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New owner for Wayamba Plantations Willem L. Bogtstra,
managing director of the Malwatte Valley and Wayamba Plantations
companies, together with his Dutch associates, has acquired a controlling
interest in Wayamba Plantations Ltd. A new holding
company called Bogtstra Gerlach Ltd is being set up to control the
shareholdings in the plantations firm after Bogtstra and his Dutch
partners successfully negotiated a management buy out of a 44 percent
stake in Wayamba Plantations held by the S.A. Silva Silvermill Group,
whose main business is exporting desiccated coconut. Bogtstra told
The Sunday Times FT that he was now in control of the Boards of
both Malwatte Valley and Wayamba and intends to slash the "crippling"
management fees charged by Wayamba to manage Malwatte Valley. Shareholders have long complained of the excessive management fees charged by the firms running the regional plantations companies which are now being reduced under foreign aid donor pressure in order to get more access to cheap funds. Malwatte Valley Plantations, which has 20 tea and seven rubber estates, incurred a loss of almost Rs. 30 million in the year ended March 31, 2002, from an operating profit of Rs. 127 million the year before, its first loss since privatisation. Bogtstra attributed the loss largely to the high management fee, although drought and a wage hike contributed to the downturn. "One of
the main reasons for the losses at Malwatte Valley was the very
high management fee based on a percentage of turnover irrespective
of profit or loss," he said. "The government
contract is now terminated. We plan to reduce the management fee
to much better levels in April to give all stakeholders a very fair
return on their investment." Minority shareholders
have complained that the loss was too high and that the Malwatte
management should have taken adequate safeguards to minimise the
ill-effects of the anticipated cyclical drought on the crop. They have also
complained that the company had not made enough investments to upgrade
black tea production by modernising factories and getting ISO management
quality certification, and to adopt better agricultural practices
and improve worker welfare. Bogtstra described
the criticism as a "lot of ballyhoo" and said: "You
can't do 15,000 acres overnight. We're building up soil, mulching,
and planting shade trees. The drought is a phenomenon that happens
in a cycle - last year was a bad year." Three factories
were going in for ISO standard certification, Bogtstra said, but
added: "ISO is not going to get you five cents more for your
tea. It's just a label." The new holding company, Bogtstra
Gerlach, together with Bogtstra's own sizeable stake, now controls
56 percent of Wayamba which in turn owns 56 percent of Malwatte
Valley. Wayamba Plantations
also manages Chilaw Plantations Ltd, which owns 5,000 acres of high
yielding coconut plantations including the famous Palugaswewa Estate
in Chilaw, formerly owned by A. Baur and Co Ltd. “Wayamba
Plantations is therefore the only plantation company to have a large
and enviable interest in all three major crops, tea, rubber and
coconut, and will be an attractive investment when it applies for
a public listing in the Colombo Stock Exchange towards the end of
the year once it has been suitably restructured,” Bogtstra
said. The Dutch family
Gerlach has long had interests in agribusiness and runs HVA, a large
Dutch agriculture firm. Bogtstra said his father’s firm had
been the HVA agent here. One of the
HVA directors, Claudia Gerlach, is managing director of Dutch operations
of the airfreight firm UTI Worldwide. “The idea
of taking over Wayamba was to reduce the management fee,” Bogtstra
said. “It will
be based on profit before interest, depreciation and taxes. So if
there’s no profit there’ll be no management fee.” The existing
management fee is calculated at 10 percent of operating profit,
five percent of turnover and five percent of inputs plus Rs. 2.50
per kg of bought crop (made tea) and Rs. 1.50 per kg of bought latex,
12.5 percent of the GST and 6.5 percent of NSL. Bogtstra said
Malwatte Valley lost 1.6 million kg of tea owing to the four-month
drought, taking some Rs. 200 million off the firm’s bottom
line. “Then
we were hit with a wage increase which cost Rs. 40 million a year
and have had to pay crippling management fees of Rs. 100 million
on average in recent years.” Malwatte Valley
was thinking of making value-added products to get better prices. Investors eye new iron ore deposit Foreign investors have shown an interest in developing a new sizable iron ore (magnetite) deposit in Wellawaya found by geologists of the Peradeniya University, which holds the prospect of developing a new iron industry in the island.
The deposit,
found on a hillock close to the Pelawatte sugar plantation, has
a purity that exceeds 90 percent and is estimated to be about 90
million tonnes in size. The reserve is estimated to be worth about
$2.5 - 3 billion based on the current market value of iron of around
$50 a tonne. "We can
start an iron industry if funding is available," said Dr. Atula
Senaratne, one of the team of scientists who found the deposit during
a field trip undertaken as part of the department's new exploration
programme. He declined to identify the foreign investors saying that it was too premature. An investment of about a billion dollars would be required for iron extraction. However, Dr.
