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Six of group’s 8 listed companies post improved results
Ceylon Theatres knocking at door of conglomerate status

The Ceylon Theatres Group is knocking at the door of blue chip conglomerate status with six of the eight listed companies of the group posting substantially improved results for the year ending March 31, 2000.

``We may not have got there yet, but there’s every prospect that we’ll reach it a couple of years down the road,’’ a senior group executive said.

Its expansion from a cinema exhibitor, the leader in that business at a time when the climate was more hospitable to both the cinemas and the film-goers is credited to the vision of Mr. Albert Page, the senior statesman of the group, who added to the prime real estate treasures on which the company’s cinemas stood with the acquisition of Millers Ltd. and its subsidiary, Cargills.

In the last fiscal year, Millers with lucrative agency lines including Kraft and Kodak had boosted turnover 12% to Rs. 2.99 billion and posted a profit of Rs. 76.7 million attributable to its shareholders, up 13% from the previous year.

Cargills which had grown on supermarketing had a consolidated turnover of Rs. 2.25 billion, up 12% from the previous year, and posted a bottom line of Rs. 48.6 million, up 28% from the previous year. This has enabled the company to erase its accumulated losses Rs. 39.7 million and carry a profit of Rs. 8.9 million in its books as at March 31, 2000.

CT Land Development Ltd. with which Ceylon Theatres turned property developer maximising the potential of its prime real estate with the Majestic City, had pushed turnover 7.5% and despite a 10% growth in operating costs, posted an after tax profit of Rs. 50.1 million, up 12.8% from the previous year.

The group’s interest in the ceramics sector it has now entered in its diversification into manufacturing industry are beginning to show results with both Lanka Tiles and Lanka Walltiles showing strong profit growth. Lanka Tiles had done nicely with group profits up 66.6% to Rs. 104.7 million on the back of 10% sales growth.

Lanka Walltiles had done better with an after tax profit of Rs. 151.7 million, up 91% from a year earlier with turnover rising 11%. But a substantial minority interest meant that the profits attributable to Lanka Walltiles shareholders was Rs. 95.8 million, up 63% from the previous year.

The Lanka Walltiles Group comprises two distinct set of companies with five involved in the manufacture and sale of ceramic tiles. The other companies are in plantation management, through Ceyexxe Plantation Management Ltd. and its subsidiaries. Nearly all the profits attributed to the parent had come off the ceramic companies.

Horana Plantations, under the Ceylon Theatres umbrella through its interests in the ceramics sector, was back on profit mode at the end of the last fiscal year with a modest Rs. 7.6 million bottom line, up from a loss of Rs. 6.4 million the previous year.

Lion licks its wounds as beer volumes slump

The beer industry in Sri Lanka has completed what a major player called "its most troubled year in over a decade,’’ with industry volumes declining as much as 10% in recent times.

Carsons Management Services (Pvt) Limited, managers of the Lion Brewery Ceylon Ltd., said that although the industry declined approximately 1.5% in volume terms for the year under review, the actual decline was much higher after the figures were analysed for the period when both Lion and its competitor, United Brewery, were in full operation. The volume decline increased as high as 10% if performance for the ten months between June and March were taken to account.

The industry which took a kidney punch from excise duty increases which applied a price deterrent on beer consumption two years ago has now found itself saddled with excess capacity. The result, in the words of Lion’s managers: "the existing policy framework cannot support existing industry capacity nor can it support the financing structures adopted by the breweries.’’

"Had we been aware of the government’s thinking, Lion Brewery would have had less capacity, been funded differently and consequently faced less difficulties and been more profitable,’’ the managers said.

"Now, we are faced with over capacity in two plants, in a situation where the total requirements can be produced at a single location, namely, Biyagama. In addition, a heavy burden is placed in meeting our financial commitments.’’

Carsons said that they expect the current difficulties to continue into the future unless a more rationale alcohol policy - on the lines of those adopted internationally - are put in place in Sri Lanka in the very near future.

Lion had boosted turnover 39% to Rs. 1.1 billion during the year ended March 31, 2000 but seen profits from its operating activities shrink 31% to Rs. 165 million. With finance cost too rising 28% to Rs. 81.8 million, a pre-tax profit of Rs. 73.2 million was earned, down 56% from Rs. 165.3 million earned the previous year.

This remained the bottom line as there was no tax liability.

The company has paid a preference dividend of 15% absorbing Rs. 52.5 million. No ordinary dividend has been proposed for the year under review although 7.5% was paid on this account the previous year.

Earnings per share stood at a dismal Rs. 0.41 against Rs. 2.26 the previous year.

Lion has an ordinary share capital of Rs. 500 million and a preference share capital of Rs. 350 million.

The directors of the company are: Messrs. Wijaya Unamboowe (w.e.f. 29.3.2000), Tilak de Zoysa (resigned 16.2.2000), Hari Selvanathan (Deputy Chairman), Mano Selvanathan, Suresh K. Shah (CEO), D.C.R. Gunawardena, Y. Bhg. Dato.Jorgen Bornhoft D.P.T.J. (Kehormat), Chin Voon Loong, Steven Mark Enderby and L.C.R. de C. Wijetunge.

Bad and doubtful debts and fall in investment value swallows operating income
Provisioning drives NDB into the red

Increased provisions for the fall in value in investments and bad and doubtful debts has skimmed the cream of the National Development Bank’s (NDB) first quarter earnings this year leaving the bank with an operating loss of Rs. 10.9 million, down from a profit of Rs. 126.3 million a year earlier.

The group result was worse with an operating loss of Rs. 30.8 million against a profit of Rs. 133.2 million in the first quarter of the previous year.

With taxation of Rs. 42.4 million for the company, down from Rs. 51.5 million a year earlier, the NDB had a first quarter loss of Rs. 53.3 million against a profit of Rs. 74.8 million a year earlier. The group loss (attributable to shareholders) at Rs. 66.5 million compared with a profit of Rs. 82 million in the first quarter of the previous year.

Provision for bad and doubtful debts during the quarter under review was Rs. 90.7 million against a writeback of Rs. 30.8 million a year earlier. Provision for the fall in value for investments was Rs. 167.5 million against Rs. 108.6 million a year earlier.

There have been increases in personnel cost (Rs. 10.9 million) and other administrative and general expenses (Rs. 16.5 million) contributing to the negative result.

The NDB which made a bonus issue of 1 new share for every 2 held on March 28 has seen its share price plunging to unprecedented lows - even dipping below the Rs. 50 bargain price at which the public was invited to take a slice of government owned equity. At its peak, the share traded at prices above Rs. 400.

Despite the negative results, the bank had boosted both its net interest income and other income and the loss is totally attributable to provisioning, the profit and loss account reveals.

After the bonus issue the NDB has an issued capital of Rs. 537.5 million.

C.W. Mackie turning around

C.W. Mackie & Co. Ltd., has turned in a group net profit of Rs. 8.4 million during the first quarter of the current financial year, up from Rs. 0.8 million a year earlier, and erased its carried forward losses of Rs. 5.9 million to retain a Rs. 2.4 million profit in its books as at March 31, 2000.

