TABLE OF CONTENTS

INTRODUCTION

CHAIRMANS REVIEW

DIRECTORS REVIEW

INDUSTRY ANALYSIS

CASH FLOW STATEMENT ANALYSIS

HORIZONTAL ANALYSIS

VERTICAL ANALYSIS
1.INTRODUCTION

Chevron Corporation in one of the biggest worldwide producer for premium lubricants. It has
branches in more than 180 countries around the globe. The headquartered is located in California-
USA. In Sri Lanka, the chevron Lubricants takes part in blending, manufacturing, importing,
distributing, and lubricant oils, greases, brake fluid, and other exceptional items. Furthermore they
offer lubricant solutions for industrial, commercial, and consumer applications. Havoline, Delo,
Caltex are the brands which are built up by the chevron oils. They likewise export their productions
to Bangladesh and Maldives. It is a public limited liability company which was fused in 1992 and
listed in the Colombo stock exchange. The provincial product houses are accessible in everywhere
throughout the country in,,

Western province (kadawatha, kochchikade,panadura,pannipitiya,Colombo 14,)

Southern, Sabaragamuwa ,Uva provinces (Galle, Rathnapura, Embilipitiya, Bandarawela)
Central, North western, North central provinces (kandy,Dambulla, Kurunegala,
Anuradhapura, Chilaw)
Eastern Province(Kattankuddy, Trincomalee, Ampara)
Northern province(Jaffna, Vavuniya)


2. CHAIRMANS REVIEW

According to the chairman of Chevron lubricant lanka PLC has showed a strong
financial performance throughout the five years which is considered to be a proud achievement. As
they have expected, in 2014 the industry showed little or no growth and domestic lubricant volumes
has come under pressure during the year due to longer drain intervals and increased competition. In
spite of these challenges, Chevron Lubricant Lanka was once again able to deliver a stellar
performance. Factors like softening of base oil prices during the latter part of the year, a stable
exchange rate, increased volumes from premium brands and threshold cost management has been
identified as the opportunities by the chairman which helped in increasing earning. The Company
overshoot the Rs.3 bn stamp to convey its best-ever financial performance beating even a year
years's achievement of net profit of Rs.2.7 bn in the midst of fluctuating economic conditions and
extraordinary competition in the industry, and Company could develop volumes in the retail front
of the residential market and general volumes in the retail markets led by Bangladesh. The
Company was all around set to gain by the favorable base oil prices because of the synergies
accumulated through procurement planning, sourcing and stock administration. Operating expenses
were streamlined since charging of the new mixing plant, while utilizing on operational cooperative
energies of co-locating the mixing plant and distribution center at Sapugaskanda.

3. DIRECTORS REVIEW

There is a prediction that the general improvements in coal and hydro power generation
infrastructure, point to the probability that the contribution of thermal power to the national grid
will continue to decline over the next couple of years, subsequently unfavorably affecting the oil
and lubricants industry in Sri Lanka in the coming years.An almost stagnant industry, combined
with heightening raw material costs duringthe years has challenged the company.

In anticipation of rising raw material prices, the company made the decision to pass on the cost
increases to customers in a bid to sustain profit margins.In line with the trend seen over the last
several years they have attributed to the trend giving the clients the advantage of amplified oil
deplete interims in the automobile sector and extended hours of operation in the industrial sector.

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The company successfully completed 13 years of incident-free operations during the period, which
places them at the forefront of the global Chevron network.
6. COMPANY ANALYSIS

Chevron lubricant plc has maintained their profit margins through increasing
operational efficiencies and also by process re- engineering cost managing. They also have
increased their profit in this year by accessing to the north and east areas and it has been a huge
benefit for the company to increase their profits.

When we consider about the year 2011 it was a milestone to the company because
they have earned the highest profit in their history and that is 2 billion. They were able to stabilize
their finance performances through sound management and also by making efficient decisions,
strong market efforts and cost management which can be considered as strength of the company.
These processes helped chevron lubricant to keep high performances in their financial statements.

