Annual Report - 2023/24

Bukit Darah PLC | Annual Report 2023/24

Contents

1. Directors' Profile

1. Group Structure

Financial Information

67 Financial Calendar

Business Review

Management Discussion & Analysis

12 Sector Reviews

1. Graphical Financial Review

1. Financial Review

1. Sustainability Report

1. Economic Value Statement

Governance & Risk

1. Management Teams

1. Group Directorate

1. Risk Management

1. Information to Shareholders & Investors

Sector Reviews pg 12

Financial Review pg 26 Sustainability Report pg 31

69 Annual Report of the Board of

Directors on the Affairs of the

Company

1. Statement of Directors' Responsibility

1. Report of the Related Party Transactions Review Committee

1. Audit Committee Report

1. Independent Auditors' Report

1. Statement of Profit or Loss
2. Statement of Comprehensive Income
3. Statement of Financial Position

1. Statement of Changes in Equity

1. Statement of Cash Flow

1. Notes to the Financial Statements

Other Information

1. Group Real Estate Portfolio
2. Income Statement - USD
3. Statement of Financial Position - USD
4. Glossary

1. Notice of Meeting

1. Form of Proxy

Inner Back Cover - Corporate Information

Dear Shareholders

I'm pleased to present the annual report for the financial year 2023/24 amidst a backdrop of economic and geo-political headwinds in the global business environment. These times of change have put to test the grit and resilience of corporates. We, too, faced unprecedented challenges which demanded perseverance in staying focused and in drawing from our strengths through many years of expertise as a leading conglomerate in Sri Lanka.

Through it, I am proud that your group, Bukit Darah PLC, has withstood these uncertainties. Your group made operating profits of Rs. 47.4 Bn for the year ending March 2024 versus

Rs. 59.2 Bn the previous year. Your group profits after tax for the year were Rs. 22.2 Bn versus Rs. 28.8 Bn in the previous year. I take pleasure in welcoming you, our valued shareholders, to the 108th Annual General Meeting and present to you the annual report, together with audited financial statements for the financial year ended 31 March 2024.

OPERATING CONTEXT

During the financial year 2023/24, the global economy had dealt with inflation concerns and weakening consumer spending. Central banks are having to consider a precarious situation of sticky inflation and slowing domestic economies. Heightened geopolitical tensions have added to uncertainty via higher commodity prices and potential disruption of trade flows.

In Sri Lanka, economic conditions have somewhat improved under the International Monetary Fund (IMF) - Extended Fund Facility (EFF) arrangement, the Domestic Debt Optimisation plan and assistance from both bilateral and multilateral creditors.

Inflation levels, which had been at peak levels in 2022, dropped to single digits by September 2023 due to base effects. The rupee witnessed strength with increased foreign exchange inflows from worker remittances and tourism receipts, as well as improvements in the country's trade and current account balances. Due to these factors, the Central Bank of Sri Lanka (CBSL) maintained a stable policy on rates that resulted in lower market interest rates.

Whilst this relative stability has eased the pressure on raw material imports for our Beverage business, the Sri Lankan government (GoSL) has had to increase taxes significantly in order to consolidate the country's fiscal position. These tax increases carried a significant impact on consumer spending as real incomes failed to keep pace with the rising tax burden. Furthermore, in the Beverage industry, excise duty was raised thrice within the year, resulting in a cumulative increase of 64%, and inadvertently favouring the illicit alcohol market. In the financial year 2023/24, your group remitted Rs. 84.1 Bn in taxes to the GoSL from Rs. 70.1 Bn in the previous year. This brings your group's cumulative 5-year tax payments to Rs. 278.1 Bn.

In Indonesia, where our palm oil plantations are located, inflation has continued to put pressure on our cost base. Furthermore, the Plantations industry faced lower Crude Palm Oil (CPO) prices versus its peak in 2022/23. Finding operational efficiencies and increasing productivity have been

key focus areas in order to mitigate pressure on the bottom line.

OUR PERFORMANCE

Over the past year, the Bukit Darah Group has demonstrated resilience, achieving Revenue of Rs. 277 Bn with an EBITDA of Rs. 58.3 Bn versus Revenue of Rs. 330 Bn and EBITDA

"The Bukit Darah Group stands well- poised for successful times ahead. The committed contribution of many stakeholders has supported our growth"

Introductory statements

Business Review

Governance & Risk

Financial Information

Other Information

of Rs. 71.2 Bn the year before. At each of our businesses, we have been strategic and extremely careful about capital deployment, which has enabled us to make significant and impactful investments in our businesses. We have intentionally reduced our net debt levels and improved debt management across our businesses. Your group's net debt reduced to Rs. 45.7 Bn in 2023/24 from Rs. 58.3 Bn in 2022/23. Your group has remained committed to cash optimisation, rigorous expense discipline, and leveraging technology to drive progress across all business sectors; prerequisites for resilient, strong and sustained performance.

