor to the success we have achieved

is the strength, determination, commitment and

dynamism of our 12,000 people whom we consider

our “associates”. The plantation industry is both unique

and complex because it employs a large workforce

living their entire lives within the estate on which they

work. The plantation thus also becomes home to their

families. For WPL the “people” it indirectly impacts

and strives to uplift hence includes over 50,000, which

encompasses women, men, the young and the old and

infants and children.

Employment and Labour Relations

Total workforce by

employment type

Watawala

Plantations PLC

Full time employees 12,168

Part time employees 0

Outsourced 0

Total employees 12,168

Total workforce by

employment contract

Watawala

Plantations PLC

Permanent employees 12,027

Fixed term/Contract employees 141

Outsourced 0

Total employees 12,168

Region No of Employees

Hatton 3,389

Watawala 2,251

Lindula 3,946

Udugama 2,531

Western Region 53

Total 12,168

The company also took steps to address a gap

identied in the employer employee relations on its

Dickoya, Wigton, Kenilworth, Lonach, Abbotsleigh

and Strathdon estates. A gap in communication was

found to be a key cause of increasing labour unrest, as

associates needs were not adequately communicated

and heard. The Company took the simple step of

appointing a mediator who facilitated much improved

communication, and thereby improved relations, which

in turn impacted positively on productivity.

Communication between employees and management

is further facilitated by the unions operating throughout

the Company. Employee interests are also governed

by a collective bargaining agreement reached by the

Employers’ Federation of Ceylon acting on behalf of

the employers and the major trade unions on behalf

of its employees. This covers approximately 90% of

the Watawala Plantations workforce to include all

categories of associates including monthly paid and

daily paid categories.

Addressing Gaps


76




Occupational Health and Safety

The working conditions for our associates wereimproved during the year, by replacing the bamboo

baskets which being used by our tea plucking

associates, with plastic ones. The plastic baskets are

ergonomically designed and much lighter in weight, and

being strapped on to the back of the plucker instead

of the neck, have greatly eased the discomfort and

the burden faced by the pluckers who work their way

up the steep slopes of a tea plantation carrying over

20 kgs of plucked leaves. In addition, nger guards

were provided to the associates to prevent soreness of

ngers that occurs when plucking tea leaves.

Watawala Plantations PLC is proud to report that

during the year under review, we did not experience

any major injuries, occupational diseases, lost days, or

work related fatalities in any of our operations island

wide. Employee absenteeism during the year under

review was also 16.34%.

Health and Medical Camps

Health and wellbeing for communities which have

limited access to medical assistance has been a priority

area for WPL and last year too saw the continuation of

these programmes with the valuable support of a few

non-prot organisations.

We continued to conduct medical camps for our

employees, their families and the neighborhoods on

our estates. Being a member of a conglomerate that

is a key player in Sri Lanka’s Healthcare market has

been an encouragement and an incentive for our active

involvement in health related community initiatives. The

medical camps provide consultation and free medicine,knowledge sharing and screening for Diabetes,

Hypertension, Asthma, Cholesterol, Blood sugar and

Blood pressure.

Eye camps organized in collaboration with the Berendina

Foundation was a signicant Health related community

initiative during the year. We have undertaken the

sponsorship of 200 patients for cataract surgeries in

support of the national programme to prevent and




control avoidable blindness under the “Vision 2020”

programme of the Ministry of Health. Cataract is a

priority area under the national Health care programme.

During the year under review, we were able to conduct

eyes camps in the district of Nuwara Eliya. The

Company provided intraocular lenses, accessories,

and the required drugs and other consumables, with

the support of our sister company Swiss Biogenics.

The camp in Nuwara eliya attended to 89 individuals with

vision problems out of whom 59 were recommended

for cataract surgery. The surgeries were conducted by

Dr. Kala Sivayoganathan at General Hospital, Nuwara

Eliya.

The Company also helped provide nourishment to

pregnant mothers as well as Diabetic patients; in

collaboration with our sister company SBL Ltd 7,500

free Glucerna, Formance milk sachets were distributed

amongst would be mothers as well as Diabetic patients

living on our estates. Additionally, we also distributed

baby care items in association with the Sri Lanka Red

Cross Society amongst pregnant mothers on our

Company’s Shannon estate.

Amongst the other health related initiatives during

the year were programs to increase awareness on

prevention of HIV /AIDS and Dengue.

Similarly an awareness program on the proper

management of serpent bites was conducted in

partnership with the Wild Life Conservation Society

of Sri Lanka. Given the high vulnerability of estate

populations in some of the regions to snake bites,

the program has been found to be very useful in

these areas which have a high rate of vulnerability

to venomous snake bites. The topics covered by the

program included the identication of snakes- which

is important as misidentication is often found to be a

cause of death of a bite victim, and the ‘what not to” in

the immediate care of a victim.


78




Male Female

Breakdown of total workforce 5790 6531

% 47% 53%

During the year under review, we have utilized 804 hours

to conduct training programmes for the employees at

all levels in the Company. Employees of all levels were

able to participate in a programme on self-development

organized at all the regional locations of our company.

Similarly, in the Udugama region some of our junior level

employees were given the opportunity to improve their

level of English competency with classes conducted

on a regular basis. Other training porgrammes include

workshops on EPF related issues, Agricultural policies,

5S and table etiquette and economical ne dining.

Having in-house resource personnel to conduct few of

the training programmes within our estates is an added

advantage. In order to further improve productivity on

our Oil palm plantations, a team of 4 from our Udugama

region was sent on a training programme to AAR and IJM

Plantations in Malaysia during the year to enable them

to improve their skills in nursery practices, integrated

pest management and mechanical harvesting.

Category Percentage of training

provided, by employeecategory

Corporate Managers 8.41%

Managers 22.78%

Executives 25.69%

Non Executives 20.18%

Associates 22.94%

Note: Approximate gures have been presented above

The Udugama team during the Malaysian Visit

Our overall stance towards gender equity and diversity,

as well as towards the development of women, can

be seen through the breakdown of our workforce by

gender


80




Accreditations

Seven of our estates, namely Kenilworth, Carolina,

Shannon, Dickoya, Abbotsleigh, Waltrim and

Homadola are ISO 22000 certied. ISO 22000 is

awarded by Sri Lanka’s standards Institution upon

inspection, verication, testing and evaluation of food/

product safety along with entire production chain, from

harvesting of leaf to dispatch of nished teas. This

certication embodies the principles of HACCP and

ISO 9001:2000 quality management systems and gives

the company a distinctive competitive advantage to

further strengthen its position in the industry.

Ethical Tea Partnership

All our tea gardens except for one- Talangaha have

gained membership in the Ethical Tea Partnership (ETP)

–an endorsement that the tea we produce has been

manufactured in a socially just and environmentally

sustainable manner.

Social ComplianceWatawala Plantations is proud of its track record in

compliance. We have not faced any monetary-nes or

non-monetary sanctions for non-compliances with laws

and regulations in general, nor of laws and regulations

concerning the provision and use of our products and

services, during the year under review. We have also

not been complicit in any incidents of corruption during

the reporting period.

Social Impact

Developing Livelihoods

Integrating The Economic Social & The Envi-

ronment –With Organic Vegetable Gardens

The women empowerment teams on our Abbotsleigh

estate initiated a project amongst its estate women to

grow vegetables using organic methods. This project

is a classic example of one which has integrated all

three aspects of People, Prot & Planet. The income

generated help empower the women and their

families whilst the organic methods of farming are

environmentally friendly. Watawala plantations helped

by providing the initial funding for these women as well

as the expertise such as on regards selection of crops

etc. The women are able to sell their healthy produce on

the estates. A ‘Singithi Pola” organized on Homadola

estate, during the year also encouraged the sale of the

produce by children, not only to enable them to earn

an income but also to provide them to think in lines

of self-reliance for their futures. The produce they sold

included vegetables and fruits as well as poultry farms.




Community Involvement

Recognizing the right of every child to food, shelter,

clothing and education, and the need for assistance to

help their families provide these basic needs, WP over

the years have continued to initiate a range of socialupliftment projects. Some of the initiatives during the

year under reported are presented below.

During the year, the company adopted a novel

approach to help the communities with greater focus,

and involvement by the company. Identied under the

concept ‘Happy Family”, the project was pioneered

in the Udugama region. It involves the evaluation

of households that make up a community, on a set

Fresh Water Fish Release

We continued our project to develop inland sheries

which was launched during the previous year. More

than 2000 Fresh Water Fish ngerlings were released to

a Lake in the Panmure Division of Strathdon Estate and

to a lake on Shannon estate in Korangumaley Division.

Live Stock and Estate Infrastructure Development

Minister Hon. Arumugam Thondaman, and ofcial of

the PHDT graced this occasion.

These lakes are now home to different species of fresh

water sh which include Thilapia, Red Cats and red

Thilapia. The project has proved to be a success by

facilitating additional incomes for villagers who can

engage in shing, as well as by enhancing nutrition

to employee families and children in our creches. For

instance, the harvesting of more than 5000 prawns

in the Udugama region during the year under review

benetted its community considerably.

Infrastructure Investment

Building Houses On Homadola Estate

During the year the company partnered with “Padem”

a nonprot organization from France to help build 20

houses for our plantation workers. We provided the

land and the required timber for the construction.

Each house valued at Rs.1 million comprises all basic

facilities including an in-house bathroom.

Renovation Of The Nakiyadeniya Temple

The management and associates on the Nakiyadeniya

Rubber Estate contributed a sum of Rs.120, 000 to

renovate the historic Nakiyadeniya Temple that was in

a dilapidated condition.


82




of criteria. The criteria include aspects such as, if all

children are enrolled at and attend school; has good

housekeeping practices – such as waste disposal;

and if both parents are gainfully employed and has

a savings plan and a peaceful home front. Thus, by

incorporating aspects such as housekeeping and

children’s’ mental wellbeing this comprehensive set of

criteria not only assesses the economic aspects but

takes a holistic approach extending the company’s own

criteria in its approach to business. The households are

continuously monitored thereafter.

It is most rewarding to us at WP that the families

chosen as the best families in the government’s DiviNeguma programme happened to be the families

from Our “Happy Family” project. This project has also

contributed to enhanced relationship with our estate

associates.

Scholarships for Deserving

Students

In keeping with our focus on education as a priority

area of support, WPL continued to award scholarships

to children of employees of all categories obtaining a

higher education or even completing school education

is dream of most parents and children; but often an

unrealized dream for some due to the lack of economic

means. Your company thus took on the task of helping

many over a decade ago and has benetted more

than 165 students over that period. During the year

we granted 26 scholarships to GCE Advanced Level

students and 13 scholarships to undergraduates to

pursue a higher education in local universities.

Additionally the company also provided nancial and in

kind support such as books and stationary to addressthe issues of school drop outs in the lower grades.

Opening a New Community Center

– Homadola Estate

Community Centers and Associations play a valuable

role by facilitating interaction and fellowship amongst

associates in a recreational setting, and in promoting

cultural and personal welfare for communities. During

the year under review, a center funded by Member

of Parliament Hon Nishantha Muttuhettigama was

opened on our Homadola estate in the Galle district.

Our company provided the land and funded for the

roong in this project.

Continuing to Empower The

Differently Abled – an X-Mas Sale

by The Vocational Training Centre

The Vocational Training Centre run by WP, on its

Kenilworth estate in Ginigathena had a Christmas sale

organized by the estate managers, of items produced

by them at the Sri Lanka Exhibition and Convention

Centre in Colombo during 14th to 23rd of December

2011.

The differently abled inviduals who are the members of

this center were brought to Colombo for the rst time

and were able to sell their greeting cards, envelopes,

eco-friendly paper bags, tea pouches, Christmas

decorations and paintings at the sale. And the income

generated was distributed amongst these individuals.




Fostering Creativity Amongst

ChildrenThe company organized many events during the year to

provide an opportunity for the children on our estates to

display their talents, and these included performances

as well as exhibitions of Arts & Crafts. Furthermore,

Universal Children’s’ day was also celebrated on all of

our estates.

Our Planet

We do not inherit the earth from our ancestors, we

borrow it from our children. ~Native American Proverb

Impacts of Climate Change

Clean air, clean water and bio-diversity are constantly

threatened by increasing populations, and spreading

industrialization. However with improving awareness of

the dire consequences, it is evident that stakeholders will

The center was one of WPL’s larger community initiatives

launched in 2001. It provides a hitherto marginalized

group of individuals who are also additionally burdened

by economic deprivation, an opportunity to develop

their talents, earn an income and enjoy recreational

facilities; and most fundamentally, a safe place to

spend the day with routine and structure. The benets

it renders to caregivers, by offering them relief as the

center take responsibility for their care of these during

the day, and, by alleviating their feelings of isolation and

despondency that arise due to social isolation and the

lack of pscho-social support have been invaluable.

Providing Nutrition to Children

The company’s Udugama region in collaboration with

the government’s Divisional Secretariat, began a project

to provide ‘a milk glass for every creche child’. The

project as the slogan indicates provides a glass of milk

daily, to every child in the Child Development centers,

with the aim of preventing malnutrition amongst these

children. The milk provided is purchased from the cattle

farms that are located on our estates thus providing an

additional income benet to the communities.

Watawala Plantations ensures to uphold the rights

of the children living in our communities. There have

been no incidents of child labour reported within our

operations during the year under review.


84




increasingly demand accountability on environmental

impacts. For us at WP the natural environment is our key

resource, and being custodian to 12,000Ha of land, and

other natural resources such as lakes and waterfalls,

we are aware of the tremendous responsibility with

which we must act towards the environment. Moreover,

being an agricultural enterprise environmental factors

such as annual rainfall and its distribution, temperature

levels, increase in the ambient Co2 concentration, and

solar radiation are key factors that determine tea yields,

and hence, our performance. These factors are thus

monitored by the company with necessary contingency

measures taken to keep production at optimal levels.

Climate change once considered a threat for the distant

future is now impacting our earth. The beginning of

last year saw tea as well as other agricultural output

decline across the country due to drought conditions.

Similarly too much rainfall can also impact tea. The

optimum rainfall for tea cultivation varies from about

223 mm per month in the upcountry region to about

417 mm per month in the other regions.

Implications of Climate Change on Tea cultivation:

• Disruption to weather patterns can reduce overall

cultivation which in turn impacts the company’s

nancial performance,

• A change in rainfall patterns in Sri Lanka as

well as other rubber growing countries induces

uctuations in rubber latex pricing.

• Changing weather patterns in Natural Rubber

producing regions make supply forecasting

difcult.

• Global warming also drives the demand for

cooling mechanisms and hence higher energy

requirements, which impact prices of fossil fuelsand in turn indirectly impact the world market

prices of rubber.

Some of the contingency measures and efforts we’ve

taken to minimize the adverse impacts of climate

change and other environmental factors include

inlling, use of drought and heat tolerant cultivars,

soil and soil moisture conservation, soil improvement,

intercropping, crop diversication, planting and

managing of shade trees, and increased scrutiny in

selection of lands for re planting. Additionally, burial of

pruning with the inclusion of compost, cleaning drains,

shade establishment, re-supplying tea and forking are

also carried out regularly to mitigate impacts. As a

considerable period of time is required to bring about

changes to a crop system such as Tea; these are long

term strategies which the company carries out despite

constraints of affordability limited labour availability. The

fact that we continued with these investments despite

last year being a downswing year for our tea sector,

underscores our optimistic outlook on the future of the

tea industry, as well as the long term perspective we

have on our business. The importance of the tea sector

to the socio-economic fabric of our country is another

factor which encourages our long term view and the

triple bottom line focus we have adopted.

Energy

The need for conservation of energy and sources of

renewable energy in the world has been made more

urgent today than ever. The need is that much greater

and immediate for countries such as Sri Lanka whose

high dependence on oil imports continues to burdenthe Balance of Payments. Renewable energy is also

of critical importance due to the favorable impact on

the environment vis-a-vis the detrimental effect of

greenhouse gas emissions from other forms of energy.

Our Direct Energy Consumption as at 31st March

2012 is presented below

In addition, Watawala Plantations utilizes direct energy

sourced from 2,682kg of LP Gas, as well as energy

generated from 1,759,266 tons of Biofuel. The Company

also monitors its energy consumed through the running

of personal vehicles, which amounts to 111 Gj sourced

from petrol, and 559Gj sourced from diesel.

Fuel Litres

Energy

Consumption (Gj)

Petrol 59,815 2,082

Diesel 2,094,033 81,053Furnace Oil 208,847 8719




kWh

Energy

Consumption (Gj)

Electricity

Consumption 2,713,758 9,769

Indirect energy consumed by the Company during

the year under review, through the use of electricity is

presented below

Your company’s efforts to explore and produce alternate

sources of renewable energy is one that integrates the

triple bottom line focus, by generating prots for the

company whilst contributing to the environment andthe nation’s progress. Our hydro power generating

schemes and the renewable fuel wood plantations are

efforts which have begun to make a contribution.

WP’s rst hydro power plant commissioned during the

year under review, now adds 1.6 Mega Watts of power

to the national grid; whilst two more plants expected to

come on board during the next nancial year.

For a third world country like Sri Lanka, Biomass is

one of the most viable and appropriate sources of

renewable energy. Our palm oil mill has invested in

a bio gas project which will generate electricity using

its mill efuent. The energy thus generated will help

to reduce the organization’s carbon footprint and its

reliance on Diesel -red generators.

Similarly our bio gas project in the Lonach Dairy Farm

produces bio gas and organic manure using cow waste.

Even though we are in the initial phase of this project,

this initiative has helped us to eliminate methane

emission thereby reducing GHG emission. The natural

fertilizer is used in the elds. Installation of a bio gas

generator is in progress since the farm generates about

100 m3 of bio gas per day which could generate 140

kWH electricity per day.

Tree Planting Campaign

He who plants a tree, Plants a hope. ~Lucy Larcom.

In 2011, we planted more than 1.1 million tree saplings

on an extent of 460 Hectares within our estates under

a tree planting campaign. Moreover, we invested

approximately Rs.38 million in the planting of Caliandra,

Rs.12 million in Eucalyptus and Rs.4 million in grass

planting. We will continue to increase the extent of

Calliandra – a short rotation crop and Eucalyptus as a

high value timber.

