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Transcript of Nestlé Lanka PLC Annual Report 2010 Nestlé Lanka PLC Annual Report 2010 Operational Highlights...
Nestlé Lanka PLC
Annual Report 2010
The world’s leading Nutrition, Health and Wellness Company.
01 Operational Highlights 2010
02 Chairman’s Statement
06 Managing Director’s Review
10 Board of Directors
12 Divisional Heads
13 Corporate Governance
15 Corporate Governance Reporting
17 Report of the Audit Committee
18 Report of the Remuneration Committee
19 Directors’ Responsibility for Financial Reporting
20 Annual Report of the Board of Directors on the Affairs of the Company
25 Financial Report
26 Independent Auditors’ Report
27 Income Statement
28 Balance Sheet
29 Statement of Changes in Equity
30 Cash Flow Statement
31 Notes to the Financial Statements
47 Value Added Statement
48 Ten Year Summary
49 Share Information
50 Notice of Meeting
51 Notes
52 Form of Proxy
55 Attendance Form
Table of contents
1 Nestlé Lanka PLC Annual Report 2010
Operational Highlights 2010
Nestlé Lanka has recorded a turnover growth of 10.3% during the fiscal year.
A contribution of approximately 54% of the Company's value added, amounting to LKR 3.9 billion, has been made to the Government of Sri Lanka as taxes/duties while more than 25.7% was paid to shareholders as dividends.
Nestlé Lanka continues to innovate and renovate existing products in keeping with the Group’s direction of Nutrition, Health and Wellness.
The Company continued its contribution to the rural economy by expanding its dairy development initiatives to the North & East and by procuring significant amounts of local raw material for its wide range of food and beverages products:
o With dairy development expansions in the North and East, Nestlé Lanka now collects milk from over 15,000 farmers every day.
o The Company has contributed Rs.1.49 Bn to the livelihoods of dairy farmers by way of milk purchases.
o 38 million coconuts were procured by the Company to the amount of LKR 721 million to produce value added "Coconut Milk Powder"
Net Revenue Net Profit
Earnings per Share Milk Payments to Farmers
2 Nestlé Lanka PLC Annual Report 2010
Chairman’s Statement
Dear Shareholders,
It gives me great pleasure to introduce the Annual Report and
Audited Statement of Accounts for Nestlé Lanka PLC for the
year ended 31st December 2010.
Your company has ended the year on a positive note and
achieved all internal targets for the year. The board is
extremely pleased with the vibrancy your Company has shown
- a clear embodiment of our Dream.Dare.Deliver spirit.
Honouring its commitment to help develop the North and
East areas of the country, your Company embarked on an
aggressive dairy development drive in those areas. A notable
mention is the opening of milk chilling centres in Kilinochichi
and Oddusudan, both of which were the first to be opened in
those areas in 30 years. Your company’s contribution towards
the development of the local dairy industry this year has
been nothing short of remarkable and a proud manifestation
of its ‘Creating Shared Value’ philosophy. Fully aligned with
Sri Lanka’s vision of developing domestic dairy production in
the coming years, we will aim to double our local fresh milk
collection during this time.
"2010 has been a year of opportunity, development and growth for Sri Lanka. Nestlé Lanka’s results are a reflection of this new era of dynamism and opportunity in the country. Your Company has accelerated its performance by recording double digit growth both in sales and gross profit despite strong cost pressures."
3 Nestlé Lanka PLC Annual Report 2010
Chairman’s Statement
Being a part of Nestlé Group, which is a leader in Nutrition,
Health and Wellness operating in over 130 countries across
the world, your Company wants to continue to ensure the
quality, trust and integrity of the brands and products in Sri
Lanka. In line with Nestlé Group’s direction, Nutrition, Health
and Wellness will remain a key focus for your Company.
Your Company’s activities in 2011 will be in line with this.
Your Company will be investing more than 2 billion rupees in
2011 in Sri Lanka to install additional production capacities
and to focus on dairy development initiatives. This is part of a
master plan drawn up for the investment of 10 billion rupees
in Sri Lanka over the next few years. I have no doubt that this
strategic investment plan will help us retain our competitive
positioning and provide a firm foundation for bigger success
in the future.
2010 has been a year of opportunity, development and
growth for Sri Lanka. Nestlé Lanka’s results are a reflection
of this new era of dynamism and opportunity in the country.
Your Company has accelerated its performance by recording
double digit growth both in sales and gross profit despite
strong cost pressures.
Your Directors were therefore pleased to declare an interim
dividend of Rs. 12/- per share which was paid in January 2011
and are recommending a final dividend of Rs.22.50 per share
for your approval.
On behalf of the Board, I thank the entire Nestlé Lanka
team for their hard work, commitment and loyalty in driving
your Company’s performance despite challenging market
conditions. I would also like to take this opportunity to sincerely
thank our stakeholder groups and business partners who
significantly contributed to your Company’s achievements in
2010. Finally, the Board and I thank you, our shareholders,
for the continued confidence and trust placed on us to steer
your company in this challenging environment. We are starting
2011 with continued momentum and look forward to delivering
the right results to you once again.
Antonio Helio WaszykChairman
4 fkiaf,a ,xld PLC jd¾Isl jd¾;dj 2010
iNdm;s;=udf.a m%ldYh
ys;j;a fldgialrejks"
jir 2010 foieïn¾ 31 jk Þhska wjika j¾Ih i|yd fkiaf,a
,xld PLC ys jd¾Isl jd¾;dj iy ú.Kkh lrk ,o .skqï
m%ldYh Tn fj; bÈßm;a lrkafka buy;a i;=áka hq;=jh'
Tfí iud.u tu jir b;d úYsIag wkaoñka ksu l< w;r tu
jir i|yd jQ iuia; wNHka;r b,lalhkao imqrd .ekSug iu;a
úh' ienúkau Tfí iud.u wm isyskhka" wNsfhda.hka iy hula
,nd§fï Ôj .=Khka uQ¾;su;a lsÍug iu;a ùu ms<sn|jo wOHlaI
uKav,h ±ä f,i m%S;shg m;aj isà'
furg W;=re yd kef.kysr m%foaY ixj¾Okh i|yd iydh ùug
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iy wjxl;ajh wLKavj mj;ajdf.k hdu ms<sn|j ;yjqre lsÍu
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wm jHdmdr iuQyfha bÈß .uk yd wkq.; fjñka fmdaIKh"
fi!LH iy iqj;djh wm iud.fï wjOdkh fhduqj we;s uQ,slu
idOl njg m;aj ;sfí' 2011 jif¾ wm issh¿u l%shdldrlï
fm<.eiS we;af;a fuh mokï fldg f.kh' Tfí iud.u jir
2011 § w;sf¾l ksmehqï Odß;djhla ia:dms; lsÍug iy lsß
ixj¾Ok kfjda;amdokhka fjkqfjka remsh,a ì,shk 2 lg wêl
uqo,la wdfhdackh lrkq we;' fuh bÈß jir lSmfha§ Y%S ,xldj
;=< remsh,a ì,shk 10 la wdfhdackh lsÍug wfmalaIs; m%Odk
ie,iqfï tla mshjrls' fuu Wmdhud¾.sl wdfhdackhka wmg
;r.ldÍ ;;a;ajhl /£ isàug fukau bÈß wkd.;fha úYd,
id¾:l;ajhla i|yd iaÓr wä;d,ula ±óu i|yd WmldÍ jk
njg lsisÿ ielhla ke;'
2010 jir Y%S ,xldj i|yd fyd| wjia:djka" ixj¾Okhka yd
ÈhqKqj i|yd u. mdok ,o jirla úh' fkiaf,a ,xld ys m%;sM,
fuu WfoHda.Su;a kj hq.h yd rfÜ wjia:djka fyd¢ka oDYHudk
jk iajNdjfha tlla úh' Tfí iud.u ±ä jeh mSvkhkao
fkd;ld wf,ú yd o< ,dNh w;ska b,lalï foll j¾Okhla
jd¾;d lrñka ;u ld¾hlaIu;dj fõ.j;a lsÍug iu;aúh'
tneúka Tfí wOHlaI uKav,h fldgila i|yd remsh,a 12 l w;=re
,dNdxY §ukdjla m%Þkh lsÍug ;SrKh fldg th 2011 ckjdß ui
f.jk ,§' tfiau fldgila i|yd wjika ,dNdxYh re' 22'50 f,i
ks¾foaY lrñka Tfí wkque;sh i|yd bÈßm;a fldg we;'
wNsfhda.d;aul fjf<| fmd< ;;a;ajhka fkd;ld ;u iud.fï
ld¾hlaIu;dj bÈßhg f.khdu i|yd fjfyi ù" lemù iy
iud.u flfrys f,ka.;=j úYd, ld¾hNdrhla isÿ l< iuia;
fkiaf,a ,xld lKavdhug wOHlaI uKav,h fjkqfjka uu fï
wjia:dfõ ia;=;sh mqo lrñ' tfiau 2010 jif¾§ Tfí iud.fï
id¾:l;ajh i|yd ie,lsh hq;= wkaoñka ;u Þhl;ajh ±lajQ
wm md¾Yajldr iuqyhka iy jHdmdßl yjq,alrejkago ia;=;sh
mqo lsÍug fuh wjia:djla lr .ksñ' wjika jYfhka fuu
wNsfhda.d;aul mßirh ;=< Tfí iud.u bÈßhg /f.k hdu
i|yd wm flfrys wLKavj úYajdih ;enQ wfma fldgialrejka
fj; wOHlaI uKav,h iu. uu ia;=;sh mqo fldg isáñ' 2011
jir ;=< ;j;a Yla;su;aj kej; j;djla Tng ksis id¾:l m%;sM,
,nd§fï wfmalaIdfjka miqfjñ'
wekafgdaksfhda yS,sfhda jisla
iNdm;s
5 ne];Ny yq;fh PLC Mz;lwpf;if 2010
jtprhshpd; mwpf;if
md;Gs;s gq;Fjhuh;fNs>
31 brk;gh; 2010 ,y; Kbtile;j Mz;bw;fhd ne];Ny yq;fh
PLC ,dJ Mz;lwpf;if kw;Wk; fzf;fha;T nra;ag;gl;l
fzf;Ffspd; $w;W Mfpatw;iw ntspapl;L itg;gjpy; ehd;
kpFe;j kfpo;r;rp milfpd;Nwd;.
cq;fsJ epWtdk; ,e;j Mz;il ntw;wpAld; cr;r
epiyapy; G+h;j;jp nra;Js;sJld;> Mz;bw;fhd midj;J
cs;sf ,yf;FfisAk; rhjfkhd ngWNgWfSld; milag;
ngw;Ws;sJ. vkJ njspthd Kd;Djhuzkhd fdT.
JzpT.ngWNgw;WtpepNahfk; vd;w kdg;ghq;F cq;fSila
epWtdj;jpw;F capNuhl;lk; mspj;Js;sijapl;L gzpg;ghsh;
rig kpFe;j kfpo;r;rpaile;Js;sJ.
ehl;bd; tlf;F kw;Wk; fpof;F gpuNjrq;fis mgptpUj;jpailr;
nra;tjw;F cjtNtz;Lk; vd;w epWtdj;jpd; mh;g;gzpg;gpw;F
kjpg;gspj;J> cq;fsJ epWtdk; me;jg; gpuNjrq;fspy;
typikahd ghYw;gj;jp mgptpUj;jpapDs; fhy;gjpj;Js;sJ.
fpspnehr;rp kw;Wk; xl;LRl;lhd; Mfpa ,lq;fspy; vk;khy;
Muk;gpj;J itf;fg;gl;Ls;s ghiyf; Fsp&l;bg; gjg;gLj;Jk;
epiyaq;fs; me;jg; gpuNjrq;fspy; fle;j 30 Mz;L
fhyg;gFjpapy; Muk;gpj;Jitf;fg;gl;l KjyhtJ epiyaq;fshfj;
jpfo;tJ Fwpg;gplj;jf;f xU tplakhFk;. cs;ehl;L ghYw;gj;jpj;
njhopw;Jiwia mgptpUj;jp nra;tjpy; cq;fsJ epWtdk;
toq;fpAs;s gq;fspg;Gf;fs; vt;tpj FiwAkpd;wp Fwpg;gpl;Lf;
$wf;$bajhf mike;Js;sJld;> ‘gfpug;gl;l ngWkjpia
cUthf;Fjy;‘ vd;w epWtdj;jpd; jj;Jtj;ijg; ngUikAld;
gpufldg;gLj;JtjhfTk; fhzg;gLfpd;wd. vjph;tUk;
Mz;Lfspy; cs;ehl;L ghYw;gj;jpia fzprkhd mstpy;
mgptpUj;jpailar; nra;jy; vd;w ,yq;ifapd; Nehf;fj;Jld;
Kw;wpYk; ,zq;fpg;NghFk; tifapy; ,e;jf; fhyg;gFjpapy;
cs;ehl;L J}a ghy; Nrfhpg;ig ,U klq;fhf;fpf; nfhs;tJ
vkJ Nehf;fkhf mikAk;.
Ngh~hf;F> MNuhf;fpak; kw;Wk; ey;tho;T Mfpatw;wpy;
Kd;NdhbahfTk;> ne];Ny FOkj;jpd; mq;fkhfTk;> cyfshtpy;
130 ,w;Fk; Nkw;gl;l ehLfspy; njhopw;gl;Lf;nfhz;bUf;Fk;
Kd;dpiy tfpf;Fk; xU rh;tNjr th;j;jfehkk; vd;w tifapy;
,yq;ifapy; vkJ th;j;jfehkq;fs; kw;Wk; cw;gj;jpfs; kPJ
juk;> ek;gpf;if kw;Wk; tpRthrk; Mfpatw;iwj; njhlh;e;Jk;
NgZtjw;F cq;fsJ epWtdk; tpUk;Gfpd;wJ. vkJ ne];Ny
FOkj;jpd; topfhl;lYf;F mikthf Ngh~hf;F> MNuhf;fpak;
kw;Wk; ey;tho;T Mfpad cq;fs; epWtdj;jpd; gpujhd Nehf;fhfj;
njhlh;e;Jk; fhzg;gLk;. Nkyjpf cw;gj;jpf; nfhs;ssTfis
,izj;Jf;nfhs;sy; kw;Wk; ghYw;gj;jp mgptpUj;jp
Kd;ndLg;Gf;fspy; ftdQ;nrYj;Jjy; Mfpatw;wpw;fhf
cq;fsJ epWtdk; ,yq;ifapy; 2011 Mk; Mz;by; &gh 2
gpy;ypaDf;Fk; mjpfkhd njhifia KjyPL nra;aTs;sJ.
