Looming death of dry cell batteries forces Laxapana to lay off 52 workers

Laxapana Batteries Plc will lay off 52 workers as part of the move to scale down the ‘D’ size battery manufacturing operations.

The headcount will be cut via a Voluntary Retirement Scheme at a cost of Rs. 29.8 million.

Given the nature of the industry in which it operates, Laxapana has been reducing its work force. In the financial year ended 31 March 2012, the number was 74, down from 95 in the previous year.

The likelihood of a scale-down was indicated in the company’s in its FY12 Annual Report. Laxapana Batteries Chairman S.D.R. Arudpragasam said that sales of the ‘D’ size batteries would continue to diminish.

“The current demand pattern coupled to the continuing technical advances in the field of energy storage makes it clear that the manufacture and sales of dry cell batteries will soon be uneconomical for the company. The cost effective energy saving lighting systems, rechargeable lighting devices, and electrification of the rural areas brings closer the diminishing importance for dry cell energy storing devices,” he said.

 

In 1Q FY13, the company reported a loss of Rs. 4.7 million, up from Rs. 3.37 million a year earlier. Operating loss was Rs. 3.7 million, up from Rs. 1.4 million.

Accumulated losses at Laxapana, which is controlled by the E.B. Creasy Group, as at 30 June 2012 was Rs. 81 million. The company achieved revenue of Rs. 34.7 million, as against Rs. 22 million in 1Q FY12.

In FY12, turnover was Rs. 115.9 million as against a turnover of Rs. 316.6 million achieved during the previous year. The company registered a loss of Rs. 73.8 million in FY12 in comparison to the profit of Rs. 6.3 million in FY11 due to a charge of Rs. 41.4 million to account for extraordinary provisions for spare parts and machinery impairment.

“Although we continue to manufacture the ‘D’ sized batteries from the impaired plant, since further decline in sales is anticipated, your Directors consider it prudent to make the necessary financial provisions in this year’s accounts,” the Laxpana Chairman said in his review in the FY12 Annual Report.

He also said in the event the company was unable to make alternative economic use of its present manufacturing facility, it would need to adopt an alternate for the continuity of the employees.

“Over the years, the company has gradually reduced its employee numbers to the minimum required to operate the factory as an economical unit. The company’s free hold office and factory building at Homagama, situated in close proximity to the Southern Expressway and the circular road which is currently under construction, is a valuable asset that the company holds,” Chairman Arudpragasam said.

He also said the Laxapana brand was well known in the rural hinterland of the country, hence the medium-term strategy of the company was to develop trading activities in lighting and energy-related products, taking advantage of its strength in sales and product loyalty.

“The company has already launched a range of CFL bulbs and associated lighting devices. Plans are well underway to launch a range of consumer disposables. Concurrently, the company is also evaluating other opportunities into which the company is able to diversify and ensure its long term viability,” the Laxapana Chairman added.