Bio gas project in Udugama

Bio gas project in Lonach estate


86




Making our Bungalow Gardens

“Fruitful”WPL continued with its campaign begun in 2009,

of planting fruit trees in the gardens of its estate

bungalows. 330 fruit plants were planted in the gardens

of our estate bungalows and the varieties of plants

included Sweet orange, Mandarin, Malaysian Guava,

Pomegranate, Pears, Chinese Guava and Cherimoya.

The harvest from the rst round of planting is expected

this year.

Water ManagementIt’s predicted that a third of the world’s population would

be facing water scarcity by 2025 unless current trends

alter. Whilst the demand for fresh water will continue

to increase at a rapid pace as the world population

increases, the availability of fresh water is dwindling

in the world. Approximately 1 billion people across the

world today lack access to safe drinking water and

2.6 billion do not have access to adequate sanitation.

Dwindling water resources is also closely linked to food

crises in many parts of the world.

Decreased access to a safe stable water supply in

Asia could also have a profound impact on security

throughout the region since reduced access to fresh

water leads to impaired food production, the loss of

livelihood security , large scale migration within and

across borders it is said could have a profound effect on

security and stability throughout the region. Although

Sri Lanka is not faced with an immediate crisis due to

dwindling fresh water sources; with only less than 25%

of water from rivers withdrawn for human purposes,

the effective management and conservation of these

resources is important to avoid crisis in the future.

Measures to preserve and sustain must be in progress

now.

Being an agriculturally based company, the importance

of water cannot be overstated in our corporate

agenda. And being in plantation agriculture where our

estates are also home to a large population, water

sustainability also becomes a priority due the basic

human consumption and sanitation needs.

Some of Our Best Practices• Has taken all necessary steps to improve its stand

of both high and low shade that not only serves

to reduce ground temperatures but provides

valuable raw material for mulching and reduces

the velocity of heavy rainfall at the point of impact.

• Resorted to deep draining – a process that

enables maximizing of the harvesting of rain

water amongst other agronomical benets

• Forking and burying of pruning material to

improve soil permeability and other agronomical

benets

• Mulching and planting of cover crops especially

on bare land to improve soil water retention

capability

• Developing water reservations and catchment

areas and the conservation of forestry by planting

of trees – Calliandra and Bamboo Species under

the guidance of the Mahaveli Authority

• Establishing continuous ‘Vettiver’ hedge rows on

the upper lip of roads and drains to reduce the

out ow of water


88




Our plantations are also home to many fresh water

sources of lakes and natural springs. The Company

over the years has adopted many water conservation

projects and measures to protect these sources from

contamination. The protection of these water bodies,

whilst being important in preserving the wildlife, habitat

and the diversity of the eco system in these areas, also

add to the aesthetic appeal of our locations.

Some of the measures we’ve undertaken to ensure

sustainability include water retention techniques and

the harvesting of rain water. These measures would

help us meet some of our needs during times when

water becomes scarce.

Preserving, retaining and revitalizing inherent ground

moisture levels enable us to grow our crops sans

irrigation. Moreover, the preservation of ground

moisture also plays a vital role in regularizing the

ow of water in our streams, water ways and springs,

to prevent them from drying out, especially during

periods of arid weather Our estates have been able

to maintain ground moisture levels by reducing ground

temperatures as far as possible by thatching, mulching

and draining, improving the permeability and water

retention capacity of our soils, and by improving

recharge structures so as to reduce or eliminate the

surface ow of water direct to the ravines and rivers.

Improvements to estate water supply schemes have

enabled the allocation and use of water in a more

organized and efcient manner benets of which are

mostly evident at times of scarcity during drought

conditions.

Measures were also taken to prevent water borne

diseases such as diarrhea and hookworm associated

with poor drinking water and inadequate sanitation.

Water schemes that supplied water safe for drinking

were implemented during the year to facilitate

better health and wellbeing and quality of life for our

communities.

With the growing uncertainties associated with global

climate change and its long term impacts, our search

for effective solutions to sustain water and to mitigate

the impacts on water will continue to be a priority.

We are also mindful of the fact that ongoing climate

change could pose challenges and bring up situationswhich we have not encountered before; requiring new

strategies and innovative solutions from us.

WPL will continue to be an enterprise that values its

inter dependence with the environment and its people

and thus consider our raison d’ etre as uplifting the lives

of all our stakeholders, whilst expanding our denition

of who our stakeholders are. We will continue to nd

opportunities to leave this planet the way we would’ve

liked to have discovered it for the rst time.

Environmental Compliance

Watawala Plantations PLC is proud to report that we

continue to maintain the utmost standards in respect

to the environment in which we operate. We have not

faced any monetary nes or non-monetary sanctions for

non-compliance with environmental laws or regulations

during the year under review.




Prole Disclosures

1. Strategy and AnalysisProle

DisclosureDescription Reported Page

1.1 Statement from the most senior decision-maker of the organization. 70

1.2 Descr iption of key impacts, risks, and opportunities. 63

2. Organizational Prole

2.1 Name of the organization. 72

2.2 Primary brands, products, and/or services. 72

2.3 Operational structure of the organization, including main divisions, operating

companies, subsidiaries, and joint ventures.72

2.4 Location of organization’s headquarters. 72

2.5 Number of countries where the organization operates, and names of countries with

either major operations or that are specically relevant to the sustainability issues

covered in the report.

72

2.6 Nature of ownership and legal form. 72

2.7 Markets served (including geographic breakdown, sectors served, and types of

customers/beneciaries).72

2.8 Scale of the reporting organization. 72

2.9 Signicant changes during the reporting period regarding size, structure, or

ownership.None

2.10 Awards received in the reporting period. 72

3. Report Parameters

3.1 Reporting period (e.g., scal/calendar year) for information provided. 72

3.2 Date of most recent previous report (if any). 73

3.3 Reporting cycle (annual, biennial, etc.) 73

3.4 Contact point for questions regarding the report or its contents. 73

3.5 Process for dening report content. 73

3.6 Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint

ventures, suppliers).73

3.7 State any specic limitations on the scope or boundary of the report. 73

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced

operations, and other entities that can signicantly affect comparability from period

to period and/or between organizations.

73

3.9 Data measurement techniques and the bases of calculations, including assumptions

and techniques underlying estimations applied to the compilation of the Indicators

and other information in the report. Explain any decisions not to apply, or to

substantially diverge from, the GRI Indicator Protocols.

73

3.10 Explanation of the effect of any re-statements of information provided in earlier

reports, and the reasons for such re-statement (e.g.,mergers/acquisitions, change of

base years/periods, nature of business, measurement methods).

73

3.11 Signicant changes from previous reporting periods in the scope, boundary, or

measurement methods applied in the report.73

3.12 Table identifying the location of the Standard Disclosures in the report. 90

3.13 Policy and current practice with regard to seeking external assurance for the report.

GRI Content Index

Application Level C


90




Economic performance

Performance

IndicatorDescription Reported Page

EC1 Direct economic value generated and distributed, including revenues, operating

costs, employee compensation, donations and other community investments,

retained earnings, and payments to capital providers and governments.

142

EC2 Financial implications and other risks and opportunities for the organization’s

activities due to climate change.

EC3 Coverage of the organization’s dened benet plan obligations. 75

EC4 Signicant nancial assistance received from government.

Market presence

EC5 Range of ratios of standard entry level wage compared to local minimum wage at

signicant locations of operation.

EC6 Policy, practices, and proportion of spending on locally-based suppliers at

signicant locations of operation.

EC7 Procedures for local hiring and proportion of senior management hired from the local

community at signicant locations of operation.

Indirect economic impacts

EC8 Development and impact of infrastructure investments and services provided

primarily for public benet through commercial, in-kind, or pro bono engagement.82

EC9 Understanding and describing signicant indirect economic impacts, including the

extent of impacts.

Environmental

Materials

EN1 Materials used by weight or volume.

EN2 Percentage of materials used that are recycled input materials.

Energy

EN3 Direct energy consumption by pr imary energy source. 85

EN4 Indirect energy consumption by primary source. 86

EN5 Energy saved due to conservation and efciency improvements.

EN6 Initiatives to provide energy-efcient or renewable energy based products and

services, and reductions in energy requirements as a result of these initiatives.

EN7 Initiatives to reduce indirect energy consumption and reductions achieved. 86

Water

EN8 Total water withdrawal by source.

EN9 Water sources signicantly affected by withdrawal of water.

EN10 Percentage and total volume of water recycled and reused.

Biodiversity

EN11 Location and size of land owned, leased, managed in, or adjacent to, protected

areas and areas of high biodiversity value outside protected areas.

EN12 Description of signicant impacts of activities, products, and services on biodiversity

in protected areas and areas of high biodiversity value outside protected areas.

Economic


92




Performance


EN13 Habitats protected or restored.

EN14 Strategies, current actions, and future plans for managing impacts on biodiversity.

EN15 Number of IUCN Red List species and national conservation list species with

habitats in areas affected by operations, by level of extinction risk.

Emissions, efuents and waste

EN16 Total direct and indirect greenhouse gas emissions by weight.

EN17 Other relevant indirect greenhouse gas emissions by weight.

EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved.

EN19 Emissions of ozone-depleting substances by weight.

EN20 NOx, SOx, and other signicant air emissions by type and weight.

EN21 Total water discharge by quality and destination.

EN22 Total weight of waste by type and disposal method. 87

EN23 Total number and volume of signicant spills.

EN24 Weight of transported, imported, exported, or treated waste deemed hazardous

under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of

transported waste shipped internationally.

EN25 Identity, size, protected status, and biodiversity value of water bodies and related

habitats signicantly affected by the reporting organization’s discharges of water and

runoff.

Products and services

EN26 Initiatives to mitigate environmental impacts of products and services, and extent of

impact mitigation.

EN27 Percentage of products sold and their packaging materials that are reclaimed by

category.

Compliance

EN28 Monetary value of signicant nes and total number of non-monetary sanctions for

non-compliance with environmental laws and regulations.89

Transport

EN29 Signicant environmental impacts of transporting products and other goods and

materials used for the organization’s operations, and transporting members of the

workforce.

Overall

EN30 Total environmental protection expenditures and investments by type.

Social: Labor Practices and Decent Work

Employment

LA1 Total workforce by employment type, employment contract, and region. 76

LA2 Total number and rate of employee turnover by age group, gender, and region.

LA3 Benets provided to full-time employees that are not provided to temporary or part-

time employees, by major operations.




Labor/management relations

Performance


LA4 Percentage of employees covered by collective bargaining agreements. 76

LA5 Minimum notice period(s) regarding signicant operational changes, includingwhether it is specied in collective agreements.

Occupational health and safety

LA6 Percentage of total workforce represented in formal joint management-worker health

and safety committees that help monitor and advise on occupational health and

safety programs.

LA7 Rates of injury, occupational diseases, lost days, and absenteeism, and number of

work-related fatalities by region.77

LA8 Education, training, counseling, prevention, and risk-control programs in place to

assist workforce members, their families, or community members regarding serious

diseases.

77

LA9 Health and safety topics covered in formal agreements with trade unions.

Training and education

LA10 Average hours of training per year per employee by employee category. 80

LA11 Programs for skills management and lifelong learning that support the continued

employability of employees and assist them in managing career endings.

LA12 Percentage of employees receiving regular performance and career development

reviews.

Diversity and equal opportunity

LA13 Composition of governance bodies and breakdown of employees per category

according to gender, age group, minority group membership, and other indicators of

diversity.

80

LA14 Ratio of basic salary of men to women by employee category.

Social: Human Rights

Diversity and equal opportunity

HR1 Percentage and total number of signicant investment agreements that include

human rights clauses or that have undergone human rights screening.

HR2 Percentage of signicant suppliers and contractors that have undergone screening

on human rights and actions taken.

HR3 Total hours of employee training on policies and procedures concerning aspects of

human rights that are relevant to operations, including the percentage of employees

trained.Non-discrimination

HR4 Total number of incidents of discrimination and actions taken.

Freedom of association and collective bargaining

HR5 Operations identied in which the right to exercise freedom of association and

collective bargaining may be at signicant risk, and actions taken to support these

rights.

Child labor

HR6 Operations identied as having signicant risk for incidents of child labor, and

measures taken to contribute to the elimination of child labor.84


94




Forced and compulsory labor

Performance


HR7 Operations identied as having signicant risk for incidents of forced or compulsory

labor, and measures to contribute to the elimination of forced or compulsory labor.

Security practices

HR8 Percentage of security personnel trained in the organization’s policies or procedures

concerning aspects of human rights that are relevant to operations.

Indigenous rights

HR9 Total number of incidents of violations involving rights of indigenous people and

actions taken.

Social: Society

Community

SO1 Nature, scope, and effectiveness of any programs and practices that assess and

manage the impacts of operations on communities, including entering, operating,

and exiting.

Corruption

SO2 Percentage and total number of business units analyzed for risks related to

corruption.

SO3 Percentage of employees trained in organization’s anti-corruption policies and

procedures.

SO4 Actions taken in response to incidents of corruption. 81

Public policy

SO5 Public policy positions and participation in public policy development and lobbying.SO6 Total value of nancial and in-kind contributions to political parties, politicians, and

related institutions by country.

Anti-competitive behavior

SO7 Total number of legal actions for anti-competitive behavior, anti-trust, and monopoly

practices and their outcomes.

Compliance

SO8 Monetary value of signicant nes and total number of non-monetary sanctions for

non-compliance with laws and regulations.81




Social: Product Responsibility

Performance


Customer health and safety

PR1 Life cycle stages in which health and safety impacts of products and services are

assessed for improvement, and percentage of signicant products and services

categories subject to such procedures.

None

PR2 Total number of incidents of non-compliance with regulations and voluntary codes

concerning health and safety impacts of products and services during their life cycle,

by type of outcomes.

None

Product and service labelling

PR3 Type of product and service information required by procedures, and percentage of

signicant products and services subject to such information requirements.None


concerning product and service information and labeling, by type of outcomes. None

PR5 Practices related to customer satisfaction, including results of surveys measuring

customer satisfaction.None

Marketing communications

PR6 Programs for adherence to laws, standards, and voluntary codes related to

marketing communications, including advertising, promotion, and sponsorship.None


concerning marketing communications, including advertising, promotion, and

sponsorship by type of outcomes.

None

Customer privacy

PR8 Total number of substantiated complaints regarding breaches of customer privacy

and losses of customer data. None

Compliance

PR9 Monetary value of signicant nes for non-compliance with laws and regulations

concerning the provision and use of products and services.81

Fully Repor ted Par tially Repor ted Not Repor ted


96




Strategic Initiatives Group (Pvt) Ltd

25/13, Cyril de Silva Mawatha, Pepiliyana Road, Nugegoda

Tel. No. 4941670 Fax: 4209074

Company Registration No: PV 9875

THIRD PARTY CHECKED STATEMENT

The 2012 Sustainability Report of Watawala Plantations PLC has undergone a third-party level check by STINGConsultants, against the requirements of the GRI G3 Guidelines, at C Level. The Self-Declared C level of this Report

is hereby conrmed to be accurate.

The aim of this statement is to conrm to readers the extent to which the GRI G3 Guidelines have been applied in

the preparation of this Report. This does not represent in any way, an opinion on the value or quality of the Report

and its content, or of the sustainability performance of the reporting organization.

Tiara Anthonisz

Head of Strategic Corporate Responsibility

STING Consultants

1st June 2012

www.stingconsultants.com




IMPROVING

PRODUCTIVITY THROUGH MECHANISATION



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

Managing Director’s and Chief Financial Ofcer’s Responsibility Statement

Statement of Directors’ Responsibility

Report of the Auditors

Balance Sheet

Income Statement

Statement of Changes in Equity

Cash Flow Statement

Accounting Policies & Notes to the Financial Statements

FINANCIALINFORMATION



Annual Report of the Board of Directorson the Affairs of the Company

The details set out provide the pertinent information

required by the Companies Act No.07 of 2007, listing

rules of the Colombo Stock Exchange and are guided

by recommended best accounting practices.

Principal Activities, Business

Review, Future Developments

The principal activities of the Company and it’s

subsidiary during the year under review were cultivation,

manufacturing and sale of Tea, Rubber, Palm Oil and

direct exports of bulk and value added tea.

Review of OperationsThe Chairman’s and the Managing Director’s reviews

described briey the Group’s activities during the year

under review. The nancial results for the year are set

out in the income statement.

The Directors, to the best of their knowledge and belief,

conrm that the Group has not engaged in any activities

that contravene laws and regulations.

Financial Statements

The nancial statements of the Company and it’ssubsidiary are stated on page no. 106 to 139 in the

Annual Report.

Auditor’s Report

The auditor’s report on the nancial statements is

stated on page no. 105 in the Annual report.

Accounting Policies

The accounting policies adopted by the Company and

it’s subsidiary in the preparation of nancial statements

are stated on pages 110 to 116. There were no changes

in the accounting policies adopted from previous

nancial year other than the ones that are disclosed.

Interest Register

In compliance with the Companies Act No. 07 of 2007,

the Company and it’s subsidiary maintained the Interest

Registers. Particulars of entries in the interest register

are detailed below.

Directors’ Interest in transactionsThe Directors of the Group made the general disclo-

sures provided for in Section 192 (2) of the Companies

Act No.07 of 2007. Note 31 to the nancial statements

has dealt with related party disclosures and include de-

tails of their interests in transactions.

Directors’ Interest in Shares as at as at

31/03/12 31/03/11

G.Sathasivam - -

R.K.Krishnakumar - -

V.Govindasamy - -

D.V.Seevaratnam 23,000 3000

P.T.Siganporia - -

D.S.Ratnasingham 5,000 5000

K.Venkataramanan - -

B.A.Hulangamuwa - -

Directors’ Emoluments

Directors’ emoluments, in respect of the Company

and the Group for the nancial year 2011/2012 areRs. 19,700,000 (2010/2011: Rs. 16,234,000) and Rs.

19,700,000 (2010/2011: Rs. 33,358,000) respectively,

as given in Note 22 to the nancial statements on page

133.

Corporate Donations

During the year 2011/2012 the Group has not made any

donations.(2010/2011: Rs. 5,000,000)

Directorate

Names of the Directors who held ofce during the

nancial year are given below and their brief proles

are appeared on pages 22 to 24 of the Annual report.

