Crisis-hit Dankotuwa Porcelain Plc, grappling with a combination of a restive workforce and continuing losses for many years, was recently confronted with a fresh problem: climate change
The company’s raw material supply was affected after clay production slowed down in China due to unusual heavy rain that flooded mines. In Korea, which supplies pebbles, a sudden onslaught of snow in May hurt output, company sources said. “In addition to the usual problems, climate change also added to our headaches,” one source said.
On Wednesday, the Dankotuwa board of directors decided against plans to liquidate the factory after the two main unions inked an agreement to allow a new investor into the company under ‘certain’ agreed conditions. Discussions with the unnamed investor, a local firm which plans to take a majority stake in Dankotuwa, has been on for several months but worker demands over maintaining wage levels – what company officials have said in the past are unrealistic – have been an obstruction. The company source said the firm desperately needs new investment to pay off debts, buy new machinery and return to profitablity in an industry that is not attractive anymore.
Dankotuwa is a large producer of porcelain tableware used in fine dining which however is going out of vogue in most countries except Europe. “Fine dining is not seen anywhere in the US and only in Europe it remains but is fast fading,” the source said. The company also produces a small quantity of casualware but relies on tableware sales for better (profit) margins.
The company is hoping to wrap up the deal in coming weeks now that the unions have given the go-ahead. The source said the new investor, who he declined to name as negotiations have not been finalized, is likely to invest through a private placement or some other way in which the authorized capital would be increased. The present shareholders will remain under a new controlling shareholder while the current controlling stake of a consortium of Japanese investors would eventually get diluted if the investor comes in, the source said.
The company has been plagued with problems since 1990 mainly due to having a costly workforce. The source said salaries average Rs 20,000 per worker per month without fringe benefits – against market rates of Rs 10,000 to Rs 12,000 -- while bonus is equivalent to eight months pay.
The wage bill has been the biggest issue in the company turning profitable and losses have been recorded for the past six years. Of the 1,100 staff, 600 are, old permanent staff working for over 20 years and refusing to budge from benefits.