Your group also furthered its efforts in actively integrating ESG (Environmental, Social, and Governance) principles into our business practices across all sectors. Among other key initiatives,

in the Plantations sector, we initiated a 25-year programme for landscape conservation, with its implementation stage commencing during the financial year 2023/24. We also took a significant step towards reducing our carbon footprint by commissioning our inaugural bio-gas facility in Central Kalimantan in April 2023. This facility complements our commitment to reducing Greenhouse Gas (GHG) emissions and also contributes to reducing our energy costs. In addition, the Plantations sector continues with its Roundtable Sustainable Palm Oil (RSPO) initiatives.

Similarly, in the Beverage sector, sustainability remained at the forefront with responsible practices for resource consumption, sourcing, packaging, and waste management. Your group consistently allocates resources to a range of environmental projects and community welfare initiatives across all business sectors, affirming the equitable commitment to environmental and social well-being throughout the

Group. For a detailed overview of these initiatives, I encourage you to review the "Sustainability Report" section in our Annual Report.

OPERATIONAL SNAPSHOT OF THE GROUP'S PORTFOLIO OF BUSINESSES

The Oil Palm Plantations sector experienced increased contributions to Fresh Fruit Bunches (FFB) from its younger plantations, such as PT Nabire Baru. In addition, a primary focus during the year was on enhancing production efficiencies to strengthen our profitability. Importantly, all of our plantation locations generated positive earnings over the year. Looking ahead, we anticipate that ongoing replanting initiatives at our mature plantations (PT Agro Indomas and PT Agro Bukit) will contribute to yield enhancements in future years.

Our targeted approach to expanding international business demonstrated solid results during the year. Within the Oils and Fats sector, our main Malaysian plant is dedicated to serving domestic customers, while our affiliated venture with J-Oil Mills Inc (A Japanese listed entity) is focused on specialised products for export to Asian markets. In the Beverage sector, a key milestone in the past year was driving international business by channelling resources into three key growth markets, viz. Africa, the Middle East, and South Asia and reducing target markets from 35 to 17 countries. This focused approach has enabled us to sharpen our product offerings in stronger alignment with growth trends in these markets and optimise our profit margins. With

this, the Beverage sector saw export volumes rise 20% in the year.

Innovation and driving novel consumer experiences have been critical success factors in our intensely competitive consumer-oriented ventures in

recent years. The Beverage sector has launched new products over the past two years with an emphasis on driving consumer experiences and new consumption occasions. For the year under review, the construction of the Innovation Brewery commenced, which is planned to be completed in the ongoing year, augmenting our efforts in product innovation. We believe we are well placed to buffer the pressures of rising prices, high taxes and slowing demand.

Over 2023/24, our Leisure sector has seen a more positive outlook, given the country's improving tourism numbers. The sector has had to be resilient through the crises over the past few years. Diligent cost management has been a significant focus area, and over recent years, the Leisure sector has had to postpone its business development projects. However, if the country's tourism sector continues to thrive, and posts consistent growth over the years, the sector will be able to invest in these projects in a phased manner.

The Portfolio and Asset Management sector capitalised on the positive developments in the Colombo Stock Exchange during the year. The sector's total returns (adjusted for dividends and share buyback) outperformed the benchmark ASPI and S&P index performance during the financial year 2023/24. The sector maintained resilient performance in its investment portfolio, adhering to its long-term value investing strategy. At the same time, we benefitted from previously locked-in higher rates for our longer-term Fixed Deposit portfolio.

Meanwhile, the Real Estate sector achieved occupancy growth and rental enhancements during the year. This was despite the lower demand witnessed in the commercial property market space due to the increased shift towards remote work models.

LOOKING AHEAD

The global economy is anticipated to slow due to persistent inflation challenges and tightening financial conditions. Concurrently, commodity markets are poised to remain susceptible to geopolitical disruptions. In Sri Lanka, ongoing reforms are expected to accelerate economic recovery. However, ensuring sustained long-term growth necessitates the implementation of investor-friendly policies and a transition towards an export-driven economy that stabilises the exchange rate. Additionally, cohesive fiscal policies and coordinated strategies are crucial to prevent abrupt policy changes that could undermine business and consumer confidence.

