The Sunday TimesBusiness

18th, August 1996




Battle of bids hots up for Agarrapatana

Traders are predicting a keen tussle for the control of a 51 per cent stake in the Agarapatana Plantations which was put for sale on the CSE last month.

The 14,400 hectare estate is currently managed by Creasy Plantation Management Ltd.

The first bid of Rs 10 per share was submitted by Lanka Securities. This bid was bettered by John Keells Stockbrokers by 25 cents. Soon after it was again topped by a bid of Rs 12 per share by Lanka Securities. The offer is due to close on the 23 rd of this month.

Market sources indicated that Tata Teas and Lankem/EB Creasy would be among the bidders.

Tata teas have already acquired stakes in other plantations companies in Sri Lanka. Traders are expecting a repeat of the Watawala Plantations battle where the two parties sent the price soaring to Rs. 30 per share.

The Hindu recently quoted Tata Chairman Ratan Tata as saying that the company was continuously exploring possibilities to invest in tea production facilities abroad. In Sri Lanka Tata was said to use the Sri Lankan registered Estate Management Services (Pvt.) Ltd. as an investment vehicle.

In addition to concerns over increasing Indian control some in the tea trade were also concerned over what is said to be yet another shortcoming of the governments privatization process. This relates to managing agents who had allegedly run down estates under their management being allowed to bid for more plantations.

For example it is pointed out that in Agarapatana Plantations itself, yields had fallen sharply under private management.

Yields in all but one of the 21 estates in Agarapatana Plantations had fallen in 1994, according to the sale document released by the Public enterprises Reform Commission.

The sharpest fall was seen at New Porter estate where the annual yield per hectare fell by 444 kg to 1452 kg in 1995 from 1896 in 1995.

In the Diyagama East and Torrington estates yields fell by 350 kg per year. Other estates in the high yielding Agarapatana sector which contains a total of 21 estates fell by volumes ranging from 342 kg to 210 kg per hectare.

In the lower yielding Haputale/Bandarawela sector which contained 10 estates, the sharpest fall was seen at Glenore estate. Annual yield there fell by 272 kg to 1,199.

This sector also contained the only estate where yields improved in 1995. In the Gonamotawa estate, annual yields increased by 92 kg to 1,062 per hectare.

Barter deal on cards

By Ruwanthi Ratnyake

Having been a "Recession Buster" in Australia, with the beginning of its operation in 1991, Bartercard has now introduced cashless trading to Sri Lanka, to provide cash flow relief to small and medium businesses, through a BOI approved trade exchange, a company official, said.

The Bartercard system in Sri Lanka will operate under the name Bartercard Lanka, a wholly owned subisidiary of Bartercard South Asia Ltd., a company spokesman said.

Taking a stake in the new venture to purchase the franchise from Bartercard International are three leading companies - Golden Key Credit Card Company, a member of the Ceylinco Group, People's Venture Investment Company, a subsidiary of People's Bank and Equity Investments Lanka, an associate of the Commercial Bank of Ceylon.

Explaining the Bartercard system, Bartercard International Chairman, Wayne Sharpe, said the members were issued a Bartercard which acts as a transaction card, within the network and each transaction would be monitored by the exchange which maintains a credit and debit system. The exchange charges a 6 percent commission on each transaction and gives an interest-free credit line facility.

According to him if a garment manufacturer gets Rs. 50,000 worth of work done by a printer, who is a network member, it is unlikely that the printer may want Rs. 50,000 worth of clothing, so he may use his Rupees 50,000 credit to purchase other goods, while the garment manufacturer has to bridge his debit by offering clothing to other network members. Thus through the new venture, both parties benefit by trading their products and services through the Bartercard system.

"Currently one third of the world's trade is done through the barter system," Mr. Sharpe said. It is predicted that by the year 2005, half the world's trade would be done on this basis, he added.

In Australia, 30,000 transactions take place every month, under this system and statistics have shown that business has grown immensely, since joining the network.

Bartercard Lanka aims at getting 600 to 800 members during its first year of operating, with an annual turnover of Australian dollars 350 million.

