1. business and industrial
2. company
3. annual report

COVER SHEET
1
C
H
E
M
R
E
Z
T
E
C
H
N
O
L
O
G
I
E
S
B
A
G
U
M
T
Y
6
4
I
N
C
A
Y
A
2
6
6
Formerly: Corro-Coat, Inc.
(Company's Full Name)
6
5
I
N
D
U
S
T
R
I
A
Q
U
E
Z
O
S
N
T
C
I
B
N
(Business Address: No. Street City / Town / Province)
1
2
3
Month
ALVIN D. LAO
635-0680
Contact Person
Company Telephone Number
1
Day
0
SEC Form 20-IS Definitive Information Statement
FORM TYPE
6
Fiscal Year
Secondary License Type, if Applicable
M
R
D
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
275
Total No. of Stockholders
Domestic
Foreign
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------To be accomplished by SEC Personnel concerned
File Number
LCU
Document I.D.
Cashier
STAMPS
0
Month
Day
Annual Meeting
2
PROXY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned, stockholder of CHEMREZ TECHNOLOGIES, INC. do hereby constitute and appoint _______________________
as my attorney-in-fact and proxy, to attend and represent me at the Annual Stockholders Meeting of Chemrez Technologies, Inc. on
2 June 2014, and thereat to vote upon all shares of stock owned by me on the following agenda items as I have indicated below
and any and all business that may come before said meeting. If I fail to indicate my vote on the items specified below, my proxy
shall vote in accordance with the recommendation of Management. Management recommends a “FOR ALL” vote for proposal &,
and a “FOR” vote for proposals 1 through 6.
ITEM NO.
SUBJECT MATTER
ACTION
3
Approval of Minutes of Previous Meeting
4
Approval of Annual Report
5
Ratification of all Acts of the Board of
Directors and Officers of the Corporation
6
Appointment of Isla Lipana & Co. as external
auditor
7
Election of Directors
For
Against
Abstain
FOR ALL*
WITHHOLD
FOR ALL*
EXCEPTION
*All nominees listed below
1.
2.
3.
4.
5.
6.
7.
Amb. Cesar Bautista - Independent
Filemon T. Berba,Jr. - Independent
Jose Fernando B. Camus - Independent
Leon L. Lao
Yin Yong Lao
John L. Lao
Dean A. Lao, Jr.
Note:
To withhold authority to vote for any individual
nominee(s) of Management, please mark Exception
box and list the name(s) under.
In the absence of my proxy, this authority is hereby conferred upon the Presiding Officer of the meeting, provided that this proxy
shall stand suspended where I am personally present thereat.
This proxy revokes and supersedes all previous proxies executed by me, and the power and authority herein granted shall be valid
for said Stockholders Meeting and Adjournments thereof, unless earlier withdrawn by me with written notice filed with the Corporate
Secretary of Chemrez Technologies, Inc.
IN WITNESS WHEREOF, the undersigned has executed this PROXY this _____ of ____________ 2014 in
______________________.
______________________________________________
Name and Signature of Stockholder/Authorized Signatory
Witnessesed by:
_________________________
______________________________
SECURITIES AND EXCHANGE COMMISSION
SEC FORM 20-IS
INFORMATION STATEMENT
Of
CHEMREZ TECHNOLOGIES INC.
(Formerly: CORRO-COAT, INC.)
PURSUANT TO SECTION 20
OF THE SECURITIES REGULATION CODE
1.
Check the appropriate box:
[
] Preliminary Information Statement
[
] Definitive Information Statement
2.
Name of Registrant as specified in its charter
3.
Metro Manila
Province, country or other jurisdiction of incorporation or organization
4.
SEC Identification Number
164266
5.
BIR Tax Identification Code
000-400-898
6.
65 Industria St., Bagumbayan, Quezon City
Address of principal office
7.
Registrant’s telephone number, including area code
8.
Date, time and place of the meeting of security holders
Date :
Time :
Place :
9.
CHEMREZ TECHNOLOGIES, INC.
(Formerly: CORRO-COAT, INC.)
1110
Postal Code
June 02, 2014
8:30 AM
Banquet A Hall
Wack Wack Golf and Country Club
Mandaluyong City, Metro Manila
Approximate date on which the Information Statement is first to be sent or given to security
holders
May 12, 2014
10.
In case of Proxy Solicitations
Name of Person Filing the Statement/Solicitor:
1
(02) 635-0680
N/A
Address and Telephone No.:
11.
N/A
Securities registered pursuant to Sections 8 and 12 of the Code or Sections 4 and 8 of the RSA
(information on number of shares and amount of debt is applicable only to corporate registrants):
Title of Each Class
Number of Shares of Common Stock
Outstanding or Amount of Debt Outstanding
Title of Each Class
Common Stock, P1 par value
No. of Shares of Common Stock
Issued & Outstanding
1,301,897,472 Shares* as of March 31, 2014
*Net of 95,958,000 treasury shares
Amount of Debt Outstanding
12.
P510,092,000 as of December 31, 2013
Are any or all of registrant's securities listed in a Stock Exchange?
Yes
No _______
If yes, disclose the name of such Stock Exchange and the class of securities listed therein:
Philippine Stock Exchange, Common Stock, P1 Par Value 1,397,855,472 Shares Listed
PART I.
INFORMATION REQUIRED IN INFORMATION STATEMENT
A. GENERAL INFORMATION
Item 1. Date, time, and place of meeting of security holders
(a)
The annual stockholders’ meeting of Chemrez Technologies, Inc. will be held on:
Date :
Time :
Place :
June 02, 2014
8:30 a.m.
Wack Wack Golf and Country Club
Mandaluyong City, Metro Manila
The complete mailing address of the principal office of the registrant is:
#65 Industria St.
Bagumbayan
Quezon City, Metro Manila
(b) Approximate date when the Information Statement is first to be sent to security holders:
May 12, 2014
2
Item 2. Dissenters' Right of Appraisal
A stockholder has a right to dissent and demand payment of the fair value of his share: (i) in case
any amendment to the articles of incorporation has the effect of changing or restricting the rights
of any stockholders or class of shares or of authorizing preferences over the outstanding shares
or extending or shortening the term of corporate existence; (ii) in case of any sale, lease,
mortgage or disposition of all or substantially all the corporate property or assets; and (iii) in case
of merger or consolidation.
The appraisal right may be exercised by a stockholder who has voted against the proposed
corporate action, by making a written demand to the Company within thirty (30) days after the
date on which the vote was taken for the payment of the fair market value of his shares.
There are no matters or proposed actions as specified in the attached Notice of Annual Meeting
that may give rise to a possible exercise by shareholders of their appraisal rights or similar right
as provided in the Title X of the Corporation Code of the Philippines.
Item 3. Interest of Certain Persons in or Opposition to Matters to be Acted Upon
(a) No director, nominee for election as director, associate of the nominee or executive officer
of the Company at any time since the beginning of the last fiscal year has had any substantial
interest, direct or indirect, by security holdings or otherwise, in any of the matters to be acted
upon in the meeting, other than election to office.
(b) None of the incumbent directors has informed the Company in writing of an intention to
oppose any action to be taken by the Company at the meeting.
B. CONTROL AND COMPENSATION INFORMATION
Item 4. Voting Securities and Principal Holders Thereof
(a)
Number of Shares Outstanding as of March 31, 2014 : 1,301,897,472 Common Shares
(net of treasury shares)
Number of Votes entitled:
3
One (1) vote per share
(b)
All stockholders of record at the close of business on May 08, 2014 are entitled to notice
and to vote at the Annual Stockholders’ Meeting.
(c)
In case of election of directors, each stockholder may vote such number of shares for as
many persons as there are directors or he may cumulate said shares and give one
nominee as many votes as the number of directors to be elected multiplied by the
number of his shares shall equal, or he may distribute them on the same principle among
as many nominees as he shall see fit, provided that the whole number of votes cast by
him shall not exceed the number of shares owned by him multiplied by the whole number
of directors to be elected.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(1) Security Ownership of Certain Record and Beneficial Owners
As of March 31, 2014, the following were owners of more than 5% of the Company's outstanding shares:
Title of
Class
Common
Common
Common
Common
Name, address of record
owner and relationship with
issuer
PCD Nominee Corp.
G/F Makati Stock Exchange,
Ayala Avenue,
Makati City
Name of Beneficial
Owner & Relationship
w/ Record Owner
The following participants
hold more than 5% of the
Registrant’s voting
securities:
1. Lucky Securities,
Inc. – 15.39%
D&L Industries, Inc. 1
65 Industria St.,
Bagumbayan, Quezon City
Stockholders
JADEL Holdings Co., Inc.
65 Industria St.,
Bagumbayan, Quezon City
Stockholders
Color Chem Corp.
65 Industria St.,
Bagumbayan, Quezon City
Stockholders
Lao Family
Citizenship
No. of
Shares Held
Percent
Filipino
599,421,552
46.04%
Filipino
251,508,404
19.32%
Filipino
155,708,523
11.96%
Filipino
88,000,000
6.76%
Lao Family
Dean L. Lao
Leon L. Lao
Alex L. Lao
Yin Yong L. Lao
John L. Lao
Percentage is based on total number of shares outstanding - 1,301,897,472
Note:
(1) 200,000,000 shares (acquired in 2007) are indirectly owned by D&L Industries through PCD
Nominee Corp. (Filipino). This brings total shareholdings held by D&L Industries to 34.68% of the
outstanding share capital of the Company as of March 31, 2014.
(2) Security Ownership of Management
The following are the number of shares owned of record by the directors and key officers of the
Company, and nominees for election as director as of March 31, 2014:
Title of
Class
Common
4
Name of Beneficial
Owner
Dean L. Lao
Position
Chairman Emeritus
Amount
and Nature
of Beneficial
Ownership(1)
49,709,881
(I)
Citizenship
% to Total
Outstanding
Filipino
3.82%
Common
Common
Yin Yong L. Lao
Common
John L. Lao
Common
Filemon T. Berba, Jr.
Common
Amb. Cesar B.
Bautista
Common
Director,
President/CEO
Leon L. Lao
Jose Fernando B.
Camus
Director
Director, EVP
Independent
Director, Chairman
Independent
Director, Audit
Committee Chairman
54,238,434
(I)
1
67,665,379
338,000
61,917,160
1,100,000
(D)
(I)
(D)
( D)
(I)
101,000
Filipino
4.17%
Filipino
Filipino
0.00%
5.20%
0.03%
4.76%
0.08%
( D)
Filipino
0.01%
1,000
(D)
Filipino
0.00%
509,029
( D)
Filipino
0.04%
10,559,040
1
1,738,829
11,595,129
93,029
( I)
(D)
( D)
(I)
( D)
Filipino
0.81%
0.00%
0.13%
0.89%
0.01%
Filipino
Independent Director
Common
Dean A. Lao Jr
Managing Director
Common
Alvin D. Lao
Treasurer & CFO
Common
Arthur R. Ponsaran
Corporate Secretary
Filipino
Filipino
Filipino
Percentage is based on total number of shares outstanding – 1,301,897,472
Note:
(1) Indirectly owned Shares are attributable to the individual Lao family member’s direct (D) and
indirect (I) interests in Color-Chem Corporation and D&L Industries, Inc. which respectively own
88,000,000and 451,508,404 shares of the Company.
Except as stated above, the Board of Directors and Management of the Company have no knowledge of
any person who, as of March 31, 2014, was indirectly or directly the beneficial owner of more than 5% of
the Company’s outstanding shares of common stock or who has voting power or investment power with
respect to shares comprising more than 5% of the outstanding common stock. There are no persons
holding more than 5% of the Company’s common stock that are under the voting trust or similar
agreement.
Item 5. Directors and Key Officers
The following are the names, ages and periods of service of the incumbent directors and executive
officers of the Company with a brief description of the business experience during the past five years of
each of the directors and executive officers:
DEAN L. LAO, Chairman Emeritus and Chairman of the Executive Committee
Mr. Dean L. Lao, 75, Filipino, has been Chairman Emeritus of the Company since June 9, 2006 and
is the Chairman of the Company’s Executive Committee. He was previously the President of D&L
Industries, Inc. since its incorporation in 1971 and now he currently serves as Chairman Emeritus and
Director. He was the founder of the various companies belonging to the Lao Family which include FIC
Marketing Co., Inc., Oleo-Fats, Inc., Corro-Coat, Inc., Aero-Pack Industries, Inc., First in Colors, Inc.,
and Chemrez, Inc.. He currently serves as Director of the following companies: Aero-Pack Industries,
Inc., Chemrez, Inc., First in Colours, Incorporated, Oleo-Fats Incorporated, Malay Resources,
5
Incorporated, FIC Marketing Co., Inc., FIC Tankers Corporation, LBL Industries, Inc., Ecozone
Properties, Inc. and First Batangas Industrial Park, Inc. Mr. Lao obtained his B.S. in Chemical
Engineering from the Polytechnic Colleges of the Philippines.
LEON L. LAO, Director and President & CEO
Mr. Leon L. Lao, 71, Filipino, has been the President and Chief Executive Officer of the Company
since October 4, 2006. He is also a Member of the Company’s Executive Committee and Nomination
Committee. He is a co-founder of D&L Industries, Inc. where he currently serves as Chairman of the
Board of Directors. He is also President of First in Colors, Inc., FIC. Marketing Co., Inc., and Director
of Aero-Pack Industries, Inc., Chemrez, Inc., First in Colours, Incorporated, D&L Polymer and
Colours, Incorporated, Oleo-Fats Incorporated, Malay Resources, Incorporated, FIC Marketing Co.,
Inc., LBL Industries, Inc., Ecozone Properties, Inc., First Batangas Industrial Park, Inc., and ColorChem Corp.. Mr. Lao obtained his B.S. in Chemical Engineering from the Polytechnic Colleges of the
Philippines.
JOHN L. LAO, Director and Executive Vice President & General Manager
Mr. John L. Lao, 59, Filipino, has been a Director of the Company since 1991 and is a Member of the
Company’s Executive Committee. He has been Executive Vice President & General Manager of the
Company since October 4, 2006 and has extensive manufacturing experience for powder coatings
and aerosols. He is currently a Director and the President of D & L Industries, Inc.. He is also
currently the Executive Vice President of Color-Chem Corporation. His other directorships include
North Mactan Industrial Corporation, Aero-Pack Industries, Inc., Chemrez, Inc., First in Colours,
Incorporated, D&L Polymer and Colours, Incorporated, Oleo-Fats Incorporated, Malay Resources,
Incorporated, FIC Marketing Co., Inc., LBL Industries, Inc., Ecozone Properties, Inc., Anonas LRT
Property and Dev’t Corp., Hotel Acropolis, Inc. and First Batangas Industrial Park, Inc. Mr. Lao
obtained his B.S. in Business Administration from the University of the East.
JOSE FERNANDO B. CAMUS, Independent Director
Mr. Jose Fernando B. Camus, 69, Filipino, has been an Independent Director of the Company. He
was the Chairman of the Philippine National Railways and Interport Resources Corporation and
served as a Director of the Bases Conversion Development Authority and Fort Bonifacio
Development Corporation. He was also the former Chairman of Jones Lang LaSalle Leechiu.
FILEMON T. BERBA, JR., Independent Director and Chairman
Mr. Filemon T. Berba, Jr., 74, Filipino, is the Chairman of the Company. He has been an Independent
Director of the Company since March 2010. He is the President of the Philippine Foundation for
Science & Technology, President Emeritus of the Philippine Quality Award Foundation and an
independent director of iPeople and EEI Corporation. He previously served as Senior Managing
Director of Ayala Corporation, seconded as Vice Chairman and President of Manila Water Company,
President of Globe Telecom, Vice Chairman and President of Integrated Microelectronics, Inc.,
President and CEO of Philippine Electric Corporation, President of Westinghouse Asia Controls
Corporation, Group President of various companies under the Herdis Group and Vice President for
Manufacturing and Logistics Services for UNILAB. He as well held other senior management
positions in the First Philippine Holdings Group. He obtained a B.S. in Electrical Engineering (Magna
Cum Laude) from the University of the Philippines in 1959 and obtained his Master’s of Business
Administration degree (with distinction) from the Wharton School of the University of Pennsylvania in
1964.
CESAR B. BAUTISTA, Independent Director
Mr. Cesar B. Bautista, 76, Filipino, and an Independent Director of the Company. He previously
served as Philippine Ambassador to the United Kingdom, the Republic of Ireland and the Republic of
Iceland, and as Permanent Representative to U.N.’s International Maritime Organization. Earlier, he
6
was Secretary of the Department of Trade and Industry of the Philippines, as well as President and
Chairman of Unilever Philippines, Inc. He is an independent director of D&L Industries and the
Chairman of CIBI and St. James’ Ventures Inc. He is also a Director of First Philippines Holdings ,
Inc., Pilipinas Shell Petroleum, Chartis Insurance, Inc., Philratings Services, Inc., PHINMA, Maxicare
Healthcare, Inc., as well as an Advisory Director of AIM-Zuellig Center for Business Transformation,
Co- Chairman of the National Competitiveness Council and a Trustee of the Institute of Corporate
Directors. Earlier, he was Secretary of the Department of Trade and Industry of the Philippines, as
well as President and Chairman of Unilever Philippines, Inc. He graduated from the University of the
Philippines with a Bachelor of Science in Chemical Engineering and finished his Master’s degree in
Chemical Engineering at Ohio State University.
YIN YONG L. LAO, Non-Executive Director
Mr. Yin Yong L. Lao, 62, Filipino, has been a Director of the Company since 2006 and a Member of
the Company’s Executive Committee and Audit Committee. He is President of LBL Industries, Inc.
Mr. Lao is also a Trustee of the Association of Petrochemical Manufacturers of the Philippines. He
also serves as a director of the following: D&L Industries, Inc., Aero-Pack Industries, Inc., Chemrez,
Inc., First in Colours, Incorporated, Oleo-Fats Incorporated, Malay Resources, Incorporated, FIC
Marketing Co., Inc., LBL Industries, Inc., Ecozone Properties, Inc., First Batangas Industrial Park,
Inc., Anonas LRT Property and Dev’t Corp. and Hotel Acropolis, Inc. He graduated from the Ateneo
de Manila University with a Bachelor of Arts degree in General Studies.
DEAN A. LAO, JR, Managing Director
Mr. Dean A. Lao, Jr., 46, Filipino, has assumed the position of Managing Director of the Company
since 2010 and has been with the Company since 1995 in various capacities. He is currently the
Chairman of the United Coconut Association of the Philippines, Director of the ASEAN Oleochemical
Manufacturing Group, President of the Philippine Oleochemical Manufacturers Association, President
of The Philippine Biodiesel Association and member of the Wallace Business Forum, Chemical
Industries Association of the Philippines, Philippine Association of Paint Manufacturers and the
Entrepreneurial Organization, Philippine Chapter. He graduated from Curtin University in Western
Australia with a Bachelor of Business in Information Processing after completing his freshman year at
the Ateneo de Manila University in the Philippines with a BA in Interdisciplinary Studies. He also
completed the Advanced Management Program of Harvard Business School in 2010.
ALVIN D. LAO, Chief Financial Officer and Treasurer
Mr. Alvin D. Lao, 42, Filipino, has been the Company’s Chief Financial Officer since 2008 and the
Treasurer of the Company since 2000. He is also the Executive Vice President and the Chief
Financial Officer of D&L Industries, Inc.. He serves as Director of Axis REIT, a real estate investment
trust listed in Malaysia, Vice President of the Technology Club of the Philippines (Philippine alumni of
the Massachusetts Institute of Technology), and past president and current member of the
Entrepreneurs Organization (EO, Philippine Chapter), the Financial Executives Institute of the
Philippines (FINEX) and the Wallace Business Forum. He is a director of Enderun Colleges, Gurango
Software Corporation, First in Colours, Incorporated, D&L Polymer and Colours, Incorporated, FIC
Tankers Corporation, Ecozone Properties, Inc., Anonas LRT Property and Dev’t Corp., and Hotel
Acropolis, Inc. He was previously a faculty member of the De La Salle University Graduate School of
Business. He graduated from the University of Western Australia with a Bachelor of Science in
Information Technology (Honours) and Statistics. He also holds a Masters degree in Business
Administration from the MIT Sloan School of Management.
ARTHUR R. PONSARAN, Corporate Secretary
Atty. Arthur R. Ponsaran, 70, Filipino, Corporate Secretary of the Company since 1999. He is also the
Corporate Secretary of, among others, Waterfront Philippines, Inc., Producers Savings Bank
Corporation, Chemrez Technologies, Inc. and MRL Gold Philippines, Inc., and Director of Iloilo City
7
Development Bank, Cebuana Lhuillier Rural Bank, Inc., New Kanlaon Construction Inc., Acesite
(Phils.) Hotel Corporation, Davao Insular Hotel, Inc., Philippine Estate Corporation, Forum Pacific Inc.
and Philsteel Holdings Corporation. Mr. Ponsaran is a lawyer and a member of the Integrated Bar of
the Philippines and the New York Bar as well as a licensed CPA and a member of the Philippine
Institute of Certified Public Accountants.
Term of Office
The Company’s Articles of Incorporation provide for the election of seven (7) directors to serve for a
term of one year. The directors are elected at each annual meeting of the stockholders by the
stockholders entitled to vote. Unless he resigns, dies or is removed, each director holds office until
the next annual election and until his successor is duly elected.
The Board of Directors
The nominees for election to the Board of Directors on June 02, 2014 are as follows:
1.
2.
3.
4.
5.
6.
7.
AMB. CESAR B. BAUTISTA, Independent Director
FILEMON T. BERBA, JR., Independent Director
JOSE FERNANDO B. CAMUS, Independent Director
LEON L. LAO, Executive Director
JOHN L. LAO, Executive Director
YIN YONG L. LAO, Non-Executive Director
DEAN A. LAO, JR., Executive Director
The incumbent Independent directors of the Company are:
1. JOSE FERNANDO B. CAMUS, Filipino
2. FILEMON T. BERBA, JR., Filipino
3. AMB. CESAR B. BAUTISTA, Filipino
The independent directors have certified that they possess all the qualifications and none of the
disqualifications provided for in the SRC. The Certifications of the incumbent independent directors
are attached hereto as Appendices 3-A, 3-B, and 3-C.
The nominees for election as independent directors of the Board of Directors on June 02, 2014 are as
follows:
Nominee for Independent
Director (a)
Jose Fernando B. Camus
Filemon T. Berba, Jr.
Cesar B. Bautista
Person/Group Recommending
Nomination (b)
Alvin D. Lao
Jose Fernando B. Camus
Alvin D. Lao
Relation of (a) and (b)
None
None
None
In approving the nominations for independent directors, the Nominations Committee took into
consideration the guidelines and procedures on the nomination of independent directors prescribed in
SRC Rule 38. The Nomination Committee is comprised of Amb. Cesar B. Bautista (Chairman), Mr.
Filemon T. Berba, Jr. and Mr. Leon L. Lao.
All the nominees for election to the Board of Directors satisfy the mandatory requirements specified
under the provisions of Section 15, Article IV of the Company’s By-Laws.
8
FAMILY RELATIONSHIPS
Messrs. Dean Sr., Leon, John and Yin Yong L. Lao are siblings. Dean A. Lao, Jr. is the son of Dean L.
Lao, Sr. and Alvin D. Lao is the son of Leon L. Lao.
There are no family relationships between the current members of the Board of Directors and key officers
other than the above.
LEGAL PROCEEDINGS
None of the directors and officers have been involved in any bankruptcy proceeding, nor have they been
convicted by final judgment in any criminal proceeding, or been subject to any order, judgment, or decree
of competent jurisdiction, permanent or temporarily enjoining, barring, suspending, or otherwise limiting
their involvement in any type of business, securities, commodities or banking activities, or found in action
by any court or administrative bodies to have violated a securities of commodities law, for the past five (5)
years up the latest date.
As of date of this report, the Company is not a party to any litigation or arbitration proceedings of material
importance, which could be expected to have a material adverse effect on the Company or on the results
of its operations. No litigation or claim of material importance is known to be pending or threatened
against the Company or any of its properties.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Details of the Related Party Transaction are discussed under Notes 1 (General Corporate Information)
and 18 (Related Party Transaction) of the Notes to the Consolidated Financial Statements of the
Company for the year ended 2013. The related party transactions have been evaluated and executed
fairly in accordance with Company’s policies and under what the Company believes to be terms and
conditions as may reasonably obtained from non-related third parties.
There were no transactions with directors, officers or any principal stockholders (owning at least 10% of
the total outstanding shares of the Company) that are not in the ordinary course of business of the
Company.
Item 6. Compensation of Directors and Executive Officers
The following table summarizes the aggregate compensation of the key management personnel of the
Company (as most highly compensated officers) for the years ended 31 December 2012, 2013 and 2014
(projected):
NAME
Leon L. Lao*
John L. Lao*
Dean A. Lao, Jr.*
9
POSITION
Director,
President &
CEO
EVP &
General
Manager
Managing
YEAR
SALARY
BONUS
&
OTHERS
TOTAL
Romeo Tan
Edison Y. See
Redentor Hipolito
Reynaldo Sta. Maria
Director
Senior
Product
Manager
Senior
Product
Manager
Technical
Manager
Production
Manager
All key senior
management
personnel as a
group
Projected 2014
2013
2012
PhP17,953,016
PhP15,553,206
PhP16,568,673
-
PhP17,953,016
PhP15,553,206
PhP16,568,673
The four most highly compensated officers in 2013 were Romeo Tan (Senior Product Manager), Edison
See (Senior Product Manager), Redentor Hipolito (Technical Manager), and Rey Santamaria (Production
Manager).
Leon L. Lao (Director, President and CEO), John L. Lao (EVP & General Manager), Dean A. Lao, Jr.
(Managing Director) no longer drew compensation from the Company starting 2007. Other senior officers
or Board appointees named in Item 9 do not receive any compensation directly from the Company or its
subsidiary.
The following allowances for reimbursable expenses are given to Directors for each meeting attended:
P30,000 for the Chairman of the Board
P20,000 for each Board member
P20,000 for the chairman of the Board Committee
P10,000 for each member of the Board Committee
Aside from the aforementioned allowances, no other compensation is paid to Directors of the Company.
Further, the Company does not have any stock option or management incentive plan as part of its current
compensation for Directors and officers.
Item 7. Independent Public Accountants
The principal accountants and external auditors of the Company is the accounting firm of Isla Lipana &
Co. The same accounting firm is being recommended for re-election at the scheduled annual meeting.
Ms. Imelda Dela Vega-Mangundaya, audit engagement partner of Isla Lipana & Co for the Company, is
expected to be present at the annual stockholders meeting. They will have the opportunity to make a
statement if they desire to do so and will likewise be available to respond to appropriate questions.
Ms. Imelda Dela Vega-Mangundaya took over as the audit engagement partner for the Company in 2009,
upon the retirement of Ms. Irenea R. Vallestero.
(a)
Audit and Audit-Related Fees
The aggregate fees billed for each of the last three (3) fiscal years for professional services
rendered by Isla Lipana & Co for the audit of the Company’s financial statements are the
following:
10
FY 2011
FY 2012
FY 2013
:
:
:
P1,610,000
P1,800,000
P1,837,500
There are no other assurance and related services by Isla Lipana & Co. that are related to the
performance of the audit or review of the Company’s Financial Statements.
(b)
Tax Fees
Tax consultancy services are secured from entities other than the appointed external auditor.
(c)
All Other Fees
There are no aggregate fees billed in each of the last two (2) fiscal years for products and
services provided by Isla Lipana & Co., other than the services reported under item (a) above.
(d)
Audit Committee’s Approval Policies and Procedures
The Audit Committee is comprised by the following members:
Chairman, Engr. Filemon T. Berba, Jr. and Mr. Yin Yong L. Lao.