Executive Directors

V.Govindasamy

D.S.Ratnasingham

D.V.Seevaratnam


100

Financial Information



Non-Executive DirectorsR.K.Krishnakumar

G.Sathasivam

P.T.Siganporia

K.Venkataramanan

B.A.Hulangamuwa

A.N.Fernando

Special notice is given of the intention to propose

an ordinary resolution for re-appointment of

Mr.R.K.Krishnakumar,who attained the age of seventy

four years notwithstanding the age limit of 70 years

stipulated by section 210 of the Companies Act No. 07

of 2007.

Mr. D.V. Seevaratnam retires by rotation and being

eligible offers himself for re-election.

Mr. K. Venkataramanan retires by rotation and being

eligible offers himself for re-election.

Auditors

Messes. PriceWaterhouseCoopers,(PWC) Chartered

Accountants are deemed to be re-appointed as

auditors in terms of Section 158 of the Companies Act

No. 07 of 2007.

The audit fees paid to PWC during the year under

review by the Company and the Group amounted

to Rs.1,696,000. (2010/2011: Rs.1,200,000) and

Rs.1,962,000 (2010/2011 Rs.1,600,000) respectively.

Further the Group has paid Rs.200,000 (2010/2011:

Rs.138,000) for reimbusement of expenses.

As far as the Directors are aware, the Auditors do not

have any relationship (other than that of an auditor)

with the Company or of its subsidiary other than those

disclosed above. The auditors also do not have any

interests in the Company or of its subsidiary.

Turnover

The revenue of the Group for 2011/2012 was

Rs.4,535,486,000 (2010/2011: Rs. 6,158,246,000)

while the Company’s revenue was Rs.4,532,269,000

(2010/2011:Rs. 4,663,744,000). An analysis of income

is given note 19 to the nancial statements.

Results of Operations

The Group’s prot for the year amounted to Rs.

412,585,000.(2010/2011: Rs.642,472,000) while the

Company recorded a net prot of Rs.520,839,000

(2010/2011:Rs.532,400,000).

The Consolidated Income Statement along with the

Company’s Income Statement for the year are given

on page 107. Details of transfer to / from reserves in

respect of the Group and the company are shown in the

Statement of Changes in Equity on page 108.

Capital Expenditure

The total capital expenditure on purchase and

construction of property, plant & equipment and

expenditure incured on immature plantations by the

Company and the Group amounted to Rs. 573,292,000

(2010/2011: Company-Rs. 715,159,000 and Group-

Rs.742,657,000). The movement in property, plant

& equipment is set out in note no 5 to the nancial

statements page on 117 and 120.

Stated Capital and Reserves

The stated capital of the Company as at 31 March

2012 is Rs. 310,000,000/- comprising of 236,666,670

ordinary shares. and 1 Golden share. There were no

changes in the stated capital during the year from

previous nancial year.

The capital and reserves of the Group and the Company

as at 31 March 2012 amounts to Rs 2,832,104,000/-

and Rs. 2,830,286,000 (2010/2011 - Group Rs.

2,620,686,000/- and Company Rs.2,510,614,000)

Share InformationInformation relating to earnings, dividends per share

and share trading is stated in the Financial Statements

on the pages 128, 142 and 143.


1



Manging Director’s and Chief FinancialOfcer’s Responsibility Statement

The Financial Statements of the Watawala Plantations

PLC are prepared in compliance with the Sri Lanka

Accounting Standards issued by the Institute of

Chartered Accountants of Sri Lanka, Companies Act,

No 07 of 2007, Sri Lanka Accounting and Auditing

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

the Colombo Stock Exchange. The Accounting Policies

used in the preparation of the nancial statements

are appropriate and are consistently applied by the

Company. There are no departures from the prescribed

Accounting Standards in their adoption. Comparative

information is reclassied wherever necessary to

comply with the current presentation.

The signicant accounting policies and estimates that

involve a high degree of judgment and complexity were

discussed with our External Auditors and the Audit

Committee.

The Board of Directors and Chief Financial Ofcer of

the Company accept responsibility for the integrity and

objectivity of these nancial statements. The estimates

and judgments relating to the nancial statements

were made on a prudent and reasonable basis, in order

that the nancial statements give a true and fair view

of the state of affairs, the forms and substance of

transactions and that the Company’s state of affairs is

reasonably presented. To ensure this, the Company has

taken proper and sufcient care in installing a system of

internal control and accounting records, for safeguarding

assets and for preventing and detecting frauds as well

as other irregularities, which is reviewed, evaluated and

updated on an ongoing basis. Our internal auditors

have conducted periodic audits to provide reasonable

assurance that the established policies and procedures

of the Company were consistently followed. However,

there are inherent limitations that should be recognized

in weighing the assurance provided by any system of

internal controls and accounting.

The nancial statements of the company were audited

by Messrs PriceWaterhouseCoopers, Chartered

Accountants and their report is given on page 101 of

the Annual Report.

The Audit Committee of the company meets periodically

with the internal audit team and the external auditors to

review their audit plans, assess the manner in which

these auditors are performing their responsibilities

and to discuss their reports on, internal controls

and nancial reporting issues. To ensure complete

independence, the external auditors and the internal

auditor have full and free access to the members of the

Audit Committee to discuss any matters of substance.

We conrm that the Company have complied with all

applicable laws and regulations and guidelines and that

there are no material litigations that are pending against

the Company.

V. Govindasamy N.A.L.Cooray

Managing Director Chief Financial Ofcer

17/05/2012


1



Statement of Directors’ Reponsibility

The following statement, which should be read in

conjunction with the Auditors’ Statement of their

responsibilities set out in their report, is made with a

view to distinguish the respective responsibilities of the

Directors and of the Auditors, in relation to the nancial

statements.

The Directors are required by the Companies Act No.

07 of 2007, to prepare nancial statements for each

nancial year, which give a true and fair view of the state

of affairs of the Company as at the end of the nancial

year and of the prot and loss for the nancial year.

The Directors are required to prepare these nancial

statements on going concern basis, unless it is notappropriate.

Since the Directors are satised that the Company has

resources to continue in business for the foreseeable

future, the nancial statements continue to be prepared

on the said basis.

The Directors consider that in preparing the nancial

statements on pages 102 to 131 the Company used

appropriate accounting policies, consistently applied

and supported by reasonable and prudent judgments

and estimated that all accounting standards, whichthey consider to be applicable, are followed.

The Directors are responsible for ensuring that the

Company keeps accounting records, which will disclose

with reasonable accuracy the nancial position of the

Company and which will enable them to ensure that

nancial statements comply with the Companies Act.

No. 07 of 2007.

The Directors are generally responsible for taking such

steps that are reasonably for them to safeguard the

assets of the Company and to prevent and detect fraud

and other irregularities.

The Directors are condent that they discharged their

responsibility as set out in this statement. They also

conrm that to the best of their knowledge all statutory

payments payable by the Company as at the Balance

Sheet date, are paid or where relevant, provided for.

By Order of the Board

V. Govindasamy D.V. Seevaratnam

Managing Director Director/CEO

17/05/2012


104




Independent Auditors’ Report



Balance sheetIn Rs.’000s Group Company

As at 31st March 2012 2011 2012 2011

Notes

ASSETS

Non-current assets

Leasehold right to bare land of JEDB / SLSPC estates 3 233,648 240,683 233,648 240,683

Immovable estate assets on nance lease(other than bare land) 4 194,474 212,121 194,474 212,121

Fixed assets other than immature / mature plantations 5 1,710,115 1,769,768 1,710,115 1,651,504

Immature / mature plantations 6 2,155,042 1,867,121 2,155,042 1,867,121

Investment in gratuity fund 42,641 - 42,641 -

Investments in subsidiaries 7 - - 852 355,852

Total non-current assets 4,335,920 4,089,693 4,336,772 4,327,281

Current assetsInventories 8 516,085 797,068 516,085 568,427

Trade and other receivables 9 325,724 488,783 343,808 312,649

Cash and cash equivalents 10 470,231 40,697 447,716 15,061

Total current assets 1,312,040 1,326,548 1,307,609 896,137

Total assets 5,647,960 5,416,241 5,644,381 5,223,418

EQUITY AND LIABILITIES

Equity attributable to equity holders of the Company

Stated capital 11 310,000 310,000 310,000 310,000

General reserve 12 150,000 150,000 150,000 150,000

Retained earnings 2,372,104 2,160,686 2,370,286 2,050,614

Total equity 2,832,104 2,620,686 2,830,286 2,510,614

Non-current liabilities

Borrowings 13 210,727 304,730 210,727 304,730

Finance lease obtained from JEDB / SLSPC 14 360,253 365,560 360,253 365,560

Retirement benet obligations 15 815,849 643,872 815,849 638,008

Deferred income and capital grants 16 244,935 255,798 244,935 255,798

Net deferred tax liability 17 30,128 27,129 30,275 26,161

Total non-current liabilities 1,661,892 1,597,089 1,662,039 1,590,257

Current liabilities

Borrowings 13 546,145 437,029 546,145 437,029

Finance lease obtained from JEDB / SLSPC 14 5,310 5,313 5,310 5,313

Trade and other payables 18 588,677 742,121 587,631 667,235

Current tax liabilities 13,832 14,003 12,970 12,970

Total current liabilities 1,153,964 1,198,466 1,152,056 1,122,547

Total liabilities 2,815,856 2,795,555 2,814,095 2,712,804

Total equity and liabilities 5,647,960 5,416,241 5,644,381 5,223,418

I certify that these nancial statements have been prepared in compliance with the requirements of the Companies Act No. 07 of 2007.

The Board of Directors is responsible for the preparation and presentation of these nancial statements. These nancial state-

ments were authorised for issue by Board of Directors on 17th May 2012.

The notes on pages 110 to 139 form an integral part of these nancial statements.

Managing Director

Date: 17th May 2012

Director/CEO

Chief Financial Ofcer


106





Income statementIn Rs.’000s

For the year ended 31st March Group Company

Notes 2012 2011 2012 2011

Revenue 19 4,535,486 6,158,246 4,532,269 4,663,744

Cost of sales (4,285,990) (4,958,450) (4,285,990) (3,980,740)

Gross prot 19 249,496 1,199,796 246,279 683,004

Other operating income 20 344,218 124,369 616,708 239,309

Administrative expenses (211,331) (342,364) (203,235) (220,759)

Distribution expenses - (167,142) - -

Management fees 21 (49,331) (90,033) (49,331) (90,033)

Operating prot 22 333,052 724,626 610,421 611,521

Net nance expenses 24 (85,468) (85,984) (85,468) (84,951)

Prot before tax 247,584 638,642 524,953 526,570

Income tax expenses 25 (4,755) 3,830 (4,114) 5,830

Prot for the year from continuing operations 242,829 642,472 520,839 532,400

Discontinued operations

Prot from discontinued operations 32 169,756 - - -Prot for the year 412,585 642,472 520,839 532,400

Attributable to:

Equity holders of the Company 412,585 642,472 520,839 532,400

Non-controlling interest - - - -

Prot for the year 412,585 642,472 520,839 532,400

Earnings per share (Rs) 26 1.74 2.71 2.20 2.25


1



Statement of changes in equity - Group

Statement of changes in equity - Company

In Rs.’000s Stated

capital

General

reserve

Retained

earnings

Total

Balance as at 1st April 2010 310,000 150,000 1,583,297 2,043,297

Net prot for the year - - 532,400 532,400

Dividends paid for the year ended 31st March 2010 - - (65,083) (65,083)

Balance at 31st March 2011 310,000 150,000 2,050,614 2,510,614

Balance at 1st April 2011 310,000 150,000 2,050,614 2,510,614




In Rs.’000s Stated

capital

General

reserve

Retained

earnings

Total




De - consolidation of Watawala Agro Limited - - (870) (870)








108




Cash ow statementIn Rs.’000s Group Company

For the year ended 31st March 2012 2011 2012 2011

Notes

Cash ows from operating activities

Cash generated from operations 30 630,936 856,487 565,362 981,602

Interest paid 24 (86,492) (86,317) (86,492) (85,227)

Tax paid - (23,511) - (23,511)

Retirement benet obligations paid 15 (93,653) (60,826) (93,653) (60,114)

Interest received 24 1,024 333 1,024 276

Net cash generated from operating activities 451,815 686,166 386,241 813,026

Investing activities

Grants received 16 - 38,554 - 38,554

Field development expenditure 6 (350,484) (317,363) (350,484) (317,363)

Purchase of property, plant and equipment 5 (222,808) (425,294) (222,808) (397,796)

Proceeds from sale of property, plant and equipment 43,422 9,348 43,422 186,275

Proceeds from disposal of subsidiary 20 ( c ) 741,595 - 741,595 -

Dividend received 20 - - 68,693 -

Investment in gratuity fund (42,641) - (42,641) -

Investment in subsidiaries 7 - - - (355,852)

Net cash ows from/(used in) investing activities 169,084 (694,755) 237,777 (846,182)

Financing activities

Dividends paid 27 (201,167) (65,083) (201,167) (65,083)

Proceeds from bank borrowings 13 186,909 626,920 186,909 626,924

Repayment of bank borrowings 13 (276,214) (671,755) (276,212) (671,755)

Repayment of lease principal 13 & 14 (18,308) (14,007) (18,308) (14,007)

Net cash ows from /(used in) nancing activities (308,780) (123,925) (308,778) (123,921)

Net increase/(decrease) in cash and cash equivalents 312,119 (132,514) 315,240 (157,077)

Movement in cash and cash equivalents

At the beginning of year (244,907) (112,393) (270,543) (113,466)

Increase/(decrease) 312,119 (132,514) 315,240 (157,077)

At end of year 10 67,212 (244,907) 44,697 (270,543)



1



Notes to the Consolidatednancial statements

1. General information

(a) Company

Watawala Plantations PLC (the Company) is a public

limited liability Company, listed on the Colombo Stock

Exchange, incorporated and domiciled in Sri Lanka. The

registered ofce of the Company is located at No 60,

Dharmapala Mawatha, Colombo 3.

The principal activities of the Company during the year

continued to be cultivation, manufacture and sale of

tea, rubber and palm oil, direct exports of bulk and

value added tea and sale of puried palm oil.

The staff strength of the Company as at 31 March 2012

is 12,168.

(b) Group nancial statements

The Group nancial statements of Watawala Plantations

PLC as at the year ended 31 March 2012 comprise the

Company and its fully-owned subsidiary Watawala Tea-

Australia Pty Ltd which continues to promote branded

tea business in Australia.

The staff strength of the Group as at 31 March 2012 is

12,169.

2. Summary of signicant

accounting policies

The principal accounting policies applied in the prepa-

ration of these consolidated nancial statements are

set out below. These policies have been consistently

applied to all the years presented, unless otherwise

stated.

2.01 Basis of preparation

The nancial statements are prepared in accordance

with Sri Lanka Accounting Standards on the historical

cost basis of accounting.

2.02 Statement of compliance

The preparation of Group nancial statements in con-

formity with Sri Lanka Accounting Standards requiresthe use of estimates and assumptions that affect the

reported amounts of assets and liabilities and disclo-

sure of contingent assets and liabilities at the date of

the nancial statements and the report of amounts of

revenue and expenses during the reporting period. The

resulting accounting estimates will, by denition, rare-

ly equal the related actual results. The estimates and

assumptions that have a signicant risk of causing a

material adjustment to the carrying amount of assets

and liabilities within next nancial year are given in note

2.25.

2.03 Aproval of nancial statements by Directors

The nancial statements were authorised for issue by

the Board of Directors in accordance with the resolutionof the Directors on 17 March 2012.

2.04 Basis of Consolidation

Subsidiaries are all entities over which the Group has

the power to govern the nancial and operating policies

generally accompanying a shareholding of more than

one half of the voting rights. The existence and effect of

potential voting rights that are currently exercisable or

convertible are considered when assessing whether the

Group controls another entity.

Subsidiaries are fully consolidated from the date onwhich control is transferred to the Group. They are de-

consolidated from the date that control ceases. Inter-

company transactions, balances and unrealised gains

on transactions between group companies are eliminat-

ed. Unrealised losses are also eliminated but consid-

ered an impairment indicator of the asset transferred.

Accounting policies of subsidiaries have been changed

where necessary to ensure consistency with the poli-

cies adopted by the Group.

2.05 Foreign currency translation

(a) Functional and presentation currency

Items included in the nancial statements of each ofthe Group’s entities are measured using the currency of

the primary economic environment in which the entity

operates (the functional currency). The nancial state-

ments are presented in Sri Lanka Rupees (LKR), which

is the Company’s functional and the Group’s presenta-

tion currency.

(b) Transactions and balances

Foreign currency transactions are translated into the

functional currency using the exchange rates prevail-

ing at the dates of the transactions. Foreign exchange

gains and losses resulting from the settlement of such

transactions and from the translation at year-end ex-

change rates of monetary assets and liabilities denomi-

nated in foreign currencies are recognised in the income

statement. Monetary assets and liabilities balances are

translated at year end exchange rate.

Foreign exchange gains and losses that relate to bor-

rowings and cash and cash equivalents are presented

in the income statement within nance income or cost.

(C) Foreign operations

The nancial statements of foreign entities within the

Group whose functional currency is different to presen-


110




tation currency (LKR) are translated to Sri lankan Ru-

pees as follows:

• Assets and liabilities - translated at the middle rate of

exchange at the date of balance sheet.

• Income and expenses - translated at the spot rate or

the average exchange rate applicable for the year.• All resulting foreign exchange differences are recog-

nised in the income statement.

2.06 Property, plant and equipment

2.06.01 Recognition and measurement

Property,plant and equipment are recognised if it is

probable that future economic benets accociated

with the assets will ow to the Group and the cost of

the asset can be measured reliably. All property, plant

and equipment are measured at cost less accumulated

depreciation and accumulated impairment loss. The

cost includes expenditure that is directly attributable

to the acquition of assets. The self-constructed assets

includes the cost of materials, direct labour and 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. Group applies cost

model to property, plant and equipment.

2.06.02 Subsequent costs

Repairs and maintenance are charged to the income

statement during the nancial period in which they are

incurred. The cost of major renovations is included in

the carrying amount of the asset when it is probable

that future economic benets in excess of the originally

assessed standard of performance of the existing asset

will ow to the Group. Major renovations are depreci-

ated over the remaining useful life of the related asset.

The cost of improvements to or on leasehold property,

is capitalised, and depreciated over the unexpired pe-

riod of the lease or the estimated useful lives of the im-

provements, which ever is shorter.