Senaratne said that for an investment of about $200 million it would
be possible to begin an industry by adding value to the raw material
by crushing and making reasonably-sized powder which can be exported. "Only
crushing and exporting of raw material can be done immediately,"
he said. "But we prefer an industry with extraction because
we import iron. If we can extract iron we can supply the local demand." The latest
iron ore deposit is in several bands sandwiched between ordinary
rock on the surface and can be exploited without too much difficulty
by the open quarry method, he said. Deposits found previously were not economically feasible to extract with the present techniques. Deposits like the one at Panirendawa, south of Chilaw, is 30 metres below ground while others at Seruwila are mixed with unwanted rocks. "If we can extract iron we can make iron billets which are used to make other forms of iron such as plates," Dr. Senaratne said. "Now iron is imported from India, or we re-melt scrap iron and produce iron billets. "This industry can provide other iron producers with raw iron and later steel and other products." Steel making is not a new industry in the island with scientists and archaeologists having found pre-historic evidence of iron smelting with wind tunnels being used to create the high temperatures required. Deposits of waste iron slag have been reported from the Ratnapura- Balangoda, Kalutara- Baddegama, Kandy-Matale and Yatiyantota -Ruwanwella areas. Pramuka Bank depositors restive While depositors of the failed Pramuka Bank get restive over delays in discussing its future, The Sunday Times FT learns that the Central Bank is insisting on a three billion-rupee bank guarantee for the bank to be reactivated. The Janathakshi
Insurance group, which has offered to revive the bank, declined
to comment on its exchange of letters with the Central Bank on the
issue. However, according to reliable sources, the Central Bank
appears to be insisting on the guarantee though Janashakthi has
pointed out valid reasons why a guarantee is not necessary. Depositors
of the bank, thrown into liquidation by the Central Bank last December
but held back by depositors going to court, were meeting today to
discuss the stalemate. Meanwhile the February salaries of Pramuka employees were also paid, eating further into deposits held by desperate customers of the bank. The Pramuka court case is due to be heard again on March 20. (QP) New SEC chairman; others remain The government
has appointed Denis Perera, former army commander and diplomat,
as the new chairman of the Securities and Exchange Commission but
some of the other commissioners against whom there have been allegations
of conflicts of interest still remain in the watchdog body. The SEC is
to follow the usual procedure and advertise the post of director
general, which fell vacant upon the resignation of Dr. Dayanath
Jayasuriya. Lt. General
Perera had just retired as the non-executive chairman of Ceylon
Tobacco Company. He was commander of the army in the early 1980s
and subsequently served as high commissioner in Australia. He replaces
Michael Mack, who resigned as chairman after the Attorney-General
K.C. Kamalasabayson advised the SEC to go ahead with the prosecution
of Mack over alleged insider dealing in shares of Aitken Spence,
the conglomerate of which he was once chairman. Mack and Norman
Gunewardene, the other Aitken Spence director accused of alleged
insider dealing, have filed writ applications in the Court of Appeal
seeking to quash the SEC's decision to prosecute them over their
sale of Aitken Spence shares. The case is to be heard next month. The gag imposed
by the SEC commissioners on members of the SEC Secretariat continues
to remain in place. Some of the private sector members of the commission such as Cubby Wijetunge, who have openly challenged the Attorney General's Department's opinion on the issue and the SEC decision to prosecute Mack, also hold on to their positions. This is despite what appears to be a clear conflict of interest and calls from the market for their resignation or removal if they do not agree with the decisions of their own organisation. Malaysia's richest man has Lankan roots The man recently declared as the richest person in Malaysia has a Sri Lankan background, a local website and reports from Kuala Lumpur indicate. T. Ananda Krishnan,
63, one of Malaysia's shrewdest tycoons who made his fortune from
property, gaming and oil trading, recently ousted a Malaysian Chinese
as the richest man there with an estimated worth of Malaysian $
8.7 billion (about Rs. 217,500 million). The Board of
Investment (BOI) lists Krishnan among a group of 13 prominent overseas
Sri Lankans on its website, and says: "The ethnic Sri Lankan
Tamil tycoon is a recluse." The Malaysian
businessman comes from a family hailing from Kopay in Jaffna. His
father came to Malaysia in the 1930s where Krishnan went to a local
Tamil school before securing a degree from the University of Melbourne
and an MBA from Harvard. The list of prominent Sri Lankans has well-known names from experienced UN diplomat Jayantha Dhanapala, the Ondaatje brothers - Christopher and Michael, and prominent scientist Chandra Wickremesinghe to lesser-known people like Arun Milinda Gunawardene and S. Chandramohan who both live in the US. Raj Rajaratnam, a US fund manager who generated a lot of excitement last year with his forays in the Colombo stock market, Sanjay Kumar, whose own company faced a crisis widely reported in US newspapers, and Mohamed Muhsin, the World Bank Vice President in charge of IT are also listed. Few may have heard of Kumar Mahadeva, founder of US-based Cognizant Technology Solutions in 1994 who is the driving force behind one of the fastest growing technology services companies in the world. Prior to establishing Cognizant, he was chairman of Dun and Bradstreet India and China. Milinda Gunawardene has a high profile position as managing director of US-based Goldman Sachs group. Chandramohan worked at the Colombo office of HSBC where he specialized in international banking before moving to the US to start the American Reprographics Company in 1988 The BOI said Sri Lanka's Thurisamy Pathmanabhan is a role model for anyone coming into business late, starting his first company at 40 and in just 12 years building UK-based United Networks into a leading supplier of digital telecom products. Dinesh Chandrasena, also on the BOI list, who has been designing clothes for the rich and famous including singer Shania Twain, actress Sandra Bullock and actress Julie Andrews, is also listed. |
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