The global economic outlook is uncertain but with your group's deep experience in its current businesses, we are confident that your group can weather the challenges ahead. Your group will continue to pursue its strategic priorities through streamlining operations, prioritising organisational enhancements and strengthening investments in human capital.

our esteemed board members for their invaluable guidance through every phase. Our devoted employees deserve special acknowledgment for their unwavering loyalty and enthusiasm in continuously improving and pushing the boundaries of the businesses of the group. We also extend our gratitude to our esteemed business partners, loyal customers, vibrant communities, and all other stakeholders whose exceptional contributions have been instrumental in our success.

(Sgd.)

Hari Selvanathan

Chairman

16th July 2024

Colombo

Directors' Profile

Governance & Risk

Financial Information

Other Information

HARI SELVANATHAN

Chairman

Hari Selvanathan is the Chairman of Bukit Darah PLC and Deputy Chairman of Carson Cumberbatch PLC. He is the Deputy Chairman/Group Chief Executive Officer of Goodhope Asia Holdings Ltd., Singapore.

He is the President Commissioner of the palm oil related companies in Indonesia, Director of Sri Krishna Corporation (Private) Limited.

He was the Past President of the National Chamber of Commerce and Past Vice Chairman of the International Chamber of Commerce (Sri Lanka).

He holds a Bachelor's Degree in Commerce.

MANO SELVANATHAN

Mano Selvanathan is the Chairman of Sri Krishna Corporation (Private) Limited and Selinsing Limited. He is a Director of most of the Companies in the Carson Cumberbatch Group in Sri Lanka, Indonesia, Malaysia & Singapore and is an active Member of its Executive Management Forums.

He has served as the Chairman of the Ceylon Chamber of Commerce and The Indo Lanka Chamber of Commerce & Industry and also as the President of the Rotary Club of Colombo North. At present, he is the Honorary Consul of the Republic of Chile in Sri Lanka.

Mano Selvanathan was conferred the National Honours in Sri Lanka the 'DESAMANYA' title by H.E. The President of Sri Lanka, in recognition of the services rendered to the Nation in November 2005.

In January 2011, he was awarded with the prestigious 'PRAVASI BHARATIYA SAMMAN AWARD' by the President of India. He also received the Presidential Honour of 'ORDER OF KNIGHT COMMANDER' in October 2013 awarded by the Government of Chile.

He holds a Bachelor's Degree in Commerce.

ISRAEL PAULRAJ

(Resigned w.e.f. 17th June 2024)

Israel Paulraj is the Chairman of Rubber Investment Trust Limited. He was the Chairman of Guardian Capital Partners PLC. He serves as a Director of several subsidiary companies within the Carsons Group.

He served as the Past Chairman of the Federation of Exporters Associations of Sri Lanka and The Coconut Products Traders Association. He was a member of the Executive Committee of the Ceylon Chamber of Commerce, National Chamber of Commerce of Sri Lanka and Shippers Council. He served on the Board of Arbitrators of the Ceylon Chamber of Commerce. He has also served as the Hony. General Secretary of the Central Council of Social Services, Hony. Treasurer of the Christian Conference in Asia, President of the Church of Ceylon Youth Movement and Hony. Treasurer of the National Christian Council of Sri Lanka. He has also served as the Chairman of the Incorporated Trustees of the Church of Ceylon.

He also served on the Presidential Task Force on Non Traditional Export and Import Competitive Agriculture set up by the late President R. Premadasa. He served as the Chairman of the Ecumenical Loan Fund of Sri Lanka and on its International Board in Geneva. He was a member of the

Commercial Law Reform Commission and has served on the Parliamentary Consultative Committee on Internal and International Trade.

He holds a Bachelor's Degree in Law and an Executive Diploma in Business Administration.

CHANDIMA GUNAWARDENA

Chandima Gunawardena currently serves as a Non-Independent, Non- Executive Director of the Company, having joined the Group Directorate in 1990. During his tenure at Carson's Group, he has served on the Boards of most of its subsidiaries in Sri Lanka and overseas and continues to serve on some of the subsidiary Boards as of date.

Mr. Gunawardena has over five decades of experience in varied fields of business and commercial activities and has held senior positions in Corporate, Mercantile and State Institutions.