Amb. Cesar B. Bautista as
The Audit Committee meets on a regular basis to:
11
a)
Assist the Board in the performance of its oversight responsibility for the financial reporting
process, system of internal control, audit process, and monitoring of compliance with applicable
laws, rules and regulations;
b)
Provide oversight over Management’s activities in managing credit, market, liquidity,
operational, legal and other risks of the corporation. This function shall include regular receipt
from Management of information on risk exposures and risk management activities;
c)
Perform oversight functions over the corporation’s internal and external auditors. It should
ensure that the internal and external auditors act independently from each other, and that both
auditors are given unrestricted access to all records, properties and personnel to enable them to
perform their respective audit functions;
d)
Review the annual internal audit plan to ensure its conformity with the objectives of the
corporation. The plan shall include the audit scope, resources and budget necessary to
implement it;
e)
Prior to the commencement of the external audit, discuss with the external auditor the nature,
scope and expenses of the audit, and ensure proper coordination if more than one audit firm is
involved in the activity to secure proper coverage and minimize duplication of efforts;
f)
Establish an internal audit function, and consider the appointment of an independent internal
auditor and the terms and conditions of its engagement and removal;
g)
Monitor and evaluate the adequacy and effectiveness of the corporation’s internal control
system, including financial reporting control and information technology security;
h)
Review the reports submitted by the internal and external auditors;
i)
Review the quarterly, half-year and annual financial statements before their submission to the
Board, with particular focus on the following matters:
- Any change/s in accounting policies and practices
- Major judgmental areas
- Significant adjustments resulting from the audit
- Going concern assumptions
- Compliance with accounting standards
- Compliance with tax, legal and regulatory requirements
Item 8.
j)
Coordinate, monitor and facilitate compliance with laws, rules and regulations;
k)
Evaluate and determine the non-audit work, if any, of the external auditor, and review
periodically the non-audit fees paid to the external auditor in relation to their significance to the
total annual income of the external auditor and to the corporation’s overall consultancy
expenses. The committee shall disallow any non-audit work that will conflict with his duties as
an external auditor or may pose a threat to his independence. The non-audit work, if allowed,
should be disclosed in the corporation’s annual report; and
l)
Establish and identify the reporting line of the Internal Auditor to enable him to properly fulfil his
duties and responsibilities. He shall functionally report directly to the Audit Committee. The Audit
Committee shall ensure that, in the performance of the work of the Internal Auditor, he shall be
free from interference by outside parties.
Compensation Plans
There are no matters or actions to be taken up in the meeting with respect to any stock option or
management incentive plan pursuant to which cash or non-cash compensation will be paid or distributed.
C. ISSUANCE AND EXCHANGE OF SECURITIES
Item 9. Authorization or Issuance of Securities Other than for Exchange
There are no matters or actions to be taken up in the meeting with respect to authorization or issuance of
securities.
Item 10. Modification or Exchange of Securities
There are no matters or actions to be taken up in the meeting with respect to the modification of any class
of the Company’s securities or the issuance of authorization for issuance of one class of the Company’s
securities in exchange for outstanding securities of another class.
Item 11. Financial and Other Information
The audited financial statements as of December 31, 2013, Management’s Discussion and Analysis,
Market, Price of Shares and Dividends and other data related to the Company’s financial information
(SEC Form 17-A) are attached hereto as Appendix 1.
Pursuant to SRC Rule 68, as amended, the Company undertakes to furnish its stockholders of record as
of May 8, 2014 with copies of its SEC Form 17-Q for the first quarter of 2014 on or before the scheduled
date of Annual Stockholders Meeting on June 2, 2014. Attached herewith is the Company’s duly
notarized undertaking to provide the stockholders the Company’s SEC Form 17-Q for the first quarter of
12
2014 (Appendix 1-A).
Market for Issuer's Common Equity
The Company’s common shares are traded on the First Board of the Philippine Stock Exchange. The
common shares were listed on 8 December 2000. The following table shows the high and low prices (in
pesos) of the Company’s shares in the Philippine Stock Exchange for the full year 2013 and for the first
quarter of 2014 :
Full Year 2013 (January 01 - December 31)
1st Quarter 2014 (January 01 - March 31)
High
Low
Php 3.15
Php 3.57
Php 2.62
Php 2.90
The last traded price of the Company’s shares as of December 31, 2013 was Php 3.07.
Compliance with leading practice on Corporate Governance
The Company’s Board adopted a Manual on Corporate Governance on April 14, 2012 in order to monitor
and assess the level of the Company’s compliance with practices on good corporate governance which
are consistent with the relevant Philippine laws and regulations. With the aid of its four committees, the
Board of Directors shall be primarily responsible for the governance of the Corporation and shall, hence,
ensure compliance with the principles of good corporate governance.
The Company’s Manual on Corporate Governance outlines specific investor’s rights and protections and
enumerates particular duties expected from the Board members, officers and employees. It also features
a disclosure system which highlights adherence to the principles of transparency, accountability and
fairness. A compliance officer is tasked with the formulation of specific measures to determine the level of
compliance with the Manual by the Board members, officers and employees. There are no known
material deviations from the Company’s Manual of Corporate Governance.
The Company filed its Annual Corporate Governance Report on June 28, 2013 pursuant to SEC
Memorandum Circular No. 5, Series of 2013.
The Company is taking further steps to enhance adherence to principles and practices of good corporate
governance.
Item 12. Mergers, Consolidations, Acquisitions and Similar Matters
There are no matters or actions to be taken up in the meeting with respect to merger, consolidation,
acquisition by, sale or liquidation of the Company.
Item 13. Acquisition or Disposition of Property
There are no matters or actions to be taken up in the meeting with respect to acquisition or disposition of
any property by the Company.
Item 14. Restatement of Accounts
The accounting policies adopted are consistent with those of the previous financial year.
13
D. OTHER MATTERS
Item 15. Action with Respect to Reports
The approval of the following will be considered and acted upon at the stockholders’ meeting:
(a)
(b)
Minutes of the annual meeting of stockholders held on June 17, 2013 (Appendix 2)
Annual Report of the Company together with the Audited Financial Statements for the
year ended December 31, 2013 (Appendix 1)
Ratification of all the acts of the Board of Directors and the Management since the date of
the 2013 annual stockholders’ meeting and adopted in the ordinary course of business
such as:
i.
Ii
Iii
iv.
Review and monitoring of Company’s financial position and operations;
Approval of credit facilities;
Treasury matters including opening of accounts and bank transactions;
Appointment of authorized corporate representative and signatories.
Item 16. Other Proposed Action
The following are to be proposed for approval during the stockholders’ meeting:
(a) Election of the Members of the Board of Directors for the ensuing year.
(b) Appointment of External Independent Auditors
Item 17. Voting Procedures
1. Manner of Voting
Method: Straight and Cumulative Voting
In all items for approval except election of directors, each share of stock entitles its
registered owner to one vote.
In case of election of directors, each stockholder may vote such number of shares for as
many persons as there are directors to be elected or he may cumulate said shares and give one
nominee as many votes as the number of directors to be elected multiplied by the number of his
shares equal, or he may distribute them on the same principle among as many nominees as he
shall see fit, provided that the whole number of votes cast by him shall not exceed the number of
shares owned by him multiplied by the whole number of directors to be elected.
2. Vote required for approval
The vote of stockholders representing at least a majority of the issued and outstanding
capital stock entitled to vote is required.
3. Methods of Counting Votes
Each share shall be counted as one (1) vote.
14
The votes will be tabulated by the stock and transfer agent and verified by the accounting
firm of Isla Lipana & Co (formerly Joaquin Cunanan Pricewaterhouse Coopers).
UPON THE WRITTEN REQUEST OF A STOCKHOLDER, THE COMPANY UNDERTAKES TO
FURNISH SAID STOCKHOLDER A COPY OF THE COMPANY’S ANNUAL REPORT ON SEC FORM
17-A AND THE QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2014 ON SEC FORM
17-Q FREE OF CHARGE. ANY WRITTEN REQUEST FOR A COPY OF SEC FORMS 17-A AND 17-Q
SHALL BE ADDRESSED TO:
Chemrez Technologies, Inc.
65 Industria Street, Bagumbayan
Quezon City, Philippines 1110
Attention: Ms. Nikka Maloles
(This space deliberately left blank)
15
APPENDIX 1
SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-A, AS AMENDED
ANNUAL REPORT PURSUANT TO SECTION 17
OF THE SECURITIES REGULATION CODE AND SECTION 141
OF THE CORPORATION CODE OF THE PHILIPPINES
1. For the fiscal year ended: December 31, 2013
2. Commission identification number: 164266
3. BIR Tax Identification No.: 000-400-898
1) Exact name of issuer as specified in its charter:
CHEMREZ TECHNOLOGIES, INC. (formerly CORRO-COAT, INC.)
5. Province, country or other jurisdiction of incorporation or organization: Metro Manila
6. Industry Classification Code: __________ (SEC Use Only)
7. Address of issuer's principal office: 65 Industria St., Bagumbayan, Quezon City
Postal Code: 1110
8. Issuer's telephone number, including area code: (02) 635 0680
9. Former name, former address and former fiscal year: Corro-Coat, Inc.
10. Securities registered pursuant to Sections 8 and 12 of the Code, or Sections 4 and 8 of the
RSA
Title of Each Class: Common Stock, P1 par value
No. of Shares of Common Stock Issued and Outstanding:
1,301,897,472 Shares* as of December 31, 2013 (Net of 95,958,000 treasury shares)
Amount of Debt Outstanding as of December 31, 2013: 510,092,000
11. Are any or all of the securities listed on a Stock Exchange?
Yes [
]
No [ ]
If yes, state the name of such Stock Exchange and the class/es of securities listed therein:
Philippine Stock Exchange; A total of 1,301,897,472 shares of common stock with par value
of P1.00 each.
1
12. Check whether the issuer:
(a) Has filed all reports required to be filed by Section 17 of the SRC and SRC Rule 17
thereunder or Sections 11 of the RSA and RSA Rule 11(a)-1 thereunder, and
Sections 26 and 141 of the Corporation Code of the Philippines, during the
preceding twelve (12) months (or for such shorter period the registrant was required
to file such reports)
Yes [ ]
No [ ]
(b) Has been subject to such filing requirements for the past one hundred eighty (90)
days.
Yes [ ]
No [ ]
13. Aggregate market value of the voting stock held by non-affiliates of the registrant:
The aggregate market value of the 463,569,851 voting stock held by non-affiliates (public
shares) as of 31 December 2013, computed based on the closing share price of Php 3.07
as of 31 December 2013 is Php 1,423,159,443.
2
TABLE OF CONTENTS
PART I – BUSINESS AND GENERAL INFORMATION
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II – OPERATIONAL AND FINANCIAL INFORMATION
Item 5. Market for Issuer’s Common Equity and Related Stockholders Matters
Item 6. Management’s Discussion and Analysis
.
Item 7. Financial Statements
Item 8. Information on Independent Accountant and Other Related Matters
PART III – CONTROL AND COMPENSATION INFORMATION
Item 9. Directors and Executive Officers of the Issuer
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
PART IV – CORPORATE GOVERNANCE
Item 13. Compliance with Leading Practice on Corporate Governance
PART V – EXHIBITS AND SCHEDULES
Item 14. Exhibits and Reports on SEC Form 17-C
.. 4
.. 4
........... 7
..... 7
8
.8
.8
. 10
... 20
.. 20
23
23
.. 26
.. 26
. 28
29
.. 29
29
...29
INDEX TO FINANCIAL STATEMENTS
...32
SIGNATURES
...33
3
PART I - BUSINESS AND GENERAL INFORMATION
Item 1. Business
The Company
The Company was incorporated on 1 June 1989 under the name Corro-Coat, Inc. and was the
result of the spin-off of the powder coating division of its affiliate, D & L Industries Inc. It was
listed on the First Board of the Philippine Stock Exchange (PSE) on 8 December 2000 under the
trading symbol “COAT”.
Positioning for further growth, the Company expanded its manufacturing business and product
line in 2006 and branched out from powder coating to move into the production of biodiesel and
other oleochemicals, resins and other specialty chemicals. This was undertaken through a
100% acquisition of its resins producer affiliate, Chemrez Inc., by way of a share exchange
transaction, and by its procurement of a new biodiesel facility and oleochemical plant assets.
These business acquisitions were financed mainly from the additional offering of primary shares
of the Company in 2006, following an increase in its authorized capital from Php 1.01 billion to
Php 2.0 billion. As part of its branding strategy for its business diversification, the Company also
assumed a new corporate name, Chemrez Technologies, Inc.
Overview of the Business
The Company and its wholly owned subsidiary, Chemrez, Inc., (collectively, the “Company”)
manufacture and market an extensive line of resins, powder coatings, and oleochemicals for
both domestic and export markets. Exports comprised 21% of 2013 revenues. In 2012, exports
were at 20%, in 2011 at 17%, and in 2010 at 17%. The Company operates principally in two
segments - agricultural-based products (oleochemicals) and resins-based products (resins &
powder coatings) which represented 47% and 53%, respectively, of consolidated sales for 2013.
Consistent with its green chemistry thrust, the Company has been creating products developed
from renewable raw materials, including coconut. These product innovations aim to eliminate
waste and toxic materials in chemical products and processes, with applications in various
industries like paint, plastics, soap, and detergents.
Principal Products, Markets and Revenue Contribution
Oleochemical Segment
Biodiesel accounts for the bulk of the oleochemical business of the Company. Its IMS-certified,
pioneering continuous process methyl ester (CME) facility and coco biodiesel products are
accredited with the Department of Energy and registered with the Board of Investments with
pioneer status. Chemrez also serves as a major contributor to the National Biofuels Program
under RA 9367, otherwise known as the Biofuels Act of 2006 and to the National Renewable
Energy Program under RA 9513 or the Renewable Energy Act of 2008. The Biofuels Act
provides for national mandates for increased use of biofuels and, in February 2009, the
biodiesel mandate was increased from a 1% (B1) to a 2% (B2) blend. While this required a
significant step-up in production commitment to satisfactorily meet higher local demand, there
are sufficient indigenous sources of coconut oil (CNO) feedstock in the country.
Presently, the local biodiesel industry is composed of 12 DOE-accredited producers including
the Company. In 2013, the Company supplied approximately 20% of the Philippine’s biodiesel
4
requirement. The Company believes that its commitment to excellence in quality, delivery and
cost competitiveness would allow it to be a primary domestic supplier of choice by oil companies
and institutional buyers. The extensive quality management systems of the Company and its
investments in logistics infrastructure and supply chain management were designed to help
assure the continuous bulk supply of compliant biodiesel to local oil companies and generate
cost efficiencies that are passed on to its customers.
Other oleochemical products of the Company include glycerine and other methyl ester (CME)
derivatives, which are used mainly as surfactants or foaming agents for soaps and detergents,
and are sold principally in the export markets. The oleochemical industry’s struggle in 2011 from
high cost of raw materials and over supply continued in 2012 and 2013. As such, the Company
has been proactively growing its CME export markets with the development of new product
applications. Through the use of pioneering process technology, oleochemical specialty
products that have high export potential were recently developed. The Company’s oleochemical
specialties segment is likewise registered with the Board of Investments with non-pioneer status
without prejudice to upgrading to pioneer status.
Resins & Powder Coating Segment
The Company has a solid record of experience and expertise in the manufacture and marketing
of powder coating, resins, and other specialty resin-based chemicals.
Powder coatings are protective materials applied to metal and other surfaces through an
electrostatic coating process to provide resistance against heat, weather and UV light, and
certain chemicals. It is used in home appliances, metal furniture, fixtures and fittings,
mechanical parts, tools and equipment and also in the construction industry.
Resins are polymerized or chemically modified substances which are manufactured in a
variety of technical specifications to suit specific industry uses, end-user applications, and
customer requirements. It includes polystyrene resins for the plastics industry, polymer
emulsions for the paint industry, and polyester resins for the construction, shipping, and
furniture industries.
Other specialty resin-based chemicals comprise of additives, colorants, and solvents.
The Company has maintained its market leadership in powder coatings and resins through
competitive pricing, consistent quality, and the ability to offer product customization and provide
on-site after-sales technical support to customers. The Company also continued to invest in
research and development to develop new powder coating and resin products with improved
and innovative features. It competes mainly against importers and traders.
The Company attributes its strong market position to several factors. Its operating scale allows it
to manufacture products at highly competitive costs. Beyond price competition, the Company
has established long-standing relationships with its customers. These partnerships allow the
Company to respond quickly to its customers’ requirements and offer newer and better products
out of its extensive efforts and achievements in research and development.
5
General Operations
Additional discussion on other business risks are also provided in Note 3 of the 2013
Consolidated Audited Financial Statement of the Company attached herein as Annex A.
The Company, in the ordinary course of business, transacts with related parties. These
transactions include the purchase/sale of goods and services. Details of the Related Party
Transaction are discussed under Notes 1 (General Information) and 16 (Related Party
Transaction) of the Notes to the Consolidated Financial Statements of the Company.
As of 31 December 2013, the Company had a total of 177 employees in its workforce.
There are no employee unions in the workforce, hence, none of the employees have
collective bargaining agreements with the Company. Also, the Company does not expect
any significant change in its existing workforce level in 2014.
Management of Key Risks related to the Company
Risk from political and regulatory risks
The Company is exposed to regulatory changes, such as changes in laws related to biofuels or
any regulations mandating the use of non-coconut oil based alternative fuels. The Company
also benefits from tax advantages provided by the government in support of renewable
materials. Any cancellation or termination of such government sponsorships might adversely
impact the Company's profitability, in particular its oleochemical business.
Reliance on existing laws and tax incentives are addressed by diversification strategies. These
include expanding the product portfolio and exploring other markets and industries. In 2013, the
Company’s non-oleochemical business generated over half of revenues.
Risk related to research and development activities
A substantial portion of the Company’s revenues is generated from R&D-driven products. In line
with principles of green chemistry, the Company has an extensive portfolio of products derived
from sustainable sources, in particular coconut oil. The technical nature of this business means
that failure to adapt to a fast-evolving market environment by means of innovation might
endanger the Company’s competitive position and profitability.
To make sure the Company can meet market needs effectively and efficiently, about 19% of its
workforce is in the technical department. These employees pursue various research and
development activities, including product development and application, as well as quality
assurance.
Risk from supply-related factors
The Company has products in the portfolio that are commodity in nature, including biodiesel and
polystyrene. This means prices and margins vary depending on a number of factors affecting
supply. Without a commensurate growth in demand, increased supply from entry of new players
or capacity expansion by existing players will put pressure on margins.
The Company continues to monitor market conditions in order to effectively and efficiently plan
6
capacity and production. Most operating decisions are made with existing and future capacity in
mind. Strategies to address unused capacity are in place as well, including changing the
product mix.
Risk from volatility in raw material prices
Raw materials, primarily coconut oil and monomers, comprise bulk of the Company’s total costs
and expenses. These raw materials are priced to market and tend to be volatile, with the ability
to pass on increases in costs largely dependent on contractual arrangements and prevailing
market conditions.
The Company in general does not lock in selling prices long term for most of its contracts with
customers. Prices for the contracts are adjusted every month on average, enabling the
Company to pass on relevant price changes in raw material costs.
Risk from customer concentration
The Company’s top three largest customers accounted for 41% of consolidated revenues in
2013. These customers come from varied industries – oil, food and beverage, and paint.
Significant changes in any of these customers’ purchases might have material impact on the
Company’s businesses and profitability.
Cognizant of the risk of customer concentration, the Company continues to work closely with
customers in order to get good demand visibility. Part of managing risks associated with
customer concentration is assessing such risks against operational and strategic factors such
as economies of scale and knowledge accumulation.
Item 2. Properties
The Company owns the manufacturing and warehousing facilities dedicated to its powder
coating division, situated on a 6,000 square meter rectangular-shaped property along Industria
Street, Bagumbayan, Quezon City. The property’s main improvement is a well-maintained and
operationally sound 2-storey reinforced concrete permanent structure with a total floor area of
approximately 9,770 square meters. The site is located in a predominantly industrial zone near
the boundary of Pasig City and Quezon City, under TCT No. N-216625 of the Registry of Deeds
of Quezon City.
There is no mortgage, lien or encumbrance over the property owned by the Company. The
Company leases out a portion of the same property to its affiliates under lease agreements
entered into in 2000, and these leases may be terminated at the option of the Company.
The commitment to excellence in quality, delivery, and cost competitiveness led the Company to
establish certification of its production and warehouse/storage facilities according to the
Integrated Management System (IMS) standards. As a result, the Company now has
certifications in ISO 9001 (quality), ISO 14001 (environmental), OHSAS 18001 (safety) and
CIP/39051/07/03/519 (Stage 2 certification).
Item 3. Legal Proceedings
As of date of this report, the Company is not a party to any litigation or arbitration proceedings of
material importance, which could be expected to have a material adverse effect on the
7
Company or on the results of its operations. No litigation or claim of material importance is
known to be pending or threatened against the Company or any of its properties.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the period covered by this
report.
PART II - OPERATIONAL AND FINANCIAL INFORMATION
Item 5. Market for Issuer's Common Equity and Related Stockholder Matters
1) The Company’s common shares are traded on the First Board of the Philippine Stock
Exchange. The common shares were listed on 8 December 2000. The following table
shows the high and low prices (in pesos) of the Company’s shares in the Philippine Stock
Exchange for the last eight quarters:
High
Low
High
2013
4th Quarter
3rd Quarter
2nd Quarter
1st Quarter
3.15
3.05
3.10
3.02
Low
2012
2.70
2.80
2.62
2.75
3.12
2.75
2.74
2.75
2.74
2.47
2.42
2.41
The last traded price of the Company’s shares as of December 31, 2013 was Php 3.07.
2) Based on the records of the Stock and Transfer Agent of the Company, the total number of
shareholders of the Company as of 31 December 2013 is 277. The top 20 shareholders as
of the same date are:
8
List of Top 20 Stockholders of Record
December 31, 2013
Name of Stockholder
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
PCD NOMINEE CORP. (FILIPINO)
D&L INDUSTRIES, INC.1
JADEL HOLDINGS, INC.
COLOR CHEM. CORP.
PCD NOMINEE CORPORATION (NON-FILIPINO)
SMARTWORKS TRADING CO., INC.
JADANA, INC.
PRIME SPIN, INC.
CEE INDUSTRIES, INC.
ALLVEE UNITED, INC.
ASIAN ALLIANCE INVESTMENT CORP
FMF DEV. CORP
ALVIN DIM LAO
DENNIS GRANADA BAGUYO
HANSEVIAN, INC.
SHIRLYN ANG LAO
IVIE MAE DIM LAO &/OR LAO, YVETTE ANN DIM
HENRY DY TAN &/ OR SHERLEY GARGANTOS TAN
ELSIE TAN MARINO
NELSON G. TAN
Number of
Shares
Held
599,360,552
251,508,404
155,708,523
88,000,000
42,829,600
38,869,200
35,482,000
35,482,000
35,482,000
32,601,999
3,368,160
2,000,000
1,294,429
501,000
499,999
440,000
255,000
205,000
203,200
200,000
Percent to
Total
Outstanding
42.88%
17.99%
11.14%
6.30%
3.06%
2.78%
2.54%
2.54%
2.54%
2.33%
0.24%
0.14%
0.09%
0.04%
0.04%
0.03%
0.02%
0.01%
0.01%
0.01%
Note:
(1) 200,000,000 shares (acquired in 2007) are indirectly owned by D&L Industries
through PCD Nominee Corp. (Filipino). This brings total shareholdings held by D&L
Industries to 34% of the outstanding share capital of the Company as of 31 December
2013.
The percentage is based on the total number of shares issued and outstanding net of
treasury shares - 1,301,897,472.
3) Based on the records of the Stock and Transfer Agent of the Company, 35.61% of the
Company’s shares are held in the hands of the public, based on 1,301,897,472 issued and
outstanding shares of P1.00 each in the capital of the Company as of December 31, 2013.
4) The Company has not adopted a formal dividend policy. The Board nonetheless, has
continuously declared dividends annually since the listing of Corro-Coat in 2000. In 2013,
the Board declared and paid Php 117 million in total dividends, equivalent to 48% of the
2012 net income.
The Company’s dividend history since 2001 is illustrated below:
Year
Stock
Cash
2013
-
0.06 (regular)
2013
-
0.09 (special)
Ex-Date
Record
Date
Date
Payable
12-Jul-13
17-July-13
12-Aug-13
12-Jul-13
17-July-13
12-Aug-13
9
2012
-
0.06 (regular)
13-Jul-12
18-July-12
13-Aug-12
2012
-
0.06 (special)
13-Jul-12
18-July-12
13-Aug-12
2011
-
0.06 (regular)
22-July-11
27-July-11
10-Aug-11
2011
-
0.09 (special)
22-July-11
27-July-11
10-Aug-11
2010
-
0.06 (regular)
21-June-10
20-July-10
13-Aug-10
2010
-
0.06 (special)
21-June-10
20-July-10
13-Aug-10
2009
-
0.06 (regular)
8-June-09
1-July-09
30-July-09
2009
-
0.03 (special)
8-June-09
1-July-09
30-July-09
2008
-
0.06 (regular)
24-Jun-08
27-Jun-08
23-Jul-08
2008
-
0.06 (special)
24-Jun-08
27-Jun-08
23-Jul-08
2007
-
0.02 (regular)
03-Sep-07
06-Sep-07
01-Oct-07
2007
-
0.04 (special)
03-Sep-07
06-Sep-07
01-Oct-07
2006
-
0.02 (regular)
10-May-06
15-May-06
07-Jun-06
2006
-
0.02 (special)
10-May-06
15-May-06
07-Jun-06
2005
-
0.04
15-Sep-05
20-Sep-05
14-Oct-05
2004
20%
-
25-Jun-04
30-Jun-04
23-Jul-04
2003
-
0.025
10-Jun-03
16-Jun-03
30-Jun-03
2002
20%
-
26-Jun-02
01-Jul-02
22-Jul-02
2001
-
0.03
17-Apr-01
20-Apr-01
18-May-01
5) There were no sales of unregistered or exempt securities within the past three (3) years,
which were not registered under the Securities Regulation Code.
Item 6. Management's Discussion and Analysis of Financial Condition, Changes of
Financial Conditions and Result of Operations
FY 2013 versus FY 2012
Results of Operations
10
Consolidated sales increased by 12% from last year. Sales for the period reached PhP
4.3 billion, higher by PhP 449 million than the PhP 3.9 billion recorded for the same
period in 2012.
Export sales this year is 21% of total sales. Export sales increased 20% to PhP 917
million in 2013 driven by specialty oleochemicals.
Revenue mix for the period: 47% oleochemicals, 37% resins, 8% powder coating and
8% color dispersion.
Cost of goods sold of PhP 3.8 billion, higher by 11% than the PhP 3.4 billion in 20112
The increase resulted primarily from higher sales volume of oleochemicals in 2013.
Gross profit of PhP 550 million, 19% higher than PhP 460 million in 2012. Gross profit
margin was 13% versus 2012’s 12%. Higher margin reflects slower growth in cost of
goods sold than sales.
Selling and marketing expenses of PhP 90 million up by 15% from the PhP 85 million in
2012. Delivery charges were higher in 2013 mainly on increased sales volume, which
increased the required quantity of goods to be produced and delivered.
Administrative expenses of PhP 82 million were down by 4% from PhP 85 million in
2012. The decrease was driven by lower taxes and licenses in 2013, which fell 29% from
the previous year.
Other income of PhP 21 million was lower by 51% than PhP 44 million in 2012. The
decrease was due to the foreign exchange loss of Php 4.8 million booked in 2013 versus
a foreign exchange gain of Php 18.6 million in 2012.
Operating profit in 2013 was PhP 399 million, 17% higher than the PhP 342 million in
2012.
The Company incurred finance cost during the year amounting to PhP 8.4 million, higher
by 58% from PhP 5.3 million in 2012. The increase was because of increased bank
borrowings and foreign exchange losses in 2012.
Profit before income tax of PhP 391 million, up by 16% from the PhP 336 million in 2012.
Profit after income tax of PhP 308 million, higher by 25% from the PhP 245 million in
2012.
Net profit margin increased from 6% in 2012 to 7% in 2013.
Earnings per share increased to PhP 0.24 from PhP 0.19 in 2012.
Financial Condition
The Company’s current ratio of 4.14:1 in 2013 was lower than 9.43:1 in 2012 mainly due
to higher borrowings during the year.
11
Debt to equity ratio of 0.23:1 was higher than 0.08:1 in 2012. The increase was driven by
increased borrowings in 2013. The Company includes all forms of liabilities in the
computation of debt.
In 2013, average days of receivables increased to 52 days from 48 days of 2012. The
Company is carefully relaxing its credit policies for select customers, while making sure it
is not done at the expense of accounts being uncollected.
Average days of of inventory were steady at 85 days in 2013, longer by a day from 84
days in 2012.
Cash increased by 68%, from PhP 345 million in 2012 to PhP 577 million. This was
because of increased bank borrowings during the year.
