Decrease in turnover and an operating loss are the significant features contained in the provisional accounts of Pugoda Textiles Lanka Limited for the 3 months ended June 30, 1996.
The company's turnover for the 3 months decreased by 24% from Rs. 208.3m. to Rs. 158 m. During the period the company incurred a loss of Rs. 63.4 m. compared to the Rs. 22.7 m. loss for same quarter the previous year.
"As a result of the staggered power cuts our production output was drastically reduced, the reason being our machinery which normally works 7 days a week and 24 hours of the day needs a couple of hours of set up time before the production is commenced" says V. R. Nadaraj, Managing Director.
The Company's balance sheet shows decrease in share- holders' fund by 33% from Rs.425.1 to Rs.284.2 m.
The Directors of Ceylon Oxygen Limited have resolved to recommend to the shareholders the increase of the authorized capital to Rs. 500,000,000/=. The present authorized capital of the company is Rs. 60,000,000/= and has been issued in full.
An extra-ordinary general meeting will be held on 7 October, 1996 to pass the special resolution to amend the article of association in this regard, according to the circular issued by the company.
Decline in total income, pre-tax profit and post-tax profit were recovered for the 3 months ended June 30 1996 according to provisional accounts.
Total income decreased by 18% from Rs. 3,054,605 to Rs. 2,493,831. However, shareholders' funds increased by 7% from Rs. 112.7 m. to Rs. 120.2 m.
Taj Lanka Limited incurred a Rs. 23.2 m. loss for the 3 months ended 30th June 1996, according to the provisional accounts. This shows a105% increase in loss compared to the same period the previous year. The carry forward loss at the end of the period was Rs. 332.6 m. after adding up the brought forward loss of Rs. 309. 4 m.
Asian Cotton Mills Ltd., recorded Rs. 36.1 m. turnover for the 6 months ended 30th March 1996 according to the provisional accounts.
However the company incurred a Rs. 9.1m. loss compared to the previous year figure Rs. 4.7 m.
Unfavourable performance of the company is mainly due to power cuts and the sluggish market conditions for domestically produced yarn, says Managing Director Mr. K. M. H. Akbar explaining the factors for the unfavourable performance of the company.
With most companies across the boards incurring heavy losses, Commercial Development Company Limited was able to earn Rs. 7.2 m. profit for the 3 months ended 30th June 1996 according to provisional accounts. However it shows 25% decline in pre-tax profit of.........
Post-tax profit dropped by 29.8% from Rs. 5.7 m. to Rs. 4.0 m. company's turnover increased by Rs.115,600/= a marginal increase form Rs.13,006,955/=.
Reverina Hotels Limited reported a Rs. 7.9 m. operating loss and Rs. 7.3 m. net loss for the 3 months ended 30th June 1996 according to the provisional accounts. However, directors have proposed 10% final dividend during the period under review.
The company's turnover declined by 40.7% from Rs. 23.8 m. to Rs. 14.1 m.
According to the provisional accounts, turnover of Eden Hotel Lanka Ltd., for the 3 months ended 30th June, 1996 was Rs. 28.0 m. This is an increase of 82% over the same period in the previous year.
Despite the increased turnover, the comapny incurred a Rs. 11.8 m. net loss for the period as against Rs. 19.1 m. previous year. The total loss carry forward at the end of the period was Rs. 199.4 m.
Representatives from the international spice trade met in Colombo this week to inject new life to an ailing industry which centuries ago had drawn enterprising European explorers to our shores.
The spice trade had suffered a sudden setback from 1991 in the wake of political upheavals in Eastern Europe, when markets were closed, officials said.
Forty delegates from twenty countries participated in the International Spice Group (ISG) meeting.
Though spice markets had picked up since 1991, they were yet to match the pre-1991 levels.
At present annual earning from spices amounted to less than US $2 bn worldwide.
The Group, which included spice-producing countries, as well as spice-consuming countries, also exchanged information on production, export, marketing and consumption trends.