During the year ended December 31, 1999, the group incurred a loss of Rs. 10.2 million attributable to its shareholders.

The company’s earnings (as opposed to the group) too were in the black during the quarter under review with an profit of Rs. 7.7 million against a loss of Rs. 4 million a year earlier.

C.W. Mackie has a share capital of Rs. 359.9 million and capital reserves of Rs. 432.9 million.

Its subsidiaries are: Ceymac Rubber Co. Ltd. (97%), Scan Products Holding Co. Ltd. (99.5%), Mackgrains Distributors (Pvt ) Ltd. (100%), Prodcarry (C.I.) Ltd. (100%), Ceytra Ltd. (59.76%) and Korea Ceylon Footwear Manufacturing Co. Ltd. (34.01% - Associate Company).

Visit of Dorset Chamber of Commerce and Industry

The British High Commission and Trade Partners UK are sponsoring a Trade Mission to Sri Lanka from 19 to 24 June. The Dorset Chamber of Commerce and Industry will be bringing 11 companies representing a variety of business interests, including cutting tools for leather goods and packaging industries; dyers, finishers for garment manufactures; narrow fabrics including plastic, rigid tapes, braids for apparel industries; smartcard systems; agricultural tractors, farm machinery and spare parts; rebuilt ‘thwartes’ dumpers and spare parts; consultancy services on civil, maritime and environmental engineering; business management consultancy; quality control and customer care products.

This will be the Chamber’s third visit to Sri Lanka. Dorset is one of Britain’s most beautiful counties and also home for major national and international businesses in financial, services and high technology. The mission members will explore new business avenues and investment opportunities in Sri Lanka. They will be staying at the Hotel Lanka Oberoi.

Sri Lankan businessmen interested in meeting mission members should contact them at the Hotel Lanka Oberoi.

Productivity drive and aggressive cost cutting yields results
Ceylon Tobacco boosts first quarter profits, evaluates self-regulation

The Ceylon Tobacco Company Limited (CTC) has succeeded in improving operational profits during the first quarter of this year ended March 31, 2000, largely due to lower operating expenses achieved by an on-going productivity drive and an aggressive attack on cost, the company has told shareholders.

Group revenue during the period under review was up 4% to Rs. 1 billion from Rs. 962 million a year earlier while operational profits had grown nearly 26% to Rs. 321 million, a provisional statement said. With interest income of Rs. 15 million, the pre-tax profit of Rs. 336 million was up 25% from a year earlier.

The tax liability grew 64% to Rs. 90 million and the after-tax profit of Rs. 246 million for the quarter under review was up 15% from Rs. 214 million a year earlier.

CTC which announced a code of conduct for its marketing activities from March 23 has stopped brand and bill board advertising with immediate effect and has discontinued brand sponsorships of all sports news.

The company which had undertaken to publish the tar and nicotine levels of its products on cigarette packs within the next 12 months will however continue to advertise its product at store level where cigarettes are sold.

"The impact on the company due to this (advertising restrictions) is currently being evaluated,’’ shareholders have been told.

CTC recently announced a 2 for 5 bonus issue for its shareholders, the first after several years.

Shareholders have been told that the board "remains committed to ensure a satisfactory return to all stakeholders for the year 2000,’’ despite the recent price increase on cigarettes and self-regulations on advertising.

The first quarter’s figures reveal that raw material cost had grown 10.5% and staff cost by 18.6%, other operating expenses had been trimmed 31.3% to Rs. 176 million.

Raw material cost for the quarter was Rs. 346 million and staff cost Rs. 121 million.

CTC has an issued capital of Rs. 1.3 billion, reserves of Rs. 656 million and retained earnings of Rs. 277 million in its books.

British American Tobacco (BAT) is its major shareholder owning over 85% of the company’s equity. Last year, CTC divested itself of its subsidiary, CTC Eagle Insurance Co. Ltd. and the sale proceeds enabled it to make an extraordinary distribution to its shareholders who received a windfall dividend income.

Michael de Zoysa head hunted by Hutchison Telecom

Michael de Zoysa, the well known tea personality, is quitting his position of Managing Director of Unilever Ceylon Tea Division (Lipton and Brooke Bond) to become the new CEO of Lanka Cellular Services Private Limited (LCS), a fully owned subsidiary of Hatchison Telecommunica-tions International of Hong Kong. He switches jobs from July 1.

Hutchison said that de Zoysa will be tasked to expand LCS to become the country’s largest telecommunication operator next to Sri Lanka Telecom within the next few years, bringing with him multinational expertise gained through many years at Unilevers as well as his experience in the local market environment.

LCS was recently granted flagship status by the BOI for investing Rs. 3.6 billion here including a nationwide digitalization program.

Commenting on what is widely regarded in business circles to be one of the most significant ``head hunts’’ in the Sri Lanka commercial scene in recent times, Hutchison boss Khoo Chek Ngee said that ``a local management team was found to be necessary for a telecommunication operation to successfully adapt itself to deliver services specific to a local market.’’

Hutchison’s new man in Colombo will be required to navigate the company through the local operating environment, Ngee said.

De Zoysa’s lead role in tea includes stints as chairman of the Colombo Tea Traders Association and director of the Sri Lanka Tea Board. He is also president of the Sri Lanka-UK Business Council and a member of the Ceylon Chamber of Commerce Strategic Planning Sub Committee and serves as a member of the Bipartisan Committee to solve the ethnic crisis.

He is a well known sports and wildlife enthusiast having served as assistant secretary of the Board of Control for Cricket in Sri Lanka and is an excellent cricket commentator.

Pegasus unable to earn finance charges

Pegasus Hotels of Ceylon Limited which operated profitably in 1999 had been unable to earn its finance cost in the year ended March 31, 2000 and closed the year in the red.

An interim report covering this financial year said that turnover was down 18% to Rs. 85.4 million while the operating profit before finance cost, after charging management fees, was down 88% to Rs. 2.2 million from Rs. 18.2 million a year earlier.

Although finance cost was slightly down to Rs. 9.6 million from Rs.10.2 million, the company closed the year with a loss of Rs. 7.4 million against a profit of Rs. 8 million a year earlier.

With accumulated losses brought forward, Pegasus was carrying forward losses of Rs. 15 million in its books as at March 31, 2000.

Economic growth and economic management

by Kanes
Sri Lanka’s economic growth showed no sign of picking up in 1999. The GDP growth rate was 4.3 per cent, even lower than the 4.7 per cent growth in 1998 and far below the 6.3 per cent growth in 1997. As growth in 1995 was 5.5 per cent and in 1996 only 3.8 per cent, average annual growth in the last five years 1995-1999 is 4.9 per cent which is quite below the announced target of 7 to 8 per cent annual growth required for rapid rise in living standards.

Higher Growth of Developing Countries in 1999 over 1998

It is futile to make excuses for this unsatisfactory growth, particularly when such excuses do nor sound very convincing. In fact, there is a tendency to rationalize this mediocre performance by emphasizing that the growth rate of 4.3 per cent in Sri Lanka was higher than the all developing country rate of 3.3 per cent that year, and that her moderate growth in the context of a global economic crisis and depressed conditions is no small achievement. These excuses ignore, first, the fact that the developing countries did better in 1999 than in 1998. The Asian Development Outlook 2000 of the Asian Development Bank points out that the developing countries, as a whole, improved from 3.2 per cent in 1998 to 3.5 per cent in 1999. This was underpinned by the strong rebound in developing Asia where growth shot up from 2.3 per cent in 1998 to 6.2 per cent in 1999.