Trade and other receivables increased by 34%, from PhP 532 million in 2012 to PhP 710
million in 2013 due to higher sales year-on-year.
Inventories increased by 35% from PhP 778 million in 2012 to PhP 1.0 billion in 2013.
The Company is maintaining its inventory levels at optimum to meet demand and lower
cost of keeping such inventories.
Prepayments and other current assets increased by 13%, from PhP 1.5 billion to Php 1.7
billion in 2013. This is mostly in the form of excess input tax (VAT) paid on raw materials
for coco-biodiesel, as sales of coco-biodiesel are subject to zero-rated VAT.
Total current assets decreased by 28%, from PhP 3.2 billion in 2012 to PhP 4.1 billion in
2013.
Long-term receivables decreased by 79% from PhP 4 million in 2011 to PhP 922
thousand in 2013, resulting from continued effort to improve collection efficiency.
Property, plant and equipment decreased by 6%, from PhP 1.2 billion in 2012 to PhP 1.1
billion in 2013.
Deferred tax asset decreased to PhP 229 thousand from PhP 1.6 million in 2012.
Retirement benefit asset decreased by 18%, from PhP 1.9 million in 2012 to PhP 1.5
million in 2013. The PhP 348 thousand decrease was the net of retirement benefit
expense and contributions paid during the year.
Total current liabilities increased by 190% from PhP 338 million in 2012 to PhP 983
million in 2013. The decrease was due to higher trade payables and bank borrowings
during the year.
Trade and other payables increased by 185%, from PhP 154 million in 2012 to PhP 438
million in 2013.
The company had short term bank loans of Php 510 million as of end December 31,
2013, a 200% increase year-on-year.
12
Income tax payable increased by 137%, from PhP 5.7 million in 2012 to PhP 13.5 million
in 2013. The increase was brought about by higher operating income during the year.
Retained Earnings increased by 12%, from PhP 1.6 billion at the end of 2012 to PhP 1.8
billion in 2013 due to the PhP 308 million profit generated during the period less the PhP
117 million dividend paid during the year.
Total equity increased by 4%, from PhP 4.0 billion at the end of 2012 to PhP4.2 billion by
the end of 2013.
During the year, the Company has re-purchased a total of 7.4 million shares with a net
cost of P26.6 million.
Status of the Company’s share buyback:
Number of Issued Shares
Share Buyback
Number of Issued and Outstanding Shares
Gross Value of Buyback (PhP)
Average Acquisition Cost per Share (PhP)
Percentage of Repurchase Value Limit
Remaining Balance of Previous Resolution
1,397,855,472
95,958,000
1,301,897,472
274,276,684
2.86
54.58%
225,735,070
The Company’s cash requirements during the period have been sourced mainly through
proceeds from borrowings.
o
o
o
Net cash generated from operating activities for the year was PhP 61 million.
Net cash used in investing activities for the period amounted to PhP 17 million
due to acquisition of property, plant and equipment.
Net cash from financing activities amounted to PhP 188 million. The Company
paid and borrowed from the bank Php 476 million and PhP 813 million,
respectively. It also paid cash dividend of PhP 117 million and bought back a
portion of its ordinary shares, and paid interest of PhP 5 million.
Key Financial Performance Indicators
The Company considers the following its key comparative performance indicators:
1/
Gross profit margin
Net profit margin 2/
Return on equity 3/
Current ratio 4/
Solvency ratio 5/
Debt-to-equity ratio 6/
Asset-to-equity ratio 7/
Interest coverage ratio 8/
1/
2/
FY 2013
FY 2012
12.7%
7.1%
7.3%
4.1:1
0.41:1
0.23:1
1.23:1
78.2:1
11.9%
6.3%
6.1%
9.4:1
1.01:1
0.08:1
1.08:1
63.8:1
Gross Profit / Net sales
Net Profit / Net sales
13
3/
Net Income / Stockholder’s Equity
Current Asset / Current Liabilities
5/
After-tax net profit + Depreciation / Total Liabilities
6/
Total Liabilities / Stockholder’s Equity
7/
Total Assets / Stockholder’s Equity
8/
Earnings before Interest and Taxes / Interest Expense
4/
FY 2012 versus FY 2011
Results of Operations
Consolidated sales decreased by 24% from last year. Sales for the period reached PhP
3.9 billion, lower by PhP 1.2 billion than the PhP 5.1 billion recorded for the same period
in 2011.
Export sales this year is 20% of total sales. Export sales decreased from PhP 1.0 billion
from last year to PhP 763 million.
Revenue mix for the period: 42% oleochemicals, 42% resins, 9% powder coating and
7% color dispersion.
Cost of goods sold of PhP 3.4 billion, lower by 25% than the PhP 4.6 billion last 2011.
The decrease was the result of lower sales volume and lower cost of raw materials of
oleochemicals in 2012.
Gross profit of PhP 460 million, 16% lower from PhP 546 million last 2011. Gross profit
margin was 11.9% versus 2011’s 10.7%. Higher margin reflects lower cost of goods
sold.
Selling and marketing expenses of PhP 78 million were lower by 1% from the PhP 77
million last 2011. Delivery charges was lower in 2013 as a consequence of lower sales
volume, which reduced the required quantity of goods to be produced and delivered.
Administrative expenses of PhP 85 million were higher by 5% from the PhP 81 million
last 2011. This can be mostly attributed to the significant increase in donations during
the year. Starting in 2012, the Company donated 1% of prior year’s net income,
equivalent to PhP 3 million, to the Lao Foundation, to provide educational assistance to
the under privileged. This will be done annually.
Other income of PhP 44 million is higher by 27% from the PhP 34 million in 2011. The
increase was mostly due to higher foreign exchange gains.
Operating profit in 2012 was PhP 341 million, 19% lower than the PhP 421 million in
2011.
The Company incurred finance cost during the year amounting to PhP 5 million, lower by
71% from PhP 18 million in 2011. The decrease was because of lower bank borrowings
and absence of foreign exchange loss in 2012.
14
Profit before income tax of PhP 336 million, lower by 17% from the PhP 403 million in
2011.
Profit after income tax of PhP 245 million, lower by 21% from the PhP 311 million in
2011.
Net profit margin increased from 6.1% in 2011 to 6.3% in 2012.
Earnings per share decreased to PhP 0.19 from PhP 0.24 in 2011.
Financial Condition
The Company’s financial position regarding liquidity has become stronger with a current
ratio of 9.4:1 in 2012 versus 4.2:1 in 2011.
Debt to equity ratio of 0.08:1 has decreased from 2011’s ratio of 0.21:1. The decrease is
due to a decrease in the level of bank borrowings in 2012. The Company is continuously
monitoring its sources of capital to further reduce cost and maintain a comfortable debtto-equity level.
In 2012, average age of receivables increased to 48 days from 42 days of 2011. The
Company is carefully relaxing its credit policies for select customers, while making sure it
is not done at the expense of accounts being uncollected.
Average age of inventory was 65 days in 2012 from 69 days in 2011. The Company is
attempting to reduce its inventory cost by trying to produce what is currently required
with allowance for future possible demands.
Cash decreased by 48%, from PhP 657 million in 2011 to PhP 344 million. This was
because of decrease in trade payables and bank borrowings.
Trade and other receivables decreased by 4%, from PhP 556 million in 2011 to PhP 534
million in 2012 due to improved collection efforts.
Inventories decreased by 10%, from PhP 861 million in 2011 to PhP 778 million in 2012.
The Company is maintaining its inventory levels at optimum to meet demand and lower
cost of keeping such inventories.
Prepayments and other current assets increased by 4%, from PhP 1.47 billion to Php
1.53 billion in 2012. This is mostly in the form of excess input tax (VAT) paid on raw
materials for coco-biodiesel, as sales of coco-biodiesel are subject to zero-rated VAT.
Total current assets decreased by 10%, from PhP 3.5 billion in 2011 to PhP 3.2 billion in
2012.
Long-term receivables decreased by 38%, from PhP 7.2 million in 2011 to PhP 4.4
million in 2012.
Property, plant and equipment is decreased by 5%, from PhP 1.24 billion in 2011 to PhP
1.17 billion in 2012.
15
Deferred tax asset decreased to PhP 1.6 million from PhP 7.6 million in 2011.
Retirement benefit asset decreased by 78%, from PhP 8.5 million in 2011 to PhP 1.9
million in 2012. The PhP 6.6 million decrease is the net of retirement benefit expense
and contributions booked during the year.
Total liabilities decreased by 60% from PhP 838 million in 2011 to PhP 338 million in
2012. The decrease was due to trade payables and bank borrowings being paid during
the year.
Trade and other payables decreased by 60%, from PhP 382 million in 2011 to PhP 154
million in 2012.
The company has paid its outstanding loans from 2011 and reduced its loans in banks
during the year resulting in a 60% decrease in borrowings.
Income tax payable decreased by 69%, from PhP 18.6 million in 2011 to PhP 5.7 million
in 2012. This decrease was brought about by lower operating income during the year.
Retained Earnings increased by 6%, from PhP 1.5 billion at the end of 2011 to PhP 1.6
billion this 2012. This was due to the profit generated for the period less the dividend
paid during the year.
Total equity increased by 2%, from PhP 3.9 billion at the end of 2011 to PhP4.0 billion by
the end of 2012.
During the year, the Company has re-purchased a total of 10.8 million shares with a net
cost of P32 million.
Status of the Company’s share buyback:
The Company’s cash requirements have been sourced mainly through cash flow from
operating activities.
o
o
o
Net cash generated from operating activities for the year was PhP 163 million.
Net cash used in investing activities for the period amounted to PhP 29 million
due to acquisition of property, plant and equipment.
Net cash used in financing activities amounted to PhP 448 million. The Company
paid and borrowed from the bank Php 422 million and PhP 170 million,
respectively. It also paid cash dividend of PhP 159 million and bought back a
portion of its ordinary shares, and paid interest of PhP 6 million.
16
Key Financial Performance Indicators
The Company considers the following its key comparative performance indicators:
1/
Gross profit margin
Net profit margin 2/
Return on equity 3/
Current ratio 4/
Solvency ratio 5/
Debt-to-equity ratio 6/
Asset-to-equity ratio 7/
Interest coverage ratio 8/
FY 2012
FY 2011
11.9%
6.3%
6.1%
9.4:1
1.04:1
0.08:1
1.07:1
63.8:1
10.7%
6.1%
7.8%
4.2:1
0.48:1
0.21:1
1.21:1
39.4:1
1/
Gross Profit / Net sales
Net Profit / Net sales
3/
Net Income / Stockholder’s Equity
4/
Current Asset / Current Liabilities
5/
After-tax net profit + Depreciation / Total Liabilities
6/
Total Liabilities / Stockholder’s Equity
7/
Total Assets / Stockholder’s Equity
8/
Earnings before Interest and Taxes / Interest Expense
2/
FY 2011 versus FY 2010
Results of Operations
Consolidated sales decreased by 13 % from last year. Sales for the period reached PhP
5.1 billion, lower by PhP 732M than the PhP 5.8 billion recorded for the same period in
2010.
Export sales this year is 20% of total sales. In 2011, export sales continuously grew,
from PhP 991 million last year to PhP 1.0 billion.
Revenue mix: 53% oleochemicals, 41% resins and color dispersion, and 6% powder
coating.
Cost of goods sold of PhP 4.6 billion, lower by 10% than the PhP 5.1 billion last 2010.
The decrease was the result of lower sales volume of biodiesel in 2011.
Gross profit of PhP 546 million, 28% lower from PhP 758 million last 2010. Gross profit
margin was 11% versus 2010’s 13%. Lower margin reflects higher cost of goods sold.
Selling and marketing expenses of PhP 77 million were lower by 7% from the PhP 83
million last 2010. The decrease in selling expenses was mostly because of the
improvement in receivables collection wherein provisions for impairment in receivables
have substantially decreased.
17
Administrative expenses of PhP 81 million lower by 3% from the PhP 84 million last
2010. The drivers of this decrease were: 1) Lower management logistics and support
services fees paid and 2) lower bank charges paid.
Other income of PhP 34 million was up by 24% from PhP 28 million in 2010.
Operating profit in 2011 was PhP 414 million, 32% lower than the PhP 619 million last
2010.
The Company incurred a finance cost of PhP 18 million during the year, higher by 41%
from PhP 8 million in 2010. The increase was because of additional bank borrowings.
Profit before income tax of PhP 403 million, lower by 34% from the PhP 611 million last
2010.
Profit after income tax of PhP 311 million, lower by 39% from the PhP 509 million last
2009.
Net profit margin decreased from 8.7% in 2010 to 6.1% in 2011.
Earnings per share decreased to PhP 0.24 from PhP 0.39 in 2010.
Financial Condition
The Company’s financial position remained strong with a current ratio of 4.2:1 in 2011
versus 5.1:1 in 2010.
Debt to equity ratio of 0.21:1 for the period is within a comfortable level. This compared
to 0.16:1 in 2010.
Average days receivable were a day shorter at 42 days from 43 days sales in 2010. The
Company tried to improve its collection efficiency through a continuous effort to collect
its accounts when they became demandable and by lowering credit terms particularly to
export customers.
Average day’s inventory was 69 days in 2011 from 64 days in 2010.
Cash increased by 83%, from PhP 360 million in 2010 to PhP 657 million. This was
because of an increase in trade payable and bank borrowings.
Trade and other receivables decreased by 19%, from PhP 688 million in 2010 to PhP
556 million in 2011 due to improved collection efforts.
Inventories decreased by 4%, from PhP 895 million in 2010 to PhP 861 million in 2011,
The Company prudently manages its purchases of raw materials.
Prepayments and other current assets increased by 17%, from PhP 1.3 billion to Php 1.5
billion in 2011. This is mostly in the form of excess input tax (VAT) paid on raw materials
for coco-biodiesel, as sales of coco-biodiesel are subject to zero-rated VAT.
18
Total current assets increased by 11%, from PhP 3.2 billion in 2010 to PhP 3.5 billion in
2011.
Long-term receivable decreased by 33% from PhP 11 million in 2010 to PhP 7 million in
2011 as a result of the Company directives to improve collection efficiency.
Property, plant and equipment was steady at PhP 1.2 billion in 2011 as acquisition of
new equipment was offset by depreciation costs
Deferred tax asset was flat at PhP 8 million.
Retirement benefit asset increased by 96%, from PhP 4 million in 2010 to PhP 8 million
in 2011. The PhP 4 million increase was net of retirement benefit expense and
contributions paid during the year.
Total payables increased by 33% from PhP 630 million in 2010 to PhP 838 million in
2011. Most of this increase was due to trade payable and bank borrowing made during
the year.
Trade and other payables increased by 72%, from PhP 233 million in 2010 to PhP 401
million in 2011. This was due to purchases of raw materials made during last month of
2011.
Company availed additional loans from banks that resulted in a 10% increase in
borrowings.
Income tax payable increased by 23%, from PhP 15 million in 2010 to PhP 19 million in
2011. This increase was brought about by increased income from non-BOI registered
activities.
Retained Earnings increased by 8%, from PhP 1.4 billion at the end of 2010 to PhP 1.5
billion this 2011. This was due to the profit generated for the period less the dividend
paid during the year.
Total equity increased by 3%, from PhP 3.9 billion at the end of 2010 to PhP4.0 billion by
the end of 2011.
Although Company’s share buyback program has not been terminated, there was no
purchase of any shares in 2011, nor were there any sale, transfer, disposal, cancellation
and/or use of treasury shares for the period up to December 2011.
The Company’s cash requirements have been sourced mainly through cash flow from
operating activities.
o
o
o
Net cash generated from operating activities for the year was PhP 544 million.
Net cash used in investing activities for the period amounted to PhP 75 million
mainly due to acquisition of property, plant and equipment.
Net cash used in financing activities amounted to PhP 177 million. The Company
borrowed from bank PhP 837 million, paid cash dividend of PhP 198 million and
interest of PhP 11 million.
19
Key Financial Performance Indicators
The Company considers the following its key comparative performance indicators:
1/
Gross profit margin
Net profit margin 2/
Return on equity 3/
Current ratio 4/
Solvency ratio 5/
Debt-to-equity ratio 6/
Asset-to-equity ratio 7/
Interest coverage ratio 8/
FY 2011
FY 2010
10.7%
6.1%
7.8%
4.2:1
0.48:1
0.21:1
1.21:1
39.4:1
13.0%
8.7%
13.2%
5.1:1
0.95:1
0.16:1
1.16:1
81.5:1
1/
Gross Profit / Net sales
Net Profit / Net sales
3/
Net Income / Stockholder’s Equity
4/
Current Asset / Current Liabilities
5/
After-tax net profit + Depreciation / Total Liabilities
6/
Total Liabilities / Stockholder’s Equity
7/
Total Assets / Stockholder’s Equity
8/
Earnings before Interest and Taxes / Interest Expense
2/
Item 7. Financial Statements
The Financial Statements of the Company are incorporated herein by reference and attached
as an integral part of this SEC Form-17A.
Item 8. Information on Independent Public Accountant and Other Related Matters
1. Independent Public Accountant
(a) Audit and Audit-Related Fees
The Company’s independent public accountant is the accounting firm of Isla Lipana & Co. The
Company’s Audit Committee recommends for approval of the Board the appointment of
external auditor for the ensuing year. The stockholders then approve and ratify the appointment
of external auditor at the annual stockholder’s meeting held on June --, 2013. Isla Lipana has
not expressed any intention to resign as the Company’s principal auditor nor has it indicated
any hesitance to accept re-election after the completion of their last audit.
Pursuant to the General Requirements of the SRC Rule 68, paragraph 3 (Qualifications and
Reports of Independent Auditors), the Company has engaged Isla Lipana & Co. as external.
Ms. Imelda Dela Vega-Mangundaya was the audit engagement partner-in-charge for the
company’s financial statement audit from 2010 to 2013.
20
The aggregate fees billed for each of the last three (3) fiscal years for professional services that
are normally rendered by Isla Lipana & Co (formerly Joaquin Cunanan & Co.) for the audit of
the company’s Annual Financial Statements are the following:
Year
2011
2012
2013
Audit Fees
P1,610,000
P1,800,000
P1,837,500
There are no other assurance and related services by Isla Lipana & Co. that are related to
the performance of the audit or review of the Company’s Financial Statements.
(b) Tax Fees
Tax consultancy services are secured from entities other than the appointed external
auditor.
(c) All Other Fees
There are no aggregate fees billed in each of the last three (3) fiscal years for products and
services provided by Isla Lipana & Co., other than the services reported under items (a) &
(b) above.
(d) Audit Committee’s Approval Policies and Procedures
The Audit Committee is comprised by the following members: Amb. Cesar B. Bautista as
Chairman (Independent Director), Mr. Filemon T. Berba Jr. (Independent Director)and Mr.
Yin Yong L. Lao.
The Audit Committee meets on a regular basis to:
a) Assist the Board in the performance of its oversight responsibility for the financial
reporting process, system of internal control, audit process, and monitoring of compliance
with applicable laws, rules and regulations;
b)
Provide oversight over Management’s activities in managing credit, market, liquidity,
operational, legal and other risks of the corporation. This function shall include regular
receipt from Management of information on risk exposures and risk management
activities;
c)
Perform oversight functions over the corporation’s internal and external auditors. It should
ensure that the internal and external auditors act independently from each other, and that
both auditors are given unrestricted access to all records, properties and personnel to
enable them to perform their respective audit functions;
d)
Review the annual internal audit plan to ensure its conformity with the objectives of the
corporation. The plan shall include the audit scope, resources and budget necessary to
implement it;
21
e)
Prior to the commencement of the external audit, discuss with the external auditor the
nature, scope and expenses of the audit, and ensure proper coordination if more than one
audit firm is involved in the activity to secure proper coverage and minimize duplication of
efforts;
f)
Establish an internal audit function, and consider the appointment of an independent
internal auditor and the terms and conditions of its engagement and removal;
g)
Monitor and evaluate the adequacy and effectiveness of the corporation’s internal control
system, including financial reporting control and information technology security;
h)
Review the reports submitted by the internal and external auditors;
i)
Review the quarterly, half-year and annual financial statements before their submission to
the Board, with particular focus on the following matters:
- Any change/s in accounting policies and practices
- Major judgmental areas
- Significant adjustments resulting from the audit
- Going concern assumptions
- Compliance with accounting standards
- Compliance with tax, legal and regulatory requirements
j)
Coordinate, monitor and facilitate compliance with laws, rules and regulations;
k)
Evaluate and determine the non-audit work, if any, of the external auditor, and review
periodically the non-audit fees paid to the external auditor in relation to their significance
to the total annual income of the external auditor and to the corporation’s overall
consultancy expenses. The committee shall disallow any non-audit work that will conflict
with his duties as an external auditor or may pose a threat to his independence. The nonaudit work, if allowed, should be disclosed in the corporation’s annual report; and
l)
Establish and identify the reporting line of the Internal Auditor to enable him to properly
fulfil his duties and responsibilities. He shall functionally report directly to the Audit
Committee. The Audit Committee shall ensure that, in the performance of the work of the
Internal Auditor, he shall be free from interference by outside parties.
2. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Changes in Accounting Policies
Refer to Note 2 – Summary of Significant Accounting Policies under Changes in Accounting
Policies and Disclosures discussion on the Consolidated Financial Statement as of the year
ended December 31, 2013 included in this report.
22
PART III - CONTROL AND COMPENSATION INFORMATION
Item 9. Directors and Executive Officers of the Issuer
The Articles of Incorporation provide for the election of seven (7) directors to the Board to serve
for a term of one year. The Board is responsible for the overall management and direction of
the Company. It meets on a regular basis to review and monitor the Company’s financial
position and operations.
The following sets forth certain information as to the Directors and executive officers of the
Company:
Name
Nationality
Position with the
Company
Chairman
Emeritus
Chairman
Dean L. Lao
Filipino
Filemon T. Berba, Jr.
Filipino
Leon L. Lao
Filipino
John L. Lao
Filipino
Jose Fernando B.
Camus
Amb. Cesar B.
Bautista
Yin Yong L. Lao
Filipino
Filipino
President, CEO &
Director
Executive Vice
President &
Director
Independent
Director
Independent
Director
Director
Dean A. Lao, Jr.
Filipino
Director
Alvin D. Lao
Arthur R. Ponsaran
Filipino
Filipino
CFO
Corporate
Secretary
Filipino
Year Position was Assumed
Chairman Emeritus since 2006
Chairman (Independent Director)
since 2012
Director and President since 2006
Director since 1991; Executive Vice
President since 2006
Independent Director since 1999
Independent Director since June
2012
Director since 2006
Managing Director since March
2010
CFO since 2008
Corp. Secretary since 1999
Dean L. Lao (Filipino), 75 and Chairman Emeritus of the Company since June 9, 2006. He is
previously the President of D&L Industries, Inc. since its incorporation in 1971. He currently
serves as Director. He was the founder of the various companies belonging to the D&L Group of
Companies which include FIC Marketing Co., Inc. (1986), Oleo-Fats, Inc. (1988), Corro-Coat,
Inc (1990), Aero-pack Industries, Inc. (1990), First in Colors, Inc. (1991), and Chemrez, Inc.
(1991).
Filemon T. Berba, Jr. (Filipino), 74, and an Independent Director of the Company. He is the
President of the Philippine Foundation for Science & Technology, President Emeritus of the
Philippine Quality Award Foundation and an independent director of iPeople and EEI
Corporation. He previously served as Senior Manager Director of Ayala Corporation, seconded
as Vice Chairman and President of Manila Water Company, President of Globe Telecom, Vice
Chairman and President of Integrated Microelectronics, Inc., President and CEO of Philippine
23
Electric Corporation, President of Westinghouse Asia Controls Corporation, Group President of
various companies under the Herdis Group and Vice President for Manufacturing and Logistics
Services for UNILAB. He as well held other senior management positions in the First Philippine
Holdings Group. He obtained a B.S. in Electrical Engineering (Magna Cum Laude) from the
University of the Philippines in 1959 and obtained his Masters of Business Administration
degree (with distinction) from the Wharton School of the University of Pennsylvania in 1964.
Leon L. Lao (Filipino), 71, and the President and Chief Executive Officer of the Company since
October 4, 2006. He is a co-founder of D&L Industries, Inc. where he currently serves as
Director. He is also President of First in Colors, Inc., F.I.C. Marketing Co., Inc., and Director of
Aero-Pack Industries, Inc., Color-Chem Corp. and Jadel Holdings, Inc.
John L. Lao (Filipino), 59, and the Executive Vice President of the Company since October 4,
2006. He has been with the Company since it was incorporated in 1988. He is currently the
Executive Vice President of D & L Industries, Inc. and Director of other companies in the D&L
Group as well as affiliates, Color-Chem Corporation and Jadel Holdings, Inc. His other
directorships include North Mactan Industrial Corporation and First Batangas Industrial Park,
Inc. Mr. J. Lao obtained his B.S. in Business Administration from the University of the East in
1974.
Jose Fernando B. Camus (Filipino), 69, and an Independent Director of the Company. He was
the Chairman of the Philippine National Railways and Interport Resources Corporation and
served as a Director of the Bases Conversion Development Authority and Fort Bonifacio
Development Corporation. He was also the former Chairman of Jones Lang LaSalle Leechiu.
Cesar B. Bautista (Filipino), 75, and an Independent Director of the Company. He previously
served as Philippine Ambassador to the United Kingdom, the Republic of Ireland and the
Republic of Iceland, and as Permanent Representative to U.N.’s International Maritime
Organization. Earlier, he was Secretary of the Department of Trade and Industry of the
Philippines, as well as President and Chairman of Unilever Philippines, Inc. He is an
independent director of D&L Industries and the Chairman of CIBI and St. James’ Ventures Inc.
He is also a Director of First Philippines Holdings , Inc., Pilipinas Shell Petroleum, Chartis
Insurance, Inc., Philratings Services, Inc., PHINMA, Maxicare Healthcare, Inc., as well as an
Advisory Director of AIM-Zuellig Center for Business Transformation, Co- Chairman of the
National Competitiveness Council and a Trustee of the Institute of Corporate Directors. Earlier,
he was Secretary of the Department of Trade and Industry of the Philippines, as well as
President and Chairman of Unilever Philippines, Inc. He graduated from the University of the
Philippines with a Bachelor of Science in Chemical Engineering and finished his Master’s
degree in Chemical Engineering at Ohio State University.
Yin Yong L. Lao (Filipino), 61, a Director of the Company. He is currently the President of D&L
Industries, Inc., LBL Industries, Inc. and serves as Director of other affiliates under the D&L
group. Mr. Lao is also a Trustee of the Association of Petrochemical Manufacturers of the
Philippines and member of the Polystyrene Packaging Council of the Philippines. He graduated
from the Ateneo de Manila University with a Bachelor of Arts degree.
Dean A. Lao, Jr. (Filipino), 46, and Managing Director of the Company since 2010 and has
been with the Company since 1995. He is also a Director of Austral Pacific Phils., Inc,
Consumer Care Products, Inc., and FIC Tankers Corp. He serves as the President of the
Philippine Oleochemical Manufacturing Association; the Chairman of the United Coconut
Association of the Philippines; a Director of the ASEAN Oleochemical Manufacturing Group and
24
President of The Philippine Biodiesel Association. He took his Advanced Management Program
in Harvard Business School in 2010. He finished his Bachelor in Business in Information
Processing from Curtin University Australia in 1991.
Alvin D. Lao (Filipino), 42, CFO and Treasurer of the Company. He has also been the Chief
Financial Officer of D&L Industries, Inc. since 1998. He serves as Director of Axis REIT a real
estate investment trust listed in Malaysia and as a Vice President of the Technology Club of the
Philippines (Philippine alumni of the Massachusetts Institute of Technology), and is a member of
the Entrepreneurs Organization (EO), Philippine Chapter, the Financial Executives Institute of
the Philippines (FINEX) and the Wallace Business Forum. He is a director of Enderun Colleges
and Gurango Software Corporation. He was previously a faculty member of the De La Salle
University Graduate School of Business. He graduated from the University of Western Australia
with a Bachelor of Science in Information Technology (Honours) and Statistics. He also holds a
Masters degree in Business Administration from the MIT Sloan School of Management.