The meeting of the Group was the fourth in a series of meetings convened and sponsored by the Commonwealth Secretariat and the International Trade Centre.
The International Spice Group founded in 1979 following the International Symposium on the Export Development of Spices held in London has since held Group Meetings in 1986 (Delhi, India), 1989 (Singapore) and 1991 (Kingston, Jamaica).
Producing countries that have accepted the ISG arrangement upto now include Sri Lanka, Nigeria, Solomon Islands, Trinidad and Tobago, Jamaica and Kenya.
Consuming countries include the Netherlands, Denmark and Singapore.
"Draconian" is the word that has been used most frequently in the press in the past few weeks to describe the Rehabilitation of Public Enterprises Bill. After having lived through the nightmare of the Business Undertakings Acquisitions Act of 1971, the use of the word "draconian" seems perfectly logical and legitimate. This outcry should not surprise the government. It should know by now that however earnestly it makes assurances that the Bill will only be used for the noblest of purposes, the business community will (and should) protest simply because it leaves open too much room for misuse.
Admittedly a government would be concerned that enterprises which have been nationalised are being mismanaged and might fail and would therefore feel that some provision needs to be made to meet such a situation. Speaking in support of the Bill the Attorney General has stated that preventing the loss of workers' jobs was a specific and primary goal of this Bill. The Government's rationale for proposing this Bill would appear to be that it would be used to avoid social unrest created by mismanagement. Another reason cited was the prevention of asset stripping.
However the language used in the Bill suggests powers that are very much broader and that could be used arbitrarily. Indeed the reasons stipulated in the Bill for the vesting in government of a privatised public enterprise are vague and lack precision.
The Bill reads (underscore added) that the President may re-nationalise any enterprise in the following situation: "Where the President is of opinion that in any privatised public enterprise there is, or likely to be, (a) a cessation of or a substantial reduction in the work of any of the units constituting the business undertaking of such enterprise; and (b) non-employment or retrenchment of workers of such an enterprise...., and the non-payment of wages or statutory dues of such workers."
A closer look at the implications of the three underlined phrases explains why the word "draconian" is appropriate. According to this bill, the President will not need any concrete evidence (or even economic analysis) on which to base a re-nationalisation. She can merely be "of the opinion" that an enterprise fulfills clause (a) and (b) in the above paragraph. Moreover, she does not need to base her decision on past performance. She can instead look into the future (perhaps into a little crystal ball) and re-nationalise an enterprise if she is "of the opinion that there is likely to be" fulfilment of clauses (a) and (b).
The Bill stipulates that a Presidential Order should be placed before Parliament for approval. But, immediately on the issue of the Order, the Competent Authority takes possession and control of all the assets of the enterprise which he can use for the purposes of the enterprise. Thus, even if Parliament refuses to approve the Order (or approval has not been obtained) and the Order is deemed to have been revoked, 4 months or more could have elapsed and the erstwhile owners would hesitate to take over the management of the enterprise.
At a time when the business climate is gloomy and privatisation is (at best) a hard sell, this Bill is the last thing that the economy needs. The privatisation of the plantations, although hurriedly planned and conducted at the "bottom" of the market, did considerably well in terms of revenue raising. With bigger privatisation such as Telecom in the pipeline, the government should be looking to create a supportive policy framework in order to bolster investor confidence. Legislation like this does just the opposite: it scares potential investors out of their wits. Investors have had a close eye on the resurgence of trade union activities, the Workers' Charter saga, etc. under the PA government and will no doubt see this as a dangerous submission to trade union power.
Labour unions will now be able to flex their muscle and threaten their employers with re-nationalisation. In a country that went through more than 72 hours without power as a result of a trade union strike, this does not seem unlikely.
The government is making two major mistakes by passing this bill. First, as mentioned earlier, they are failing in their obligation to create a supportive policy and legal framework in which privatised enterprises can thrive. Second, they are creating disincentives for long-term management of the enterprises (and their resources/assets) that have been privatised. By leaving this Bill hanging over new owners' heads, the government is encouraging adoption of a short-term perspective focusing on the prevention of re-nationalisation. Many investors buy public enterprises with a long-term view, in spite of the fact that they will have to incur losses in the early years. This type of investor would now steer clear of privatisation.
