what’s inside · in 2013, chemco limited’s broad-based trading and manufacturing operations...

What’s Inside

Dear Shareholder

The Board of Directors is pleased to present the Annual Report of Chemco Limited for the year ended 31 December 2013, the contents of which are listed below.

This report was approved by the Board of Directors at its meeting held on 26 March 2014.

Vincent LabatDirector

Antoine L HarelChairman

Profile, Vision, Mission and Values

At a Glance

Corporate Information

Board of Directors

Report of the Board of Directors

Senior Management Profile

Corporate Governance Report

Statutory Disclosures

Statement of Directors’ Responsibilities

Certificate by Secretary

Independent Auditors’ Report to the Members

Financial Statements

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Annual Report 2013 1

PROFILE

Chemco Limited was incorporated in 1984. It is a trading company that focuses on the marketing of industrial chemicals and specific general goods. Chemco Limited is located in the port area and services both local and export markets. Chemco Limited is a public company listed on the Development and Enterprise Market (DEM) since 2007. Chemco Limited is a subsidiary of Harel Mallac & Co. Ltd.

VISION

To be the leader in the chemical business in the regionand to diversify through new ventures

MISSION

• To foster a quality culture and sustainable development.• To satisfy the requirements of all our stakeholders.• To create an environment conducive to maximising the

wealth of our Company.• To promote the development and welfare of our staff

while applying best practices and high ethical standards.

OUR VALUESVALUES

At Chemco, we live our values with P.R.I.D.E. and endeavour to bring each one of these

values in everything we do

Chemco Limited2

7sectorsof activity

Operating since 1984

Turnover 2013

Dividendper Share

Profit afterTaxation

Rs306.3M

Dedicated Employees80

Rs7.8MRe1.00

SugarChemicals

7% Coagulants, Flocculants,Lime, Biocides,Phosphoric Acid, Sulphur

Complete range of process chemicals for the sugar industry

Caustic Soda, Hydrochloric Acid,Hydrogen Peroxide, Calcium Carbonate,Sodium Sulphate, Sodium Chloride,Sulphuric Acid, Food Chemicals

IndustrialChemicals

54%

LaboratoryServices

2%

Water TreatmentChemicals

3%

Range of chemicals for textile, food and beverages anddetergents industry

GT RadialCEATBKTBRILLAND

12%Tyres

Variety of radial tyres for passengercars to fit 12 to 15 inch rims and tyresfor light trucks, lorries and buses

Air ConditionersGalanz (9,000 - 24,000 btu)Midea (9,000 – 60,000 btu)Ammonia Gas and Freon gasesR22, R407C and R410

17%Refrigeration

Air conditioners suitable fordomestic and industrial purposes

Cyanuric Acid, Calcium HypochloriteChempool Acid & Alkali, Pools Accessories, Pumps & Filters

5%Swimming PoolChemicals andEquipments

Wide range of chemicals and equipment to keep swimming pool water crystal clear

Coagulants Flocculants, Polymers,Lime, Calcium Hypochlorite,Chlorine Dioxide

Boiler water treatment, Cooling tower/chiller,Process water treatment, Water Treatment:Demineralised System, Softeners PlantReverse Osmosis Membrane System

Water & Wastewater Analysis,Microbiological Testing,Soil and Sand Analytical Services

Environmental monitoring servicesprovided with high tech laboratory equipmentTechnical support to Customers

The Laboratory is ISO 17025 certified.

Products End Uses

At a Glance


Corporate Information

Chemco Limited4

COMPANY SECRETARYHM Secretaries Ltd.18 Edith Cavell StreetPort Louis

AUDITORSBDO & Co

BANKERSThe Mauritius Commercial Bank Ltd.Bramer Banking Corporation Ltd.

LEGAL ADVISERSIvan Collendavelloo ChambersEtude Georges Robert

NOTARYMr Didier Maigrot, Notary Public

REGISTERED OFFICEChaussée TromelinFort GeorgePort Louis

REGISTRYMauritius Computing Services Ltd.18 Edith Cavell StreetPort Louis

BUSINESS REGISTRATION NUMBERC07004261


Board of Directors

ANTOINE L HAREL (56) Chairman (Non-Executive)

Antoine L Harel is a Fellow Member of the Institute of Chartered Accountants in England and Wales and holds a BA (Hons) degree in Accounting and Computing. He joined Harel Mallac & Co. Ltd. in 1987. In 1997, he was appointed Group CEO and is Chairman of the Board since April 2005. He was President of the Mauritius Chamber of Commerce and Industry in 1992/1993. He was appointed to the Board of Directors of Chemco Limited on 30 November 1999.

Other Directorships (listed Companies): Compagnie des Magasins Populaires Limitée (Chairman), Harel Mallac & Co. Ltd. (Chairman), The Mauritius Chemical and Fertilizer Industry Limited (Chairman), Bychemex Limited (Chairman) and Les Gaz Industriels Ltd (Chairman).

CHARLES HAREL (46) Non-Executive Director

Charles Harel holds a National Diploma in Management and Finance from the Cape Technikon, South Africa, as well as a MBA from the University of Birmingham, UK. He joined the Harel Mallac Group in 1993 and is presently acting as the Chief Executive Officer. He was appointed to the Board of Directors of Chemco Limited on 29 May 2013.

Other Directorships (listed Companies): Harel Mallac & Co. Ltd., Compagnie des Magasins Populaires Limitée, The Mauritius Chemical and Fertilizer Industry Limited and Bychemex Limited.

VINCENT LABAT (51)Independent Director

Vincent Labat graduated as a Chemical Engineer. From 1996 to 2009 he was the Managing Director of Les Gaz Industriels Ltd, a listed Company. In 2010, he joined Medine Limited as Project Development Executive. In July 2011, he was appointed Managing Director of the Agriculture Cluster. He was appointed to the Board of Directors of Chemco Limited on 12 August 2010.

Other Directorships (listed Companies): Bychemex Limited and The Mauritius Chemical and Fertilizer Industry Limited.

Chemco Limited6

JEAN-YVES CORSON (54) Independent Director

Jean-Yves Corson is holder of a Maîtrise d’Economie d’Entreprise from Université de Paris I, Panthéon, Sorbonne. He held various senior management positions in France from 1986 to 1990 before returning to Mauritius where he joined Noblesse Cie Ltée. He joined the Groupe Union in 1992 as Financial Manager and was appointed Corporate Planning and Development Manager in 1999. He held the function of Land Development Manager of Compagnie de Beau Vallon Ltée from August 2010 to December 2011. He was appointed to the Board of Directors of Chemco Limited on 14 December 2010.

Other Directorship (listed Companies): Bychemex Limited and The Mauritius Chemical and Fertilizer Industry Limited.

GUY HAREL (65) Non-Executive Director

Aged 65, Guy Harel joined the Harel Mallac Group in 1981 as Managing Director of Fapcom Ltd. In 1983 he created Henkel Chemical (Mauritius) Limited and became its Managing Director in 1996. He was, since the acquisition of the former by the Harel Mallac Group in 2007, the Managing Director of Archemics Ltd. up to 31 December 2012.

Other Directorships (listed companies): Bychemex Limited and The Mauritius Chemical and Fertilizer Industry Limited.

MICHEL RIVALLAND G.O.S.K. (60) Non-Executive Director

Michel Rivalland G.O.S.K. is a Fellow Member of the Chartered Association of Certified Accountants. He joined the Board of Directors of The Mauritius Chemical and Fertilizer Industry Limited on 1 June 2006 and served as Managing Director from October 2006 to 30 June 2009. He is currently an Executive Director of Harel Mallac & Co. Ltd. He was appointed to the Board of Directors of Chemco Limited on 21 December 2006.

Other Directorships (listed Companies): Compagnie des Magasins Populaires Limitée, Harel Mallac & Co. Ltd., Bychemex Limited and The Mauritius Chemical and Fertilizer Industry Limited.

SÉBASTIEN LAVOIPIERRE (40)Executive DirectorIn office up to 12 August 2013

HAROLD NG KWING KING (64)Non-Executive DirectorIn office up to 12 May 2013




The core business of Chemco Limited is the trading of chemicals and general goods. Our business segments are industrial chemicals, sugar chemicals, water treatment chemicals and services, laboratory services and specific general goods (tyres and air conditioners).

In 2013, Chemco Limited’s broad-based trading and manufacturing operations faced a tough year. The Company registered total sales of Rs306M down Rs18M from the previous year. Gross profit was down Rs3.8M from 2012 and profit before tax down to Rs9.3M from Rs13.4M in 2012. Other income in terms of commissions perceived on direct indent sales was lower by Rs1.7M compared to 2012. This was due to lower sales volume of specific products in the sectors of sugar milling and refining.

The Industrial Sector remained very competitive throughout the year. To secure competitive advantage, Chemco Limited has increased its bulk buying strategy for basic industrial chemicals which has enabled the Company to mitigate margin erosion on some high volume liquid chemicals.

The Refrigeration Division maintained its performance in 2013. Sales of household air conditioning units continued its upward trend. Sales for the year reached Rs53M, up from last year’s Rs44M. The quality of the units being marketed was widely accepted by air conditioning contractors and the public in general. An agreement with a large retail outlet was also concluded during the course of the year. This led to an increase in market share as well as penetration in the market of the air conditioner brands Galanz Supreme and Media Supreme. The Company intends to diversify into environment-friendly air conditioning technology in 2014 to align with the local authorities’ initiatives to promote less power thirsty air conditioning units. The division will continue to look for innovative technologies in refrigeration in 2014 to gain an edge over competitors.

Chemco’s Tyre Division registered lower sales in 2013. Turnover in 2013 dropped to Rs35M. The sale of its flagship GT Radial brand was affected by cheaper tyre imports from China. The removal of duty allowed a multitude of cheap brands to enter the market. Competition reached its peak during the year as price trumped quality. Customers with large fleets of vehicles imported their own brands of tyres which they marketed openly on the market. The Chemco Tyre Centre in Pailles did not perform as expected due to its low visibility and location. The centre has received its first container of tyres from China, with sales of this consignment having started in the last quarter of 2013. An advertising campaign will be launched which will encompass the overall tyre division.

Chemco Limited8

Antoine L Harel Beas CheekhooreeChairman General Manager

Chemco Lab Services has made good progress by offering competitive laboratory analysis and testing services to new sectors following its accreditation to ISO 17025 in 2012. Turnover in 2013 was Rs5.5M, up from Rs4.8M in 2012. Its client portfolio has grown considerably with new accounts from within the hospitality sector. The sector is also seeing the arrival of new and well-equipped competitors which calls for a well-coordinated short, medium and long-term strategy which will shape the future of the business, which we will be working on, early in 2014.