Arthur R. Ponsaran (Filipino), 70, is the Corporate Secretary of the Company. He is the
Managing Partner of the law firm Corporate Counsels, Philippines Law Office. He is also the
Corporate Secretary of, among others, Waterfront Philippines, Inc., Producers Savings Bank
Corporation, and MRL Gold Philippines, Inc., and Director of Iloilo City Development Bank,
Cebuana Lhuillier Rural Bank, Inc., New Kanlaon Construction Inc., Acesite (Phils.) Hotel
Corporation, Davao Insular Hotel, Inc. and Philsteel Holdings Corporation. Mr. Ponsaran is
lawyer-CPA and a member of the Integrated Bar of the Philippines and the New York Bar as
well as the Philippine Institute of Certified Public Accountants.
Involvement in Certain Legal Proceedings
No Director, executive officer, or senior officer of the Company during the past five (5) years that
has been subject to:
(a) Any bankruptcy petition files by or against any business of which such person was a general
partner or executive officer either at the time of the bankruptcy or within two years prior to
that time;
(b) Any conviction by final judgment, including the nature of the offense, in a criminal
proceeding, domestic or foreign, excluding traffic violations and other minor offenses;
(c) Any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining,
barring, suspending or otherwise limiting his involvement in any type of business, securities,
and commodities or banking activities.
Being found by a domestic or foreign court of competent jurisdiction (in a civil action), the
Commission or comparable foreign body, or a domestic or foreign Exchange or other organized
trading market or self regulatory organization, to have violated a securities or commodities law
or regulation and the judgment has not been reversed, suspended, or vacated.
25
Board Attendance
Board
Chairman
Member
Member
Member
Member
Independent
Independent
06-17-13
06-17-13
06-17-13
06-17-13
06-17-13
06-17-13
No. of
Meetings
Held during
the year
5
5
5
5
5
5
06-17-13
5
Date of
Election
Name
Filemon T. Berba, Jr.
Leon L. Lao
Yin Yong L. Lao
John L. Lao
Dean A. Lao, Jr.
Jose
Fernando
B.
Camus
Cesar B. Bautista
No. of
Meetings
Attended
%
5
4
5
4
4
4
100
80
100
80
80
80
5
100
Item 10. Executive Compensation
The total annual compensation received by Executive Officers and key senior personnel of the
Company and its wholly subsidiary in 2011, 2012 and 2013 amounted to PhP12,124,558,
PhP16,568,673, and Php 15,553,206 respectively. The projected total annual compensation for
the current year 2014 is PhP17,953,016.
The most highly compensated key officers and senior personnel of the Company are senior
managers Edison Y. See, Reynaldo A. Sta. Maria, Aldrin R. Magpantay, Romeo A. Tan, Jerome
Uy, Ronnie S. Bonus, Michael S. Pangan, and Leonardo A. Tapia. Other senior officers or
Board appointees named in Item 9 above do not receive any compensation directly from the
Company or its subsidiary.
The following allowances for reimbursable expenses are given to Directors for each meeting
attended:
P30,000 for the Chairman of the Board
P20,000 for each Board member
P20,000 for the chairman of the Board Committee
P10,000 for each member of the Board Committee
Aside from the aforementioned allowances, no other compensation is paid to Directors of the
Company. Further, the Company does not have any stock option or management incentive plan
as part of its current compensation for Directors and officers.
Item 11. Security Ownership of Certain Beneficial Owners and Management
As of 31 December 2013, the beneficial owners of more than five (5) percent of any class of the
Company’s voting securities are as follows:
Title of
Class
Name, address of record
owner and relationship
with issuer
Name of Beneficial
Owner & Relationship
w/ Record Owner
Citizenship
No. of
Shares
Percent
26
Held
Common
Common
Common
Common
PCD Nominee Corp.
G/F Makati Stock
Exchange, Ayala Avenue,
Makati City
D&L Industries, Inc. 1, 2
65 Industria St.,
Bagumbayan, Quezon City
Stockholders
JADEL Holdings Co., Inc.
65 Industria St.,
Bagumbayan, Quezon City
Stockholders
Color Chem Corp.1
65 Industria St.,
Bagumbayan, Quezon City
Stockholders
The following
participants hold more
than 5% of the
Registrant’s voting
securities:
1. Lucky
Securities, Inc.
– 14.33%
Dean L. Lao
Leon L. Lao
Alex L. Lao
Yin Yong L. Lao
John L. Lao
n/a
Dean L. Lao
Leon L. Lao
Alex L. Lao
Yin Yong L. Lao
John L. Lao
Filipino
599,360,552
42.88%
Filipino
251,508,404
17.99%
Filipino
155,708,523
11.14%
Filipino
88,000,000
6.30%
Percentage is based on total number of shares issued – 1,397,855,472
Note:
(1) Beneficially owned Shares are attributable to the individual Lao family member’s direct and
indirect interests in D&L Industries, Inc. and Color-Chem Corporation.
(2) 200,000,000 shares (acquired in 2007) are indirectly owned by D&L Industries through PCD
Nominee Corp. (Filipino). This brings total shareholdings held by D&L Industries to 34% of
the outstanding share capital of the Company as of 31 December 2013.
27
The following table shows the security ownership of the Company’s senior management:
Title of
Class
Name of Beneficial
Owner
Common
Common
Common
Dean L. Lao
Leon L. Lao
Yin Yong L. Lao
Position
Chairman Emeritus
President & CEO
Director
Amount and
Nature of
Beneficial
Ownership(1)
Citizenship
% to Total
Outstanding
49,709,881
1
(I)
( D)
Filipino
Filipino
3.82%
0.00%
54,238,434
(I)
Filipino
4.17%
338,000
( D)
Filipino
0.03%
67,665,379
(I)
Filipino
5.19%
1,100,000
( D)
Filipino
0.08%
61,917,160
(I)
Filipino
4.76%
101,000
( D)
Filipino
0.0077%
Common
John L. Lao
EVP & Director
Common
Filemon T. Berba,
Jr.
Chairman of the Board
/ Independent Director
Cesar B. Bautista
Jose Fernando B.
Camus
Dean A. Lao Jr
Independent Director
1,000
( D)
Filipino
0.00%
Independent Director
Managing Director
509,029
1
( D)
( D)
Filipino
Filipino
0.04%
0.00%
10,559,040
(I)
Filipino
0.82%
1,738,829
( D)
Filipino
0.13%
11,595,129
(I)
Filipino
0.89%
Common
Common
Common
Common
Alvin D. Lao
Treasurer
93,029 ( D)
Common Arthur R. Ponsaran
Corporate Secretary
Filipino
Percentage is based on total number of shares issued and outstanding – 1,301,897,472
0.01%
Note:
(1) Indirectly owned Shares are attributable to the individual Lao family member’s direct (D)
and indirect (I) interests in Color-Chem Corporation, Jadel Holdings, Inc., D&L
Industries, Inc. which respectively own 88,000,000, 155,708,523 and 451,508,404
shares of the Company.
Item 12. Certain Relationships and Related Transactions
Messrs. Dean, Leon, John and Yin Yong L. Lao are siblings. Dean A. Lao, Jr. and Alvin D. Lao
are sons of Dean L. Lao and Leon L. Lao, respectively. All other directors and officers are not
related either by consanguinity or affinity.
Details of the Related Party Transaction are discussed under
Notes 1 (General Corporate
28
Information) and 15 (Related Party Transaction) of the Notes to the Consolidated Financial
Statements of the Company. There were no transactions with directors, officers or any principal
stockholders (owning at least 10% of the total outstanding shares of the Company) that are not
in the ordinary course of business of the Company.
PART IV – CORPORATE GOVERNANCE
Item 13. Compliance with Leading Practice on Corporate Governance
This section on corporate governance is deleted pursuant to SEC Memorandum Circular
No. 5, Series of 2013. In lieu thereof, the Company has submitted an Annual Corporate
Governance Report (“ACGR”), which it keeps updated as may be necessary. The
Company’s updated ACGR is available on the website.
Whistle Blowing Policy
The Company expects its employees to bring to its attention, or to that of senior
management, any breach or suspected breach of these principles. Provisions have been
made to assure its employees that their reports shall be held in confidence and that they will
not suffer as a consequence of doing so.
PART V – EXHIBITS AND SCHEDULES
Item 14. Exhibits and Reports on SEC Form 17-C
(a) Exhibits
Not applicable to the Company or require no answer.
(b) Reports on SEC Form 17-C
CHEMREZ TECHNOLOGIES, INC.
LIST OF CORPORATE DISCLOSURES/REPLIES TO SEC LETTERS
UNDER SEC FORM 17-C
JANUARY 1, 2013 TO DECEMBER 31, 2013
Date
3-Jan-13
4-Jan-13
7-Jan-13
7-Jan-13
8-Jan-13
8-Jan-13
10-Jan-13
11-Jan-13
14-Jan-13
Description of Document
Buy-back transactions on January 2, 2013
Buy-back transactions on January 3, 2013
Public Ownership Report for quarter ended December 31, 2012
Buy-back transactions on January 4, 2013
Buy-back transactions on January 7, 2013
Top 100 Stockholders for quarter ended December 31, 2012
Buy-back transactions on January 9, 2013
Buy-back transaction on January 10, 2013
Buy-back transactions on January 11, 2013
29
15-Jan-13
17-Jan-13
18-Jan-13
23-Jan-13
29-Jan-13
30-Jan-13
30-Jan-13
31-Jan-13
31-Jan-13
4-Feb-13
6-Feb-13
7-Feb-13
13-Feb-13
13-Feb-13
19-Feb-13
22-Feb-13
22-Feb-13
26-Feb-13
27-Feb-13
28-Feb-13
4-Mar-13
5-Mar-13
7-Mar-13
12-Mar-13
12-Mar-13
14-Mar-13
19-Mar-13
20-Mar-13
21-Mar-13
22-Mar-13
22-Mar-13
25-Mar-13
25-Mar-13
27-Mar-13
2-Apr-13
3-Apr-13
5-Apr-13
10-Apr-13
10-Apr-13
15-Apr-13
15-Apr-13
17-Apr-13
17-Apr-13
10-May-13
Buy-back transactions on January 14, 2013
Buy-back transactions on January 16, 2013
Buy-back transactions on January 17, 2013
Buy-back transactions on January 22, 2013
Buy-back transaction on January 28, 2013
Certification on compliance with Manual on Corporate Governance
Certification on attendance of members of Board of Directors for year 2012
Buy-back transactions on January 31, 2013
Buy-back transactions on January 30, 2013
Buy-back transactions on February 4, 2013
Buy-back transaction on February 5, 2013
Buy-back transaction on February 6, 2013
Buy-back transactions on February 13, 2013
Buy-back transaction on February 12, 2013
Buy-back transaction on February 19, 2013
Buy-back transactions on February 22, 2013
Buy-back transactions of February 21, 2013
Buy-back transactions on February 25, 2013
Buy-back transactions on February 26, 2013
Buy-back transactions on February 27, 2013
Buy-back transactions on March 1, 2013
Buy-back transactions on March 4, 2013
Buy-back transactions on March 6, 2013
Buy-back transactions on March 12, 2013
Buy-back transaction on March 11, 2013
Buy-back transaction on March 13, 2013
Buy-back transaction on March 18, 2013
Buy-back transaction on March 20, 2013
Compliance Report on Corporate Governance for year 2012
Statement of Changes in Beneficial Ownership of Securities
Statement of Changes in Beneficial Ownership of Securities
Statement of Changes in Beneficial Ownership of Securities
Buy-back transaction on March 22, 2013
Buy-back transaction on March 27, 2013
Public Ownership Report for quarter ended March 31, 2013
Buy-back transaction on April 3, 2013
Top 100 Stockholders for quarter ended March 31, 2013
Buy-back transaction on April 10, 2013
Buy-back transaction on April 8, 2013
2012 Annual Report
Buy-back transaction on April 12, 2013
Buy-back transaction on April 17, 2013
Buy-back transaction on April 16, 2013
Annual Meeting of Stockholders on June 17, 2013 with record date of May 27, 2013
30
14-May-13
14-May-13
16-May-13
22-May-13
14-Jun-13
17-Jun-13
17-Jun-13
26-Jun-13
27-Jun-13
2-Jul-13
8-Jul-13
8-Jul-13
9-Jul-13
16-Jul-13
17-Jul-13
8-Aug-13
14-Aug-13
2-Oct-13
8-Oct-13
7-Nov-13
15-Nov-13
4-Dec-13
13-Dec-13
Quarterly Report for period ended March 31, 2013
Preliminary Information Statement for Annual Meeting of Stockholders on June 17,
2013 with record date of May 27, 2013
Buy-back transaction on May 15, 2013
Definitive Information Statement for Annual Meeting of Stockholders on June 17, 2013
with record date of May 27, 2013
Buy-back transaction on June 13, 2013
Results of Annual Stockholders' Meeting and Organizational Meeting of Board of
Directors
Declaration of cash dividends
Buy-back transaction on June 25, 2013
Amended Quarterly Report for period ended March 31, 2013
Annual Corporate Governance Report for year 2012
Public Ownership Report for quarter ended June 30, 2013
Top 100 Stockholders for quarter ended June 30, 2013
Statement of Changes in Beneficial Ownership of Securities
Press Statement: "Chemrez Technologies strongly supports National Biofuel Board's
approval of higher biofuel blend"
Guidelines for Cash Dividend Distribution
Constitution of Compensation Committee and appointment of committee members
Quarterly Report for period ended June 30, 2013
Public Ownership Report for quarter ended September 30, 2013
Top 100 Stockholders for quarter ended September 30, 2013
Board approval of results of operation for 3rd quarter 2013
Quarterly Report for period ended September 30, 2013
Buy-back transaction on December 3, 2013
Buy-back transaction on December 12, 2013
31
CHEMREZ TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
Form 17-A, Item 7
Consolidated Financial Statements
Statement of Management’s Responsibility for Financial Statements
Independent Auditor’s Report
Consolidated Balance Sheets as of December 31, 2013 and 2012
Consolidated Statements of Income for the years ended December 31, 2013 and 2012
Consolidated Statements of Changes in Equity for the years ended December 31, 2013 and
2012
Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012
Notes to Consolidated Financial Statements
32
Chemrez
Technologies,
Inc. and Subsidiary
Consolidated Financial Statements
With Supplemental Schedules
For the Securities and Exchange Commission
December 31, 2013
Audited Consolidated Financial Statements with
Supplemental Schedules for the
Securities and Exchange Commission
December 31, 2013
TABLE OF CONTENTS
First Section
Statement of management responsibility
Report of independent auditors
Consolidated statements of financial position
Consolidated statements of total comprehensive income
Consolidated statements of changes in equity
Consolidated statements of cash flows
Notes to the consolidated financial statements
FIRST SECTION
Chemrez Technologies, Inc. and Subsidiary
Consolidated Statements of Financial Position
December 31, 2013 and 2012 and January 1, 2012
(All amounts in Philippine Peso)
Notes
December 31,
2013
December 31,
2012
(Restated)
January 1,
2012
(Restated)
577,537,108
710,357,114
1,445,225
1,052,570,407
627,788,758
1,055,570,826
47,198,775
4,072,468,213
343,844,541
532,079,192
2,391,508
778,045,242
638,654,090
865,922,519
28,230,700
3,189,167,792
656,610,647
504,952,695
50,707,359
861,026,260
839,403,502
597,679,910
35,266,911
3,545,647,284
921,760
1,102,264,585
228,877
1,547,557
9,596,954
1,114,559,733
5,187,027,946
4,431,570
1,172,678,777
1,641,491
1,895,202
8,279,876
1,188,926,916
4,378,094,708
7,184,944
1,238,455,722
7,599,101
8,488,603
9,281,394
1,271,009,764
4,816,657,048
ASSETS
Current assets
Cash
Trade and other receivables, net
Due from related parties
Inventories
Input VAT, net
Prepaid taxes
Other current assets, net
Total current assets
Non-current assets
Long-term receivables
Property, plant and equipment, net
Deferred income tax assets, net
Retirement benefit asset
Other non-current assets
Total non-current assets
Total assets
5
16
6
7
7
7
5
8
19
17
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables
Due to related parties
Borrowings
Income tax payable
Total current liabilities
Equity
Share capital
Share premium
Treasury shares
Unappropriated retained earnings
Remeasurement gain on retirement benefit
Total equity
Total liabilities and equity
9
16
10
438,318,135
20,685,251
510,092,000
13,542,049
982,637,435
153,769,635
8,830,817
170,000,000
5,708,152
338,308,604
381,787,199
15,504,541
422,078,863
18,594,752
837,965,355
11
11
11
1,397,855,472
1,254,007,292
(274,276,684)
1,814,324,840
12,479,591
4,204,390,511
5,187,027,946
1,397,855,472
1,254,007,292
(247,645,064)
1,623,661,446
11,906,958
4,039,786,104
4,378,094,708
1,397,855,472
1,254,007,292
(215,902,354)
1,536,890,397
5,840,886
3,978,691,693
4,816,657,048
17
(The notes on pages 1 to 54 are integral part of these consolidated financial statements)
Chemrez Technologies, Inc. and Subsidiary
Consolidated Statements of Total Comprehensive Income
For each of the three years in the period ended December 31, 2013
(All amounts in Philippine Peso)
Notes
2013
2012
(Restated)
2011
(Restated)
Sales, net
16
4,323,883,760
3,874,939,421
5,104,064,428
Cost of sales
Gross profit
12
(3,773,820,859)
550,062,901
(3,414,579,668)
460,359,753
(4,558,377,665)
545,686,763
Selling and marketing expenses
13
(90,162,404)
(78,109,341)
(77,533,813)
General and administrative expenses
14
(81,820,678)
(84,998,572)
(81,280,798)
Other income, net
Operating profit
15
21,337,867
399,417,686
43,917,811
341,169,651
34,462,740
421,334,892
10
18
(5,107,900)
(3,340,800)
(8,448,700)
390,968,986
(5,345,323)
(5,345,323)
335,824,328
(10,684,197)
(7,799,079)
(18,483,276)
402,851,616
(82,595,550)
(518,299)
(83,113,849)
307,855,137
(84,978,548)
(5,447,994)
(90,426,542)
245,397,786
(91,894,087)
110,595
(91,783,492)
311,068,124
Finance costs
Interest expense
Foreign exchange loss
Profit before income tax
Income tax expense
Current
Deferred
19
Profit for the year
Other comprehensive income (loss)
Items that will not be
subsequently reclassified to
profit or loss
Remeasurement gain (loss) of
retirement benefit, net of tax
Total comprehensive income
for the year
Earnings per share
Basic and diluted
21
572,633
6,066,072
(154,602)
308,427,770
251,463,858
310,913,522
0.24
0.19
0.24
(The notes on pages 1 to 54 are integral part of these consolidated financial statements)
Chemrez Technologies, Inc. and Subsidiary
Consolidated Statements of Changes in Equity
For each of the three years in the period ended December 31, 2013
(All amounts in Philippine Peso)
Note
Balances at January 1, 2011,
As previously reported
Effect of restatement (Note 20)
Balances at January 1, 2011, As restated
Comprehensive income
Profit for the year, As restated
Other comprehensive loss, As restated
Total comprehensive income
Transaction with owners
Cash dividends
Balances at December 31, 2011, As restated
Balances at January 1, 2012, As restated
Comprehensive income
Profit for the year, As restated
Other comprehensive income, As restated
Total comprehensive income
Transaction with owners
Cash dividends
Purchase of treasury shares
Total transactions with owners
Balances at December 31, 2012, As restated
Comprehensive income
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners
Cash dividends
Purchase of treasury shares
Total transactions with owners
Balances at December 31, 2013
11
11
11
11
11
Share capital
Share premium
1,397,855,472
1,397,855,472
1,254,007,292
1,254,007,292
-
-
1,397,855,472
1,397,855,472
1,254,007,292
1,254,007,292
-
-
1,397,855,472
1,254,007,292
-
-
1,397,855,472
1,254,007,292
Treasury
shares
(215,902,354)
(215,902,354)
(215,902,354)
(215,902,354)
(31,742,710)
(31,742,710)
(247,645,064)
(26,631,620)
(26,631,620)
(274,276,684)
Unappropriated
retained
earnings
Remeasurement
Gain/(loss) on
retirement benefit
Total equity
1,423,189,324
916,370
1,424,105,694
5,995,488
5,995,488
3,859,149,734
6,911,858
3,866,061,592
311,068,124
311,068,124
(154,602)
(154,602)
311,068,124
(154,602)
310,913,522
(198,283,421)
1,536,890,397
1,536,890,397
5,840,886
5,840,886
(198,283,421)
3,978,691,693
3,978,691,693
245,397,786
245,397,786
6,066,072
6,066,072
245,397,786
6,066,072
251,463,858
(158,626,737)
(158,626,737)
1,623,661,446
11,906,958
(158,626,737)
(31,742,710)
(190,369,447)
4,039,786,104
307,855,137
307,855,137
(117,191,743)
(117,191,743)
1,814,324,840
(The notes on pages 1 to 54 are integral part of these consolidated financial statements)
572,633
572,633
12,479,591
307,855,137
572,633
308,427,770
(117,191,743)
(26,631,620)
(143,823,363)
4,204,390,511
Chemrez Technologies, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For each of the three years in the period ended December 31, 2013
(All amounts in Philippine Peso)
Notes
Cash flows from operating activities
Profit before income tax
Adjustments for:
Receivables directly written-off
Provision for impairment of receivables
Reversal of provision for inventory obsolescence
Provision for unrecoverable input VAT
Depreciation and amortization
Gain on sale of equipment
Retirement benefit expense
Unrealized foreign exchange (gain) loss
Interest income
Interest expense
Operating income before working capital changes
(Increase) decrease in:
Trade and other receivables
Due from related parties
Inventories
Input VAT, net
Prepaid taxes
Other current assets
Other non-current assets
(Decrease) increase in:
Trade and other payables
Due to related parties
Cash generated from operations
Income taxes paid
Retirement benefit contribution
Interest received
Net cash from operating activities
Cash flows from investing activities
Proceeds from disposal of equipment
Acquisitions of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Payment of cash dividends
Proceeds from borrowings
Payments of borrowings
Interest paid
Purchase of treasury shares
Net cash from (used in) financing activities
Net increase (decrease) in cash
Cash balance
Beginning of year
Effect of exchange rate changes on cash
End of year
5,13
5,13
12
7,12
8
15
17
18
15
10
17
8
11
10
10
10
11
2013
2012
(Restated)
2011
(Restated)
390,968,986
335,824,328
402,851,616
6,815
953,906
38,235,773
99,603,573
(12,029,027)
3,864,743
1,958,100
(731,108)
5,107,900
527,939,661
482,608
(39,965)
8,663,405
94,614,889
15,775,199
(2,021,140)
(902,379)
5,345,323
457,742,268
574,286
(19,434,145)
64,317,274
90,770,611
3,544,189
12,994,029
(1,200,637)
10,684,197
565,101,420
(177,600,769)
946,283
(274,525,165)
(27,370,441)
(216,240,612)
(18,968,075)
2,192,732
(23,743,713)
48,315,851
82,981,018
192,086,007
(320,400,782)
(12,322,361)
1,001,518
184,927,779
(50,707,359)
53,421,339
360,056,604
(597,679,910)
(35,236,041)
(3,573,520)
282,460,183
11,854,434
110,688,231
(48,169,348)
(2,050,150)
731,108
61,199,841
(227,754,470)
(6,673,724)
191,231,612
(26,348,404)
(2,606,109)
902,379
163,179,478
226,021,631
(69,789,219)
632,542,724
(88,416,183)
(945,159)
1,200,637
544,382,019
33,183,850
(50,344,204)
(17,160,354)
(28,837,944)
(28,837,944)
(74,813,402)
(74,813,402)
(117,191,743)
813,128,659
(476,377,459)
(5,107,900)
(26,631,620)
187,819,937
231,859,424
(158,626,737)
170,000,000
(422,078,863)
(5,708,143)
(31,742,710)
(448,156,453)
(313,814,919)
(198,283,421)
837,954,379
(805,686,732)
(10,998,350)
(177,014,124)
292,554,493
343,844,541
1,833,143
577,537,108
656,610,647
1,048,813
343,844,541
359,706,644
4,349,510
656,610,647
(The notes on pages 1 to 54 are integral part of these consolidated financial statements)
Chemrez Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
As at December 31, 2013 and 2012 and
for each of the three years in the period ended December 31, 2013
(All amounts are shown in Philippine Peso, unless otherwise stated)
Note 1 - Business information
1.1
General information
Chemrez Technologies, Inc. (the “Parent Company”) was incorporated in the Philippines and registered
with the Securities and Exchange Commission (SEC) on June 1, 1989. The Parent Company attained its
status of being a “public company” on December 8, 2000 and is listed on the Philippine Stock
Exchange. The Parent Company is engaged in the business of manufacturing, processing, refining of all
kinds of chemical products, compounds, derivatives or chemical substances, and all kinds of goods,
wares, supplies and manufactures, and buy, sell, trade, distribute or otherwise dispose of the same,
locally or abroad, in the normal course of business without engaging in the business of manufacturing
food, drugs and cosmetics.
The Parent Company is considered a public company under Part I Section 2 A (i) of the Securities
Regulation Code (SRC) Rule 68, as amended on October 20, 2011, which, among others, defines a
public corporation as any corporation with assets of at least P50 million and having 200 or more
shareholders, each of which holds at least 100 shares of its equity securities is also covered by
additional requirements under SRC Rule 68, as amended, Part II.
On May 12 and June 9, 2007, the Board of Directors (BOD) and shareholders, respectively, authorized
the Parent Company to invest and/or engage in the manufacture, sale and distribution of biodiesel
under the brand “BioActiv”.
The Parent Company’s sales generated from biodiesel are entitled to income tax holiday (ITH) for a
period of six years from June 2007 as a result of its registration with the Board of Investments (BOI) as
a new export producer of biodiesel.
On March 4, 2011, the Parent Company’s registration with the Board of Investments (BOI) as “new
export producer of oleochemical specialties and derivatives” was approved. As a result, the Parent
Company’s sales generated from oleo-chemical segment are entitled to ITH for a period of four (4)
years.
Chemrez, Inc. (Chemrez or the “subsidiary”) was registered with the SEC on November 16, 1988 to
carry on the business of buying, selling, importing, exporting, bartering, distributing, exchanging,
processing, manufacturing, and disposing at wholesale and retail of chemical products, compounds,
derivatives of chemical substances and generally engage in and conduct any form of manufacturing or
mercantile enterprises.
The Parent Company and its wholly-owned subsidiary, Chemrez (collectively referred to as the
“Group”) are 64% owned by local individuals, including those held by D&L Industries, Inc. (D&L), a
public company, Jadel Holdings Co., Inc. and Color Chem Corporation, domestic companies, which
collectively own 53% of the Parent Company’s issued shares of stock. The remaining 36% of the shares
outstanding are publicly held.
The Parent Company and its subsidiary’s registered office address, which is also its principal place of
business, is at 65 Industria St., Bagumbayan, Quezon City. At December 31, 2013, the Parent Company
has 73 (2012 - 67) employees.
1.2
Significant developments in 2012 and 2013
The Parent Company maintains sales contracts with customers considered key players in the oil
industry. In 2012 and 2011, certain long-term contracts with the Parent Company’s major customers
were not renewed as a result of market competition. In line with the Parent Company’s business
objectives, short-term sales contract was entered into with new customers providing for competitive
and reasonable pricing agreements with customers.
The Parent Company’s ITH under its BOI registration as a new export producer of Biodiesel expired in
June 2013. As a result, the Parent Company pays 10% income tax on income generated from its
biodiesel operations covered by its BOI registration.
1.3
Approval of the financial statements
These consolidated financial statements have been approved and authorized for issuance by the Parent
Company’s BOD on February 26, 2014. There are no significant events that occurred subsequent to
February 26, 2014 until March 12, 2014 requiring adjustment or disclosure in the consolidated
financial statements.
Note 2 - Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated 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 consolidated financial statements consisting of the Group have been prepared in accordance with
Philippine Financial Reporting Standards (PFRS). The term PFRS in general includes all applicable
PFRS, Philippine Accounting Standards (PAS), interpretations of the Philippine Interpretations
Committee (PIC), Standing Interpretations Committee (SIC) and International Financial Reporting
Interpretations Committee (IFRIC) which have been approved by the Financial Reporting Standards
Council (FRSC) and adopted by the SEC.
The consolidated financial statements have been prepared under the historical cost convention.
The preparation of consolidated financial statements requires the use of certain critical accounting
estimates. It also requires management to exercise judgment in the process of applying the Group’s
accounting policies. The areas involving higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the consolidated financial statements are disclosed in
Note 4.
