Sri Lanka’s Industrial Asphalts says flooding â€˜manmade disaster’
ECONOMYNEXT – Floods that disrupted operations in May 2016 were a ‘man-made disaster’, Sri Lanka’s Industrial Asphalts (Ceylon) (IAC) has told shareholders.
The firm’s premises at New Nuge Road, Peliyagoda, on the banks of the Kelani River north of Colombo were affected by flooding in and around the capital.
“It is very important to note that the company’s land at Peliyagoda was not affected by the flooding due to its location or the contours of the land but due to a man-made disaster,” managing director G. Ramanan told shareholders in the annual report.
“All rainwater from the property is discharged to the adjoining canals. Water from the canal in turn is pumped out to the Kelani river. The canal has no direct link to the river,” he said.
When the area experienced historically record high rainfall, the canal’s two pumps were unable to cope; one of the pumps was out of service, he said.
This resulted in the canal’s water level rising above the company’s outlet pipes, effectively blocking the sole rainwater discharge channel, Ramanan said.
“All rainwater falling within IAC’s premises remained within the premises, resulting in the flood.”
Ramanan said IAC is gradually getting back to normal and that the total impact of the floods would be felt in the next financial year.
The company, which makes bituminous products and surface coatings for industry and household use, including road construction and maintenance, made a net loss of Rs11.2 million in the year to 31 March 2016 compared with a profit of Rs3 million the year before.
Sales rose to Rs78 million from Rs67 million. It reported a loss per share of Rs16.87 compared with earnings of Rs4.56 the year before.
IAC’s auditor, chartered accountants Cecil Arseculeratne & Company, has given a qualified opinion of the annual accounts.
They said spending by a related firm, Britex (Pvt) Ltd., set up recently, have an impact on IAC’s financial statements which it was unable to assess.
“Since we have no access to such records of Britex (Pvt) Ltd. we are not able to quantify the impact of such transactions to the Industrial Asphalts (Ceylon) PLCs’ financial statements,” the auditors said.
It drew the attention of shareholders to the management view on the matter disclosed in related party transactions note No.29.1 in the financial statements.
According to the note, Britex was formed with no direct shareholding by IAC with the aim of doing product development encompassing the latest developments in paints and coatings in the specific segments IAC has been operating in.
IAC has gradually lost its market dominance to new entrants who have been successfully introducing products that compete with and have replaced its own range of paints, the note said.
This prompted the common shareholding directors to “ring-fence” the new product development under Britex, which started early in the last financial year.
The note said the initial response to new products and coatings had been good and the firm had planned out a promotional campaign to introduce the new products.
“Unfortunately, the product tests of Britex’s initial development initiatives were not positive and there were significant setbacks,” it said.
“We could not bring to market the new products as fast as we wanted but there was no way to stop the advertisements.”
Total cost of such spending was Rs1.8 million and was done independent of IAC with no current or future spending to be incurred by IAC either as reimbursements or in any other manner the note said. (COLOMBO, Sept 21, 2016)