The Water Treatment Division met its objectives in 2013. Sales were up on 2012 by Rs4M and gross profit up by Rs1.2M. The division will diversify into related new sectors. Discussions to set up a sea water desalination project and a brackish water treatment plant, with two hotel groups, have been conclusive. The project involves the drilling of boreholes, the supply and installation of equipment, and the subsequent management of day-to-day operations to supply 600M3/day desalinated water and 600M3/day of treated brackish water to two hotel groups. These projects are planned for commissioning in 2014.

The division plans to diversify into and market household water purifiers, and other water purification accessories, across its customer base to help improve local water hygiene levels. It will continue to seek state-of-the-art technology in water purification systems and make it available to the general public. The division also plans to export its expertise to neighbouring islands in 2014.

Acknowledgements

The Board would like to express its appreciation to Sébastien Lavoipierre, Chemco’s former Managing Director for his contribution to the Company. Our thanks go to the management and employees for their usual dedication to the Company. We hope that their dynamism and eagerness to do well will help direct the company on a path of growth and improved profitability. Together, we will put a lot of emphasis on innovative products and solutions for the benefit of our customers and leverage same to bring more value to our shareholders.

“ To secure competitive advantage, Chemco Limited has increased its bulk buying strategy for basic industrial chemicals. This has enabled the Company to mitigate margin erosion on some high volume liquid chemicals.”



Senior ManagementSenior Management

BEAS CHEEKHOOREE General Manager

Beas Cheekhooree holds a Bachelors degree in Chemical Engineering from North East London Polytechnic, United Kingdom. He occupied various senior management positions in the textile industry locally and in India before joining the Harel Mallac Group in 2013 as Managing Director of Harel Mallac Export Ltd. He was appointed Managing Director of Harel Mallac Export Ltd. and General Manager of MCFI Ltd., Bychemex Limited, Chemco Limited and Coolkote Enterprises Ltd. in October 2013.

RAVI VENKATASAMI Operations Manager

Ravi Venkatasami holds a BEng (Hons) degree in Chemical and Environmental Engineering and a Masters degree in Project Management. He joined the Company in October 2001 where he has assumed various positions as Sales Executive (2003) and Export Manager (2007). He is Operations Manager of Chemco Limited and Bychemex Limited since February 2010.

ROMESH RAJA RAI Finance Manager

Romesh Raja Rai is an Associate Member of the Institute of Chartered Accountants in England and Wales (ACA). He was articled with Coopers and Lybrand (London). After qualifying, he joined DCDM in 1983 and left in 1988 to join the MCFI Group as Finance Manager. He was also involved in the setting up of the Association of Mauritian Manufacturers (AMM) and was a council member representing MCFI.

Romesh Raja RaiFinance Manager

Beas CheekhooreeGeneral Manager

Ravi VenkatasamiOperations Manager

From left to right:

Chemco Limited10

Chemco Limited (the ‘Company’) is committed to the highest standards of business integrity, transparency and professionalism in all its activities to ensure that the activities within the Company are managed ethically and responsibly to enhance business value for all stakeholders.

THE BOARD OF DIRECTORS

The Board endeavours to exercise leadership, entrepreneurship, integrity and judgment in directing the Company, so as to achieve continuing prosperity for the organisation whilst ensuring both performance and compliance.

The Board also ensures that the activities of the Company comply with all legal and regulatory requirements as well as with its constitution from which the Board derives its authority to act.

The Board inter alia oversees the development and implementation of the Company’s corporate strategy and reviews performance objectives. It provides for succession plans for key individuals, ensures effective communication with the Company’s stakeholders, promotes the Company’s Code of Ethics, and oversees financial and capital management. As such, it reviews and approves quarterly and annual financial reports, monitors financial results and approves major capital expenditure, acquisitions, divestitures and material commitments. The Board finally oversees compliance and risk management.

At 31 December 2013 the Board of Directors consisted of six members, of whom two were independent Directors. The Board concluded that in view of its size, having the General Manager and the Finance Manager attending Board meetings whenever required, is in accordance with the spirit of the Code of Corporate Governance for Mauritius with regard to executive presence on the Board. Non-executive Directors have free access to members of the senior management team. All Directors have access to the Company Secretary. The Directors are elected as per the provisions of the Company’s constitution that do not provide for a definite term of office.

With a view to enhancing the Board’s effectiveness, a Board performance review is carried out yearly to assess the directors’ appreciation of the Board’s performance, its procedures and practices. The results of the assessment are examined by the Corporate Governance Committee. This Committee makes its recommendations to the Board on any required remedial action.

Since the Company has a management contract with The Mauritius Chemical and Fertilizer Industry Limited (MCFI), the Board has delegated authority to MCFI’s Audit Committee and Corporate Governance Committee to provide it with assistance in discharging its duties and responsibilities. This is done through a more comprehensive evaluation of specific issues that are the remit of such committees. The Board regularly receives the reports and recommendations of these committees and takes appropriate action.

The Board entrusts the day-to-day management of the Company to MCFI through its General Manager who ensures the smooth

running of the organisation. The composition of the Board of Directors and other directorships held by the Directors in other listed companies are given on pages 6 and 7.

BOARD MEETINGS

The Board meets regularly during the year. For the period under review the Board met six times. Board meetings are conducted in accordance with the Company’s constitution and the Companies Act. Board meetings are organised in such a way as to allow Directors to receive all relevant information critical to their understanding of the business to be conducted at the Board meeting, and therefore to participate fully in the decision-making process. The Board may invite management or external consultants to attend Board meetings whenever required.

RESPONSIBILITIES ENTRUSTED TO MCFI’S CORPORATE GOVERNANCE COMMITTEE

The Board has entrusted to MCFI’s Corporate Governance Committee the key areas that are the remit of a nomination and remuneration committee. The Committee’s main responsibilities include establishing a formal and transparent procedure for developing policy on senior management remuneration. The Committee also fixes the fees of the Company’s non-executive and independent non-executive Directors. It oversees the process regarding recommendation of potential candidates as Directors, ensures that proposed Directors are not disqualified from holding that position, and monitors the balance and effectiveness of the Board. The Committee met three times in 2013.

RESPONSIBILITIES ENTRUSTED TO MCFI’S AUDIT COMMITTEE

The Board has entrusted to MCFI’s Audit Committee the key areas that are the remit of an Audit Committee as detailed in the formal terms of reference approved by the Board. The Committee thus assists the Board in discharging its duties relating to the safeguarding of assets, the operation of adequate systems and control processes, and the preparation of accurate financial reports and statements, in compliance with all applicable legal requirements and accounting standards. The Committee also addresses issues relating to risk management and provides a forum for discussing business risks and control issues, and for formulating relevant recommendations for consideration by the Board. During the period under review the Committee met four times.

ATTENDANCE AT BOARD MEETINGS HELD IN 2013

Corporate Governance

AttendanceAntoine L Harel 6/6Charles Harel 4/4Guy Harel 2/3Jean Yves Corson 6/6Vincent Labat 6/6Sébastien Lavoipierre 3/3Harold Ng Kwing King 1/2Michel Rivalland G.O.S.K 6/6


RISK MANAGEMENT

The Board regularly addresses and evaluates physical, human resources, IT, business, financial, reputational as well as regulatory and compliance risks. In the course of 2013, the internal audit function examined and evaluated the adequacy and effectiveness of control systems in place within the Company. Reports were subsequently produced and submitted to the Audit Committee. The Audit Committee reviewed the reports and, when applicable, made relevant recommendations to the Board. Since 2010 a risk management framework for the Company was adopted followed by implementation of a continuous and dynamic system of risk assessment through compliance checks and discussions with the management for enhanced risk mitigation strategies. Some of the risk areas and relevant control procedures have been identified as follows:

Physical Risks

Among the physical risks identified are unavoidable events such as riots, cyclones and other natural calamities. Mitigating actions such as the adoption of cyclone and fire procedures, the subscription to a relevant insurance cover, and the identification of a business continuity plan and disaster recovery plan have been taken.

To limit the occurrence of on-site accidents, health and safety as well as security procedures have been implemented. The Company also draws upon the expertise of both an Occupational Physician Consultant and a full-time Health and Safety Officer.

The Company’s control procedures ensure mitigation of risks relating to fraud and theft.

Human Resources Risks

Loss of key personnel has been identified as a major risk factor. In view of mitigating this risk, retention policies have been adopted as well as a formal performance assessment and reward system implemented within the Company. Furthermore, a Code of Ethics has been adopted, so as to limit reputational risks. Health surveillance is performed at regular intervals on employees in high risk jobs in line with the Company’s health and safety policy.

Technology Risks

In order to mitigate the risk of an IT crash or major breakdown, back up and restriction procedures have been set up within the Company.

Internal Control

Internal control is a process designed to provide reasonable assurance regarding the achievement of organisational objectives with respect to:

• Effectiveness and efficiency of operations• Safeguarding of assets and data of the organisation• Reliability of financial and other reporting• Prevention of fraud and irregularities• Acceptance and management of risk

• Conformity with the codes of practice and ethics adopted by the organisation

• Compliance with applicable laws and regulations• Supporting business sustainability under normal as well as

adverse operating conditions.

Internal Control is applicable to and is built into various business processes so as to cover all significant enterprise areas.

During the year, one review of internal control was performed by the Internal Audit which covered all significant enterprise areas.

The Board has set appropriate policies to ensure that the above control measures are implemented.

Internal Audit

Internal audit is an objective assurance function reporting to the Board of Directors and Management. The Internal Audit function is performed by the Harel Mallac Group Internal Auditor.

Internal audit provides assurance as to the adequacy and effectiveness of the risk management and internal control framework of an organisation. Internal audit assists the Board and management to maintain and improve the process by which risks are identified and managed, and helps the Board discharge its responsibilities to maintain and strengthen the internal control framework.

The Internal Auditor has examined the current control systems to check their suitability and to ensure that they are being adhered to. The Internal Auditor conducts its assignments based on a yearly plan which is validated by the Audit Committee and has unrestricted access to the Company’s records, management and employees. Systems reviewed in 2013 at Company levels include the sales, debtors’ and cash cycle as well as the stock cycle and cover all significant areas of the Company’s internal control.

In 2013, the Internal Auditor has regularly submitted to the Audit Committee reports for discussion and follow-up of the implementation of recommended actions.

GROUP STRUCTURE

The Directors recognise that the parent entity is Harel Mallac & Co. Ltd. and that the ultimate parent entity is Société Pronema. The Directors common to the aforesaid entities are Mr Antoine L Harel who is gérant of Société Pronema and Director of Harel Mallac & Co. Ltd. and Messrs. Charles Harel and Michel Rivalland G.O.S.K. who sit on the Board of Directors of Harel Mallac & Co. Ltd.