Countries which had negative growth in 1998 achieved significant positive growth, in 1999: Hong Kong, Indonesia, Malaysia, Philippines, Thailand and South Korea as shown in the table. These were the crisis-hit countries. Countries outside the epicentre of the currency crisis but slightly affected in 1998 too showed satisfactory growth in 1999: China achieved 7.1 per cent growth and India 5.9 per cent. If crisis-hit Asian countries recovered so dramatically, India and China which were slightly affected like Sri Lanka achieved high growth and developing countries overall improved their growth in 1999 over 1998, Sri Lanka’s mediocre performance remains a puzzle.

Second, Sri Lanka’s lacklustre performance in 1999 can hardly be attributed to global depressed conditions when world economic growth in 1999 was better than in 1998: World output grew at 2.5 per cent in 1998 but at 3.0 per cent in 1999. GDP growth in the industrial economies rebounded from 2.4 per cent in 1998 to 2.6 per cent in 1999. The US economy - Sri Lanka’s principal export market - continued to perform strongly in 1999 with buoyant domestic demand. It grew at 4.0 per cent as compared to 3.9 per cent in 1998. Further, the rate of growth of world trade volume too increased from 3.6 per cent in 1998 to 4.0 per cent in 1999. Thus, the world economic environment being more favourable than in 1998 could not have slowed Sri Lanka’s economic growth in 1999. On the contrary, it should have been conducive to higher growth as it was in the case of other developing countries.

Recovery of Stock Markets in all Developing Countries

Third, stock markets of almost all Asian developing countries show a marked recovery in 1999 but not of Sri Lanka’s. The CSE all share index which was 987 at the end of 1994 declined to 702 at the end of 1997; then it dropped to 597 at the end of 1998 and 573 at the end of 1999. In 1998, stock prices in most Asian countries dropped, e.g. Hong Kong, Singapore, Bangkok, Taipei, Bombay, Karachi and Colombo; only those of Kuala Lumpur, Manila and Seoul show a rise. In 1999, however, stock prices of all Asian countries rose: Seoul, Singapore, Jakarta, Bombay, Hong Kong and Karachi by as much as 50 to 75 per cent, Kuala Lumpur and Bangladesh by 25 to 50 per cent and Manila and Taipei 5 to 20 per cent. Both the countries which were directly hit by the East Asian currency crisis, i.e. East and South East Asian countries and those indirectly hit such as India and Pakistan experienced a marked upswing in their stock exchange: South Korea by as much as 75 per cent and India by 60 per cent.

Sri Lanka was the only Asian country whose stock prices declined — by 4.0 per cent — in 1999. This cannot be explained by adverse external factors for the same factors would have operated for other Asian countries as well but their stock prices boomed. Apparently foreigners had little confidence in the Sri Lankan stocks and in fact there was net outflow of portfolio investment in both 1998 and 1999, in contrast to net inflows in 1996 and 1997. As Sri Lanka received very little short-term capital, unlike East Asian countries, there were not much sudden outflows which destabilized the economy. This too was a major factor for the stability and high growth in 1997.

Economic Management

It is invariably the habit of authorities to take credit for good performance of the economy and to blame external factors for poor performance. When the year 1997 showed a high growth of 6.3 per cent the authorities attributed it to good economic management which made the economy resilient and insulated it from the highly uncertain global environment created by the East Asian currency crisis. When economic growth declined to low levels in 1998 and 1999 however, it was attributed to external factors: we were told the entire world economy was experiencing the worst economic crisis since the Great Depression in the early 1930s and the Sri Lankan economy was fortunate enough to achieve even 4.7 per cent growth in 1998 and 4.3 per cent in 1999. It is not revealed that the Indian economy confronting the same "sea of turbulence" achieved 6.8 per cent growth in 1998, even higher than the 5.0 per cent growth in 1997 and nearly 6 per cent growth in 1999.

The authorities do not seem to be perturbed by the downturn in the economy. On the contrary, they consider the low rates of growth as creditable achievements given the difficult environment, and that growth would have been even lower but for the good economic management which in the words of the Central Bank "helped to protect the economy to a large extent against the adverse spillover effects of the recent global economic recession". In their self-complacency, the authorities have kept the public wondering why the so called sound economic management failed to arrest the decline in growth in 1999 when all the crisis-hit countries of Asia did so and achieved higher growth in 1999 over 1998.

External Factors caused Economic Ups and Downs

The fact of the matter is good economic management had little to do with the high growth of the Sri Lankan economy in 1997 or in preventing even lower growth in the economy on account of the world economic recession with 1998 and 1999. The high growth in 1997 was mainly the result of rains which ended the drought of 1996 and converted the negative growth of minus 4.6 per cent in the agriculture sector in 1996 to a positive rate of 3.1 per cent in 1999 and the sharp rise of manufacturing on account of favourable external demand. Manufacturing output increased by 6.5 per cent in 1996, and 9.1 per cent in 1997. This marked increase in industrial and agricultural production resulted in a significant rise in exports growth from 7.6 per cent to 13.3 per cent in the same period.

The decline in overall economic growth in 1998 was mainly on account of a marked drop in the rate of growth of manufacturing output - from 9.1 per cent in 1997 to 6.3 per cent in 1998 - and also a decline in that of agricultural production - from 3.0 per cent in 1997 to 2.5 per cent in 1998. Consequently, export growth dropped sharply from 13.3 per cent to 3.4 per cent. The year 1999 saw an upturn in agriculture but it could not offset the further fall in the growth rate of manufacturing - from 6.3 per cent to 4.4 per cent - and the consequent fall in exports growth - from 3.4 per cent minus 4.1 per cent. The East Asian economic crisis and its contagion effects apparently did not affect Sri Lanka in 1997 but their impact was felt in 1998 and 1999.

If the drought was the principal cause of the decline in economic growth in 1996 and the rains combined with boom in manufacturing, the main causes of recovery and high growth in 1997, the persistent fall in the rate of growth of manufacturing - from 9.1 per cent in 1997 to 6.3 per cent in 1998 and further to 4.4 per cent in 1999 - was the crucial factor behind the downturn in the economy in 1998 an 1999. Manufacturing contributes 17 per cent of GDP and industrial exports constitute about 75 per cent of the total exports. The slowing down of the growth rate of manufacturing inevitably resulted in slowing the pace of export growth. Sri Lanka’s exports as mentioned earlier, grew in dollar terms by 13.3 per cent in 1997 but by 3.4 per cent in 1998; in 1999 they fell - for the first time in many years - by 4.1 per cent. While the decline in exports growth in 1998 was caused by a drop in the volume of exports, that in 1999 was caused by a fall in export prices (in dollar terms) by 10 per cent in spite of an increase in export volume. Actually, export prices had risen in 1997 and 1998 - both agricultural and industrial - but both declined in 1999.

