Chemanex PLC with 35 years in chemical manufacturing for exports has posted a record group profit of Rs.327 million in the year ended March 31, 2009, up from Rs.178.3 million the previous year, on account of substantial capital gains made by disposing of its stakes in Commercial Leasing Company and Lighthouse Hotel, the company’s annual report reveals.

Chemanex Chairman B.R.L. Fernando said that the sale of 36.7% of Commercial Leasing for Rs.598 million yielded a capital gain of Rs.465 million while divesting its 6% stake in Lighthouse Hotel generated a further capital gain of Rs.147 million.

Fernando described these moves as "rationalization measures" undertaken during the first half of the year under review.

"The high interest rates and the risk profile of the leasing business prompted us to review our investment in the Commercial Leasing Company PLC. Consequently, we exited from this company realizing a sizeable addition to our liquidity in a tight money market," he explained.

"With the fall in tourist arrivals, we re-evaluated our exposure in the hospitality sector and exited from our investment in the Lighthouse Hotel PLC once again adding to our liquid resources."

He said that Chemanex is now positioned to pursue investment in export markets where the company has acquired and developed quality customers who valued and appreciated their knowledge and experience as demonstrated by increased orders.

The company’s MD/CEO, Mr. M.P. Jayewardena, announced that they hoped to embark on a new venture, the details of which they would share the moment it is finalized.

"We intend entering into an agreement with a multinational company to supply a product for the global market,’’ he said without identifying the product or the multinational.

``Our partner has guaranteed us that 100% of what we produce will be bought by them to supply to many parts of the world."

The year under review had seen several of the group’s manufacturing subsidiaries including Chemanex Adhesives, Yasui Lanka and Chemcel posting losses with the most profitable subsidiary being CAL Exports Lanka which turned in an after tax profit of Rs.26.2 million, up from a loss of Rs.2.4 million the previous year.

Chemanex Adhesives lost Rs.16.1 million against a loss of Rs.2.8 million the previous year while Yasui Lanka lost Rs.12.1 million against a profit of Rs.30.9 million the previous year.

Fernando attributed the loss at Yasui to a reduction in purchases by a large European customer depended on the motor car industry which is in recession. This company recorded a loss after generating considerable profits during the previous two years, Fernando said.

"For the future, the company is hopeful that it would secure a continuing order from a new customer we developed to mitigate the market risk profile of this venture. Consequently, we expect the company to recover and extend market reach generating improved results in the coming year," he said.

Chemanex Adhesives and CAL Exports, both with ISO certification, manufacture chemicals for both the detergent and weaving industries.

Fernando explained that Chemanex Adhesives had lost market share to Chinese competition and the management was reviewing the operation to decide whether to continue in this business.

Jayewardena said that the challenges they faced included high cost of energy, obsolete labour laws and over-valued currency and these were matters they had to battle with in the immediate future.

Chemanex has a stated capital of Rs.126.3 million, capital reserves of Rs.46.9 million, general reserves of Rs.232.8 million and retained earnings of Rs.652 million in its books.

The company was carrying in its books Rs.67 million on account of the current portion of its long-term interest bearing borrowings and Rs.92.1 million on account of short-term interest bearing borrowings.

CIC is the controlling shareholder of Chemanex holding 48.9% of its equity on its own account and 2.8% through CIC Agri Business. CIC’s Trust for Charity and Educational Purposes owns 10.3% of the company and Mr. S.K. Wickremesinghe 4.32%.

The Chemanex share traded at a high of Rs.65 and a low of Rs.37 during the year under review against a trading range of Rs.194 to Rs.43 the previous year. The company sub-divided each of its shares last year into three.

Net assets per share at Rs.77.60 were up from Rs.63.69 and shareholders will get a record dividend of Rs.10 per share for the year with a final dividend of Rs.4 per share on top of Rs.6 interim already paid.