2.06.03 Biological assets

Livestock is measured at their fair value less estimated

point-of-sale costs. The fair value of livestock is deter-

mined based on market prices of livestock of similar

age, breed and genetic merit.

2.06.04 Capital work-in-progress

Capital work-in-progress is stated at cost. These are ex-

penses of a capital nature directly incurred in the con-

struction of buildings, major plant and machinery and

system development, awaiting capitalisation. Capital

work-in-progress would be transferred to the relevant

asset when it is available for use. Capital work-in-prog-

ress is stated at cost less any accumulated impairment

losses.

2.06.05 Assets / liabilities classied as held for transfer

Assets and liabilities (primarily non-current assets) that

are expected to be recovered principally than through

continuing use are classied as held for transfer. These

are measured at the fair value less cost to transfer.

2.06.06 Discontinued operations

A discontinued operation is a component of the Group’s

business that represents a separate major line of busi-

ness that has been disposed off or held for sale. Clas-

sication as discontinued operations occurs upon dis-

posal or when the operation meets the criteria to be

classied as held for sale.

2.06.07 Mature and immature plantations

The cost directly attributable to re-planting and new

planting are classied as immature plantations up to the

time of harvesting the crop.

General charges incurred on the re-plantation and new

plantations are apportioned based on the labour days

spent on respective replanting and new planting and

capitalised on immature areas. The remaining portion

of the general charges are expensed in the accounting

period in which it is incurred.

The cost of areas coming into bearing are transferred

to mature plantations and depreciated over their use-

ful lives using the depreciation rates given in the policy

no.2.06.10.

2.06.08 Inlling cost

Where inlling results in an increase in the economic life

of a relevant eld beyond its previously assessed stan-

dard of performance, the costs are capitalised in ac-

cordance with Sri Lanka Accounting Standard, No. 32

Plantations, and depreciated over the remaining useful

life at rates applicable to mature plantations. Inlling

costs that are not capitalised are charged to the income

statement in the year in which they are incurred.

2.06.09 Derecognition

Gains and losses on disposals are determined by com-

paring proceeds with carrying amount and are included

in operating prot.2.06.10 Depreciation

Depreciation is calculated on the straight-line method

to write off the cost of each asset to their residual val-

ues over their estimated useful lives. Assets held un-

der nance lease are amortised over the shorter of the

lease term and their useful lives, in equal amounts.

Depreciation of an asset begins when it is available for

use and ceases at the earlier of the date that the asset

is classed as held for sale and the date that the asset

is discontinued.


1



The economic useful lives of assets are estimated

below for depreciation/amortisation purposes.

Freehold Leasehold

assets assets

Years Years

Bare land - 53 Improvements to land - 30

Vested other assets - 30

Buildings 40 25

Plant and machinery 13 15

Equipment 8 -

Computer Equipment 4 -

Computer software 6 -

Furniture and ttings 10 -

Motor vehicles 5 5

Sanitation, water and electricity 20 20

Roads and bridges 40 40

Fences and security lights 3 -

Mini hydro power - 10

Mature plantation

-Tea 33 30

-Rubber 20 20

-Palm oil 20 20

-Caliandra 10 -

-Coconut 33 -

2.07 Impairment of assets

Assets that have an indenite useful life are not

subject to amortisation and are tested annually for

impairment. Assets that are subject to amortisation are

reviewed for impairment whenever events or changes in

circumstances indicate that the carrying amount may

not be recoverable. An impairment loss is recognised

for the amount by which the asset’s carrying amount

exceeds its recoverable amount. The recoverable

amount is the higher of an asset’s fair value less costs

to sell and value in use. For the purposes of assessing

impairment, assets are grouped at the lowest levels for

which there are separately identiable cash ows (cash

generating units).

2.08 Borrowing costs

Borrowing costs are recognised as an expense in the

period in which they are incurred, except to the extent

where borrowing costs that are directly attributable to

the acquition, construction or production of a qualifying

asset that takes a substantial period of time to get ready

for its inteded use or sale is capitalised

as part of the asset in accordance with the Sri Lanka

Accounting Standards. Capitalisation of borrowing cost

seases when substantially all the activities necessary

to prepare the qualifying asset for its intended use are

completed.

2.09 Investment

In the parent Company’s nancial statements,

investments in subsidiaries are carried at cost under

the parent Company accounting policy for long-term

investments. Provision for fall in value is made when in

the openion of the Directors there has been a decline

other than temporary in the value of the investment.

2.10 Accounting for leases

Leases in which a signicant portion of the risks and

rewards of ownership are retained by the lessor are

classied as operating leases. Payments made under

operating leases (net of any incentives received from

the lessor) are charged to the income statement on a

straight-line basis over the period of the lease.

The Group leases certain property, plant and equipment.

Leases of property, plant and equipment where the

Group has substantially all the risks and rewards of

ownership are classied as nance leases. Finance

leases are capitalised at the commencement of the

lease at lower of the fair value of the leased property

and the present value of the minimum lease payments.

Each lease payment is allocated between the liability

and nance charges so as to achieve a constant rate

on the nance balance outstanding. The corresponding

rental obligations, net of nance charges, are included

in other long-term payables. The interest element of the

nance cost is charged to the income statement over

the lease period so as to produce a constant periodic

rate of interest on the remaining balance of the liability

for each period. The property, plant and equipment

acquired under nance leases is depreciated over the

shorter of the useful life of the asset and the lease term.

2.11 Capital grants

Grants relating to the purchase of property, plant

and equipment are included in non current liabilities

as deferred income and are credited to the income

statement on a straight line basis over the expected

lives of the related assets.


112




2.12 Inventories

Inventories other than produce stock and nurseries are

stated at lower of cost and net realisable value. Net

realisable value is the price at which inventories can be

sold in the ordinary course of business.

The Group has valued unsold produce stock

(tea,rubber,palm oil) at since realised prices. The

balance unsold stock remained as at the balance sheet

date valued at an estimated selling prices based on

most recent selling prices available subsequent to the

year end.

Nurseries are valued at the cost of direct materials,

direct labour and an appropriate proportion of other

directly attributable overheads or the net realisable

value whichever is lower.

2.13 Trade receivables

Trade receivables are carried at anticipated realisable

value. A provision for impairment of trade receivables

is established when there is objective evidence that

the Group will not be able to collect all amounts due

according to the original terms of the receivables.

Signicant nancial difculties of the debtor, probability

that the debtor will enter bankruptcy or nancial

reorganisation and default payments are considered

indicators that the trade receivable is impaired. 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 within distribution

cost. When a trade receivable is uncollectible, it is written

off against the allowance account for trade receivable.

Subsequent recoveries of amounts previously written-

off are credited against distribution cost in the income

statement.

2.14 Cash and cash equivalents

For the purposes of the cash ow statement, cash and

cash equivalents comprise cash in hand, deposits held

at call with banks, net of bank overdrafts. In the balance

sheet, bank overdrafts are included in borrowings under

current liabilities.

2.15 Stated Capital

Ordinary shares are classied as stated capital. The

details are given in note 11.

2.16 Liabilities and provisions

Liabilities classied as current liabilities in the balance

sheet are those which fall due for payment on demand

or within one year from the reporting date. Non-current

liabilities that fall due for payment later than one yearfrom the reporting date.

Provisions are recognised when the Group has a

present legal or constructive obligation as a result of

past events, it is probable that an outow of resources

embodying economic benets will be required to settle

the obligation, and a reliable estimate of the amount of

the obligation can be measured reliably.

All known liabilities and provisions have been accounted

for in preparing the nancial statements.

Trade payables are recognised initially at cost.

2.17 Employee retirement benets

2.17.01 Dened contribution plans

Dened contribution plan is a post employment plan

under which an entity pays xed contribution into a

separate entity and will have no legal or constructive

obligation to pay a further amount. Obligations

for contributions to dened contribution plans are

recognised as an expense in the income statement as

and when they are due.

a) Employees’ Providend Fund

Estate Staff Provident Society

Ceylon Planters’ Provident Fund

All employees of the Group are members of the

Employees’ Provident Fund or the Estate Staff Provident

Society or Ceylon Planters’ Provident Fund to which the

Group contributes 12% of the salary of each employee.

(b) Employees’ Trust Fund

The Group contributes 3% of the salary of each

employee.

2.17.02 Dened benet plan - retiring gratuity

Dened benet plans dene an amount of benet

that an employee will receive on retirement, usually

dependent on one or more factors such as age, years

of service and compensation.

The Group has adopted the benet plan as required

under the Payment of Gratuity Act No. 12 of 1983 for all


1



2.17.02 Dened benet plan - retiring gratuity (Cont.)

eligible employees. The benet plan is patially funded.

Provision for gratuity is made by the Group taking

account of the recommendation of an independent

qualied actuaries rm, Messrs Actuarial & ManagementConsultants (Private) Limited.

The liability recognized in the balance sheet in respect of

dened benet plans is the present value of the dened

benet obligation at the balance sheet date together

with adjustments for unrecognized past service cost.

The dened benet obligation is calculated annually by

the Company using the projected unit credit method

prescribed in Sri Lanka Accounting Standard 16;

Employee Benets. The present value of the dened

benet obligation is determined by discounting the

estimated future cash ows using the interest rates

of Government bonds that are denominated in the

currency in which the benets will be paid, and that

have terms to maturity approximating to the terms of

the related pension liability.

Gains and losses arising from experience adjustments

and changes in actuarial assumptions are charged or

credited to income statement in the period in which

they arise.

Past service costs are recognized immediately in

income statement, unless the changes to the plan are

conditional on the employees remaining in service for a

specic period of time (the vesting period). In this case,

the past service costs are amortised on a straight-line

basis over the vesting period.

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.

2.17.03 Gratuity investment fund

The Board of Directors has decided to fund the

gratutity liability proportionately based on the Group’s

performance each year.

2.18 Income tax

The tax expense for the period comprises current

and deferred tax. Tax is recognised in the income statement,

except to the extent that it relates to items recognised in

other comprehensive income or directly in equity. In this case

the tax is also recognised in other comprehensive income or

directly in equity, respectively.

2.18.01 Current income tax

The current income tax charge is calculated on

the basis of the tax laws enacted or substantively

enacted by end of the reporting period in the countries

where the Company and subsidiaries operate andgenerate taxable income. Management periodically

evaluates positions taken in tax returns with respect to

situations in which applicable tax regulation is subject

to interpretation. It establishes provisions where

appropriate on the basis of amounts expected to be

paid to the tax authorities.

2.18.02 Deferred tax

Deferred income tax is recognised, using the liability

method, on temporary differences arising between the

tax bases of assets and liabilities and their carryingamounts in the consolidated nancial statements.

However, the deferred income tax is not accounted for

if it arises from initial recognition of an asset or liability

in a transaction other than a business combination

that at the time of the transaction affects neither

accounting nor taxable prot or loss. Deferred income

tax is determined using tax rates (and laws) that have

been enacted or substantially enacted by the end of

reporting period and are expected to apply when the

related deferred income tax asset is realised or the

deferred income tax liability is settled.

Deferred income tax assets are recognised only to the

extent that it is probable that future taxable prot will be

available against which the temporary differences can

be utilised.

Deferred income tax assets and liabilities are offset

when there is a legally enforceable right to offset current

tax assets against current tax liabilities and when the

deferred income taxes assets and liabilities relate to

income taxes levied by the same taxation authority

on either the taxable entity or different taxable entities

where there is an intention to settle the balances on a

net basis.

2.19 Revenue recognition

The Group has adopted following policies and methods

to determine the point in time at which the entity

transfers the signicant risks and rewards of ownership

of goods and to determine the stage of completion of

the service.


114




2.19.01 Perennial crops

Revenue and prot or losses on perennial crops are

recognised in the year of harvesting. Revenue comprises

the invoiced value of sales, net of brokerage, public sale

expenses, and other levies related to turnover.

a) Sale of tea at auction

As per the Tea By-Laws & Conditions issued by the

Ceylon Tea Traders’ Association (Section 17) the highest

bidder(buyer) is accepted and a sale shall be completed

at the fall of the hammer. The sale is valued at the price

and quantity agreed upon and raising the Sale Note.

b) Sale of rubber at auction

As per the Rubber By-Laws & Conditions issued by

the Colombo Rubber Traders’ Association the highest

bidder(buyer) is accepted and a sale shall be completed

at the fall of the hammer. The sale is valued at the price

and quantity agreed upon and raising the Sale Note.

c) Sale of palm oil

The revenue is recognised when the cash is received

and the oil is ready for delivery to the buyer. Usaully,

buyer arranges the transport while acknowledging the

quantity.

2.19.02 Other income

Other income is recognised on an accruel basis.

2.19.03 Prot/loss from disposal of property,plant and

equipment

Prot/loss from sale of property,plant and equipment is

recognised in the period in which the sale occures and

the delivery order is issued.

2.19.04 Income on harvesting of matured trees (as part

of reforestation program)

Income is recognised when the cash is received and the

delivery order is issued.

2.19.05 Interest income

Interest income is recognised on an accruel basis.

2.19.06 Dividend income

Dividend income is recognised in the income statement

on an accruel basis when the Group’s right to receive

the dividend is established.

2.20 Segment information

The segmental information has been prepared in

accordance with the “management approach”, which

requires presentation of the segments on the basis of

the internal reports about components of the entitywhich are regularly reviewed by the chief operating

decision maker in order to allocate resources to a

segment and to assess its performance.

The Group comprises the following major business

segments.

Tea

Rubber

Palm oil

Exports

Measurement of segment assets,liabilities ,segmentrevenue and results is based on the accounting policies

set out above. Segment expenses are expenses that are

directly attributed to a segment or a relevant portion of

expenses that can be allocated on a reasonable basis

as determined by the management. Inter-segment

pricing is determined on an arms length basis based

on fair market prices. Considering the activities of the

operations, segment information based on geographical

segments does not arise.

The segments information is given in the note 19 to the

nancial statements.

2.21 Commitments and contingencies

Contingencies are possible assets or obligations that

arise from a past event and would be conrmed only on

the occurrence or non-occurrence of uncertain future

events, which are beyond the control of Group.

Contingent liabilities are not recognised, instead,

disclose the existence of contingent liability,unless the

possibility of payment is remote, as set out in note 28

and 29.

2.22 Events after the reporting period

Events after the reporting period are events, favourable

and unfavourable, that occur between the end of

the reporting period and the date when the nancial

statements are authorised for issue as given in note 33.

2.23 Dividends

If the dividends are declared after the reporting period

but before the nancial statements are authorised for


1



issue, the dividends are not recognised as a liability

at the end of the reporting period. The provision for

dividends is recognised at the time the dividend

recommended and declared by the Board of Directors

is aproved by the Shareholders. The details of dividends

are detailed in note 27.

2.24 Comparatives

Where necessary, comparative gures have been

adjusted to conform with changes in presentation in the

current year.

2.25 Critical accounting estimates and judgements

a) Income taxes

The Group is subject to income taxes in numerous

jurisdictions. Signicant judgement is required in

determining the worldwide provision for income taxes.

There are many transactions and calculations for which

the ultimate tax determination is uncertain. The group

recognises liabilities for anticipated tax audit issues

based on estimates of whether additional taxes will be

due. Where the nal tax outcome of these matters is

different from the amounts that were initially recorded,

such differences will impact the current and deferred

income tax assets and liabilities in the period in which

such determination is made.

b)Pension benets - gratuity

The present value of the pension obligations depends

on a number of factors that are determined on an

actuarial basis using a number of assumptions. The

assumptions used in determining the net cost (income)for pensions include the discount rate. Any changes in

these assumptions will impact the carrying amount of

pension obligations.

The Group determines the appropriate discount rate at

the end of each year. This is the interest rate that should

be used to determine the present value of estimated

future cash outows expected to be required to settle

the pension obligations. In determining the appropriate

discount rate, the group considers the interest rates of

high-quality corporate bonds that are denominated in

the currency in which the benets will be paid, and that

have terms to maturity approximating the terms of the

related pension liability.

Other key assumptions for pension obligations are

based in part on current market conditions.

3. Leasehold right to bare land of JEDB/SLSPC estates

In Rs.’000s Group Company

2012 2011 2012 2011

Revaluation as at 18 June 1992 372,840 372,840 372,840 372,840

Cost

At the 31st March 372,840 372,840 372,840 372,840

Accumulated amortization

At the 31st March 132,157 125,122 132,157 125,122

Amortization for the year 7,035 7,035 7,035 7,035

At the 31st March 139,192 132,157 139,192 132,157

Carrying value

As at 31st March 233,648 240,683 233,648 240,683


116




4. Immovable estate assets on nance lease (other than bare land) - Group and Company

The leases of JEDB/SLSPC estates handed over to the

Company for a period of 53 years have all been executed.

The leasehold rights to the land on all these estates have

been taken into the books of the Company as at 18 June

1992 immediately after formation of the Company in terms of

a ruling obtained from the Urgent Issues Task Force (UITF) of

the Institute of Chartered Accountants of Sri Lanka. The bare

land has been recorded at the value established for each

land by valuation specialist, D R Wickramasinghe, just prior

to the formation of the Company.

a. Assets in these estates under nance leases have

been taken into books of the Company retrospectively

retroactive from 18 June 1992. For this purpose, theBoard of Directors of the Company decided at its

meeting held on 8 March 1995 that those assets would

be taken at their book value as they appeared in the

books of the JEDB / SLSPC, on the day immediately

preceding the date of formation of the Company.

b. Estate leases shown under immature plantation (revalued

as at 18 June 1992) have been transferred to mature

plantations as at the balance sheet date. Investment bythe Company on mature and immature plantations is

shown separately under mature / immature plantations

in note 06 to the nancial statements.