Poor Performance of Textiles and Garments

Textiles and garments constitute Sri Lanka’s principal export accounting for about 53 per cent of the country’s total exports in 1999. Textiles and garments exports which had risen in dollar value terms every year in recent times, declined by 1.4 per cent in 1999, in spite of an 8 per cent increase in export volume because of a drop in export prices by 9 per cent. Over 60 per cent of Sri Lanka’s textiles and garments exports go to the USA - the largest market - and Sri Lanka’s textiles and garments exports to the USA which had increased by 3.4 per cent in 1998 declined by 1.2 per cent in 1999 on account of a fall in export prices by 7.3 per cent - a sign perhaps of increased competition from existing exporters with depreciated currencies and new exporters. The key to Sri Lanka’s economic growth, thus lies in the demand and price for its textiles and garments exports to the US market. High growth appears difficult without a rise in export prices in the American economy. This is the crucial problem in the Sri Lankan economy and our efforts should be to retain and expand our market in the US and to secure better prices without dissipating our energies on minor export markets.

Economic Management Played No Role

The high growth in 1997 and the low growth in 1998 and 1999 were mainly the result of external factors - climatic factors such as rainfall and the demand and prices for our exports, particularly textiles and garments in the US market. Good rainfall and buoyant demand for exports would have raised the economic growth rate in 1997 in any case; economic management had no hand in it. The lower demand and lower prices for textiles and garments in the US market caused lower growth in the Sri Lankan economy in 1998 and 1999 and economic management could not prevent it and did not cushion its impact. The mediocre economic performance in 1998-1999 is a matter not for self-congratulations but for a serious study of why economic growth dropped in 1999 when almost all the Asian economies and developing countries in general achieved higher growth in spite of an unfavourable external environment. If the high growth in 1997 was due to good economic management was the mediocre growth in 1998- 1999 due to poor management?

Coconut Oil versus Desiccated Coconut Industries
Robbing Peter to pay Paul

by Analyst
In the 1980’s when the analyst was trading in coconut products, the coconut oil industry was producing a significant volume of coconut oil for export. But the industry suffered from the general malady that has affected the country since the political leaders began to pursue inflationary policies with the ballooning budget deficits each year.

Domestic inflation rose much more than inflation in the external world. So, our domestic coconut oil producing mills could not compete with the coconut oil manufactured in countries like the Philippines. But the higher domestic inflation created a strong demand for coconut oil in the local market where the price soon exceeded the export price.

Our coconut oil exports were out priced in the world market and we could only become a marginal supplier producing only when the world market price went up with the usual price fluctuations in the market with all its imperfections. Alternative edible oils were not available in the domestic market and the consumer had a marked preference for coconut oil. There was no significant import of other edible oils. So the local coconut oil mills produced mainly for the domestic market where the profits were in any case better.

Coconut oil exports declined dramatically as seen from the following figures of volumes exported in (000 kgs)

‘441There has been a steep decline from 1990 to 1998 in the volume of exports as seen in the table. The FOB prices of exports and the Colombo market prices are shown in Table. By 1996 & 97, the domestic prices had exceeded the export prices. What determine the volume of exports of Coconut Oil are not the domestic price of Coconut Oil but its export price. So when a tariff on the import of other edible vegetable oils, is imposed, say on Palm Oil, it is the domestic price alone that rises and not the export price. When import tariffs on.

When import tariffs on other vegetable oils are kept high, the price of coconut oil as well as the price of coconuts will be raised. But this affects adversely the volume of exports of desiccated coconut since the export price of DC, which is also determined in the world market, will not rise. So when the government keeps the import tariff on vegetable oils high, the consumer of coconuts will be called upon to pay an unduly higher price. He will be subsidizing the producer of coconuts and the manufacture of coconut oil.

Why should the consumer, who is generally much poorer than the producer of coconuts, be made to subsidize the latter? We are protecting the coconut industry for the benefit of the coconut growers and coconut oil millers. The DC Millers Association have pointed out that the recent increase of import duty on edible oils from 5% to 35%, will adversely affect the desiccated coconut industry which is an export industry with good prospects now and in the future.

The Chairman of the Coconut Research Board has in an article to the Island newspaper, put out some spurious arguments about an excess of coconuts this year. He shows concern about this alleged excess. He should know that if the supply exceeds demand for coconuts, the price of coconuts will fall to absorb this excess unless those who demand coconuts, like the consumer, the DC producer or the coconut oil producer can’t buy any more. This will apply only to the manufacturers of DC & coconut oil if they do not have the capacity to process the coconuts into these products.

According to the spokesman of the DC producers, they have the capacity to process 90,000 tons, whereas they produced only 63,000 tons in 1998.If the market price of coconuts comes down, the DC millers will be able to absorb the excess production which according to the Chairman of the Coconut Research Board is 250-300 million nuts per year. He is basing his projections on interpolating the time series. But the coconut crop fluctuates with the weather, particularly the rainfall of the previous year.

If the crop increases and the price declines there will be an increase in demand to absorb any such increase. His argument that the DC mills can produce only 16,000 tons more is contradicted by the DC millers Association statistics. He also says that the DC exports can take up only 1/3 of the increase in world demand for DC There is no inherent reason why this should be so. The DC mills should be able to export more provided they have the capacity for production.

Remember the slaughter tapping of rubber to gain advantage of the high price of rubber during the war. The market will respond if there is the demand and there is the possibility of producing at a profit.

On the other hand there is no future for the coconut oil industry, unlike the DC industry. Both industries can export only if the export prices cover their costs of production. There is no case to subsidize the coconut producer by a protective tariff and the 35% duty on imported edible oils is unwarranted.

David Ricardo in 1817 enunciated the principle of comparative cost advantage and showed the benefits from international trade. Trade theory predicts that if you protect producers in one industry from foreign competition, say the coconut oil milling industry, then there must be a loss in economic efficiency and welfare. The DC industry competes with the coconut oil industry to buy coconuts and convert them to DC.

If the coconut oil industry is protected from foreign competition, the coconut oil producers will pay higher prices for fresh coconuts and the DC industry will suffer because they cannot afford to pay higher prices unless their export price goes up. Their export price will not go up because the local price of coconuts goes up due to high tariffs on edible oils introduced by the Government to protect the coconut producers and the oil millers.

The task of allocating production between DC and oil milling can be done in government regulation. The government can order how many coconuts should go to the DC millers and how many to the oil millers in the manner that the Communist planners did in the former Soviet Union. But this is not the best way to allocate resources, which in this case is the supply of fresh coconuts, between the two processes of production.

A competitive price system selects that allocation that minimizes total production cost of both coconut oil & DC. It would be unnecessarily expensive to manufacture only coconut oil & unnecessarily expensive also to use the two processes in anything other the natural ratio that emerges as a result of competitive market forces. Protection not only transfers income from consumers of coconut oil to the producers of coconut oil and producers of coconuts. It also raises the total costs of providing the people with a given amount of fresh coconuts and coconut oil with no corresponding gain to offset this loss.