He is a Fellow of the Chartered Institute of Management Accountants, UK.

LESLIE RALPH DE LANEROLLE

Ralph De Lanerolle has over 50 years of work experience in both the public and private sectors, where he has held senior management positions.

A Chartered Engineer, Mr. De Lanerolle holds a Bachelor's Degree in Civil Engineering (First Class Honors) from the University of Ceylon (1965) and a Master's Degree from the University of Waterloo, Ontario, Canada (1968). He is a member of the Association of Professional Bankers of Sri Lanka and a Fellow of the Economic Development Institute of the World Bank, Washington and a honorary life member of the Institution of Engineers, Sri Lanka.

Bukit Darah PLC | Annual Report 2023/24

Directors' Profile

Mr. De Lanerolle has worked primarily in the field of Project Finance and Management, undertaking assignments in diverse sectors of the economy, especially in the financial services, real estate and property, tourism, hotel and transportation sectors. He has worked as a team leader/ member with several multidisciplinary groups in carrying out project studies. In an individual capacity, he has served as Consultant to several private companies, providing project related advisory services from pre investment to implementation.

Mr. De Lanerolle has served and continues to serve, on the Board of Directors of several other private and public listed companies.

SURESH SHAH

Mr. Suresh Shah is the Chairman of Ceylon Tobacco Company PLC and a Director of Carson Cumberbatch PLC, Bukit Darah PLC, Hunter & Company PLC, Hatton National Bank PLC and Lanka Canneries (Pvt) Ltd. Further, he currently functions as the Head of the State-Owned Enterprise Restructuring Unit of the Government of Sri Lanka set up under the Ministry of Finance, Economic Stabilization and National Policies.

Previously, he was Director & CEO of Ceylon Beverage Holdings PLC & Lion Brewery (Ceylon) PLC, a position he held for 30 years.

He is a Past Chairman of the Ceylon Chamber of Commerce and of the Employers Federation of Ceylon. Previously, he has served as a Commissioner of the Securities and Exchange Commission of Sri

Lanka, a Member of Council of the University of Moratuwa and a Member of the Monetary Policy Consultative Committee of the Central Bank of Sri Lanka.

He is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka.

MAHENDRA DAYANANDA

Mahendra Dayananda is an Independent, Non-Executive Director of Bukit Darah PLC and Pegasus Hotels of Ceylon PLC and was also an Independent, Non-Executive Director of Nestle Lanka PLC and resigned from the company with effect from 1st February 2024. He was a former Non- Executive Director of Delmege Ltd and Chairman of Lewis Brown & Company Ltd. An expert on the Tea Industry and economic issues, he was until recently the Chairman of the Sri Lanka Business Development Centre and former Chairman of the Colombo Tea Traders Association.

He was until recently the President of the Sri Lanka Japan Business Council, former President of the Sri Lanka Institute of Directors and past Chairman of the Ceylon Chamber of Commerce and also chaired the Monetary Policy Consultative Committee - Central Bank of Sri Lanka for a period of 09 years. He was also the former Chairman of Indo Asia Teas (Private) Limited and continues to chair Total Tea Concepts (Private) Limited.

He was the former Honorary Consul for the Republic of Benin in Sri Lanka until October 2019.

Earlier he was a Founder Managing Director commencing 1st January 1980 and subsequently the Chairman of Tea Tang (Private) Limited.

NARAYANAN GIRISH KUMAR

(Appointed w.e.f. 17 June 2024)

As a Board Member, Mr Narayanan Girish brings deep knowledge of global capital markets, investment and restructuring expertise alongside global governance standards. His investment experience spans public and private equity and credit markets across Asia. Girish served as the CEO of Apollo Management Singapore, a subsidiary of the New York based global private equity and alternative investment powerhouse. Girish was the founding partner of Apollo Asia's private credit business in the region. He oversaw investment funds that invested more than US$1 Billion across the Asia Pacific region. He was a Board Member of Apollo Management Singapore and its various subsidiaries as well as the US$ 800 Million AION India private equity fund.

Prior to that, he was a Managing Director at Merrill Lynch in various investment roles across Asia and Australia. He was a ranked equity analyst for regional banks and was instrumental in raising more than US$2 Billion in capital for Indian, Indonesian, Thai and Korean banks after the Asian Banking Crisis.

He has an MBA from Indian Institute of Management Calcutta and a Bachelor of Engineering from College of Engineering Guindy (Anna University), Chennai.