Holcim Lanka in disclosure deficit?

Friday, 24 June 2016 00:28 - - {{hitsCtrl.values.hits}}

Holcim Lanka, a former privatised venture of Sri Lanka, as it readies for an impending sale is said to be suppressing important information that could affect the price, according to informed sources.

It is alleged that Holcim, which has only invested $ 26 million, has enjoyed a 12 year tax holiday from funds borrowed from within Sri Lanka and has reaped approximately Rs. 48 billion from extraction and limestone alone, is not revealing to potential buyers the true state of the company.

In 1993 the Sri Lanka Cement Corporation entered into an agreement with Holcim Lanka Limited to lease 5141 acres of cement quarry land in Aruwakkalu, Puttalam for a period of 50 years. Accordingly, the Lessee is entitled to use said premises exclusively for the purpose of extracting and removing raw materials for cement production.

Sources point out that a year ago, the then CEO, Bernard Fontana of the global giant when visiting Sri Lanka had categorically stated that there were no plans to sell the Company. In fact he pledged that $ 300 million would be invested to increase the capacity of the Puttalam plant.

The Ministry of Industry and Commerce in a letter to the Chief Executive Officer of Holcim in March 2016 has observed that Holcim has utilised only 500 acres of the said property.

Moreover, the Ministry notes that “the Government is not making any profit out of the covenant other than the lease rental and the royalty payment to the Geological Survey and Mines Bureau, whereas ‘the company is making huge profits out of the limestone available in the quarry land.” The Ministry also charges that Holcim is in arrears with respect to rent owed to the Cement Corporation.

The Ministry has therefore decided to re-evaluate the terms and conditions of the agreement in order to gain more benefits to the industry and the country. The Ministry, in this harshly worded missive, quotes Section 4(b) of the said agreement and warns Holcim that it “cannot transfer or sublet the premises without the consent of the Cement Corporation”.

Holcim is yet to disclose these details, the names of the bidders or the intended sales process. Sources reveal that among the bidders is a company in Dubai that is currently under investigation by the FCID regarding allegations of money laundering. It could not be confirmed whether the Ministry has taken further action on this matter since March 2016.