There is a loss in economic efficiency and it impoverishes the community it may be that both DC & coconut oil production processes are inefficient and should be improved. But the two processes should be combined in optimal proportions and this is possible only if there is a competitive market determined price for coconuts and coconut oil. Such market determined price cannot exclude the import of edible oil, for long run equilibrium require that resources (land) should be used where the marginal cost equals the marginal return (the market price). The last thing the government should do is to hobble one of the competing industries with an excessive tariff to protect the other industry.

The long tem trend of the coconut oil industry is one of decline as pointed out by the Chairman of the Coconut Research Board. The number of oil mills decreased, he says, from 980 in 1987 to 156 in 1999. Of these only some 38 mills appear to be in regular operation with 128 functioning on an irregular basis. 60,00 workers, he says have already lost employment. Why should the industry be given artificial respiration when it is one which economists will say is a ``sunset’’ industry which must fade off in the long run?

Of course the industry is paying the price for economic mismanagement by our illiterate political leaders who since 1956 have sought to promote the economy by creating inflation far in excess of that prevailing in the rest of the world. They have engaged in spending sprees putting the budget into enormous deficit, while dispensing money in the name of social welfare - free education, free health, consumer subsidies etc; destroying our export industries thereby. This is the same fate that awaits our agriculture.

Seven of our processed agricultural products are at risk with the opening up of the economy to world trade. It is not the fault of the opening up but of faulty inflationary policies followed by our governments over the years. None of our agricultural products can compete with imports owing to the ruinous past policies which show no signs of change even now in spite of the budgetary platitudes.

The decision to raise the tariff on edible oil imports is obviously wrong and the government should not be subject to pressure groups of the trade. The coconut growers are all locals and whenever the industry went through boom times the estate owners have busted the excess incomes on conspicuous consumption rather than invest in the industry to upgrade the plantations. Such upgrading has always been financed by subsidized loans from the government, which in effect means that the rest of the community has subsidized them.

Even from a political point of view, there are more consumers; more voters who are consumers than coconut producers

There are other products made from the kernel or which are processed from the shell which according to the Chairman of the Coconut Research Board have good market prospects. These are edible copra, coconut cream, defatted coconut, and instant coconut. He says the export earnings from these products have increased by 30-50% over the last three years.

 There is also the market for products made out of coconut fiber and coconut shell like activated carbon.

If there is protection given by way of an import tariff for coconut oil, such as the recent increase in duty on imported edible oils, then the economics of these exportable products will also change adversely. There are also the earnings potential from toddy tapping which has not been given emphasis owing to moral considerations perhaps.

There should be tapping of coconuts permitted without government regulation. This will add to the aggregate demand facing the coconut grower or at least give him another option for securing income.

The Chairman of the Coconut Research Board also refers to other coconut products which can be developed like processing of coconut water. He says the Philippines Coconut Development Authority has listed some 300 uses of coconut. The economics of developing these products will all change when a protective tariff is imposed. The allocation of the fresh coconuts between these various products should be based not on government regulation but on market forces.

If the Government still wants to protect the coconut grower and the coconut oil miller, it should do so by a subsidy rather than by a tariff. Tariffs adjust the internal price structure to the internal cost structure whereas a subsidy will adjust the internal price structure to the external cost structure. If the government wants to protect the coconut oil millers, it should give a subsidy equal to the difference in price between the internal price of coconut oil in the domestic market and the export price of coconut oil. This will ensure that coconut oil exports will continue without distorting the internal price structure of coconuts for the other industries based on processing fresh coconuts.

Coconut oil exports could then continue without distorting the economics of other coconut products .Of course the money has to be found by the government to pay out the subsidy to the coconut oil industry. But at least a subsidy will be the least distortion of resources.

There are other arguments against a protective tariff for coconut oil. It will transfer income to high income groups with a higher propensity to import and thus lead to more imports worsening the balance of payments at a time when the war is reducing aggregate supply and the running down of foreign exchange reserves. It will also lead to more consumption.

Bartleet’s Weekly Market Commentary

A very quiet week of trading at the Colombo Stock Exchange ended with both indices witnessing moderate gains despite continued selling pressure on the part of foreigners. With the exception of Thursday where both the ASPI and MPI witnessing marginal declines, the rest of the four days of the week saw both indices witness marginal to moderate gains. For the week as a whole the ASPI gained 10.3 points (2.15%) to close at 478.9 points, while the MPI witnessed a gain of 15.9 points (2.07%) to end the week at 769.9 points. Equity Turnover reached its lowest level for the year on Monday but improved significantly on Tuesday, Wednesday and Thursday but ended the week on a rather quiet note. On a wow basis Equity Turnover totalled Rs. 136.55Mn. which represents a drop of Rs. 41.06Mn. (23%) from the previous week’s figure of Rs. 177.6Mn. Average Daily Turnover for the week totaled Rs. 27.31Mn. a drop compared to the previous week’s Rs. 35.52Mn. There were as many as 5.11Mn. shares traded during the week while Average Daily Share Volume totaled 1.02Mn. Foreign activity which was virtually nonexistent on Monday improved during the rest of the week due to moderate to heavy foreign selling which contributed Rs. 69.71Mn. (51%) to total market turnover. Foreign purchases which remained inactive for yet another week contributed Rs. 24.26Mn. (18%) to total market turnover. This resulted in there being a net foreign outflow of Rs. 45.45Mn. during the week.

Lanka Tiles Ltd. was the most actively traded stock during the week, which was the direct result of Ceylon Theatres Ltd. increasing their stake to over 10% of Lanka Tiles issued capital. Pelwatte Sugar, CTC, Aitken Spence Hotels Holdings, CCS, JKH, Korea Ceylon, Lanka Walltile, Colonial Motors, Aitken Spence, Royal Ceramics, Lanka Milk Food, LOLC, DFCC, Grain Elevators, Vanik, Lion Brewery and NDB shares were some of the other most actively traded stocks.

Despite the current situation that is prevalent in the country we still anticipate that there are opportunities for investors to take advantage of in the market in the coming weeks.

Rs. 130 million upgrading programme for Tri Star

The Tri Star group of companies plans to invest over Rs. 130 million to upgrade its production base and delivery services with new technology to increase productivity and quicker delivery while maintaining product quality, the company’s Chairman, Mr. Kumar Dewapura recently told senior executives of the group and the heads of its 34 factories and 8 service centres.

Tri Star which claims to be the country’s largest garment manufacturer and exporter said that its main foreign collaborator, S. R. Gent of the UK, will part finance the upgrading program with a grant of sterling pounds 300,000. Tri Star will carry the rest of the tab, Dewapura said.

The company which faced severe financial problems due to what Dewapura said were "circumstances beyond its control’’ in 1998 and early 1999, had turned around during the past year with increased non-quota orders. Its traditional buyers have returned to the company which had also attracted a host of new buyers, the chairman said.

He said that the group had been able to reschedule its bank liabilities and he was glad to announce that Tri Star will not sell any of its 34 factories due to these favourable developments.

The group had been pressed by the banks to divest some of its factories and meet its obligations to lenders. But Tri Star was able to raise fresh credit and Dewapura tenaciously fought to avoid the sale of any of the group’s factories.

