Laxapana’s diversification yields results

Two consecutive dividends after long period of nil returns

June 13, 2015, 6:50 pm 

Laxapana Batteries Plc., a company founded 59 years ago as Elephant Lite Corporation Ltd. to manufacture torch and transistor batteries in Sri Lanka has ended a long spell of loss making and difficult years and succeeded in declaring its second consecutive dividend in the year ended March 31,2015.

Laxapana Chairman S D R Arudpragasam had said in the company’s just released annual report that it had continued to grow recording a turnover of Rs. 190 million in the year under review, up 81% from the Rs. 105 million achieved the previous year.

The pre-tax profit had also improved 44% to Rs. 19.5 million from the previous years, Rs. 13.5 million as a result of the adoption of new strategies to diversify the businesses to include a range of new products contributing to the growth of both turnover and profits.

"The decision to diversify and thereby achieve the business objectives of the company resulted in a higher emphasis on quality; the quality of our products surpassed the competitor standards and sales were supported by a judicious marketing campaign, all of which bore fruit," Arudpragasam said.

He explained that the company which was a dedicated torch and transistor battery manufacturer in the past had to adapt to changes in the dry cell battery market with rural electrification affecting local purchasing patterns of portable lighting.

"The company’s performance had been falling and it was imperative that the management made bold decisions to diversify the business, to arrest the decline and propel the business on a new upward path to achieve the desired growth," he said.

He had reported in the previous annual report that they had begun assembling CFL bulbs in their factory. This project has been successfully implemented and plans are afoot to widen the product range and improve market share by the end of the next financial year.

With investment in laboratory testing facilities, Laxapana has been able to impose very strict quality control to ensure the high standard of quality of their CFL bulbs. Research and development was an ongoing function with emphasis on offering innovative high-tech products providing better lighting at low energy consumption levels.

Arudpragasam noted that the dividend of 25 cents per share for the year under review "would be the second successive year in which a dividend is being paid after a long lapse."

Laxapana continues to market zinc chloride and alkaline type AA and AAA batteries, CFL bulbs, safety wax matches and sanitary napkins under the Lily brand name. It has also introduced a Laxapana brand re-chargeable torch to the market during the year.

The company’s factory and office are located on three and half acres of freehold land in Colombo.

The company has a stated capital of Rs. 138 million and retained earnings of Rs. 22.7 million in its books. Total assets ran at Rs. 268.2 million and total liabilities at Rs. 107.5 million.

E B Creasy and company with 51.58 % is the controlling shareholder.

All other shareholders individually hold less than 6.5%.

The company has 1,963 shareholders on its register with the majority holding between 1001 and 10,000 shares. The Laxapana share closed at Rs. 4.60 in the year under review trading between a low of RS. 3.40 and a high of Rs.6.70. This compared to a close of Rs. 3.50 the previous year on a trading range of Rs. 3.40- Rs. 6.20.

The directors of the company are, S D R Arudpragasam, Chairman, K D Sumanasekera (CEO), R N Bopearatchy, S Rajaratnam, R C A Welikala, P M A Sirimanne, A R Rasiah, S M P Palihena, A M Mubarak and S W Gunawardena.

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No dividend from Madulsima for 13 years running

Mr. Harry Jayawardena, Chairman of Madulsima Plantations PLC which is carrying over Rs. 2.1 billion in accumulated losses in its books, has told shareholders in the company’s annual report for the year ended Dec. 31, 2014 that he "regrets very much" to tell them that the directors were not recommending a dividend for the 13th consecutive year.

Although there was no dividend to shareholders, the company’s largest shareholder, Stassen Exports Ltd., with 35.17% of Madulsima has received a Managing Agent’s fee of Rs. 13.7 million in addition to rent of Rs. 2.28 million for its Colombo office.

While these figures are carried in the annual report under a note titled "transactions with parents and related entities", the director’s report elsewhere said that the management fee had been "reduced substantially to Rs. 12 million per annum" with effect from Jan. 1, 2009."

The report also says that the directors did not receive any remuneration or other benefits during the accounting period under review.

Madulsima has valued its timber reserves at Rs. 2.65 billion helping to keep its total assets above total liabilities despite the retained losses.

Stassen Exports and Melstacorp, a related company, with 31.20% of Madulsima are the controlling shareholders of the plantation company with a portfolio of mainly high grown tea, are the controlling shareholders. The Secretary to the Treasury holds 13.10% with other shareholders individually holding less than 1%.

Labour cost, the major cost in the tea industry, is going up with no effort to link wages to productivity as urged by the industry.

Jayawardena has said that production costs of the company, even prior to the last wage increase in April, were uneconomic. It was crucial that the industry moves away from the traditional wage model. The introduction of an out-grower system with worker participation was one approach that can be attempted.

He advocated measures such as mechanical harvesting, outsourcing and improving the living environment of the plantation worker saying these were areas in which the government had a key role to play as they must be implemented on a national scale.

