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Hayleys plants abroad Haycarb, the Hayleys subsidiary making coconut shell charcoal-based activated carbon, is also close to clinching a deal with Calgon Corporation of the US, a dominant player in the activated carbon industry, to set up a joint venture that would eventually lead to the transfer of value adding technology. "We're now in the process of either leasing or setting up anew an activated carbon plant in Sulawesi, Indonesia and, more or less following on its heels, another plant in Sumatra," Hayleys chairman Rajan Yatawara said in an exclusive interview with The Sunday Times FT. "We feel with that and expansions thereof we should be able to keep pace with the increasing demand." The new plants will start with two kilns with a capacity of about 2,400 tonnes. The total project cost is about $2.5 million each, which will include equity from minority shareholders and bank loans. "I think the coconut carbon business as a whole has a huge future, more so because coal is becoming more expensive," Yatawara said. "The coal used for making activated carbon is a fairly selective type of coal. The price of coal has started increasing with oil price increases. So long term, I think there'll be an overlap of coconut carbon moving into applications where coal was used before. So market-wise, it's strong. Production-wise, we're hoping to gear ourselves up to it." Hayleys already has a carbon plant in Thailand and its Dipped Products subsidiary is building a medical gloves factory there at a total cost of $10 million. Yatawara said Calgon Corp was "still reticent" about passing technology on value addition but that they had agreed to work as exclusive supplier and exclusive buyer for the major markets. "As our relationship gets stronger, they would be passing on value adding technologies over here and splitting the sale. We think it's going in the right direction." He said he hopes Calgon will eventually pass on all expensive value-adding operations such as special sizing of carbon and addition of chemicals to plants in Sri Lanka or to Thailand or Indonesia. "When we started in Thailand there was no market for coconut carbon. Now half our capacity is being sold in Thailand. Now China and India are awakening and if you look at the European and American market for carbons of all types and equipment containing carbon - there's a huge potential in China and India for similar developments. And Calgon can use Sri Lanka and our employees as the springboard into these territories." Demand for carbon used in gas masks and protective suits by foreign militaries geared for fighting in nuclear, chemical and biological warfare environments had died down, probably because of receding fears of threats from weapons of mass destruction. Haycarb faced entry barriers in such markets because of tough military specifications that favoured producers in those countries. Yatawara also said there was good potential for coir fibre-based value-added products because of booming demand from China and India and that the company was expanding its production base outside Sri Lanka to overcome raw material shortages here caused by drought. Hayleys plans to set up a rubberised coir plant in China, probably near Beijing, as a joint venture, transferring some machinery from Sri Lanka to China. "This will be followed on its heels by setting up fibre extraction capability in Indonesia. The actual location is still under debate but it will probably be in Sulawesi, although not near the carbon plant," Yatawara said. "In terms of value added products from coir, there's tremendous growth particularly in the geo-textile sector - brushes, mats, and the like, rubberised products." Yatawara said he hopes the coir business, although an older industry, would grow internationally in the same way as Dipped Products and Haycarb. The coir fibre business had recovered from the effects of droughts and crop shortages with profitability and performance back to normal this year. "Simultaneously there's been a big surge in demand from China and India, surprisingly," Yatawara said. "India is the world's largest producer of coir but they're no longer self sufficient in their own needs and there's import of coir now from Sri Lanka to India. Raw coir at the moment but it could develop into made products." Yatawara said Hayleys core business would remain gloves, carbon and related engineering, coir and coir products, and agricultural exports. "We're heavily involved in the agri-sector although we have still not seen major growth prospects. That is what we're looking for." Hayleys deputy chairman N.G. Wickremeratne said in the same interview that there was good potential in rubber gloves and value-added teas but sounded a note of caution about rising costs. "We came in with the intention of having a long-term involvement in the plantations sector," he said. "But we have to view with concern if wages are pushed up by political pressure to a great extent and we're not able to resist it. We can't run businesses at a loss. We're concerned about the total viability of the both tea and rubber industry." He warned that if established companies with experience in the field start moving away from plantations it could leave valuable state assets in the hands of people who are not best suited to manage them. "As forces in the plantations call for unsustainable wage increases, whatever its merits may be by the worker, if you can't make a margin on the plantations (the margins are very small) long term there could be problems. The latest collective agreement with labour unions would drive about 10 plantations companies into the red, even on current fairly good prices. "From our viewpoint, it reduces the amount you can invest in the plantations. When we are just about to make some money and make serious improvements to the plantations we have a big increase in wages." |
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