(2)
Changes in accounting policy and disclosures
(a) New and amended standards adopted by the Group
The following standards have been adopted by the Group effective January 1, 2013:
PAS 1 (Amendment), Financial Statement Presentation - Other Comprehensive Income (effective
July 1, 2012). The main change resulting from these amendments is a requirement for entities to
group items presented in other comprehensive income on the basis of whether they are potentially
reclassifiable to profit or loss subsequently (reclassification adjustments). The required change in
presentation has been effected in the consolidated statement of total comprehensive income.
PAS 19 (Amendment), Employee Benefits (effective January 1, 2013). These amendments eliminate
the corridor approach and calculate finance costs on a net funding basis. They would also require
recognition of all actuarial gains and losses in other comprehensive income as they occur and of all
past service costs in profit or loss. The amendments 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 20 for the impact of the adoption to the consolidated
financial statements.
(b) New standards, amendments and interpretations not early adopted by the Group
PFRS 9, Financial Instruments. This new standard addresses the classification, measurement and
recognition of financial assets and financial liabilities. It replaces the parts of PAS 39, Financial
Instruments: Recognition and Measurement that relate to the classification and measurement of
financial instruments, and hedge accounting. PFRS 9 requires financial assets to be classified into
two measurement categories: those measured as at fair value and those measured at amortized
cost. The determination is made at initial recognition. The classification depends on the entity’s
business model for managing its financial instruments and the contractual cash flow characteristics
of the instrument. For financial liabilities, the standard retains most of the PAS 39 requirements.
The main change is that, in cases where the fair value option is taken for financial liabilities, part of
the fair value change due to an entity’s own credit risk is recorded in other comprehensive income
rather than profit or loss, unless this creates an accounting mismatch. PFRS also details the
changes in requirements to hedge accounting that will allow entities to better reflect their risk
management activities in the financial statements. The mandatory effective date of PFRS 9 which
is for annual periods beginning January 1, 2015 has deferred and left open pending the finalization
of the impairment classification and measurement requirements. The Group has yet to assess the
full impact of PFRS 9 and intends to adopt PFRS 9 upon completion of the IASB project. The
Group will also consider the impact of the remaining phases of PFRS 9 when issued
There are no other applicable and relevant standards, amendments and interpretations, which are issued
and effective beginning January 1, 2013 and onwards that have or expected to have a significant impact
on the Group’s financial statements during and at the end of reporting period, other than those disclosed
above.
(3)
2.2
Financial assets
2.2.1
Classification
The Group classifies its financial assets in the following categories: (a) loans and receivables, (b) heldto-maturity, (c) at fair value through profit or loss, and (d) available-for-sale. The classification depends
on the purpose for which the financial assets were acquired. Management determines the classification
of its financial assets at initial recognition.
The Group did not hold financial assets under categories (b), (c) and (d) during and at the end of each
reporting period.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They are included in current assets, except for those with maturities
greater than 12 months after the reporting date, which are classified as non-current assets.
The Group’s loans and receivables consist of cash in bank, trade and other receivables excluding
advances from officers and suppliers, due from related parties, long-term receivables and refundable
deposits under other non-current assets in the consolidated statement of financial position.
2.2.2
Initial recognition and measurement
The Group recognizes a financial asset in the statement of financial position when the Group becomes a
party to the contractual provisions of the instrument.
Loans and receivables are initially recognized at fair value plus transaction costs.
2.2.3
Subsequent measurement
Loans and receivables are subsequently carried at amortized cost using the effective interest method.
2.2.4
Derecognition
Loans and receivables are derecognized when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has transferred substantially all risks and rewards
of ownership.
2.2.5
Impairment of loans and receivables
The Group 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. A financial asset or a group of financial assets
is impaired and impairment losses are incurred only if there is objective evidence of impairment as a
result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and
that loss event (or events) has an impact on the estimated future cash flows of the financial asset or
group of financial assets that can be reliably estimated.
(4)
The criteria that the Group uses to determine that there is objective evidence of an impairment loss
include:
• Significant financial difficulty of the customer;
• A breach of contract, such as a default or delinquency in interest or principal payments;
• The Group, for economic or legal reasons relating to the customer’s financial difficulty, granting to
the customer a concession that the lender would not otherwise consider;
• It becomes probable that the customer will enter bankruptcy or other financial reorganization;
• The disappearance of an active market for that financial asset because of financial difficulties; or
• Observable data indicating that there is a measurable decrease in the estimated future cash flows
from a portfolio of financial assets since the initial recognition of those assets, although the decrease
cannot yet be identified with the individual financial assets in the portfolio, including: adverse
changes in the payment status of customers in the portfolio; and national or local economic
conditions that correlate with defaults on the assets in the portfolio.
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 asset’s original effective interest rate. The carrying amount of the asset is reduced
through the use of an allowance account and the amount of the loss is recognized in the provision for
impairment of receivables account in the consolidated statement of total comprehensive income.
2.3
Financial liabilities
2.3.1
Classification
The Group’s financial liabilities are classified at (a) amortized cost, and (b) fair value through profit or
loss (including those that are designated at fair value).
The Group did not hold any financial liabilities at fair value through profit or loss during and at the end
of each reporting period.
The Group’s on balance sheet financial liabilities at amortized cost consist of trade and other payables
(excluding amounts due to government agencies), due to related parties and borrowings.
The Group’s off balance sheet financial liabilities include corporate guarantee (Note 3.5).
Financial liabilities at amortized cost are included in current liabilities, except for maturities greater
than 12 months after the reporting date when the Group has an unconditional right to defer settlement
for at least 12 months after the reporting date, which are classified as non-current liabilities.
2.3.2
Initial recognition and measurement
The Group recognizes a financial liability in the statement of financial position when the Group
becomes a party to the contractual provision of the instrument.
Financial liabilities are initially measured at fair value plus transaction costs.
2.3.3
Subsequent measurement
Financial liabilities are subsequently measured at amortized cost using the effective interest method.
(5)
Interest expense on financial liabilities is recognized within finance cost, at gross amount, in the
consolidated statement of total comprehensive income.
2.3.4
Derecognition
Financial liabilities are derecognized when it is extinguished, that is, when the obligation specified in a
contract is discharged or cancelled, or when the obligation expires.
2.4
Determination of fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The Group classifies its fair value measurements using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The fair value hierarchy has the following
levels:
•
•
•
quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2); and
inputs for the asset or liability that are not based on observable market data (that is, unobservable
inputs) (Level 3).
The appropriate level is determined on the basis of the lowest level input that is significant to the fair
value measurement.
The fair value of financial instruments traded in active markets is based on quoted market prices at the
reporting date. 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 Group is the current bid price. These instruments are
included in Level 1.
The fair value of assets and liabilities that are not traded in an active market (for example, over-thecounter derivatives) is determined by using valuation techniques. These valuation techniques maximize
the use of observable market data where it is available and rely as little as possible on entity specific
estimates. If all significant inputs required to fair value an instrument are observable, the asset or
liability is included in Level 2. If one or more of the significant inputs is not based on observable
market data, the asset or liability is included in Level 3.
Specific valuation techniques used to value financial instruments include:
• Quoted market prices or dealer quotes for similar instruments.
• The fair value of interest rate swaps is calculated as the present value of the estimated future cash
flows based on observable yield curves.
• The fair value of forward foreign exchange contracts is determined using forward exchange rates at
the reporting date, with the resulting value discounted back to present value.
• Other techniques, such as discounted cash flow analysis, are used to determine fair value for the
remaining financial instruments.
(6)
The Group has no significant financial assets and liabilities carried at fair value.
The carrying amounts of significant financial assets and liabilities presented in Note 3.2 approximate
their fair values at reporting date, as the impact of discounting is not significant considering that
significant financial assets and liabilities generally have short-term maturities.
For non-financial assets, the Group uses valuation techniques that are appropriate in the circumstances
and applies the technique consistently. Commonly used valuation techniques are as follows:
• Market approach - A valuation technique that uses prices and other relevant information generated
by market transactions involving identical or comparable (i.e., similar) assets, liabilities or a group
of assets and liabilities, such as a business.
• Income approach - Valuation techniques that convert future amounts (e.g., cash flows or income
and expenses) to a single current (i.e., discounted) amount. The fair value measurement is
determined on the basis of the value indicated by current market expectations about those future
amounts.
• Cost approach - A valuation technique that reflects the amount that would be required currently to
replace the service capacity of an asset (often referred to as current replacement cost).
The fair value of a non-financial asset is measured based on its highest and best use. The asset’s current
use is presumed to be its highest and best use.
The carrying value of the Group’s non-financial assets, substantially property, plant and equipment,
approximate its fair value, in the light of the asset’s current use is presumed to be its highest and best
use.
The fair value of financial and non-financial liabilities takes into account non-performance risk, which
is the risk that the entity will not fulfill an obligation.
2.5
Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount reported in the consolidated statement of
financial position when there is a legally enforceable right to offset the recognized amounts and there is
an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
2.6
Cash
Cash consists of cash on hand and deposits held at call with banks. Cash in bank earns interest at the
prevailing bank deposit rate.
2.7
Trade and other receivables
Trade receivables arising from regular sales with an average credit term of 30 days are initially
recorded at invoice value, which approximates fair value at initial recognition and are subsequently
measured at amortized cost, less any provision for impairment.
Other receivables are recognized initially at fair value plus transaction costs and subsequently
measured at amortized cost using effective interest method, less any provision for impairment.
(7)
An individual and collective provision for impairment of receivables is established when there is
objective evidence that the Group will not be able to collect all amounts due according to the original
terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter
bankruptcy or financial reorganization, and default or delinquency in payments are considered as
indicators that the receivable is impaired. 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 carrying amount of the asset is reduced through the use of an allowance account and
the amount of the loss is recognized in the provision for impairment of receivables in profit or loss
within selling and marketing expenses.
The Group first assesses whether objective evidence of impairment exists individually for receivables
that are individually significant, and collectively for receivables that are not individually significant. If
the Group determines that no objective evidence of impairment exists for an individually assessed
receivable, whether significant or not, it includes the asset in a group of financial assets with similar
credit risk characteristics and collectively assesses them for impairment. Receivables that are
individually assessed for impairment and for which an impairment loss is or continues to be recognized
are not included in a collective assessment of impairment.
An individual and collective provision for impairment of receivables is established when there is
objective evidence that the Group will not be able to collect all amounts due according to the original
terms of receivables (Note 2.2).
When a receivable is uncollectible, it is written off against the provision account for receivables.
Receivables and its related provision for impairment are written off when the Group has determined
that the receivable is uncollectible as they have already exerted all collection efforts, including filing a
legal case. Bad debts written off are specifically identified by the Group’s marketing department after
exhausting all collection efforts (i.e. sending demand letters and legal notice of default to customers),
and is approved by the respective product manager and subsequently by the BOD. Write offs represent
the release of previously recorded provision from the allowance account and credited to the related
receivable account following the Group’s assessment that the related receivable will no longer be
collected after all collection efforts have been exhausted.
Subsequent recoveries of amounts previously written-off are credited against the provision account
within selling and marketing expenses in the consolidated statement of total comprehensive income.
Reversals of previously recorded impairment provision are credited within selling and marketing
expenses in the consolidated statement of total comprehensive income based on the result of
management’s update assessments, considering available facts and changes in circumstances, including
but not limited to results of recent discussions and arrangements entered into with customers as to the
recoverability of receivable at reporting date.
2.8
Inventories
Inventories are stated at the lower of cost and net realizable value (NRV). The cost of finished goods
inventories is determined on the basis of standard cost which is adjusted at periodic intervals and
which approximate actual manufacturing cost, determined at weighted average method. The cost of
raw materials is determined using the weighted average method. The cost of inventories in transit is
their invoice cost including related importation costs. Cost of inventory excludes borrowing costs. NRV
is the estimated selling price in the ordinary course of business, less applicable variable selling
expenses.
(8)
Provision for inventory losses is established for slow-moving, obsolete, defective and damaged
inventories based on physical inspection and management evaluation. Inventories and its related
provision for impairment are subsequently written off when the Group has determined that the related
inventory may not be further utilized or reprocessed. Write offs represent the release of previously
recorded provision from the allowance account and credited to the related inventory account following
the disposal of the inventories. Destruction of the obsolete and damaged inventories is made in the
presence of regulatory agencies. The carrying amount of the inventories is reduced through the use of an
allowance account and the amount of the loss is recognized within cost of sales in the consolidated
statement of total comprehensive income.
Reversals of previously recorded impairment provisions are credited to cost of sales in the consolidated
statement of total comprehensive income based on the result of management’s update assessment,
considering available facts and circumstances, including but not limited to net realizable value at the
time of disposal.
Inventories are derecognized when sold or otherwise disposed of.
2.9
Tax credit claim from excess input value added tax (VAT)
Tax credit claim from excess input VAT is stated at face value less provision for impairment, if any.
Provision for unrecoverable tax credit claim from excess input VAT, if any, is maintained by the Group
at a level considered adequate to provide for potential uncollectible portions of the claim. The Group,
on a continuing basis, makes a review of the status of the claim designed to identify those that may
require provision for impairment losses.
Provision for unrecoverable tax credit claim from excess input VAT is established when there is objective
evidence that the Group will not be able to recover the claim. The carrying amount of the asset is reduced
through the use of an allowance account and the amount of the loss is recognized within cost of sales in
the consolidated statement of total comprehensive income.
Provision for unrecoverable tax credit claim from excess input VAT is recognized at each reporting period
in consideration of management’s assessment that it has complied with the prescribed regulatory
requirements such that the tax credit claim from excess input VAT is filed within the 2 year prescription
period, appropriate supporting documents are available to support the tax credit claim from excess input
VAT and likelihood of potential disallowed amounts based on discussion with and correspondences
received from local tax authorities. Write-off is recognized upon receipt of a formal notice of disallowance
from local tax authorities.
Tax credit claim from excess input VAT is derecognized when actually collected or disallowed by tax
authority.
2.10
Prepayments
Prepayments are recognized in the event that payment has been made in advance of obtaining right of
access to goods or receipt of services and measured at nominal amounts. These are derecognized in the
consolidated statement of financial position either with the passage of time or through use or
consumption.
Unused tax credits, which are presented as part of prepayments, are derecognized when there is a
legally enforceable right to offset the recognized amounts against income tax due and there is an
intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
(9)
Prepayments are included in current assets, except when the related goods or services are expected to
be received and rendered more than twelve months after the end of the reporting period, in which case,
these are classified as non-current assets.
2.11
Property, plant and equipment
Land and buildings relate mainly to plant factories and offices. All property, plant and equipment are
shown at historical cost less subsequent depreciation and any impairment, except for land, which is
shown at historical cost less any impairment. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably. All other repairs and maintenance are
charged to profit or loss during the reporting period in which they are incurred.
Construction in progress represents property under construction. It is stated at cost and depreciated
only until such time as the relevant assets are completed and put into operational use. Upon
completion, this property is reclassified to the relevant property, plant and equipment account.
Depreciation on other items of property, plant and equipment is computed using the straight-line
method to allocate the cost of each asset less its residual value over its estimated useful life, determined
based on the Group’s historical information and experience on the use of such assets, as follows:
Land and leasehold improvements
Building and improvements
Machinery and equipment
Furniture, fixtures and office equipment
Transportation equipment
In years
5-10
5-25
5-20
5
5
Land is not depreciated. Land improvements are amortized over the lease term or the estimated useful
life of the improvements, whichever is shorter.
Major expenditures and renovations are depreciated over the remaining useful life of the related asset.
The asset’s residual values, depreciation method and useful life are reviewed, and adjusted as
appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount (Note 2.12).
An item of property, plant and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal at which time the cost and their accumulated depreciation
or amortization and impairment, if any, are removed from the asset accounts.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and
are included in the consolidated statement of total comprehensive income within other income, net.
(10)
2.12
Impairment of non-financial assets
Assets that have indefinite useful life, such as land, are not subject to depreciation and amortization
and are tested annually for impairment. Assets that have definite useful life, such as property, plant
and equipment, are subject to depreciation or amortization and are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost 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). Value in use requires
entities to make estimates of future cash flows to be derived from the particular asset, and discount
them using a pre-tax market rate that reflects current assessments of the time value of money and the
risks specific to the asset. Non-financial assets for which impairment loss has been recognized are
reviewed for possible reversal of the impairment at each reporting date.
2.13
Trade and other payables
Trade and other payables are obligations to pay for related money received, goods or services that have
been acquired in the ordinary course of business from suppliers.
Trade and other payables are recognized in the period in which the related money, goods or services are
received or when a legally enforceable claim against the Group is established or when the
corresponding assets or expenses are recognized. These are classified as current liabilities if payment is
due within one year or less (or in the normal operating cycle of the business if longer). If not, they are
presented as non-current liabilities.
Trade and other payables are recognized initially at fair value plus transaction costs and subsequently
measured at amortized cost using effective interest method.
2.14
Borrowings and borrowing costs
2.14.1
Borrowings
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are
subsequently stated at amortized cost; the difference between the proceeds and the redemption value is
recognized in the consolidated statement of total comprehensive income over the period of the
borrowings using the effective interest method. Borrowings are classified as current liabilities unless
the Group has an unconditional right to defer settlement of the liability for at least 12 months after the
reporting date.
2.14.2 Borrowing costs
Generic and specific borrowing costs which are directly attributable to the acquisition, construction or
production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale)
are capitalized as part of the cost of that asset until such time as the assets are substantially ready for
their intended use or sale.
Borrowing costs, not directly attributed to a qualifying asset, are recognized in the consolidated
statement of total comprehensive income in the year in which they are incurred.
Borrowings are derecognized when the obligation is settled, paid or discharged.
(11)
2.15
Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result of
past events, it is more likely than not that an outflow of resources will be required to settle the
obligations, and the amount has been reliably estimated. Provisions are not recognized for future
operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. A provision is recognized
even if the likelihood of an outflow with respect to any one item included in the same class of
obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation using a pre-tax rate that reflects current market assessments of the time value of money and
the risks specific to the obligation. The increase in the provision due to passage of time is recognized as
interest expense in the consolidated statement of total comprehensive income.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best
estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be
required to settle the obligation, the provision is reversed and derecognized from the consolidated
statement of financial position.
2.16
Related party relationships and transactions
Related party relationships exist when one party has the ability to control, directly, or indirectly
through one or more intermediaries, the other party or exercises significant influence over the other
party in making financial and operating decisions. Such relationships also exist between and/or among
entities, which are under common control with the reporting enterprise, or between and/or among the
reporting enterprise and its key management personnel, directors, or shareholders. In considering
each possible related party relationship, attention is directed to the substance of the relationship, and
not merely the legal form.
2.17
Equity
2.17.1
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
shares are shown in equity as a deduction from the proceeds.
2.17.2
Share premium
Any amount received by the Parent Company in excess of par value of its shares is credited to share
premium which forms part of the non-distributable reserves of the Parent Company and can be used
only for purposes specified under the corporate legislation.
(12)
2.17.3
Treasury shares
Where the Parent Company purchases its own equity share capital (treasury shares), the consideration
paid, including any directly attributable incremental costs, is deducted from equity until the shares are
cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any
consideration received, net of any directly attributable incremental transaction costs and the related
income tax effects, is included in equity.
2.17.4
Unappropriated retained earnings
Unappropriated retained earnings pertain to the unrestricted portion of the accumulated profit from
operations of the Parent Company and its subsidiary which are available for dividend declaration.
2.18
Dividend distribution
Dividend distribution to the Parent Company’s shareholders is recognized as a liability in the
consolidated financial statements in the period in which the dividends are approved by the Parent
Company’s BOD.
2.19
Earnings per share
2.19.1
Basic
Basic earnings per share is computed by dividing the profit attributable to equity holders of the Parent
Company by the weighted average number of shares outstanding during the year excluding ordinary
shares purchased by the Parent Company and held as treasury shares.
2.19.2 Diluted
The diluted earnings per share is calculated by adjusting the weighted average number of shares
outstanding to assume conversion of all dilutive potential ordinary shares, if any. The Group has no
dilutive potential ordinary shares.
2.20
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and
services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax,
returns, rebates and discounts.
For the years ended December 31, revenue is shown net of the following:
Returns
Discounts
2013
20,071,502
17,610,279
37,681,781
2012
5,608,439
12,635,733
18,244,172
2011
10,492,723
12,121,784
22,614,507
The Group recognizes revenue when the amount of revenue can be reliably measured, it is probable
that future economic benefits will flow into the entity, the collectability of related receivable is
reasonably assured and specific criteria have been met for each of the Group’s activities as described
below. The amount of revenue is not considered to be reliably measured until all contingencies relating
to the sale have been resolved.
(13)
Revenue is recognized as follows:
2.20.1 Sale of goods
The Group manufactures and sells a broad range of chemical products. Sale of goods is recognized
when the Group has delivered the products to the customer and there is no unfulfilled obligation that
could affect the acceptance of the products. Delivery does not occur until the products have been
shipped to the specific location, the risk of obsolescence and loss have been transferred to the
customer, and either the customer has accepted the products in accordance with the sales contract, the
acceptance provision have lapsed or the Group has objective evidence that all criteria for acceptance
have been satisfied.
2.20.2 Rental income
Rental income is recognized in the consolidated statement of total comprehensive income on a straightline basis over the period of the lease.
2.20.3 Interest income
Interest income, which is presented net of final taxes paid or withheld, is recognized on a timeproportion basis using the effective interest method.
2.20.4 All other income
All other income is recognized when earned.
2.21
Cost and expenses
Costs and expenses, classified by function, are charged to the consolidated statement of total
comprehensive income when incurred.
2.22
Employee benefits
2.22.1 Retirement benefit obligations
The Group has a defined retirement benefit plan in accordance with the local conditions and practices
in the Philippines. The plan is generally funded through payments to trustee-administered funds as
determined by periodic actuarial calculations. Defined benefit plans define an amount of retirement
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 recognized in the balance sheet in respect of defined benefit retirement 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. The present value of the defined benefit obligation is determined by
discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that
are denominated in the currency in which the benefits will be paid, and that have terms to maturity
approximating to the terms of the related retirement obligation. In countries where there is no deep
market in such bonds, the market rates on government bonds are used.
(14)
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions
are charged or credited to equity under other comprehensive income in the period in which they arise.
Past-service costs are recognized immediately in profit or loss.
2.22.2 Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal
retirement date, or whenever an employee accepts voluntary redundancy in exchange for these
benefits. The Group recognizes termination benefits at the earlier of the following dates: (a) when the
Group can no longer withdraw the offer of those benefits; and (b) when the entity recognizes costs for a
restructuring that is within the scope of PAS 37 and involves the payment of termination benefits. In
the case of an offer made to encourage voluntary redundancy, the termination benefits are measured
based on the number of employees expected to accept the offer. Benefits falling due more than 12
months after the end of the reporting period are discounted to their present value.
2.23
Leases
2.23.1 Accounting by lessee
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor
are classified as operating leases. Payments made under operating leases are charged to the
consolidated statement of total comprehensive income on a straight-line basis over the period of the
lease (Note 16).
When the Group enters into an arrangement, comprising a transaction or a series of related
transactions, that does not take the legal form of a lease but conveys a right to use an asset or is
dependent on the use of a specific asset or assets, the Group assesses whether the arrangement is, or
contains, a lease. The Group does not have such arrangements during and at the end of each reporting
period.
2.23.2 Accounting by lessor
The Group leases out certain property, plant and equipment.
Leases in which a significant portion of the risks and rewards of ownership are retained by the Group
are classified as operating leases. When assets are leased out under an operating lease, the asset is
included in the consolidated statement of financial position based on the nature of the asset. Lease
income is recognized over the term of the lease on straight-line basis. The Group’s operating lease
agreements are disclosed in Note 16.
When assets are leased out under a finance lease, the present value of the lease payments is recognized
as a receivable. The difference between the gross receivable and the present value of the receivable is
recognized as unearned finance income. Lease income is recognized over the term of the lease using
the net investment method, which reflects a constant periodic rate of return. The Group has no finance
lease arrangement during and at the end of each reporting period.
(15)
2.24
Foreign currency transaction and translation
2.24.1 Functional and presentation currency
Items included in the consolidated financial statements are measured using the currency of the primary
economic environment in which the Parent Company operates (the “functional currency”). The
consolidated financial statements are presented in Philippine Peso, which is the Parent Company’s
functional and presentation currency.
2.24.2 Transactions and balances
Foreign currency transactions are translated into Philippine Peso using the exchange rates prevailing at
the dates of the transactions or valuation where items are remeasured. Foreign exchange gains or
losses resulting from the settlement of foreign currency transactions and from the translation at yearend exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized
in the consolidated statement of total comprehensive income and are presented within other income,
net.
For income tax purposes, foreign exchange gains and losses are treated as taxable income or deductible
expense, respectively, in the period such are realized.
2.25
Current and deferred income tax
The tax expense for the period comprises current and deferred income tax. Tax is recognized in profit
or loss, except to the extent that it relates to items recognized in other comprehensive income or
directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in
equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at reporting date. Management periodically evaluates positions taken in the tax returns with
respect to situations in which applicable tax regulation is subject to interpretation and establishing
provisions where appropriate on the basis of amounts to be paid to tax authorities.
Deferred income tax (DIT) is recognized on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However,
DIT is not accounted for if it arises from initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction affects neither accounting nor taxable
profit or loss. DIT is determined using tax rates (and laws) that have been enacted or substantively
enacted by the reporting date and are expected to apply when the related DIT asset is realized or the
DIT liability is settled.
DIT assets are recognized for all deductible temporary differences, carry-forward of unused tax credits
from excess minimum corporate income tax (MCIT) and unused tax losses (net operating loss
carryover or NOLCO), to the extent that it is probable that future taxable profit will be available against
which the temporary differences, unused tax credits and unused tax losses can be utilized. The Group
re-assesses at each reporting date the need to recognize a previously unrecognized DIT asset, if any.
DIT assets are recognized on deductible temporary differences arising from investments in
subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary
difference will reverse in the future and there is sufficient taxable profit available against which the
temporary difference can be utilized.
(16)
DIT liabilities are recognized in full for all taxable temporary differences, except to the extent that the
deferred tax liability arises from the initial recognition of goodwill. DIT liabilities are provided on
taxable temporary differences arising from investments in subsidiaries, associates and joint
arrangements, except for DIT liability where the timing of the reversal of the temporary difference is
controlled by the Group and it is probable that the temporary difference will not reverse in the
foreseeable future. Generally the Group is unable to control the reversal of the temporary difference for
associates. Only where there is an agreement in place that gives the group the ability to control the
reversal of the temporary difference not recognized.
DIT assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the DIT assets and liabilities relate to income taxes levied by the
same taxation authority on either the taxable entity or different taxable entities where there is an
intention to settle the balances on a net basis.
2.26
Consolidation
The consolidated financial statements comprise the financial statements of the Group as at
December 31, 2013 and 2012 and January 1, 2012 and for each of the three years in the period ended
December 31, 2013. These consolidated financial statements include the financial statements of the
Parent Company and its wholly-owned subsidiary, Chemrez, Inc.
A subsidiary is an entity over which the Group has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
A subsidiary is fully consolidated from date on which control is transferred to the Group and deconsolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration
transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities
incurred and the equity interests issued by the Group. The consideration transferred includes the fair
value of any asset or liability resulting from a contingent consideration arrangement. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the
Group recognizes any non-controlling interest in the acquiree either at fair value or at the noncontrolling interest’s proportionate share of the recognized amounts of acquiree’s identifiable net
assets.
Acquisition-related costs are expensed as incurred.
Inter-company transactions, balances and unrealised gains on transactions between group companies
are eliminated. Unrealised losses are also eliminated.
Accounting policies and reporting period of subsidiaries are consistent with the policies adopted by the
Parent Company.
(17)
2.27
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the
Chief Operating Decision Maker (CODM), who is the representative of the members of the
Management Committee (ManCom), making collective operating decisions with regard to the business
segments. The ManCom, which is responsible for allocating resources and assessing performance of the
operating segments, is identified as the one that makes strategic decisions for the Group.
The accounting policies used to recognize, classify and measure the segment’s assets, liabilities and
profit and loss are consistent with that of the financial statements.
2.28
Subsequent events (or events after the reporting date)
Post year-end events that provide additional information about the Group’s position at reporting date
(adjusting events) are reflected in the consolidated financial statements. Post year-end events that are
not adjusting events are disclosed in the notes to the consolidated financial statements when material.
