Glass in Rs. 500 mln expansion
By a Staff reporter
Ceylon Glass Company (CGC) plans to invest in new technology
to augment its product range and launch an export drive to take advantage
of its skills in catering to niche markets.
emerging from the furnace.
company, which has a near monopoly of the market for glass bottles
and containers, will spend Rs. 500 million to modernise its plant
and put up its own power station, said Niraj Tipre, executive director
of Ceylon Glass.
"This investment has been on hold for the last one year because
of the downturn in the economy. When the going is tough, prudent
financial management is required," he said in an interview.
"Now, we're going to phase out the investment, starting in
October. It will increase our production capacity by 25 percent."
The firm, which
employs 426 people and is owned by India's Gujarat Glass, makes
glass packaging (bottles and jars) for liquor, pharmaceuticals,
food, beverages, perfumes and cosmetics.
company's raw material consists of broken bottles, which it
recycles. This helps to conserve energy and protect the environment.
It requires less energy to melt bottles than silica sand,
calcite and dolomite.
Glass is a member of Piramal Enterprises, a big business organisation
in the sub-continent with a turnover of Rs. 30 billion.
the planned investment would be spent on re-lining the furnace,
an incremental capacity addition, the modernisation of all downstream
equipment to give more flexibility in operations before it enters
export markets, and on a two-megawatt power plant.
is old," Tipre said. "The re-lining of the furnace would
give us the flexibility to cater to a changing product mix. We will
also invest in new technology that will help us make 'boutique'
coloured bottles without changing the glass colour in the furnace."
CGC has over 95 percent of the local market, there being no
other manufacturers of glass containers, and only very small quantities
virtual monopoly, the company which was founded in 1956, was in
the red for the financial year ending March 1999 when it was acquired
by Gujarat Glass.
freight critical cost elements
The glass industry is divided into companies that make
sheet glass (also known as float glass) and glass for television
picture tubes, and glass containers used as packaging material
Glass makes two types of glass containers - amber coloured
glassware for products that are sensitive to sunlight such
as pharmaceuticals and flint (transparent) glass.
significant features of the industry are that it is an extremely
capital-intensive and energy-intensive industry that is also
initial capital outlay is required to build the furnace required
to make glass, huge amounts of power are needed to power the
plant, and freight costs are high given the high volume, low-value
nature of the product.
is a continuous process - we work round the clock," said
Ceylon Glass Director NirajTipre.
company's turnover last year was Rs. 780 million on a gross
asset base of Rs. 1.6 billion.
profit of Rs. 90 million "looks good" but in relation
to the return on capital, the firm "still has a long
way to go," Tipre said.
today we carry an accumulated book loss of Rs. 42 million,"
said Tipre. "So if we fix prices arbitrarily, it would put
us in a bigger mess."
made a profit after tax of Rs. 90 million for the year ended March
31 2002, up by 38 percent, on a turnover of Rs. 779 million.
that we are the single source of glass packaging material, it puts
a lot of responsibility on us," said Tipre.
This was because
of certain distinct characteristics of the Sri Lankan market. Its
small size makes it difficult for the firm to maximise the economies
of scale. Ceylon Glass has an installed capacity of only 100 tonnes
or 200,000 bottles a day. Its parent, Gujarat Glass, can make six
million bottles a day. By comparison, Thailand, with a population
of around 60 million, has two big suppliers with an individual installed
capacity of 1,800 tonnes a day and three suppliers with a total
installed capacity of 700 tonnes a day.