,J mLj;j rpy Mz;Lfspy; &gh 10 gpy;ypaDf;Fk; mjpfkhd
njhifia KjyPL nra;tJ vd;w gpujhd jpl;lj;jpd; xU
gFjpahfTk; mike;Js;sJ. ,e;j %Nyhgha KjyPl;Lj;
jpl;lkhdJ vkJ Nghl;bj;jpwd; ];jhdj;ijg; NgZtjw;F
vkf;F cjTtJld;> vjph;fhyj;jpy; ,d;Dk; ghhpa ntw;wpfis
<l;bf;nfhs;tjw;F VJthf cWjpahd xU mbj;jsj;ijAk;
Vw;gLj;Jk; vd;gjpy; vdf;F vt;tpj re;Njfq;fSk; fpilahJ.
2010 Mk; Mz;lhdJ ,yq;ifapy; tha;g;G> mgptpUj;jp
kw;Wk; tsh;r;rpf;fhd Mz;lhf mikag;ngw;wJ. ehl;by;
Kd;Ndw;wk; kw;Wk; tha;g;Gf;fs; Mfpatw;wpd; Gjpa Afk;
xd;wpid ne];Ny yq;fhtpd; ngWNgWfs; gpujpgypg;gjhf
mike;Js;sd. fLikahd nryT mOj;jq;fSf;F kj;jpapYk;
tpw;gidfs; kw;Wk; nkhj;j ,yhgk; Mfpa ,uz;bYk; ,ul;il
,yf;fj;Jldhd tsh;r;rpiag; gjpthf;fp cq;fsJ epWtdk;
jdJ ngWNgw;Wj;jpwid Jhpjkhf;fpAs;sJ.
,e;j fhuzj;jhy; cq;fSila rigg; gzpg;ghsh;fs; [dthp
2011 ,y; nfhLg;gdT nra;ag;gl;bUe;j gq;nfhd;wpw;F &gh
12Æ- tPjg;gb ,ilf;fhy gq;Fyhgnkhd;iw kfpo;r;rpAld;
gpufldg;gLj;jpapUe;jJld;> gq;nfhd;wpw;F &gh 22.50 tPjk;
,Wjpg; gq;Fyhgj;jpw;fhd ghpe;JiuiaAk; toq;fpAs;sdh;.
rthy;kpf;f re;ij #oypy; cq;fsJ epWtdj;jpd; ngWNgWfis
Kd;ndLg;gjpy; ntspf;fhl;ba fbd ciog;G> mh;g;gzpg;G
kw;Wk; tpRthrk; Mfpatw;wpw;fhd ne];Ny yq;fh mzpiar;
Nrh;e;j midtUf;Fk; gzpg;ghsh; rigapd; rhh;gpy; vdJ
ed;wpfisj; njhptpj;Jf; nfhs;fpd;Nwd;. 2010 Mk; Mz;by;
epWtdj;jpd; ngWNgWfSf;F Kf;fpa gq;fspg;G toq;fpa
vk;Kld; njhlh;Ggl;Ls;s midj;Jj; jug;gpdUf;Fk;> tpahghug;
gq;fhsh;fSf;Fk; vdJ kdkhh;e;j ed;wpfisAk; ,j;jUzj;jpy;
njhptpj;Jf;nfhs;s tpUk;Gfpd;Nwd;. ,Wjpahf rthy;kpf;f ,e;j
#oypy; cq;fsJ epWtdj;ij topelhj;jpr; nry;tjw;F vkJ
gq;Fjhuu;fshfpa ePq;fs; vk;kPJ nfhz;bUe;j njhlh;r;rpahd
cWjp kw;Wk; ek;gpf;if Mfpatw;wpw;fhf gzpahsh;fs; rigapd;
rhh;gpYk; vd; rhh;gpYk; ed;wpfisj; njhptpj;Jf;nfhs;fpd;Nwd;.
ePq;fs; toq;fpa ,e;j rpwg;ghd gq;fspg;ig vjph;tUk; Mz;bYk;
njhlh;e;Jk; cj;Ntfj;Jld; Kd;ndLj;J kPz;Lk; xU jlit
rpwg;ghd ngWNgWfis ngw;Wf;nfhs;tjw;F vjph;ghh;j;Js;Nshk;.
md;ldpNah n`ypNah th]pf;
gzpg;ghsh; rigj; jiyth;
6 Nestlé Lanka PLC Annual Report 2010
Managing Director’s Review
Dear Nestlé Shareholders,
As my first financial year at Nestlé Lanka ends, I’m very pleased
to report that this has been a good year for your Company. We
have ended 2010 strong and your Company is in good shape to
take on the challenges of the New Year 2011.
With a double digit turnover growth during the fiscal year,
your Company has delivered on its promise for 2010. With a
fresh focus on the consumer and a renewed determination to
uphold our consumers’ trust in us as a leading Nutrition, Health
and Wellness Company, your Company has innovated and
renovated and delivered on its promise to provide 'Good Food,
Good Life' to all our Sri Lankan consumers.
Strengthening our core products with enhanced nutritional
profiles whilst maintaining their great taste, I am proud to say
that now MAGGI has more Calcium, NESPRAY has more Iron
and MILO has less sugar.
We successfully launched MAGGI Rasa Musu, an affordable
seasoning for all income groups and fortified with Iron Nutrient
to address the wide spread deficiency of iron in Sri Lanka. It
is available in single use sachets priced at only Rs. 7/-, thus
enabling our consumers at all income levels to have tasty and
healthy meals.
"With a double digit turnover growth during the fiscal year, your Company has delivered on its promise for 2010. With a fresh focus on the consumer and a renewed determination to uphold our consumers’ trust in us as a leading Nutrition, Health and Wellness Company, your Company has innovated and renovated and delivered on its promise to provide 'Good Food, Good Life' to all our Sri Lankan consumers."
7 Nestlé Lanka PLC Annual Report 2010
Managing Director’s Review
We also introduced MAGGI Chinese Remix Noodles, a new
hot and spicy flavor targeting local youth, and brought back
NESTUM Green Gram, a local favourite, in the third quarter
of the year. NESPRAY Enriched with Iron was also launched
to address iron deficiency in children in Sri Lanka and we
also strongly established NESPRAY Everyday as a nutritious,
affordable milk powder for everyone. Most importantly, I am
pleased to state that we have solidified our market leadership
on NESTOMALT and MAGGI Noodles.
2010 has been witness to a good acceleration in our sales. With
renewed vigour and determination, we have achieved solid
growth in all channels and geographies. A notable mention is
the strong development of our distribution and presence in the
newly liberated areas of the North and East.
I’m proud to say that today, being a multi-category and multi-
product business in Sri Lanka, your Company leads the market
in most segments that it operates in and is within the top two
in others. Our success in the market is a testament to our
commitment to ensure quality, taste and nutrition across all
our products, and to continually earn our consumers’ trust by
touching their lives in a positive way.
In line with our philosophy of Creating Shared Value, many
of your Company’s activities for the year were driven with the
objective of creating long term sustainable value for both Nestlé
and society.
Recognizing a requirement for sustainable Nutrition, Health and
Wellness in the country, your Company is currently working with
the Ministry of Education and the University of Peradeniya to
enhance the wellness of our nation. Aiming to address nutrition
concerns in Sri Lanka, the three organizations jointly developed
a Nutrition Awareness programme. Primarily targeted at rural
communities, the first programme has been implemented
in schools in Pannala, Seruwawila and Kandy for over 1,000
children.
Your Company is also contributing to Sri Lanka achieving
its Millennium Development Goals by constructing several
outstanding hygienic facilities to supply clean drinking water.
These facilities are built in schools, hospitals and places of
worship across the island and benefit thousands of people.
In parallel, we conduct water education programmes in rural
schools to promote water conservation.
Dairy Development has also been a key focus area throughout
the year, where we significantly accelerated dairy development
in the North and East. Today your Company is the country’s
largest private sector collector of milk, with the largest number
of milk chilling centres in the country. We have overachieved
on our milk collection target for the year with a 20% growth and
today collect over 100,000 litres of milk from 15,000 farmers
every day.
In addition to our strong focus on local fresh milk production,
your Company also procures significant volumes of local raw
material for our wide range of food and beverage products. For
e.g., 38 million coconuts are procured annually to produce value
added “Coconut Milk powder”, which is exported to about 60
countries and also sold locally. This year, your Company has
contributed over LKR 2 billion directly to the rural economy
through raw material procurement for fresh milk and coconut
products. In addition, we paid LKR 3.9 billion in 2010 as taxes
and duties to the government.
2010 has also proved to be a good year in terms of other
wins and accolades for the company. We were honoured
to be recognized in the LMD Top 50, LMD Most Respected
and Business Today Top 20 and won the prestigious Swarna
Lanka Award for our significant contribution towards local
dairy development. It was also wonderful to be honoured by
the Nestlé Group with NESTOMALT – a truly Nestlé Lanka
brand – winning the MILO Trophy and being placed amongst
the top 20 of the Nestlé worldwide Hit Parade. Another great
8 Nestlé Lanka PLC Annual Report 2010
moment for us was when the First Lady of Sri Lanka, Madam
Shiranthi Rajapaksa, endorsed our Nestlé Lanka Healthy Kids
programme.
2011 holds big plans for the company, where we will commence
with our long term LKR 10 billion investment plan this year.
These investments highlight the founding philosophy of how we
go about our business; where we believe that companies are
only sustainable and successful over the long term if they create
value not just for their shareholders but also for the societies in
which they operate.
Through our mission of ‘Good Food, Good Life’ and our
strategic direction of Nutrition, Health and Wellness, all of our
future plans aim to enhance the lives of Sri Lankan consumers
with great tasting and nutritious products at affordable prices.
Our local, state-of-the-art manufacturing facility now produces
over 90% of our products, bringing us closer to our dream of
making quality products accessible to the entire nation.
In spite of trying market conditions, our people have continued
to show a wonderful level of enthusiasm for their jobs and
commitment to their Company. I would like to thank them all
from the bottom of our hearts on behalf of the Board and of
all our fellow shareholders for their efforts in 2010. We firmly
Managing Director’s Review
believe that our people are our greatest asset; more than
anything else, they make the Company what it is. I am proud to
state that we have a reached a new level of employee relations
with the 9th collective agreement signing between the All Ceylon
Commercial & Industrial Workers Union (ACCIW) and Nestlé
Lanka PLC. This symbolises the long standing relations that
the company has been maintaining with the union, where the
three year agreement that was entered into will most certainly
strengthen the industrial relations of the company even further.
We have dreamed, dared and delivered and will now dream
bigger and push the boundaries of what is possible in a world
of new opportunity.
Alois HofbauerManaging Director
9 Nestlé Lanka PLC Annual Report 2010
Nes
tlé L
anka
Fac
tory
, Kur
uneg
ala
10 Nestlé Lanka PLC Annual Report 2010
Board of Directors
1. Mr. Antonio Helio Waszyk
Mr. Antonio Helio Waszyk is the Chairman and Managing Director of Nestlé India Limited and was appointed Chairman to the Board of Nestlé Lanka with effect from 15th October 2009. He is also Director of Nestlé Bangladesh Limited.
Mr. Waszyk, a Brazilian National, joined the Nestlé Group in November 1977. He holds a Bachelor’s Degree in Pharmacy and a Masters Degree in Food Biochemistry and developed his earlier career in the Technical and R&D functions. He has had a distinguished International record, highlights being postings in USA (1988-1990), Brazil (1990-1994), France (1994-1996), Philippines (1996-1998), and Head of Nestlé R&D Centers, Switzerland (1998-2002) and Israel (2002-2004). His last posting was as Head of the Food Strategic Business Unit (SBU), Switzerland.
2. Mr. Alois Hofbauer
Mr. Alois Hofbauer is the Managing Director of Nestlé Lanka PLC. He joined Nestlé Austria in 1990 and has since held a number of Senior Management positions in Sales, Marketing and General Management in Nestlé Austria, Hong Kong, China and Taiwan.
In 1995 he was transferred to Hong Kong for what would prove to be the first of several assignments over the next 15 years in the Greater China Region. During his tenure in Hong Kong, he worked in Brand Management roles of increasing responsibility in the Coffee, Beverages and Confectionery categories. In 1998 he moved into Sales Management in Mainland China, and soon after became
the Head of Marketing of the Coffee and Beverages Group there. He then moved on as Business Development Manager for Dairy in China and was later promoted to Head of the Confectionary Business Unit in the Greater China Region for almost 3 years.
In 2004, he moved to Nestlé Taiwan as General Manager where he lead the business for 6 years until his transfer to Sri Lanka.
3. Mr. Syed Saiful Islam
Mr. Syed Saiful Islam, Vice President - Finance & Control of Nestlé Lanka, has been with the Company from April 2010.
With prior experience in Ericsson and Citibank, Mr. Islam, a Chartered Accountant, joined Nestlé Bangladesh as Financial Accounting Manager in 1999. Moving to Nestlé India in 2000, he worked in the Corporate Office as Manager – Financial Planning and thereafter moved to their Delhi Sales branch as Head of Finance & Control. He returned to Nestlé Bangladesh in 2005 as Corporate Controller and took over as Finance & Control Director in 2006 before moving to Nestlé Lanka in 2010.
1. Mr. Antonio Helio Waszyk 2. Mr. Alois Hofbauer 3. Mr. Syed Saiful Islam
11 Nestlé Lanka PLC Annual Report 2010
4. Mr. Pierre Schaufelberger 5. Mr. Ranjan Seevaratnam 6. Mr. Mahen Dayananda
4. Mr. Pierre Schaufelberger
Mr. Pierre Schaufelberger, the Zone Regional Manager, started his career with the Group in January 1980 in Vevey. His international career, which was mostly within the Asian hemisphere, started off with Sri Lanka being his first assignment. Through his 31 years with the Group, he has occupied different positions of increasing responsibilities in the Generating Demand functions.
He has an extensive and proven operational record and solid leadership within a variety of Nestlé Market Zones.
5. Mr. Ranjan Seevaratnam
Mr. Ranjan Seevaratnam is an independent Non-Executive Director and the Chairman of the Audit Committee. He is well versed in fiscal matters and has enjoyed a long distinguished tenure as former Partner of KPMG Ford, Rhodes, Thornton & Company. He is currently on the Board of several prominent local companies.
