Factory closure costs Rs. 900 m in turnover, Rs. 180 m in profit for Hayleys subsidiary
Wednesday, 30 October 2013 00:44
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Dipped Products Venigross factory at Rathupaswala marks three months of closure today despite independent reports clearing company of water
No hope of early re-opening by authorities despite company deciding to transport 6000 litres of water daily from outside via 15 bowsers and discharge used water at BOI Zone recycling facilitycontamination
The closure of Hayleys Group Dipped Products factory in Rathupaswala marking exactly three months today has caused a Rs. 900 million loss in revenue and around Rs. 180 million in profit with remedial efforts by the company to address the water issue continuing to be ignored by authorities concerned.
According to the company, estimated loss of revenue was Rs. 300 million a month and pre-tax loss was around Rs. 60 million per month.
Whilst these estimates are for the period August to October, the release of interim financial results for the six months ended 30 September 2013 by Dipped Products PLC (DPL) yesterday confirms the trend.
According to published accounts turnover from hand protection business had come down to Rs. 6.9 billion in the six months of FY13/14 from Rs. 7.3 billion the corresponding period of last year reflecting a dip of Rs. 400 million.
Profit before tax from the hand protection business was Rs. 192 million from Rs. 686 million in the first half of last year, to Rs. 494.5 million in the six months ended 30 September 2013.
Hopes of an early opening of the Venigross factory remains slim as local authorities alleged to be unresponsive whilst residents continue to entertain fears over water contamination in the area.
Misconception
Hayleys has informed of a decision to source water amounting to 6,000 litres per day from outside the locality and transport it via 15 bowsers for production use daily as well as take back used water to the treatment plant at BOI Zone.
The company has also agreed to carry out this operation under the supervision of representatives of the villagers or even by government investigators but the there hasn’t been an agreement.
In its accompanying notes to the financial statements filed in the Colombo Stock Exchange, DPL said villagers in the broad neighbourhood of manufacturing facilities in Nedungamuwa started protests since 27 July with a misconception that the factory was responsible for low pH levels in the shallow water affecting the wells.
Arising from these protests and subsequent meetings with the state, the company temporarily suspended production in order to enable independent verification of facts in relation to the low pH water issue.
“The temporary suspension since 30 July 2013 continues to date thus incurring loss of revenue and profitability. Discussions with relevant authorities and stakeholders are underway to resolve the matter as we now understand that the independent reports confirm our position,” DPL said in the note.