wide range of products - 120 different shapes and sizes of containers
- creates its own problems. Very few of the individual products
have a large enough volume to give the required efficiencies of
The firm also
has continuous problems with energy given the power cuts and price
hikes caused by the shortage of installed generation capacity. "Our
cost of energy has virtually doubled in the last two years,"
said Tipre. "We're spending Rs. 100 million more on energy
alone. " Furthermore, the cost of manpower here is also quite
Given these difficulties, why invest in a plant here? Tipre
points to what he calls the "extremely freight sensitive"
nature of the business. The cost of shipping glass containers -
one of the lowest value, high volume products - is very high. "For
example, our parent company is based in Gujarat but we can't compete
in New Delhi because of the freight costs," Tipre said. If
a client here wants a product available for filling on a particular
day, Gujarat Glass would not be able to meet the delivery schedule,
even if there was a very efficient port through which to make shipments.
need to be here if we want to cater to this market," Tipre
said. "We can't supply from India." Another reason to
invest in the island was that the product mix of Ceylon Glass is
complementary to that of Gujarat Glass, which makes smaller bottles.
the most important reason for the investment here was the desire
to penetrate export markets. "Sri Lanka's location is ideal
for exports," Tipre said.
odds are heavily stacked against exports because of the freight
costs, Ceylon Glass has developed a set of skills by operating in
a small market that give it certain advantages. "Over the years,
we specialised in small quantity production," said Tipre. A
"huge amount of downtime" is required in changing from
one product to another - the firm typically loses about one shift
of production. By contrast, production runs in India are at least
for a million bottles.
is eyeing export markets in Australia and South Africa, hoping to
exploit niche markets for glass products, which command higher prices.
"They have very large glass manufacturers," Tipre said.
"So customers with smaller requirements are starved."
The export drive is expected to be launched next April once
the seasonal rush, between November and March when the bulk of orders
is generated, is over. Before that, the company has to go for a
shut down of its furnace and is under pressure to fulfil outstanding
Lanka, we've developed the expertise to make bottles with smaller
production runs to serve niche markets where international clients
pay higher prices," Tipre said.
So far, the
company has hardly made any exports, because of the need to supply
the local market. But once the investment in the new plant comes
on stream, the incremental increase in capacity would enable it
to meet export orders.
have had "disastrous consequences" on the company's production.
Even a trip disrupts the entire production process. While the support
and co-operation of the Ceylon Electricity Board has ensured the
smooth running of the furnace, Tipre said the company was setting
up its own captive power plant given the power crisis in Sri Lanka.
Having its own power plant ensures a continuous availability of
power although not at lower cost. The company has just set up a
design and development centre with professional glassware designers
whose job is to develop new products, particularly for export.
CGC is also looking at 'decoration avenues' such as frosting,
colouring and printing to further add value to its products. The
new products are seen as a significant revenue stream in the future.
to create some amount of excitement and difference to make the market
grow," said Tipre.
for the immediate future is "tough", Tipre said. He described
last year's 10 percent fall in the market as a "huge worry".
The market has not grown in the last six months but there were positive
signals coming from the peace process, the revival of tourism and
the opening up of Jaffna, which is expected to improve sales.
putting our faith in the economy, making this huge investment, in
the hope that the market would show positive signs of growth,"
to take risks in business," he added. "This is a long-term
business. Success and risk are different sides of the same coin.
If you try to play very safe you'll never make money."
markets and the Banking Act
Nominations before August 14 The Sunday Times Business Club
invites nominations from among its membership for the new executive
committee of the TBC which was re-launched last month. The club
will have a nine-member committee inclusive of a president and vice
president while the secretary of the club would be a nominee of
the Sunday Times.
should be sent to Club Secretary Ms Devi at 304179 or 075-345163
on or before Wednesday, August 14.
CSE to offer diverse products
The Colombo Stock Exchange (CSE) will seek to re-position
itself from a small illiquid equity-based exchange to being an exchange
offering diverse products, its chairman Ajit Gunewardene has said.
In a bid to
internationalise the operations of the exchange and promote strategic
alliances, the CSE will pursue opportunities to promote cross trading
and cross listing of securities with other markets, he said in the
CSE's annual report.
will help the CSE to position itself as an international exchange
and overcome the limitations of size and liquidity," he said.
should treat capital market development as an objective as equally
important as raising revenue and increasing productivity when considering
the privatisation of state-owned enterprises, Gunewardene said.