6. Mr. Mahen Dayananda
Mr. Mahen Dayananda is an Independent Non-Executive Director and the Chairman of the Remuneration Committee. An expert on economic issues, Mr. Dayananda chairs several organizations such as Total Tea Concepts (Pvt) Ltd, Indo Asia Teas (Pvt) Limited and Lewis Brown & Co. Limited (holding company of the Delmege Forsyth Group). He is also Chairman of the Monetary Policy Consultative Committee of the Central Bank of Sri Lanka and is the President of the Sri Lanka Institute of Directors.
12 Nestlé Lanka PLC Annual Report 2010
Divisional Heads
From left to right
1. Mr. Suren Jacob Vice President – Supply Chain
2. Mr. Muhammed Hamza Senior Vice President – Commercial
3. Mr. Alois Hofbauer Managing Director
4. Mr. Syed Saiful Islam Vice President – Finance & Control
5. Mr. Sant-Lal Girdhar Vice President – Technical
13 Nestlé Lanka PLC Annual Report 2010
Corporate Governance is defined as a mechanism whereby corporate entities ensure transparency and the effective running of their Corporate Sectors. Emphasis on Governance within an organization is such that the company’s business is managed with the objective of balancing corporate achievements within the expectations of law and society.
Nestlé Lanka’s commitment to sound governance is ensured by its best practices and business objectives that do not favour short term profits at the expense of successful long term business development. The Company is a leading manufacturer and marketer of world renowned branded food products and recognizes the fact that it is important to create sustainable long term value for its shareholders, consumers, business partners and employees. Nestlé Lanka recognizes the importance, responsibility and role of the Board of Directors, which is to not only direct and lead the company to profitability and provide an additional return to the company’s shareholders on their investment in the company, but also to look after the interests of its other stakeholders; namely its employees, suppliers, creditors, the community and its environment. Moreover, good governance can operate effectively only if there is an implied consent and willingness on the part of those responsible for the administration of the Company.
Board of Directors
The Board of Directors of Nestlé Lanka consists of six members; one Non-Executive Chairman, two Executive Directors, one Non-Executive Director and two Non-Executive Independent Directors. As per the code of best practices, there is a separation of power of the Chairman from that of the Chief Executive Officer.
Corporate Governance
The Directors’ interest/involvement in the affairs of the Company is explained in page 21.
The Managing Director of the Company acts as the Chief Executive Officer and the Board has entrusted the Managing Director to manage all the affairs of the Company.
The Directors also ensure that the Company is fully compliant with the provisions of the Companies Act and the Listing Rules of the Colombo Stock Exchange. You may refer to pages 15 & 16 for the Compliance table.
Company Secretary
The Company Secretary is qualified to act as per the provisions of the Companies Act No. 7 of 2007 and also functions as the Legal Adviser to the Company.
Management Committee
The members of the Management Committee, inclusive of the Executive Directors and Senior Managers, have been assigned and delegated to guide the Company to achieve its business objectives.
Auditors
The shareholders reappointed the Auditors M/s. KPMG Ford, Rhodes, Thornton & Company and authorized the Directors to fix their remuneration at the 29th Annual General Meeting of the Company held on 11th June 2010.
The independent auditors conduct the annual audit in order to provide an external and objective assurance on the way in which the Financial Statements have been prepared and presented.
14 Nestlé Lanka PLC Annual Report 2010
Corporate Governance
Internal Control
In keeping with compliance, the guidelines and standards of the Company are regularly monitored and reviewed by the Business Analyst, who reports directly to the Finance Director and is accountable to the Managing Director.
To ensure conformity to the best practices as laid down by the Nestlé Group, international and regional audits are conducted from time to time.
Audit & Remuneration Committee
The Audit Committee Report and Remuneration Committee Report in pages 17 and 18 briefly explain the functions and responsibilities of the respective committees.
Risk Management
Nestlé has always recognized its obligation towards the occupational health and safety of its employees as well as of community members directly or indirectly involved in the Company’s operations. Equally important is your Company’s obligation to protect your interests as a shareholder by managing risks to minimize potential financial loss.
Relationship with Shareholders
The Board emphasizes on the disclosure of financial and non financial information pertaining to the Company. Nestlé Lanka’s Annual Report and Quarterly Financial Statements provide its shareholders complete information through which shareholders can scrutinize the Company’s past performance and analyze future prospects.
15 Nestlé Lanka PLC Annual Report 2010
Corporate Governance Reporting
DISCLOSURE REGARDING THE BOARD OF DIRECTORS
Rule No Subject Applicable Requirement Compliance Status Details
7.10.1(a) to (c)
Non-Executive Directors
Two or at least one third of the total number of Directors should be Non- Executive Directors
Compliant Four out of six 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
Compliant Two of the Four Non- Executive Directors are independent
7.10.2(b) Independent Directors Each Non-Executive Director should submit a declaration of independence / non-independence in the prescribed format
Compliant The two Non-Executive Independent Directors have submitted to the Company a declaration in the prescribed format.
7.10.3(a) Disclosure relating to Directors
Names of Independent Directors should be disclosed in the Annual Report
Compliant Please refer Page 11 of the Annual Report
7.10.3(c) Brief Resume of each Director in the Annual Report
A brief resume of each Director should be included in the Annual Report, including their area of expertise
Compliant Please refer Page 10-11 of the Annual Report
7.10.4 Directors do not qualify as independent but are specified by the Board as independent
As outlined in section 7.10.3 (c) of the listing rules.
NA NA
DISCLOSURE REGARDING THE REMUNERATION & REMUNERATION COMMITTEE
Rule No Subject Applicable Requirement Compliance Status Details
7.10.5(a) Composition of Remuneration Committee
Shall Comprise of Non–Executive Directors, a majority of whom can be independent.
The Chairman of the Committee shall be a Non-Executive Director.
Compliant
Compliant
Please refer Page 18 of the Annual Report
7.10.5(a) Remuneration Committee
A Listed Company may be permitted to have the same Remuneration Committee, if the parent company is also listed.
NA Parent Company is not listed in Sri Lanka. As such, a separate Remuneration Committee has been formed.
7.10.5(b) Disclosure of the functions of the Remuneration Committee
The Remuneration Committee shall recommend the remuneration payable to the board and the executive officers.
Compliant Please refer Page 18 of the Annual Report
7.10.5 (c) Disclosure in the Annual Report
The names of Directors comprising the Remuneration Committee.
A statement of Remuneration Policy.
The aggregate remuneration paid to Executive and Non - Executive directors
Compliant
Compliant
Compliant
Please refer Page 18 of the Annual Report
16 Nestlé Lanka PLC Annual Report 2010
CONTENTS UNDER THE AUDIT COMMITTEE
Rule No Subject Applicable Requirement Compliance Status Details
7.10.6.( a) Composition of Audit Committee
Shall Comprise of Non –Executive Directors, a majority of who can be independent.
The Chairman of the Committee shall be a Non-Executive director.
The Chairman or a member should be a member of a recognized professional accounting body.
Compliant
Compliant
Compliant
Please refer Page 17 of the Annual Report
7.10.6(a) & ( c)
Audit Committee A Listed Company may be permitted to have the same Audit Committee if the parent company is also listed.
NA Parent Company is not listed in Sri Lanka. As such, a separate Audit Committee has been formed
7.10.6. (b) Functions of the Audit Committee
Should be as outlined in section 7.10.6 (b) of the listing rules.
Compliant Please refer Page 17 of the Annual Report
7.10.6.(c) Disclosure in the Annual Report
The names of the Directors comprising the Audit Committee.
The basis of determination of Auditors’ independence.
A report of the Audit Committee as outlined in section 7.10.6 (c) of the Listing Rules.
Whether the CEO and the CFO attend Audit Committee meetings.
Compliant
Compliant
Compliant
Compliant
Please refer Page 17 of the Annual Report
17 Nestlé Lanka PLC Annual Report 2010
Report of the Audit Committee
The Audit Committee comprises of two Non-Executive Independent Directors, Mr. Ranjan Seevaratnam and Mr. Mahen Dayananda. Mr. Seevaratnam acts as the Chairman of the Committee and is a fellow member of the Institute of Chartered Accountants of Sri Lanka. He is also currently on the Board of several listed companies.
The main responsibility of the Audit Committee is to assist the Board of Directors in fulfilling the following;
1. Review of financial information in order to monitor the financial statements of the Company; Annual Report, Accounts and Quarterly Reports prepared for disclosure.
2. Reporting to the Board on the quality and acceptability of the accounting policies and practices.
3. Review of risk management process and regulatory compliance.
4. Reviewing the Company’s internal control system.
5. Assessments on the independence of the Company’s External Auditors' performance.
6. To make recommendations to the Board regarding the appointment, reappointment and removal of External Auditors and approve the remuneration and the terms of engagement of the External Auditors.
The Committee met four times during the period under review. The attendance of the committee members are reflected in the table below.
Date of the meeting Attendance Yes (Y) /No (N)
R. Seevaratnam M. Dayananda
05/02/2010 Y Y
06/05/2010 Y Y
12/08/2010 Y Y
09/11/2010 Y Y
The Managing Director and the Vice President - Finance & Control attended these meetings by invitation, and the Secretary to the Board acted as Secretary to the Audit Committee. Senior Managers were invited to participate as and when required.
The Audit Committee, during the year ended 31/12/2010, reviewed the Company’s Quarterly and Annual Financial Statements prior to the release to the Colombo Stock Exchange. The effectiveness of the internal audit function and the independent performance of the external auditors were analyzed examined and reviewed. The regular compliance declaration submitted by the management were also reviewed by the Committee and independent observations were made.
The Audit Committee has recommended to the Board that KPMG Ford, Rhodes, Thornton & Company be re-appointed as Auditors of the company.
R. SeevaratnamChairman, Audit Committee
NESTLÉ LANKA PLC
21st April 2011
18 Nestlé Lanka PLC Annual Report 2010
The Board appointed Remuneration Committee comprises of two Non Executive Independent Directors, Mr. M. Dayananda and Mr. R. Seevaratnam.
In order to enhance Corporate Governance and strengthen the Committee’s scope, the Board of Directors appointed the Chairman of the Company, Mr. Antonio Helio Waszyk, as a member of the Committee with effect from 7th January 2011.
The objective of the Committee is to ensure that the Compensation Policy of the Company is consistent and aligned with market reality (the policy is to attract and retain qualified and competent personnel), and also to recommend the remuneration payable to the Executive Directors and Chief Executive Officer of the Company.
Report of the Remuneration Committee
The Committee was assisted by the Vice President - Finance & Control and Human Resources department in providing relevant information.
The members of the Committee met once in the year under review. The Managing Director, Vice President - Finance & Control of the Company and the Board Secretary, who functions as the Secretary to the Remuneration Committee, were invited to the meeting.
M.DayanandaChairman, Remuneration Committee
NESTLÉ LANKA PLC
07 th January 2011
19 Nestlé Lanka PLC Annual Report 2010
Directors’ Reponsibility for Financial Reporting
The Company's Financial Statements, presented in this report for the year 2010, conform to the requirements of the Sri Lanka Accounting Standards and the Companies Act No. 7 of 2007. They also confirm that the Financial Statements presented by them gives a true and fair view of the Company activities as at that date. The Financial information is consistent with that in the Financial Statements.
The Board of Directors has initiated an efficient and concise system of Internal Control. It also includes Internal Checks and Internal Audits, along with financial and other controls required to carry on the business smoothly whilst safeguarding its assets in a secure, practical, accurate and reliable manner.
The Company's Auditors, M/s KPMG Ford, Rhodes, Thornton & Company, review and carry out random checks on internal controls (wherever considered necessary) towards endorsing their opinion on the Financial Statements.
The management's responsibilities on financial reporting is overseen by the Board of Directors/Audit committee through regular review meetings and approving of financial information contained in the Annual Report, along with the preparation and presentation of Financial Statements.
M/s KPMG Ford, Rhodes, Thornton & Co., are the Auditors appointed by the shareholders. They have audited the Financial Statements submitted by the Board of Directors as well as all supporting financial records, minutes from the shareholders meetings and the Directors meetings and have expressed their opinion which is published under the Independent Auditor’s Report on page 26.
By Order of the Board
NESTLÉ LANKA PLC
Lioshon RajapaksheCompany Secretary
21st April 2011
20 Nestlé Lanka PLC Annual Report 2010
Annual Report of the Board of Directors on the Affairs of the Company
The Directors of Nestlé Lanka PLC are pleased to present to the shareholders their Report together with the Audited Accounts for the year ended 31st December 2010 and the Auditors’ Report thereon.
DIRECTORS
Mr. A. H. Waszyk, Mr. D. Saudan (resigned w.e.f 31.08.2010), Mr. A. Hofbauer (appointed w.e.f. 01.09.2010), Mr. Syed Saiful Islam, Mr. P. Schaufelberger, Mr. M. Dayananda and Mr. R. Seevaratnam.
In accordance with Articles 56, 57 & 58 of the Articles of Association, Mr. P. Schaufelberger and Mr. M. Dayananda, retired and being eligible, offer themselves for re-election.
REVIEW FOR THE YEAR
The Chairman’s Statement and Managing Director's Review in pages 02 and 06 highlight the Company’s affairs and its performance of the period under review.
RESULTS & DIVIDENDS
The Profits achieved by the Company on a net turnover of Rs. 21.4 billion, after provisioning for all known liabilities and depreciation on Fixed Assets but before taxation, amounts to Rs 2,828 million. After deducting a sum of Rs 927 million as taxation, the profit was Rs 1,901 million. The profit available for appropriation was Rs. 2,016 million, which is obtained by also adding the profit of Rs.115 million brought forward from the past year. The Income Statement for the year 2010 is given on page 27.
The Directors of Nestlé Lanka PLC were pleased to recommend an Interim Dividend of Rs 12/- per share which was paid on 31st January 2011, and a Final Dividend of Rs. 22.50 per share payable on 03rd June 2011 subject to approval by the shareholders at the forthcoming Annual General Meeting on 25th May 2011.
STATED CAPITAL
The Stated Capital of the Company as at 31st December 2010 amounts to Rs. 537,254,630.
ACTIVITY
The Company manufactures a variety of quality products at its factory situated in Kurunegala, under the exclusive permission of the Trademark owner, Societe de Produits Nestle S.A. Vevey, Switzerland. Internationally renowned brands such as NESPRAY, NESTOMALT, CERELAC, MILO and the MAGGI range of products, namely MAGGI Bouillon Cubes and MAGGI Noodles are manufactured in Sri Lanka. Other products manufactured by Nestlé worldwide are also imported to Sri Lanka.
