We’ve been in the industry for 150 years

Consult us on regulatory changes says Bogala chief

Mr. Vijaya Malalasekara, Chairman of Bogala Graphite Lanka PLC, has expressed the hope that Bogala, which has been in the graphite industry for the last 150 years, will be consulted by the authorities who are proposing regulatory changes for the industry.

"We earnestly hope that the authorities concerned will consult us as we have been in this industry for the last 150 years. Regulations, we believe, should be done in consultation with parties who could be affected," he said in the company’s annual report.

The Geological Survey and Mines Bureau had informed the mining industry that the related ministry intends to make changes to the regulations applicable to the industry.

Bogala which hoped they would be consulted prior to promulgation of new regulations said they would be in a position to contribute positively towards the formulation of these regulations given their long history in the mining industry in Sri Lanka.

Bogala CEO Amila Jayasinghe said they have already sought clarification from the line ministry (about what is intended). "Pending response of the Ministry our capital expenditure plans have been temporarily reduced."

He further said that they are aware that foreign investors have shown interest in mining graphite in Sri Lanka. Depending on what their objectives are the competitive landscape is likely to change, Jayasinghe said.

The year ended December 31, 2013 had seen Bogala’s revenue decline to Rs.535 million from Rs.556 million the previous year due to changes in the product mix in sales resulting from the different grades of graphite extracted during the early part of the year.

"However, the company ended the year with a profit after-tax of Rs.24.8 million compared to PAT of Rs.23.8 million in 2012. It is also salient to mention that a reversal of depreciation amounting Rs.7.4 million resulting from the re-estimation of useful lifetime of Plant & Machinery is included in the PAT of the year," Malalasekara said.

He reported that the rupee had shown a modest depreciation against the US dollar during the year while the depreciation against the Euro was great. Despite this the company had suffered an exchange loss of Rs.13.8 million against a loss of Rs.30.6 million in 2012.

Malalasekara said that the year had been one of mixed fortunes for Bogala emerging from the changing competitive environment and regulatory (measures) and the likely legislative pressures.

"These challenges have tested our strength and our ability to adapt to them whilst ensuring that the sustainability of our business into the future is not affected," he said.

He reported that the investment the company had made in its Lubricant Plant was delivering incremental returns. They continued to focus on cost minimization and productivity improvements and have also focused on improving processes. The initial results they have seen were very encouraging.

"The process improvements that have been carried out should enable us to cater to the high end graphite market," he said.

"The support we received from our parent company AMG Mining AG particularly towards our marketing efforts is commendable considering the slow recovery of the international economy. Their continued support for the management team has been an inspiration and will continue to be so," Malalasekara said.

The company’s CEO, Mr. Amila Jayasinghe said that a 30% increase in electricity rates announced in April 2013 had adversely affected the company’s bottom line. Pressure on profitability and cash generation had been further aggravated by having to recognize an increase in royalty by 2% of the FOB value last November.

The higher royalty had been enforced retrospectively from October 2013 leading to an increase in the payment of royalty. Despite these setbacks the company had closed the year with a net profit of Rs.24.8 million including an adjustment in depreciation of Rs.7.4 million.

Bogala has a stated capital of Rs.80.07 million, reserves of Rs.5.7 million and retained earnings of Rs.111.2 million in its books. Total assets ran at Rs.537.6 million and total liabilities at Rs.340.6 million.

AMG Mining AG owns 90.33% of Bogala followed by the Secretary to the Treasury (0.54%). All other shareholders individually own less than 0.5%.

The Bogala share traded at a high of Rs.27.80 and a low of Rs.18 in 2013 closing at Rs.18.40. Net assets per share had grown to Rs.4.16 from Rs.3.64 the previous year.

The directors of the company are: Messrs. Vijaya Malalasekara (Chairman), Frank E. Berger (Vice Chairman), J.C.P. Jayasinghe, N.A. De Mel, T. Junker, J.J. Ambani, Amila Jayasinghe (CEO/MD), ET. Muller and Ms. Coralie Pietersz.

http://www.island.lk/