Dewapura said that the upgrading program envisaged the setting up of a central cutting department for the group’s Colombo based factories. This facility equipped with computerised machinery and equipment will replace the separate cutting departments in each of the factories.

The group also plans to introduce modern sewing machines, purchase a fleet of prime movers, trailers and containers to meet the requirements of Marks and Spencer global logistic program. Marks and Spencer is a major buyer of Tri Star manufactured products.

Dewapura said that training programs and infusion of new skills and methods to improve quality control and packing are some of the other developments envisaged. He said that financial controls, administration and import export procedures have been streamlined.

He said that much of what they were able to achieve was thanks to their devoted and dedicated workforce that had stood by the company through good and bad times. This support reflected their philosophy of giving employment to the poor by opening factories in the countryside and offering their workers numerous welfare benefits.

They have divided their 34 factories into 4 main groups making each an independent profit making centre and had improved day to day operations, he said.

"It is important that every employee feels that the factory or institution where they work is their own. Even though we have the most modern machinery and equipment, a factory cannot succeed without the commitment and dedication of the workers. Therefore it is essential that the heads of factories and officials managing them pay attention to welfare of the workers and look after them with care.

"If you take the example of a family, it is when you treat your wife and children well and be kind to them that it will be a happy home. It is so in a factory. Whenever there is a bereavement in the family of an employee a committee appointed for each factory should do everything possible to help them,’’ Devapura said.

Group Deputy Chairman Upali Gajanayake stressed the need to enforce strict discipline at all levels sand that the company had no alternative other than to take firm disciplinary action against any officer who violates company policies. He said high officials should set an example to their subordinates.

Singalanka to sell off assets

Singalanka Standard Chemicals Limited, a company quoted on the Colombo Stock Exchange (CSE) which had its factory closed in 1996 by a court order, is seeking members’ authority to sell off its assets.

An extraordinary general meeting of the company has been summoned for June 29 to consider a resolution to sell the shares and assets of the company and first apply the sales proceeds to meet all liabilities.

Any funds available thereafter will be paid to shareholders on the basis of an equal apportionment per share owned by them.

The resolution authorises the directors to look for a prospective buyer.

Singalanka which owns a sulphuric plant at Ranala with a capacity to produce 30 mt of sulphuric acid per day had modified the plant to produce 10 mt per day as a larger quantity was not utilisable.

The major portion of the sulphuric production was combined with aluminium hydroxide to produce aluminium sulphate (alum) that was sold to the National Water Supply and Drainage Board for water purification.

The company had won the annual 3,000 mt tender for alum in 1992, 1993, 1994 and 1996 but thereafter was faced with competition from India on price.

Singalanka then decided to diversify production to other sulphates such as zinc sulphate, magnesium sulphate and manganese sulphate and got a company in Madras to do a feasibility report funded by SAARC.

This report was received in March 1995 and the company planned to produce zinc sulphate and magnesium sulphate but not manganese sulphate as these sulphates could not be produced in the same plant which was to be constructed alongside the alum plant.

But the closure of the factory on the order of the District Judge, Homagama in June 1996, on environmental grounds aborted this program. The company appealed to the High Court at Avissawella and made plans to move its factory to the Lanka Industrial Development Limited (Lindel) industrial estate at Sapugastenna. Lindel agreed to accommodate the factory within their premises and a block of land was allocated.

Plans for the construction of this factory and the purchase of a new plant were drawn. The NDB was willing to fund the project if the company generated some of its own funds to support it. The chairman of the company, Mr. D. C. L. Amarasinghe, said that a rights issue was necessary for this purpose but the board turned it down in April 1997.

"Sine then we have been managing the company by selling off our raw materials which have been deteriorating and some coloured sulphuric acid which were able to sell to the sugar industries.

"We also made plans with the permission of the lawyers to rent the warehouse and the land, the warehouse to Elephant House and the land for parking of containers, but this was not successful as the parties required these facilities in the vicinity of Colombo,’’ Amarasinghe said.

In April this year the company had got a feasibility report on the economics of producing acid and alum at their plant at a competitive price. The consultant had reported that 80% of the company’s sales had been from alum and 20% from acid. He has said that alum cannot be produced any longer to compete with the imported price and the ex factory price of acid too will come close to the current landed price.

The consultant had concluded that operating the Singalanka plant would not be viable any longer.

Hunas Falls pays a modest dividend despite retained losses

Hunas Falls Hotels Limited, a Hayleys-Jetwing collaboration, has boosted turnover 11% during the year ended March 31, 2000 and increased after-tax profits to Rs .3.4 million from Rs. 2 million the previous year enabling the declaration of a 5% dividend despite continuing retained losses.

The company paid a 2% dividend the previous year in spite of retained losses which had been marginally reduced to Rs. 3.3 million as at balance sheet date from Rs. 3.9 million a year earlier.

The company’s Chairman, Mr. Sunil Mendis reported that 1999 was the best year ever for tourist arrivals to Sri Lanka with visitor arrivals up almost 15% from a year earlier. The Hunas Falls Hotel continued to attract a significant clientele of discerning Sri Lankans and expatriate residents too, he said.

Expressing pride at the hotel’s continuing successes as an internationally recognized friend of the environment, Mendis said that Hunas Falls was featured in the cover page of the Green Hotelier , a magazine of the International Hotels Environmental Initiative.

He said that recognition of this type assist in maintaining high levels of enthusiasm and continuing environmentally friendly activities. With the country itself being marketed as an eco friendly destination, Hunas Falls will further strengthen its interest in this area.

Like most other hotel owners, Mendis implied disappointment at the government’s failure to exempt hotels from GST after April 1, 2000 or at least grant a further extension of GST exemption on foreign room revenue.

He said that as a result of international competition, it was not possible to get appreciable rate increases from travel agents and tour operators to adequately compensate the cost increases and the added GST burden. However, an even stronger marketing effort for Sri Lanka’s tourism product was being carried out by the government in close cooperation with the private sector. Sri Lankan Airlines too had been enlarging its network.

Mendis expected that all these efforts along with enhanced marketing of the hotel locally will contribute to an improved performance in the future.

Carbotels Limited, a subsidiary of Haycarb, is the largest shareholder of Hunas Falls with a 46.9% stake. The Jetwing group and associated companies are the other major players in the company.

Jetwing Hotels Limited was paid fees totalling Rs. 1.9 million during the year under review in consideration for an operation and marketing arrangement.

The directors of the company are: Messrs. Sunil Mendis (Chairman), N. G. H. Cooray, R. Yatawara (Managing Director), N. J. H. M. Cooray and V. K. Wickremasinghe.

Interest and exchange losses bedevil Galadari Hotels

Despite a trading profit of Rs. 14.4 million posted by Galadari Hotels (Lanka) Limited, up from Rs. 5.6 million the previous year, interest costs, depreciation and exchange losses continue to bedevil the company.

These charges totalling Rs. 140.5 million have swallowed up the operating profit and much more, leaving the company with a pre-tax loss of Rs. 126.1 million compared to a loss of Rs. 90.3 million a year earlier.