In Rs. ‘000s

Improvements

to land

Other

vested

assets

Mature

plantations

Roads

and

bridges

Water

supply Buildings

Mini-

hydro

power

plant Machinery Total

Revaluation as at 18 June 1992 3,340 3,305 406,633 484 3,838 93,279 1,540 32,506 544,925

Cost as at 31st March 2011 3,340 3,305 406,633 484 3,838 93,279 1,540 32,506 544,925

Cost as at 31st March 2012 3,340 3,305 406,633 484 3,838 93,279 1,540 32,506 544,925

Accumulated amortization

As 31st March 2010 1,973 801 208,455 212 3,394 66,276 1,540 32,506 315,157

Amortisation for the year (Note 22) 111 44 13,541 11 186 3,754 - - 17,647

At the 31st March 2011 2,084 845 221,996 223 3,580 70,030 1,540 32,506 332,804

Amortisation for the year (Note 22) 111 44 13,541 11 186 3,754 - - 17,647

At the 31st March 2012 2,195 889 235,537 234 3,766 73,784 1,540 32,506 350,451

Carrying value

As at 31st March 2011 1,256 2,460 184,637 261 258 23,249 - - 212,121

As at 31st March 2012 1,145 2,416 171,096 250 72 19,495 - - 194,474


1



5. Fixed assets other than immature / mature plantations - Group

In Rs. ‘000s

Buildings

Capital

work in

progress

Motor

vehicles

Plant

and

machinery Equipment Computer

Furniture

and

ttings

Biological

assets Others Total

Cost

At 31st March 2010 650,388 37,665 293,532 801,918 141,272 - 40,424 11,212 114,894 2,091,305

Additions 63,531 7,116 55,873 240,567 13,769 5,813 3,476 10,843 24,306 425,294

Transfers (345) - - (188) 188 - 345 - - -

Disposals - - (7,389) - (275) - - (2,700) - (10,364)

At 31st March 2011 713,574 44,781 342,016 1,042,297 154,954 5,813 44,245 19,355 139,200 2,506,235

Additions 62,017 18,557 26,686 129,371 5,136 5,602 79 6,778 7,507 261,733

Transfers (38,925) - - - - (38,925)

Disposal of subsidiary (5,855) (56,663) (41,026) (23,899) (10,606) (138,049)

Disposals - (46,616) (7,783) - - - (6,096) - (60,495)

At 31st March 2012 775,591 18,558 265,423 1,122,859 136,191 11,415 33,718 20,037 146,707 2,530,499

Accumulated depreciation

At 31st March 2010 53,927 - 138,544 275,840 86,866 - 25,102 - 24,813 605,092

Charge for the year

(Note 22)

15,879 - 48,530 54,841 11,090 1,074 2,922 - 2,586 136,922

Disposals - - (5,272) - (275) - - - - (5,547)

At 31st March 2011 69,806 - 181,802 330,681 97,681 1,074 28,024 - 27,399 736,467

Charge for the year

(Note 22)

17,727 - 33,563 67,113 6,254 1,799 1,474 - 5,895 133,825

Disposals - - (25,878) (4,245) - - - - - (30,123)

Disposal of subsidiary (11,200) (3,269) (3,807) (1,509) (19,785)

At 31st March 2012 87,533 - 178,287 390,280 100,128 2,873 27,989 - 33,294 820,384

Carrying value

As at 31st March 2011 643,768 44,781 160,214 711,616 57,273 4,739 16,221 19,355 111,801 1,769,768

As at 31st March 2012 688,058 18,558 87,136 732,579 36,063 8,542 5,729 20,037 113,413 1,710,115


118




6. Immature / mature plantations - Group and Company

(a) Investments in immature/mature plantations since

the formation of the Company and Group have been

classied as shown above.

(b) Borrowing costs amounting to Rs 26,012,919 (2011 - Rs

24,296,680) incurred on borrowings obtained to meet

expenses relating to eld development expenditure has

been capitalised as part of immature plantations using

a capitalisation rate of 10.32% (2011 - 10.3%).

(c) The transfer of immature plantations to mature

plantations commences at the time the plantation is

ready for commercial harvesting.

In Rs.’000s Notes Immature Mature Total

plantations plantations

Cost

At 31st March 2010 653,894 1,201,593 1,855,487

Additions 317,363 - 317,363

Transfers (176,890) 176,890 -

At 31st March 2011 794,367 1,378,483 2,172,850

Additions 350,484 - 350,484

Transfers (308,075) 308,075 -

At 31st March 2012 836,776 1,686,558 2,523,334

Accumulated depreciation

At 31st March 20110 - (251,774) (251,774)

Charged for the year 22 - (53,955) (53,955)

At 31st March 2011 - (305,729) (305,729)

Charged for the year 22 - (62,563) (62,563)

At 31st March 2012 - (368,292) (368,292)

Carrying value

As at 31st March 2011 794,367 1,072,754 1,867,121

As at 31st March 2012 836,776 1,318,266 2,155,042


120




7. Investments in subsidiaries

8. Inventories

9. Trade and other receivables

Investments wholly consist of 100% controlling interests of

Watawala Tea-Australia Pty Limited. The Company disposed

the investment made in Watawala Marketing Limited to

Estate Management Services (Private) Limited as at 29

February 2012. Consequently the control was ceased as of

29 February 2012.


2012 2011 2012 2011

At 1st April - - 355,852 -

Investment made during the year

- Watawala Marketing Limited - - - 355,000

- Watawala Tea-Australia Pty Limited - - - 852

Sale of Subsidiary

- Watawala Marketing Limited - - (355,000) -

At 31st March - - 852 355,852


As at 31st March 2012 2011 2012 2011

Growing crop nurseries 50,105 36,943 50,105 36,943

Harvested crop 365,506 454,396 365,506 454,396

Raw materials, spares and consumables 100,474 305,729 100,474 77,088

516,085 797,068 516,085 568,427


As at 31st March 2012 2011 2012 2011

Notes

Trade receivables 129,891 252,590 78,088 92,565

Amount due from related companies 31 (i),(iv) 6,072 4,960 75,959 4,016

Employee advances 37,148 40,271 37,148 40,271

Advance paid to suppliers 29,396 41,094 29,396 41,094

Taxes recoverable-net (a) 96,785 87,684 96,785 87,684

Deposits and pre-payments 6,025 9,717 6,025 9,717

Other receivables 20,407 52,467 20,407 37,302

325,724 488,783 343,808 312,649

(a) Taxes receivable includes Advance Company Tax of Rs

48,692,103 (2011 - Rs 48,692,103), Value Added Tax of

Rs 627,910 (2011 - Rs 3,204,283) and Economic Service

Charge of Rs 37,256,664 (2011 - Rs 24,552,187).


1



10. Cash and cash equivalents

11. Stated capital


As at 31st March 2012 2011 2012 2011

Cash at bank 469,431 39,166 446,916 14,393

Cash in hand 800 1,531 800 668

470,231 40,697 447,716 15,061

For the purposes of the cash ow statement, the year end cash and cash equivalents comprise the following:


As at 31st March 2012 2011 2012 2011

Notes

Bank overdrafts 13 (403,019) (285,604) (403,019) (285,604)

Cash and bank balance 470,231 40,697 447,716 15,061

67,212 (244,907) 44,697 (270,543)


As at 31st March 2012 2011 2012 2011

Issued and fully paid

236,666,667 ordinary shares and 1 golden share 310,000 310,000 310,000 310,000

The Golden Shareholder

The Golden Share is currently held by the Secretary to

the Treasury and should be owned either directly by the

Government of Sri Lanka or by a 100% Government

owned public company. In addition to the rights of the

normal ordinary shareholder, the Golden Shareholder

has the following rights:

(a) The concurrence of the Golden Shareholder will be

required for the Company to sublease any of the estateland leased / to be leased to the Company by the

Janatha Estate Development Board / Sri Lanka State

Plantation Corporation.

(b) The concurrence of the Golden Shareholder will

be required to amend any clause in the Articles of

Association of the Company which grant specic rights

to the Golden Shareholder.

(c) The Golden Shareholder, or his nominee will have

the right to examine the books and accounts of the

Company at any time with two weeks written notice.

(d) The Company will be required to submit a detailed

quarterly accounts report to the Golden Shareholder in

a specied format within 60 days of the end of each

quarter. Additional information relating to the Company

in a specied format must be submitted to the GoldenShareholder within 90 days of the end of the each scal

year.

(e) The Golden Shareholder can request the Board of

Directors of the Company to meet with him / his

Nominee, once every quarter to discuss issues

related to the Company’s operation of interest to the

Government.


122




12. General reserve

13. Borrowings


As at 31st March 2012 2011 2012 2011

At the beginning of the year 150,000 150,000 150,000 150,000

At the end of the year 150,000 150,000 150,000 150,000


As at 31st March 2012 2011 2012 2011

Notes

Repayable within one year

Term loans 13.1 96,089 100,763 96,089 100,763

Other assets obtained on leases 13.6 2,037 5,662 2,037 5,662

Money market loans 45,000 45,000 45,000 45,000

Bank overdrafts 13.5 403,019 285,604 403,019 285,604

546,145 437,029 546,145 437,029

Repayable after one year

Term loans 13.1 206,131 294,536 206,131 294,536

Other assets obtained on leases 13.6 4,596 10,194 4,596 10,194

210,727 304,730 210,727 304,730

Total borrowings 756,872 741,759 756,872 741,759

Total borrowings as at 31 March 2012 can be analysed as follows :

Short term loans are secured on leasehold rights on specic estates.

In Rs.’000s Less than

one year

1 - 2

years

2 - 5

years

More than

5 years Total

Term loans 96,089 92,076 114,055 - 302,220

Money market loans 45,000 - - - 45,000

Other assets obtained on leases 2,037 2,255 2,341 - 6,633

Bank overdrafts 403,019 - - - 403,019

As at 31st March 2012 546,145 94,331 116,397 - 756,872

As at 31st March 2011 437,029 86,264 151,517 66,949 741,759


1



13.1.1 Term loans - Commercial Bank of Ceylon PLC

Purpose : For eld development activities from commercial banks under ADB re-nance scheme:

Purpose : For processing development, vehicles and equipment from commercial banks under ADB re-nance scheme:

In Rs.’000s 2011 / 2012 2010 / 2011

Year Loan Original Interest Repayable Repayable Balance Repayable Repayable Balance Repayment

number amount rate within after as at within after as at terms

% p.a. one year one year 31/03/2012 one year one year 31/03/2011

1996 37321 19,510 11.5 - - - 1,951 - 1,951 40 equal quarterly instalments

commencing from June 2002

1997 56134 &

62148

29,684 11.5 2,968 451 3,419 2,968 3,419 6,387 40 equal quarterly instalments


2000 68675 60,052 11.5 6,005 6,005 12,010 6,005 12,010 18,015 40 equal quarterly instalments

commencing from May 2004


commencing from September 2004



Sub total 180,976 16,146 20,716 36,862 18,097 36,862 54,959

In Rs.’000s 2011 / 2012 2010 / 2011




1996 35531 18,391 11.5 - - - 1,839 - 1,839 40 equal quarterly instalments com-

mencing from June 2002

2006 369491&

369487

50,340 9.74 6,804 24,939 31,743 6,804 31,743 38,547 96 equal monthly instalments

commencing from October 2008

2007 375394&

375396

48,479 9.74 6,606 29,193 35,799 6,606 35,799 42,405 96 equal monthly instalments


2008 501241 1,181 9.74 148 701 849 148 849 997 96 equal quarterly instalments

commencing from January 2010

Sub total 118,391 13,558 54,833 68,391 15,397 68,391 83,788

13. Borrowings

In Rs.’000s Outstanding liability Outstanding liability Security

Nature of liability Repayable Repayable Balance Repayable Repayable Balance

within after as at within after as at

one year one year 31/03/2012 one year one year 31/03/2011

Commercial Bank of Ceylon PLC

(Note 13.1.1)

66,507 124,695 191,202 71,474 191,203 262,677 Leasehold rights on specied estates

and machinerypurchased under

Environmental Friendly Scheme.

Hatton National Bank PLC

(Note 13.1.2)

8,333 16,667 25,000 9,289 25,000 34,289 Machinery purchased under

Environmental Friendly Scheme and

leasehold rights on specied estates.

ICICI Bank Limited

(Note 13.1.3)

20,000 58,334 78,334 20,000 78,333 98,333 Unsecured.

Public Bank Berhad

(Note 13.1.4)

1,249 6,435 7,684 - - -

Total 96,089 206,131 302,220 100,763 294,536 395,299

Short term loans are secured on leasehold rights on specic estates

13.1 Term loans - Group and Company


124




13.1.1 Term loans - Commercial Bank of Ceylon PLC (Contd.)

Purpose : For environmental friendly activities from commercial banks under ADB re-nance scheme:

13.1.2 Term loans - Hatton National Bank PLC

Purpose : For environment friendly activities from Hatton National Bank PLC:

Purpose : To fund working capital requirements of 12 Tea factories from Commercial Bank under Tea Relief Package

In Rs.’000s 2011 / 2012 2010 / 2011




2001 110221 5,350 8.5 - - - 167 - 167 96 equal quarterly instalments

commencing from July 2003

2001 145300

& 116166

16,874 8.5 - - - 1,010 - 1,010 96 equal quarterly instalments





commencing from November 2009

Sub total 57,754 6,792 2,810 9,602 7,969 9,602 17,571

In Rs.’000s 2011 / 2012 2010 / 2011




2009 - 148,874 AWPLR 30,011 46,336 76,347 30,011 76,348 106,359 59 equal quarterly instalments

commencing from November2009

minus 6%

Sub total 148,874 30,011 46,336 76,347 30,011 76,348 106,359

Total (Note no. 13.1.1) 66,507 124,695 191,202 71,474 191,203 262,677

In Rs.’000s 2011 / 2012 2010 / 2011




2001 LD13540

10,200 8.5 - - - 956 - 956 96 equal monthly instalmentscommencing from January 2004

2008 - 50,000 6.5 8,333 16,667 25,000 8,333 25,000 33,333 72 equal monthly instalments

commencing from March 2009

Total (Note 13.1.2) 60,200 8,333 16,667 25,000 9,289 25,000 34,289


1



13.1.3 Term loans - ICICI Bank Limited

Purpose - For purchase of xed assets in factories

13.1.4 Term loans - Public Bank Berhad

Purpose - For purchase of vehicle

In Rs.’000s 2011 / 2012 2010 / 2011




2011 180 50,000 SLIBOR

+ 5%

10,000 29,167 39,167 10,000 39,167 49,167 60 equal monthly instalments


1 year

2011 181 50,000 SLIBOR

+ 5%

10,000 29,167 39,167 10,000 39,167 49,167 60 equal monthly instalments


2 to 5

years

Total(Note 13.1.3) 100,000 20,000 58,334 78,334 20,000 78,334 98,334

In Rs.’000s 2011 / 2012 2010 / 2011




2012 - 5,850 11% 939 4,835 5,774 - - - 60 equal monthly instalments


2012 - 1,935 11% 311 1,599 1,910 - - - 60 equal monthly instalments


Total(Note 13.1.4) 7,785 1,249 6,435 7,684 - - -

13. Borrowings


126




13.1.5 Overdraft - Grop and Company

13.1.6 Obligation on other assets obtained on lease

In Rs.’000s Outstanding liability

As at 31st March 2012 2011 Security

Hatton National Bank PLC 74,394 89,796 Movable assets, stock in trade and anassignment of book debts.

Standard Chartered Bank 38,568 - Unsecured.

Sampath Bank PLC - 9,078 Stocks and receivables. Leasehold rights on

specic estates.

Commercial Bank of Ceylon PLC 26,962 11,778 Leasehold rights on specic estates.

Peoples Bank PLC 406 - Leasehold rights on specic estates.

Hongkong and Shanghai Banking Corporation - 1,282 Secondary mortgage of stocks and debtors.

Citi Bank, N.A. 131,430 4,107 Commercial paper guarantee agreement

executed under the company seal.

ICICI Bank Ltd - 70,830 Unsecured.

MCB Bank Ltd 131,259 97,901 Unsecured.

Nations Trust Bank PLC - 832 Unsecured.

Total 403,019 285,604

In Rs.’000s Current Non-current Total

As at 31st March 2012 2011


Finance lease liabilities - minimum lease payments 1,045 2,265 3,310 389

Finance charge allocated to future periods (136) (118) (254) (13)

Present value of nance lease liabilities 909 2,147 3,056 376

Peoples Leasing Limited

Finance lease liabilities - minimum lease payments 1,562 2,735 4,297 17,191

Finance charge allocated to future periods (434) (286) (720) (2,843)

Present value of nance lease liabilities 1,128 2,449 3,577 14,348

Nations Trust Bank PLC

Finance lease liabilities - minimum lease payments - - - 1,163

Finance charge allocated to future periods - - - (31)

Present value of nance lease liabilities - - - 1,132

Total 2,037 4,596 6,633 15,856


1



14. Finance lease obtained from SLSPC and JEDB - Group and Company

15. Retirement benet obligations

In Rs.’000s

2012 2011

Current Non-current Current Non-current

Gross liability 20,320 650,240 20,320 670,560

Less: Interest in suspense (15,010) (289,987) (15,007) (305,000)

Net liability to lesser 5,310 360,253 5,313 365,560

Non-current as at 31 March 2012 can be analysed as follows:

Total 1- 2 years 2 - 5 years More than

5 years

Net liability

At 31st March 2012 360,253 5,310 15,930 339,013

At 31st March 2011 365,560 5,520 17,940 342,100

The annual lease series of payments payable by the

Company with effect from 18 June 1996 in respect of theseestates is Rs 20.32 million (basic lease series of payments)

plus an amount to reect ination during the previous year

determined by multiplying Rs 20.32 million by gross domestic

product (GDP) deator of the preceding year. However as per

the agreement entered into with the Ministry of Plantations

the application of GDP deator has been suspended for ve

years commencing from 18 June 2003, resulting in a xed

lease payment of Rs 29.04 million. In September 2010, as per

the cabinet decision the regional plantation companies were

requested to revert back to the original method of calculating

lease rentals by applying the GDP deator of the preceding

year. The gross liability to the lessor represents the total basic

lease series payable by the Company for the remaining termof the lease. The net liability to the lessor is the present value

of annual basic lease series of payments over the remaining

tenure of the lease. The discount rate used is 6% p.a.

The interest in suspense is the total amount of interest

payable during the remaining tenure of the lease at 6%

p.a. on the net liability to the lesser on 18 June each year.

The basic lease series of payments paid each year (in equal

quarterly instalments in advance) has been debited to the

gross liability and the appropriate interest amount for the

year is charged to nance costs by crediting the interest in

suspense account.