SHAREHOLDERS HOLDING MORE THAN 5 PER CENT OF THE COMPANY

Shareholders directly or indirectly interested in 5 per cent or more of the ordinary share capital of the Company are detailed on page 17.


Chemco Limited12

DIVIDEND POLICY

Dividends are distributed after considering the Company’s performance and profitability, gearing, investment needs, capital expenditure requirements and growth opportunities.

SHARE PRICE INDEX FROM JANUARY 2011 TO FEBRUARY 2014

DIRECTORS’ DEALING IN SHARES OF THE COMPANY

The direct and indirect interests of Directors in the ordinary shares of the Company are to be found on page 17. The Directors are aware of Appendix 6 of the Listing Rules of the Stock Exchange of Mauritius Ltd. which provides for restrictions on dealings during a close period as well as the provisions of the Companies Act 2001 on disclosure and restrictions on share dealings by Directors. All the disclosures made by the Directors are entered into an Interest Register.

During the year under review none of the Directors bought or sold any of the Company’s shares.

RELATED PARTY TRANSACTIONS

Related party transactions are detailed on page 51.

SENIOR MANAGEMENT PROFILE

The profile of the senior management members is given on page 10.

Year Dividend per Share

(Rs)Dividend Cover

(Times) Dividend Yield

(%)

2009 1.1 3.1 6.5

2010 1.1 3.2 4.7

2011 1.0 4.1 3.1

2012 1.0 1.8 4.0

2013 1.0 1.3 4.4


ChemcoDEMEX

Jan-

11

15

25

35

45

55

65

75

85

130

135

140

145

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155

160

165

170

175

180

185

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11

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-11

Apr

-11

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-11

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11

Jul-1

1

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-11

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-11

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-11

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-11

Jan-

12

Feb-

12

Mar

-12

Apr

-12

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-12

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Jul-1

2

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-12

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12

Oct

-12

Nov

-12

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-12

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13

Feb-

13

Jan-

14

Feb-

14

Mar

-13

Apr

-13

May

-13

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Jul-1

3

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-13

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-13

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Rs)

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Chemco Share Price v/s Demex

DE

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COMPANY’S CONSTITUTION

The constitution of the Company does not provide any ownership restrictions or pre-emption rights. It is in agreement with the Companies Act 2001 and the DEM rules, and does not contain any material clause that needs to be disclosed.

SHAREHOLDERS AGREEMENT AFFECTING THE GOVERNANCE OF THE COMPANY BY THE BOARD

The Company is not aware of any such agreement during the period under review.

THIRD PARTY MANAGEMENT AGREEMENT

The Company has a management agreement with The Mauritius Chemical and Fertilizer Industry Limited for management support services including but not limited to financial, accounting, legal, internal audit and human resources fields. The agreement is renewable on a yearly basis.

DIRECTORS’ FEES

Directors are paid directors’ fees with the exception of two of the non-executive Directors.

DIRECTORS’ REMUNERATION

Directors’ remuneration is given on page 17. It has been disclosed globally due to sensitivity of the information.

REMUNERATION POLICY

The Company’s remuneration policy recommends that the Company provides competitive rewards for its senior executives and other senior management staff, taking into account the Company’s performance and external market data from independent sources, in particular, where available salary levels for similar positions in comparable companies. The remuneration package consists of base salary, fringe benefits and an annual individual performance bonus. The remuneration package is determined by the Board of Directors upon recommendations of the Corporate Governance Committee.

EMPLOYEE SHARE OPTION PLAN

No employee share option plan is available within the Company.

CODE OF ETHICS

The Board has adopted a Code of Ethics reflecting the Company’s values and corporate culture.

PROFILE OF COMPANY’S SHAREHOLDERS AS AT 26 MARCH 2014

Size of Shareholding Number of Shareholders Number of Shares Owned % Holding

1 - 500 888 77,421 1.24501 - 1,000 164 110,477 1.781,001 - 5,000 105 212,806 3.435,001 - 10,000 19 137,133 2.2110,001 - 50,000 21 409,974 6.6050,001 - 100,000 4 273,804 4.41100,001 - 250,000 3 418,260 6.74250,001 - 500,000 3 1,174,140 18.91Over 500,000 1 3,394,707 54.68TOTAL 1,208 6,208,722 100.00

Chemco Limited14

SHAREHOLDER INFORMATION

Forthcoming Annual Meeting

A proxy form is enclosed for those shareholders unable to attend. Shareholders are requested to bring their identity cards or passports to the meeting, as these are required for registration.

Shareholders’ Practical Guide

Issues Action

Change of address Contact the Company’s secretariatIf shares are deposited with CDS Contact personal brokerChange of name Contact the Company’s secretariatAcquisition or disposal of shares Contact personal brokerShare transfers Contact the Company’s secretariatLost share certificate Contact the Company’s secretariatDirect dividend credit Forward the relevant form to the Company’s secretariat

Schedule of Events

Publication of condensed audited results for previous year March 2014Annual Meeting May / June 2014Publication of condensed results for 1st quarter May 2014Publication of condensed results for 2nd quarter August 2014Publication of condensed results for 3rd quarter November 2014Dividend declaration & payment December 2014 / January 2015

SOCIAL, SAFETY AND HEALTH

The Company complies with the Occupational Safety and Health Act 2005 and other legislative and regulatory frameworks. It is committed to sustainable development and ensures that its operations are conducted in a way that minimizes their impact on the environment and on society at large.

The Company ensures that its recruitment and promotion policies are fair and that procedures adopted are both transparent and merit-based. We also promote conscientious business practices whereby we ensure that there is honesty and transparency in all our practices, and the provision of a healthy and safe environment for all employees.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Since its creation in November 2009, the philosophy and priority of ‘Fondation Harel Mallac’ is to help improving the lives of underprivileged and disabled children through educational projects.

In 2013, Fondation Harel Mallac was allocated a CSR fund whereby 50 per cent of the fund was spent on priority areas introduced by the government in January 2011. These were allocated to the Adolescent Non Formal Education Network (ANFEN) whose objective is to develop a non-formal pedagogy to sustain the inclusion of vulnerable out-of-school adolescents. Part of the amount was given to NEF for remedial classes at L’Agrément & La Valette.


SUMMARY BY SHAREHOLDING CATEGORY AS AT 26 MARCH 2014

Category of Shareholders Number of Shareholders Number of Shares Owned % Holding

Individual 1,138 704,259 11.34Insurance and assurance companies 3 94,698 1.52Investment and trust companies 2 101 0.00Other corporate bodies 65 5,409,664 87.13Total 1,208 6,208,722 100.00


CORPORATE SOCIAL RESPONSIBILITY (CSR) (CONT’D)

Several other independent projects which address the education challenges of vulnerable children also benefited from the CSR Fund. The NGOs running these projects were: APDA, APEIM, Association d’Alphabétisation de Fatima, SOS Children’s Village Bambous. The fund also sponsored the project ‘Development of performing arts’ organised by ACSEA for underprivileged children of Ste Catherine and Almas, as well as projects of Atelier Mo’zar, Institut Cardinal Jean Margéot, Mauritian Wildlife Foundation and in line with our focus on education, the fund sponsored the training on ‘Sustainable use of our lagoons and Oceans’ organised by Oceanyka.

In the course of 2013, Fondation Harel Mallac has supported many Not-For-Profit, Non-Governmental Organisations, whose actions were aligned to the foundation’s philosophy. The aim, close to the heart of employees and stakeholders of Harel Mallac Group , remains above all a priority and a major step in the building of a better future for the children and citizens of Mauritius.

PROMOTING A BETTER ENVIRONMENT

The Company strives to improve the environmental impact of our activities by encouraging responsible use of resources in order to ensure quality of life for future generations. The Company has embarked on significant programmes in the use of more environment-friendly products and services, as well as the reduction of electricity and other resources in the conduct of its business.


Chemco Limited16

2013 2012Rs'000 Rs'000

Executive Directors - - Non-executive Directors 499 464

Statutory Disclosures

DIRECTORS' INTERESTS IN SHARES

The interests of the Directors in the shares of the Company as at 31 December 2013 were:

CONTRACTS OF SIGNIFICANCE

There was no contract of significance to which the Company has been a party and in which a director of the Company was materially interested, be it directly or indirectly.

SHAREHOLDERS

At 26 March 2014, the following shareholders were directly or indirectly interested in more than 5 per cent of the Company’s share capital.

Shareholders Interest %Harel Mallac & Co. Ltd. 54.67Flacq United Estates Ltd. 7.42The Mauritius Chemical and Fertilizers Industry Limited 6.52

PRINCIPAL ACTIVITIES

The principal activities of the Company consist of the trading of chemicals and general goods.

DIRECTORS

The Directors of the Company as at 31 December 2013 are listed on pages 6 and 7.

DIRECTORS’ SERVICE CONTRACTS

There are no service contracts between the Company and its Directors.

DIRECTORS’ REMUNERATION AND BENEFITS

Remuneration and benefits received, or due from the Company were:

Directors Direct

Interest Indirect Interest

Antoine L Harel - 196,085Charles Harel - 194,920Jean Yves Corson - -Vincent Labat - -Guy Harel - -Michel Rivalland G.O.S..K - -

CORPORATE SOCIAL RESPONSIBILITY

2013 2012Donations Rs'000 Rs'000Political - - Others - 5 Corporate Social Responsibility 307 555

AUDITORS’ FEES

The fees payable to the auditors, for audit and other services were:

2013 2012Rs’000 Rs’000

Audit fees payable to:- BDO & Co 130 120Fees payable for other services provided by:- BDO & Co 10 10

Other services provided by the auditors of the Company relate to the issue of certificate for stock item in the bonded warehouse.


Statement of Directors’ Responsibilities

The Directors acknowledge their responsibilities for:

1. Adequate accounting records and maintenance of effective internal control systems.2. The preparation of financial statements which fairly present the state of affairs of the Company as at the end of the financial year,

the results of its operations, and cash flow for that year and comply with International Financial Reporting Standards (IFRS).3. The selection of appropriate accounting policies supported by reasonable and prudent judgements.

The External Auditors are responsible for reporting on whether the Company’s financial statements are fairly presented.

The Directors report that:

1. Adequate accounting records and an effective system of internal controls and risk management have been maintained.2. Appropriate accounting policies supported by reasonable and prudent judgements and estimates have been used consistently.3. International Financial Reporting Standards have been adhered to. Any departure in the fair presentation has been disclosed, explained

and quantified.4. The Code of Corporate Governance has been adhered to. Reasons have been provided where there has not been compliance.