It seems as though the government has forgotten its commitment to the free market.
The apparel and textile industry is the earner of highest export revenue in the country. For the first six months of 1996, earnings were Rs. 45,286.62 mn, while total earnings in 1995 were Rs. 94,946mn.
Statistics show that out of a total of 642 garment exporters, 250 belong to the small and medium scale sector, which provides employment to 160,000 people. Scattered mainly in the Colombo and Gampaha districts, these small and medium factories are currently facing numerous problems.
According to Sri Lanka Chamber of Garments President, C.M. Fernando, prior to the introduction of the 200 garment factory programme these small factories accounted for 65 percent of the total garment exports and this percentage was disturbed by this programme.
"During the first 2 years of the 200 garment factory programme, the small factories faced serious difficulties", he said. Most of the small factories had only a small percentage of quotas of their own. According to the terms of the Ministry, a factory was entitled to a performance quota, where the previous year's performance would entitle the factory for the following year's quota.
In addition, there was a large number of quotas which belonged to the "pool" which the factories had access to, but were later denied. "We had performed a substantial amount from the pool, but when the 200 factories were opened, they took the position that we were not entitled to what we performed on the pool ", Mr. Fernando said.
Due to the difficulties faced by the small factories during this period, the Sri Lanka Chamber of Garments came into being. According to Mr Fernando there is a Cabinet decision which says anyone who opens a factory is not entitled to any quotas, but can apply to those already in the pool. Even in this instance, the existing factories are allocated quotas in the pool and the remainder can be taken by the newcomers. Hence, by this decision those already in the trade are not disturbed, he observed.
At present, a few factories have been opened on this basis. "The Textile Quota Board refuses to depart from this Cabinet decision, but at persent there is a lot of political lobbying to change this decision and make allocations", Mr. Fernando said.
Another problem faced by many of these small factories is that they have very little machinery and a fair amount of capital is needed to upgrade these facilities with new technology. "The present market conditions do not permit these small manufacturers to take this step, because at present we are operating in a market of falling prices", Mr. Fernando said, adding, that the Chamber suggests a re-structuring fund for the small and medium sector garment industry, being either an Asian Development Bank or World Bank loan chanelled through the commercial banks at low interest.
Marketing is an area which has to be developed in order that the small and medium sector may survive. Awareness programmes are needed to enhance the knowledge of the small factory owners, Mr Fernando observed. According to him the Export Development Board had organised programmes abroad and had received a very poor response, because the people could not afford such programmes. "There will have to be many more programmes which are at least 100 percent financed for the participants, giving them the chance to meet buyers face to face," he said. Unlike at fairs, where there is a very small chance of getting buyers, if direct meetings are organised between buyers and sellers then it would be a success both here and abroad, he observed.
The other important aspect concerning small and medium factories is the lack of skilled labour. This is mainly due to the fact that many of these people receive employment abroad and those who are trained are insufficient for the industry. Mr Fernando feels that at present there are less people entering the garment industry, because the jobs are strenuous and takes long hours. "In the rural areas, there is a serious dearth of labour during harvest time, when employees prefer harvesting in comparison to their factory jobs", he said. Awareness had to be made and this lethargy which has crept into the minds of the people has to be remedied in some form, Mr Fernando said. Not only in the rural areas but also in the urban sector the lack of skilled labour is common. This is due to several reasons, which include, poor living standards, difficulties in transport etc. The number of holidays is also causing a serious problem. With the April and December holidays, there is a great deal of absenteeism in these factories, where frequent leave is taken. "Apart from the lower ranks there is a severe dearth of personnel at middle management level", Mr Fernando said. According to him the reason for this was that the expansion of the garment industry took place very quickly and most of the lower ranking employees were given higher positions at an unrealistic salary scale, due to the demand in the industry. Hence, the small factories, currently find that they cannot afford such skilled labour at a high cost. According to research on Vocational Training Centres, it was found that the government spends as much as Rupees 50 million on vocational training, but those that get the training are not an appropriate labour force. The Chamber has suggested that these training institutes should be handed over to the private sector who will know the type of skills they require. Furthermore, it would be wise to have training centres such as the Textile Training and Services Centre which is in Ratmalana, scattered around the country. This would give the rural community an opportunity to receive a proper training. Otherwise, a factory in Gampaha sends its staff all the way to Ratmalana and transport is not even provided, Mr Fernando said.