The amounts recognised in the balance sheet are determined as follows:


As at 31st March 2012 2011 2012 2011

Present value of obligation 815,849 643,872 815,849 638,008

Liability in the balance sheet 815,849 643,872 815,849 638,008

The movement in the dened benet obligation over the year is as follows:


As at 31st March 2012 2011 2012 2011

At 1 April 643,872 643,388 638,008 643,388

Current service cost 53,276 41,949 53,276 41,342

Interest cost 70,181 78,122 70,181 77,207

Actuarial loss /(gain) 148,037 (58,761) 148,037 (58,754)

Transfer to Watawala Marketing Ltd (5,864) - - (5,061)

Benets paid (93,653) (60,826) (93,653) (60,114)

At 31st March 815,849 643,872 815,849 638,008


128




16. Deferred income and capital grants

The amounts recognised in the income statement are as follows:


As at 31st March 2012 2011 2012 2011

Current service cost 53,276 41,949 53,276 41,342Interest cost 70,181 78,122 70,181 77,207

Transfer to Watawala Marketing Ltd - - - (5,061)

Actuarial loss / (gains) 148,037 (58,761) 148,037 (58,754)

Total included in the staff cost (Note 23) 271,494 61,310 271,494 54,734

The key assumptions used by Messrs. Actuarial and Management Consultant (Private) Limited include the following:

Year 2011/12 Year 2010/11

(a) Rate of interest (net of tax) 11 % p.a. 11 % p.a.

(b) Rate of salary increase

- tea estate workers (every two years) 20% 19%

- rubber estate workers (every two years) 20% 19%

- oil palm factory workers (every two years) 20% 19%

- estate staff (every three years 20% 20%

- estate management and head ofce staff(every year) 7.5% 7.5%

(c) Retirement age 60years 60years

(d) The Group will continue in business as a going concern.


As at 31st March 2012 2011 2012 2011

Capital grants

At the beginning of the year 255,798 228,732 255,798 228,732

Received during the year - 38,554 - 38,554

255,798 267,286 255,798 267,286

Less: Amortised during the year (Note 22) (10,863) (11,488) (10,863) (11,488)


Funds have been received from the Plantation Human

Development Trust (PHDT) and Ministry of Estate

Infrastructure for workers’ welfare facilities including re-

roong of line rooms, latrines, water supply, sanitation, etc.

Grants received from the Ministry of Estate Infrastructure for

construction of creches, farm roads and community centres,

are also included above. The amounts spent have been

capitalised under the relevant xed assets category. The

capital grants are amortised on a straight-line basis over the

useful life of the respective asset.


1



17. Deferred income tax


As at 31st March 2012 2011 2012 2011

Beginning of the year 27,129 - 26,161 -Charge for the year 2,999 27,129 4,114 26,161


Deferred tax is calculated on temporary differences between

carrying value of xed assets and tax written down value of

such assets as analysed by each taxable activity.

The reconciliation of timing differences related to carrying

amounts of assets and liabilities of the balance sheet is as

follows.

Deferred income tax - Group

Deferred income tax - Company

Deferred tax assets and liabilities shall be measured based on the the tax rates that have been enacted or substantially

enacted by the end of the reporting period. Accordingly, the Group has used following tax rates in assessing the

deferred tax asset/liability for the current nancial year.

(a) Agricultural undertakings - 10%

(b) Exports - 12%

(c) Other - 28%

In Rs.’000s 2012 2011

Deferred Deferred Net Deferred Deferred Net

tax tax deferred tax tax deferred

asset liability tax liability asset liability tax liability

Tangible xed assets 147 (68,073) (67,926) - (41,688) (41,688)

Immature / mature plantation - (289,868) (289,868) - (210,647) (210,647)

Retirement benet obligations 127,900 - 127,900 95,103 - 95,103

Capital grants 68,582 - 68,582 71,623 - 71,623

Tax losses carried forward 131,184 - 131,184 58,480 - 58,480

Liability / (asset) at 31st March 327,813 (357,941) (30,128) 225,206 (252,335) (27,129)

In Rs.’000s 2012 2011

Deferred Deferred Net Deferred Deferred Net

tax tax deferred tax tax deferred

asset liability tax liability asset liability tax liability

Tangible xed assets - (68,073) (68,073) - (40,016) (40,016)

Immature / mature plantation - (289,868) (289,868) - (210,647) (210,647)

Retirement benet obligations 127,900 - 127,900 94,399 - 94,399

Capital grants 68,582 - 68,582 71,623 - 71,623

Tax losses carr ied forward 131,184 - 131,184 58,480 - 58,480

Liability / (asset) at 31st March 327,666 (357,941) (30,275) 224,502 (250,663) (26,161)


130




18. Trade and other payables

19. Segmental analysis by principal activities-

In Rs.’000s Notes Group Company

As at 31st March 2012 2011 2012 2011

Trade payables 206,580 282,696 205,534 260,507

Employee related creditors 128,161 124,102 128,161 124,102

Provisions and accruals 136,145 173,185 136,145 173,185

Other payables 43,402 94,158 43,402 42,949

Amount due to related companies 31 (l) (iii) 74,389 67,980 74,389 66,492

588,677 742,121 587,631 667,235

Accrued expenses and other payables mainly comprise of lease rent payable to Ministry of Plantations on SLSPC/

JEDB lease amounting to Rs 54,840,833 (2011-Rs 36,950,441).

The analysis by the principal activities, is as follows:



Revenue

Tea 3,183,034 3,558,239 3,179,817 3,569,495

Rubber 288,228 334,721 288,228 334,721

Palm oil 919,096 701,679 919,096 701,679

Exports 145,128 176,125 145,128 57,849

FMCG - 1,387,482 - -

Total 4,535,486 6,158,246 4,532,269 4,663,744

Gross prot/(loss)

Tea (354,711) 189,218 (354,711) 199,050

Rubber 81,786 173,680 81,786 173,680

Palm oil 520,356 276,956 520,356 308,082

Exports 2,065 60,866 (1,152) 2,192

FMCG - 499,076 - -

Total 249,496 1,199,796 246,279 683,004


1



19. Segmental analysis by principal activities - Group

19. Segmental analysis by principal activities - Company

20. Other operating income

In Rs.’000s Tea Rubber Palm Oil Export Unallocated Total

For the year ended 31st March 2012 2011

Revenue 3,179,817 288,228 919,096 252,375 - 4,639,516 6,199,205

Inter segment revenue (104,030) - - - - (104,030) (40,959)

Segment revenue 3,075,787 288,228 919,096 252,375 - 4,535,486 6,158,246

Gross prot / (loss) (354,711) 81,786 520,356 2,065 - 249,496 1,199,796

Operating prot (446,248) 66,434 398,170 1,473 593,226 613,055 724,626

Inter segment prot - - - - (394,081) (394,081) -

Net nance (cost) / income (54,341) (6,242) (24,885) - - (85,468) (85,984)

Prot / (loss) before tax (500,589) 60,192 373,285 1,473 199,145 133,506 638,636

Tax - - - (641) (4,114) (4,755) 3,830

Prot-Watawala Marketing Ltd - - - - - 283,834 -

Net prot / (loss) (500,589) 60,192 373,285 832 195,031 412,585 642,466

Segment assets 3,308,124 307,959 1,443,011 75,878 512,988 5,647,960 5,416,241

Segment liabilities 2,360,635 97,902 244,964 - 112,357 2,815,858 2,795,555

Other segment items

Capital expenditure 275,791 8,126 235,896 - 53,479 573,292 742,657

Depreciation 101,115 13,753 63,051 1,261 34,855 214,035 208,524

Amortisation 4,894 1,337 804 - - 7,035 7,035

In Rs.’000s Tea Rubber Palm Oil Export Unallocated Total

For the year ended 31st March 2012 2011

Revenue 3,179,817 288,228 919,096 145,128 - 4,532,269 4,663,744

Gross prot / (loss) (354,711) 81,786 520,356 (1,152) - 246,279 683,004

Operating prot (446,248) 66,434 398,170 (1,162) 593,227 610,421 611,521

Finance costs (54,341) (6,242) (24,886) - - (85,468) (84,951)

Prot / (loss) before tax (500,589) 60,192 373,284 (1,162) 593,227 524,953 526,570Tax - - - - (4,114) (4,114) 5,830

Net prot / (loss) (500,589) 60,192 373,284 (1,162) 589,113 520,839 532,400

Segment assets 3,308,124 307,959 1,443,011 75,878 509,409 5,644,381 5,223,418

Segment liabilities 2,359,920 97,902 244,964 - 111,311 2,814,097 2,712,804

Other segment items

Capital expenditure 275,791 8,126 235,896 - 53,479 573,292 715,159

Depreciation 101,115 13,753 63,051 1,261 34,855 214,035 186,621

Amortisation 4,894 1,337 804 - - 7,035 7,035



Prot on sale of property, plant and equipment 13,050 5,687 13,050 4,042

Amortisation of capital grants 10,864 11,488 10,864 11,488

Harvesting of matured trees (a) 106,284 45,742 106,284 45,742

Hydro power income (b) 18,241 31,970 18,241 31,970

Gain on disposal of intangible assets 72,356 - - 72,356

Prot from disposal of subsidiary 20. 1 110,442 - 386,595 -

Dividend income - 1,090 68,693 45,820

Net sundry income 12,981 28,392 12,981 27,891

344,218 124,369 616,708 239,309


132




21. Management fees

22. Operating prot

(a) Tree income has been recognised as per Urgent

Issues Task Force (UITF) ruling No. 14, Accounting for

Sale Proceeds of Perennial Plantation Trees, dated 31

December 2001.

20.1 Prot from disposal of subsidiary



Consideration received 741,595 - 741,595 -

Carrying value of assets/

investments sold ( Note 32 and Note 7 ) (631,153) - (355,000) -

110,442 - 386,595 -

Management fee is payable as per the understanding with

the Ministry of Plantation Industries and in agreement with

the managing agent Messrs Estate Management Services

(Private) Limited. The management fee is calculated on

The following items have been charged / (credited) in arriving at operating prot:



Auditors’ remuneration

- Audit 1,962 1,600 1,696 1,200

- Non audit 200 138 200 138

Amortisation

- leasehold right to bare land 3 7,035 7,035 7,035 7,035

Depreciation

- Immovable leased assets 4 17,647 17,647 17,647 17,647

- Fixed assets (other than

immature / mature plantations) 5 133,825 136,922 133,825 115,019

- Mature plantations 6 62,563 53,955 62,563 53,955

Directors’ emoluments 19,700 33,358 19,700 16,234

Workers prot share bonus 6,393 22,000 6,393 20,000

Prot on sale of

property, plant and equipment 20 13,050 5,687 13,050 4,042

Staff costs 23 2,744,397 2,173,009 2,744,397 2,124,301

Amortisation of grants received 16 (10,863) (11,488) (10,863) (11,488)

EBITDA (Earnings before interest, tax, depreciation and

land amortization). The rate applicable for the current year is

10% of EBITDA, Rs 49,331,477 (2011 - 10% of EBITDA, Rs

90,033,000).

(b) Hydro power income include income from Mark Hydro

(Private) Limited - Rs 3,159,799 (2011 - Rs 6,553,766),

Unit Energy Lanka (Private) Limited - Rs 9,287,770

(2011 - Rs 14,754,562) , Upper Agaraoya Hydro Power

Limited - Rs 5,793,433 (2011 - 10,61,805).


1



23. Staff costs

24. Net nance costs

25. Tax



Wages and salaries 2,259,184 1,917,660 2,259,184 1,884,757

Dened contribution plan 213,719 194,039 213,719 184,810

Dened benet plan 15 271,494 61,310 271,494 54,734

2,744,397 2,173,009 2,744,397 2,124,301

Average number of persons employed during the year

Full time 12,169 12,616 12,168 12,616



Loans and overdraft interest 84,154 83,413 84,154 82,320

Interest capitalised (26,013) (24,297) (26,013) (24,297)

58,141 59,113 58,141 58,023

Interest portion on JEDB/SLSPC lease series of payments 23,731 23,932 23,731 23,932

Interest portion on other nance lease series of payments 4,620 3,272 4,620 3,272

Interest income (1,024) (333) (1,024) (276)

85,468 85,984 85,468 84,951

Interest amounting to Rs 26,012,919 (2011 - Rs24, 296, 680) on loans and bank overdrafts relating to eld development activi-

ties has been capitalised using a capitalisation rate of 10.3 % p.a. (2011 - 10.3 % p.a.).



Current tax 641 13,837 - 12,805

Reversal of tax over provision in prior years - (44,796) (44,796)

Deferred tax 4,114 27,129 4,114 26,161

4,755 (3,830) 4,114 (5,830)

Tax is calculated using tax rates enacted for the year of assessment. The prots from agricultural activities are taxed at

10%, prot from export is taxed at 12% and prots from other activities are taxed at 28%.


134




30. Cash generated from operation

28 Commitments

a) Financial commitments

The future minimum lease payments for the nancial leases as at the end of the reporting period is disclosed in note 13 ( c ).

b) Other commitments

The Group entered into an agreement with Ismart Business Solutions Pvt Ltd., India to develop an accounting software(anERP). The maximum amount committed under this is Rs. 17,250,000, payable upon successful completion of the ERP

implimentation.

b) Capital commitments

Capital expenditure approved by the Board of Directors is as follows.

29 Contingent liability

Bank guarantees amounting to Rs. 3,571,000 was issued in favour of the Sri Lanka Customs to facilitate the Company

to import machinery on duty free basis. As at the balance sheet date the Company is in compliance with the terms and

conditions of the imports.

The Group conrms that there is no case (including the LT cases) led against the Group which is not disclosed which

would have been a material impact on the nancial position of the Group.

Reconciliation of prot before tax to cash generated from operations.

There were no other capital commitments as at 31st March 2012. The budgeted capital expenditure but not committed by the

Group/Company for the nancial year 2012/13 is Rs. 349,290,279.



Net prot before taxation front continuing operations 247,584 638,642 524,953 526,570

Adjusted for:

Depreciation 4,5 and 6 214,035 208,524 214,035 186,621

Prot on sale of property, plant and equipment (13,050) (5,687) (13,050) (4,042)

Amortisation of leasehold right 3 7,035 7,035 7,035 7,035

Amortisation of capital grants 16 (10,864) (11,488) (10,864) (11,488)

Transfer of net assets to Watawala Marketing Ltd - - - (72,356)

Dividend income - - (68,693) -Interest received 24 (1,024) (333) (1,024) (276)

Interest expense 24 86,492 86,317 86,492 85,227

Changes in working capital

- Inventories 52,342 (256,485) 52,342 (27,844)

- Trade and other receivables (32,049) (24,172) (31,159) 158,463

- Trade and other payables (80,617) 152,824 (79,604) 78,958

Provision for retirement benet obligations 15 271,494 61,310 271,494 54,734

Prot from disposal of subsidiary 20 ( c ) (110,442) - (386,595) -

Cash generated from operations 630,936 856,487 565,362 981,602



Approved and contracted for 573,292 742,657 573,292 715,159

Approved and not contracted for - - - -

Total 573,292 742,657 573,292 715,159


136




31. Related party transactions

The Group is controlled by Estate Management Services

(Private) Limited which owns 53.75% of ordinary shares.

(2011 - 53.75%) of the Company’s shares. The remaining

ordinary shares are widely held. The ultimate parent company

of the Group is Sunshine Holdings Limited.Directors’ interest

in contracts.

(a) Messrs R K Krishna Kumar and P T Siganporia who

are directors of the Company are also directors of Tata

Global Beverage Limited and Tetley GB.

(b) Messrs G Sathasivam, R K Krishna Kumar, V

Govindasamy and P T Siganporia who are directors of

the Company are also directors of Estate Management

Services (Private) Limited, the Managing Agent of the

Company.

(c) Mr G Sathasivam who is a director of the Company is a

shareholder of Sunshine Tea (Private) Limited.(d) Messrs D S Ratnasingham and B A Hulangamuwa

who are directors of the Company are also directors of

Sunshine Tea (Private) Limited.

(e) Messrs G Sathasivam, V Govindasamy and B A

Hulangamuwa who are directors of the Company are

also directors of Sunshine Holdings Limited.

(f) Messrs V Govindasamy and B A Hulangamuwa who

are directors of the Company are also directors of

Secretaries and Financial Services (Private) Limited.

(g) Messrs G Sathasivam, B A Hulangamuwa and V

Govindasamy who are directors of the Company are

also directors of Sunshine Travels and Tours Limited.

(h) Messrs V Govindasamy and B A Hulangamuwa who

are directors of the Company are also directors of

HealthGuard Pharmacy Limited.

(i) Messrs G Sathasivam and V Govindasamy who are

directors of the Company are also directors of SBL

Limited.

(j) Messrs G Sathasivam and V Govindasamy who are

directors of the Company are also directors of Sunshine

Packaging (Private) Limited.

(k) Messrs P T Siganporia and K Venkataramanan who are

directors of the Company are also directors of Watawala

Marketing Limited.

(l) Messrs G Sathasivam, V Govindasamy and D S

Ratnasingham who are directors of the Company are

also directors of Watawala Marketing Limited.


31st March 2012 2011 2012 2011

(i) Sales of goods and services

Sunshine Tea (Private) Limited 2,581 2,828 2,581 2,828

The Tetley Group 22,728 55,092 22,728 55,092

Secretaries and Financial Service (Private) Limited 81 43 81 43

Sunshine Packaging (Private) Limited - 155 - 155

SBL Limited 977 - 977 -

Watawala Marketing Limited - - 76,964 41,959

Sunshine Power (Private) Limited 1,610 - 1,610 -

Sunshine Holdings PLC 297 - 297 -

Sunshine Travels and Tours Limited 4,552 - 4,552 -

Watawala Tea Australia (Pty) Limited - - 104,030 -

(ii) Purchase of goods and services

Estate Management Services (Private) Limited 58,699 93,003 58,699 93,003

Sunshine Tea (Private) Limited 17,493 52,926 17,493 20,576

Secretaries and Financial Services (Private) Limited 6,169 8,604 6,169 8,604

Sunshine Travels and Tours Limited 5,924 4,337 5,924 3,649

Health Guard Limited 1,416 1,200 1,416 1,200SBL Limited 455 450 455 450

Sunshine Packaging (Private) Limited 253 29,128 253 -

Sunshine Holdings PLC 4,282 - 4,282 -

Watawala Marketing Limited - - 104,030 -

(iii) Outstanding balances arising from purchase of goods and services

Amounts due to related companies

Estate Management Services (Private) Limited 4,502 66,492 4,502 66,492

Sunshine Travels and Tours Limited - 54 - -

Watawala Marketing Limited 69,887 1,434 69,887 -

74,389 67,980 74,389 66,492


1



31. Related party transactions ( contd)

32. Discontinued operations

In Rs.’000s 31 March 31 March

31st March 2012 2011 2012 2011

(iv) Amounts due from related companies

The Tetley Group - 4,016 - 4,016

SBL Limited - 450 - -

Sunshine Packaging (Private) Limited - 494 - -

Watawala Marketing Limited 6,072 - 6,072

Watawala Tea Australia (Pty) Limited - - 69,887 -

6,072 4,960 75,959 4,016

Transactions with related parties have been carried out on normal commercial terms.

