Accumulated losses Rs. 528 mn.,
survives by lenders’ grace
The deeply troubled Elephant Lite Corporation Limited, manufacturers of Laxapana batteries, has sold off 5 acres of its Homagama land mortgaged to the Hatton National Bank and the entire realized proceeds had been applied to settle a Rs. 25 million loan in May this year, the company has disclosed in its latest annual report for the year ended March 31, 2003.
Elephant Lite which retains three-and-half acres at Homagama where its factory and office are located has described the land as "excess."
The company which was carrying Rs. 528 million in accumulated losses as at March 31, 2003, has posted a loss of Rs. 7.8 million for this year, down substantially from the Rs. 14.5 million loss the previous year and the lowest loss posted during ten years of continuous loss-making.
Elephant Lite Chairman, A. Rajaratnam, said that turnover was up 13% to Rs. 150.6 million during the year with an operating profit of Rs. 10.3 million before finance charges had been posted. This included revenue of Rs. 13.2 million from the sale of franchised Laxapana products. After interest, the company suffered a loss of Rs. 7.7 million.
The company’s auditors KPMG Ford, Rhodes, Thornton & Company have without qualifying their opinion drawn attention to the fact that the company had incurred losses over the past several years and carried an accumulated Rs. 528 million loss as at balance sheet date. The company’s current liabilities exceeded current assets as at balance sheet date by Rs. 101.9 million and total liabilities exceeded total assets by Rs. 344.2 million.
"The company’s ability to continue in business as a going concern is dependent on the continuing support available to the company, from it’s parent company M/s E. B. Creasy & Company Limited and the related company M/s Darley Butler & Company Limited and lending institutions," the auditors have said.
Rajaratnam said that the steep increase in energy and other utility rates had resulted in a substantial increase in the cost of production. Local manufacturers did not enjoy any tariff protection from the concerned authorities.
"The market is flooded with cheap imports from China and other developing countries which has forced the company to compromise on profit margins on sales in order to meet the threat from these cheap imports," Rajaratnam said.
Claiming that the quality of their batteries was "second to none" and superior to most imported batteries marketed locally, Rajaratnam said that they would utilise their entire installed capacity to manufacture batteries locally. They have also taken steps to increase worker productivity.
He was hopeful that savings from better material sourcing, low cost finance and increased efficiency in production should help to reduce cost of production
"The company is confident, with grater attention being paid to efficient production management, that the year 2003 should be profitable provided there are no unforeseen circumstances," he said.
E.B. Creasy & Company Limited with 38.2% is the company’s biggest shareholder followed by the Secretary to the Treasury with 29.6%.
Elephant Lite has an issued capital of Rs. 32.4 million and a revaluation reserve of Rs. 151.4 million in its books.
The directors of the company are: Messrs. N. Jayasingam (Chairman - retired 30.12.2002), A. Rajaratnam (Chairman w.e.f. 24.01.2003 – alternate D. S. Abeyratna), G. Gunawickrama (Ceased to be director 04.03.2003- govt. director), S. D. R. Arudpragasam, A. C. Gunasinghe, R. N. Bopearatchy, R. C. A. Welikala and Ms. W. C. M. Dissanayake (w.e.f. 10.06.2003- govt. director).
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