The Galadari’s accumulated losses are now Rs. 4.3 billion, over double its issued capital of Rs. 1.8 billion.

These figures have been circulated among shareholders by the troubled company which has for long been carrying the burden of interest and exchange losses which are substantially high this year than a year earlier.

The Galadari has an issued share capital of Rs. 1.82 billion. Its long term liabilities are Rs. 2.55 billion and a government loan of Rs. 350 million. Its fixed assets has been stated in the balance sheet at Rs. 3.56 billion and current assets at Rs. 54.5 million.

The company had a net asset per share of Rs. 3.93, down from Rs. 6.24 a year earlier. These figures are incorporated in the company’s interim statement to shareholders incorporating the first quarter’s provisional unaudited results.

Travel Agents Association having annual conference in Malaysia

Several leading Sri Lankan travel personalities will participate in the third convention of the Travel Agents Association of Sri Lanka to be held in Malaysia from June 16 to 18 on the theme "Managing change and marketing competitive advantage.’’

This is the first time that a national association here is holding its annual conference overseas, the Ceylon Chamber of Commerce said in a news release.

The chamber said that the event in Malaysia will be of great importance to the members of the Trave Agents Association as its 25th annual general meeting will be held at the same time.

The technical sessions will address current issues facing the industry, new developments, innovations and technological advancements in travel, aviation and tourism.

Several eminent local and international speakers who are industry specialists will make presentations.

They include Mr. Carlos Roesch, Former Minister of Tourism Costa-Rica 1994-1998, Mr. Cyrus Guzder, Chairman/Managing Director, Carlson Wagonlit, Travel Mumbal, a Past President of the Travel Agents Association of India and the Universal Federation of Travel Agents Association (UFTAA), Mr. G. T. Jeyaseelan, Head of Commercial, Sri Lankan Airlines, Mr. Lee Llat Check, President, National Travel Agents Association of Singapore, Mr. Jagath Fernando, Director, John Keells Holding, Mr. A. B. Ranjith Silva, Director, Ceylon Tourist Board, UK and Benelux Countries, Mr. Prema Cooray, Deputy Chairman, Aitken Spence Group of Companies and President of the Hotels Association of Sri Lanka.

Many important officials from Malaysia will participate at the event including the Minister and Director General of the Ministry of Tourism, presidents of the National Tourism Association of Malaysia, Kuwait, Bahrain , the presidents of the National Tourist Association of the countries in the entire SAARC region land the president of the Universal Federation of the Travel Agents Associations.

Airlines are offering special rebated travel to participants and hotels too are offering discounts, a news release from the Ceylon Chamber said. "The package has been arranged at a very special price,’’ it said.

The main sponsors of the event are Sri Lankan Airlines and the other sponsors are Abacus International, Thai Airways, Singapore Airlines and Cathy Pacific.

Picture grim if dimunition in securities’ value considered
Seylan Merchant claims marginal first quarter profit

The Seylan Merchant Bank has earned a small profit in the first quarter of the current financial year against a loss of Rs. 5.7 million in the comparative quarter a year earlier, provisional unaudited results now with shareholders reveal.

But shareholders who have received an interim statement covering the quarter has been told that these figures have been prepared without considering the impact under the Sri Lanka Accounting Standard No.22. If provision for the diminution in value of the dealing and investment securities portfolio were made in full, there would have been a Rs. 66.8 million loss for the quarter under review, the company has said.

This is due to the fall in value of Blue Diamonds Jewellery Worldwide Limited shares of Rs. 41.5 million (investment securities) and the fall in value of Rs. 25.5 million in dealing securities less the Rs. 0.2 million profit for the quarter.

The bank’s gross income during the quarter under review at Rs. 79.4 million was up 58% from the comparative quarter the previous year while its net interest income at Rs. 5.8 million was up from a negative Rs. 0.2 million a year earlier. With other income of Rs. 11.8 million, up from Rs. 5.7 million a year earlier, the bank had an operating income of Rs. 17.5 million against Rs. 5.5 million in the first quarter of the last financial year.

But the bank’s personnel costs at Rs. 7.1 million was up 33% from a year earlier and its premises, equipment and overheads at Rs. 8.5 million was up 72% from the comparative quarter in 1999. Loan loss provision too was up to Rs. 1.8 million from Rs. 0.9 million and operating expenses totalled Rs. 17.3 million. This compared to Rs. 11.2 million in the first quarter of the previous financial year.

The pre-tax profit was Rs. 0.2 million against a loss of Rs. 5.7 million in the first quarter of the last financial year. This remained the after-tax result as there was no tax obligation.

These earnings have enabled the company to slightly reduce its accumulated losses of Rs. 103.1 million to Rs. 102.9 million.

The company had an earning of 2 cents per share compared to a loss of 68 cents a share a year earlier. Its net assets per share at Rs. 7.31 compared to Rs. 7.69 in the first quarter of the previous financial year.

Sicille Kotelawala hony.consul for Cyprus

Mrs. Sicille P. C. Kotelawala, a director of several companies in the Ceylinco Group, has been appointed Honorary Consul General for the Republic of Cyprus in Sri Lanka.

Mrs. Kotelawala who is an advisor for foreign trade for the Kingdom of Belgium is a director of Ceylinco Consolidated, Deputy Chairman of The Finance Company Limited, Ceylinco Hotels Limited and Ceylinco Limited.

Educated at Bishop’s College, Colombo, she continued her studies in London. A accomplished Kandyan dancer, renowned for her interests in the arts, she is the author of the book "The Classical Dance of Sri Lanka - Kandyan Dance.’’

Two years ago, she contributed five entries on aspects of Kandyan dance to the International Encyclopedia of Dance published by the Oxford University Press, New York.

Mrs. Kotelawala is the wife of Mr. Lalith Kotelawala, Chairman of the Ceylinco-Seylan Group and the daughter of former Justice Minister Sam P. C. Fernando who later served as ambassador in Cairo.

The Competitiveness Initiative opens new offices in Colombo

The Competitiveness Initiative (TCI), a long-term, Colombo-based project managed by the U.S. consulting firm of J.E. Austin Associates and funded by the U.S. Agency for International Development, marked the opening of its new Colombo offices with a reception at its World Trade Center office suite on May 25, 2000. The reception also marked the opening of the Institute of Policy Studies’ Competitiveness Unit (IPS-CU). TCI is dedicated to identifying and implementing new commercial strategies to make Sri Lanka more competitive by reversing its historical pattern of low cost, low value business strategies.

The IPS-CU represents a major evolution in the organization of competitiveness in Sri Lanka. The unit represents the alliance of business, academia, and the policy establishment. Businesses’ participation is by way of hiring and paying for a director to lead the strategizing process and to oversee the development of action plans, the investment in them, and their implementation. Five industries have hired or are in the process of hiring a "cluster" coordinator - rubber, tea, jewelry, tourism, and information and communications technologies. A "cluster" is a critical mass of firms, suppliers, service providers, and specialized institutions in a particular field that is located within a country. Clusters form the operative unit of competitiveness. In addition to industry’s investment in strategy at the IPS-CU, academia is represented by Dr. Tilak Fonseka, who, in addition to serving as research director at the Postgraduate Institute of Management, serves as director of the IPS-CU. Much of TCI’s work is at the intersection of corporate strategy and national policy, and IPS’s contribution to the project’s work is to facilitate the coordination of interests at this intersection.