Signed on behalf of the Board of Directors on 26 March 2014.



Chemco Limited18

Certificate by Secretary

We certify to the best of our knowledge and belief that the Company has filed with the Registrar of Companies all such returns as are required of the Company under the Companies Act 2001.

For HM Secretaries Ltd.Secretary

26 March 2014


Independent Auditors’ Report to the Members

This report is made solely to the members of Chemco Limited (the “Company”), as a body, in accordance with Section 205 of the Companies Act 2001. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Report on the Financial Statements

We have audited the financial statements of Chemco Limited on pages 22 to 53 which comprise the statement of financial position at 31 December 2013 and the statement of profit or loss, statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Directors’ Responsibility for the Financial Statements

The directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in compliance with the requirements of the Companies Act 2001, and for such internal control as the directors determine is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements on pages 22 to 53 give a true and fair view of the financial position of the Company at 31 December 2013 and of their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with the Companies Act 2001.

Report on Other Legal and Regulatory Requirements

Companies Act 2001

We have no relationship with, or interests in, the Company, other than in our capacity as auditors, business advisers and dealings in the ordinary course of business.

We have obtained all information and explanations we have required.

In our opinion, proper accounting records have been kept by the Company as far as it appears from our examination of those records.

Financial Reporting Act 2004

The Directors are responsible for preparing the corporate governance report. Our responsibility is to report the extent of compliance with the Code of Corporate Governance as disclosed in the annual report and on whether the disclosure is consistent with the reuirements of the Code.

In our opinion, the disclosure in the annual report is consistent with the requirements of the Code.

BDO & Co Rookaya Ghanty, FCCAChartered Accountants Licensed by FRC

Port Louis,Mauritius.

26 March 2014

Chemco Limited20

Statement of Financial Position

Statement of Profit or Loss

Statement of Profit or Loss and Other Comprehensive Income

Statement of Changes in Equity

Statement of Cash Flows

Notes to the Financial Statements

22

23

24

25

26

27

Financial Statements


Statement of Financial Position At 31 December 2013

Notes 20132012

Restated

As at1 January 2012

RestatedRs Rs Rs

ASSETS

Non-current assetsProperty, plant and equipment 5 9,817,056 11,090,646 13,206,705 Investments in financial assets 7 48,768 56,896 87,986

9,865,824 11,147,542 13,294,691 Current assetsInventories 9 68,754,202 71,031,568 56,220,839 Trade and other receivables 10 82,608,044 99,656,751 83,447,650 Cash and cash equivalents 27(b) 10,429,353 1,454,618 3,214,197

161,791,599 172,142,937 142,882,686

Total assets 171,657,423 183,290,479 156,177,377

EQUITY AND LIABILITIES

Capital and reservesShare capital 11 6,208,722 6,208,722 6,208,722 Share premium 5,518,864 5,518,864 5,518,864 Other reserves (1,421,702) (1,802,988) (1,678,605)Retained earnings 89,467,943 87,854,844 82,884,407 Owners’ interest 99,773,827 97,779,442 92,933,388

LIABILITIESNon-current liabilitiesDeferred tax liabilities 13 9,423 105,906 149,361 Retirement benefit obligations 8 2,791,577 2,167,791 1,676,712

2,801,000 2,273,697 1,826,073 Current liabilitiesTrade and other payables 14 62,067,075 53,238,700 35,146,760 Current tax liabilities 15(a) 806,799 972,155 1,932,331 Borrowings 16 - 22,817,763 18,130,103 Dividends 17 6,208,722 6,208,722 6,208,722

69,082,596 83,237,340 61,417,916

Total liabilities 71,883,596 85,511,037 63,243,989

Total equity and liabilities 171,657,423 183,290,479 156,177,377

These financial statements have been approved for issue by the Board of Directors on 26 March 2014.

The notes on pages 27 to 53 form an integral part of these financial statements.Auditors’ report on page 20.



Chemco Limited22

Statement of Profit or LossYear ended 31 December 2013

Notes 2013 2012Rs Rs

Revenue 2.14, 18 306,263,328 324,134,974 Cost of sales 24 (241,613,002) (255,667,584)Gross profit 64,650,326 68,467,390 Other income 19 1,216,842 2,920,039 Other (losses)/gains - net 20 (225,761) 563,850 Operating expenses 24 (56,968,634) (57,120,930)

8,672,773 14,830,349 Finance income/(costs) 21 695,978 (1,394,432)Profit before taxation 23 9,368,751 13,435,917 Income tax expense 15(b) (1,546,931) (2,256,758)Profit for the year 7,821,820 11,179,159

Profit attributable to owners of the parent 7,821,820 11,179,159

Earnings per share (Rs/share) 26 1.26 1.80



Statement of Profit or Loss andOther Comprehensive IncomeYear ended 31 December 2013

Note 2013Restated

2012Rs Rs

Profit for the year 7,821,820 11,179,159

Other comprehensive income for the year:Items that will not be reclassified to profit or loss:Remeasurement of defined benefit obligations 12 389,414 (93,293)

Items that may be reclassified subsequently to profit or loss:Decrease in fair value of available-for-sale financial assets 12 (8,128) (31,090)

Other comprehensive income for the year, net of tax 381,286 (124,383)

Total comprehensive income for the year 8,203,106 11,054,776

Total comprehensive income attributable to owners of the parent 8,203,106 11,054,776


Chemco Limited24

Statement of Changes in EquityYear ended 31 December 2013

Not

esS

hare

cap

ital

Sh

are

pre

miu

mF

air

val

ue

re

serv

e

Act

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gain

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ings

To

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Rs

Rs

Rs

Rs

Rs

Rs

At

1 Ja

nuar

y 20

13-

as p

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port

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5

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3

6,57

6 -

8

7,85

4,84

5 9

9,61

9,00

7 -

effe

ct o

f ado

ptin

g IA

S 19

(R

evis

ed)

-

-

-

(1,

839,

564)

-

(1,

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564)

- as

res

tate

d 6

,208

,722

5

,518

,864

3

6,57

6 (

1,83

9,56

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7,85

4,84

5 9

7,77

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3

Profi

t fo

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ar -

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7

,821

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O

ther

com

preh

ensi

ve in

com

e fo

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ar12

-

-

(8,

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389

,414

-

3

81,2

86

Tota

l com

preh

ensi

ve in

com

e fo

r th

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ar -

-

(

8,12

8) 3

89,4

14

7,8

21,8

20

8,2

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Div

iden

ds17

-

-

-

-

(6,

208,

722)

(6,

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722)

Tota

l tra

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with

ow

ners

of t

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aren

t -

-

-

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(

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8,72

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6,20

8,72

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t 31 D

ece

mb

er

20

13

6,2

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5,5

18

,86

4

28

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8

(1,4

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89

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7,9

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9,7

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7

At

1 Ja

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y 20

12-

as p

revi

ousl

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port

ed 6

,208

,722

5

,518

,864

6

7,66

6 -

8

2,88

4,40

7 9

4,67

9,65

9 -

effe

ct o

f ado

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(R

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(1,

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(1,

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- as

res

tate

d 6

,208

,722

5

,518

,864

6

7,66

6 (

1,74

6,27

1) 8

2,88

4,40

7 9

2,93

3,38

8

Profi

t fo

r th

e ye

ar -

-

-

-

1

1,17

9,15

9 1

1,17

9,15

9 O

ther

com

preh

ensi

ve in

com

e fo

r th

e ye

ar12

-

-

(31

,090

) (

93,2

93)

-

(12

4,38

3)To

tal c

ompr

ehen

sive

inco

me

for

the

year

-

-

(31

,090

) (

93,2

93)

11,

179,

159

11,

054,

776

Div

iden

ds17

-

-

-

-

(6,

208,

722)

(6,

208,

722)

Tota

l tra

nsac

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with

ow

ners

of t

he p

aren

t -

-

-

-

(

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Bal

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t 31 D

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mb

er

20

12

(re

stat

ed

) 6

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5

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6,5

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) 8

7,8

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4

97

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9,4

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The

not

es o

n pa

ges

27 t

o 53

form

an

inte

gral

par

t of

the

se fi

nanc

ial s

tate

men

ts.

Aud

itors

’ rep

ort

on p

age

20.


Statement of Cash FlowsYear ended 31 December 2013

Notes 2013 2012Rs Rs

Cash flow from operating activitiesCash generated from operations 27(a) 42,847,145 7,477,279 Interest paid (984,029) (3,405,726)Tax paid (1,877,490) (3,243,926)Net cash generated from operating activities 39,985,626 827,627

Cash flows from investing activitiesPurchase of property, plant and equipment 5 (2,180,053) (1,491,636)Proceeds from sale of property, plant and equipment - 301,858 Dividend received 2,032 2,032 Net cash used in investing activities (2,178,021) (1,187,746)

Cash flows from financing activitiesDividends paid 17 (6,208,722) (6,208,722)Net cash used in financing activities (6,208,722) (6,208,722)

Net increase/(decrease) in cash and cash equivalents 31,598,883 (6,568,841)

Movement in cash and cash equivalentsAt 1 January (21,363,145) (14,915,906)Increase/(decrease) 31,598,883 (6,568,841)Effect of foreign exchange rate changes 193,615 121,602 At 31 December 27(b) 10,429,353 (21,363,145)


Chemco Limited26

1. GENERAL INFORMATION

Chemco Limited is a public company incorporated and domiciled in Mauritius. The address of its registered office is Chaussée Tromelin, Fort George, Port Louis. Its main activity is the trading of chemicals and general goods.

The Company is listed on the Development & Enterprise Market (DEM) of the Stock Exchange of Mauritius.

The directors consider Harel Mallac & Co. Ltd., incorporated in the Republic of Mauritius as the holding company and Société Pronema, an entity registered in the Republic of Mauritius as the ultimate parent entity.

These financial statements will be submitted for consideration and approval at the forthcoming Annual Meeting of Shareholders of the Company.

2. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The financial statements of Chemco Limited comply with the Companies Act 2001 and have been prepared in accordance with International Financial Reporting Standards (IFRS). Where necessary, comparative figures have been amended to conform with changes in presentation in the current year. The financial statements are prepared under the historical cost convention, except that available-for-sale investments are stated at their fair value.

These financial statements are that of an individual entity. The financial statements are presented in Mauritian Rupees.

(a) Standards, Amendments to published Standards and Interpretations effective in the reporting period

Amendment to IAS 1, ‘Financial statement presentation’ regarding other comprehensive income. The main change resulting from these amendments is a requirement for entities to group items presented in ‘other comprehensive income’ (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments).