"With fluctuations observed in the weather pattern which is affecting timing of agricultural practices and harvesting, the plantation industry is increasingly becoming a relatively volatile sector for investment," he said.

Madulsima saw revenue up to Rs. 2.2 billion in 2014 from Rs. 2.05 billion the previous year while it’s after tax loss of Rs. 277.7 million, up from a loss of Rs. 219.6 million a year earlier, translated to a loss per share of Rs. 9.58 (Rs. 7.57 the previous year).

The company has total assets of Rs. 4.87 billion and total liabilities of Rs. 3.29 billion in its books.

The directors of the company are Messrs. D.H.S. Jayawardena (Chairman/MD) R.K. Obeysekere, Zaki Alif, Dr. N.M. Abdul Gaffar, S.K.L. Obeysekere (Director/CEO), Dr. A. Shakthivale and D.S.K. Amarasekera.

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Vehicle sales propel Dimo’s 2014/15 performance

"Rs. 2.5 bn. workshop and showroom facility among best in Asia"

June 13, 2015, 6:39 pm 

Diesel and Motor Engineering PLC which celebrated its 75th Anniversary, during the year ended Mar. 31, 2015, has posted revenue of Rs. 28 billion and a profit after tax of Rs. 596 million, successfully achieving its planned profit before tax which was a substantial increase from the previous year.

"We expect this growth momentum to continue into 2015/16," the company said in its recently released annual report.

The company which was founded in 1939, and incorporated in 1945 has long held the Mercedes Benz agency and have in more recent years branched into Tata and Mahindra and Mahindra ranges.

The company’s chairman, Mr. A R Pandithage, said that external factors such as a stable US dollar, had remained helpful during the year. Relatively low interest rates, increasing total industry volume of commercial vehicle sales, and the commencement of construction related projects (DIMO is a supplier of construction equipment) and many other factors had fostered a conducive environment for business.

Dimo has invested Rs. 2.5 billion, including the land purchase price, in its Dimo 800 facility in Colombo. This facility with 24,748 square metres built area houses the Mercedes Benz Centre of Excellence which became fully operational during the year under review.

"The facility consisting of 16 car showrooms, and a 85-bay state of the art workshop is recognized by Daimler AG as one of the best facilities in Asia," Pandithage said.

He said they had established a branch in Jaffna in 2009, to serve the Northern Province. It is supported by their customer contact points in Vavuniya and Mannar.

Saying they had made significant investments in the recent past in their vehicle related segments, Pandithage was confident that this will provide the competitive edge to seize opportunities arising in these segments in the medium to long-term.

The company’s Director/CEO A G Pandithage said the number of vehicles sold during the year had increased by 176% from the previous year and this segment stands to gain from the gradual increase of the country’s per capita income.

"The Tata passenger vehicle sales grew by a staggering 228% after reposition of the products offered," he said. "This year we sold ten per cent more Tata commercial vehicles, the main contributor to group turnover. The last six months in particular generated 76% of units sold for the year; we expect this momentum to continue well into 2015/16."

The Tata commercial vehicle business has been earmarked for further investment given its potential for future growth, he said.

Pandithage also said that the turnover of their marketing and distribution segment grew to an impressive Rs. 3.35 billion from Rs. 2.65 billion the previous year with the growth driven by their tyre business where turnover increased by 24%. They had embarked on retailing tyres under the brand ‘Dimo Tyre Mart’ which was part of their medium and long-term strategy for the business.

Plans for the forthcoming year include the better utilization of workshop capacity with results expected to flow in from the expansion of the spare parts distribution business during the previous year. Consequently, an improved performance is also forecast for the vehicle after sales segment.

"The state infrastructure development programs are expected to pick up during the second half of the year which should have a positive impact on demand for our construction and material handling equipment and after service segment," Pandithage said. "The marketing and distribution and the electromechanical, bio-medical and marine engineering segments are also expected to produce an improved performance."

Dimo has a stated capital of Rs. 425.29 million, other equity components of Rs. 2.84 billion and revenue reserves of Rs. 6 billion in its books. Total assets of the group stood at Rs. 18.07 billion and total liabilities at Rs. 8.83 billion.

Earnings per share at Rs. 67.15 for the group and Rs. 61.57 for the company were up from Rs. 44.34 and Rs. 31.54 respectively for the previous year.

The Employees Provident Fund is the top shareholder of Dimo with 18.59 % of the company, up from 13.84% the previous year. The directors comprising the Pandithage and Algama families are also major shareholders with the top 20 shareholders on the register owning 81.18 % of the company.

Mr. A R Pandithage owns 11.17%, Mrs. J C Pandithage (10.64%), A&G investments (6.86%), Mr. C Algama ( 6.40%) and Mr. A G Pandithage ( 5.92%).