The Directors have disclosed the nature of their interests in contracts and proposed contracts with the Group at meetings

of the directors.

(v) Key management compensation

Key management includes the Executive Committee of the Group & Company. The compensation paid or payable to key

management for employee services is as follows:



Salaries and other short term employee benets 35,439 46,982 35,439 29,858

The Company disposed Watawala Marketing Limited on 29 February 2012 as described in Note 7.

a) Financial performance of Watawala Marketing Limited for the period ended 29 February 2012 is shown below.

In Rs.’000s 11 months

ended

29 February 2012

Revenue 1,483,444

Cost of sales (911,258)

Gross prot 572,186

Other income 5,099Distribution expenses (165,513)

Administrative expenses (197,096)

Operating prot 214,676

Management fees (1,018)

Prot before tax 213,658

Tax (43,902)

Prot from discontinued operations 169,756


138




b) Carrying value of assets and liabilities de - recognised at the sale date is as follows.

In Rs.’000s As at

29 February 2012

Total non-current assets 238,776

Total current assets 545,902

Total non-current liabilities (10,947)

Total current liabilities (142,578)

Net assets disposed 631,153

33 Post balance sheet events

There have been no events subsequent to the balance sheet date, which would have any material effect on the Group,

other than the following.

The Board of Directors has declared a rst and nal dividend of 35 cents per share for the nancial year ended 31st

March 2012 as detailed in note 27 to the nancial statements.

As required by section 56 (2) of the Companies Act No. 07 of 2007, the Board of Directors has conrmed that the Group

satises the solvancy test in accordance with section 57 of the Companies Act No. 07 of 2007, and has obtained a

certicate from the auditors prior to declaring the dividend.

34. Risk management

The Group activities expose it to variety of nancial risks, market risk (including currency risk and interest rate risk), credit

risk and liquidity risk. The Group overall risk management programme focuses on the unpredictability of nancial markets

and seek to minimise potential adverse effects on the Group’s nancial performance.

Risk management is carried out by the management under the policies approved by the Board of Directors. Management

identies, evaluate and mitigate nancial risks in close corporation with the Group’s operating units.


1



QUALITY

ASSURANCETHROUGH PEOPLE, PROCESS

AND PRODUCT



Group Company

2011/2012 2010/2011 2011/2012 2010/2011Rs.’000 Rs.’000 Rs.’000 Rs.’000

Revenue 4,535,486 6,158,246 4,532,269 4,663,744

Other income 344,218 124,369 616,708 239,309

4,879,704 6,282,615 5,148,977 4,903,653

Cost of materials and services

obtained

(1,226,393) (2,946,823) (1,386,297) (1,779,699)

Value Addition 3,653,311 3,335,792 3,762,680 3,123,354

Value allocated to:

To Employees

Salaries,wages and other benets 2,744,399 75% 2,173,009 65% 2,744,399 73% 2,129,362 68%

To Providers of funds

Interest to money lenders 85,468 2% 85,984 3% 85,468 2% 84,951 3%

To Government

JEDB/SLSPC Lease rental 55,990 50,958 55,990 50,958

Value Added Tax 104,455 64,947 104,455 64,947

Nation Bulding Tax 26,075 59,285 26,075 25,965

Business Turnover Tax - 463 - -

Social Responsibity Levy 21 174 21 174

Stamp Duty 249 1,975 249 1,975

Income Tax - 13,837 - 12,805

186,790 5% 191,639 6% 186,790 5% 156,824 5%

To providers of capital

Dividend paid to shareholders 201,167 6% 65,083 2% 201,167 6% 65,083 2%

To Expansion and growth

Prot retained 211,418 577,389 319,672 467,317

Depreciation & ammotization 221,070 215,559 221,070 193,656Deferred Taxation 2,999 27,129 4,114 26,161

435,487 12% 820,077 24% 544,856 14% 687,134 22%

3,653,311 100% 3,335,792 100% 3,762,680 100% 3,123,354 100%

Value Added Statement


142

Supplementary Information



Estate Hectarage Statement

Total Cultivated Other Area Total Area Area (Ha) Area (Ha) Area (Ha)

TEAKenilworth 455.11 147.00 602.11Carolina 466.93 425.49 892.42Wigton 525.87 141.71 667.58Lonach 248.75 171.23 419.98Shannon 224.44 37.60 262.04WATAWALA REGION 1,921.10 923.03 2,844.13

Abbotsleigh 362.25 65.21 427.46Dickoya 512.62 116.97 629.59

Vellai Oya 570.15 269.85 840.00Strathdon 494.96 151.41 646.37HATTON REGION 1,939.98 603.44 2,543.42

Agrakande 206.25 22.50 228.75Henfold 484.05 55.95 540.00Lippakelle 216.00 71.50 287.50Ouvahkelle 198.87 40.88 239.75Tangakelle 313.78 54.01 367.79Waltrim 486.33 91.92 578.25LINDULA REGION 1,905.28 336.76 2,242.04

Homadola 108.91 423.11 532.02Talangaha 92.45 - 92.45UDUGAMA REGION 201.36 423.11 624.47

TOTAL TEA 5,967.72 2,286.34 8,254.06

RUBBERHomadola 307.19 - 307.19Nakiadeniya Rubber 569.19 126.57 695.76Talangaha 119.38 62.79 182.17Nakiadeniya Oil Palm 57.47 16.00 73.47TOTAL RUBBER 1,053.23 205.36 1,258.59

OIL PALMNakiadeniya Oil Palm 899.95 68.00 967.95Talangaha 424.80 - 424.80Nakiadeniya Rubber 1,005.04 1.50 1,006.54Homadola 528.07 - 528.07TOTAL OIL PALM 2,857.86 69.50 2,927.36

COMPANY TOTAL 9,878.81 2,561.20 12,440.01


144




Crops & Yields

PRODUCTION (KG’000) 15 Months

REGION 2011/ 2012

2010/ 2011

2009/ 2010

2008/ 2009

2007/ 2008

2006/ 2007

2005/ 2006

2004/ 2005

2003/ 2004

2002/ 2003

2001/ 2002

2000/ 2001

TEA

Watawala 2,245 2,364 2,189 2,076 2,156 1,654 2,127 2,047 2,058 2,498 2,284 2,656

Hatton 3,875 3,872 3,577 3,012 2,837 2,773 3,007 2,931 2,435 2,948 2,700 3,451

Lindula 2,388 2,513 2,359 2,174 2,250 1,981 2,447 2,606 2,603 2,751 2,543 3,532

Udugama 886 1,081 963 723 1,104 1,189 1,581 1,654 1,755 1,934 1,830 2,444

TEA 9,394 9,830 9,087 7,986 8,347 7,597 9,162 9,238 8,851 10,131 9,357 12,083

RUBBER 648 674 658 766 884 854 1,001 874 1,027 978 1,119 1,401

OIL PALM 6,584 5,080 6,164 6,162 5,671 7,563 7,330 6,244 4,644 4,557 4,156 4,540

YIELD PER HECTARAGE (KG) 15 Months

REGION 2011/

2012

2010/

2011

2009/

2010

2008/

2009

2007/

2008

2006/

2007

2005/

2006

2004/

2005

2003/

2004

2002/

2003

2001/

2002

2000/

2001

TEA

Watawala 1,262 1,209 1,152 1,158 1,152 1,062 1,372 1,346 1,397 1,611 1,595 2,088

Hatton 1,365 1,342 1,378 1,245 1,235 1,201 1,470 1,487 1,445 1,638 1,579 2,118

Lindula 1,343 1,396 1,295 1,235 1,267 1,258 1,382 1,332 1,330 1,623 1,544 2,195

Udugama 1,799 1,782 1,752 1,486 1,674 1,341 1,457 1,439 1,546 1,625 1,830 2,384

TEA 1,345 1,344 1,304 1,228 1,243 1,192 1,413 1,392 1,395 1,626 1,583 2,128

RUBBER 753 645 604 671 755 671 779 652 816 783 852 923

OIL PALM 3,156 2,391 2,973 2,908 2,734 2,781 2,814 2,512 2,321 2,609 2,755 3,044


1



2002/03 2003/04 2004/05 2005/06 2006/07

In Rs.’000s

INCOME STATEMENT

Revenue 1,999,337 2,229,238 2,719,781 2,855,036 3,169,788

Gross prot 190,113 287,258 414,948 464,467 502,376

Other Operating income 36,538 28,992 45,287 55,101 76,946

Administrative expenses (67,800) (68,119) (78,910) (86,465) (92,054)

Distribution expenses (43,768) (66,967) (59,253) (71,702) (105,281)

Management fees (42,311) (50,365) (65,152) (60,702) (50,960)

Operating prot 72,772 130,799 256,920 300,699 330,826

Net nance cost (106,619) (98,549) (98,010) (89,819) (83,092)

Amortisation of negative goodwill 7,870 7,870 7,870 - -

Prot /(loss) before Tax (25,977) 40,120 166,780 218,893 247,734

Tax expense - - (4,973) (14,315) (26,034)

Prot /(loss) for the year (25,977) 40,120 161,807 204,578 221,700

Prot from discontinued operations

Attributable to:

Equity holders of the Company (25,977) 40,120 161,807 204,578 221,700

Minority interests - - - - -

Prot /(loss) for the year (25,977) 40,120 161,807 204,578 221,700

BALANCE SHEET

Non Current Assets

Leasedhold right to bare land of JEDB/SLPC estates 296,961 289,926 282,891 267,756 260,928

Immovable estate assets on nance lease 362,541 342,727 322,913 296,958 277,534

Tangible xed assets 551,833 567,670 606,811 656,823 722,453Immature-mature plantations 814,691 846,693 883,679 884,880 990,204

Investment in Gratuity Fund - - - - -

Investments 6,200 - - 205,820 203,416

Total Non Current Assets 2,032,226 2,047,016 2,096,294 2,312,237 2,454,535

Current Assets

Inventories 190,555 175,324 226,546 260,926 292,917

Trade and other receivables 226,473 241,478 293,021 340,306 336,986

Cash and cash equivalents 7,141 3,045 60,001 66,148 75,356

Total Current Assets 424,169 419,847 579,568 667,380 705,259

Total Assets 2,456,395 2,466,863 2,675,862 2,979,617 3,159,794

Capital and reseves

Stated capital 310,000 310,000 310,000 310,000 310,000

General reserve 150,000 150,000 150,000 150,000 150,000

Negative goodwill 116,087 108,217 100,347 92,477 -

Investment reserve - - - 147,926 146,030

Retained earnings 118,930 159,050 279,441 483,876 768,470

Total equity attributable to equity holders of the company 695,017 727,267 839,788 1,184,279 1,374,500

Minority interests - - - - -

Historical nancial information


146




2007/08 2007/08 2008/09 2008/09 2009/10 2009/10 2010/11 2010/11 2011/12 2011/12

Group Company Group Company Group Company Group Company Group Company

4,313,604 4,313,604 4,124,503 4,121,976 5,615,167 5,611,731 6,158,246 4,663,744 4,535,486 4,532,269

811,320 811,320 487,193 489,495 851,239 860,887 1,199,796 683,004 249,496 246,279

84,563 86,121 43,523 45,223 130,603 132,303 124,369 239,309 344,218 616,708

(128,637) (127,854) (138,479) (137,225) (164,099) (178,687) (342,364) (220,759) (211,331) (203,235)

(148,084) (148,084) (201,360) (200,981) (231,657) (231,375) (167,142) - - -

(75,427) (75,427) (35,112) (35,112) (75,798) (75,798) (90,033) (90,033) (49,331) (49,331)

543,735 545,671 155,765 161,400 510,288 507,330 724,626 611,521 333,052 610,421

(87,902) (87,902) (71,057) (71,415) (79,669) (79,711) (85,984) (84,951) (85,468) (85,468)

- - - - - - - - - -

455,833 457,769 84,708 89,985 430,619 427,619 638,642 526,570 247,584 524,953

(51,879) (51,879) (10,000) (10,000) (4,000) (4,000) 3,830 5,830 (4,755) (4,114)

403,954 405,890 74,708 79,985 426,619 423,619 642,472 532,400 242,829 520,839

169,756 -

404,438 - 76,026 - 429,900 - 642,468 - 412,585 520,839

484 - 1,318 - 3,281 - - - - -

403,954 - 74,708 - 426,619 - 642,472 532,400 412,585 520,839

261,788 261,788 254,753 254,753 247,718 247,718 240,683 240,683 233,648 233,648

265,062 265,062 247,415 247,415 229,768 229,768 212,121 212,121 194,474 194,474

885,477 879,626 1,068,101 1,062,527 1,486,213 1,478,604 1,769,768 1,651,504 1,710,115 1,710,1151,168,364 1,168,364 1,376,476 1,376,476 1,603,713 1,603,713 1,867,121 1,867,121 2,155,042 2,155,042

- - - - - - - - 42,641 42,641

- 10,781 - 16,125 - - - 355,852 - 852

2,580,691 2,585,621 2,946,745 2,957,296 3,567,412 3,559,803 4,089,693 4,327,281 4,335,920 4,336,772

540,488 534,023 351,370 342,092 540,583 540,583 797,068 568,427 516,085 516,085

439,337 441,303 525,966 530,740 464,611 471,112 488,783 312,649 325,724 343,808

90,434 86,134 73,615 67,920 53,442 52,369 40,697 15,061 470,231 447,716

1,070,259 1,061,460 950,951 940,752 1,058,636 1,064,064 1,326,548 896,137 1,312,040 1,307,609

3,650,950 3,647,081 3,897,696 3,898,048 4,626,048 4,623,867 5,416,241 5,223,418 5,647,960 5,644,381

310,000 310,000 310,000 310,000 310,000 310,000 310,000 310,000 310,000 310,000

150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000

- - - - - - - - - -

- - - - - - - -

1,137,408 1,138,860 1,154,267 1,159,678 1,584,167 1,583,297 2,160,686 2,050,614 2,372,104 2,370,286

1,597,408 1,598,860 1,614,267 1,619,678 2,044,167 2,043,297 2,620,686 2,510,614 2,832,104 2,830,286

3,110 3,571 - 290 - - - - -

Ten Years summary


1



2002/03 2003/04 2004/05 2005/06 2006/07

In Rs.'000s

Non-current liablilites

Long term borrowings 335,236 357,474 286,791 225,056 221,371

Obligations under nance lease obtained from SLPC/JEDB 408,608 398,730 394,530 390,170 385,628

Retirement benet obligation 237,690 243,342 278,233 288,034 357,538

Deferred income and capital grants 109,065 117,679 128,144 136,790 139,632

Net Deferred tax liability - - - - -

Total Non-current liablilites 1,090,599 1,117,225 1,087,698 1,040,050 1,104,169

Current liablilites

Short-term borrowings 410,788 368,769 399,899 362,906 343,866

Obligations under nance lease obtained from SLPC/JEDB - 4,040 4,200 4,360 4,542

Trade and other payables 259,991 249,562 344,277 388,022 325,722

Current tax payable - - - - 6,995

Total Current liablilites 670,779 622,371 748,376 755,288 681,125

Total Liabilities 1,761,378 1,739,596 1,836,074 1,795,338 1,785,294

Total Equity & Liabilities 2,456,395 2,466,863 2,675,862 2,979,617 3,159,794

CASH FLOWS

Cash generated/(used in) from/to operations 211,949 260,223 407,552 404,188 418,681

Net cash inow/(outow) from operating activities 106,434 134,335 270,835 271,821 297,699

Net cash inow/(outow) from investing activities (162,273) (112,812) (128,869) (162,743) (217,720)

Net cash inow/(outow) from nancing activities 100,063 60,001 (162,652) (78,980) (59,530)

Increase/(decrease) in cash and cash equivalents 44,224 81,524 (20,686) 30,098 20,449

OPERATING RATIOS

Annual turnover growth % 21 11 22 5 11

Prot Growth % (311) 254 303 26 8

Turnover per employee (Rs.’000) 122 154 189 201 225

FINANCIAL RATIOS

Return on equity % (3.74) 5.52 19.27 17.26 16.13

Current ratio (Times) 0.63 0.67 0.77 0.88 1.04

Debt equity ratio (Times) 1.07 0.99 0.81 0.49 0.41

Interest cover (Times) 0.76 1.40 2.70 3.44 3.98

Total assets to current liabilities % 27 25 28 25 22

INVESTOR RATIOS

Annualised earning per share (Rs.) (1.10) 1.69 6.84 8.64 9.37

Price earning share (Times) (7.50) 4.73 2.67 4.60 5.66

Dividend per share (Rs.) - 0.75 1.00 1.25 1.50

Dividend cover (Times) - 2.26 6.84 6.91 6.24

Market Capitalization (Rs.’000) 195,250 189,333 431,917 940,751 1,254,298

Net assets value per share (Rs.) 29.37 30.73 35.48 50.04 58.08

Historical nancial information


148




2007/08 2007/08 2008/09 2008/09 2009/10 2009/10 2010/11 2010/11 2011/12 2011/12

Group Company Group Company Group Company Group Company Group Company

303,168 303,168 246,811 246,811 412,824 412,824 304,730 304,730 210,727 210,727

380,896 380,896 375,983 375,983 370,870 370,870 365,560 365,560 360,253 360,253

420,624 420,624 439,939 439,939 643,388 643,388 643,872 638,008 815,849 815,849

156,618 156,618 177,421 177,421 228,732 228,732 255,798 255,798 244,935 244,935

10,000 10,000 20,000 20,000 - - 27,129 26,161 30,128 30,275

1,271,306 1,271,306 1,260,154 1,260,154 1,655,814 1,655,814 1,597,089 1,590,257 1,661,892 1,662,039

287,444 287,444 503,704 503,704 262,895 262,895 436,830 436,830 546,145 546,145

4,720 4,720 4,910 4,910 5,113 5,113 5,313 5,313 5,310 5,310

453,985 451,774 466,621 465,133 589,297 588,277 742,121 667,235 588,677 587,631

32,977 32,977 44,469 44,469 68,472 68,471 14,003 12,970 13,832 12,970

779,126 776,915 1,019,704 1,018,216 925,777 924,756 1,198,466 1,122,547 1,153,964 1,152,056

2,050,432 2,048,221 2,279,858 2,278,370 2,581,591 2,580,570 2,795,555 2,712,804 2,815,856 2,814,095

3,650,950 3,647,081 3,897,696 3,898,048 4,626,048 4,623,867 5,416,241 5,223,418 5,647,960 5,644,381

529,981 534,205 520,845 526,931 891,758 893,936 861,544 981,602 630,936 565,362

404,297 408,521 375,135 380,863 752,710 754,846 685,774 813,771 451,815 386,241

(364,299) (372,823) (512,966) (520,091) (727,659) (725,173) (694,367) (846,927) 169,084 237,777

(44,107) (44,107) (20,451) (20,451) 120,393 120,393 (123,921) (123,921) (308,780) (308,780)

(4,109) (8,409) (158,282) (159,679) 145,444 150,066 (132,514) (157,077) 312,119 315,240

36 36 (4) (4) 36 36 10 (17) (26) (3)

82 82 (82) (80) 471 430 51 26 (62) (2)

302 302 309 309 431 430 472 358 372 371

25.20 25.40 4.60 4.90 4.79 4.82 24.52 21.21 14.57 18.40

1.37 1.37 0.93 0.92 1.14 1.15 1.11 0.80 1.14 1.14

0.37 0.37 0.46 0.46 0.33 0.33 0.70 0.72 0.59 0.59

6.19 6.21 2.19 2.26 6.40 6.36 8.43 7.14 3.90 7.19

21 21 26 26 20 20 5 5 4.89 4.90

17.07 17.15 3.21 3.38 1.80 1.79 2.72 2.25 1.74 2.20

5.04 5.01 18.53 17.31 9.76 9.83 0.92 1.11 5.74 4.54

2.50 2.50 - - 2.75 2.75 - - 0.35 0.35

6.83 6.86 - - 6.55 6.51 - - 4.98 6.29

2,035,333 2,035,333 1,384,500 1,384,500 4,165,333 4,165,333 5,916,675 5,916,675 2,366,670 2,366,670

67.50 67.56 68.35 68.44 86.38 86.34 110.73 106.08 11.97 11.96

Ten Years summary


1



Shareholders’ & investors’ information

Stock Exchange Listing

The issued shares of Watawala Plantations PLC arelisted with the Colombo Stock Exchange (CSE) in Sri

Lanka. The Audited Consolidated Income Statements

for the year ended 31st March 2012 and the Audited

Consolidated Balance Sheets at that date have been

submitted to the Colombo Stock Exchange within three

months of the Balance Sheet date.