IFRS 10, ‘Consolidated financial statements’ builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the

determination of control where this is difficult to assess. The standard is not expected to have any impact on the Company’s financial statements.

IAS 27, 'Separate Financial Statements' deals solely with separate financial statements. The standard has no impact on the Company's financial statements.

IFRS 11, ‘Joint arrangements’ focuses on the rights and obligations of the parties to the arrangement rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. Joint operations arise where the investors have rights to the assets and obligations for the liabilities of an arrangement. A joint operator accounts for its share of the assets, liabilities, revenue and expenses. Joint ventures arise where the investors have rights to the net assets of the arrangement; joint ventures are accounted for under the equity method. Proportional consolidation of joint arrangements is no longer permitted. The standard is not expected to have any impact on the Company’s financial statements.

IAS 28, ‘Investments in Associates and Joint Ventures’. The scope of the revised standard covers investments in joint ventures as well. IFRS 11 requires investments in joint ventures to be accounted for using the equity method of accounting. The standard has no impact on the Company’s financial statements.

IFRS 12, ‘Disclosures of interests in other entities’ includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, structured entities and other off balance sheet vehicles. The standard has no impact on the Company’s financial statements.

IFRS 13, ‘Fair value measurement’, aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs.

IAS 19, ‘Employee benefits’ was revised in June 2011. The changes on the Company’s accounting policies has been as follows: to immediately recognise all past service costs; and to replace interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit liability (asset). See note 32 for the impact on the financial statements.

IFRIC 20, ‘Stripping costs in the production phase of a surface mine’, has no impact on the Company’s financial statements.

Amendment to IFRS 7, ‘Financial instruments: Disclosures’, on asset and liability offsetting. This amendment includes new disclosures and is not expected to have any impact on the Company’s financial statements.

Notes to the Financial StatementsYear ended 31 December 2013


Amendment to IFRS 1 (Government Loans) has no impact on the Company’s financial statements.

Annual Improvements to IFRSs 2009-2011 Cycle

IFRS 1 (Amendment), ‘First time adoption of IFRS’, has no impact on the Company’s operations.

IAS 1 (Amendment), ‘Presentation of financial statements’, clarifies the disclosure requirements for comparative information when an entity provides a third balance sheet either as required by IAS 8, ‘Accounting policies, changes in accounting estimates and errors’ or voluntarily.

IAS 16 (Amendment), ‘Property, plant and equipment’, clarifies that spare parts and servicing equipment are classified as property, plant and equipment rather than inventory when they meet the definition of property, plant and equipment. The amendment does not have an impact on the Company’s operations.

IAS 32 (Amendment), ‘Financial instruments: Presentation’, clarifies the treatment of income tax relating to distributions and transaction costs. The amendment does not have an impact on the Company’s operations.

IAS 34 (Amendment), ‘Interim financial reporting’, clarifies the disclosure requirements for segment assets and liabilities in interim financial statements.

(b) Standards, Amendments to published Standards and Interpretations issued but not yet effective

Certain standards, amendments to published standards and interpretations have been issued that are mandatory for accounting periods beginning on or after 1 January 2014 or later periods, but which the Company has not early adopted.

At the reporting date of these financial statements, the following were in issue but not yet effective:

IFRS 9 Financial InstrumentsIAS 32 Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)IFRIC 21: LeviesRecoverable Amount Disclosures for Non-financial Assets (Amendments to IAS 36)Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39)IFRS 9 Financial instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39)Defined Benefit Plans: Employee Contributions (Amendments to IAS 19)

Annual Improvements to IFRSs 2010-2012 cycleAnnual Improvements to IFRSs 2011-2013 cycle

Where relevant, the Company is still evaluating the effect of these Standards, amendments to published Standards and Interpretations issued but not yet effective, on the presentation of its financial statements.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 4.

2.2. Property, plant and equipment

Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the assets carrying amount or recognised as a separate asset as appropriate, only when it is probable that the future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably.

Depreciation is calculated on a straight line method to write off the cost or revalued amounts of the assets to their residual values over their estimated useful lives as follows:

YearsPlant and machinery 10Furniture, fittings and office equipment 3 - 10Motor vehicles 5Forklift 5

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

Gains and losses on disposals of property, plant and equipment are determined by comparing proceeds with carrying amount and are included in the income statement.

2.3. Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average basis. The cost of finished goods comprises purchase cost and other direct costs. Net realisable value is the estimated selling price in the ordinary course of business less the costs of completion and applicable variable selling expenses.

2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

2.1 Basis of preparation (cont’d)

(a) Standards, Amendments to published Standards and Interpretations effective in the reporting period (cont’d)

Notes to the Financial Statements Year ended 31 December 2013

Chemco Limited28


2.4. Foreign currencies

(i) Functional and presentation currencyItems included in the financial statements are measured using Mauritian rupees, the currency of the primary economic environment in which the entity operates (“functional currency”).

(ii) Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing on the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in profit or loss within ‘finance income/(costs)’. Foreign exchange gains and losses that relate to trade payables and purchases are presented in profit or loss within ‘cost of sales’. All other foreign exchange gains and losses are presented in profit or loss within ‘other gains/(losses) - net’.

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date the fair value was determined.

2.5. Deferred income tax

Deferred income tax is provided in full, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for.

Deferred income tax is determined using tax rates that have been enacted by the end of the reporting period and are expected to apply in the period when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which deductible temporary differences can be utilised.

2.6. Alternative Minimum Tax (AMT)

Alternative Minimum Tax (AMT) is provided for, where the Company, which has a tax liability of less than 7.5% of its book profit, pays a dividend. AMT is calculated as the lower of 10% of the dividend paid and 7.5% of book profit.

2.7. Retirement benefit obligations

(i) Defined contribution plansA defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

The Company operates a defined contribution retirement benefit plan for all qualifying employees. Payments to deferred contribution retirement plans are charged as an expense as they fall due.

(ii) Defined benefit plansA defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognised in the statements of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.

Remeasurement of the net defined benefit liability, which comprise actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), is recognised immediately in other comprehensive income in the period in which they occur. Remeasurements recognised in other comprehensive income shall not be reclassified to profit or loss in subsequent period.

The Company determines the net interest expense/(income) on the defined benefit liability/(asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability/(assets), taking into account any changes in the net defined liability/(asset) during the period as a result of contributions and benefit payments. Net interest expense/(income) is recognised in profit or loss.

Service costs comprising current service cost, past service cost, as well as gains and losses on curtailments and settlements are recognised immediately in profit or loss.

(iii) Gratuity on retirementFor those employees who are not covered (or who are insufficiently covered) by the above pension plans, the net present value of gratuity on retirement payable under the Employment Rights Act 2008 is calculated by a qualified actuary and provided for. The obligations arising under this item are not funded.



(iv) Profit sharing and bonus plansThe Company recognises a liability and an expense for bonuses and profit sharing, based on a formula that takes into consideration the profit attributable to the Company’s shareholders after certain adjustments. The Company recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

2.8. Financial assets

(a) Categories of financial assetsThe Company classifies its financial assets in the following categories : available-for-sale financial assets and loans and receivables. The classification depends on the purpose for which the investments were acquired. Management determines the classification of the financial assets at initial recognition.

(i) Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within twelve months of the end of the reporting period.

(ii) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost less any impairment. They are included in current assets when maturity is within twelve months after the end of the reporting period or non-current assets for maturities greater than twelve months.

The Company’s loans and receivables comprise of cash and cash equivalents, and trade and other receivables.

(b) Recognition and measurementPurchases and sales of financial assets are recognised on trade-date (or settlement date), the date on which the Company commits to purchase or sell the asset. Investments are initially measured at fair value plus transaction costs.

Unrealised gains and losses arising from changes in the fair value of financial assets classified as available-for-sale are recognised in other comprehensive income.

When financial assets classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in profit or loss as gains and losses on financial assets.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Company establishes fair value by using

valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same and capitalised earnings method.

(c) Impairment of financial assets(i) Financial assets classified as available-for-saleThe Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss, measured as the difference between acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in profit or loss.

Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available-for-sale are not reversed through profit or loss

(ii) Financial assets carried at amortised costFor loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective rate. The carrying amount of the asset is reduced and, the amount of the loss is recognised in profit or loss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

2.9. Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables.

The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of provision is recognised in profit or loss.


2.7. Retirement benefit obligations (cont’d)


Chemco Limited30

2.10. Borrowings

Borrowings are recognised initially at fair value being their issue proceeds net of transaction costs incurred.

Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least twelve months after the end of the reporting period.

2.11. Trade and other payables

Trade and other payables are stated at fair value and subsequently measured at amortised cost using the effective interest method.

2.12. Cash and cash equivalents

Cash and cash equivalents include cash in hand and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.

2.13. Share capital

Ordinary sharesOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as deduction, net of tax, from proceeds.

2.14. Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, stated net of discounts, returns, value added taxes, rebates and other similar allowances.

(i) Sale of goodsSales of goods are recognised when the goods are delivered and titles have passed, at which time all of the following conditions are satisfied:- the Company has transferred to the buyer the significant risk

and rewards of ownership of the goods;- the Company retains neither continuing managerial involvement

to the degree usually associated with ownership nor effective control over the goods sold

- the amount of revenue can be measured reliably;- it is probable that the economic benefits associated with the

transaction will flow to the Company; and- the costs incurred or to be incurred in respect of the transaction

can be measured reliably.

(ii) Rendering of servicesRevenue from rendering of services are recognised in the accounting year in which the services are rendered (by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of total services to be provided).

Other revenues earned by the Company are recognised on the following bases:- Interest income - on a time-proportion basis using the effective

interest method.- Dividend income - when the shareholder’s right to receive

payment is established.

2.15. Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the Company’s financial statements in the period in which the dividends are declared.

2.16. Provisions

Provisions are recognised when the Company has a present or constructive obligation as a result of past events; it is probable that an outflow of resources that can be reliably estimated will be required to settle the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).

2.17. Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).




3. FINANCIAL RISK MANAGEMENT

3.1 Financial Risk Factors

The Company's activities expose it to a variety of financial risks, namely market risk (including currency risk, fair value interest risk, cash flow interest risk and price risk), credit risk and liquidity risk.

The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance.

(a) Market risk

(i) Currency riskThe Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures primarily with respect to US dollar, Euro and South African Rand. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities.

