Molasses now wasted
Alcohol distillery will add to Pelwatte's viability

Pelwatte Sugar Industries Ltd. (PSIL) expects the commissioning of its Rs. 500 million distillery to substantially improve the results of the company with an annual 20% rate of return, the company's chairman, Mr. Mahinda. P.B. Senanayake, has said in the company's annual report and accounts for 1997/98 now with shareholders.

Senanayake, however, has not indicated when this distillery, in which the company has invested Rs. 320 million from its own resources and funded the balance through a People's Bank loan, will become operational.

He said that since the inception of the project, the disposal of the molasses by-product was a problem for the company. While small quantities had been sold for a range of uses, most of the molasses in recent years have been discharged to ground pits "and hence wasted.'' But this by-product will be used for the production of a premium grade potable alcohol by its subsidiary, Pelwatte Sugar Distilleries (Pvt) Ltd.

"The distillery, once fully operational, is expected to generate a return of 20% or better for the benefit of its owners who ultimately are you, the shareholders of PSIL,'' Senanayake said.

He said that a composting plant will be attached to the distillery to produce 25,000 mt of compost fertilizer per year, all of which will be required for the sugar cane plantation. Describing the whole project as "environmentally friendly,'' he said that the cycle will be completed with what is derived from the soil being returned to the soil.

The year ended March 31, 1998 had seen the company processing 525,305 mt of sugar cane and producing 44,150 mt of sugar. This was an improvement on the previous year's performance of crushing 513,401 mt of cane to produce 43,560 mt of sugar. Sugar revenue during the year had grown to Rs. 1.4 billion from Rs. 1.13 billion the previous year.

Senanayake said that the elephant "menace'' which had cost the company about Rs. 50 million a year to protect its own plantation as well as settler plots from wild elephants had been mitigated by moving the Handapanagala herd "quite successfully'' to the Yala sanctuary. But a few loners that were left had not been taken away by the wild life authorities despite numerous requests, he said.

PSIL which turned over Rs. 1.4 billion during the year under review, up from Rs. 1.134 billion a year earlier, had earned a pre-tax profit of Rs. 109 million which compared to Rs. 123 million posted the previous year. The after tax profit of Rs. 57.3 million compared to Rs. 102.1 million earned the previous year.

No dividend has been declared for the year. The profit earned had enabled reduction of the company's retained losses of Rs. 393.2 million to Rs. 335.9 million as at March 31, 1998. There was a dividend pay-out of Rs. 51.1 million in the last financial year despite retained losses of Rs. 444.4 million then in the books.

Senanayake said that climatic conditions during the year were favourable for cane growing although too much rain during Maha 1997 affected the growth of new plants. Settlers (98,297 mt) and outgrowers (371,387 mt) produced the bulk of the cane with PSIL's nucleus estate contributing 55,621 mt. Senanayake said that the full potential of the nucleus estate is "yet to be realised.''

"Outgrower farmers were increasingly participating in cane production and remain the dominant suppliers of sugar cane to the factory accounting for 71% of the cane processed,'' he said.

Although they had a few "nasty strikes'' earlier that cost the company heavily, the major part of the year under review passed with no such incidents. "The workers are now much more dedicated and motivated,'' the chairman said.

The government with 47.7% of the shares is the main stakeholder in PSIL. Other big shareholders are the Commonwealth Development Corporation (16.33%), Kerry Engineering (7.99%) and Booker Tate Ltd. (5.64%). The balance shares are held by private investors and the public.

Three percent of the 1,464 sugar cane growing families had earned over Rs. 100,000 from their crop, 20% between Rs. 50-100,000, 35% between Rs. 20-50,000 and 42% less than Rs. 20,000, the chairman said.

The directors of the company are Messrs. Mahinda Senanayake (chairman), G.R. Gunawardene, N.I.R. de Mel, R.A. Ali, Steven Enderby, Khor Chin Poey and A.A.I. Uwise.