21 Nestlé Lanka PLC Annual Report 2010
DIRECTORS' INTEREST
(A) IN CONTRACTS
Details of Directors' interest in contracts of the Company are disclosed below. The Directors have no direct or indirect interest or proposed contract other than those disclosed.
The Directors have disclosed all material interests in contracts, if any, involving the Company and have refrained from participating when decisions are taken.
INTEREST REGISTER
Antonio Helio Waszyk - Transactions with Affiliates or related parties.
Company Position Amount Involved
Nestlé India Limited Chairman/Managing Director Disclosed in notes 17, 23, & 24 of Pages 40 & 43 of the Financial Statement.
Nestlé Bangladesh Limited Director -
Alois Hofbauer - (appointed w.e.f. 01.09. 2010) No Transactions with Affiliates or related parties.
Syed Saiful Islam - No Transactions with Affiliates or related parties.
Pierre Schaufelberger - Transactions with Affiliates or related parties.
Company Position Amount Involved
Nestlé Products (Mauritius) Limited Chairman/Managing Director Disclosed in notes 23 & 24 of Page 43 of the Financial Statement.
Nestlé Iran Private Joint Stock Company Director -
Nestlé Pakistan Limited Director Disclosed in note 24 of Page 43 of the Financial Statement.
Annual Report of the Board of Directors on the Affairs of the Company
22 Nestlé Lanka PLC Annual Report 2010
M. Dayananda - No Transaction with Affiliates
Directorships in other Companies
Company / Associations Position
Lewis Brown & Co. Ltd. Chairman
Monetary Policy Consultative Committee Chairman
Sri Lanka Institute of Directors Chairman
Sri Lanka Business Development Centre Chairman
Total Tea Concepts (Private) Ltd. Chairman
Indo Asia Teas (Pvt) Ltd Chairman
Delmege Teas (Pvt) Ltd Director
The Sanjiv Mendis Memorial Foundation Director
R. Seevaratnam - No Transaction with Affiliates
Directorships in other Companies
Company Position Transaction Amount due as at 31.12.2009 (LKR)
Haycarb Limited Non-Executive Director No -
Dipped Products Limited Non-Executive Director No -
Diesel & Motor Engineering Co. (Ltd) Non-Executive Director Procurement 42,593.60
Acme Packaging Solutions (Pvt) Ltd. Non-Executive Director No 17,841,636.00
Metroof (Pvt) Limited Non-Executive Director No -
Classic Teas (Pvt) Limited Non-Executive Director No -
Tea Small Holders Factories Ltd Non-Executive Director No -
Green Farms Limited Non-Executive Director No -
Hatton National Bank Limited Non-Executive Director Banking 0
Tokyo Cement Limited Non-Executive Director No -
Hayleys MGT PLC Non-Executive Director No -
Lanka Aluminum PLC Non-Executive Director No -
Shaw Wallace and Hedges PLC Non- Executive Director No -
Shaw Wallace Marketing PLC Non-Executive Director Procurement 0
Colombo Fort Land and Building Co. Non-Executive Director No -
Annual Report of the Board of Directors on the Affairs of the Company
23 Nestlé Lanka PLC Annual Report 2010
POST BALANCE SHEET EVENTS
There were no notable events that occurred subsequent to the date of the Balance Sheet which required adjustment or disclosure in the Financial Statements.
CONCLUSION
The Directors of Nestlé Lanka PLC wish to convey their gratitude and appreciation to the Management and staff of the Company for their dedicated and untiring co-operation during the year under review.
For and on behalf of the BoardNESTLÉ LANKA PLC
Alois Hofbauer Syed Saiful Islam Managing Director Vice President - Finance & Control
Lioshon RajapaksheCompany Secretary
21st April 2011
(B) IN SHARES OF THE COMPANY
DirectorShareholding
Management01/01 31/12
Executive
Mr. D. Saudan (Managing Director until 31.08.2010) No No Yes
Mr. A. Hofbauer (Managing Director w.e.f. 01.09.2010) No No Yes
Mr. S. S. Islam - - Yes
Non-ExecutiveMr. A. H. Waszyk - No No
Mr. P. Schaufelberger - No No
Independent Non-Executive
Mr. M. Dayananda No No No
Mr. R. Seevaratnam No No No
CORPORATE GOVERNANCE.
The Corporate Governance practices of the Company are set out in detail in page 13.
PROPERTY, PLANT & EQUIPMENT
Details of Property, Plant and Equipment, additions made during the year and depreciation thereof for the year are shown in Note 12 to the Financial Statements on page 38.
DONATIONS
Total donations made by the Company amounted to a sum of Rs. 3,059,000/=.
AUDITORS
M/s KPMG Ford, Rhodes, Thornton and Company, Chartered Accountants have been the Company’s Auditors in the past and being eligible, offer themselves for re-appointment for the next year. Auditors fees are disclosed in note 7 to the Financial Statement on page 36.
As far as the Directors are aware, the Auditors do not have any relationship (other than that of an Auditor) with the Company or other than those disclosed in note 7 to the Financial Statements on page 36.
The Auditors also do not have any interest in the Company.
Annual Report of the Board of Directors on the Affairs of the Company
24 Nestlé Lanka PLC Annual Report 2010
25 Nestlé Lanka PLC Annual Report 2010
Financial ReportIndependent Auditors' Report 26
Income Statement 27
Balance Sheet 28
Statement of Changes in Equity 29
Cash Flow Statement 30
Notes to the Financial Statement 31
Company Highlights
In thousands of Rupees 2010 2009
Net Revenue 21,422,984 19,427,135
Profit before Taxation 2,827,877 2,427,850
As a % of Net Revenue 13% 12%
Profit after Taxation 1,901,115 1,580,315
Return on Capital Employed 74% 89%
Capital Expenditure 769,796 323,555
Shareholders Funds 2,553,462 1,780,582
Key Ratios
Earnings per Share 35.39 29.41
Net Assets per Share 47.53 33.14
Dividend per Share 34.50 30.00
Dividend Cover 1.03 0.98
Dividend Payout Ratio 97% 102%
Current Ratio 1.06 1.01
Market value per share - Highest 800.00 440.00
- Lowest 425.00 251.00
- Average 611.42 345.64
- Last traded 663.00 415.00
Number of Personnel 1,053 973
**
*
26 Nestlé Lanka PLC Annual Report 2010
Independent Auditors' Report
KPMG Ford, Rhodes, Thornton & Co. Tel : +94 - 11 242 6426(Chartered Accountants) +94 - 11 542 642632A, Sir Mohamed Macan Markar Mawatha, Fax : +94 - 11 244 5872P. O. Box 186, +94 - 11 244 6058Colombo 00300, +94 - 11 254 1249Sri Lanka. +94 - 11 230 7345 Internet : www.lk.kpmg.com
KPMG Ford, Rhodes, Thornton & Co., a Sri Lankan Partnershipand a member firm of the KPMG network of independentmember firms affiliated with KPMG International cooperative ("KPMG International"), a Swiss entity.
A.N. Fernando FCA M.R. Mihular FCA Ms. M.P. Perera FCA P.Y.S. Perera FCA C.P. Jayatilake FCA T.J.S. Rajakarier FCAW.W.J.C. Perera FCA Ms. S. Joseph ACA Ms. S.M.B. Jayasekara ACAW.K.D.C. Abeyrathne ACA S.T.D.L. Perera ACA G.A.U. Karunaratne ACA
Principals - S.R.I. Perera ACMA, LLB, Attorney-at-Law, H.S. Goonewardene ACA
TO THE SHAREHOLDERS OF NESTLÉ LANKA PLC
Report on the Financial Statements
We have audited the accompanying financial statements of Nestlé
Lanka PLC, as at 31st December 2010 which comprise the balance
sheet as at 31st December 2010, and the income statement,
statement of changes in equity and cash flow statement for the
year then ended, and notes to the financial statements set out on
pages 31 to 46.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair
presentation of these financial statements in accordance with
Sri Lanka Accounting Standards. This responsibility includes:
designing, implementing and maintaining internal control relevant
to the preparation and fair presentation of financial statements that
are free from material misstatement, whether due to fraud or error;
selecting and applying appropriate accounting policies; and making
accounting estimates that are reasonable in the circumstances.
Scope of Audit and Basis of Opinion
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in
accordance with Sri Lanka Auditing Standards. Those standards
require that we plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material
misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting policies used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation.
We have obtained all the information and explanations which
to the best of our knowledge and belief were necessary for the
purposes of our audit. We therefore believe that our audit provides
a reasonable basis for our opinion.
Opinion
In our opinion, so far as appears from our examination, the
Company maintained proper accounting records for the year ended
31st December 2010 and the financial statements give a true and
fair view of the Company's state of affairs as at 31st December 2010
and its profit and cash flows for the year then ended in accordance
with Sri Lanka Accounting Standards.
Report on Other Legal and Regulatory Requirements
These financial statements also comply with the requirements of
Section 151(2) of the Companies Act No. 07 of 2007.
Chartered Accountants
Colombo
21" April 2011
27 Nestlé Lanka PLC Annual Report 2010
Income Statement
For the Year Ended 31st December 2010 2009
Note Rs.‘000s Rs.‘000s
Revenue 5 21,439,008 19,439,934
Turnover Related Taxes (16,024) (12,799)
Net Revenue 21,422,984 19,427,135
Cost of Sales (14,016,536) (12,686,576)
Gross Profit 7,406,448 6,740,559
Other Operating Income / (Expense) 6 24,302 (48,784)
Marketing, Selling and Distribution Expenses (3,339,394) (2,989,054)
Administrative Expenses (1,312,562) (1,311,339)
Results from Operating Activities 7 2,778,794 2,391,382
Finance Income 51,390 44,629
Finance Expenses (2,307) (8,161)
Net Finance Income 8 49,083 36,468
Profit before Taxation 2,827,877 2,427,850
Income Tax Expense 9 (926,762) (847,535)
Profit for the Period 1,901,115 1,580,315
Basic Earnings per Share 10 35.39 29.41
Dividend per Share 11 34.50 30.00
“Notes to the Financial statements” set out on pages 31 to 46 form an integral part of the Financial Statements.
Figures in brackets indicate deductions.
28 Nestlé Lanka PLC Annual Report 2010
Balance Sheet
Notes to the “Financial statements” set out on pages 31 to 46 form an integral part of the Financial Statements.
I certify that these financial statements are prepared in compliance with the requirements of the Companies Act No. 07 of 2007.
Syed Saiful IslamVice President - Finance & Control
The Board of Directors is responsible for the preparation and presentation of these Financial Statements.
Signed for and on behalf of the Board.
Alois Hofbauer Ranjan SeevaratnamManaging Director Director Colombo21st April 2011
As at 31st December 2010 2009Note Rs.‘000s Rs.‘000s
ASSETSNon-Currrent AssetsProperty, Plant and Equipment 12 2,357,696 1,839,724 Capital Work-in-Progress 13 439,096 217,802
Intangible Assets 14 78,116 111,594
2,874,908 2,169,120 Current AssetsInventories 15 2,131,493 1,479,679 Trade and Other Receivables 16 826,393 657,989 Amounts due from Related Parties 17 95,113 131,510 Cash and Cash Equivalents 18 615,078 969,184
3,668,077 3,238,362
Total Assets 6,542,985 5,407,482
EQUITY AND LIABILITIESEquityStated Capital 19 537,255 537,255 Retained Earnings 2,016,207 1,243,327
2,553,462 1,780,582
Non-Current LiabilitiesRetirement Benefit Obligations 20 475,663 326,665 Deferred Tax Liabilities 21 41,783 104,300
517,446 430,965 Current LiabilitiesTrade and Other Payables 22 1,955,314 1,889,302 Amounts due to Related Parties 23 655,708 474,817 Current Tax Payable 705,754 714,949 Dividends Payable 56,032 52,172 Bank Overdrafts 99,269 64,695
3,472,077 3,195,935 Total Liabilities 3,989,523 3,626,900
Total Equity and Liabilities 6,542,985 5,407,482
29 Nestlé Lanka PLC Annual Report 2010
Statement of Changes in Equity
“Notes to the Financial statements” set out on pages 31 to 46 form an integral part of the Financial Statements.
Figures in brackets indicate deductions.
For the year ended 31st December 2010Stated Retained Total
Capital EarningsRs.‘000s Rs.‘000s Rs.‘000s
Balance as at 1st January 2009 537,255 1,221,051 1,758,306
2nd Interim Dividend for 2008 (537,255) (537,255)
Final Dividend for 2008 - (537,255) (537,255)
1st Interim Dividend for 2009 (483,529) (483,529)
Profit for the Year - 1,580,315 1,580,315
Balance as at 31st December 2009 537,255 1,243,327 1,780,582
Balance as at 1st January 2010 537,255 1,243,327 1,780,582
2nd Interim Dividend for 2009 - (537,255) (537,255)
Final Dividend for 2009 - (590,980) (590,980)
Profit for the Year 1,901,115 1,901,115
Balance as at 31st December 2010 537,255 2,016,207 2,553,462
30 Nestlé Lanka PLC Annual Report 2010
Cash Flow Statement
For the year ended 31st December 2010 2009Rs.‘000s Rs.‘000s
Cash Flows from Operating ActivitiesProfit before Taxation 2,827,877 2,427,850 Adjustments for;Depreciation 247,331 208,444 Amortisation 33,478 33,478 Provision for Impairment Losses on Property, Plant and Equipment - net - 27,515 Profit on Sale of Property, Plant and Equipment (2,014) (2,712)Interest Expense 1,053 8,161 Interest Income (50,136) (44,629)Provision for Obsolete Inventories (10,508) 8,654 Inventory Write Off 58,301 39,855 Provision for Doubtful Debts 1,307 3,844 Bad Debts Write Off - 1,497 Provision for Retiring Gratuity 180,287 180,441 Operating Profit before Working Capital Changes 3,286,976 2,892,398
Working Capital Changes(Increase)/ Decrease in Inventories (699,607) 567,094 (Increase)/ Decrease in Trade and Other Receivables (133,314) 38,981 Increase in Trade and Other Payables 246,901 107,419 Cash Generated from Operations 2,700,956 3,605,892
Interest Paid (1,053) (8,161)Income Tax paid (998,474) (824,243)Gratuity Paid (31,289) (56,726)
Net Cash Flows Generated from Operating Activities 1,670,140 - 2,716,762
Cash Flows from Investing ActivitiesPurchase of Property, Plant and Equipment (991,087) (514,022)Proceeds from Sale of Property, Plant and Equipment 6,505 3,750 Interest Received 50,136 44,629 Net Cash Flows Used in Investing Activities (934,446) (465,643)
Cash Flows from Financing ActivitiesDividends Paid (1,124,374) (1,544,578)Net Cash Flows Used in Financing Activities (1,124,374) (1,544,578)
Net Increase/ (Decrease) in Cash and Cash Equivalents (388,680) 706,541 Cash and Cash Equivalents at the Beginning of the Year 904,489 197,948 Cash and Cash Equivalents at the End of the Year (Note 18) 515,809 904,489
Analysis of Cash and Cash Equivalents at the End of the Year
Cash in Hand and Balances with Bank 615,078 969,184 Bank Overdrafts (99,269) (64,695)
515,809 904,489
“Notes to the Financial statements” set out on pages 31 to 46 form an integral part of the Financial Statements.