At 31 December 2013, if the rupee had weakened/strengthened by 5% against the US Dollar, Euro and South African Rand with all other variables held constant, post tax profit would have changed as follows:

2013 2012Rs Rs

Impact of ±5% movement:Post tax profit 977,063 358,898

Currency profile EUROSouth African

Rand US dollarRs Rs Rs

2013Financial assetsTrade and other receivables - - 14,099,052 Cash and cash equivalents - - 2,756,085

Financial liabilitiesTrade and other payables - - 40,430,148

2012Financial assetsTrade and other receivables 28,420 - 15,362,516 Cash and cash equivalents - - 1,439,618

Financial liabilitiesTrade and other payables - 1,610,556 23,664,656

(ii) Price risk

The market prices of the Company’s available-for-sale quoted investment securities are susceptible to future fluctuations.

Sensitivity analysisThe table below summarises the impact of increases/decreases in the fair value of the investments on the Company’s equity. The analysis is based on the assumption that the fair value has increased/decreased by 5%.

Impact on equity2013 2012Rs Rs

Available-for-sale financial assets 2,438 2,845


Chemco Limited32

(b) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s trade receivables. The amounts presented in the statements of financial position are net of allowances for doubtful receivables, estimated by the Company’s management based on prior experience and the current economic environment. The Company has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history.

The Company has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

The Company has policies that limit the amount of credit exposure to any company.

(c) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivery of cash or another financial asset.

Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities. The Company aims at maintaining flexibility in funding by keeping committed credit lines available.

Management monitors rolling forecasts of the Company’s liquidity reserve on the basis of expected cash flows and does not foresee any major liquidity risk over the next two years.

(d) Cash flow and fair value interest rate risk

The Company’s interest rate risk arises from short-term borrowings. Borrowings issued at variable rates expose the Company to cash flow interest-rate risk.

At 31 December 2013, if interest rates on borrowings had been 50 basis points higher/lower with all other variables held constant, post tax profit for the year would have been RsNil (2012: Rs160,699) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings.

3.2 Capital risk management

The Company’s objectives when managing capital are:- to safeguard the Company’s ability to continue as a going

concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders,

- to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

The Company sets the amount of capital in proportion to risk. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, or sell assets to reduce debt.

Consistent with others in the industry, the Company monitors capital on the basis of the debt-to-adjusted capital ratio. This ratio is calculated as net debt adjusted capital. Net debt is calculated as total debt (as shown in the statement of financial position) less cash and cash equivalents. Adjusted capital comprises all components of equity (i.e., share capital, share premium, fair value reserve, actuarial (losses)/gains reserve, and retained earnings).

During the year, the Company’s strategy, which was unchanged from 2012, was to maintain the debt-to-adjusted capital ratio at the lower end in order to secure access to finance at a reasonable cost. The debt-to-adjusted capital ratios at 31 December 2013 and at 31 December 2012 were as ‘follows:

The debt-to-capital ratio at 31 December 2013 and 2012 were as follows:

There were no changes in the Company’s approach to capital risks management during the year.

3. FINANCIAL RISK MANAGEMENT (CONT’D)

3.1 Financial Risk Factors (cont’d)

The table below analyses the Company’s non-derivative financial liabilities based on the remaining period at the end of the reporting period:

Less than1 year

RsAt 31 December 2013Trade and other payables 62,067,075

At 31 December 2012Bank borrowings 22,817,763 Trade and other payables 53,238,700

Forecasted liquidity reserve is as follows: 2014Rs’000

Net cash flows from operating activities 6,250 Net cash flows from investing activities (9,960)Net cash flows from financing activities (4,346)Increase (8,056)Opening balance 10,429 Closing balance 2,373

2013 2012Rs Rs

Debt (note 16) - 22,817,763 Less: cash and cash equivalents (note 27(b)) (10,429,353) (1,454,618)Net debt (10,429,353) 21,363,145

Total equity 99,773,827 97,779,442

Debt-to-capital-ratio - 0.21 : 1



The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Company is the current bid price. These instruments are included in level 1. Instruments included in level 1 comprise primarily of quoted equity investments classified as trading securities or available-for-sale.

If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

4.1 Critical accounting estimates and assumptions

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are disclosed below.

(a) Depreciation policies

Property, plant and equipment are depreciated to their residual values over their estimated useful lives. The residual value of an asset is the estimated net amount that the Company would currently obtain from disposal of the asset, if the asset were already of the age and in condition expected at the end of its useful life.

The directors therefore make estimates based on historical experience and use best judgement to assess the useful lives of assets at the end of their expected useful lives.

(b) Limitation of sensitivity analysis

Sensitivity analysis in respect of market risk demonstrates the effect of a change in a key assumption while other assumptions remain unchanged. In reality, there is a correlation between the assumptions and other factors. It should also be noted that these

sensitivities are non-linear and larger or smaller impacts should not be interpolated or extrapolated from these results.

Sensitivity analysis does not take into consideration that the Company’s assets and liabilities are managed. Other limitations include the use of hypothetical market movements to demonstrate potential risk that only represent the Company’s view of possible near-term market changes that cannot be predicted with any certainty.

(c) Asset lives and residual values

Property, plant and equipment are depreciated over its useful life taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In reassessing asset lives, factors such as technological innovation and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. Consideration is also given to the extent of current profits and losses on the disposal of similar assets.

(d) Pension benefits

The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net costs for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations.

The Company determines the appropriate discount rate at the end of each year. This is the interest that should be used to determine the present value of estimated future cash flows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the Company considers the interest rate of long-term government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension obligation.

Other key assumptions for pension obligations are based in part on current market conditions. Additional information is disclosed in note 8.

(e) Impairment of available-for-sale financial assets

The Company follows the guidance of IAS 39 on determining when an investment is other-than-temporarily impaired. This determination requires significant judgement. In making this judgement, the Company evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost, and the financial health of and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

3. FINANCIAL RISK MANAGEMENT (CONT’D)

3.3 Fair value estimation


Chemco Limited34

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Chemco Limited36

7. INVESTMENTS IN FINANCIAL ASSETS

(a) The movement in investments in financial assets may be summarised as follows:2013 2012Rs Rs

Available-for-sale financial assetsAt 1 January 56,896 87,986 Decrease in fair value (8,128) (31,090)At 31 December 48,768 56,896

(b) Level 1 Rs

At 31 December 2013Available-for-sale financial assets 48,768

Level 1 Rs

At 31 December 2012Available-for-sale financial assets 56,896

(c) Available-for-sale securities comprise of quoted investments. The fair value of listed securities is based on The Stock Exchange of Mauritius Ltd’s share prices at the close of business at the end of the reporting date.

Available-for-sale financial assets are denominated in Mauritian rupees.

8. RETIREMENT BENEFIT OBLIGATIONS2013 Restated 2012Rs Rs

Amounts recognised in the statement of financial position:- Defined pension benefits (note 8(a)(i)) 938,534 941,984 - Other post-retirement benefits (note 8(b)(ii)) 1,853,043 1,225,807

2,791,577 2,167,791

Analysed as follows:Non-current liabilities 2,791,577 2,167,791

Amount charged to profit or loss:- Defined pension benefits (note 8(a)(v)) 882,695 561,278 - Other post-retirement benefits (note 8(b)(v)) 624,225 245,045

1,506,920 806,323

Amount credited/(charged) to other comprehensive income:- Defined pension benefits (note 8(a)(vi)) 461,145 (632,385)- Other post-retirement benefits (note 8(b)(vi)) (3,011) 522,629

458,134 (109,756)



8. RETIREMENT BENEFIT OBLIGATIONS (CONT'D)

(a) Defined pension benefits

The Company operates a defined benefit pension. The plan is a final salary plan, which provides benefits to members in the form of a guaranteed level of pension payable for life and a benefit on death or disablement in service before retirement. The level of benefits provided depends on members' length of service and their salary in the final years leading up to retirement.

The assets of the plan are independently administered by The Anglo Mauritius Assurance Society Ltd.

The most recent actuarial valuation of the plan assets and the present value of the defined benefit obligations were carried out at 31 December 2013 by The Anglo Mauritius Assurance Society Ltd. The present value of the defined benefit obligations, and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

The assets of the plan in respect of staff members are invested in Anglo Mauritius' deposit administration fund. The latter is expected to produce a smooth progression of return from one year to the next. The breakdown of the assets above corresponds to a notional allocation of the underlying investments based on the long term strategy of the fund.

As the fund is expected to produce a smooth return, a fairly reasonable indication of future returns can be obtained by looking at historical ones. Therefore, the long term expected return on asset assumption has been based on historical performance of the fund.

In terms of the individual expected returns, the expected return on equities has been based on an equity risk premium above a risk free rate. The risk free rate has been measured in accordance to the yields on government bonds at the measurement date.

The fixed interest portfolio includes government bonds, debentures. mortgages and cash. The expected return for this asset class has been based on yields of government bonds at the measurement date.

The assets of the plan is based on the reserves held for the Deferred Annuity policies for statutory purposes. This asset value is a notional value and assumes that the scheme is on a going concern.

(i) The amounts recognised in the statement of financial position are as follows:

2013Restated

2012Rs Rs

Present value of funded obligations 10,288,175 9,461,244 Fair value of plan assets (9,349,641) (8,519,260)Liability in the statement of financial position 938,534 941,984


Chemco Limited38


(a) Pension benefits (cont'd)

(ii) The reconciliation of the opening balances to the closing balances for the net defined benefit liability is as follows:

2013Restated

2012Rs Rs

At 1 January- as previously reported (1,571,774) (1,708,052)- effect of adopting IAS 19 (Revised) 2,513,758 1,881,373 - as restated 941,984 173,321 Charged to profit or loss (note 8(a)(v)) 882,695 561,278 (Credited)/charged to other comprehensive income (note 8(a)(vi)) (461,145) 632,385 Contributions paid (425,000) (425,000)At 31 December 938,534 941,984

(iii) The movement in the defined benefit obligation over the year is as follows:2013 2012Rs Rs

At 1 January 9,461,244 8,072,377 Current service cost 509,570 446,689 Interest cost 846,211 778,573 Past service cost 160,410 - Actuarial (gains)/losses (689,260) 365,385 Benefits paid - (201,780)At 31 December 10,288,175 9,461,244

(iv) The movement in the fair value of plan assets of the year is as follows:2013 2012Rs Rs

At 1 January 8,519,260 7,899,056 Expected return on plan assets 737,768 743,408 Actuarial losses (228,115) (267,000)Employer contributions 425,000 425,000 Scheme expenses (11,488) (15,036)Cost of insuring risk benefits (92,784) (64,388)Benefits paid - (201,780)At 31 December 9,349,641 8,519,260




(a) Pension benefits (cont'd)

(v) The amounts recognised in profit or loss are as follows:

2013Restated

2012Rs Rs

Current service cost 509,570 446,689 Interest cost 846,211 778,573 Expected return on plan assets (737,768) (743,408)Scheme expenses 11,488 15,036 Cost of insuring risks benefits 92,784 64,388 Past service cost 160,410 - Total included in employee benefit expense (note 25) 882,695 561,278

The total included in employee benefit expense is included in operating expenses in the statement of profit or loss.

