Bogala Graphite Lanka : Annual Report - 2023

BOGALA GRAPHITE LANKA PLC

BOGALA GRAPHITE LANKA PLC

Annual Report 2023

CONTENTS

	Overview	Financial and Operational Highlights	4
	Executive Reviews and
	Management Information	Management Discussion and Analysis	5
			Chairperson's Review	6 - 7
			Chief Executive Officer's Review	8
			Directors' Profiles	9
	Governance Reports	Corporate Governance Report	10 - 22
			Audit Committee Report	23 - 26
			Remuneration Committee Report	27 - 28
			Related Party Transaction
			Review Committee Report	29 - 31
	Financial Reports	Annual Report of the Board of Directors	32 - 38
			Statement of Directors' Responsibilities	39 - 40
			Independent Auditors' Report	41 - 45
			Financial Statements
				Statement of Profit or Loss and
				Other Comprehensive Income	46
				Statement of Financial Position	47
				Statement of Changes in Equity	48
				Statement of Cash Flows	49
				Notes to the Financial Statements	50 - 89
			Ten-year Financial Summary	90
			Investor Information	91 - 92
			Notice of Meeting	93 - 94
			Form of Proxy	95 - 96
			Corporate Information	Inside Back Cover

3

FINANCIAL AND OPERATIONAL HIGHLIGHTS

Year Ended 31st December

Earnings Highlights and Ratios		2023
Revenue	Rs.'000	1,623,085
Gross profit	Rs.'000	695,503
Profit from operations	Rs.'000	224,703
Profit before tax	Rs.'000	241,945
Profit after tax	Rs.'000	155,316
EBITDA	Rs.'000	266,274
Cash from operating activities	Rs.'000	254,662
Gross profit to turnover	%	42.9
Net income to turnover	%	9.6
Interest Cover	Number of Times	393.1
Return on equity (ROE)	%	9.2
Balance Sheet Highlights & Ratios
Total assets	Rs.'000	1,976,334
Total debt	Rs.'000	292,270
Total shareholders' funds	Rs.'000	1,684,063
No. of shares in issue	Number	94,632,904
Net assets	Rs.'000	1,684,063
Net assets per share	Rs.	17.8
Debt/equity (book value)	%	17.4

2022

1,699,944

904,971

789,299

806,675

664,335

827,172

609,681

53.2

39.1

998.3

43.8

1,853,582

336,074

1,517,508

94,632,904

1,517,508

16.0

22.1

Operational Highlights

Lost time accident rate

Accident severity rate

Earning per share

%

%

Rs.

zero zero 1.64

zero

zero

7.02

4	Bogala Graphite Lanka PLC | Annual Report 2023

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis, provides insight to our operations and performance during the past year and outlining our prospects for the upcoming year.

Financial Performance

In 2023, our total revenue amounted to Rs. 1,623.1 million, reflecting a decrease of 4.5% compared to Rs. 1,699.9 million in 2022. We recorded a profit before taxation of Rs. 241.95 million, representing a significant decline of 70% from Rs. 806.7 million in 2022. Furthermore, our Return on Equity (ROE) decreased from 43.8% to 9.2%. Profit from operations also experienced a substantial decrease, with Rs. 224.70 million recorded, down 71.5% from Rs. 789.30 million last year. Further, cash generated from operating activities declined to Rs. 254.7 million, as opposed to Rs. 609.7 million in the previous year, recording a decline of 58.2%.

Despite the challenges, our total assets increased by 6.6%, rising from Rs. 1,853.6 million in 2022 to Rs. 1,976.3 million in 2023. Notably, total debts declined from Rs.

336.1 million to Rs. 292.3 million, while total shareholder's funds grew by 11% from Rs. 1,517.5 million to Rs. 1,684.1 million.

The decreases during 2023 were mainly due to circumstances beyond our control such as global market uncertainties and general unfavourable conditions faced by the industry as a whole.

Operational Efficiency

We are pleased to report that our lost time accident rate and accident severity rate remained at zero, consistent with the previous year. Furthermore, in December 2023, we celebrated 2000 consecutive days without a 'lost time accident,' marking a significant milestone in the Sri Lankan mining industry. Throughout the year, a total of 2,629 hours were dedicated to health and safety training for our employees.

Awards & Recognition

In recognition of outstanding service, the main shaft of the mine was renamed "Malalasekera Shaft" in honor of Mr. Vijaya Malalasekera, our former Chairman. Additionally, 14 employees who completed 25 years of dedicated service were awarded.

Risk Management

As we navigate volatility in the global economies and challenging market conditions coupled with uncertainties in the domestic environment, we acknowledge the potential impact on our operations in the year ahead. However, our strategic plans are designed to mitigate risks and address challenges effectively. Risk management remains integral to our processes, with thorough reviews conducted to identify and analyse potential risks to the business. Furthermore, we have aligned our systems and policies to comply with evolving regulatory requirements and have implemented effective mechanisms to ensure compliance.

5

CHAIRPERSON'S REVIEW

It is my great pleasure to welcome you all on behalf of the Board to the 33rd Annual General Meeting of our Company.

In 2023, the year under review, the nation achieved a degree of stability despite the continuing uncertainties. A much-needed respite - having weathered four consecutive years of turmoil from terror attacks, a global pandemic to the nation's worst ever economic crisis since independence. Although the clouds have yet to clear, some rays of hope filtered through. It was a rather challenging year for us but, as always, the determination and commitment of your Company helped us to keep moving forward. During the year under review your Company recorded a turnover of Rs. 1,623.1 million and Rs. 224.7 million profits from operations compared to a turnover of Rs. 1,699.9 million and Rs. 789.3 million profits from operations in 2022.