The operating premise of clustering in Sri Lanka is that where the Sri Lankan economy has been policy driven and politically driven for some time, the role of strategy has been diminished, and this at a time when the need to compete in global markets suggests that strategy should lead the way for commercial policy formulation, not, as currently practiced, the other way around.

The lamp lighting ceremony included Mr. David B. Flood, Resident Advisor for J.E. Austin Associates, Ms. Lisa Chiles, USAID Director/Colombo, U.S. Ambassador Mr. Shaun E. Donnelly, Dr. Saman Kelegama of IPS, and Dr. Tilak Fonseka of PIM. About 100 people attended the event.

Wet weather & rocketing freight dampens Hayleys Exports profits

Hayleys Exports Limited, the Hayleys subsidiary processing and trading in coir fibre, had seen a downturn in group profitability in the year ending March 31, 2000 attributed to a shortfall in supply of mattress fibre and increased purchase prices due to prolonged wet weather experienced throughout the year.

While the parent company itself succeeded in increasing its profits despite sharp increases in freight cost to the United States and Continental destinations and the appreciation of the rupee against European currencies, contributions from its associate and subsidiaries depressed the overall group result.

Mr. Sunil Mendis, Chairman of the company, said that two subsidiaries, Eco Fibres Limited and Bonterra Lanka Limited had posted reduced profits but their associate, Rileys, had once again significantly contributed towards group profitability.

Eco Fibres, a fully owned subsidiary exporting value added fibre products had achieved budgeted volumes for woven geotextile and products for soil substrates applications

"Yet a decline in profit was recorded primarily due to increase in price of raw material and price competition from domestic suppliers of similar products in user countries, who do not incur freight charges,’’ Mendis said.

He said that Bonterra which produces stitched erosion control blankets had a poor year. The high freight cost to its primary markets in the United States and Europe impacted on export volumes and margins.

Discussing prospects, Mendis expected a good coconut crop this year as in 1999 when the pick was up 25% due to continuous rains in 1998. With similar rainfall last year, the crop this year too is expected to be good.

He said that this is expected to lead to some reduction in the purchase price of coconut husk, but increases in fuel and electricity cost may negate the expected savings on raw material cost.

"Mindful of the companies’ exposure to the vagaries of weather, an economical alternative to sun drying of coir fibre is being researched,’’ he said.

Mendis expressed confidence of improving group profits in the current financial year saying that they continued their endeavours to penetrate new markets, diversify product range and improve quality and delivery standards.

The group which saw a marginal loss of turnover down, to Rs. 251.7 million from Rs. 253.1 million, saw pre-tax profits declining to Rs. 33.7 million from the previous year’s Rs. 54.5 million.

While the group’s after-tax result was a profit of Rs. 29.6 million, down from Rs. 45 million a year earlier, the company increased its profit to Rs. 24.6 million from the previous year’s Rs. 21.3 million.

The directors have recommended a final dividend of 20% on top of a 15% interim paid on March 31. The performance during the year under review reflected a group earning per share of Rs. 6.58, down from Rs. 10 the previous year. But net assets per share at Rs. 40.82 was up from Rs. 28.12 the previous year.

Hayleys Exports have made bonus share issues for the last five consecutive years since 1996.

The directors of the company are: Messrs. Sunil Mendis (Chairman), M. J. C. Amarasuriya, S. Krishnananthan, R. Yatawara, N. G. Wickremeratne, P. S. P. S. Perera, G. F. de Silva, F. R. Alles, M. N. Fernando and L. K. B. Godamunne.

Taxis versus three-wheelers

How do taxi owners fare against the ubiquitous three-wheelers clogging not only Colombo roads but also those of provincial towns?

They are growing bigger, judging by the performance of Quick Radio Cab (Pvt) Ltd. which began in 1987 with 25 Daihatsu Cuore cars and now boasts a 75-strong fleet.

"We’re pioneers in the field and remain active even though others like Ace Radio Cabs are no longer in business,’’ C. S. W. Mack of Quick Radio Cab said. Ace was an Aitken Spence company which was unable to operate profitably.

The business is not very profitable according Quick Radio’s Sarath Fonseka. Managing a fleet is a very difficult business he said. "At one time I had 110 vehicles and 65 were in the garage.’’

He says that it is difficult to run a taxi fleet with new cars and he has opted for re-conditioned vehicles. They are not diesel driven as might be expected but powered by auto gas.

Quick Radio says that they offer a 24-hour service 365 days of the year. All their cars are air-conditioned and equipped with tamper proof meters and Motorola communication sets.

Services offered includes airport drops and pick-ups (a popular service offered by several firms), hiring vehicles for weddings, luxury vehicles for tours and an emergency service.

Fonseka says that he can think of three radio cab services in operation in the city. He couldn’t remember the name of one, but he knew its phone number! The better known have easy to remember phone numbers.

Eagle honours best sales people at the Millennium Convention

Eagle Insurance held its annual sales convention at the Tangerine Beach Hotel recently to honour and recognise its top sales persons in the Life and General divisions for their excellent performance in 1999, a company news release said.

‘Eagles to the Millennium -Convention 2000’ was the theme of this prestigious event where 228 Sales Persons from different parts of the island qualified to participate.

This year’s convention was held under the patronage of Mr. Alan Parsonson, Deputy Chairman Eagle Insurance. "In the last ten years, you have achieved much. The future has more challenges and demands. I am confident that with a team like you, we can face all challenges we encounter," said Deputy Chairman Alan Parsonson in his address to the gathering.

Managing Director Eagle Insurance, Mr Chandra Jayaratne said, " 1999 was a very challenging year for all members of the Eagle Family. I am indeed proud to say that even during an year of transition, your courage and commitment kept the Eagle flag flying high Let us be inspired by our past success and face the challenges of the future with confidence".

This was also an occasion to commemorate that Eagle has been awarded the prestigious membership into the LIMRA (Life Insurance Marketing Research Association which is one of the premier marketing & research organisations in the world.). Already 2 top Eagle sales persons Ms D M Nawaratne and Mr A. Fernando have qualified for the prestigious International Quality Award presented by the LIMRA International, USA. The International Quality Award signifies that the agent has reached the top of the "Life Insurance Profession".

In addition, 11 members of the Eagle Team with Wings received further international recognition as they qualified to sit at the Million-Dollar Round Table in San Francisco, California, USA for the year 2000.

In the Life Division, Mr. Ajith Fernando of Colombo once again won the Best Sales Persons Award for his exceptional performance for the year 1999. Mr. Anura Dantanarayana of Ambalantota won the award for the Best Team whilst Mr P B Wijekoon (Kandy) was presented with the Best Regional Manager’s award.

In the General Division, Mr Buddha Perera won the Best Sales Executives Award, whilst Mr A L P Indika Ruwan was presented with the Best Sales Supervisor’s award. Mr Luxman Rajapaksha received the award for the Best Sales Associate.

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