It was inevitable
that liberalisation and globalisation would pose threats, especially
to a small and illiquid market such as the Colombo bourse, he said.
reaction when faced with such a threat is to seek protection in
laws and regulations, he added. In the context of financial markets
such protection could work to the detriment of the industry and
economy cannot afford the luxury of inefficiency created by protection
afforded to financial markets," he said.
The CSE has
asked the government to consider relaxing foreign exchange control
restrictions and enable local companies that can borrow in foreign
currency to list foreign currency denominated securities in the
of this principle will enable foreign companies to list foreign
exchange denominated securities in the CSE," Gunewardene said.
regulations that prevent local companies accessing the capital market
to raise foreign currency denominated securities while being able
to borrow in foreign currency or list in international markets create
an imbalance which is detrimental to the development of the local
capital market, he said.
Waves Logistics wins UK award
Logistics (UK) Ltd, (NWL-UK), one of the UK logistics companies
of the Nippon Yusen Kaisha (NYK) group, has been named the Logistic
Company of the Year 2002 at the Motor Transport Awards 2002 in London.
ceremony is sponsored by the U.K. transport business newspaper,
'Motor Transport'. The most outstanding performers from among companies
of the logistics and transport equipment industries are selected
from a total of 17 categories.
NWL - UK this
time entered the competition for the first time; therefore its recognition
was significant in that a first-time candidate won the award. NYK
Line (Europe) Chairman Minoru Sato, Managing Director Malcolm Wilson
and Rohan Morris, both of NWL - UK were present at the ceremony,
representing the NYK group. The award winner intends to affix a
"Logistics Company of the Year 2002" logo on all its trucks
for one year.
NWL-UK is represented
in Sri Lanka by New Wave and Kusuhara Colombo Ltd of the Maritime
Holdings Group of Hayleys.
Bank maintains steady growth
The Commercial Bank group representing
the bank and its subsidiaries and associate companies has declared
a post tax profit of Rs. 651.8 million, an increase of Rs. 91.3
million representing a growth of 16.30 percent for the first half
The group recorded
a pre-tax profit of Rs. 835.375 million for the period, representing
an increase of Rs. 57 million, a growth of 7.33 percent over the
corresponding period last year. The bank said this profit growth
was achieved despite a considerable drop (22.88 percent) in exchange
profits due largely to the slower depreciation of the Rupee against
the US Dollar in comparison with the steep depreciation experienced
in the corresponding period last year, following the free-floating
of the currency in January 2001.
Bank's Deputy General Manager (Finance and Planning) Ranjith Samaranayake
said the bank has been able to improve profit levels due to many
factors. It was able to maintain its growth momentum in business
volumes with the growth of 20.42 percent in deposits and 18.46 percent
in net advances over the corresponding period last year. The higher
growth in deposits over advances generated excess liquidity, which
was gainfully invested by the bank in government securities and
inter-bank money market, he said. The bank reported a post tax profit
of Rs. 586.194 million, up Rs. 69 million and a gross income of
Rs. 3,860 million (Rs. 3.86 billion) for the period under review.
against market manipulators
and Exchange Commission (SEC), the capital markets watchdog, has
compounded offences against 12 people connected to four cases that
were investigated by the Investigations and Market Monitoring Division.
The SEC's annual
report said the offences were compounded, or settled out of court,
under Section 51A of the SEC Act, which allows it to compound offences
for a sum of money not exceeding one-third of the maximum fine imposable
for such offence.
Under the SEC
Act anyone found guilty of an offence shall be liable, on conviction
after summary trial by a Magistrate, to a maximum jail term of five
years or to a maximum fine of Rs. 10 million or to both imprisonment
and a fine.