Having faced crisis upon crisis, our nation has begun to stabilise, helped by decisive policies implemented by the government. The external debt restructuring talks with creditors, intensified discussions with the IMF, and other efforts made a difference. Our economy is stabilising, although major challenges still remain. The year-on- year GDP growth rate for the third quarter of 2023 has been reported as 1.6%. In addition, GDP for Q3 of 2023 increased up to Rs. 6,906,8 billion from Rs. 6,586,6 billion, recorded in the same quarter in 2022 registering a 4.9% increase. After shrinking 7.8% in 2022, Sri Lanka's economy is expected to contract by 3.6% this year. Full- year growth is predicted to return in 2024 with the nation's economy projected to grow by 1.8%. Smooth sailing, however, cannot be expected with challenging reforms looming ahead.

Global growth is forecast to slow from 3.5% in 2022 to 3.0% in 2023 and 2.9% in 2024. The projections remain below the historical (2000-19) average of 3.8%, and the forecast for 2024 is down by 0.1%. The slow growth is attributed to tight monetary policy, restrictive financial conditions, and weak global trade and investment. Downside risks include an escalation of the recent conflict in the Middle East, financial stress, persistent inflation, trade fragmentation, and climate-related disasters.

Emerging markets and developing economies are expected to have modest growth declines, from 4.1% in 2022 to 4.0% in both 2023 and 2024, with a downward revision of 0.1% in 2024. Forecasts for global growth over the medium term, at 3.1%, are at their lowest in decades, and prospects for countries to attain higher living standards are weak. Global inflation is forecast to decline steadily, from 8.7% in 2022 to 7.0% in 2023 and 6.4% in 2024 but does not expected to return to target until 2025 in most cases.

The year under review was a challenging one for us. However, as always, we made progress. We are proud of the resilience our company displays in the face of challenges, and we look forward to the year ahead despite the uncertainties our industry and country face.

Acknowledgement

In conclusion, on behalf of the Board of Directors and the employees of the Company, I extend my gratitude to our valued shareholders, including our major shareholder and Parent Company, Graphit Kropfmühl for their unwavering support. I also express my appreciation to our stakeholders for the confidence and trust they placed on the management of the Company as we faced yet another demanding year.

6	Bogala Graphite Lanka PLC | Annual Report 2023

CHAIRPERSON'S REVIEW

I thank my colleagues on the Board for their continuing support and guidance, and the Management team and our employees for their unstinted dedication. Your Company achieved another year of progress despite many challenges, and I am confident that our journey in the coming year will be a successful one.

Coralie Pietersz

Chairperson

07th March 2024

7

CHIEF EXECUTIVE OFFICER'S REVIEW

In 2023, after four consecutive years of incredible turmoil, our country finally saw a year of relative stability free from devastating or melodramatic events. However, it was not, by any means, an easy year to weather with so much uncertainty - both globally and locally. As our nation fought hard to stay afloat and sail on, we too did the same. As a company we had faced some of the most troubled times in our history during the past few years but progressed in spite of them. It was this spirit of perseverance and resolve that kept us on track during the year under review.

It was not an easy year for the industry, globally. With weakened supply and demand fundamentals, the graphite sector struggled significantly in 2023, and did not record the success forecast by analysts. This unfavourable environment coupled with local uncertainties adversely affected our performance during the year. However, we were able to meet our production targets, and as in the previous years, continued operations without loss of working days. Stringent measures we had put in place during crisis times such as the disaster management plan and the business continuity plan helped us, once again.

Health, Safety and Operations

2023 was a landmark year for us as we created history in the local mining industry by recording 2000 consecutive days without a 'lost time accident'. Setting a precedent, we proved that safety and productivity can go hand in hand with commitment, collaboration, and continuous training. Throughout the year, we rigorously maintained all safety procedures, raising our standards to ensure the wellbeing of all our employees and stakeholders. We continued our health and safety training for the staff dedicating 2629 hours towards doing so. Prior guidelines and regulations stipulated by the Government for Covid-19 were also adhered to as per our company policy.

Our People

The most vital asset a company can have is its people, and in that regard, we have been immensely fortunate. Right throughout the years, we have always had the deepest commitment and support of our people. They stood

steadfast during some of the worst days a company - and a nation - could face. Even then, they worked hard with absolute dedication and helped the company to move forward and continued to do so during the year gone by too. Just as our people support us in good times and bad, we, as a company, will continue to do our utmost for them.

Appreciation

I wish to express my deepest gratitude to our faithful employees and the Managers who continue to stand by the Company in times both good and bad, come what may. They kept us progressing during the darkest of days in the recent past, and in 2023, too they did not waver in their commitment to hard work even when the industry itself was facing tough times. Their dedication is much appreciated. I also extend my appreciation to the police, armed forces, and medical authorities for the service and support they always give us.

I also take this opportunity to thank our parent company Graphit Kropfmühl GmbH, the Chairperson, and the Board of Directors for their consistent guidance and support, and also for the confidence and trust they continue to have in me.

In conclusion, I extend my sincere appreciation to all our shareholders, employees, the management team and staff for their unwavering support. While the financial outcomes of the past year did not fully meet our expectations, we were awarded the "Certificate of Ethical Trading" (CET) by the National Chamber of Exporters of Sri Lanka. Our continued focus on the exploration programme is showing positive results, and albeit different, are significant achievements in their own right. I have absolute faith that our company can face whatever 2024 holds for us and we are determined to make strides on the path of progress in the days ahead.

Amila Jayasinghe

Chief Executive Officer

07th March 2024

8	Bogala Graphite Lanka PLC | Annual Report 2023