Figures in brackets indicate deductions.
31 Nestlé Lanka PLC Annual Report 2010
Notes to the Financial Statements
1 Reporting Entity Nestlé Lanka PLC is a company incorporated and domiciled
in Sri Lanka and listed in the Colombo Stock Exchange. The registered office and the principal place of business is at 440, T.B. Jayah Mawatha, Colombo 10. The Company is in the Food & Beverage Industry.
The Financial Statements were authorized for issue by the Directors on 21st April 2011.
The ultimate holding company is Nestlé S A.
1.1 Principal Activities and Nature of Operations Principal activities of the company include manufacturing,
marketing, selling and distribution of food and beverages products. The Company is also involved in the export of locally manufactured food and beverages products.
2 Basis of Preparation
a) Statement of Compliance The Financial Statements of Nestlé Lanka PLC have been
prepared in accordance with the Sri Lanka Accounting Standards issued by the Institute of Chartered Accountants of Sri Lanka (ICASL) and the requirements of the Companies Act. No. 07 of 2007.
b) Basis of Measurement The Financial Statements are prepared on the historical cost
basis and applied consistently with no adjustments made for inflationary factors affecting the financial statements.
c) Functional and Presentation Currency The financial statements are presented in Sri Lankan
Rupees, which is the Company’s functional currency. All financial information presented in Sri Lankan Rupees have been rounded to the nearest thousand.
d) Use of Estimates and Judgments The preparation of Financial Statements in conformity with
SLAS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.
e) Going Concern When preparing the Financial Statements, the Directors
have made an assessment of the ability of the company to continue as a going concern in the foreseeable future and they do not foresee a need for liquidation or cessation of trading, taking into account all available information about the future.
3 Significant Accounting Policies The accounting policies set out below have been applied
consistently to all periods presented in these financial statements, and have been applied consistently by the company.
3.1 Foreign Currency Transactions Transactions in foreign currencies are translated at the
foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the Balance Sheet date are translated to Sri Lankan Rupees at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the Income Statement.
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
3.2 Property, Plant and Equipment
a) Recognition and Measurement Property, Plant and Equipment other than Land are stated
at cost, less accumulated depreciation and accumulated Impairment Losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials, direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.
32 Nestlé Lanka PLC Annual Report 2010
Where an item of Property, Plant and Equipment comprises of major components having different useful lives, they are accounted for as separate items of Property, Plant and Equipment.
Gains and losses on disposal of an item of Property, Plant and Equipment are determined by comparing the proceeds from disposal with the carrying amount of Property, Plant and Equipment, and are recognized net within “Other Operating Income” in the Income Statement.
b) Derecognition The carrying amount of an item of Property, Plant and
Equipment is derecognised on disposal or when no future economic benefits are expected from use or disposal. The gain or loss arising from derecognition of an item of Property, Plant and Equipment is included in the income statement when the item is derecognised.
c) Subsequent Expenditure The cost of replacing part of an item of Property, Plant and
Equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the company and its cost can be measured reliably. The costs of the day-to-day servicing of Property, Plant and Equipment are recognized in the Income Statement as incurred.
d) Depreciation Depreciation is recognized in the Income Statement on a
straight-line basis over the estimated useful lives of items of Property, Plant and Equipment. Land is not depreciated. The estimated useful lives are as follows:
2010 2009
Freehold Buildings 35 years 35 years
Leasehold Buildings-Factory 25-35 years 25-35 years
Plant & Machinery 10-25 years 10-25 years
Tools, Furniture & Office Equipment 5 years 5 years
Motor Vehicles 5 years 5 years
Information Systems (IS) equipment 3 -5 years 3 -5 years
Depreciation on an asset begins when it is available for use and ceases at the earlier of the date that the assets are classified as held for sale and the date that the assets are derecognised.
The useful lifetime, depreciation methods and residual values are reassessed annually or on an earlier date where any circumstances indicate such assessment is required.
Improvements on leasehold buildings and buildings constructed on leasehold land are depreciated over the lower of their useful economic life or unexpired period of lease.
e) Capital Work in Progress Capital expenses incurred during the year which are not
completed as at the Balance Sheet date are shown as Capital Work-in-Progress, whilst the capital assets which have been completed during the year and put to use have been transferred to Property, Plant and Equipment.
f) Leased Assets Buildings constructed by the company on leasehold land
are capitalised and included under the category “leasehold building”.
3.3 Intangible Assets Intangible assets that are acquired by the company,
which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses.
a) Basis of Recognition An Intangible Asset is recognised if it is probable that the
future economic benefits that are attributable to the asset will flow to the entity and cost can be measured reliably and carried at cost less accumulated amortisation and accumulated impairment losses.
b) Subsequent Expenditure Subsequent expenditure is capitalised only when it increases
the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in the Income Statement as incurred.
c) Amortisation Amortisation is recognised in the Income Statement on
a straight-line basis over the estimated useful lives of Intangible Assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:
Globe Project 5 years
d) Retirement and Disposal An Intangible Asset is derecognised on disposal or when
no future economic benefits are expected from its use and subsequent disposal.
Notes to the Financial Statements
33 Nestlé Lanka PLC Annual Report 2010
3.4 Impairment The carrying amounts of the Company’s assets are reviewed
at each Balance Sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated (see Note 2(d) ).
An Impairment Loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment Losses are recognised in the Income Statement.
(a) Calculation of Recoverable Amount The recoverable amount of assets is the greater of their net
selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.
(b) Reversal of Impairment Impairment Losses recognized in prior periods are assessed
at each reporting date for any indications that the loss has decreased or no longer exists.
An Impairment Loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
An Impairment Loss is reversed only to the extent that
the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no Impairment Loss had been recognised.
3.5 Trade and other receivables Trade and Other Receivables are stated at the amount
estimated to be realised. Provision has been made in the Financial Statements for bad and doubtful debts.
3.6 Inventories Inventories are stated at the lower of cost and net realisable
value. In general, cost is determined on a first-in-first-out basis and includes expenditure incurred in acquiring the inventories and bringing them to their existing condition and location. In the case of manufactured inventories and work-in-progress, cost includes all direct expenditure and production overheads based on the normal level of activity.
Net realisable value is the price at which stocks can be sold in the normal course of business after allowing for the cost of realisation and, where appropriate, the cost of conversion from their existing state to a finished condition.
Provision is made where necessary for obsolescence, slow-moving and defective stocks.
3.7 Cash and Cash Equivalents Cash and cash equivalents comprise of cash balances and
call deposits with a maturity period of less than three months. For the purpose of the Statement of Cash Flows, cash and cash equivalents are presented net of bank overdrafts, short term borrowings and short term investments.
Cash Flow Statement The Cash Flow Statement has been prepared using the
Indirect Method in accordance with Sri Lanka Accounting Standard No. 09 – ‘Cashflow Statements’.
3.8 Employee Benefits
(a) Defined Benefit Plan - Retirement Gratuity The liability to Retirement Benefit Obligation under the
payment of Gratuity Act No. 12 of 1983 is a defined benefit plan covering 724 employees of the company. The pre-1996 liability is unfunded and provided for by way of an accounting provision in the Financial Statements of the company in accordance with Sri Lanka Accounting Standard No.16 – Employee Benefits (Revised 2006). The liability subsequent to this date is funded by way of an insurance policy.
An annual valuation of the fund at AVIVA NDB Insurance PLC is carried out by a certified actuary using the “Projected Unit Credit Method” and the premium for the year is charged as an expense to the Income Statement in the period to which it relates.
The actuarial valuation of the defined benefit obligation is carried out by a qualified actuary Mr. Poopalanathan (Acturial and Management Consultants (Pvt) Ltd.) every two years. The Projected Unit Credit Method is used to determine the present value of the defined benefit obligation. The movement of the obligation during the year and assumptions used for actuarial valuation are disclosed in Note 20 to the Financial Statements.
(b) Defined Contribution Plans – Mercantile Services Provident Society and Employee Trust Fund
A defined contribution plan is a post-employment benefit plan
Notes to the Financial Statements
34 Nestlé Lanka PLC Annual Report 2010
under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in the Income Statement when they are due.
All employees of the company are members of the Mercantile Service Provident Society and Employees’ Trust Fund to which the company contributes 12% and 3% respectively of such employees’ wages or salary.
3.9 Liabilities and Provisions Liabilities and provisions are recognised in the Balance
Sheet when there is a present legal/constructive obligation as a result of the past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits. Obligations payable at the demand of the creditor or within one year of the Balance Sheet date are treated as Current Liabilities in the Balance Sheet. Liabilities payable after one year from the Balance Sheet date are treated as Non-Current Liabilities in the Balance Sheet.
a) Dividends Dividends are recognised as a liability in the period in which
they are declared and approved for distribution. b) Trade and Other Payables Trade and Other Payables are stated at their cost. 3.10 Revenue
Sale of Goods
Revenue from the sale of goods is measured at fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated cost and possible return of goods can be estimated reliably and there is no continuing management involvement with goods.
Transfer of risks and rewards vary depending on the individual terms of the contract of sale.
3.11 Other Operating Income
(a) Profit / Loss from Sale of Property, Plant and Equipment Any gains or losses on retirement or disposal of Property,
Plant and Equipment are recognized in the period in which the sale occurs and is classified as other operating income.
(b) Export Subsidy Export subsidy includes the proceeds from an economic
stimulus package approved by the Cabinet of Ministers to reward direct exporters in managing their vulnerabilities and risks associated with the current global economic crisis. An amount of 5% of the export proceeds is measured on FOB basis, corresponding to the export earnings recorded in the respective quarter, confirmed as received within 120 days from the expiry of the quarter has been paid to the company as it recorded such amount of export earnings (FOB) and met the other eligibility criteria as laid down by the EDRS Scheme. This proceed is recognized on cash basis.
3.12 Expenses
Expense Recognition
(a) Revenue Expenditure The profit earned by the Company as shown in the Income
Statement is after providing for all known liabilities and for depreciation of Property, Plant & Equipment.
For the purpose of presenting the Income Statement, the Directors are of the opinion that the function of expenses method presents fairly the elements of the enterprises performance, hence such presentation method is adopted.
(b) Capital Expenditure Expenditure incurred for the purpose of extending or
improving assets of a permanent nature by means to carry on the business or for the purpose of increasing the earning capacity of the business has been treated as capital expenditure.
Gains or losses of revenue nature, on the disposal of Property, Plant and Equipment have been accounted for in the Income Statement.
Operating Lease Payments Payments made under operating leases are recognised in
the Income Statement on a straight – line basis over the term of the lease.
Net Financing Costs Net financing costs comprise interest payable on borrowings,
interest receivable on funds invested and foreign exchange gains and losses that are recognised in the Income Statement.
Interest income is recognised in the Income Statement on accrual basis unless collectability is in doubt.
Notes to the Financial Statements
35 Nestlé Lanka PLC Annual Report 2010
All interest and other costs incurred in connection with borrowings are expensed as incurred as part of net finance costs.
3.13 Taxation
Income Tax Expense Income tax expense for the year comprises current and
deferred tax. Income tax is recognised in the Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
(a) Current Tax Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at the Balance Sheet date as per the provisions of the Inland Revenue Act No. 10 of 2006 and any adjustment to tax payable in respect of previous years.
(b) Deferred Tax Deferred tax is provided using the Balance Sheet liability
method as per Sri Lanka Accounting Standard 14 (Revised 2005) Income Taxes, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purpose and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the Balance Sheet date.
3.14 Earnings per Share (EPS) Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year.
3.15 Segment Reporting A segment is a distinguishable component of the company
that is engaged either in providing related products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and returns that are different from those of other segments.
3.16 Borrowing Costs Borrowing costs are recognised as an expense in the year in
which they are incurred.
3.17 Comparative Information Comparative information has been reclassified where necessary
to conform to the current year’s presentation. 3.18 Commitments and Contingencies Contingencies are possible assets or obligations that arise
from a past event and would be confirmed only on the occurrence or non-occurrence of uncertain future events which are beyond the Company’s control.
3.19 Events Occurring After the Balance Sheet Date All material post Balance Sheet events have been considered,
disclosed and adjusted where applicable. 4 New Accounting Standards issued but not effective
as at Balance Sheet date
The Institute of Chartered Accountants of Sri Lanka has issued a new volume of Sri Lankan Accounting Standards which will become applicable for the financial period beginning on or after 1st January 2012. Accordingly, these standards have not been applied in preparing these Financial Statements as they were not effective for the year ended 31st December 2010.
These Sri Lankan Accounting Standards comprise accounting standards prefixed both SLFRS (corresponding to IFRS) and LKAS (corresponding to IAS). Application of Sri Lanka Accounting Standards prefixed SLFRS and LKAS for the first time shall be deemed to be an adoption of SLFRS.
