Eastern Merchants to raise Rs. 1 b for diversification by selling 134-perch land
Wednesday, 18 February 2015 00:16
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Eastern Merchants Plc is to raise Rs. 1 billion to diversify business by selling a portion of its land and buildings.
The company said its Board, at a meeting on Monday, resolved to sell land and buildings owned at 284 Vauxhall Street, Colombo 2 and 341 Union Place, Colombo 2 (with a combined extent of 134 perches) for Rs. 1.04 billion.
It said, according to the valuation dated 6 April 2014 by Incorporated Valuer Prof. Gamini Haegoda, the property is worth Rs. 939 million. The Union Place property was the registered office and principal place of business.
“It is proposed that the funds raised through the sale are to be invested to diversify the business of the company from its traditional commodity trading into new business ventures focusing on value addition,” Eastern Merchants said. The company also proposes to utilise a part of the sale proceeds to settle outstanding debt which is considerably low.
The Eastern Merchants Board has approved the sale in principle. Since the value of the property to be sold is more than one half of the total value of assets of the company, the sale constitutes a major transaction in terms of the Companies Act. Total assets were Rs. 1.28 billion as at 31 December 2014 of which property plant and equipment amounted to Rs. 487.5 million and investments property was Rs. 508 million.
Therefore the Board has resolved to summon an Extraordinary General Meeting on 16 March to seek shareholder approval. Directors control nearly 70% stake in the company.
At the company level, interest bearing short-term borrowings amounted to Rs. 25.6 million as at December 2014, down from Rs. 171 million a year earlier. At the group level it was Rs. 85 million, down from Rs. 217 million. The company also has Rs. 234 million in Bank Overdraft.
Major shareholders of Eastern Merchants Plc include J.B.L. De Silva (27.57%), H.J. De Silva (13.7%), C.I. Tilakaratna (13%), C.S.L. De Silva (12.4%) and N.S. Karunaratne (10.7%).
The group specialises in the export of traditional and non-traditional products and the manufacture and export of coir and rubber wood brushes.
The company’s third quarter revenue was down by 65% to Rs. 151.5 million and by 58% to Rs. 514 million during the first nine months of FY2015. Its loss was Rs. 13.4 million in 3Q, up from Rs. 11.3 million a year earlier. Its nine months’ loss had increased by 145% to Rs. 57 million. At the group level 3Q revenue was down by 62% to Rs. 173 million and by 55% to Rs. 571.5 million for nine months. However, revenue reserves as at December 2014 amounted to Rs. 627 million at the company level.
Losses grew by 58% to Rs. 27.2 million in 3Q and by 50% to Rs. 74 million for nine months.
In January, Channa S.L. De Silva was appointed Managing Director of Eastern Merchants Plc and subsidiaries Eamel Exports and Spice Lane Ltd., after Anil Karunaratne retired.