Sharholders information

Total No of Shareholders as at 31st March 2012 :17,957(as at 31st March 2011-18,240)

Total No of Shares : 236,666,671

Public share holding

The Percentage of shares held by the public : 27.29%

(2011 - 26.10%)

Distribution of shareholding

Share trading information from 1st April to 31st March

Categories of shareholders

No of

Shares held

Residents Non-Residents Total

No. of

Share

holders %

No. of

Shares %

No. of

Share

holders %

No. of

Shares %

No. of

Share

holders %

No. of

Shares %

1-1,000 8,712 48.52 4,485,419 1.90 8 0.04 4,500 0.00 8,720 48.56 4,489,919 1.90

1,001-5,000 8,650 48.17 16,676,009 7.05 12 0.07 38,200 0.02 8,662 48.24 16,714,209 7.06

5,001-10,000 335 1.87 2,563,811 1.08 9 0.05 71,000 0.03 344 1.92 2,634,811 1.11

10,001-50,000 167 0.93 3,556,622 1.50 8 0.04 306,700 0.13 175 0.97 3,863,322 1.63

50,001-1,000,000 46 0.26 8,564,390 3.62 2 0.01 137,000 0.06 48 0.27 8,701,390 3.68

Over 1,000,000 6 0.03 191,300,090 80.83 2 0.01 8,962,930 3.79 8 0.04 200,263,020 84.62

Total 17,916 99.77 227,146,341 95.98 41 0.22 9,520,330 4.02 17,957 100.00 236,666,671 100.00

No of

Shares held

Residents Non-Residents Total

No. of

Share

holders %

No. of

Shares %

No. of

Share

holders %

No. of

Shares %

No. of

Share

holders %

No. of

Shares %

1-1,000 36 0.20 20,638 0.01 8,684 48.36 4,469,281 1.89 8,720 48.56 4,489,919 1.90

1,001-5,000 60 0.33 185,920 0.08 8,602 47.90 16,528,289 6.98 8,662 48.24 16,714,209 7.06

5,001-10,000 30 0.17 224,840 0.10 314 1.75 2,409,971 1.02 344 1.92 2,634,811 1.11

10,001-50,000 30 0.17 762,622 0.32 145 0.81 3,100,700 1.31 175 0.97 3,863,322 1.63

50,001-1,000,000 25 0.14 5,874,000 2.48 23 0.13 2,827,390 1.19 48 0.27 8,701,390 3.68

Over 1,000,000 7 0.04 198,938,070 84.06 1 0.01 1,324,950 0.56 8 0.04 200,263,020 84.62

Total 188 1.05 206,006,090 87.04 17,769 98.95 30,660,581 12.96 17,957 100.00 236,666,671 100.00

2012 2011

Highest during the year 14.50 (02.01.2012) 34.70 (27.01.2011)

Lowest during the year 8.80 ( 15.02.2012) 24.90 ( 31.03.2011)

As at 31st March 10.00 24.50

No. of Transactions 1,454 6,918

No. of Shares Traded 1,322,270 11,922,400

Value of Shares Traded (Rs) 14,150,296 367,775,240


150



Twenty (20) largest shareholders as at

Share trading information- last ve years

Market capitalization (Bn)

Name

31st March 2012 31st March 2011

No of

Shares held

% of the

holding

No of

Shares held

% of the

holding

Estate Management Services (Pvt) Ltd 127,216,340 53.75 127,216,340 53.75Mouldex Limited 44,855,100 18.95 44,820,700 18.94

Bank of Ceylon A/C Ceybank Unit Trust 17,903,700 7.56 17,846,400 7.54

Aureos South Asia Fund LLC 6,962,930 2.94 6,962,930 2.94

HSBC International Nominees LTD-SSBT-Deustche Bank 2,000,000 0.85 2,000,000 0.85

K.C.Vignarajah 1,324,950 0.56 1,174,500 0.50

Vyjayanthi & Company Limited 1,000,000 0.42 1,000,000 0.42

S.N.M.Semasinghe 545,100 0.23 595,500 0.25

National Savings Bank 419,500 0.18 242,400 0.10

Bank of Ceylon A/C Ceybank No.1 Account 350,100 0.15 350,100 0.15

M.I.Abdul Hameed 350,000 0.15 350,000 0.15

Lexinton Holdings (Pvt) Ltd 323,600 0.14 323,600 0.14

Mrs. S.Vignaraj 319,489 0.13 250,000 0.11

Cocoshell Activated Carbon Company Ltd 293,600 0.12 293,600 0.12

Con Investments (Pvt) Ltd 293,000 0.12 293,000 0.12

Con Management Services (Pvt) Ltd 293,000 0.12 293,000 0.12

Anverally and sons (Pvt) Ltd 257,100 0.11 247,100 0.10

Mr.P.L.A. Waniganayake 255,700 0.11 - -

Merchant Bank of Sri Lanka Limited 250,000 0.11 250,000 0.11

Perera and Sons (Bakers) Limited 250,000 0.11 250,000 0.11

ACL Plastics Ltd - 200,000 0.08

Sub Total 205,463,209 86.82 204,959,170 86.60Others 31,203,462 13.18 31,707,501 13.40

Grand Total 236,666,671 100.00 236,666,671 100.00

2011/12 2010/11 2009/10 2008/09 2007/08 2006/07

Highest during the year 14.50 34.70 192.00 88.50 107.00 65.00

Lowest during the year 8.80 24.90 53.25 42.50 45.00 30.50

As at 31st March 10.00 24.90 176.00 58.50 86.00 53.00

No. of shares 236,666,671 236,666,671 23,666,668 23,666,668 23,666,668 23,666,668

Year Rs. Bn.

2011/2012 2.37

2010/2011 5.89

2009/2010 4.17

2008/2009 1.38

2007/2008 2.04

2006/2007 1.25


1



ACCOUNTING POLICIES

The specic principles, bases, conventions, rules, and

practices adopted by an enterprise in preparing and

presenting Financial Statements.

ACCRUAL BASIS

Recording revenues & expenses in the period in which

they are earned or incurred regardless of whether cash

is received or disbursed in that period.

GSA

The Gross Sales Average. This is the average sales price

obtained (over a period of time, for a kilo of produce)

before any deductions such as Brokerage, etc.

NSA

The Net Sales Average. This is the average sale price

obtained (over a period of time) after deducting

Brokerage fees, etc.

COP

The Cost of Productions. This generally refers to the

cost of producing per kilo of produce (Tea /Rubber /

Palm Oil)

AMORTISATION

The systematic allocation of the depreciable amount ofan intangible asset over its useful life.

EBITDA

Earning before interest, tax, depreciation and

amortization.

VALUE ADDITIONS

The quantum of wealth generated by the activities of

the company and its application.

EARNING PER SHARE – EPS

Prot attributable to ordinary shareholders divided by

the number of ordinary shares in ranking for dividend.

ENTERPRISE VALUE – EV

Market Capitalization plus Debt, Minority Interest &

Preferred shares minus total Cash & Cash equivalents.

ENTERPRISE MULTIPLE – EM

Enterprise Value (EV) divided by Earnings before Interest

Tax Depreciation & Amortization (EBITDA)

Glossary

MARKET VALUE ADDED – MVA

Shareholder funds divided by the market value of

shares

PRICE EARNINGS RATIO - PE

Market Price of a share divided by earnings per share.

MARKET CAPITALIZATION

Number of Shares issues multiplied by the market value

of each share at the year end.

NET ASSETS

Sum of xed Assets and Current Assets less total

liabilities.

NET ASSETS PER SHARE

Net Assets at he end of the period divided by the

number of Ordinary Shares in issues.

RETURN ON EQUITY

Attributable prots divided by average shareholders’

funds.

INTEREST COVER

Prot before tax plus interest charges divided by

interest charges, including interest capitalized.

DIVIDEND COVER

Prot attributable to shareholders divided by gross

dividend.

DIVIDENT PAYOUT

Prot paid out to share holders as dividends as a

percentage of prots made during the year.

RELATED PARTIES

Parties who could control or signicantly inuence the

nancial and operating policies of the Company.

CONTINGENT LIABILITIES

Conditions or situations at the balance sheet date, thenancial effects of which are to be determined by future

events, which may or may not occur.

WORKING CAPITAL

Current assets exclusive of liquid funds and interest-

bearing nancial receivables less operating liabilities

and non-interest-bearing provisions.

Supplementary InformationWatawala Plantations PLC

152



TOTAL BORROWINGS

Total borrowings consist of interest-bearing liabilities,

fair-value derivatives, accrued interest expenses and

prepaid interest income, and trade receivables with

recourse.

NET BORROWINGS

Total borrowings less liquid funds.

CASH EQUIVALENTS

Liquid investments with original maturities of three

months or less.

CURRENT RATIO

Current Assets divided by current liabilities

DEBT TO EQUITY RATIO

Borrowing divided by equity

GERAING RATIO

Interest bearing Capital divided by total Capital (interest

bearing an non interest bearing)

TURNOVER PER EMPLOYEE

Consolidated turnover of the company for the year

divided by the number of employees employed at the

year end.

EXTENT IN BEARING

The extent of land. From which crop is being harvested.

Also see “Immature Plantation”

CROP

The total produce harvested during a nancial year

FIELD

An unit extent of land. Estates are divided into elds in

order to facilitate management.

IMMATURE PLANTATIONS

The extent of plantation that is under-development andis not being harvested.

MATURE PLANTATIONS

The extent of plantation from which crop is being

harvested. Also see “Extent in Bearing”.

IN FILLING

A method of eld development whereby planting of

individual plants is done in order to increase the yield

of a given eld, whilst allowing the eld to be harvested.

REPLANTING

A method of eld development where an entire unit of

land is taken out of “bearing” and developed by way of

uprooting the existing trees/bushes and replanting with

new trees/bushes.

VP TEA

The average crop per unit extent of land over a given

period of time (usually Kgs. per hectare per year)

Yield (YPH)

The average crop per unit extent of land over a given

period of time (usually Kgs. Per hectare per year)

TASL

Tea Association of Sri Lanka

ISO

International Standards Organization

HACCP

Hazard Analysis Critical Control Point System.

Internationally accepted food safety standard.

5S

A Japanese management technique on the organization

of the workplace. 5s stands for Seiri (Sorting),

Seiton (Organizing), Seiso (Cleaning), Seiketso

(Standardization), Shitsuke (Sustenance).


1



NOTICE is hereby given that the nineteenth (19th)

Annual General Meeting of Watawala Plantations PLC

will be held at the “Park Premier Banquet Hall” at Excel

World, No 338, T.B.Jaya Mawatha, Colombo 10 on

Friday 06th July 2012 at 10.00 a.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 Statement of Accounts

for the Financial year ended 31st March 2012 with

the Auditors’ Report thereon.

2. To re-appoint Mr. R.K. Krishnakumar, who retires

having attained the age of seventy four years and

the Company has received a special notice to pass

the under noted ordinary resolution in compliance

with section 211 of the Companies Act No.07 of

2007 in relation to his appointment.

Ordinary Resolution

“That Mr. R.K. Krishnakumar a retiring Director who has

attained the age of seventy four years be and is hereby

re-appointed a Director of the Company and it is hereby

declared that the age limit of seventy years referred to

in Section 210 of the Companies Act No.07 of 2007shall not apply to the appointment of the said Director”

3. To re-appoint Mr.A.N.Fernando as per article 28

(2) of the Articles of Association, who has been

appointed by the Board, since the last Annual

General Meeting, a Director.

4. To re-elect Mr. P. T. Siganporia who retires by

rotation at the Annual General Meeting, a Director

5. To re-elect Mr. B. A. Hulangamuwa who retires by


6. To re-elect Mr. G. Sathasivam who retires by


7. To declare a Dividend of Rs.0.35 per share as

recommended by the Directors.

8. To re-appoint Messrs. PricewaterhouseCoopers as

Auditors and authorize the Directors to determine

their remuneration

9. To authorize the Directors to determine

contributions to Charities.

By order of the Board

Secretaries & Financial Services (Pvt) Ltd.,

Secretaries, Watawala Plantations PLC.,

Colombo

17/05/2012

We shall be obliged if the Shareholders/ proxiesattending the Annual General Meeting, produce

their National Identity card to the Security Personnel

stationed at the entrance

Notice of Meeting


154



Form of Proxy

I/We ………………………………………………………………………………………......................................................

of ………………………………………………………………………………………….......................................................

being a member /members of Watawala Plantations PLC, hereby appoint :

………………………………………………………………………………….......................................................of

……………………………………………………………….…… .......................................................or failing him,

Mr. G.Sathasivam (Chairman of the Company) of Colombo, or failing him, one of the Directors of the Company as

my/our proxy to vote as indicated hereunder for me/us and on/ my behalf at the 19th Annual General Meeting of the

Company to be held on 6 July 2012 at 10.00 a.m. and every poll which may be taken in consequence of aforesaid

meeting and any adjournment thereof:

For Against

i) To consider and adopt the Annual Report of the Board of Directors

and the Statement of the Accounts for the nancial year ended 31st March

2012 with the Report of the Auditors thereon.

ii) To re-appoint Mr.R.K.Krishnakumar who retires having attained

the age of seventy four years, a Director by passing the Ordinary

Resolution set out in the notice.

iii) To re-appoint Mr. A. N. Fernando who was appointed during the

year, a Director.

iv) To re-elect Mr.P. T. Siganporia who retires by

rotation at the Annual General Meeting, a Director.

v) To re-elect Mr.B. A. Hulangamuwa who retires by


vi) To re-elect Mr.G. Sathasivam who retires by


vii) To declare a Dividend of Rs.0.35 per share as

recommended by the Directors.

viii) To re-appoint Messrs. Pricewaterhouse Coopers as Auditors

and authorize the Directors to determine their remuneration.

ix) To authorize the Directors to determine contributions to Charities.

Dated …………. day of ……………. 2012 .......................................

Signature of Shareholder

i) A proxy need not to be a member of the Company

ii) Instructions regarding completion appear overleaf


1



Name of the Company


Legal form

A public Company with limited liability

Registered under Companies Act No 17 of 1982 and

re-registered under the Companies Act No. 07 of

2007 and quoted on the Colombo Stock Exchange.

Date of incorporation

18 June 1992

Registration NoPQ 65

Accounting Year

31 March

Directors

G Sathasivam - Chairman

S G Sathasivam (Alternate to G Sathasivam)

R K Krishnakumar

V Govindasamy-Managing Director

P T Siganporia

D V Seevaratnam-Chief Executive Ofcer

D S Ratnasingham

K Venkataramanan

A N Fernando

B A Hulangamuwa

Secretaries - Jt

Samanthi Haddegoda

Secretaries & Financial Services Pvt Ltd

60, Dharmapala Mawatha

Colombo 03

Auditors

PriceWaterhouseCoopers

(Chartered Accountants)

PO Box 918,100

Braybrooke Place

Colombo 02

Bankers


Commercial Bank of Ceylon PLC

Sampath Bank Ltd

People’s Bank Ltd

MCB Bank Ltd

Bank of Ceylon

ICICI Bank

Citi Bank N A

Nations Trust Bank

The Hongkong & Shanghai Banking Corporation

Managing Agents

Estate Management Services (Pvt) Ltd


Colombo 03

Lawyers

D N Thurairajah & Co

(Attorneys-at-Law)

No 50/6A, Sripa Road

Off Thimbirigasyaya

Colombo 05

FJ & G de Saram

(Attorneys-at-Law)

No 216, de Saram Place

Colombo 10

Registered Ofce


Colombo 03

Sri Lanka

Tel: +94 114 702 400

Fax: +94 114 716 365

E-mail: [email protected]

Website: www.zestatea.com

Corporate Information


1

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