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7th June 1998

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How feeder friendly is Colombo?

During a recent visit to Sri Lanka, Ian Hills talked to two feeder operators using colombo as a hub. Both were optimistic, but both showed concern about the port's future capabilities.

Sea Consortium and Orient Express Lines are two feeder operators using the port of Colombo as a hub.

Both express concern over the port's ability to continue dealing efficiently with their already large and rapidly growing throughput at a time when around 75% of the port's volume is transhipment cargo.

Singapore-based Sea Consortium (SC) act as managing agents for X-Press Container Line (UK) Ltd. (XCL), West Asia Kontena Line Ltd. (WAKL), BXCL Shipping Pte. Ltd (BXCL) and ASXCL Shipping Pte Ltd (ASXCL). The company currently operates a fleet of 35 chartered and 6 owned vessels.

In 1997, Sea Consortium carried around 245,000 TEU on its own operated vessels and 40,000 TEU as slots on non-operated tonnage through the port of Colombo. This figure makes it the largest user of the port in terms of throughput, claims Rohan Abeywickrema, director of Colombo-based Sea Consortium Lanka (Pvt) Ltd.

During 1997, two new Indian services were introduced based around Colombo. One linking it with Kandla, the other with Vizakhapatnam. In 1998, Abeywickrema feels it is unlikely that any new services will be introduced using Colombo as a hub, due to, in his opinion, expected port capacity restrictions.

The executive states that, in his view, the port must both expand and increase productivity to meet the requirements of its users.

An increase in productivity alone will not be sufficient to meet increasing volumes, which are already well in excess of the port's theoretical annual capacity of 1.6 million TEU.

At the present time, SC vessels experience delays of on average, 24 hours due to the non-availability of berths. This has on occasions, extended to 36 hours.

The reason for these delays, it is claimed, is that berthing priority is given to deep sea mother vessels ahead of feeders.

Following complaints to and strenuous denials by, the Sri Lanka Ports Authority (SLPA), talks were undertaken with a view to introducing measures to eradicate the problem including a berth reservation scheme.These talks have, so far, not produced satisfactory results, although plans are in hand for the introduction of two additional feeder berths.

A further problem is that feeder vessels experience problems with heavy swell at berths one and two at the Jaye Container Terminal, which faces the southern entrance to the port. It is believed that the two additional berths will not have such a problem.

Other problems experienced by SC in Colombo include:

o Delays due to meal breaks - SLPA is trying to reduce the time taken for meals breaks from one hour to 30 minutes.

o Delays between shifts - As the port works a two shift system, delays are sometimes encountered between the end of the first and commencement of the second shift.

o Crane inefficiency - some of the breakbulk cranes used to work feeder vessels are old.

o Marshalling area congestion - SLPA is investigating a satellite control system to ease congestion in the marshalling yards.

Despite the above, Abeywickrema is complimentary of the port's Customs, which he says, operates well, adding that the vigorous security checks conducted at the port are a necessity.

In 1997 there were increases in volume across the board on SC's tradelegs, with business booming to/from the Indian Sub-Continent. Freight rate levels, however, have come under serious pressure as reductions in rates achieved by the mother vessels are passed down to feeder vessels.

To try and reduce the impact of this, the company is strenuously s looking to reduce port turnaround times through berth reservation schemes in, Mumbai and Chennai.

Abeywickrema concludes on the future of feedering around the Indian Sub-Continent. 'Colombo has the advantage of its position and this should ensure it remains as a main hub. Jawaharlal Nehru Port and Chennai could develop as sub-hubs. We could see vessels of up to 2,000-3,000 TEU loading in the niche markets over the next few years.Dubai-based Orient Express Lines (OEL) started serving Colombo in 1992 in a small way through a joint arrangement with APL, by which an OEL vessel was chartered to APL with OEL taking around 160 slots a month in each direction on the Colombo/Kochi leg, subject to availability.

At that time, OEL took the decision to approach the business in a conservative fashion. The company began its expansion plans in early 1995 with the introduction of a Colombo/Tuticorin service and has continued to grow ever since.

Today, OEL boasts six services hubbing over colombo in addition to other services based on the Mid-East Gulf/Indian, using Dubai as a hub.

OEL sees its strength in a mix of owned and chartered ships, which ensures maximum flexibility in its trading parameters. The company also, from time to time and when relevant, charters out vessels. At present OEL and affiliated companies own 12 ships, ranging in capacity between 234 TEU and 1,000 TEU plus.

Volumes handled through Colombo have grown dramatically in recent times. The company currently moves around 1,50,000 TEU per year through the port and this is expected to increase by around 30-35 during 1998

(Condensed from Containerisation International)

Cold Stores never had it so good

Ceylon Cold Stores (CCS) has recorded a gross turnover of Rs. 1.7 billion and a consolidated pre-tax profit of Rs. 250 million for the year ending March 31, 1998.

According to Chairman Ken Balendra, this year's gross turnover has increased by Rs. 300 million, 21.4% over the previous year, while the pre-tax profit shows an increase of 43.2%. "The Company's turnover as well as the profits recorded are the highest ever," a company release says.

Capital expenditure of Rs. 458 million was incurred during the year under review with a new bottling line being commissioned at the Kaduwela factory. Despite competition, CCS has continued to further consolidate its dominant position amidst competition both in the soft drinks and ice cream market, while even in the processed meats area, CCS have established a 'niche' market for its range of uncooked processed meats most suited for the local palate, the most recent addition being Chicken Lingus, a product that has been enthusiastically received. The Elephant Soft Drinks 400 ml range continued to drive volume and increase market share through aggressive marketing activities, while the positioning of Ginger Beer as the drink most suited to be consumed with food, as well as the re-launch of Orange Barley were the most successful campaigns conducted by the Company during the year. CCS also launched an Independent Distributor Network for its 250 ml range of Soft Drinks introducing new products such as Ride coupled with the re-launch of Bitter Lemon, Rango and Manga enabled them to gain further market share. This was possible on account of the commissioning of the new bottling line in February this year, thus enhancing capacity at the Kaduwela Plant to cater to this need," said Sumithra Gunesekare, Managing Director CCS.