Note 3 - Financial risk and capital management
3.1
Financial risk factors
The Group’s activities expose it to a variety of financial risks and these activities involve the analysis,
evaluation and management of some degree of risk or combination of risks. The Group’s overall risk
management program focuses on the unpredictability of financial markets, aims to achieve an
appropriate balance between risk and return and seeks to minimize potential adverse effects on the
Group’s financial performance.
Risk assessment and management is carried out by the ManCom.
The most important types of risk the Group manages are: credit risk, market risk and liquidity risk.
Market risk includes foreign exchange, interest and price risks.
3.2
Components of financial assets and financial liabilities
Financial assets
Details of the Group’s financial assets, categorized as loans and receivables, at December 31 are as
follows:
Notes
Cash in banks
Trade and other receivables
Due from related parties
Long-term receivables
Accrued interest income on long-term receivable
Refundable deposits
(18)
5
16
5
2013
577,537,108
710,474,721
1,445,225
921,760
3,008,993
5,727,280
1,299,115,087
2012
343,844,541
517,294,791
2,391,508
4,431,570
1,429,144
5,990,050
875,381,604
Receivables are presented gross of provision for impairment at December 31, 2013 amounting to
P2,108,874 (2012 - P1,154,968) and exclude advances to officers and suppliers amounting to P1,978,997
and P12,270 (2012 - P5,845,826 and P10,093,543), respectively (Note 5).
Accrued interest income pertains to related discounted cash flows on interest receivable arising from the
Group’s long-term receivables (Note 5).
Refundable deposits and accrued interest income on long-term receivable are presented among other
non-current assets in the consolidated statement of financial position.
The other components of other current and non-current assets are considered non-financial assets.
Financial liabilities
Details of the Group’s on-balance sheet financial liabilities at amortized cost at December 31 are as
follows:
Notes
9
16
10
Trade and other payables
Due to related parties
Borrowings
2013
430,872,110
20,685,251
510,092,000
961,649,361
2012
148,209,426
8,830,817
170,000,000
327,040,243
As at December 31, 2013, trade and other payables exclude payable to government agencies amounting to
P7,446,025 (2012 - P5,560,209) (Note 9).
The Group’s off-balance sheet financial liabilities are discussed in Note 3.5.
3.3 Credit risk
The Group’s exposure to credit risk arises primarily from cash in banks, trade and other receivables and
refundable deposits.
The aging of the Group’s financial assets at December 31 is as follows:
December 31, 2013
Cash
Trade and other receivables
Due from related parties
Long-term receivable
Accrued interest income
Refundable deposits
(19)
Gross
amount
Neither past
due nor
impaired
577,537,108
710,474,721
1,445,225
921,760
3,008,993
5,727,280
1,299,115,087
577,537,108
434,807,107
1,445,225
921,760
3,008,993
5,727,280
1,023,447,473
Past due in the following periods but not
impaired
31 - 60 days
61 - 90 days Over 90 days
181,960,854
181,960,854
54,742,360
54,742,360
36,855,526
36,855,526
Overdue
and
impaired
2,108,874
2,108,874
December 31, 2012
Cash
Trade and other receivables
Due from related parties
Long-term receivable
Accrued interest income
Refundable deposits
Gross
amount
Neither past
due nor
impaired
343,844,541
517,294,791
2,391,508
4,431,570
1,429,144
5,990,050
875,381,604
343,844,541
302,253,710
2,391,508
4,431,570
1,429,144
5,990,050
660,340,523
Past due in the following periods but not
impaired
31 - 60 days
61 - 90 days Over 90 days
124,041,875
124,041,875
62,828,412
62,828,412
27,015,826
27,015,826
Overdue
and
impaired
1,154,968
1,154,968
There are no cash on hand and revolving fund as at December 31, 2013 and 2012.
The maximum exposure to credit risk at the reporting date is the carrying value of financial assets
summarized above.
None of the fully performing financial assets has been renegotiated in 2013 and 2012.
The Group does not hold any collateral as security to the above financial assets.
3.3.1
Credit quality of the Group’s financial assets
(a) Neither past due nor impaired
Cash in banks
Credit risk exposure arising from cash deposit with banks arises from default of the counter party, with
a maximum exposure equal to the fair value of these financial assets. The Group has policies that limit
the amount of credit exposure with financial institutions.
To minimize the credit risk exposure, the Group’s cash are held in universal and commercial banks that
have good credit rating.
Cash deposited in these banks at December 31 are as follows:
Universal banks
Commercial banks
2013
549,194,632
28,342,476
577,537,108
2012
327,084,340
16,760,201
343,844,541
Trade and other receivables
The Group has prudent credit policies to ensure that sales of its products are made to customers with
good credit history. The senior management team, product group heads and the respective sales teams
perform monthly reviews of outstanding receivables as part of the regular performance assessment
process. All receivables from key customers are monitored for collectibility and actual settlement
performance, and specific action plans are required for any material overdue amounts from all
categories of customers.
(20)
From time to time management undertakes an evaluation of certain customer accounts for potential
provisioning and write-off.
Trade receivables from its five major customers (existing customers with some defaults in the past but
all defaults were fully recovered) for each segment at December 31 are as follows:
Group 1
Group 2
Group 3
Group 4
2013
Amount
% to total
237,020,138
54%
24,497,242
6%
4,482,262
1%
8,305,558
2%
274,305,200
63%
2012
Amount
% to total
118,146,351
39%
56,245,564
19%
5,582,187
2%
6,474,296
2%
186,448,398
62%
Group 1 - biodiesel and oleo-chemical segments
Group 2 - resin segment
Group 3 - powder coating segment
Group 4 - color dispersion segment
The remaining balance comes from a broad base of customers in all of the markets where the Group’s
business is engaged, where certain defaults were experienced in the past but significant balances have
been fully recovered. Management is not expecting significant credit risks on its major customers as
well as from its remaining customers, which are considered to be fully collectible.
Due from related parties
At December 31, 2013, due from related parties amounting to P1,445,225 (2012 - P2,391,508) pertain
to amounts receivable for sale of inventories to related parties. These are non-interest bearing and are
due on demand but not later than 12 months from reporting date (Note 16). The Group is not expecting
significant credit risk on the outstanding balances as these are transacted with related parties with no
history of default.
Long-term trade receivables and accrued interest income
Long-term receivables at December 31, 2013 of P921,760 (2012 - P4,431,570) relates to non-interest
and unsecured trade receivable from third party customers which was agreed to be collected in equal
quarterly installments for until March 2015.
The related discounted cash flows on interest receivable as at December 31, 2013 is P3,008,993
(2012 - P1,429,144).
The outstanding balance is fully collectible with no historical default in the past.
Refundable deposits
Credit exposure on refundable deposits relates to the Group’s existing lease agreements for a period of
more than twelve months from the reporting date. These outstanding balances are fully collectible at
the end of the lease term. The Group limits its exposure to credit risk by transacting only with
counterparties that have appropriate and acceptable credit history.
(21)
(b) Past due but not impaired
Past due but not impaired trade and other receivables are related to trade transactions with a number
of independent customers with whom there is no recent history of default.
At December 31, 2013, past due but not impaired trade and other receivables amounting to
P273,558,740 (2012 - P213,886,113) are fully recoverable and no provision for impairment is required
on these outstanding balances.
(c)
Overdue and impaired
Overdue and impaired trade and other receivables relate to transactions arising from sale of goods to
customers. The Group establishes an allowance for impairment based on loss component that relates
to significant exposures.
The impaired trade receivables at December 31, 2013 amounting to P2,108,874 (2012 - P1,154,968)
substantially relate to receivables from customers that are in an unexpected difficult economic
situations. Overdue and impaired accounts at December 31, 2013 and 2012 are fully provided with
allowance from impairment. There are no collaterals held by the Group for overdue and impaired
accounts.
3.4
Market risk
3.4.1
Foreign currency risk
Foreign exchange risk arises when future commercial transactions and recognized assets and liabilities
are denominated in a currency that is not the Group’s functional currency.
The Group has transactional currency exposures. Such exposure arises mainly from cash in banks,
receivable from customers, inventory purchases and borrowings in currencies other than the Group’s
functional currency. As at December 31, 2013, the Group has financial assets and liabilities
denominated in US Dollar and Euro as presented in Note 18.
The Group manages its foreign currency exchange risk by maintaining sufficient cash in foreign
currency to cover its maturing obligations.
A reasonable possible change in foreign currency exchange rate would lead to the following pre-tax
profit and equity movements:
At December 31, 2013
Net foreign currency denominated monetary assets (liabilities)
Reasonable possible changes in exchange rates
Effect on pre-tax profit for the year and equity
At December 31, 2012
Net foreign currency denominated monetary assets
Reasonable possible changes in exchange rates
Effect on pre-tax profit for the year and equity
(22)
US Dollar
(120,742,426)
+/-1.84%
2,221,661
Euro
17,388,377
+/-1.45%
252,131
US Dollar
190,891,079
+/-0.88%
1,679,841
Euro
6,015,368
+/-1.15%
69,177
The reasonable possible change in foreign exchange rate used in the sensitivity analysis is the rate of
change in various foreign currencies between the Peso equivalent at reporting date and the Peso
equivalent determined thirty (30) days from reporting date, by which management is expected to
receive or settle the Group’s most significant financial assets or liabilities, respectively.
3.4.2
Cash flow and fair value interest rate risks
Cash flow interest rate risk is the risk that the future cash flows of financial assets and liabilities will
fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the
value of a financial assets and liabilities will fluctuate because of changes in market interest rates.
Cash flow interest rate risk
The Group’s exposure to cash flow interest rate risk pertains to long term-receivables and short-term
borrowings with interest rates that are repriced at periodic intervals based on the prevailing mark-tomarket prices, in accordance with the terms of the agreement. The Group’s practice is to manage its
interest cost by reference to current market rates in borrowings.
At December 31, 2013, if interest rates increased/decreased by 1.12% (2012 - 0.07%) from the last
repricing date, with all other variable held constant, profit and equity would have been P1,925,120
(2012 - P120,417) lower/higher, respectively, as a result of higher/lower interest expense, net, with
variable rates.
The reasonable possible change in interest rate used in the sensitivity analysis is the rate of change
between the nominal interest rate at the end of the reporting period and the use of hypothetical interest
rate (gross of applicable final tax rate), which is normally equal to the discount rate set by reference to
yields on government bonds, determined at the next repricing date or the date by which management is
expected to settle the Group’s variable interest-bearing borrowings and long term receivables.
Fair value interest rate risk
The Group has no significant financial assets and liabilities that are carried at fair value and subject to
fixed interest rates. Accordingly, the Group does not foresee fair value interest rate risk to be
significant.
3.4.3
Price risk
As at December 31, 2013 and 2012, the Group has no significant financial assets and liabilities that are
exposed to significant price risk.
3.5
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding
through an adequate amount of credit facilities and the ability to close out market positions. Due to the
dynamic nature of the underlying businesses, the Group aims to maintain flexibility by keeping credit
lines available.
On a regular basis, management monitors forecasts of the Group’s liquidity reserve on the basis of
expected cash flow. The Group places money in excess of immediate requirements in banks.
(23)
The table below presents the Group’s on-balance sheet financial liabilities into relevant maturity
groupings based on the remaining period at the reporting date to contractual maturity date.
As at December 31, 2013
Trade and other payables
Due to related parties
Borrowings
As at December 31, 2012
Trade and other payables
Due to related parties
Borrowings
Due and
demandable
Less than 3
months
Between 3 to
6 months
Between 6 to
12 months
Total
312,201,706
20,685,251
332,886,957
118,670,404
512,058,165
630,728,569
-
-
430,872,110
20,685,251
512,058,165
963,615,526
68,396,863
8,830,817
77,227,680
79,812,563
171,126,250
250,938,813
-
-
148,209,426
8,830,817
171,126,250
328,166,493
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12
months equal their carrying balances, as the impact of discounting is not significant.
Borrowings at December 31, 2013 include the undiscounted cash flows on future interest payable of
P1,966,165 (2012 - P1,126,250) until its maturity.
The Parent Company and its subsidiary provide corporate guarantee for the obligations and
indebtedness incurred or may be incurred by the Parent Company and its subsidiary from short-term
credit accommodation extended by a foreign bank. As at December 31, 2013, the Group’s total shortterm borrowings from the foreign bank amounted to P160 million (2012 - P170 million). As at
December 31, 2013 and 2012, the Parent Company and its subsidiary have not incurred obligation or
indebtedness arising from default in the above borrowings covered by said corporate guarantee
agreement. Obligations, arising from the above guarantee, if any, will be funded by the Group
(Note 16).
The above corporate guarantee is considered off balance sheet financial liabilities payable in less than 3
months.
The Group believes that cash generated from its operating activities and current assets are sufficient to
meet currently maturing obligations required to operate the business. The Group would also be able to
meet unexpected cash outflows by accessing additional funding sources such as available credit lines
with local banks and borrowings from related parties.
The Group expects to settle the above financial obligations in accordance with their contractual
maturity dates.
3.6
Capital management
The Group’s objective when managing capital are to safeguard the Group’s ability to continue as going
concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders
and to maintain an optimal capital structure to reduce the cost of capital.
(24)
In order to maintain or adjust the capital structure, the Group reviews its capital structure from time to
time to assess the proper financing mix necessary to grow and sustain its operations. As a matter of
policy, capital expenditures have been financed from internally-generated cash flow, where possible,
and issuance of new shares while working capital requirements will be augmented by short-term bank
borrowings from time to time. The Group has been engaged in a conscious effort to keep its overall
gearing ratio as low as possible through proper management of its working capital cycle.
Earnings in excess of dividend distribution to shareholders have been continuously redeployed and
reinvested in the growth of the Group’s business. Each instance of expansion of manufacturing
capacity and entry into new products and markets undergo a thorough evaluation process to ensure
that such investments and marketing programs are in consonance with the Group's core competencies
and would be enhancing, rather than diminishing, shareholder value in the long run.
In line with the Group’s objective to maximize returns to shareholders, the Group may consider the
option of returning additional cash to shareholders in the form of special dividends or through share
buybacks.
On August 22, 2007, the Parent Company’s BOD approved the share buyback program with a maximum
funding mandate of P500 million (Note 11). The share buyback is part of the Parent Company’s balance
sheet management program with the objective of improving the Parent Company’s financial position for
capital efficiency and enhancing shareholder value through repurchases of shares whenever the Parent
Company’s stocks are trading at a price discount perceived by the Parent Company as not reflective of its
true corporate value.
As part of the reforms of the Philippine Stock Exchange (PSE) to expand capital market and improve
transparency among listed firms, PSE has required listed entities to maintain a minimum of ten percent
(10%) of their issued and outstanding shares, exclusive of any treasury shares, to be held by the public.
The Parent Company is compliant with respect to this requirement.
At December 31, 2013 and 2012, the capital being managed by the Group is equal to the total equity as
shown in the consolidated statement of financial position.
Note 4 - Critical accounting estimates, assumptions and judgments
Estimates, assumptions and judgments are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related actual results. The estimates, assumptions and
judgments that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are discussed below.
(25)
4.1
Critical accounting estimates and assumptions
4.1.1
Retirement benefit asset (Note 20)
Net retirement benefit asset presented in the consolidated statement of financial position is impacted
by the calculations relating to the retirement benefit obligation. The present value of the retirement
benefit obligation depends on a number of factors that are determined on an actuarial basis using a
number of assumptions. The assumptions used in determining the net cost (income) for retirement
benefit include the discount rate, expected return on plan assets and future salary increases. Any
changes in these assumptions will impact the carrying amount of retirement benefit obligation and
related retirement benefit expense.
The Group determines the appropriate discount rate at the end of each reporting year. This is the
interest rate that should be used to determine the present value of estimated future cash outflows
expected to be required to settle the retirement benefit obligation. In determining the appropriate
discount rate, the Group considers the interest rates of 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 retirement benefit obligation.
Other key assumptions for retirement benefit obligation are based in part on current market
conditions.
The possible effects of sensitivities surrounding these actuarial assumptions at reporting date are
presented in Note 17.
4.1.12
Estimated useful lives of property, plant and equipment (Note 8)
The useful life of each of the Group’s property, plant and equipment is estimated based on the period
over which these assets are expected to be available for use. Such estimation is based on a collective
assessment of, internal technical evaluation and experience with similar assets. The estimated useful
life of each asset is reviewed periodically and updated if expectations differ from previous estimates due
to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of
the asset. It is possible, however, that future results of operations could be materially affected by
changes in the amounts and timing of recorded expenses brought about by changes in the factors
mentioned above. A change in the estimated useful life of any property, plant and equipment would
impact the recorded depreciation expense and carrying value of property, plant and equipment.
The Group considers that it is impracticable to disclose with sufficient reliability the possible effects of
sensitivities surrounding the estimated useful lives of the property, plant and equipment at the
reporting date. One or more of the assumptions may differ significantly and as a result, the
depreciation expense and the net carrying value of the property, plant and equipment at reporting date
may differ significantly from amount reported.
4.2
Critical judgment in applying the entity’s accounting policies
4.2.1
Provision for impairment of receivables (Note 5)
Provision for impairment of receivables is maintained at a level considered adequate to provide for
potentially uncollectible receivables. The level of provision is based on past collection experience and
other factors that may affect collectability. An evaluation of the receivables, designed to identify
potential charges to the provision, is performed on a continuous basis throughout the year.
(26)
Management evaluates specific accounts of customers who are unable to meet their financial
obligations. In these cases, management uses judgment based on the best available facts and
circumstances, including but not limited to, the length of relationship with the customers and the
customers’ payment history. The amount and timing of recorded provision for impairment for any
period would therefore differ based on the judgments made.
There are no uncollectible receivables written off during the year (2012 - P109,571). At December 31,
2013, provision for impairment of receivables amounted to P2,108,874 (2012 - P1,154,968) for those
accounts considered past due and impaired.
In relation to receivables which are past due but not impaired as at December 31, 2013 and 2012,
particularly those over 90 days which account for 5% of trade and other receivables, no provision for
impairment has been determined by management to be necessary considering customer relationship and
historical experience.
Although the amount and timing of recorded provision for impairment for any period would differ
based on the judgments made, receivables are recognized at fair value based on recently observed
market conditions. Such fair values may change materially within the next financial year but these
changes would not arise from assumptions or other sources of estimation uncertainty as at December
31, 2013 and 2012 and for each of the three years in the period ended December 31, 2013.
4.2.2
Provision for inventory obsolescence (Note 6)
Provision for inventory obsolescence is maintained at a level considered adequate to provide for
potential loss on inventory items. The level of provision is based on past experience and other factors
affecting the recoverability and obsolescence of inventory items. An evaluation of inventories, designed
to identify potential charges to the provision, is performed on a continuous basis throughout the period.
Management uses judgment based on the best available facts and circumstances, including but not
limited to evaluation of individual inventory items’ future recoverability and utilization. The amount
and timing of recorded provision for inventory obsolescence for any period would therefore differ based
on the judgments made. A change in provision for inventory obsolescence would impact the Group’s
recorded expenses and carrying value of inventories.
There were no provisions set up for the years ended December 31, 2013 and 2012.
The carrying values of the inventories at the end of the reporting period and the amount and timing of
recorded provision for inventory obsolescence for any period could be materially affected by actual
experience and changes in such judgments such as effect of technological obsolescence, competition in
the market and changes in prices of raw and packaging materials, including any associated labor costs.
Thus, it is reasonably possible, on the basis of existing knowledge, that the actual outcome within the
next financial year arising from changes in judgments may have a significant impact on the carrying
amounts of the Group’s inventories.
(27)
4.2.3
Provision for unrecoverable tax credit claims from excess input VAT (Note 7)
Provision is maintained at a level considered adequate to provide for potentially unrecoverable tax credit
claims from excess input VAT. The level of provision is based on factors affecting the recoverability of the
tax credit claims applied and filed with the Bureau of Internal Revenue (BIR). An evaluation of the tax
credit claims from excess of input VAT, designed to identify potential charges to the provision, is
performed on a continuous basis throughout the period. Management uses judgment based on the best
available facts and circumstances, including but not limited to the evaluation of the individual tax credit
claim’s recoverability incompliance with tax regulations, and future utilization in determining provision for
unrecoverable input VAT. A change in the provision would impact the Group’s recorded carrying value of
claim for input VAT and provision for impairment.
At December 31, 2013, provision for unrecoverable input VAT credits amounted to P1,409,786
(2012 - P8,808,985).
4.2.4
Impairment of property, plant and equipment (Note 8)
The Group’s property, plant and equipment are carried at cost less accumulated depreciation and
amortization and impairment losses. The carrying value is reviewed and assessed for impairment
whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. Changes in those judgments could have a significant effect on the carrying value of
property, plant and equipment and the amount and timing of recorded impairment provision for any
period.
As at December 31, 2013, management believes, based on its judgments, that there are no indications of
impairment or changes in circumstances indicating that the carrying value of its property, plant and
equipment may not be recoverable.
4.2.5
Property, plant and equipment leased out to related parties (Note 16)
The Parent Company has certain property, plant and equipment consisting of owner-occupied portion
and portion leased out to related parties. The Group could not practicably allocate the carrying values
of the properties into the owner-occupied portion and the portion leased out due to diversified use of
the properties. Based on management assessment, the owner-occupied portion of property, plant and
equipment on the leases is considered significant during and at the end of the reporting date.
As at December 31, 2013 and 2012, these properties have aggregate carrying amount of P243,372,468
and P245,375,886, respectively.
4.2.6
Provision for income tax; deferred income tax asset (Note 19)
PFRS requires recognition of deferred tax assets to the extent that it is probable that future taxable
income will be available against which temporary differences can be utilized. Determining the
realizability of deferred tax assets requires the judgment and assessment of sufficient taxable profit
expected to be generated from future operations against which the deferred income tax assets can be
applied.
Further, significant judgment is required in determining the provision for income taxes. There are
many transactions and calculations for which the ultimate tax determination is uncertain in the
ordinary course of business. The Group recognizes liabilities based on careful evaluation and
assessment of whether additional taxes will be due.
(28)
Where the final tax outcome of these matters is different from the amounts that were initially recorded,
such differences will impact the Group’s current and deferred tax provisions in the period in which
such determination is made.
Note 5 - Trade and other receivables, net
Trade and other receivables, net at December 31 consist of:
2013
709,029,912
2,108,874
706,921,038
4,357,836
711,278,874
921,760
710,357,114
Trade receivables
Less: Allowance for impairment of trade receivables
Net trade receivables
Other receivables
Less: long-term trade receivables
Current portion of receivables
2012
521,726,361
1,154,968
520,571,393
15,939,369
536,510,762
4,431,570
532,079,192
Long-term trade receivables is related to trade transactions with a third party customer which was
agreed to be collected in equal quarterly installments for a period of 5 years ending March 2015.
The present values of long-term receivables at December 31 are as follows:
2013
3,509,810
921,760
4,431,570
Current portion
Non-current portion
2012
4,769,974
4,431,570
9,201,544
The present value of long-term receivables is based on discounted cash flows at annual interest rate of
8% based on the Group’s average borrowing rate on short-term bank loans at the time of initial
discounting.
Movements in the provision for impairment of trade receivables at December 31 are as follows:
Note
Beginning of year
Provision (recovery)
Write-off
End of year
13
2013
1,154,968
953,906
2,108,874
2012
1,304,504
(39,965)
(109,571)
1,154,968
As at December 31, 2013, the Group has directly written-off accounts receivable amounting to P6,815
(2012 - P482,608) (Note 13).
(29)
Note 6 - Inventories
Inventories at December 31 consist of:
Note
At cost
Raw materials
Finished goods
In transit
12
2013
2012
696,301,397
315,712,673
40,556,337
1,052,570,407
406,962,576
344,544,706
26,537,960
778,045,242
The carrying amount of inventories is stated at cost, which is lower than their net realizable value
(estimated selling price less variable selling expense).
Based on management’s assessment, there is no provision for inventory obsolescence required as at
December 31, 2013 and 2012.
The cost of inventories recognized as expense and included in cost of sales sold for the year ended
December 31, 2013 amounted to P3,773,820,859 (2012 - P3,414,579,668; 2011 - P4,558,377,665)
(Note 12).
Note 7 - Input VAT; prepaid taxes and other current assets
7.1
Input VAT
Input VAT, net at December 31 consists of:
Input VAT
Less: Provision for unrecoverable input VAT
2013
629,198,544
1,409,786
627,788,758
2012
647,463,075
8,808,985
638,654,090
2013
328,204,466
279,953,300
13,547,851
7,492,927
629,198,544
2012
174,715,493
449,996,145
18,224,699
4,526,738
647,463,075
Details of the Group’s gross input VAT at December 31 are as follows:
Carryover claimable against output VAT
Tax credit claim
On depreciable assets claimable against output VAT
Deferred
Deferred input VAT pertains to input VAT on services which is claimable upon payment of related
liabilities.
(30)
Movements in the provision for unrecoverable input VAT at December 31 are as follows:
Note
Beginning of year
Provision
Write-off
End of year
12
2013
8,808,985
38,235,773
(45,634,972)
1,409,786
2012
26,465,272
8,663,405
(26,319,692)
8,808,985
Provision for impairment relates to potentially unrecoverable tax credit claim on excess input VAT, based
on management assessment.
For the year ended December 31, 2013, the BIR approved the Group’s claim for tax credit certificates in
lieu of excess input VAT amounting to P191,786,696 (2012 - P320,410,782). During the same period, the
BIR disallowed P45,634,972 (2012 - P26,319,692) of tax credit certificate application. As a result of the
disallowance, the related disallowed amount was written off against the allowance for unrecoverable input
VAT.
7.2
Prepaid taxes
Prepaid taxes as at December 31, 2013 amounting to P1,055,570,826 (2012 - P865,922,519) substantially
consist of actual tax credit certificates issued by the BIR in favor of the Group from its application to
convert excess input VAT into tax credit certificates, net of utilized tax credits amounting to P5,000,000
(2012 - P52,168,173).
7.3
Other current assets
Other current assets at December 31 consist of:
Deposits to suppliers
Other prepayments
2013
47,167,904
30,871
47,198,775
2012
28,178,831
51,869
28,230,700
Deposits to suppliers pertain to payment for inventory purchases that have partial deliveries as at
December 31, 2013 and 2012.
(31)
Note 8 - Property, plant and equipment
Property, plant and equipment at December 31 consist of:
Land
At January 1, 2012
Cost
Accumulated depreciation and amortization
Accumulated impairment losses
Net carrying value
For the year ended December 31, 2012
Opening net carrying value
Additions
Transfers
Write-offs
Cost
Accumulated depreciation and amortization
Accumulated impairment losses
Depreciation and amortization
Closing net carrying value
At December 31, 2012
Cost
Accumulated depreciation and amortization
Net carrying value
For the year ended December 31, 2013
Opening net carrying value
Additions
Transfers
Disposals
Cost
Accumulated depreciation and amortization
Depreciation and amortization
Closing net carrying value
At December 31, 2013
Cost
Accumulated depreciation and amortization
Net carrying value
Land
improvements
Building and
Improvements
Machinery and
equipment
Furniture
and fixtures
Transportation
equipment
Construction
in progress
Total
156,000,000
156,000,000
7,330,466
(6,937,585)
392,881
91,821,036
(36,915,299)
54,905,737
1,464,630,016
(509,698,952)
(2,684,801)
952,246,263
4,543,811
(3,455,893)
1,087,918
7,241,984
(6,514,471)
727,513
73,095,410
73,095,410
1,804,662,723
(563,522,200)
(2,684,801)
1,238,455,722
156,000,000
-
392,881
-
54,905,737
-
952,246,263
8,087,563
44,370,801
1,087,918
260,446
-
727,513
-
73,095,410
20,489,935
(44,370,801)
1,238,455,722
28,837,944
-
156,000,000
(95,823)
297,058
(6,395,893)
48,509,844
(3,727,247)
1,042,446
2,684,801
(87,737,072)
916,967,555
(295,162)
1,053,202
(90,939)
636,574
49,214,544
(3,727,247)
1,042,446
2,684,801
(94,614,889)
1,172,678,777
156,000,000
156,000,000
7,330,466
(7,033,408)
297,058
91,821,036
(43,311,192)
48,509,844
1,513,361,133
(596,393,578)
916,967,555
4,804,257
(3,751,055)
1,053,202
7,241,984
(6,605,410)
636,574
49,214,544
49,214,544
1,829,773,420
(657,094,643)
1,172,678,777
156,000,000
-
297,058
667,254
48,509,844
220,536
4,003,710
916,967,555
17,885,804
66,487,256
1,053,202
509,598
544,643
636,574
-
49,214,544
31,728,266
(71,702,863)
1,172,678,777
50,344,204
-
156,000,000
(205,405)
758,907
(6,227,664)
46,506,426
(33,188,003)
12,033,180
(92,575,063)
887,610,729
(504,502)
1,602,941
(90,939)
545,635
9,239,947
(33,188,003)
12,033,180
(99,603,573)
1,102,264,585
156,000,000
156,000,000
7,997,720
(7,238,813)
758,907
96,045,282
(49,538,856)
46,506,426
1,564,546,190
(676,935,461)
887,610,729
5,858,498
(4,255,557)
1,602,941
7,241,984
(6,696,349)
545,635
9,239,947
9,239,947
1,846,929,621
(744,665,036)
1,102,264,585
Construction in progress represents machinery and equipment that will be used in the manufacture of resins and emulsions which is expected to be
completed within the next 12 months from reporting date.
