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Leaders and teams
Ensuring that our strategic business units had leaders and teams in place capable of delivering on the plans coupled with rigorous review of performance was key to delivery.

It is my pleasure to report that CIC Holdings has delivered a profit of Rs.1,040.84 Mn for the year 2014/15 as the result of a carefully orchestrated turnaround in a year that went to plan. The story was about getting back to our core strengths after the painful restructuring in the previous year. Top line growth of 3%, asset growth of 2% and a return to profitability demonstrate our commitment to our corporate vision, efficiency of our business processes,strength of our governance structure and most importantly efforts of our staff.

Governance
The Board implemented rigorous performance evaluation systems and strengthened governance structures with a strong focus on the results achieved as well as how it was achieved, ensuring that process changes agreed were delivered to ensure efficient value creation. Reconstitution of the Board in 2013/14 brought in a collective wealth of experience in the corporate sector of the country with diverse perspectives enhancing the objectivity in review of business processes. Ensuring that our strategic business units had leaders and teams in place capable of delivering on the plans coupled with rigorous review of performance was key to delivery. The Chairman played a key role in bringing about greater understanding between the Board and the management which ensured that areas of concern were addressed quickly. High levels of stakeholder engagement in our turnaround resulted in valuable feedback, positive encouragement and support during a period of fast paced change.

Performance
The main objective of restructuring was about getting back to our core competencies in 6 industries selected for their growth potential, namely Pharmaceuticals, Dairy, Seeds, Rice, Industrial Chemicals and Strategic Initiaitives.

The Consumer and Pharmaceuticals segment has turned around focusing on a selective growth strategy. The Pharmaceuticals segment focused on surgical products in niche areas introducing cutting edge technology in an ethical manner by educating the medical profession of potential applications of the product range. Whilst the pharmaceuticals division consolidated on its diverse portfolio of Pharma Agencies, the consumer division turned into profitability with careful management of the distributor system and market expansion.

Link Natural has taken on leading fast moving consumer goods giants with Link Sudantha and has made significant inroads in capturing market share. Samahan is a trusted household name with Sri Lankans all over the world who have opened new avenues in key migrant markets. The Link Naturals distribution network is ranked among the top ten networks in the country and this company is well poised for growth in a sector that has high potential. The company continues to innovate and has launched a further improved, new product range catering to the needs of higher income segments of the market.

Consolidation of Agriculture involved taking a strategic view at where our strengths lie and ensuring that we stayed in businesses that continued to create value for our stakeholders. Consequently, we have focussed on dairy, grain, rice and seeds. Dairy and grain dovetails into our animal feeds presenting opportunities for cross sell and growth. Rice exports have been a success with CIC Red Basmathi which has health benefits being a major success. CIC has been the leading producer of seed paddy in the country. CIC constantly innovates to produce new varieties of rice which are appealing to the high end local and overseas consumers. Our focus on land productivity ensures that CIC gets some of the highest yields in rice which are around three times the national average through sustainable means, managing waste to nourish the soil as an integral part of farming.

The performance of the Construction industry segment was below expectations due to an extremely challenging, environment which curtailed top line growth but the segment has shown signs of improvement in the last quarter. Cisco Packaging had a good year as consumer demand remained strong delivering growth in top line and profitability. Industrial raw materials segment has also performed according to plan supported by strong growth in the industry sector turning in the planned profit.



This has also been a period of significant change for our staff and maintaining morale was critical to implementing enduring change. Many of our staff are experts in their fields making retention and on boarding of key value creators a high priority. Communicating change, inspiring and motivating our team has paved the way for a stronger company.
Delivering Expectations of Stakeholders
CIC has a large number of stakeholders and we are committed to delivering their expectations as many rely on CIC to sustain their quality of life.

We have continued to maintain our promise of quality to our consumers who include our products in their regular shopping lists. CIC is the largest producer of fruits and curd and one of the leading players in eggs and chicken. We practice the farm to fork concept in order to guarantee traceability. Key B2B customers have entered in to special programmes with CIC to source chicken and vegetables for their own production because of this promise of quality which relies on a robust system of farmer education and quality control audits of agricultural practices.

Over 20,000 farmers and 2,000 distributors who are located throughout the island forming vital links in our supply chain. Our projects on farmer education have continued unabated and supported the education of over 350 children annually. We carry out various initiatives to encourage youth into farming through education and other social programs.

Our shareholders and bankers who provide capital have been supportive throughout the period of restructuring. We are sincerely appreciative of their understanding and have delivered on our commitments made to our bankers and our shareholders this year achieving the turnaround in performance within the agreed timeframes.
Way Forward
Sri Lanka’s growth of 7.4% and in particular, the increasing contribution to GDP from the provinces, provides a sound platform for growth. Improvement of the country’s infrastructure, particularly the road network, plays a key role in connecting farmers to markets and also enables us to expand distribution chains reaching every village. Agriculture sector’s share of GDP reduced in 2014 to 10.1% turning in a disappointing performance largely attributable to adverse weather conditions. However, Sri Lanka’s self-sufficiency in rice and increasing harvest of vegetables is encouraging as the lustre of export crops dim due to declining prices in global commodity markets.

Government will continue to be a key player in the sector and is also the policy maker which may impact potential entrants. CIC has been a key player in this segment and has proven its ability to compete effectively and profitably, contributing to the country’s food security due to our expertise and experience. It is also noteworthy that policy decisions have a considerable impact on investment decisions such as regulating milk prices and price control of yoghurts.

The country’s progress towards middle income status supports the growth of our consumer segments as non-food expenditure increases with the increased disposable income. Strong distribution networks and a portfolio of brands that are trusted enhance CIC’s competitive positioning in this lucrative segment.

The Industrial Raw Materials, Packaging Materials and Construction segments will benefit from the positive growth observed in key export markets and the growth of the industry segment. Lower oil prices are also expected to boost industry in oil importing countries such as Sri Lanka and this is also expected to support the growth of this business segment.

We are encouraged by the results we have achieved but understand that there is no room for complacency. New opportunities in an environment that is increasingly more favourable to Sri Lanka must be seized and realised without delay. CIC Group continues to focus on innovation, product development, market development and technology to drive growth. Our grounding in sustainability principles facilitates efficient resource allocation in delivering value to our stakeholders.

Acknowledgements
In a year of unprecedented challenge for CIC, having a strong Board that provides encouragement balanced with a realistic analysis of the ground situation is a solid foundation for driving performance. I wish to thank especially the Chairman for the role he played in this crucial year and the Board of Directors for sharing their industry insights, expertise and business acumen to develop appropriate strategies and ensure that we stayed on track. Our Bankers who have supported the group through our transformation have my sincere respect for continuing to provide the umbrella during the rains. My thanks to the team who have been the implementers of our new corporate architecture and transformation, for delivering the results presented in this report.

Samantha Ranatunga
Managing Director/CEO
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