With regards to the ever popular Elephant House Ice Cream range, as a result of improved distribution and re-positioning of ice cream flavours, the Company enhanced market share, countering competition from Multi-nationals. "We established an independent distributor network for the on-premise range of products which have greater consumer acceptance than that of the Multi-national's," said Billy Walpola, Director Marketing CCS. In addition, during the year under review new and improved packaging in the 2 litre and 1 litre as well as the 500 ml packs were introduced with a distinct identity for the more popular flavours.

The Company's milk division continues to efficiently deliver its premium products to the household and hotel sector, while plans are afoot to intensify the home delivery network.

As part of its on-going effort towards resource rationalisation, the management implemented a decision which had been under consideration for some time to cease the operations of the jams and cordials division and the ice factory, the release said.

The Trincomalee Branch further expanded its operations significantly, while negotiations relating to the handing over of the Kirimetiya Farm to the Land Reform Commission are in its final stages, with the LRC having agreed in principle to this transaction.

In keeping with the Company's principle of maximising its human resources potential, considerable investments were made during the year by way of training and development of both the management staff and workforce.

Bank in step with its theme: Innovative

Corporate profile

By Company Watcher

Solid business growth across all major profit centres of the Union Bank generated excellent financial results in 1997. Net profit after tax grew from Rs. 5 million to Rs. 35 million, representing a 14% return on average shareholders' funds and a 1.4% return on average total assets.

Stating that the returns are in line with or better than the market, Union Bank Chairman Chanaka de Silva calls it "proud achievement for a bank in its third year," in his annual review to shareholders.

Noting that there was a sharp drop in deposit rates last year, he says that for a new bank which is in the process of establishing a wide deposit/customer base, the sharp drop in rates proved to be an obstacle.

"The acquisition of new borrowing clients became almost impossible as many were able to borrow monies at rates based on inter bank through others. Competing on products/service capability rather than on price, we believe, will yield better results in the long term.

"Accordingly, we opted to stay out of those names whose sole concern was price, resulting in the bank being a lender in the inter bank market for most part of the year. This naturally had an impact on our interest income in 1997. It is a price we need to pay now, for the sake of long term benefits," he adds.

The Bank's deposit base registered an impressive increase of 80% to reach Rs. 2.7 billion. The loan portfolio increased from Rs. 1.2 billion to Rs. 2.1 billion.

"In keeping with our credit policies and guidelines, facilities were extended in a very selective and diversified manner. For a new bank that is increasing its asset base, the quality of its portfolio is of paramount importance," Mr. de Silva says. Gross income of the Bank registered a 111% growth from Rs. 215 million to Rs. 455 million. Net interest income for the year was Rs. 99 million, an increase of 103%.

Discussing the Bank's values, Chief Executive Officer Shan Shanmuganathan says that the Bank was set up with client intimacy as the core discipline, providing innovative products and superior service to a customer base which is growing rapidly and demanding increasingly sophisticated financial services.

"Our success is due to our strict adherence to this discipline, avoiding the temptations to build a vast network, balance sheet, or client base and never wavering in our focus merely for the sake of short term benefits," he says.

He stresses that the Bank provides the target segment - the broad mid-sector of the market - with banking and investment services and payment products that help these customers achieve their personal objectives.

"Customer intimacy being the core discipline, our entire operation has been designed around this model. Union Bank of Colombo is probably the only bank in Asia that uses the unique concept of Customer Service Centres as against traditional branches.

"This is in stark contrast to the current market practices of preferential or exclusive treatment to respective branch clients or assigning some clients as having priority status," he states.

Calling the deposit mobilisation as a success story, he points out that the major contributor for an increase of 80% has been the innovative 'Super Savings' product for regular savers, "which quite clearly has no parallel in the market".

Realising that personalised service could be provided only to a limited number, the Bank has never gone overboard to acquire customers.

The Bank's value added services include handling customers' own bank reconciliations through the Bank's system and the provision of Screen Phones enabling customers to access their own account at any time.

While the Bank is hopeful of getting a license to operate as a Stock Broker soon, necessary plans are also underway to provide margin trading. These services are primarily to support the Bank's customers' participation in the equity market.

Among the plans for 1998 are the expansion of the Bank's network primarily into outstation areas, introduction of ATM and Credit Card facilities, completion of the initiative to adopt quality improvement techniques, expanding money management activities by offering equity management services, and building an environment with a reputation for being the 'best place to work'.

The Annual Report highlights the Bank's efforts to pay a lasting tribute to Sanath Jayasuriya, "Sri Lanka's very own Revolutionary Wizard of the Gentleman's Game.... the Master Blaster", who is the Bank's Business Development Manager.

The Bank established 'Innovation' - a trust foundation committed to achievement, a means of fostering excellence in Sri Lankan sport, cricket in particular.

The upliftment of sports in the outstations and the development of sports in the Matara district (from where Jayasuriya hails) are among projects identified.

The name 'Innovation' was derived from the Bank's corporate theme 'The Spirit of Innovative Banking'. The Bank believes that even as the Fund's purpose remains prominent in the minds of all well-wishers, the contributions will more than see the rapid realisation of the objectives of the Foundation leading to the discovery of many more 'Sanaths'.

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