Notes to the Financial Statements
36 Nestlé Lanka PLC Annual Report 2010
Notes to the Financial Statements
2010 2009Rs.‘000s Rs.‘000s
5 Revenue Local 19,185,922 17,211,333Exports 2,253,086 2,228,601
21,439,008 19,439,9346 Other Operating Income/ (Expense)
Gain on Sale of Property, Plant and Equipment 2,014 2,713Export Subsidy 2,500 10,000 Exchange Gains/ (Losses) 19,788 (61,497)
24,302 (48,784)
7 Profit from OperationsProfit from Operations is stated after charging/(crediting) all expenses including the following;Depreciation 247,331 208,444 Amortisation 33,478 33,478 Impairment Loss - 27,515 Provision for Obsolete Inventories (10,508) 8,654 Inventory Write Off 58,301 39,855 Royalty Payment 778,438 696,298 Lease Payment 360 360 Auditors Remuneration - Audit 2,200 1,980 - Audit related 57 507 - Non Audit 392 600 Provision for Doubtful Debts 1,307 4,554 Bad Debts Write Off - 1,497 Legal Fees 11,746 11,250 Directors' Fees 400 400 Personnel Cost (Note 7.1) 1,105,787 1,046,737
7.1 Personnel CostsExecutive Directors' Emoluments 23,243 21,364 Salaries and Wages 811,220 747,828 Provision for Retiring Gratuity (Note 20) 180,287 180,441 Premium Paid for Gratuity - 17,482 Contributions to Employees' Provident Fund and Mercantile Services Provident Society 73,240 64,074 Contribution to Employees' Trust Fund 17,797 15,548
1,105,787 1,046,7378 Net Finance Income
Finance IncomeInterest on Call Deposits/Others 51,390 42,210Gain on Foreign Currency Revaluation - 2,419
51,390 44,629Finance ExpensesInterest on Short Term Borrowings and Overdrafts (1,053) (8,157)Loss on Foreign Currency Revaluation (1,254) (4)
(2,307) (8,161)
Net Finance Income 49,083 36,468
37 Nestlé Lanka PLC Annual Report 2010
Notes to the Financial Statements
9.2 Reconciliation between Accounting Profit and Taxable Profit
2010 2009
Rs’000 Rs’000
9 Income Tax Expense Tax on Current year Profits (Note 9.2) 992,100 909,600
SRL on Dividend 1,692 2,335
Reversal of over provision for previous year (4,513) -
Deferred Tax Reversal (Note 21) (62,517) (64,400)
Total Income Tax Expense in the Income Statement 926,762 847,535
9.1 (a) The Corporate Income Tax rate applicable to Nestle Lanka PLC is 35%, while qualifying export profits are taxed at a concessionary rate of 15%. Profits with respect to off-shore business earned in foreign currency and Ready to Drink milk business are exempt from income tax.
(b) The full benefit of Capital Allowances arising in terms of section 25 of the Inland Revenue Act No. 10 of 2006 has been taken
into account in determining Income Tax Expense on profits for the year.
(c) Deferred tax has been computed using the future tax rate of 28% (effective 2011/12). SRL will be abolished with effect from 2011/12.
2010 2009
Rs'000 Rs'000
Accounting Profit Before Tax 2,827,877 2,427,850
Adjustments Relating to Disallowances 689,817 627,075
Adjustments Relating to Capital Allowances (54,096) 28,620
Adjustments Relating to Allowable Income (2,500) (10,000)
Profit from Tax Exempted Undertakings (461,129) (303,521)
Taxable Profit 2,999,969 2,770,024
Income Tax at 15% 43,483 42,233
Income Tax at 35% 948,617 867,367
Income Tax Expense 992,100 909,600
10 Basic Earnings per Share (EPS) The calculation of basic earnings per share is based on the profit for the year attributable to Ordinary Shareholders divided by the weighted average number of Ordinary Shares outstanding during the year.
Net profit attributable to ordinary shareholders and weighted average number of ordinary shares is given below.
2010 2009Profit attributable to the Ordinary Shareholders (Rs'000) 1,901,115 1,580,315Weighted Average Number of Shares 53,725,463 53,725,463Basic Earnings Per Share (Rs.) 35.39 29.41
38 Nestlé Lanka PLC Annual Report 2010
Notes to the Financial Statements
12 Property, Plant and Equipment
Free hold Land
Freehold Buildings
Lease-hold
Buildings
Plant and Machinery
Tools, Furniture
and Office Equipment
Motor Vehicles
Information Systems
Equipment
Total 2010
Total 2009
Rs.‘000s Rs.‘000s Rs.‘000s Rs.‘000s Rs.‘000s Rs.‘000s Rs.‘000s Rs.‘000s Rs.‘000s
Cost
Balance as at 01st January 17,925 45,169 592,487 2,532,398 660,108 270,310 180,696 4,299,093 4,000,048
Additions during the Year - - 41,246 305,302 130,541 46,829 28,075 551,995 296,220
Transferred from capital working progress - - 17,067 200,734 - - - 217,801 27,335
Disposals during the Year - - (9,645) (95,276) (65,229) (7,403) (15,663) (193,216) (24,510)
Balance as at 31st December 17,925 45,169 641,155 2,943,158 725,420 309,736 193,108 4,875,671 4,299,093
Depreciation
Balance as at 01st January - 21,087 152,531 1,470,870 483,277 189,523 142,081 2,459,369 2,246,882
Charge for the year - 1,089 17,564 122,705 54,144 32,640 19,189 247,331 208,444
Impairment loss - - - - - - - 27,515
On Disposals - - (7,214) (94,110) (64,712) (7,026) (15,663) (188,725) (23,472)
Balance as at 31st December - 22,176 162,881 1,499,465 472,709 215,137 145,607 2,517,975 2,459,369
Written Down Value
As at 31st December 2010 17,925 22,993 478,274 1,443,693 252,711 94,599 47,501 2,357,696
As at 31st December 2009 17,925 24,082 439,956 1,061,528 176,831 80,787 38,615 1,839,724
The Property situated at No.440, T.B. Jayah Mawatha, Colombo 10 (extent - 45,230 sq.ft.) was valued on 31st July 2009 by a chartered valuer. The carrying amounts of Free hold Land and Building (three buildings) had it been at revalued amount is:
-Free hold land Rs. 669,200,000 -Free hold Buildings Rs. 68,800,000
However, the effect on revaluation has not been taken to the financial statements; the said properties are stated at cost.
11 Dividend per Share (a) The Directors have recommended a final dividend of Rs. 22.50 per share for the year ended 31.12.2010, which will be declared
at the Annual General Meeting to be held on 25th May 2011. In accordance with Sri Lanka Accounting Standards 12 (Revised) Events After the Balance Sheet date, the interim dividend and proposed final dividend have not been recognised as a liability as at 31st December 2010.
(b) However for the purpose of computing Dividend per Share, the final dividend to be approved has been taken into consideration, for both years and the First Interim Dividend of Rs. 644,705,556 paid on 31st January 2011.
(c) Calculation of Dividend per share is based on the total dividend attributable to ordinary shareholders of Rs. 1,853,528,474 (2009 – Rs. 1,611,763,890) divided by the weighted average number of ordinary shares as at Balance Sheet date.
39 Nestlé Lanka PLC Annual Report 2010
Notes to the Financial Statements
2010 2009Rs '000s Rs '000s
13 Capital Work-in-ProgressBalance as at 1st January 217,802 27,335 Capitalised during the year (217,802) (27,335)Additions during the year 439,096 217,802 Balance as at 31st December 439,096 217,802
14 Intangible Assets CostBalance as at 1st January 167,391 167,391 Additions during the year - -Balance as at 31st December 167,391 167,391AmortizationBalance as at 1st January 55,797 22,319Charge for the Year 33,478 33,478Balance as at 31st December 89,275 55,797
Carrying Amount 78,116 111,594
15 InventoriesRaw Materials 627,539 609,594Packing Materials 106,467 74,801Finished Goods 875,614 425,469Energy 13,676 10,872Technical Materials 125,063 124,711Work-in-Progress 63,196 64,684
1,811,555 1,310,131Goods-in-Transit 324,036 184,154
2,135,591 1,494,285Less: Provision for Obsolete Inventory (Note 15.1) (4,098) (14,606)
2,131,493 1,479,67915.1 Provision for Obsolete Inventory
Balance as at 1st January 14,606 5,952Provision/(Reversal) during the year (10,508) 8,654Balance as at 31st December 4,098 14,606
16 Trade and Other ReceivablesTrade Receivables - Net (Note 16.1) 477,703 347,387Other Receivables - Net (Note 16.2) 348,690 310,602
826,393 657,989
16.1 Trade ReceivablesTrade Receivables 524,374 392,751Less: Provision for Doubtful Debts (Note 16.1.1) (46,671) (45,364)
477,703 347,387
16.1.1 Provision for Doubtful Debts Balance as at 1st January 45,364 41,520Provision made during the year 1,307 3,844Balance as at 31st December 46,671 45,364
40 Nestlé Lanka PLC Annual Report 2010
Notes to the Financial Statements
2010 2009Rs '000s Rs '000s
16.2 Other Receivables Deposits and Prepayments 130,895 59,858Non Trade Receivables 24,542 64,909Loans to Employees (Note 16.2.2) 222,353 214,935
377,790 339,702Less: Provision for Other Receivables (Note 16.2.1) (29,100) (29,100)
348,690 310,60216.2.1 Provision for Other Receivables
Balance as at 1st January 29,100 29,100Provision/(Reversal) during the year - -Balance as at 31st December 29,100 29,100
16.2.2 Loans to Employees (over Rs. 20,000)Balance as at 1st January 214,935 197,471Granted During the Year 79,739 77,465Repaid During the Year (72,321) (60,001)Balance as at 31st December 222,353 214,935
Loans to employees are disbursed to officers of the company excluding Directors. The quantum of each loan in excess of Rs. 20,000 has been granted to 385 officers (2009 - 388 officers).
2010 2009Rs '000s Rs '000s
17 Amounts Due from Related PartiesOsem UK Ltd 3,927 7,792 Nestlé Italiana S.P.A. 9,334 4,075 Nestrade S.A. 10,080 9,354 Nestlé Maghreb S.A. 3,225 - Nestlé Middle East FZE 20,302 31,408 Nestlé Taiwan Ltd 3,703 4,074 Nestlé India Ltd 6,650 9,661 Nestlé Japan Ltd 2,682 2,415 Nestlé Singapore (pte) Ltd 536 349 Nestlé Australia Ltd 6,810 3,188 Nestlé Jamaica Ltd 12,439 24,681 Nestlé Trinidad and Tobago Ltd 9,934 31,712 Nestlé Panama S.A 3,209 2,801 Nestlé Caribbean Inc. 2,282 -
95,113 131,510
18 Cash and Cash EquivalentsFavourable BalancesBalances with Banks 214,978 20,929Cash in Hand 100 100Short Term Investments 400,000 948,155 615,078 969,184Unfavourable BalancesBank Overdrafts (99,269) (64,695)
(99,269) (64,695)
Cash and Cash Equivalents 515,809 904,489
41 Nestlé Lanka PLC Annual Report 2010
Notes to the Financial Statements
2010 2009Rs.’000s Rs.’000s
53,725,463 Ordinary Shares 537,255 537,255
The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
20 Employee Benefits
2010Rs.’000s
2009Rs.’000s
PV ofUnfunded Obligation
PV ofFunded
ObligationTotal
PV ofUnfundedObligation
PV of Funded
ObligationTotal
Active Employees 387,060 365,690 752,750 385,978 296,681 682,659 Pensioners 95,935 - 95,935 82,044 - 82,044Total present value of obligations 482,995 365,690 848,685 468,022 296,681 764,703 Fair value of plan assets - (373,022) (373,022) - (348,038) (348,038)Recognised liability for defined benefit obligations 482,995 (7,332) 475,663 468,022 (51,357) 416,665 Unrecognized Past Service Cost - (90,000)Total employee benefits 475,663 326,665
The Company makes contributions to a non contributory defined benefit plan that provides gratuity to employees upon retirement. The plan entitles a retired employee to receive a payment equal to 1/2 of final salary multiplied by the number of completed years of service.
The portion of the unrecognized obligation relating to past service which is not vested is recognized in the Income Statement over 3 years on a straight line basis.
Employees who joined prior to 2006 and who have 10 years of service and attain the age of 55 years are entitled for pension upon retirement. Furthermore, 26 employees who retired are drawing a monthly pension.
The plan is partially funded by a policy obtained from AVIVA NDB Insurance PLC (formally known as Eagle Insurance PLC) on 31st
December 1996 and covers 724 employees attached to Nestlé Lanka PLC. AVIVA NDB Insurance PLC has confirmed that the features of the policy satisfy the definition of a “qualifying insurance policy”. The fund assets (Rs. 373 Mn) and the defined benefit obligations (Rs. 849 Mn) have been netted off in Note 20 above.
(a) Movement in the Present Value of the Defined Benefit Obligations:2010 2009
Rs.’000s Rs.’000sBalance as at 1st January 764,703 711,456Benefits paid by the plan (54,157) (77,520)Current Service Cost 39,340 34,619Interest 76,470 99,604Actuarial (gains)/losses 22,329 (3,496)Balance as at 31st December 848,685 764,703
(b) Movement in the Present Value of Plan Assets:Balance as at 1st January 348,038 328,546Contributions paid into the plan - 14,752Benefits paid by the plan (22,868) (19,523)Expected return on plan assets 33,064 29,569Actuarial (losses)/gains 14,788 (5,306)Balance as at 31st December 373,022 348,038
19 Stated Capital
As at 31st December
42 Nestlé Lanka PLC Annual Report 2010
Notes to the Financial Statements
(c) The expense is recognized in the following line items in the income statement:2010 2009
Rs.’000s Rs.’000sCost of sales 82,082 80,191Administrative expenses 98,205 115,002
180,287 195,193
Actuarial Assumptions Principle actuarial assumptions at the reporting date (expressed as weighted averages)
2010 2009(1) Rate of Discount 10% 10%(2) Expected Return on plan assets as at 31st December 9.5% 9%(3) Future Salary Increase 9.5% 8%(4) Future Pension Increase 6% 5%
Assumptions regarding future mortality are based on published statistics and mortality tables.The retirement age is assumed as 55 years.
Composition of Insurance Plan Asset is as follows.1. Reporting entity’s own financial instruments – 69,800 shares2. Property occupied by, or other assets used by, the reporting entity – Nil.