(32)
Depreciation and amortization for the years ended December 31 are as follows:
Cost of sales
Administrative expenses
Notes
12
14
2013
98,932,351
671,222
99,603,573
2012
93,954,877
660,012
94,614,889
2011
89,430,454
1,340,157
90,770,611
The Group has fully depreciated property and equipment as at December 31, 2013 which are still being
used in operations with an aggregate cost of P149,409,814 (2012 - P101,249,809).
Note 9 - Trade and other payables
Trade and other payables at December 31 consist of:
Note
Trade payables
Due to regulatory agencies
Security deposit
Others
2013
423,627,241
7,446,025
7,244,869
438,318,135
16
2012
139,302,809
5,560,209
3,000,000
5,906,617
153,769,635
Due to regulatory agencies substantially consist of expanded withholding tax payable and withholding
tax payable on compensation.
Note 10 - Borrowings
Short-term borrowings with an annual interest rates ranging from 2% as at December 31, 2013
(2012 - 2% to 4.5%) consist of secured loans from local banks (Note 3.5) and are subject to monthly
repricing. These borrowings have an average maturity of one to three months from reporting dates.
Interest expense and accrued interest for the year ended December 31, 2013 amounted to P5,107,900
and nil (2012 - P5,345,323 and nil; 2011 - P10,684,197 and P362,820), respectively.
There are no significant warranties and covenants, including breaches thereof, in relation to these
short-term borrowings.
Borrowings of the Group for the years ended December 31, 2013 and 2012 were obtained specifically
for working capital purposes, thus borrowing costs were not capitalized.
Note 11 - Equity
11.1
Share capital and share premium
Details of share capital at December 31, 2013, and 2012 are as follows:
Shares
Common shares at P1 par value per share
Authorized
Issued
(33)
2,000,000,000
1,397,855,472
Amount
2,000,000,000
1,397,855,472
The Parent Company undertook a public offering of the primary shares during the period December 4
to 8, 2008, in which the Parent Company issued 340,909,090 additional shares at P4.40 per share.
With the proceeds of P1.4 billion from the additional listing (net of the stock issuance costs of P55.4
million), the Parent Company realized share premium of P1.104 billion.
On October 9, 2007, the SEC approved the share swap relating to the Parent Company’s 100%
acquisition of Chemrez which entailed the increase in the Parent Company’s issued and outstanding
shares by 462,226,382 shares. As the net assets of Chemrez amounted to approximately P597.2 million
as at October 9, 2007, the Parent Company realized share premium of P135.0 million from the share
swap.
The Parent Company’s record of registration of its securities under the Securities Regulation Code
follows:
Number of shares registered
Issued/offer price
Date of approval
: 2,000,000,000
: P4.40
: November 20, 2007
As at December 31, 2013 and 2012, the Parent Company has 268 and 281 shareholders, respectively,
each holding at least 100 shares of the Parent Company’s common shares.
11.2
Share buyback program
On August 22, 2007, the Parent Company’s BOD approved a share buyback program and authorized
the repurchase of a maximum of P500 million worth of the Parent Company’s shares, presently
equivalent to 9% of the Parent Company’s current capitalization. The Parent Company repurchased a
total of 75,966,000 of its common shares through open market purchases using the trading facilities of
the Philippine Stock Exchange for a total purchase price of P215.9 million at an average price per share
of P2.84 in 2008.
For the period ending December 31, 2013, the Parent Company has re-purchased a total of 9.2 million
shares (2012 - 10.8 million) with a net cost of P26.6 million (2012 - P31.7 million).
At December 31, 2013, the Parent Company has unrestricted retained earnings amounting to
P1.46 billion (2012 - P1.26 billion) which is adequate to support the cost of its treasury shares.
11.3
Dividend declaration
The Parent Company’s Board of Directors declared dividends as follows:
Declaration date
June 27, 2011
June 18, 2012
June 17, 2013
(34)
Payment dates
Dividend rate per share
Amount
August 20, 2011
P0.15 per share (consisting of P0.06
regular cash dividend and P0.09 special
cash dividend)
198,283,421
August 13, 2012
P0.12 per share (consisting of P0.06
regular cash dividend and P0.06 special
cash dividend)
158,626,737
August 12, 2013
P0.09 per share (consisting of P0.06
regular cash dividend and P0.03 special
cash dividend)
117,191,743
Note 12 - Cost of sales
The components of cost of sales for the years ended December 31 are as follows:
Raw materials used
Finished goods, net of change
Direct labor
Factory overhead
Depreciation and amortization
Management service fees
Light and water
Fuel and oil
Outside labor services
Rent
Indirect labor
Repairs and maintenance
Supplies
Development expense
Reversal of provision for inventory
losses
Notes
6, 7
6
17
2013
3,278,800,417
28,832,033
30,447,392
2012
(Restated)
2,836,351,239
139,424,347
33,210,326
2011
(Restated)
4,126,353,230
27,601,004
30,047,683
8
16
98,932,351
86,848,413
76,850,968
47,705,631
36,964,246
32,783,371
30,226,991
15,604,965
9,507,788
316,293
93,954,877
77,848,137
63,142,034
47,282,350
35,804,348
20,907,745
31,684,195
26,557,739
8,000,543
411,788
89,430,454
102,670,919
53,483,046
15,704,401
34,686,151
20,575,218
25,839,785
31,051,986
19,800,011
567,922
3,773,820,859
3,414,579,668
16
17
6
(19,434,145)
4,558,377,665
Note 13 - Selling and marketing expenses
The components of selling and marketing expenses for the years ended December 31 are as follows:
Notes
Delivery charges
Salaries and allowances
Transportation and travel
Representation and entertainment
Provision (recovery) for impairment of
receivables
Advertising and promotions
Receivables directly written-off
(35)
17
5
5
2013
51,853,124
19,571,815
9,536,925
7,409,714
2012
(Restated)
38,920,708
22,762,777
6,709,633
6,723,383
2011
(Restated)
41,637,662
21,867,652
5,778,323
5,177,535
953,906
830,105
6,815
90,162,404
(39,965)
2,550,197
482,608
78,109,341
574,286
2,498,355
77,533,813
Note 14 - General and administrative expenses
The components of administrative expenses for the years ended December 31 are as follows:
Notes
Taxes and licenses
Outside services
Management service fees
Donations, gifts and contributions
Bank charges
Office supplies
Communication
Depreciation and amortization
Others
16
8
2013
27,670,314
25,476,521
19,205,651
2,567,574
2,132,709
627,466
681,382
671,222
2,787,839
81,820,678
2012
35,705,647
20,483,849
16,784,567
3,103,964
2,229,826
1,044,810
830,691
660,012
4,155,206
84,998,572
2011
35,011,393
17,899,721
18,931,468
128,051
3,173,563
1,052,980
877,961
1,340,157
2,865,504
81,280,798
Note 15 - Other income, net
The components of other income for the years ended December 31 are as follows:
Notes
16
Rental income
Gain on sale of equipment
Interest income
Foreign exchange (loss) gain, net
Other income
18
2013
12,570,714
12,029,027
731,108
(4,826,052)
833,070
21,337,867
2012
24,249,875
902,379
18,558,603
206,954
43,917,811
2011
23,591,299
1,200,637
9,306,657
364,147
34,462,740
Note 16 - Related party transactions
The Group, in the ordinary course of business, has transactions with related parties. Significant related
party transactions for the year ended December 31 include the following:
For the years ending December 31:
Transactions
(A) Sale of goods
Shareholder
D&L Industries, Inc.
Entities under common control
Oleo-Fats, Incorporated
First in Colours, Incorporated
D&L Polymer and Colours, Inc.
FIC Marketing Co., Inc.
Others
(36)
Terms and conditions
Sales of goods and
services are negotiated
with related parties on a
cost-plus basis. These
are collectible on
demand but not later
than 12 months from
reporting date.
2013
2012
2011
443,636
205,105
832,822
22,482,458
16,985,262
5,896,137
1,212,610
1,094,627
48,114,730
32,139,025
25,964,275
1,978,437
317,268
60,604,110
125,482,603
19,090,598
4,720,348
165,029
340,943
150,632,343
Transactions
(B) Purchases of goods and services
Shareholder
D&L Industries, Inc.
Entities under common control
Oleo-Fats, Inc.
D&L Polymer & Colours, Inc
FIC Marketing Co., Inc.
First in Colours, Incorporated
FIC Tankers Corporation
Aero-Pack Industries, Inc.
Others
(C) Management service fees
Shareholder
D&L Industries, Inc.
Cost of sales
Administrative expenses
Terms and conditions
Purchases of goods are
negotiated with related
parties on a cost-plus
basis. These are
payable on demand but
not later than 12 months
from reporting date.
The fee for technical and
logistics support services
is fixed at 2% of net
receipts from operations
and those for
administrative and
executive management
support services at 3.5%
of gross profit from
operations.
2013
2012
2011
1,967,152
1,645,465
1,040,119
71,400,888
35,974,122
33,630,291
18,920,707
8,020,651
3,860,944
173,774,755
5,728,544
37,441,511
34,521,046
20,152,545
5,186,711
2,150,282
106,826,104
781,244,053
54,492,380
21,147,708
29,586,652
5,886,187
952,499
77,929
894,427,527
86,848,413
19,205,651
77,848,137
16,784,567
102,670,919
18,931,468
106,054,064
94,632,704
121,602,387
6,672,708
7,039,621
6,629,153
5,898,006
-
5,210,254
12,000,000
4,962,146
12,000,000
12,570,714
24,249,875
23,591,299
32,783,371
20,907,745
20,575,218
These are payable on
demand but not later than
12 months from reporting
date.
(D) Rental income
Shareholder
D&L Industries, Inc.
Entity under common control
First in Colours, Inc.
Oleo-Fats, Incorporated
Rental rates are based on
agreed rates in the rental
lease agreement.
(E) Rental expense
Entity under common control
LBL Industries, Inc.
Rental rates are based on
agreed rates in the rental
lease agreement.
These are collectible on
demand but not later than
12 months from reporting
date.
These are payable on
demand but not later than
12 months from reporting
date.
(37)
Transactions
(F) Advances from related parties
Parent Company
Jadel Holdings Co., Inc.
Shareholders
D&L Industries, Inc.
Entities under common control
Aero-Pack Industries, Inc.
Oleo-Fats, Incorporated
First in Colours, Incorporated
Individual shareholders
Terms and conditions
Advances are provided
by related parties for
working capital
requirements.
Advances from individual
shareholders pertain to
advances made by
shareholder of the
Company.
2013
2012
2011
194,901,877
-
-
13,000,000
251,213,000
-
50,000,000
-
70,000,000
30,000,000
1,062,624
90,170,000
-
257,901,877
352,275,624
90,170,000
9,000,000
7,892,284
-
90,000,000
-
5,055,600
-
30,000,000
-
100,000
-
-
22,047,884
30,000,000
90,000,000
Reference
2013
2012
A, B, D, F, G
A, B, D, F, G
A, B
1,445,218
7
1,618,935
772,573
-
1,445,225
2,391,508
These are unsecured,
non interest bearing and
due on demand but not
later than 12 months from
reporting date.
(G) Advances to related parties
Entities under common control
Oleo-Fats, Incorporated
D&L Polymer and Colours,
Inc.
Ecozone Properties, Inc.
First in Colours, Incorporated
Shareholders
Jadel Holdings Co., Inc.
Advances provided to
related parties are for
working capital
requirements.
These are non-interest
bearing, unsecured, due
on demand but not later
than 12 months from
reporting date.
Net amounts at December 31:
(A) Due from related parties
Entities under common control
First in Colours, Incorporated
Oleo-Fats, Incorporated
Others
(38)
Terms and conditions
Amounts are settled in
cash on a net basis.
These are unsecured,
non-interest bearing,
and are collectible on
demand but not later
than 12 months from
reporting date.
Terms and conditions
(B) Due to related parties
Shareholders
D&L Industries
Individual shareholders
Entities under common control
D&L Polymer and Colours, Inc.
Oleo-Fats, Incorporated
FIC Marketing Co., Inc.
FIC Tankers Corporation
Aero-pack Industries, Inc.
Others
Amounts are settled in
cash on a net basis.
These are unsecured,
non-interest bearing,
and are payable on
demand but not later
than 12 months from
reporting date.
Reference
2013
2012
A, B, C, F
F
7,155,215
-
6,689,721
1,062,624
A, B
A, B, D, F, G
A, B
B
A, B
A, B, E
8,285,636
2,292,501
1,572,033
1,281,777
98,089
20,685,251
974,246
102,000
2,226
8,830,817
Due to individual stockholders pertain to advances made by stockholder of the Parent Company. These
advances are unsecured, non-interest bearing and are due and demandable any time.
16.1
Management services
The Group has an existing management agreement with D&L, a shareholder, whereby the latter
provides the following technical, logistics, administrative and executive management services:
Technical support which includes research and development, quality control and assurance, use of
trademarks, and IT related services;
Logistics support which includes transport, fleet management, warehousing management, tank farm
management, port clearing and procurement;
Administrative support which includes accounting and finance, human resources, information
technology, property management, legal services, and research and development; and
Executive management which includes the services performed by the executives to manage the
business operations of the Group.
The agreement remains in force unless terminated by the parties.
16.2
Income from facilities rental
In July 1, 2007, the Parent Company entered into a five-year cancellable lease operating agreements
with D&L, a shareholder and First in Colours, Incorporated, an entity under common control, whereby
the latter leases certain portion of the Parent Company’s refinery plant and warehouse facilities with
various escalation clauses and renewal rights. The lease runs for a period of 5 years starting from July 1,
2007 to June 30, 2012. Monthly rental amounted to P348,495 subject to an escalation of 5% annually
starting on the second year of the lease term. The lease agreement was extended up to October 31,
2012.
On October 31, 2012, the lease agreement was renewed for another five years until October 31, 2017.
Monthly rental amounted to P444,746 subject to an escalation of 5% annually starting on the second
year of the lease term.
(39)
A portion of the Group’s property classified as land, building and building improvements are under the
operating lease. At December 31, 2013 and 2012, these land, building and building improvements have
aggregate carrying amount of P202,506,426 and P204,509,844, respectively (Note 8). The Group
could not practicably allocate the carrying values of the land, building and building improvements into
the owner-occupied portion and the portion leased out due to diversified use of the properties.
The Parent Company had a cancellable lease operating agreement with Oleo-Fats, Inc., an entity under
common control, for the use by the latter of some of the Parent Company’s storage tanks and various
machineries and equipment for a period of five years until December 31, 2013. This contract was
terminated effective January 1, 2013.Total rental deposit of P3 million as t December 31, 2012, which
was recorded under trade and other payables in the consolidated statement of financial position as part
of the agreement in 2012, was collected in 2013.
As at December 31, 2013 and 2012, the properties subject to lease have aggregate carrying amount of
P40,866,042 which is classified under property, plant and equipment as part of machinery and equipment
in the statement of financial position (Note 8). The Group could not practicably allocate the carrying values
of the storage tanks and various machineries and equipment into the owner-occupied portion and the
portion leased out due to diversified use of the properties.
Based on management assessment, the owner-occupied portion of property, plant and equipment on
the above leases, is considered significant during and at the end of the reporting date.
There are no contingent-based rentals recognized for the years ended December 31, 2013, 2012 and 2011.
16.3
Lease agreements
The Group has various existing cancellable operating lease agreements as lessee with LBL Industries,
Inc., an entity under common control, covering the latter’s factory and warehouse spaces. The lease
period ranges from one year to ten years, unless terminated by either party or renewed by mutual
agreement of parties. At December 31, 2013 and 2012, refundable deposit amounting to P2,614,420, is
presented as part of other non-current assets in the consolidated statement of financial position.
16.4
Corporate guarantee
The Parent Company and its subsidiary have an existing agreement to provide corporate guarantee for
the obligations and indebtedness incurred or may be incurred by the Group from short-term credit
accommodation extended by a foreign bank. As at December 31, 2013 and 2012, the Group has not
incurred obligation or indebtedness related to this agreement (Note 3.5).
(40)
16.5
Key management compensation
Key management compensation for the years ended December 31 is as follows:
Salaries and wages
Other short-term
employee benefits
Retirement benefits
Terms
Key management compensation
covering salaries and wages and other
short-term benefits are determined
based on contract of employment and
payable in accordance with the
Company’s payroll period. These were
fully paid at reporting date. Retirement
benefits are determined and payable in
accordance with policies disclosed in
Notes 2.23 and 18.
2013
13,679,012
2012
14,552,207
2011
11,034,062
1,874,192
1,737,212
2,016,466
1,746,020
1,090,496
418,511
17,290,416
18,314,693
12,543,069
The Group has not provided share-based payments, termination benefits or other long term benefits,
other than the retirement benefits, to its key management employees for the years ended December 31,
2013, 2012 and 2011.
Other related party transactions comprise contributions to, benefits paid and investment in shares or
stock of the listed entities under common control by the retirement fund (Note 17).
There are no amounts due from or to key management arising from the above compensation
arrangement at December 31, 2013 and 2012.
Note 17 - Retirement plan
The Group maintains a non-contributory defined benefit retirement plan for the benefit of its regular
employees. The normal retirement age is 60. Normal retirement benefit is equal to three-fourth
month salary as of date of retirement multiplied by retiree’s years of service. Three-fourth month salary
is equivalent to 22.5 days basic salary, cash equivalent of 5 days vacation leaves, and one-twelfth (1/12)
of the 13th month pay. Actuarial valuation is performed by independent actuary on an annual basis.
The amounts recognized in the consolidated statement of financial position at December 31 are
determined as follows:
Fair value of plan assets
Present value of funded obligation
Retirement benefit asset
(41)
2013
57,660,509
(56,112,952)
1,547,557
2012
(Restated)
50,379,935
(48,484,733)
1,895,202
The movements in the defined benefit obligation for the years ended December 31 are as follows:
2013
48,484,733
4,050,327
2,497,262
(92,986)
1,560,936
(387,320)
56,112,952
Beginning of year
Past service cost
Current service cost
Interest cost
Transfers (to) from affiliates
Remeasurement
Benefits paid
End of year
2012
(Restated)
31,240,028
12,415,548
2,771,712
1,895,613
1,023,864
(470,361)
(391,671)
48,484,733
Past service cost in 2012 is due to the amendment of the retirement plan rules which increased the
normal retirement benefit from one-half to three-fourth month salary.
Transfers (to) from affiliates relate to retirement benefit obligation of certain employees transferred
(to) from entities under common control.
The movements in the fair value of plan assets for the years ended December 31 are as follows:
2013
50,379,935
2,589,860
3,027,884
2,050,150
(387,320)
57,660,509
Beginning of year
Interest income
Remeasurement gain
Contributions paid
Benefits paid
End of year
2012
(Restated)
41,263,016
2,420,839
4,481,642
2,606,109
(391,671)
50,379,935
The amounts recognized in the consolidated statement of total comprehensive income for the years
ended December 31 are as follows:
Notes
Current service cost
Net interest cost
Transfers (to) from affiliates
Past service cost
Retirement benefit expense
12,13
2013
4,050,327
(92,598)
(92,986)
3,864,743
2012
(Restated)
2,771,712
(435,925)
1,023,864
12,415,548
15,775,199
2011
(Restated)
1,848,220
(688,349)
2,384,318
3,544,189
Retirement benefit expense is included in direct and indirect labor under cost of sales (Note 12) and
salaries and allowances under selling and marketing expenses (Note 13).
(42)
The amounts recognized in other comprehensive income for the years ended December 31 are as
follows:
Remeaserement (loss) gain - obligation
Remeasurement gain (loss) - plan asset
Changes in effect of asset ceiling
Remeasurement gain (loss)
2013
(1,560,936)
3,027,884
1,466,948
2012
(Restated)
470,361
4,481,642
1,623,686
6,575,689
2011
(Restated)
(6,144,642)
(1,110,696)
7,034,478
(220,860)
Remeasurement gain (loss) above is presented net of deferred tax in the statement of total
comprehensive income amounting to P894,315 for the year ended December 31, 2013 (2012 - P509,617;
2o11 - P66,258).
Breakdown of remeasurement gain (loss) at December 31 are as follows:
Due to change in financial assumption
Due to experience adjustment
2013
5,989,146
(4,428,210)
1,560,936
2012
(Restated)
3,199,011
(3,669,372)
(470,361)
2011
(Restated)
6,750,992
(606,350)
6,144,642
The movements in the remeasurement of plan assets at December 31 are as follows:
Actual return
Interest income
2013
5,617,744
(2,589,860)
3,027,884
2012
(Restated)
6,902,481
(2,420,839)
4,481,642
Changes in the effect of asset ceiling at December 31 are as follows:
Beginning of year
Interest income
Changes in the effect of limiting to asset ceiling
End of year
2013
-
2012
(Restated)
1,534,385
89,301
(1,623,686)
-
The movements in the retirement plan asset recognized in the consolidated statement of financial
position at December 31 are as follows:
Beginning of year
Total retirement benefit expense
Remeasurement gain
Contributions paid
End of year
(43)
2013
(1,895,202)
3,864,743
(1,466,948)
(2,050,150)
(1,547,557)
2012
(Restated)
(8,488,603)
15,775,199
(6,575,689)
(2,606,109)
(1,895,202)
The Group has plan asset under the D&L Group of Companies Employees’ Retirement Plan (the
“Retirement Plan”) that share risks between various entities under common control. Plan assets are
handled by a trustee bank, governed by local regulations and practices and approved by the
management of the Group. As at December 31, 2013, the Group has an allocated fund of P57,660,509
(2012 - P50,379,935) in the Retirement Plan based on the fund balance report of the trustee (using the
Company’s percentage of equity over the total plan assets under the Retirement Plan). The Retirement
Plan has investments as at December 31 consisting of the following:
Listed stocks
Mutual funds
Unit investment trust funds
Treasury bonds and notes
2013
Amount Percentage
120,052,551
53.71%
73,136,935
32.72%
17,265,825
7.72%
13,051,554
5.85%
223,506,865
100.00%
2012
Amount Percentage
135,777,512
69.18%
28,133,897
14.34%
26,419,693
13.46%
5,931,396
3.02%
196,262,498
100.00%
The carrying value of the plan assets as at December 31, 2013 is P233,125,125 (2012 - P156,142,127).
Net defined benefit cost and contributions are allocated to the participating entities in the retirement
plan on the basis of retirement benefit expense and obligation attributable to each of the participating
entities.
The defined benefit plan typically exposes the participating entities to a number of risks such as
investment risk, interest rate risk and salary risk. The most significant of which relate to investment
and interest rate risk. The present value of the defined benefit obligation is determined by discounting
the estimated future cash outflows using interest rates of 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 retirement liability. A decrease in government bond yields will increase the defined
benefit obligation although this will be partially offset by an increase in the value of the plan's fixed
income holdings. Hence, the present value of defined benefit obligation is directly affected by the
discount rate to be applied the participating entities. However, the participating entities believe that
due to the long-term nature of the retirement liability, the mix of debt and equity securities holdings of
the plan is an appropriate element of the long-term strategy to manage the plan efficiently.
Investments are well diversified, such that the failure of any single investment would not have a
material impact on the overall level of assets. The largest proportion of assets is invested in equities,
although there are also investments in mutual fund, unit investment trust funds and treasury bonds
and notes. The management believes that equities offer the best returns over the long term with an
acceptable level of risk.
Listed stocks include shares of stocks of the Parent Company and its shareholder with an aggregate
amount of P69,997,400 as at December 31, 2013 (2012 - P62,512,000). The voting right on investment
decision over these shares is exercised by the trustee bank. The Retirement plan recognized net gains
on these investments in listed stocks of related parties of P7,076,611 for the year ended December 31,
2013 (2012 - P6,211,120).
(44)
The allocated share of the Group in the retirement plan asset at December 31 is as follows:
Listed stocks
Mutual funds
Unit investment trust funds
Treasury bonds and notes
2013
Amount Percentage
30,969,459
53.71%
18,866,519
32.72%
4,451,391
7.72%
3,373,140
5.85%
57,660,509
100.00%
2012
Amount Percentage
34,852,839
69.18%
7,224,483
14.34%
6,781,139
13.46%
1,521,474
3.02%
50,379,935
100.00%
The principal annual actuarial assumptions used at December 31 were as follows:
Discount rate
Future salary increases
2013
4.39%
6.00%
2012
5.27%
6.00%
The average expected remaining working lives of employees entitled to retirement benefits at
December 31, 2013 and 2012 is 20 years.
Assumptions regarding future mortality experience are set based on advice from published statistics
and experience.
As part of its funding policy, the Group follows the recommended contribution to the plan as
determined by independent actuary. The recommended contribution to the plan consists of the annual
amortization of the unfunded past service liability/excess fund plus the current service cost for the
year. The expected contribution to plan assets in 2014 is P3,856,549 (2013 - P2,050,150).
The expected return on plan assets was determined by considering the expected returns available on
the assets underlying the current investment policy. Expected yields in fixed interest investments are
based on redemption yields at the reporting date.
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:
Discount rate
Salary growth rate
Impact on defined benefit obligation
Change in
Increase in
Decrease in
assumption
assumption
assumption
0.50%
2,135,480
(1,940,890)
1.00%
4,239,855
(3,594,088)
The above sensitivity analyses are based on a change in an assumption while holding all other
assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions
may be correlated. When calculating the sensitivity of the defined benefit obligation to significant
actuarial assumptions the same method has been applied as when calculating the retirement liability
recognized within the statement of financial position.
The methods and types of assumptions used in preparing the sensitivity analysis did not change
compared to the previous period.
(45)
Expected maturity analysis of undiscounted retirement benefits as at December 31 is as follows:
2013
2012
1 year and
less
541,722
More than 1
year to
5 years
10,590,758
4,673,420
More than 5
years to 10
years
33,797,938
38,509,476
More than
10 years to
15 years
49,641,230
49,457,990
More than
15 years to
20 years
56,557,113
61,734,042
More than
20 years
314,255,974
288,489,364
Total
464,843,013
443,406,014
There are no other transactions with the retirement fund except for the contributions to, benefits paid
and investments in shares of stocks in the listed entities under common control by the retirement fund.
Note 18 - Foreign currency denominated financial assets and liabilities
The Group’s foreign currency denominated financial assets and liabilities at December 31 are as
follows:
2013
USD
Current assets:
Cash
Trade receivables
Total current assets
Current liabilities:
Trade payables
Borrowings
Total current liabilities
Net foreign currency denominated assets
Closing exchange rate to Philippine Peso
Philippine Peso equivalent
3,073,874
2,535,346
5,609,220
(4,728,644)
(3,600,000)
(8,328,644)
(2,719,424)
44.40
(120,742,426)
2012
EUR
259,906
46,422
306,328
(20,429)
(20,429)
285,899
60.82
17,388,377
USD
3,225,327
2,424,911
5,650,238
(1,000,029)
(1,000,029)
4,650,209
41.05
190,891,079
EUR
87,358
24,168
111,526
(1,213)
(1,213)
110,313
54.53
6,015,368
Foreign exchange gain presented under other income (Note 15) in the consolidated statement of total
comprehensive income for the years ended December 31 consists of:
Realized foreign exchange gain
Unrealized foreign exchange gain (loss)
2013
(6,208,752)
1,382,700
(4,826,052)
2012
16,537,463
2,021,140
18,558,603
2011
14,501,607
(5,194,950)
9,306,657
Foreign exchange loss on borrowings amounting to P3,340,800 for the year ended December 31, 2013
(2012 - nil; 2011 - P7,799,079) is presented as part of finance cost in the statement of total
comprehensive income.