Simplification of procedures and cutting down on delays and costs in port constitute another important area. "One of the problems that we are facing is that the port authorities delay the clearance of cargo and sometimes we have to wait for days for fabric to arrive at our factory, to commence production", Ashraf Sattar of Continental Fashions said. In his personal experience he has paid over Rupees 3.8 million in 1996 only for air freight, due to problems at the port. "The simplification of documents is another vital part", he said, stressing that there is a great deal of documentation in the Ministry, Customs and Port, resulting in various delays. On the part of the Government, the documentation reduces pilferage and corruption, but on the part of the garment exporter, it causes a great deal of hassle and unnecessary delay, which should be looked into, he pointed out.
"Due to lobbying by the textile manufacturers there is an attempt to introduce a Pre-Shipment Inspection Certificate (PSI) ", Mr Fernando said. This means that when fabric is being imported, an approved inspector in that country is asked to issue a certificate that conforms to quality and quantity. Textile manufacturers feel that the PSI will reduce smugglng. However, it will only cause further delay, because these inspectors are not always available and the fabric importer is at their mercy. "The countries which introduced this have withdrawn the scheme because it has been a disaster", Mr Fernando said, stressing that it is not a good idea to introduce PSI to the garment industry.
Hence, the Sri Lanka Chamber of Garment Exporters has brought forward many suggestions to the government, in its effort to curb the difficulties faced by the small and medium sector, which accounts for a large percentage of economic activity, in the country.
Celebrations were probably in order when Industrial Gases (Pvt.) Limited held its Annual Dealer Convention at Uswetakeiyawa last week. The mood all around was unmistakably jubilant.
The reason seemed simple enough. Industrial Gases, a 100 per cent Sri Lankan venture incorporated on March 31 1992 and set up in Heiyanthuduwa, Sapugaskanda is said to have ended the monopoly in Industrial Gases held by Ceylon Oxygen Ltd., till then. The major shareholder of Ceylon Oxygen is the Norwegian Company Norske Hydro. Having geared up for full commercial operation only in 1995, Industrial Gases prides itself on being, as it says, the only Sri Lankan company to break a foreign monopoly.
Chief Executive Officer, T.M. Jayasekera said his company already had a large part of the market share in just over an year in commercial operation. Industrial Gases, a direct competition of Ceylon Oxygen is into the manufacture and marketing of Industrial Gases like oxygen, acetylene, nitrogen and compressed air.
Said Mr. Jayasekera, addressing the seventy or so dealers, "Our company is not afraid of competition. There should be healthy competition for developing the industry." However he made an exception where unfair ploys are concerned.
With the advent of Industrial Gases into the market, a cubic metre of oxygen which had sold at Rs. 80/- was brought down to between Rs. 40 and Rs. 50. Now it averages at Rs. 55/=. The cylinder deposit had been increased from Rs. 5000/- to Rs. 8000/-. With the entry of Industrial Gases the cylinder deposit now is Rs. 2500/=.
Mr. Jayasekera said giving discounts is merely hoodwinking the consumer for discounts can always be taken away. To bring down the price of a product is giving a permanent discount, he says.
The Industrial Gases has set up a free delivery service to bulk buyers in any part of the country. Mr. Jayasekera feels sales in the provinces have been boosted substantially.
Furthermore, Industrial Gases is said to have frequent checks on the purity of its oxygen. The company had requested standards for testing medical oxygen from the Sri Lanka Standards Institute. However, there are no standards yet locally for oxygen. Mr. Jayasekera says his company is thus compelled to follow various foreign standards.