The year of 2014/15 was a year that showed little or no growth in the industry.
During this year the domestic lubricant volume has reduced and came under pressure due to the
longer drain intervals and also due to the high competitiveness in the market. But still chevron
lubricants were able to perform well in the industry and despite all these challenges they were able
to be on the top of the line. The performances of the company increased well even though they face
to many challenges is due to the softening of the oil prices, stable exchange rate , increase volume
of premium brands and also due to the prudent cost. These factors benefited the company to
perform well in this year.

INCOME STATEMENT IN BRIEF

Revenue

The Company recorded a topline of Rs. 11.6 bn during the period under review in comparison to
Rs. 11.5 bn posted in 2014. However the Company was able to grow volumes in the domestic
market driven by the retail sales segment, which was noteworthy given industry growth of 1% and
decline of 5% in 2014 and 2013 respectively. Overall domestic volumes grew by 3% compared to
2014. The favorable movement in base oil prices allowed the Company to adroitly maneuver its
trade schemes and promotional campaigns to incentivize customers and consumers, thereby grow
volumes. The growth in volumes was further augmented by performance in both export markets
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 Bangladesh and Maldives through higher retail penetration and acquisition of new accounts by the
respective distributors. Exports to Bangladesh were consistent, resulting in a 13% year-on-year
volume growth, while export volumes from Maldives grew by 13% as well. However volumes
from marine lubricant sales and exports to related companies declined by 15% year-on-year. Total
export revenue grew by 3% in 2015 to reach Rs. 895 mn (2014: Rs. 872 mn),

Profit after Tax

During the year under review the Company recorded a profit after tax of Rs. 3,092 mn compared to
Rs. 2,747 mn in 2014, which translated to a growth of 13% YOY. The gross profit margin
augmented to 45% from 40% in 2014 stemming from focused pricing strategies vis--vis value-
selling, leveraging on strong brand equity, whilst capitalizing on softening base oil prices which
partly trended with global crude oil prices . The disequilibrium in the global base oil market owing
to demand-supply economics also contributed to lower base oil prices.

Operating profit grew by 16% in 2015 primarily due to the robust gross margin performance,
despite an increase in operational expenditure and a decline in other income compared to 2014.

Profit before tax increased to Rs.4,319 mn in 2015 from Rs. 3,700 mn in 2014.

Net finance income increased by 36% to Rs. 175 mn (2014: Rs.129 mn) as cash reserves
strengthened during the year owing to less capital expenditure commitments, whilst the yield on
short term investments remained relatively stable. Total comprehensive income for the year was
Rs.3,095 mn, which included a net other comprehensive income after tax of Rs.3 mn pertaining to
an actuarial gain on retirement benefit obligation.

Income Tax

Income Tax expense for the year was Rs.1,227 mn, which translates to an effective tax rate of 28%.
The increase in income tax largely correlates to the growth in profits before tax. However the
effective tax rate for 2015 was higher than the effective rate of 26% recorded in 2014, due to an
incremental provision necessitated for prior years of assessment. This provision was largely due to
the position taken by the Company in the past in computing taxes on supply of oils to ships at the
Colombo port as export sales , which should be treated as local sales as per a ruling ratified by the
Tax appeals commission.

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 Total Income Tax expense amounted to Rs.1,228 mn, which included a charge for other
comprehensive income during the year. Company also paid Rs. 847 mn as Super Gain Tax which
has been accounted as shown in the statement of changes in equity and disclosed under note 10 to
the accounts.

Distribution and Administration Expenses

Distribution expenses declined by 6% to Rs.502 mn from Rs.534 mn recorded in 2014. The decline
in distribution expenses was mainly due to cost rationalization with the culmination of the plant
relocation during year end 2014.