Movements in Temporary Differences during the year: 2010 2009
TemporaryDifference Tax Effect Temporary
Difference Tax Effect
Rs'000 Rs'000 Rs'000 Rs'000 Property, Plant and Equipment (814,786) (228,140) (982,221) (275,022)
Retiring Gratuity 574,471 160,852 517,754 144,971
Other provisions 91,089 25,505 91,968 25,751
Net tax (assets)/liabilities (149,225) (41,783) (372,500) (104,300)
21 Deferred Tax Liabilities
2010 2009
Rs'000 Rs'000
Balance as at 1st January 104,300 168,700
Reversal for the year (62,517) (64,400)
Balance as at 31st December 41,783 104,300
2010 2009
Rs'000 Rs'000
22 Trade and Other Payables 1,385,276 1,599,909
Trade Payables 570,038 289,393
Other Payables 1,955,314 1,889,302
43 Nestlé Lanka PLC Annual Report 2010
Notes to the Financial Statements2010 2009
Rs '000s Rs '000s23 Amounts Due to Related Parties
Nestlé Deutschland Ag 1,122 - Nestlé France Ltd 1,855 - Nestlé Waters France 3927 2,633 Nestlé UK Ltd 3,276 3,655 Nestlé Nederland B.V. - 5,872 Nestrade S.A. 30,609 576 Nestec S.A. 1,489 Societe des Produits Nestle S.A. 197,418 175,269 Nestlé Suisse S.A. 3,119 3,125 Nestlé Products (Mauritius) Ltd - 528 Nestlé Qingdao Ltd - 54 Nestlé Taiwan Ltd. 770 - Nestlé India Ltd. 4,006 25,974 P T Nestle Indonesia 3,309 - Nestlé Products Sdn Bhd 22,417 3,002 Nestlé Asean (Malaysia) Sdn Bhd 6,252 - Nestlé Manufacturing (Mal) Sdn Bhd 93,796 50,282 Nestlé Phillippines Inc 90,098 66,946 CPW Philippines, Inc 6,234 1,750 Nestlé Business Sevices AOA, Inc 146 - Nestlé Singapore (pte) Ltd 106,504 58,694 Nestlé TC Asia-Pacific (Pte) Ltd 23,773 24,621 Nestlé R & D Centre (Pte) Ltd 217 1,309 Nestlé (Thai) Ltd. 6,887 3,631 Nestlé Australia Ltd. 49,973 45,407
655,708 474,817
24 Related Party Disclosure Mr. Antonio Helio Waszyk, the Chairman of the Company, is also the Director of Nestlé Bangladesh Ltd and Chairman and Managing Director of Nestlé India Ltd.
24.1 Transactions with Related Companies
Name of the company Nature of the Relationship
Nature of the Transactions 2010 2009
Rs '000 Rs '000
Osem UK Ltd Affiliates Exports 47,760 73,554 Nestlé Middle East FZE Affiliates Exports 268,362 281,569 Nestrade S.A. Affiliates Exports 20,027 128,681 Nestlé Korea Ltd Affiliates Exports 1,023 383 Nestlé Taiwan Ltd Affiliates Exports 20,290 7,102 Nestlé India Ltd Affiliates Exports 97,733 61,441 Nestlé Japan Ltd Affiliates Exports 24,715 19,452 Nestlé Manufacturing (Malasia) Sdn Bhd Affiliates Exports 0 9,023 Nestlé Singapore (Pte) Ltd. Affiliates Exports 1,710 2,372 Nestlé Australia Ltd Affiliates Exports 45,152 43,875 Nestlé (Png) Ltd Affiliates Exports 12,785 11,812 Nestlé New Zealand Ltd Affiliates Exports 3,087 2,160 Nestlé Canada, Inc. Affiliates Exports 2,873 5,076 Nestlé Panama S.A. Affiliates Exports 3,218 2,800 Nestlé Jamaica Ltd. Affiliates Exports 63,096 80,699 Nestlé Trinidad And Tobago Ltd Affiliates Exports 65,421 80,806 Nestlé Italiana S.P.A. Affiliates Exports 36,498 91,548
44 Nestlé Lanka PLC Annual Report 2010
Notes to the Financial Statements
Name of the company Nature of the Relationship
Nature of the Transactions 2010 2009
Rs '000s Rs '000s
Societe des produits Nestle.S.A * Affiliates Technical Assistance Fees (778,438) (696,298)
Nestlé Manufacturing (Mal) Sdn Bhd Affiliates Imports (389,491) (354,621)
Nestlé Australia Ltd. Affiliates Imports (30,778) (20,978)
Nestlé Singapore (Pte) Ltd Affiliates Imports (1,044,272) (828,488)
Nestlé Suisse S.A. Affiliates Imports (17,573) (123,500)
Nestlé (Thai) Ltd Affiliates Imports (22,727) (10,781)
P.T. Nestle Indonesia Affiliates Imports (14,799) (8,312)
Nestlé India ltd. Affiliates Technical (21,613) (208,564)
Nestlé Waters France Affiliates Imports (12,808) (8,273)
Nestlé Phillipines Inc Affiliates Imports (737,961) (213,391)
Nestlé Nederlands B.V. Affiliates Imports (6,470) (67,041)
Nestlé (China) Ltd Affiliates Service Charges (24) (4,641)
CPW Phillipines Inc Affiliates Imports (20,727) (21,769)
Nestlé Brazil LTDA Affiliates Imports (398) (354)
Nestlé UK Ltd Affiliates Service Charges (626) (6,655)
Nestlé's Products (Mauritius) Ltd. Affiliates Imports (547) (528)
Nestrade S.A. Affiliates Imports (74,432) (4,076)
Nestlé Korea Ltd. Affiliates Imports (5,600) -
Nestlé R & D Centre (Pte) Ltd. Affiliates Technical (2,873) (10,355)
Nestlé Deutschaland Affiliates Technical (1,197) (3,717)
Nestlé TC Asia Pacific (Pte) Ltd. Affiliates Imports - (9,017)
Nestec SA Affiliates Service Charges (2,373) (2,886)
Nestec SA Affiliates Dividend Payment/RSUP (946,404) (1,415,019)
Nestlé Australia Ltd Affiliates Professional Charges (198,789) (166,085)
Nestlé Quingdao Ltd Affiliates Imports - (75)
Nestlé Egypt S A E Affiliates Service Charges - (298)
Nestlé France Ltd Affiliates Technical (2,533) (148)
Nestlé Middle East FZE Affiliates Service Charges - (143)
Nestlé Pakistan Ltd Affiliates Service Charges (4,683) -
Nestlé Taiwan Ltd Affiliates Service Charges (770) -
Nestlé Business Service AOA Inc Affiliates Service Charges (146) -
24.1 Related Party Transactions Contd….
* Technical Assistance fee computed as a % of net sales is paid to Societe Des Produits Nestlé S.A. according to the terms and conditions in the General License agreement.
45 Nestlé Lanka PLC Annual Report 2010
24.2 Transaction with Key Management Personnel Key Management Personnel include all the members of the Board of Directors of the company having authority and responsibility
for planning, directing and controlling the activities of the company.
2010 2009
Rs '000 Rs '000
Short Term employee benefits 23,243 21,364
Non Cash benefits 25,691 18,949
Share based payments 11,427 75,508
60,361 115,821
There are no related party transactions other than those disclosed in notes 17, 23, 24.1 and 24.2.
25 Segmental Analysis The different geographical sales regions do not attract significantly different risks nor command different returns. Thus they do not
qualify for segment reporting. Consequently the need to present segment information does not arise.
26 Commitments
(a) Capital Commitments The Capital commitment for the year 2010, which has been approved by the Board but has not been contracted for, is
Rs. 128 Mn.
(b) Lease Commitment The land in which the Nestle Lanka’s factory building is constructed was leased out from the Sri Lankan Government. As per the
lease agreement, the land in Mahayaya Estate was leased for 50 years from 25th March 1981.
The annual amount payable under lease agreement is Rs. 359,693 and the lease is renewable.
2010 2009
Rs '000s Rs '000s
Non cancellable operating lease commitments are as follows
Not later than one year 360 360
Later than one year and not later than five years 1,439 1,439
Later than five years 5,755 6,115
7,554 7,914
27 Contingent Liabilities The company’s distributors are provided with a financing facility with the Company’s bankers.
The bank would accept the liability only up to the full recourse provided by them to the Company’s customers.
As at the end of the year, an amount of Rs. 219 Mn had been granted to the distributors by the bankers, which in the event where distributors default, the company would be liable.
Notes to the Financial Statements
46 Nestlé Lanka PLC Annual Report 2010
28 Events Occurring after Balance Sheet Date There were no other material events occurring after the Balance Sheet date that require adjustment or disclosure in the financial
statements, other than the following;
An interim dividend of Rs. 12/- per share amounting to Rs. 644,705,556 was paid on 31st January 2011.
The Board of Directors has recommended a final dividend of Rs. 22.50 per share amounting to Rs. 1,208,822,918 for the year ended 31st December 2010. This is to be approved at the Annual General Meeting to be held on 25th May 2011.
29 Directors’ Responsibility The Board of Directors is responsible for the preparation and presentation of Financial Statements.
The Directors' Responsibility Statement is given in page 20 of this annual report.
Notes to the Financial Statements
47 Nestlé Lanka PLC Annual Report 2010
Value Added Statement
Value Added Statement 2010 2009
Rs '000s Rs '000s
Turnover 21,439,008 19,439,934
Bought out Goods and Services (14,224,504) (12,460,047)
Value added 7,214,504 6,979,887
% Rs 000s % Rs 000s
To Government as Taxes / Duties 54.3 3,916,290 57.2 3,991,720
To Employees as Remuneration 13.1 947,961 12.4 868,101
To Lenders as Interest 0.0 1,053 0.1 8,161
To Shareholders as Dividends 25.7 1,853,528 23.1 1,611,765
Retained with business (including depreciation) 6.9 495,671 7.2 500,140
100.00 7,214,504 100.0 6,979,887
Statement of Value Added 2010 Statement of Value Added 2009
48 Nestlé Lanka PLC Annual Report 2010
Ten Year Summary
Results 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Rs '000 Rs '000 Rs '000 Rs '000 Rs '000 Rs '000 Rs '000 Rs '000 Rs '000 Rs '000
Statement of Income
Net Revenue 6,647,416 7,467,048 8,079,136 9,897,372 12,779,555 14,128,658 16,255,216 19,111,985 19,427,135 21,422,984
Profit before tax 92,104 239,551 908,669 908,775 1,599,678 2,043,874 2,046,975 2,483,987 2,427,850 2,827,877
Taxation (14,600) (64,218) (426,855) (312,703) (548,554) (688,988) (655,383) (820,894) (847,535) (926,762)
Profit after tax 77,504 175,333 481,814 596,072 1,051,124 1,354,886 1,391,592 1,663,093 1,580,315 1,901,115
Retained profits/ brought forward
19,429 227 952 4,609 144,014 35,009 46,758 95,213 146,542 115,092
Profit available for distribution 96,933 175,560 482,766 600,681 1,195,138 1,389,895 1,438,350 1,758,306 1,726,857 2,016,207
Interim Dividend - - - - (134,314) (537,255) (483,529) (537,255) (483,529) -
Final Dividend (96,706) (174,608) (478,157) (456,667) (1,047,644) (805,882) (859,608) (1,074,510) (1,128,236) -
Retained Profits carried forward
227 952 4,609 144,014 13,180 46,758 95,213 146,541 115,092 2,016,207
Balance Sheet
Share capital 537,255 537,255 537,255 537,255 537,255 537,255 537,255 537,255 537,255 537,255
Reserves 22,056 197,389 504,595 622,510 1,082,653 852,640 954,821 1,221,051 1,243,327 2,016,207
Deferred Liability 107,379 110,485 275,172 271,069 273,635 213,703 206,541 371,650 430,965 517,446
666,690 845,129 1,317,022 1,430,834 1,893,543 1,603,598 1,698,617 2,129,956 2,211,547 3,070,908
Represented by:
Tangible Fixed Assets 907,286 1,171,199 1,111,698 1,311,233 1,373,806 1,263,724 1,809,300 1,780,501 2,057,526 2,796,792
Intangible Assets 145,072 111,594 78,116
Current Assets 1,673,087 1,690,595 1,805,690 1,609,603 1,959,706 2,441,960 3,196,200 3,157,602 3,238,362 3,668,077
Less: Current Liabilities (1,913,683) (2,016,665) (1,600,366) (1,490,002) (1,439,969) (2,102,086) (3,306,883) (2,953,219) (3,195,935) (3,472,077)
Net Current Assets (240,596) (326,070) 205,324 119,601 519,737 339,874 (110,683) 204,383 42,427 196,000
666,690 845,129 1,317,022 1,430,834 1,893,543 1,603,598 1,698,617 2,129,956 2,211,547 3,070,908
Average Market price per share (Rs) 58.02 51.15 66.02 83.90 101.55 180.15 262.85 278.74 345.64 611.42
Earnings per Share (Rs) 1.44 3.26 8.97 11.09 19.56 25.22 25.90 30.96 29.41 35.39
Dividend paid / pro-posed (Rs. 000s) 96,706 174,608 478,157 456,667 1,181,961 1,343,137 1,343,137 1,611,764 1,611,764 1,853,528
49 Nestlé Lanka PLC Annual Report 2010
Share Information
Analysis of Shareholders according to the Number of Shares as at 31st December 2010
No Names % No. of shares 2010
No. of shares 2009
1 Nestlé S.A 90.82 48,793,746 48,793,746
2 HSBC International Nominees Ltd- JPMCB 0.70 377,000 391,300
3 Mellon-Frontaura Global Frontier Fund LLC 0.39 211,800 251,500
4 Miss Harnam Neesha 0.37 200,100 200,100
5 HSBC International Nominees Ltd –SSBT-Deustche Bank Ag Singapore 0.29 155,600 155,600
6 AIVA NDB Insurance PLC A/C 07 0.28 149,200 51,400
7 Employees Provident Fund 0.26 139,600 125,000
8 Mr. Aloysius Kattar 0.21 111,419 111,419
9 Mr. Radhakrishnan Mariapillai 0.20 110,000 110,000
10 Ceylon Nutritional Foods Ltd Trust 0.19 104,001 104,001
11 HSBC Intl Nom Ltd – UBS Ag Singapore Branch 0.17 90,000 90,000
12 Ceylon Investment PLC A/C No. 1 0.14 76,000 76,000
13 AVIVA NDB Insurance PLC A/C 03 0.13 69,800 0
14 Freudenberg Shipping Agencies Limited 0.11 60,000 60,000
15 Colombo Investment Trust PLC 0.09 50,904 50,904
16 Mr. Bandaranayake Jayampathi Divale 0.09 49,750 49,750
17 MAS Capital (private) Ltd 0.08 42,800 0
18 Mr. Hirdaramani Anil Kumar Lalchand 0.08 40,500 40,500
19 Dr. Chawla Subash 0.07 40,000 40,000
20 Mrs. Singh 0.06 34,700 0
Individual 5,641 2,921,182
Institutional 144 50,804,281
5,785 53,725,463
High/Low market prices Highest Market value : Rs. 800.00 Lowest Market value : Rs. 425.00 Market value as at 31.12.2010 : Rs. 663.00Public holding as at 31.12.2010 = 8.99%
List of 20 Major shareholders based on their shareholdings as at 31st December 2010.
