Several parties have confirmed ties with Kelani tyres
Market speculation of a possible merger between two tyre manufacturers has boosted the share price of a local tyre manufacturing company which had halted production for the past six months.
M/s. Kelani Tyres Ltd., crippled for the past six months by strikes and forced to temporarily halt production, is now set to resume operations, its Managing Director, Rohan Fernando told The Sunday Times Business.
Kelani Tyres which was trading at Rs. 9.00 per share, shot up to Rs. 17.25 on Thursday, August 27th fuelled by speculation of a possible merger with Associated Ceat (Pvt.) Ltd., a subsidiary of Associated Motorways Ltd., market analysts said.
Mr. Fernando explained that several parties in the trade have made an Expression of Interest (EOI), since they confirmed their intentions of resuming operations with newly recruited staff.
Severe labour disputes led to the temporary closure of the company six months ago, when negotiations between the management and the unions collapsed.
According to a company release, in January this year, Kelani Tyres employees resorted to strike action demanding a 40 per cent salary increase, despite salaries being increased by over 50 per cent over the past 3 1/2 years.
The Commissioner of Labour intervened, and a Tri-partie Agreement was formed under Section 12 (1) of the Industrial Disputes Act on April 8th 1997, to which all Trade Unions and the management were signatory.
The agreement required all employees to report to work on April 10th, but the 1,118 workers who signed it, failed to do so.
On April 22nd, the Commissioner of Labour wrote to the unions requesting the employees to report to work.
However, since the employees continued to stay away, Kelani Tyres management wrote to all 1,118 employees requesting them to report to work. There was no response to this communication from the employees.
The management then advertised for new staff to replace the 1,118 employees who were deemed to have vacated their posts.
In July this year, the unions once again made representations saying they wanted their jobs back.
Rohan Fernando said that the unions "maliciously stood in the way" of the employees by "preventing them from resuming their duties."
In a letter to the Surveillance and Enforcement Manager Colombo Stock Exchange (CSE), Kelani Tyres states that "consequent to non-compliance by the employees under the terms of the agreement executed under Section 12 (1) of the Industrial Disputes Act, the company has concluded that 1,118 workers comprising all manual and operational cadres have ceased employment in the company."
Meanwhile, the Surveillance and Enforcement Division of the CSE has informed all Brokers that Kelani Tyres has "confirmed its intention to commence its operations as soon as possible and for this purpose advertisements have been placed to recruit new employees."
The circular further states that "there has been an expression of interest by several tyre manufacturers, both foreign and local, to form a strategic alliance and discussions are under way. No agreement or conclusion has been reached as yet."
The CSE had called for explanations from Kelani Tyres regarding the sharp increase of the company share prices last week.
Mr. Fernando told The Sunday Times Business that the surge in the share price was due to "truly speculative reasons." These rumours have emerged because the company is due to begin operations shortly.
However, the industrial dispute does not seem to be resolved yet. When Times Business contacted the Ceylon Federation of Labour (one of the trade unions representing the workers) General Secretary, Mr. Siriwardene said that they have made several representations to the Labour Ministry to resolve the dispute, but nothing has come out of them yet.
"In fact, we have heard a rumour that the company is going to pay voluntarily compensation without re-instating the workers, and we have sent a letter on Thursday, September 4th to the Labour Minister to appraise him of this matter," Mr. Siriwardene said.
The unions representing Kelani Tyres workers are the Jathika Sevaka Sangamaya (JSS), the Sri Lanka Nidahas Sevaka Sangamaya (SLNSS), the Technical Officers Trade Union, the United Co-operative Union (which is represented by Mr. Siriwardene's, Ceylon Federation of Labour) and another trade union.
Mr. Siriwardene emphasised that the dispute was not a strike. "The employers were locked out by the management, whilst negotiations were going on with the management for a salary increase."
"We are urging the management to re-open the factory and resume work," he said. "We are urging the President to step in to help settle the matter. If not, we are asking the government to urge PERC (Public Enterprise Reform Commission) to find another buyer for the company."
Meanwhile, Managing Director Associated Ceat (Pvt.) Ltd., Abhik Mitra told The Sunday Times Business that "it is too early to comment on the deal...we have made an offer... but we understand that there are others, both Indian and foreign companies that have also shown an interest in forming a strategic alliance with the company (Kelani Tyres)."
The Times Business reliably understands that the unions have no knowledge about the possible 'strategic alliance' between Kelani Tyres and another tyre manufacturer. Meanwhile, shares of the company continue to hover around Rs. 14.00 per share on the market.
Market Focus
Renewed buying interest by retail investors have pushed up the ASPI indices towards the 850 levels. Foreign investments were mainly concentrated on the blue-chip banking sector. Gradual increase in unit-trust prices over the past few weeks was also noticeable. With more investors coming into the equity market an appreciable price increase in this sector is evident in the near to medium term.
It is expected that the offer for sale of NDB shares would be an all-out success due to the prevalent foreign interest in the company (69%).
Plantation sector companies have shown improved performances for this quarter as a year to year (YOY) comparison, due to the increase in world market commodity prices.
Bogawanthalawa Plantations Ltd: Managed by the Metropolitan Group, has released audited results for the first quarter of their financial year 97/98. Turnover has increased by 43.3% to record at Rs. 467.6 m YOY. Profits have increased by 45.6% to record at 44.9m YOY.
Agalawatte Plantations Ltd: Managed by Mackwoods Plantations (Pvt) Ltd., has released the results for the 2nd quarter by '97. The company has recorded an increase of turnover by 12.9% to Rs. 337.5m YOY while earnings have shot up by 16.9% YOY.
Tourism sector: Increase in arrivals of tourists to the South Asian region during the May-July period (15% approx), has raised hopes of all in this vital sector of the economy. Mainly resort hotels have performed admirably due to increase in tourists influx as analysing the increase in tourist influx reveal that most tourist arrivals to Sri Lanka are low to medium budget ($10 to $100 range per day segment) attracting the high rollers (above US$ 100) would create more value to the industry, and upto an extent the seasonality of the trade also could be avoided.
Company news: Magpek Exports has notified the CSE of its unavailability to submit quarterly reports before the stipulated deadline, and requested an extension until November. It is expected that the banks would work out with the management a re-structuring plan to overcome the present predicament.
Recommended: Fundamentally sound: NDB/DFCC/HNB/Cold Stores/Commercial Bank. Speculative: Veytex, Magpek, CSF. The Finance, Seylan, Blue Diamonds.
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