There were certain one-off expenditure such as rental and transportation in 2014 to facilitate
inventory build-up during the phase of decommissioning the old plant and the subsequent
relocation to the new plant. However there was increased expenditure on advertising and sales
promotion to support brand building and marketing communication initiatives. Administration
expenses amounted to Rs. 562 mn which was a 10% increase compared to Rs.511 mn recorded in
2014. The increase largely stemmed from inter-company service charges, and exchange rate effects.

BALANCE SHEET IN BRIEF

Total inventory declined by Rs. 438 mn, due to a reduction in both raw material and finished good
inventory. The raw material inventory declined by Rs.186 mn due to timing effects of imports and
the softening of base oil prices. Finished goods inventory also sharply declined by Rs.252 mn to
Rs.342 mn in 2015 reflecting concentrated efforts towards lean inventory management practices,
whilst the comparative period was burdened by inventory that was intentionally built-up to
facilitate the smooth transition to the new plant.

Trade Receivables declined by Rs.13 mn despite a higher proportion of revenue being recorded
during the last two months of 2015 compared to 2014. As a result the days sales outstanding (DSO)
improved by a day to close at 33 days (34 days in 2014). The improvement in DSO is a testament to
the Companys collection efficiency, sound credit control policies and the commitment towards
increased efficiency in managing its working capital cycle.

The company maintained a healthy liquidity position by recording a current ratio of 2.3 (2014: 3.9)
and a quick asset ratio of 1.7 in 2014 (2014: 2.3) to meet working capital requirements. The decline
in current ratio and quick asset ratio over 2014 stemmed from the increase in trade and other
payables which included an interim dividend payable and an increase in current income tax
liabilities for 2015.

7. CASH-FLOW STATEMENT ANALYSIS

Net cash generated from operating activities increased to Rs. 3.0 bn compared to Rs. 2.6 bn in
2014, despite having paid Rs. 847 mn during the year on account of Super Gain Tax for the year of
assessment 2013/14. The Company generated a free cash flow of Rs. 3.1 bn

(2014: Rs.1.7 bn) as capital expenditure in particular eased post-completion of the new blending
plant and warehouse facility in 2014.

In 2015, Chevron Lubricants Lanka PLC increased its cash reserves by 81.25%, or 1.05bn. The
company earned 3.03bn from its operations for a Cash Flow Margin of 26.19%. In addition the

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 company generated 59.38m cash from investing, though they paid out 2.04bn more in financing
than they received.

Dividend per share amounted to Rs.23 which translates to a dividend yield of 6.7% based on the
share price recorded as at end December 2015 (2014: 5%), whilst capital growth contracted via fall
in market share price amounting to -13.9% (2014: 49%) resulting in an adverse Total Shareholder
Return of -7.2% in 2015 (2014: 54%).

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8. CONCLUSION / RECOMMENDATIONS

Basically a company prepares financial statements to meet its financial reporting obligations and to
assist in strategic decision-making. As well as financial statements are the major key attribute to
present their financial situation to stock holders, creditors and the general public and help to
communicate what financial decisions have been made and how they affect the bottom line.

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 When we consider aboutChevlon Lubricants Lanka PLC, during its existence, the Company has
evolved into a specialized manufacturer of the quality lubricants in the country, while
strengtheneing the leadership in market being the only plant with BS EN ISO 9001:2008 certificate

Most of ratios that analyzes above are almost closed to the industrial benchmarks or averages
(ie. Current ratio is arround 2:1 and Quick ratio is around 1:1).
This is a good approach to attract investors and shareholders towards the company
According to above analyzes we can say that this company is in good financial position. So this
fact is very much needed to get approvements from bankers for launching loans, and also to
invest without financial risks.
There was good improvements in cash flow activities thoughout the period. Here they well
managed their all operating, investing and financing activities.
Return on Equity also well maintained, So we can say that they use their equity iffectivey to get
more income.


*Finally By taking over all overview on this Financial statement analysis Chevron
lubricants Lanka is on a good financial platform with almost non financial risks and performing
financially well. Also they well managed their cash inflows and outflows.

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