Bottom Line

By P.M.N. Bandara

Mercantile Leasing -20% Dividend

The financial year 95/96 has been a difficult period for most of the financial institutions, borrowing short-term from the financial market at sky high interest rates. Mercantile Leasing Limited also falls into this category. However the company has been able to record Rs. 51.2m. post tax profit for the year ended 31st March, 1996 although the figures were a little below the previous year's level.

According to the published financial statements, the company's operating profit before interest was up by 39% from Rs. 121.8 m. to Rs. 169.4 m. It's profit after taxation dropped marginally by 2.4% from Rs. 52.5 m. to Rs. 51.2 m. However, the shareholders funds as at 31st March, 1996 was Rs. 217.0 m. and it shows 12.4% increase over the corresponding year's figure. The directors of the company decided to recommend a first and final dividend of 20%.

Having watched the experience of others in the industry, Chairman, N.U. Jayawardena says he is happy with the profit earned during the year.

Some key financial performance indicators are given below together with comparative figures.

DIMO - 'Disappointing' performance

Despite the increase of group turnover, decline of profit had been the significant feature recorded by the Dimo Diesel & Motor Engineering Co., Ltd. in its financial statements for the year ended 31st March 1996.

The Company's group turnover was Rs. 142.9 m. during the year under review. It reflects 9% increase over the previous year. Group profit before tax dropped by 18% from Rs. 159.6 m. to Rs. 131.6 m. Group profit after tax dropped by 31% from Rs. 89.5 m. to Rs. 61.4 m. However, shareholders' funds increased by 28% from Rs. 340 m. to Rs. 434 m.

The directors of the company recommended a first and final dividend of 30% for the year. The dividend payable for the year, Rs. 14.4 m. compares with Rs. 10.8 m. paid in the pervious year.

"The results recorded by the group was disappointing. The main reason for the lower profitability was the substantial share of loss accruing from the associate company Dimo Auto Industries", says Chairman, S. Mendis commenting on performance.

Pugoda Textile- Performance below expectation

The performance of Pugoda Textiles Lanka Limited during year 1995/96 was well below expectations as observed by Chairman, D. Jayavarthanavelu.

The turnover for the year dropped by 23% from Rs. 1052 m. to Rs. 849m. according to the published accounts. This is mainly due to sluggish market and security situation.

The comapny incurred a loss of Rs. 148 m. as against previous year's profit of Rs. 26.8 m . As a result the company was not able to declare dividends to its shareholders. This led to decrease the shareholders' funds by 22% from Rs. 447.9 m. to Rs. 347. 6 m.

Commenting on future prospects of the company, the Chairman says with the government assistance already announced, the company would be able to produce favourable financial results in future. "The Government has listened to the local textile manufacturers grievances and announced several steps to save the industry. The main assistance so far announced is the interest rate rebate scheme on long term loans. General Treasury has already extended this facility to short term loans as well. The government is also in the process of implementing the Pre-Inspection Scheme. The raw material prices are coming down at present; specially polyester fibre has come down by 50% in May 1996 when compared to May 1995", Chairman, Jayavarthanawelu further added.

Ceylon Brewery Significant growth

Ceylon Brewery Ltd., has recorded dramatic improvement of performance in terms of turnover and profit for the quarter ended 30th June, 1996.

The Company's turnover increased by 64% from Rs. 174.7 m. to Rs. 287.3m. for the quarter under review, compared to the same period in the previous year according to the provisional accounts. Profit before tax increased from Rs. 1.6 m. to Rs. 30.8 m. followed by an increase of profit after taxation from Rs. 1.0 m. to Rs. 19.8 m. Increase of shareholders' funds was 46% from Rs. 116 m. to Rs. 170 m

This is mainly due to the excise duty reduction on beer which was announced at the previous budget speech to bring down the beer price to a realistic level.

"Not only has the company's performance improved substantially, the Government too has gained in terms of revenue as the Company's contribution towards the Treasury, during this period has increased when compared to the corresponding period in 1995. Not only has Government revenue increased in terms of excise duty, turnover tax and defence levy, there are also significant gains in terms of income taxes payable on profits. Hence, it is clear that the reduction in excise duty has benefited both the Government in terms of additional revenue and the Industry in terms of greatly enhanced profitability," says a company spokesman.

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