Division and the Market Monitoring Division were integrated last
year. The new division carried out about 50 preliminary inquiries
into possible abuses in the stock market and 30 investigations during
the year, of which fifteen were completed. The SEC did not institute
any legal proceedings against people who were investigated for stock
market abuses last year.
In the action
against Kotagala Plantations, where the SEC instituted proceedings
in 1997 against Kotagala and its directors for failing to comply
with the continuing disclosure requirements in the SEC rules, the
case was compounded on a request made by the accused with Kotagala
Plantations paying a sum of Rs 3.3 million and each director making
a payment of Rs. 80,000.
case, the SEC filed charges against Magpek Exports and its directors
for not disclosing certain material information in its annual report
as required by the SEC rules.
three non-executive directors, Tennyson Rodrigo, Deemathi de Silva
and Piyasiri Ratnayake were compounded at their request on payment
of Rs. 500,000 each.
The trial against
the remaining defendants, the executive directors, whose request
to compound the charges was refused by the SEC, is pending.
that was compounded was a probe into share price manipulation.
An SEC investigation
into significant increases in the share prices of certain listed
companies in the latter part of December 1998 revealed that two
fund managers, Gihan Rajapakse and Vajira Premawardena, were responsible
for making the investment decisions to buy these shares for National
Development Bank and CTC Eagle whose securities accounts were managed
by Eagle NDB.
revealed that the purchases were manipulative in nature and resulted
in a significant increase in the share prices of the companies,"
the SEC annual report said.
The SEC filed
charges against these two fund managers in January 2000 and the
case was pending as at December 31, 2001.
investigation that was concluded was into certain trades in respect
of Commercial Bank shares, which suddenly fell more than 12 percent
in a day from Rs. 185 to Rs. 162.
revealed that Rohan Fernando, a director of CT Smith Stock Brokers,
had executed a sell order of 1,375,000 shares of Commercial Bank
at a pre-determined price of Rs. 162 per share and that, in order
to facilitate this transaction, the broker had executed another
sell order at Rs. 170 and brought down the market price of Commercial
Bank shares from Rs. 185 to Rs. 170.
The SEC filed
charges against Fernando for violating rule 19 of the SEC rules,
which covers market manipulation, and the case was compounded for
a sum of Rs. 200,000 on a request by Fernando and the charges were
The SEC investigation
into the business affairs of Horana Plantations Ltd (HPL) was also
compounded. The inquiry was launched on information that big sums
of money had been transferred directly out of HPL to Uni Walker
Ltd, an unlisted subsidiary.
Wimalasekara refused a SEC request for information and he was charged
with non-compliance with Section 45 of the SEC Act. The case was
compounded for a sum of Rs. 3 million at Wimalasekara's request
and the charges withdrawn.
In all cases
except one where the SEC has compounded offences, the fines imposed
have been more than the unethical gain made by the accused, SEC
The SEC decides
whether or not to compound offences after taking into consideration
the magnitude of the offence and the unethical gains made.
The SEC compounds
cases, on requests made by the accused, largely because of the inefficiencies
of the legal system where cases can drag on for years, officials
awards on August 16
The National Chamber of Exporters of Sri Lanka (NCE) will
be celebrating its 10th "Year of Export Excellence" Awards
on August 16 at the Colombo Hilton.
are for the members of the NCE and recognises them for their commitment
and contribution to the nation, NCE founder chairman Patrick Amarasinghe
told a press conference.
Juergen Elias will be chief guest at the event. Past presentation
of awards have been an outstanding success prompting the group's
members to improve the performance year on year, NCE Senior Vice
President Kingsley Bernard said.
In a bid to
improve the awards scheme by eliminating discrepancies, the awards
committee had called for applications covering six important sectors:
traditional agriculture, non-traditional agriculture, value-added
tea, industry, gem and jewellery and service providers to exporters.
This year NCE
will be presenting 74 awards for extra large, large, medium and
small categories of business.
sponsoring the NCE awards for the seventh successive year. (HR)