Categories of Shareholders No. of Shareholders No. of Shares
RESIDENT NON RESIDENT TOTAL
1 to 1000 Shares 5,168 833,605 1.55 57 15,928 0.03 5,225 849,533 1.58 1001 to 10,000 Shares 488 1,365,251 2.54 21 88,499 0.16 509 1,453,750 2.70 10,001 to 100,000 Shares 31 770,014 1.43 10 299,700 0.56 41 1,069,714 1.99 100,001 to 1,000,000 Shares 5 614,220 1.14 4 944,500 1.76 9 1,558,720 2.90 Over 1,000,000 Shares 0 0 0.00 1 48,793,746 90.82 1 48,793,746 90.82 5,692 3,583,090 6.67 93 50,142,373 93.33 5,785 53,725,463 100.00
Shareholdings No. of No. of Percentage Number of No. of Percentage Number of No. of Percentage Shareholders Shares (%) Shareholders Shares (%) Shareholders Shares (%)
50 Nestlé Lanka PLC Annual Report 2010
Notice of Meeting
Note:
1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote instead of him/her.
2. A proxy need not be a member of the Company.
3. A form of proxy accompanies this notice.
4. Shareholders attending the meeting are requested to complete the Attendance Form as instructed, and handover same at the entrance to the meeting hall for registration.
5. Shareholders/ Proxy holders are requested to bring their National Identity Cards for the purpose of identification.
6. No parcels and other belongings will be permitted to be taken into the meeting hall.
7. Only the shareholder will be permitted to enter the committee room and shareholders are kindly requested to refrain from bringing children in order to avoid any inconvenience.
8. Kindly note that no complimentary gift parcels will be issued at the AGM.
Notice is hereby given that the Thirtieth Annual General Meeting of Nestle Lanka PLC will be held at the Sri Lanka Foundation Institute, No. 100, Independence Square, Colombo 07, on Wednesday, 25th May 2011, at 10.00 am for the following purposes;
Agenda
1. To receive and consider the Annual Report of the Board of Directors on the affairs of the Company, Independent Auditor’s Report and the Audited Accounts for the year ended 31st December 2010.
2. To declare a final dividend as proposed by the Directors.
3. To Re- elect Directors.
4. To reappoint the auditors and authorise the Directors to fix their remuneration.
By Order of the BoardNESTLÉ LANKA PLC.
Lioshon RajapaksheCompany Secretary
21st April 2011
51 Nestlé Lanka PLC Annual Report 2010
Notes
52 Nestlé Lanka PLC Annual Report 2010
Form of Proxy
Nestlé Lanka PLC
I / We .....................................................................…………………………………………………………………………………...
of ……..............................................................................…………………………………………………………………………….
Being a member/ members of the above named Company hereby appoint :
...............................................................................………………………………………………………………………………... of
..............................................................................………………………………………………………………………... or failing
..............................................………………………………….……… of …......................................………………………………
………………………………………………………...........................................................................…………………….or failing
………………………………………………………………………...........………… as my / our proxy to represent me / us and vote for me / us on my behalf at the Thirtieth Annual General Meeting to be held on Wednesday 25th May 2011 at 10.00 a.m. and at any adjournment thereof.
Signed this ............................................................................. Day of ............................................................................. 2011
Signature : ...........................................................................................
INSTRUCTIONS AS TO THE COMPLETION
1. Kindly perfect the form of proxy legibly by filling in your full name and address in the spaces provided along with the date and your signature.
2. If the proxy form is signed by an Attorney, the related Power of Attorney should also accompany the completed form of proxy registration, if it has not been already registered with the Company.
3. If the shareholder is a Company or Corporate Body, the proxy form should be executed under its common seal in accordance with its Articles of Association or Constitution.
4. The completed form of proxy should be deposited at the Office of the Registrars of the Company at No: 101, Inner Flower Road, Colombo 03, not less than 48 hours before the time appointed for holding of the Meeting to be held at the Sri Lanka Foundation Institute, No. 100, Independence Square, Colombo 07 on Wednesday 25th May 2011 at 10.00 a.m.
53 Nestlé Lanka PLC Annual Report 2010
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1' Èkh iy Tnf.a w;aik o iys;j" ysia;ekaj, Tnf.a iïmQ¾K ku iy ,smskh meyeÈ,s wl=frka fuu fmrl,dis fmdaruh lreKdlr mqrjd
iïmQ¾K lrkak'
2' fmrl,dis fmdaruh w;aika lr we;af;a kS;s{jrhl= úiska kï" iïmQ¾K lr we;s fmrl,dis fmdaruh ta jk úg iud.u yd ,shdmÈxÑ lr
ke;akï" ,shdmÈxÑ l< hq;= tu fmdaruh Tyq úiska iïmQ¾K l< hq;= fõ'
3' fldgialrejd iud.ula fyda ixia:dms; wdh;khla kï" fmrl,dis fmdaruh" tys idx.ñl jHjia:dj,sh fyda jHjia:d ud,djg wkql+,j tys fmdÿ
uqødj hgf;a iïmdokh l< hq;= fõ'
4' YS% ,xld mokï wdh;kh" wxl 100" ksoyia p;=ri%h" fld<U 07" 2011 uehs ui 25 jk nodod Èk fm'j' 10'00 g meje;aùug kshñ; /iaùu mgka
.ekSug meh 48lg fkdjeä ld,hla we;=<; § iïmQ¾K lrk ,o fmrl,dis fmdaruh" fld<U 3" wxl 101" we;=,a u,a udj; (Inner Flower Road)
ys msysá iud.ï frðiag%d¾jrekaf.a ld¾hd,fha ;ekam;a l< hq;= fõ'
54 Nestlé Lanka PLC Annual Report 2010
gjpyhs; gbtk;
ne];Ny yq;fh PLC
Nkw; Fwpg;gpl;l epWtdj;jpd; gq;Fjhuuhfpa (ngah;/fs;) ...................................................................................................................................................
.....................................................................................................................................................................................................................................................
vd;Dk; tpyhrj;jpy; trpf;Fk; ehd;/ehq;fs;. (gjpyhs; tpyhrk;) .....................................................................................................................................
..................................................................................................................................................................................................................................... trpf;Fk;
................................................................................................................................................................................................................. Mfpatiu my;yJ
.............................................................................................................................................................................................................. tpyhrj;jpy; trpf;Fk;.
.....................................................................................................................................................................................................................................................
Mfpatiu my;yJ mJTkpd;Nwy; .......................................................................................................................................................................................
..................................................................................... tpyhrj;jpy; trpf;Fk; ........................................................................................................................
.............................................................................................................................................................. Mfpatiu vdJ/vkJ gjpyhsuhf epakpg;gJld;
2011 Nk 25k; jpfjp Gjd;fpoik eilngwtpUf;Fk; Kg;;gjhtJ tUlhe;j nghJj; $l;lj;jpy; vdf;fhf/vkf;fhfr; r%fkspj;J thf;fspf;Fk;
chpikiaAk; nfhLj;jDg;GfpNwhk;.
,jw;fhf ,d;iwa ............................................................................... ehshd> 2011 Mz;L ..................................................................
khjj;jpy; ifnahg;gkpLfpNwd;.: .............................................................................................................
gjpyhs; gbtk;
epug;Gtjw;fhd topKiwfs;:
1. jaT $h;e;J gjpyhs; gbtj;jpy; cq;fs; ngaiuAk; tpyhrj;ijAk; Fwpg;gpl;l ,lj;jpy; tpsf;fkhf vOjp jpfjpapl;L ifnahg;gkply;
Ntz;Lk;.
2. rl;l g+h;tkhfg; gjpyhs; epakpf;fg;gl;lhy; gbtj;Jld; rl;lG+h;t cj;juT gw;wpa tpguj;ijAk; ,izj;J mDg;Gjy; Ntz;Lk;.
3. gq;Flikahsh; xU jdp epWtdkhfNth $l;L epWtdkhfNth ,Ug;gpd; mjd; mikg;Gr; rl;l jpl;lq;fSf;fika nghJ
Kj;jpiuaplg;gl;L> Vw;fdNt vk;Kld; gjpT nra;gl;buhtpbd; mDg;gp itj;jy; Ntz;Lk;.
4. ,J tpjk; g+uzg;gLj;jg;gl;l gjpyhl;gbtk; ,y. 101> cs;kyhghij (Inner Flower Road) nfhOk;G 03y; mike;Js;s gjpthsh;
mYtyfj;jpy;> 2011 Nk 25 jpfjp ,y 100 Rje;jpu rJf;fj;jpy; mike;Js;s ,yq;if ki;wf; fy;Yhupay; fhiy 10.00f;F>
,lk;ngWfpd;w $l;lj;Jf;F 48 kzpj;jpahyq;fSf;F Kd;djhf xg;gilf;fg;gl Ntz;Lk;.
55 Nestlé Lanka PLC Annual Report 2010
Attendance Form/meñKSfï igyka m;%h$tuTj; jhs;
Notes:
1. Shareholders are kindly requested to bring this attendance form to the Thirtieth Annual General Meeting of Nestle Lanka PLC to be held at the Sri Lanka Foundation Institute No. 100, Independence Square, Colombo 07, on Wednesday, 25th May 2011, at 10.00 am.
2. Kindly note that No complimentary gift parcels will be issued at the AGM.
igyka(
1. fkiaf,a ,xld iud.fï 30 jk jd¾Isl uy iNd /iaùu 2011 uehs ui 25 jk nodod Èk fm'j' 10'00 g wxl 100" ksoyia p;=ri%h" fld<U 07" YS% ,xld mokï wdh;kfhaoS meje;afõ' tu /iaùug meñfKk úg fuu meñKSfï igyka m;%h /f.k meñfKk f,i ish¨u fldgialrejkaf.ka ldreKslj b,a,d isákq ,efí'
2. fuÈk ia;=;smQ¾jl ;E.s md¾i,a ksl=;a lsÍula fyda ix.%y lsÍula isÿ fkdjk nj ldreKslj okajd isákq ,efí'
Fwpg;Gf;fs;:
1. ,y. 100> Rje;jpu rJf;fj;jpy; mike;Js;s ,yq;if kd;wf; fy;Yhupay; 2011 Nk 25 jpfjp, fhiy
10.00f;F eilngwTs;s ne];Ny yq;fh gPvy;rp epWtdj;jpd; Kg;gjhtJ nghJf; $l;lj;jpw;Fr;
r%fkspf;Fk; xt;nthU gq;FjhuUk; Nkw;gb tuTj;jhisg; g+Hj;jp nra;J jk;Kld; nfhz;L
tu Ntz;Lk;.
2. ,f;$l;lj;jpd;NghJ vJtpj ghpRg; nghjpfSk; rpw;Wz;bfSk; toq;fg;gl khl;lhnjd;gij
jho;ikAld; Fwpg;gpLfpNwhk;.
Full Name of the Shareholder/fldgialref.a iïmQ¾K ku/gq;Fjhuhpd; KOg; ngah;:
…………………………………………….........................................................……………………
Folio No. /m;abre wxlh/Nfhit ,yf;fk;:
…………………………………………….........................................................……………………
NIC No. /cd;sl ye÷kqïm;a wxlh/Nj.m.m ,yf;fk;:
…………………………………………….........................................................……………………
No. of Shares Held/ysñ fldgia ixLHdj/ngw;wpUf;Fk; gq;Ffspd; vz;zpf;if:
…………………………………………….........................................................……………………
Signature /w;aik/ifnahg;gk;:
…………………………………………….........................................................……………………
CORPORATE INFORMATION
Name of Company:Nestlé Lanka PLC
Registered Office & Head Office:No. 440, T.B. Jayah Mawatha, Colombo 10, Sri Lanka.Tel: (+94 11) 2696304, 2697821, 2699991Fax: (+94 11) 2699437E-mail: [email protected]
Legal Form:A public quoted company with limited liability, incorporated in Sri Lanka on 29th January 1981 and listed on the Main Board of the Colombo Stock Exchange
Company Registration Number:PQ20
Company Secretary:Mr. Lioshon Rajapakshe
Prin
ted
by: S
oftw
ave
Prin
ting
and
Pac
kagi
ng (P
vt) L
td.
Nestlé Lanka PLCEnhancing the quality of life for Sri Lankan consumers everywhere - one sip, one bite, one drop at a time
Nestlé was founded in 1866 by Henri Nestlé in Vevey, Switzerland, where our headquarters are still located today. Nestlé is today the world's leading Nutrition, Health and Wellness company and the largest Food and Beverage company in the world.
Nestlé has been in Sri Lanka for over 100 years and includes some of the country’s best loved brands in our local portfolio. From a trading company in 1906, we are one of the leading Food and Beverage companies in Sri Lanka today. We have the largest number of milk chilling centres in the Island and are the largest private sector collector of fresh milk in the country. Nestlé Lanka is also the world’s largest exporter of coconut milk powder.
Good Food, Good LifeOur mission of "Good Food, Good Life" is to enhance the lives of Sri Lankan consumers with great tasting and nutritious products at affordable prices. Our local, state-of-the-art manufacturing facility in Kurunegala manufactures 90% of our products, bringing us closer to our vision of producing superior quality products at affordable prices to the entire nation.
Nutrition, Health and WellnessNutrition, Health and Wellness (NHW) is Nestlé’s strategic direction. We want our consumers to be able to make healthy choices about their food and beverages. We aim to make our consumers’ lives more pleasurable because our products not only taste better but are also more nutritious.
Everything we do is driven by our Nutrition, Health and Wellness agenda - Good Food, Good Life - which seeks to offer our consumers products with the best nutritional profile in their categories.
Creating Shared ValueCreating Shared Value (CSV) is the way we do business and the philosophy we abide by in all of our business activities. CSV happens in three specific areas – water, nutrition and rural development - where we can best create value for both society and shareholders.
Registrars:M/s. SSP Corporate Services (Pvt) LtdNo. 101, Inner Flower Road, Colombo 3, Sri Lanka.Tel: 011 2573894, 2576871
Legal Advisors:M/s. DL and F De Saram (Attorneys-at-Law)M/s. Julius and Creasy (Attorneys-at-Law)
Auditors:M/s. KPMG Ford, Rhodes, Thornton and Company (Chartered Accountants)
Bankers:Commercial BankHatton National BankThe Hong Kong and Shanghai Banking Corporation LimitedStandard Chartered Bank
Financial Year:1st January to 31st December
Nestlé Lanka Certifications:
ISO 22000: 2005 (Food Safety Management Systems)
ISO 14001: 2004 (Environmental Management Systems)
ISO 18001: 2007 (Occupational Health & Safety Management Systems)
NQMS (Nestlé Quality Management Systems certified by SGS)
Good Food, Good Life