The Dimo share closed at Rs. 630 on March 31, 2015, trading between Rs. 485 and Rs. 730. It closed at Rs. 505 the previous year trading between Rs. 450 and Rs. 649.

The directors of the company are Messrs A R Pandithage, (Chairman / MD) A G Pandithage (CEO), AN Algama, S C Algama, Dr. H Cabraal, B C S A P Gooneratne, Prof. U P Liyanage, A M Pandithage, R Seevaratnam and R C Weerawardena.

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Sri Lanka sells Rs15.0bn in 07 and 09 year bonds; rupee falls to record low

June 12, 2015 (LBO) – Sri Lanka has sold 15.0 billion rupees of seven and nine year bonds after calling bids for 12.0 billion rupees of bonds, the state debt office said.

The debt office on Friday sold 5.35 billion rupees of seven year bonds maturing on 01 October 2022 at a weighted average yield of 8.56 percent.

A nine year bond maturing on 15 March 2025 was sold at an average yield of 8.89 percent, raising 9.65 billion rupees.

The state debt office of the Central Bank offered 2.0 billion rupees in four year bonds, 3.0 billion rupees in seven year bonds and 7.0 billion rupees in nine year bonds.

All bids for the four year bond was rejected.

Meanwhile the Sri Lankan rupee has fallen to a record low of 134 on Friday ahead of a possible Parliamentary election in the near future.

Sri Lanka’s Hemas group mulls acquisitions with cash pile

COLOMBO (EconomyNext) – Sri Lanka’s Hemas Holdings group says it is looking at “transformational” growth opportunities, having amassed a cash pile through a rights issue and disposal of assets.

Chairman Husein Esufally said that given management’s plans for growth through acquisitions, and investments in new markets, it went for an infusion of fresh capital by way of a rights issue of four billion rupees.

Strong demand for the company’s shares, mainly by foreign institutional investors, prompted the controlling shareholders to forego their rights.

“Proceeds of the rights issue, proceeds from the sale of the power business and our traditionally low gearing, places the company with a healthy cash pool to look at transformational growth opportunities,” Esufally told shareholders in the firm’s annual report.

But he said the Board of Directors will exercise “due care” to ensure that new investments are aligned with the group’s core business and deliver attractive returns.

Hemas Holdings has said the proceeds of the rights issue are mainly to fund strategic investment opportunities in healthcare and personal care and that the firm is looking at growth opportunities in Bangladesh.

ACCOUNTS MANIPULATED! - Four independent CIFL Directors allege

By Ishara Gamage

Ceylon Finance Today: Four independent directors of the Troubled Central Investments and Finance PLC (CIFL) yesterday alleged that there had been many manipulated figures in the financial statements of the company since 2004.

The numbers presented to the board meetings we attended as independent directors from end 2012 have been completely distorted, these four independent Directors told Ceylon FT yesterday on the basis of anonymity.

These were submitted by fully qualified professional accountants and we as non executive directors had no way of getting the correct picture other than believing them. In fact the accounts presented to the Board from the time we served on the Board were showing positive bottom lines and even the audited accounts showed a small net profit, they said in disdain.

When the CBSL directed us to remove the former CEO on 23 December 2012, and wanted us to act for the CEO, we went into the accounting records and found that they were really messed up. We found that the values of properties mortgaged to CIFL by Aspic Homes against their dues were heavily inflated.

When we made further inquiries we found that the actual value of net assets were covering only about 33 per cent of the deposit base. Based on this information, we immediately stopped the interest accrual on the Homagama investment with immediate effect and started providing for the actual interest liability. Then, we noted that the company was making a loss about Rs 60 Million a month, they said. The situation shown in the KPMG audited accounts indicate the most prudent position of the assets. All uncertain values are provided including around Rs 1.6 billion due from Aspic Homes (capital and interest). That is the reason for the huge loss of Rs 4.3 billion shown in the current years' accounts.

The possible realizable values of properties mortgaged to CIFL by Aspic Homes against these due amounts were totally ignored in these accounts because we have no faith in the valuations given by previous valuers

With regard to liabilities, we have ensured all known liabilities are recorded.

The incurred net loss of Rs 4.3 billion during the year ended 31st March 2014 and as of the date has a net liability position of Rs 3.9 billion, latest audited accounts show.

"These conditions cast significant doubt on the company's ability to continue as a going concern and therefore its abilities to realize assets and discharge liabilities in the normal course of business," KPMG, auditors stated in their audit report of the company. During the previous year ended 31st March 2013 the company has reported a net loss of Rs 332 million.

The company does not meet the regulatory requirements for capital, the losses mainly due to large number of written off's, the accounts stated.

The company last Wednesday releases their latest audited accounts to the Colombo Stock Exchange almost after a year's time.

"We have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements ", KPMG, auditors further stated.

They also highlighted the company's non compliances with certain provisions of the Finance Act and the Companies Act. The company's total asset value has reduced to Rs 216 million from Rs 3.8 billion during the year.
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