Chairman, Stanley Wickremaratne said Industrial Gases which is now looking towards expansion of infrastructure, has gone a long way since NDB loaned it Rs. 30 million to start up the venture. He also said there are two Chinese experts working full-time servicing their production process.
General Manager, Lalith Jayewardene said the company owed its success largely to consumer loyalty to a 100 percent national venture.
The entire focus of the convention was "Think Sri Lankan, act Sri Lankan. "
In a landmark judgement, described as a deterrent to other companies, the Colombo High Court has sent to jail five executives of a Finance Company for criminally breaching the trust of some 19,000 depositors. Heavy fines have also been imposed on them.
This is the first time such tough penalties have been imposed in such a case involving the Union Trust and Investment Ltd (UTIL).
The convicted executives are Wasantha Basnayake (Deputy Chairman and Managing Director), J. C. N. Fernando (Chairman), V. M. Kandiah (Director), A. P. St. John Jackson (General Manager, Financial Service) and T. S. Moorthy (Asst. Accountant).
The first, fourth and fifth accused were each sentenced to four years imprisonment and a fine of one million rupees, while the second and third accused were each sentenced to two years imprisonment and a fine of Rs. 500,000.
All five accused were indicted with conspiring to commit Criminal Breach of Trust in respect of monies belonging to UTIL. The 1st, 4th and 5th accused were indicted with committing Criminal Breach of Trust in respect of Rs. 6.15 million worth of deposits. The 4th accused was indicted for committing Criminal Breach of Trust in respect of a Rs. 3 million loan transaction and the other four accused were indicted for aiding and abetting the 4th accused.
Senior State Counsel Buvana Aluvihare, the Chief Prosecutor said in giving sentences the Court must consider the hardships faced by the depositors, some of whom had deposited their life-savings. He asked that maximum punishment be given to the company officials. The defence pleaded for compassion and lenient sentences for the accused.
The Judge, Shirani Thilakawardena said the Court had to be mindful of the interests of society, while considering the interests of the individuals and the punishment should be a deterrent to others.
UTIL, earlier known as Maharaja Investment Limited was a Finance Company registered under the now repealed Control of Finance Companies Act No. 27 of 1979.
Consequent on a report submitted by the then Central Bank Director of Bank Supervision that UTIL was unable to meet the demands of the depositors and was insolvent, the Monetary Board, acting under the provisions of an amendment made to the now repealed Control of Finance Companies Act, under the Public Security Ordinance, decided to vest the management and administration of UTIL in itself with effect from 20.06.1988.
After the vesting order, Ford Rhodes Thornton & Co., was appointed to investigate and report on acts and omissions of Directors and any other principal officers of UTIL from the start of its trading operations up to the date of vesting the management and administration by the Central Bank. This report highlighted some large scale irregularities done by the Directors by granting funds and loans to associated Companies and certain persons.
Since the Directors and Principal Officers of UTIL were responsible for the above irregularities, this information was forwarded to the Criminal Investigation Department (CID) for necessary action.
The CID investigated some of these irregularities and the matter was handed over to the Attorney General's Department for legal action. On the basis of these, the AG's Department instituted legal action in the High Court of Colombo.
Cargo traffic between Colombo and Hong Kong is fast expanding, outpacing revenue growth from passenger operations, airline officials said.
While passenger revenus had grown by 3.6 per cent, cargo revenue had grown by 16.6 per cent at Cathay Pacific, the airline's General Sales Agency Manager, Alex Fernando said.
He was speaking at Cathay Pacifics 50-year celebrations in Colombo this week.
The once weekly flights from Colombo to Hong Kong had been doubled late last year to accommodate the traffic growth.
Though the airline first used Lockhead L-1011 Tristar equipment on this sector, brand new Airbus A-330 aircraft were now being used.
The A-330 can carry 50 business class and 270 economy class passengers.
The airline had been set up in 1940 by Texan entrepreneur cum air-ace operating a war surplus DC-3.
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