(46)
Note 19 - Taxation
Deferred income tax (DIT)
DIT assets (liabilities) at December 31 are as follows:
2013
To be recovered (settled) within 12 months:
Unrealized foreign exchange loss
Provision for unrecoverable input VAT
To be recovered (settled) after 12 months:
Retirement plan assets
Remeasurement gains on retirement benefit obligation
2012
(Restated)
(416,111)
-
(151,940)
1,331,856
3,733,938
(3,088,950)
228,877
2,656,210
(2,194,635)
1,641,491
The movement in DIT assets and liabilities, without taking into consideration the offsetting of balances
within the same tax jurisdiction, is as follows:
Provision for
unrecoverable
input VAT
At January 1, 2011
(Restated)
Charge to equity
Charge to profit or loss
At December 31, 2012
(Restated)
Charge to equity
Charge to profit or loss
At December 31, 2013
7,939,582
(6,607,726)
1,331,856
(1,331,856)
-
Provision for
impairment
of fixed asset
47,006
(47,006)
-
Net unrealized
foreign exchange
gain
Retirement
benefit asset
Remeasurement
Total
353,109
(505,049)
944,423
1,711,787
(1,685,018)
(509,617)
-
7,599,102
(509,617)
(5,447,994)
(151,940)
(264,171)
(416,111)
2,656,210
1,077,728
3,733,938
(2,194,635)
(894,315)
(3,088,950)
1,641,491
(894,315)
(518,299)
228,877
Income tax expense
On December 20, 2008, Revenue Regulations (RR) No. 16-2009 on the Optional Standard Deduction
(OSD) was published. The regulation prescribed the rules for the OSD application by corporations in
the computation of their final taxable income. For corporations, OSD shall be 40% based on gross
income; “cost of sales” and “cost of services” will be allowed to be deducted from gross sales.
For taxable period 2008, the maximum 40% deduction shall only cover the period beginning July 6,
2009. However, July 1, 2008 shall be considered as the start of the period when the 40% OSD may be
allowed.
On February 26, 2010, RR 2-2010 on the amendment of Section 6 and 7 of RR 16-2009 was published.
The regulation amended the other implications of the OSD particularly on the election to claim either
the OSD or the itemized deduction which must be signified on the first quarter and must be consistently
applied for all the succeeding quarterly returns and in the final income tax return for the taxable period.
The Parent Company availed of the itemized deductions and OSD for the purposes of income tax
calculation for the years ended December 31, 2013 and 2012, respectively.
Income tax expense pertains to the corporate income tax relating to the Group’s profit for the reporting
periods on its non-BOI registered activities (Note 1).
(47)
A reconciliation of income tax expense computed at the statutory income tax rate to the income tax
expense as reflected in the consolidated statement of total comprehensive income for the years ended
December 31 is as follows:
BOI registered
activity
(0%)
Tax base:
Net profit before tax
Statutory income tax at
respective income tax
rates
Unallowable interest
expense
Gross income from BOI
registered activity
under ITH
Availment of OSD
Change in tax rate
Interest income subjected to
final withholding tax
Income tax expense
2013
BOI registered
activity
(10%)
Total
87,894,947
65,248,927
237,825,112
390,968,986
26,368,484
6,524,893
71,347,534
104,240,911
18,980
4,838
15,496
39,314
(22,424,126)
(46,013)
3,917,325
(11,728)
6,518,003
Tax base:
Net profit before tax
Statutory income tax at respective income tax rates
Gross income from BOI registered activity under
ITH
Availment of OSD
Derecognition of DTA related to provision for
unrecoverable excess input VAT
Non-deductible expenses
Interest income subjected to final withholding tax
Change in tax rate
Income tax expense
2,296,011
(883,870)
(22,424,126)
2,296,011
(883,870)
(96,650)
72,678,521
(154,391)
83,113,849
2012 (Restated)
Non-BOI
registered
activity (30%)
Total
(3,064,654)
(919,396)
338,888,982
101,666,695
335,824,328
100,747,299
4,531,786
(4,043,907)
(19,740,635)
4,531,786
(23,784,542)
5,719,822
2,599,021
7,887,326
(270,714)
883,870
82,539,216
5,719,822
2,599,021
(270,714)
883,870
90,426,542
BOI registered
activity
(0%)
(48)
Non-BOI
registered
activity (30%)
2011 (Restated)
Non-BOI
registered
activity (30%)
Total
42,789,356
12,836,807
360,062,260
108,018,678
402,851,616
120,855,485
(24,951,592)
(1,466,491)
13,912,800
331,524
(17,915,792)
1,709,273
(360,191)
91,451,968
(24,951,592)
(19,382,283)
13,912,800
1,709,273
(360,191)
91,783,492
BOI registered
activity
(0%)
Tax base:
Net profit before tax
Statutory income tax at respective income tax rates
Non-deductible expenses under exempt and
special rates (ITH)
Availment of OSD
Non-deductible input VAT write off
Non-deductible expenses
Interest income subjected to final withholding tax
Income tax expense
Note 20 - Restatement
As discussed in Note 2.1, the Company has applied the amendments to PAS 19 beginning January 1,
2013. The impact of the adoption on the Company’s statement of financial position, statement of total
comprehensive income and statement of cash flows are as follows:
Statements of financial position
As at December 31, 2012
Non-current assets
Deferred income tax assets, net
Retirement plan asset
Total
Equity
Other comprehensive income
Remeasurement gain on retirement benefit
Retained earnings
Unappropriated
Beginning
Current
Total
As at January 1, 2012
Non-current assets
Deferred income tax assets, net
Retirement plan asset
Total
Equity
Other comprehensive income
Remeasurement loss on retirement benefit
Retained earnings
Unappropriated
Total
(49)
As previously
stated
Effect of
adoption of PAS
19
As restated
975,237
1,517,280
2,492,517
666,254
377,922
1,044,176
1,641,491
1,895,202
3,536,693
-
11,906,958
11,906,958
1,377,766,827
256,757,401
1,634,524,228
496,833
(11,359,615)
1,044,176
1,378,263,660
245,397,786
1,635,568,404
As previously
stated
Effect of
adoption of PAS
19
As restated
7,470,598
2,279,387
9,749,985
128,503
6,209,216
6,337,719
7,599,101
8,488,603
16,087,704
-
5,840,886
5,840,886
1,536,393,564
1,536,393,564
496,833
6,337,719
1,536,890,397
1,542,731,283
As at January 1, 2011
Equity
Other comprehensive income
Remeasurement loss on retirement benefit
Retained earnings
Unappropriated
Total
As previously
stated
Effect of
adoption of PAS
19
As restated
-
5,995,488
5,995,488
1,423,189,324
1,423,189,324
916,370
6,911,858
1,424,105,694
1,430,101,182
Effect of
adoption of PAS
19
As restated
Statements of total comprehensive income
For the year ended December 31, 2012
Cost of sales
As previously
stated
(3,404,730,919)
(9,848,749)
(3,414,579,668)
Selling and marketing expenses
(75,551,108)
(2,558,233)
(78,109,341)
Profit before income tax
348,231,310
Income tax expense
Deferred
Profit for the year
Other comprehensive income
Remeasurement losses on retirement benefit
Total comprehensive income for the year
Earnings per share
Basic and diluted
(50)
(6,495,361)
256,757,401
-
(12,406,982)
1,047,367
(11,359,615)
6,066,072
335,824,328
(5,447,994)
245,397,786
6,066,072
256,757,401
(5,293,543)
251,463,858
0.20
(0.01)
0.19
For the year ended December 31, 2011
Cost of sales
As previously
stated
Effect of
adoption of PAS
19
As restated
(4,557,949,614)
(428,051)
(4,558,377,665)
Selling and marketing expenses
(77,413,912)
(119,901)
(77,533,813)
Profit before income tax
403,399,568
(547,952)
402,851,616
Income tax expense
Deferred
Profit for the year
(17,820)
110,595
311,487,661
(419,537)
311,068,124
-
(154,602)
(154,602)
(574,139)
310,913,522
Other comprehensive income
Remeasurement gains on retirement benefit
Total comprehensive income
for the year
Earnings per share
Basic and diluted
128,415
311,487,661
0.24
-
0.24
Statements of cash flows
The adoption of PAS 19 has no impact to cash from operating, investing and financing activities in the
consolidated statements of cash flows as at December 31, 2012 and 2011.
Note 21 - Earnings per share
The calculation of earnings per share at December 31 follows:
Profit for the year
Weighted average number of common shares, end
Basic and diluted earnings per share
2013
307,855,137
1,294,969,392
0.24
2012
(Restated)
245,397,786
1,302,540,104
0.19
2011
(Restated)
311,068,124
1,321,889,472
0.24
The Group has no dilutive potential common shares. Therefore, the amount reported for basic and
diluted earnings per share is the same.
Note 22 - Segment information
22.1
Primary reporting - business segments
The Group’s operating businesses are organized and managed according to the nature of the products
marketed, which each segment, representing a strategic business unit, offers different products and
services to different markets.
(51)
The Group has organized its reporting structure based on the grouping of similar products and services
resulting in four main business segments as follows:
(i)
Powder coating
This segment is involved in the production and sale of powder coatings, which are protective materials
applied to metal surfaces through an electrostatic coating process.
(ii) Oleochemicals
This segment accounts for the oleochemical business of the Group.
Biodiesel (under the brand “Bioactiv”) accounts for the bulk of the oleochemical business of the Group.
Biodiesel is a general term for fatty acid methyl esters, a type of oleochemical derived from biological
sources and proven to possess chemical and technical properties that are similar to mineral based
diesel.
Other oleochemical products of the Group include glycerine and coconut methyl ester (CME)
derivatives, which are used mainly as surfactants or foaming agents for soaps and detergents, and are
sold principally in the export markets.
The Group has an oleo-chemical integrated processing facility which combines a coconut oil refining
plant, methyl ester plant, a fractionation plant, methanol rectification plant and a glycerine refining
plant. The CME it produces from coconut oil is not only applicable for bio-diesel products but also has a
number of downstream industrial applications that are in demand in the world market.
(iii) Resins
This segment is involved in production and sale of resin products which include unsaturated polyester,
polystyrene, and polymer dispersions or emulsions. These are all manufactured in a variety of
technical specifications to suit specific industry uses, end user applications and customer requirements.
(iv) Color dispersion
This segment is involved in the production of fully dispersed color pigments and color master batches
used in plastic films and tapes, moldings, wires and cables, and high-end fiber applications.
The following table presents the segment information provided to the ManCom about the Group’s
business segments for the years ended December 31:
2013
Total sales
Segment result
General corporate income
Finance costs
Income tax
expense
Profit for the year
(52)
Oleochemicals
Resins
2,052,843,607
1,577,442,650
Powder
coating
345,688,876
Color
dispersion
347,908,627
Total
4,323,883,760
113,352,728
17,408,934
(1,257,500)
104,263,825
(10,617,141)
(6,768,096)
94,378,700
13,624,761
(210,678)
66,084,566
921,313
(212,426)
378,079,819
21,337,867
(8,448,700)
(3,338,911)
126,165,251
(28,300,503)
58,578,085
(31,445,218)
76,347,565
(20,029,217)
46,764,236
(83,113,849)
307,855,137
2012 (Restated)
External sales
Segment result
General corporate income
Finance costs
Income tax expense
Profit for the year
2011 (Restated)
External sales
Segment result
General corporate income
Finance costs
Income tax expense
Profit for the year
Oleochemicals
Resins
Powder
coating
Color
dispersion
Total
1,629,190,663
1,619,892,067
335,898,987
289,957,704
3,874,939,421
(26,774,672)
12,042,833
(8,778,997)
(23,510,836)
157,547,063
14,441,594
(3,290,474)
(41,598,368)
127,099,815
89,941,179
17,278,365
(2,054,849)
(22,862,301)
82,302,394
76,538,270
155,019
(17,186,876)
59,506,413
297,251,840
43,917,811
(5,345,323)
(90,426,542)
245,397,786
Oleochemicals
Resins
Powder
coating
Color
dispersion
Total
2,176,088,576
1,771,159,869
838,879,907
317,936,076
5,104,064,428
46,020,242
12,340,891
(10,953,713)
47,407,420
151,556,752
7,578,256
(3,931,462)
(37,822,134)
117,381,412
83,817,236
14,543,593
(14,551,544)
(21,393,474)
62,415,811
105,477,922
(270)
(21,614,171)
83,863,481
386,872,152
34,462,740
(18,483,276)
(91,783,492)
311,068,124
Other segment information as at and for the years ended December 31 is as follows:
2013
Segment assets
Segment liabilities
Capital expenditures
Depreciation
Non-cash expenses other
than depreciation
2012 (Restated)
Segment assets
Segment liabilities
Capital expenditures
Depreciation
Non-cash expenses other
than depreciation
Oleochemicals
Resins
Powder
coating
Color dispersion
Total
3,178,314,789
1,309,374,252
433,365,583
265,744,445
5,186,799,069
477,442,150
22,154,939
76,364,969
348,854,008
5,639,705
12,148,922
85,792,101
16,203,577
8,761,921
70,549,176
6,345,983
2,327,761
982,637,435
50,344,204
99,603,573
218,827
6,490,109
36,662
36,966
6,783,564
Oleochemicals
Resins
Powder
coating
Color dispersion
Total
2,132,385,516
1,031,207,190
994,690,039
218,170,472
4,376,453,217
226,652,495
19,937,404
74,008,022
64,080,357
4,816,323
11,418,528
23,420,119
3,275,048
8,412,503
24,155,633
809,169
775,836
338,308,604
28,837,944
94,614,889
8,663,405
4,583,297
9,130,797
-
22,377,499
The difference between the segment assets and total consolidated assets presented in the consolidated
statement of financial position for the year ended December 31, 2013 amounting to P5,187,027,946
(2012 - P4,378,094,708) pertains to the DIT assets, net amounting to P228,877 (2012 - P1,641,491).
The amounts provided to the ManCom with respect to total assets, liabilities and profit and loss are
recognized and measured in a manner consistent with that of the financial statements. Segment assets
are allocated based on the operations of the segment and consist primarily of inventories, and property,
plant and equipment, net of related accumulated depreciation.
Capital expenditures comprise additions to property, plant and equipment (Note 8).
(53)
Non-cash expenses comprise of provisions for impairment of receivables, inventory obsolescence,
unrecoverable input VAT, impairment of assets, CWT written off and unrealized foreign exchange loss.
Secondary reporting - geographical segments
The Group is domiciled in the Philippines. The revenue from customers in the Philippines is
P3,407,141,476 (2012 - P3,111,789,446; 2011 - P4,082,596,222), and the total of revenue from
customers in other countries is P916,742,284 (2012 - P763,149,975; 2011 - P1,021,468,206).
(54)
SECOND SECTION
Second Section
Schedules
Supplementary Schedules
Remarks
A
Financial assets
Not Applicable
B
Amounts Receivable and Payable from Directors,
Officers, Employees, Related Parties, and Principal
Stockholders (Other than Related parties)
Schedule B
C
Amounts Receivable and Payable from Related Parties
which are eliminated during the consolidation of
financial statements
Schedule C
D
Intangible Assets - Other Assets
Not Applicable
E
Long-term Debt
Not Applicable
F
Indebtedness to Related Parties
Not Applicable
G
Guarantees of Securities of Other Issuers
Not Applicable
H
Capital Stock
Schedule H
Annex 68-C
Reconciliation of Parent Company’s Retained
Earnings Available for Dividend Declaration
Annex 68-C
Annex 68-H
A Map Showing the Relationships between and among
the Parent Company and its Ultimate Parent
Company, Middle Parent, Subsidiaries or Cosubsidiaries and Associates
Annex 68-H
SCHEDULE H
Chemrez Technologies, Inc. and Subsidiary
Capital Stock
December 31, 2013
Title of Issue
No. of shares
authorized
Number of
shares issued
Common shares
2,000,000,000
1,397,855,472
Treasury
shares
(95,958,000)
Number of
shares
outstanding
Number of shares
reserved for
options,
warrants,
conversion and
other rights
1,301,897,472
-
Number of shares issued to
Affiliates
Directors,
officers
and
employees
Others
834,446,732
3,880,889
463,569,851
SCHEDULE B
Chemrez Technologies, Inc. and Subsidiary
Amounts Receivable from Directors, Officers, Employees, Related Parties
and Principal Shareholders (Other than Related Parties)
December 31, 2013
(All amounts in Philippine Pesos)
Name of Related Party
Due from related parties
Officers and Employees
First in Colours, Incorporated
LBL Industries, Inc.
Oleo-Fats, Inc.
Due to related parties
D&L Polymer and Colours, Inc.
D&L Industries
Oleo-Fats, Inc.
FIC Marketing Co., Inc.
FIC Tankers Corporation
Aero-pack Industries, Inc.
Individual shareholders
Others
NET DUE TO RELATED PARTIES
Balance at
beginning of
period
Additions
5,845,826
1,618,935
772,573
8,237,334
1,375,529
22,366,688
32,783,371
31,482,458
88,008,046
(6,689,721)
(974,246)
(102,000)
(1,062,624)
(2,226)
(8,830,817)
(593,483)
(35,974,122)
(121,021,216)
(71,400,888)
(33,630,291)
(8,020,651)
(53,860,944)
(323,908,112)
(235,900,066)
Collections/
Payments
(4,032,039)
(22,540,405)
(32,783,364)
(32,255,031)
(91,610,839)
27,688,486
120,555,722
69,108,387
32,058,258
7,713,120
53,864,855
1,062,624
2,226
312,047,678
220,436,839
Total
Current
Balance at end
of period
3,189,316
1,445,218
7
4,634,541
3,189,316
1,445,218
7
4,634,541
3,189,316
1,445,218
7
4,634,541
8,285,636
7,155,215
2,292,501
1,572,033
1,281,777
98,089
20,685,251
(16,050,710)
8,285,636
7,155,215
2,292,501
1,572,033
1,281,777
98,089
20,685,251
(16,050,710)
8,285,636
7,155,215
2,292,501
1,572,033
1,281,777
98,089
20,685,251
(16,050,710)
SCHEDULE C
Chemrez Technologies, Inc. and Subsidiary
Amounts Receivable and Payable from Related parties which are eliminated
during consolidation of financial statements
December 31, 2013
(All amounts in Philippine Pesos)
Name of Related Party
Chemrez, Inc.
Due from related party
Due to related party
Balance at
beginning of
period
Additions
Collections/
Payments
Total
Current
Balance at
end of period
3,628,515
287,182
14,664,767
455,114,392
(17,419,710)
(455,401,574)
873,572
-
873,572
-
873,572
-
Annex 68-C
Chemrez Technologies, Inc. and Subsidiary
65 Industria Street
Bagumbayan, Quezon City
Reconciliation of Parent Company’s Retained Earnings Available for Dividend Declaration
For the year ended December 31, 2013
(All amounts in Philippine Peso)
Unappropriated retained earnings, January 1, 2013
Net income based on the face of the Parent’s separate
audited financial statements
Less: Non-actual/unrealized income net of tax
Equity in net income of associate/joint venture
Unrealized foreign exchange gain - net (except those
attributable to cash)
Gain on remeasurement of retirement benefit
Unrealized actuarial gain
Fair value adjustment (M2M gains)
Fair value adjustment of Investment Property resulting to
gain
Adjustment due to deviation from PFRS/GAAP-gain
Other unrealized gains or adjustments to the retained
earnings as a result of certain transactions
accounted for under the PFRS
Add: Non-actual losses
Depreciation on revaluation increment (after tax)
Adjustment due to deviation from PFRS/GAAP – loss
Loss on fair value adjustment of available-for sale
financial assets (after tax)
Profit actually earned/realized during the year
Add: Release of retained earnings appropriation
Less: Treasury shares
Stock dividends declared during the year
Cash dividends declared during the year
Unappropriated retained earnings, as adjusted,
December 31, 2013
1,256,793,104
321,277,052
629,856
-
629,856
(274,276,684)
(117,191,743)
321,906,908
(391,468,427)
1,187,231,585
Chemrez Technologies, Inc. and Subsidiary
A Map Showing the Relationships between and among the Company and its
Ultimate Parent Company, Middle Parent, Subsidiaries or Co-subsidiaries and Associates
December 31, 2013
Annex 68-H
APPENDIX 1-A
APPENDIX 2
MINUTES OF THE MEETING OF THE STOCKHOLDERS OF
CHEMREZ TECHNOTOGIES, INC.
HELD AT MANDALUYONG CITY ON JUNE 17, 2013 AT 9:00
AM
ATTENDANCE:
TOTAL NUMBER OF SHARES PRESENT/REPRESENTED:
ISSUED
AND OUTSTANDING (NET OF TREASURY
STOCK)
PERCENTAGE OF SHARES PRESENT /REPRESENTED
876,998,955
1
343,297,472
67.29%
PROCEEDINGS OF THE MEETING
I.
Mr. Filemon T. Berbo, Choirmon, colled the meeiing to order ond
theleofter presided. The Corporote Secretory, Aity. Arfhur R. Ponsoron
recorded lhe minutes thereof
II.
PROOF OF NOTICE
The Corporote Secretory certified thot notices of the meeting
were seni to oll stockholders of record of the Corporotion on Moy 24,
2013, the dote definitive copies of the Informotion Stotement were
sent out to oll stockholders. The notice of meeling wos olso publlshed
in the Monilo Bulletin on June 2,2013.
ITI.
DETERMINATION OF QUORUM
The Corporote Secretory certified thot bosed on the record of
ottendonce, siockholders represeniin g 87 6,99 8,9 55 shores or 67.297"
of ihe totol issued ond outstondlng copitol stock of the Corporolion
(net of treosury stock) were presenl, either in person or by proxy, ond
thot there wos o quorum to consider the business stoled in the
ogendo for the meeiing.
IV.
APPROVAT OF MINUTES
OI
PREVIOUS MEETINGS
On motion duly mode ond seconded, the
stockholders
opproved lhe minules of the onnuol stockholders' meeting held on
June 18,2012.
l
V.
APPROVAI, OF ANNUAI REPORT AND FINANCIAT STATEMENTS
Proceeding with lhe ogendo, Mr. Alvin D. Loo. Chief Finonciol
Officer ("CFO"), presented the Annuol Report to the Stockholders for
2012, including resulis of the Compony's operotions os reflected in
lhe Audited Finonciol Stolemenis os of December 31 ,2a12, ond the
Compony's performonce for the first quorter of 2013. Mr. Deon A.
Loo, Jr., Monoging Director presented o preview of the Compony's
plons for 2013.
2012 Performonce
o gross profit of P47O Million for 2012, which
wos oown oy 127" os compored to P546 Million in 201 l. Morgins in
The CFO reporled
201 2
to
however. improved in 2012
P51
'12"v")
os compored {o 201 1 {1 1q").
Revenue for 2012 is P3,825 Billion, down bv 24% as compored
04 Billion in 201 1. Seoment soles ore os follows:
OPERATION
Oleochem
Resin
Powder Cootinq
Color DisDersion
Segment Gross Profit
OPERAIION
Oleochem
Resin
Powder Cootinq
Color Dispersion
20r r
2012
42%
s3%
3s%
42%
9%
7%
is os
6%
6%
follows:
2012
12%
44%
.24%
2011
23%
37%
18%
20%
22%
Bolonce sheel is foirly heolthy. Cosh is
ol
P344 Million; Totol
Assets P4,378 Billion; Bonk Borrowings PlZ0 Million; Totol Liobilities P340
Million; ond Stockholders Equily P4,038 Billion. Roiios ore good while
returns is slightly lower os Relurn on Fquily for 2O12 is c,I 6.4%
compored Io 7.8% in 2O1 1 .
First
Quorler of 20'l2 Perlormonce
The CFO olso reported on the Compony's performonce for the
first quorter of 20'13, the highlights of which ore os foliows:
-
Net lncome is
PZO Million, 42%
down os compored to Pl20
Million in Jon-Morch 2012. Il wos exploined thot ihe net income
for the lst quorter of 2012 constituted olmosl holf of the net
income for the full yeor 2O12. lf ihe I'r quorter income for 2013
however, will be onnuolized, the net income for the full yeor
2013 will be higher lhon jhol of 2012.
-
Bolonce sheet remoins foirly heolihv. Totol Assets is
-
Currenl Rotio for Morch 2013 is 10.2 : I {9.4 : 1 in Morch 2Ol2}
ond Debt-to-Equity Rotio is 0.8 : l, some os in Morch 2012.
P4,408
Billion, Cosh P350 Million, Totol Liobiliiies P3l9 Million, Totol Equitv
P4,089 Billion.
Plon of Ooerotions for 201 3
The Monoging Director reported thot the brood strotegy of the
Co'npony is to d''ev"elop noturol ond plonl-derived productslhol ore
to
customer requiremenls. These ore speciolty ond
products
thot creole o blue oceon for the Compony.
higher-volue
customized
of
In relotlon thereto, the Componv coniinues to be on odvocote
Green Chemistry ond os port of its initiotives, it is replocing mony
products mode of solvents with plont-bosed olternolives, which ore
sofer to use ond will not horm the environment.
Further, the Compony is on octive odvocote of increosing the
biodiesel mondote trom 2% to 5% (B5l .
The Compony clso plons to complement the high-volue
coloronts business with 3D effecls point finishes which is colled
"
Espresso".
Finolly, the Compony hos developed Sovonel, o coconutbosed noturol soop for export, oll of which ore unique offerings.
Some quesiions ond clorificotions were oddressed. Thereofter,
on, motion duly,.mode ond seconded, the stockholders possed the
ro owno resotuTlon:
"RESOtVED, Thot
the 2012 Annuol Report
ond the Audiled Finonciol Slotements of
lhe
Corporotion os of December 31 ,2Ol2 included in the
Annuol Report be. os they ore. hereby opproved.'
\1.
RATIFICATION
Of
THE ACTS OF THE BOARD
AND MANAGEMENI
On motion duly mode ond seconded, the
opproved the following resolution:
"RESOLVED,
Thot
stockholders
oll octs of the Boord of
Directors ond Monogement from the dote of the lost
onnuol stockholdersr meeling held on June 18,2A12
to dote os well os the controcts ond tronsoctions
eniered into by the Corporotion for the some period,
oll os reflecled in the minules of the meetinos of the
Boord of Directors, the Annuol Report, dnd the
Audited Finonciol Stolements os of December 31.
2012 ore hereby opproved, rolified ond confirmed."
vII.
The Choirmon thereofler opened nominolions for directors io
serve for the term 2013-2014. The following were nominoted, ond on
proper molions duly seconded ond unonimously opproved, the
following were elected os Directors of the Corporotion to serve os
such until their successors shoH hove been elected ond quolified:
Mr. Leon L. Loo
Mr. .John L. Loo
Mr. Yin Yong L. Loo
Mr. Deon A. Loo, Jr.
Amb. Cesor B. Boutislo
Mr. Jose Fernondo B. Comus
Mr. Filemon T. Berbo, Jr.
Amb. Cesor B. Boufisto, Mr. Filemon T. Berbo. Jr.. ond Mr. Jose
Fernondo B. Comus were nominoled ond elecled os lndependent
Directors.
VIII. APPOINTMENT OF EXTERNAT AUDITORS
The Choirmon informed lhe stockholders thot the next item in
the ogendo wos the designotion of the Corporotion's externol
ouditors. Upon motion duly mode ond seconded, the followinq
resolution wos oooroved:
Thot lhe occounlino firm of lslo
Lipono & Co. is hereby desig-noied os the
Corporotion's exlernol ouditors for the yeor 2013"RESOLVED,
2014."
IX.
OIHER MATTERS
The Choirmon informed the siockholders thol ot the meetino of
thd Boord of Directors held immediolely before the
slockhold=ers'
meeting, the Boord opproved the declorotion of cosh dividends for
slockholders of record os of July 17 , 2013 os follows: Regulor cosh
dividend ot PhPO.O6 per shore ond o Speciol cosh dividendbf PhpO.O3
per shore, or o totol of PhP0.09 per shore poyoble on August 12,2013.
X.
ADJOURNMENT
There being no further business to tronsoct, the meeting wos,
on moiion duly mode ond seconded. odjourned.
A
R. PONSARAN
Corporote Secretory
ATTEST:
BERBA, JR.
Choirmo n
APPENDIX 3-A
APPENDIX 3-B
APPENDIX 3-C