Actual return on plan assets 509,653 476,408

(vi) The amounts recognised in other comprehensive income are as follows:

2013Restated

2012Rs Rs

Remeasurement on the net defined benefit liability: Liability experience gains/(losses) 1,047,662 (293,222)Losses on pension scheme assets (228,115) (267,000)Actuarial losses arising from changes in financial assumptions (358,402) (72,163)Actuarial gains/(losses) recognised 461,145 (632,385)

(vii) The fair value of the plan assets at the end of the reporting period for each category are as follows:

2013 2012Rs Rs

Local equities 3,384,909 3,046,939 Overseas equities 2,030,945 1,828,163 Fixed interest 3,159,249 2,843,809 Properties 451,321 406,258 Insured contracts 323,217 394,091 Total market value of assets 9,349,641 8,519,260

The fair values of the above equity and debt instruments are determined based on quoted market prices in active markets whereas the fair values of properties and derivatives are not based on quoted market prices in active markets.


Chemco Limited40


2013 2012 2011 2010 2009 Rs Rs Rs Rs Rs

(viii) Present value of defined benefit obligation 10,288,175 9,461,244 8,072,377 8,088,390 9,871,020 Fair value of plan assets (9,349,641) (8,519,260) (7,899,056) (8,798,190) (9,617,667)Deficit/(surplus) 938,534 941,984 173,321 (709,800) 253,353 Liability experience gains/(losses) during the year 689,260 (365,385) (472,104) 1,126,077 (1,545,022)Asset experience losses during the year (228,115) (267,000) (240,473) (266,250) (483,601)

(ix) The principal actuarial assumptions used for the purposes of the actuarial valuations were:

2013 2012% %

Discount rate 7.00 8.50 Expected return on plan assets 7.00 8.50 Future salary increases 5.00 6.50

(x) Sensitivity analysis on defined benefit obligations at the end of the reporting period:

Increase Decrease Rs Rs

Discount rate (1% increase) - 909,664 Future salary growth (1% increase) 779,001 -

An increase/decrease of 1% in other principal actuarial assumptions would not have a material impact on defined benefit obligations at the end of the reporting period.

The sensitivity above have been determined based on a method that extrapolates the impact on net defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. The present value of the defined benefit obligation has been calculated using the projected unit credit method.

The sensitivity analysis may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.

(xi) The defined benefit pension plan exposes the Company to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk.

(xii) The funding requirements are based on the pension fund's actuarial measurement framework set out in the funding policies of the plan.




(xiii) The Company expects to pay Rs539,120 in contributions to its post-employment benefit plans for the year ending 31 December 2014.

(xiv) The weighted average duration of the defined benefit obligations as at 31 December 2013 is 9 years.

(b) Other post-retirement benefits

(i) Other post-retirement benefits comprise of retirement gratuity payable under the Employment Rights Act 2008.

(ii) The amounts recognised in the statement of financial position are as follows:

2013Restated

2012Rs Rs

Liability in the statement of financial position 1,853,043 1,225,807

(iii) The reconciliation of the opening balances to the closing balances for the net defined benefit liability is as follows:

2013Restated

2012Rs Rs

At 1 January- as previously reported 1,575,372 1,330,327 - effect of adopting IAS 19 (Revised) (349,565) 173,064 - as restated 1,225,807 1,503,391 Charged to profit or loss (note 8(b)(v)) 624,225 245,045 Charged/(credited) to other comprehensive income (note 8(b)(vi)) 3,011 (522,629)At 31 December 1,853,043 1,225,807

(iv) The movement in the defined benefit obligation over the year is as follows:2013 2012Rs Rs

At 1 January 1,225,807 1,503,391 Current service cost 74,249 97,008 Interest cost 110,505 148,037 Past service cost 439,471 - Actuarial losses/(gains) 3,011 (522,629)At 31 December, 1,853,043 1,225,807


Chemco Limited42


(b) Other post-retirement benefits (cont'd)

(v) The amounts recognised in profit or loss are as follows: 2013 2012Rs Rs

Current service cost 74,249 97,008 Past service cost 439,471 - Interest cost 110,505 148,037 Total included in employee benefit expense (note 25) 624,225 245,045

The total included in employee benefit expense is included in operating expenses in the statement of profit or loss.

(vi) The amounts recognised in other comprehensive income are as follows:2013 Restated 2012Rs Rs

Remeasurement on the net defined benefit liability: Liability experience (losses)/gains (11,274) 522,629 Actuarial gains arising from changes in financial assumptions 8,263 - Actuarial (losses)/gains recognised (3,011) 522,629

(vii) Sensitivity analysis on defined benefit obligations at the end of the reporting period: Increase Decrease

Rs Rs

Discount rate (1% increase) - 268,627 Future salary growth (1% increase) 530,234 -

An increase/decrease of 1% in other principal actuarial assumptions would not have a material impact on defined benefit obligations at the end of the reporting period.

(viii) 2013 2012 2011 2010 2009 Rs Rs Rs Rs Rs

Present value of defined benefit obligation 1,853,043 1,225,807 1,503,391 1,329,048 1,046,667

Deficit 1,853,043 1,225,807 1,503,391 1,329,048 1,046,667

Liability experience (losses)/gains during the year (3,011) 522,629 60,309 (93,579) 64,442



9. INVENTORIES2013 2012Rs Rs

Finished goods 63,859,237 67,966,267 Containers and tools 1,222,459 396,112 Goods in transit 3,672,506 2,669,189

68,754,202 71,031,568

(a) The cost of inventories recognised as expense and included in cost of sales amounted to Rs241,613,002 (2012: Rs255,667,584).

(b) The bank borrowings are secured by floating charges on the assets of the Company including inventories (Note 16).

10. TRADE AND OTHER RECEIVABLES2013 2012Rs Rs

Trade receivables 76,304,136 85,691,832 Less: provision for impairment (220,868) -

76,083,268 85,691,832 Receivables from related companies 4,173,390 12,514,473 Prepayments 2,040,311 371,932 Other receivables 311,075 1,078,514

82,608,044 99,656,751

The carrying amount of trade and other receivables approximate their fair value.

At 31 December 2013, trade receivables of Rs220,868 were impaired (2012: Rsnil). The amount of provision was Rs220,868 as at 31 December 2013 (2012: Rsnil). These relate to three customers for whom there is no recent history of default. The ageing analysis is as follows:

2013 2012Rs Rs

Over 6 months 220,868 -

At 31 December 2013, trade receivables of Rs5.9 million (2012: Rs5.5 million) were past due but not impaired. These relate to independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:

2013 2012Rs Rs

3 to 6 months 4,502,172 5,193,991 Over 6 months 1,475,058 305,599

5,977,230 5,499,590

The carrying amount of the trade and other receivables are denominated in the following currencies:

2013 2012Rs Rs

Rupee 68,508,992 84,265,815 US Dollar 14,099,052 15,362,516 Euro - 28,420

82,608,044 99,656,751


Chemco Limited44

10. TRADE AND OTHER RECEIVABLES (CONT'D)

Movements on the provision for impairment of trade receivables are as follows:2013 2012Rs Rs

(b) At 1 January - - Provision for receivable impairment 222,559 23,180 Receivables written off during the year as uncollectible (1,691) (23,180)At 31 December 220,868 -

The other classes within trade and other receivables do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Company does not hold any collateral as security.

11. SHARE CAPITAL2013 2012Rs Rs

Authorised12,417,444 ordinary shares of Re1 each 12,417,444 12,417,444

Issued and fully paid6,208,722 ordinary shares of Re1 each 6,208,722 6,208,722

12. OTHER COMPREHENSIVE INCOME

NotesActuarial gains/

(losses)Fair valuereserve

Rs Rs2013Items that may be reclassified subsequently to profit or loss:Decrease in fair value of available-for-sale financial assets 7 - (8,128)

Items that will not be reclassified to profit or loss:Remeasurement of defined benefit obligations 8 458,134 - Deferred tax relating to components of other comprehensive income 13 (68,720) - Other comprehensive income for the year 2013 389,414 (8,128)

2012Items that may be reclassified subsequently to profit or loss:Decrease in fair value of available-for-sale financial assets 7 - (31,090)

Items that will not be reclassified to profit or loss:Remeasurement of defined benefit obligations 8 (109,756) - Deferred tax relating to components of other comprehensive income 13 16,463 - Other comprehensive income for the year 2012 (93,293) (31,090)



12. OTHER COMPREHENSIVE INCOME (CONT'D)

Actuarial (losses)/gainsThe actuarial (losses)/gains reserve represents the cumulative remeasurement of defined benefit obligation recognised.

Fair value reserveThe fair value reserve comprises of the cumulative net change in the fair value of available-for-sale financial assets that has been recognised in other comprehensive income until the investments are derecognised or impaired.

13. DEFERRED TAX LIABILITIES

Deferred taxes are calculated on all temporary differences under the liability method at 15% (2012: 15%).

There is a legally enforceable right to offset current tax assets against current tax liabilities and deferred income tax assets and liabilities when the deferred income taxes relate to the same fiscal authority on the same entity. The following amounts are shown in the statements of financial position:

2013 2012Rs Rs

Deferred tax liabilities 9,423 105,906

The movement on the deferred tax account is as follows: 2013 2012Rs Rs

At 1 January - As previously reported 430,537 457,529 - effect of adopting IAS 19 (Revised) (324,631) (308,168)- as restated 105,906 149,361 Credited to profit or loss (note 15) (165,203) (26,992)Charged/(credited) to statement of other comprehensive income 68,720 (16,463)At 31 December 9,423 105,906

The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same fiscal authority on the same entity, is as follows:

Deferred tax liabilities

Deferredtax assets

Accelerated taxdepreciation

Retirement benefit

obligations TotalRs Rs Rs

At 1 January 2012- as previously reported 400,870 56,659 457,529 - effect of adopting IAS 19 (Revised) - (308,168) (308,168)- as restated 400,870 (251,509) 149,361 Charged/(credited) to statement of profit or loss 30,206 (57,198) (26,992)Credited to statement of comprehensive income - (16,463) (16,463)At 31 December 2012 431,076 (325,170) 105,906 Credited to statement of profit or loss (2,916) (162,287) (165,203)Charged to statement of comprehensive income - 68,720 68,720 At 31 December 2013 428,160 (418,737) 9,423


Chemco Limited46

14. TRADE AND OTHER PAYABLES2013 2012Rs Rs

Trade payables 46,018,895 29,127,614 Payable to related parties 10,800,350 18,443,864 Other payables and accruals 5,247,830 5,667,222

62,067,075 53,238,700

The carrying amounts of trade and other payables approximate their fair value.

