Chemanex decides to exit export, retail paint biz

Chemanex Plc’s Board of Directors has decided to implement a program of rationalisation of its operations, including an exit from exports and the retail paints business. 

The company said the move was made in order to adapt to changing business conditions and to improve profitability. It intends to implement several measures over the next few months. 

The Board has decided to cease the export business entirely since it has been deemed to be non-viable. It will recommend to the Board of Cal Exports Ltd. that it should be wound up since it has been decided in principle that the company will not continue with export business. Chemanex Plc will also wind up its wholly-owned subsidiary Chemanex Exports.

The Board has also decided to cease operations in the retail paints business in a managed manner since it does not have the required scale to move forward as an independent business operation. 

Chemanex Plc will at present focus on its chemical trading business. Since the staffing requirement of Chemanex Plc will be significantly less as a result of the planned rationaliation, the Board will seek to implement a Voluntary Retirement Scheme for its staff. It is intended to obtain support services from holding company CIC Holdings Plc for the chemical trading business, which will further reduce the cost of trading operations. 

In addition, the Board is in the process of reviewing and formulating a plan on the company’s existing resources and assets.

As of end FY17, the Chemanex Group had 126 employees, down from 132 a year before. 

In the first half of FY18, Chemanex Group revenue was Rs. 610 million, down by 23% from the corresponding period of last year. Pre-tax profit was down by 2% to Rs. 72 million. This was despite sharp increase other income by 2,593% to Rs. 50 million and net finance income by 797% to Rs. 29 million.  In the 2Q revenue was down by 24% to Rs. 319 million and gross profit down by 23% to Rs. 60.5 million. Gain in other income and net finance income helped to boost pre-tax profit by 83% to Rs. 64.3 million.

Segment wise, revenue from chemicals was down to Rs. 360 million in the first half of FY18 from Rs. 514 million a year earlier whilst paints  turnover was Rs. 206 million, lower compared to Rs. 254 million. Chemicals business suffered a pre-tax loss of Rs. 14 million as against a profit of Rs. 57 million in first half of FY17 and paints business reported a Rs. 9 million loss as against a profit of Rs. 0.5 million.

In FY17, net profit attributable to equity holders amounted to Rs. 66.7 million as against Rs. 40 million in the previous year. At the company level, after tax profit was Rs. 196.2 million, up from Rs. 85.2 million. Group turnover was Rs. 1.54 billion, up from Rs. 1.44 billion, whilst that of the company was Rs. 1.37 billion, up from Rs. 1.22 billion in FY16.

The chemicals business produced a profit of Rs. 49.6 million in FY17, down from Rs. 62.5 million in the previous year. Paints made a loss of Rs. 23.6 million as against a profit of Rs. 18.8 million in FY16.