15. CURRENT TAX LIABILITIES 2013 2012Rs Rs

(a) Current tax liabilitiesAt 1 January 972,155 1,932,331 Current tax on adjusted profit for the year at 15% (2012: 15%) 1,693,895 2,283,750 Tax paid during the year (990,396) (1,932,352)Payment under Advance Payment System (887,094) (1,311,574)Underprovision in previous year 18,239 - At 31 December 806,799 972,155

(b) Income tax expense 2013 2012Rs Rs

Current tax on the adjusted profit for the year at 15% (2012: 15%) 1,693,895 2,283,750 Deferred tax (note 13) (165,203) (26,992)Underprovision in respect of last year 18,239 - Tax charge 1,546,931 2,256,758

The tax on the Company's profit before tax differs from the theoretical amount that would arise using the basic tax rate of the Company as follows:

2013 2012Rs Rs

Profit before taxation 9,368,751 13,435,917

Tax calculated at 15% 1,405,313 2,015,388 Expenses not deductible for tax purposes 123,682 259,914 Income not subject to tax (303) (18,544)Underprovision in previous year 18,239 - Tax charge 1,546,931 2,256,758

16. BORROWINGS 2013 2012Rs Rs

Bank overdraft (note 16 (a)) - 22,817,763

(a) The bank overdraft is secured by floating charges on the assets of the Company. The rate of interest on bank overdraft in 2012 and 2013 is PLR + 0.75% per annum.

(b) The exposure of the Company’s borrowings to interest rate changes and the contractual repricing dates were less than six months.

(c) The carrying amounts of the Company’s borrowings are denominated in Mauritian Rupees.



17. DIVIDENDS PER SHARE2013 2012Rs Rs

At 1 January 6,208,722 6,208,722 Proposed dividend per share Rs1 (2012: Rs1 per share) 6,208,722 6,208,722 Dividend paid (6,208,722) (6,208,722)At 31 December 6,208,722 6,208,722

18. REVENUE2013 2012Rs Rs

Revenue from the sale of goods 305,103,170 321,876,075 Revenue from the rendering of services 1,160,158 2,258,899

306,263,328 324,134,974

19. OTHER INCOME2013 2012Rs Rs

Investment income 2,032 2,032 Profit on disposal of property, plant and equipment - 283,741 Management fees receivable 1,080,000 1,080,000 Professional fees received - 1,209,017 Sundry income 134,810 345,249

1,216,842 2,920,039

20. OTHER (LOSSES)/GAINS - NET2013 2012Rs Rs

Net foreign exchange (losses)/gains (note 22) (225,761) 563,850

21. FINANCE INCOME/(COSTS)2013 2012Rs Rs

Interest expense- Bank overdraft (662,693) (2,949,296)- Current accounts (321,336) (456,430)Total interest expense (984,029) (3,405,726)Net foreign exchange gains (note 22) 1,680,007 2,011,294

695,978 (1,394,432)

22. NET FOREIGN EXCHANGE GAINS/(LOSSES)2013 2012Rs Rs

The exchange differences credited to profit or loss are included as follows:Cost of sales 668,675 654,307 Other (losses)/gains - net (note 20) (225,761) 563,850 Finance income/(costs) (note 21) 1,680,007 2,011,294


Chemco Limited48

23. PROFIT BEFORE TAXATION2013 2012Rs Rs

Profit before taxation is arrived at after:Crediting:Profit on disposal of property, plant and equipment - 283,741 and charging:Depreciation on property, plant and equipment (note 5) 3,453,643 3,589,581 Employee benefit expense (note 25) 29,312,133 27,061,656

24. EXPENSES BY NATURE2013 2012Rs Rs

Depreciation on property, plant and equipment 3,453,643 3,589,581 Employee benefit expense (note 25) 29,312,133 27,061,656 Repairs and maintenance 4,437,546 4,966,729 Rent and rates 5,150,520 5,431,316 Management fees 4,863,597 6,497,708 Changes in inventories of finished goods 4,107,030 (12,486,765)Raw materials and consumables used 237,505,972 268,154,349 Other expenses 9,751,195 9,573,940 Total cost of sales and operating expenses 298,581,636 312,788,514

25. EMPLOYEE BENEFIT EXPENSE2013 2012Rs Rs

Wages and salaries 25,612,928 25,280,497 Social security costs 1,157,402 947,900 Pension costs - defined contribution plans 1,034,883 26,936 Pension costs - defined benefit plans (note 8(a)(v)) 882,695 561,278 Other post-retirement benefits (note 8(b)(v)) 624,225 245,045

29,312,133 27,061,656

26. EARNINGS PER SHARE2013 2012Rs Rs

Profit for the year 7,821,820 11,179,160

Number of ordinary shares in issue 6,208,722 6,208,722

Earnings per share 1.26 1.80



27. NOTES TO THE STATEMENT OF CASH FLOWS2013 2012Rs Rs

(a) Cash generated from operationsProfit before taxation 9,368,751 13,435,917 Adjustments for:Depreciation of property, plant and equipment 3,453,643 3,589,581 Movement in retirement benefit obligations 1,081,920 381,319 Interest expense 984,029 3,405,726 Profit on sale of property, plant and equipment - (283,741)Investment income (2,032) (2,032)Net foreign exchange gains (66,659) (289,928)Changes in working capital:- inventories 2,277,366 (14,810,730)- trade and other receivables 16,897,174 (16,063,240)- trade and other payables 8,852,953 18,114,407 Cash generated from operations 42,847,145 7,477,279

(b) Cash and cash equivalents

Bank and cash balances 10,429,353 1,454,618 Cash and cash equivalents 10,429,353 1,454,618

Cash and cash equivalents and bank overdrafts include the following for the purpose of the statement of cash flows.

Cash and cash equivalents 10,429,353 1,454,618 Bank overdraft (note 16) - (22,817,763)

10,429,353 (21,363,145)

28. CONTINGENT LIABILITIES

At 31 December 2013, the Company had contingent liabilities in respect of bank and other guarantees and other matters arising in the ordinary course of business from which it is anticipated that no material liabilities would arise.


Chemco Limited50

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32. EFFECTS OF CHANGES IN ACCOUNTING POLICIES

Adoption of IAS 19 Employee Benefits (Revised 2011)

In the current year, the Company has adopted IAS 19 Employee Benefits (Revised 2011). The Company has applied IAS 19 (Revised 2011) retrospectively in accordance with the transitional provisions as set out in IAS 19 (Revised 2011), paragraph 173. These transitional provisions do not have an impact on future periods. The opening statement of financial position of the earliest comparative period presented (1 January 2012) has been restated.

The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous version of IAS 19 and accelerate the recognition of past service costs.

All actuarial gains and losses are recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the statements of financial position to reflect the full value of the plan deficit or surplus. Furthermore, the interest cost and expected return on plan assets used in the previous version of IAS 19 are replaced with a ‘net-interest’ amount under IAS 19 (Revised 2011), which is calculated by applying the discount rate to the net defined benefit liability or asset. IAS 19 (Revised 2011) introduces certain changes in the presentation of the defined benefit cost including more extensive disclosures.

Impact of the application of IAS 19(Revised 2011)

These 2013 financial statements are the first financial statements in which the Company has adopted IAS 19 (Revised 2011). IAS 19 (Revised 2011) has been adopted retrospectively in accordance with IAS 8. Consequently, the Company has adjusted opening equity as of 1 January 2012 and the figures for 2012 have been restated as if IAS 19 (Revised 2011) had always been applied.

The effect on the statements of financial position are as follows:

Retirementbenefit

obligationsDeferred tax

liabilitiesRs Rs

Balance as reported at 1 January 2012 - as previously reported (377,725) 457,529 - effect of adopting IAS 19 (Revised 2011) 2,054,437 (308,168) - as restated 1,676,712 149,361

Balance as reported at 31 December 2012 - as previously reported 3,598 430,537 - effect of adopting IAS 19 (Revised) on 2011 figures 2,054,437 (308,168) - effect of adopting IAS 19 (Revised) on 2012 figures 109,756 (16,463) - as restated 2,167,791 105,906

The effect on total comprehensive income is as follows: 2012Rs

Remeasurement of defined benefit obligations 109,756 Decrease in deferred tax relating to remeasurement of defined benefit obligations (16,463)Decrease in other comprehensive income 93,293


Chemco Limited52

33. THREE-YEAR SUMMARY OF PUBLISHED RESULTS AND ASSETS AND LIABILITIES

(a) Statement of profit or loss

2013Restated

2012Restated

2011Rs Rs Rs

Continuing operationsRevenue 306,263,328 324,134,974 325,030,479

Profit before taxation 9,368,751 13,435,917 29,632,869 Income tax expense (1,546,931) (2,256,758) (4,139,988)Profit for the year from continuing operations 7,821,820 11,179,159 25,492,881

Profit attributable to:- Owners of the parent 7,821,820 11,179,159 25,492,881

(b) Statement of profit or loss and other Comprehensive Income

Profit for the year from continuing operations 7,821,820 11,179,159 25,492,881 Other comprehensive income for the year 381,286 (124,383) 10,770 Total comprehensive income for the year 8,203,106 11,054,776 25,503,651

Total comprehensive income attributable to:- Owners of the parent 8,203,106 11,054,776 25,503,651

Dividend per share (Rs) 1.00 1.00 1.00 Earnings per share from continuing operations(Rs/share) 1.26 1.80 4.11

(c) Statement of financial position

20132012

Restated

As at1 January

2012Restated

ASSETS Rs Rs RsNon-current assets 9,865,824 11,147,542 13,294,691 Current assets 161,791,599 172,142,937 142,882,686 Total assets 171,657,423 183,290,479 156,177,377

EQUITY AND LIABILITIESCapital and reserves 99,773,827 97,779,442 92,933,388

LIABILITIESNon-current liabilities 2,801,000 2,273,697 1,826,073 Current liabilities 69,082,596 83,237,340 61,417,916 Total equity and liabilities 71,883,596 85,511,037 63,243,989

Total equity and liabilities 171,657,423 183,290,479 156,177,377



Notes

Chemco Limited54

Member of the Harel Mallac Group

Chemco LimitedChaussée Tromelin, Fort Georges, Port Louis, Mauritius

Tel: (230) 216 3990 Fax: (230) 242 5321

what’s inside · in 2013, chemco limited’s broad-based trading and manufacturing operations...

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