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The great management rip-off on the plantations
Heads I win, tails you lose

Minority shareholders of plantation companies are convinced that the majority with the exception of one or two are creaming unconscionable management fees off the companies’ profit and loss accounts to ensure that they profit handsomely even when the estates are losing.

"It’s a heads I win, tails you lose situation as far as the minority shareholders are concerned," one disgusted shareholder said. "The majority shareholders get either themselves or one of their companies appointed the managers and then rip off as much as they can."

Shareholder dissatisfaction on this score has been expressed in some of the annual general meetings of plantation companies but no major rows have erupted. When questioned, company chairmen have said as little as they could on the terms of the management contracts with vague generalisations like "it’s a part of the top and bottom lines."

What’s the real picture? A shareholder must wade through the annual report and carefully read the note about directors interest in contracts. That would generally indicate the management fees paid but there will be no pointer to how this sum is determined.

"If you want to find that out, you have to go back to the prospectuses issued when the plantation companies first made their IPO’s (initial public offers)," said a share analyst. "But even that is not a Bible because some of the management agreements have changed since the IPOs."

The Sunday Island did some research on the terms of the management contracts and found them heavily weighted in favour of the managers, inevitably a related party to the major shareholder of the plantation company, well placed by way of the controlling interest to generously ladle the gravy on to his own plate.

Balangoda Plantations was one good example. The 5-year agreement effective from November 1996 places the company under the management of Stassen Exports. The Distilleries Company of Sri Lanka Ltd. who own 51% of the Balangoda shares is a member of the Stassen Group.

Under this agreement, the managers get 3% of Balangoda’s turnover, 2% on all supplies (such as fertilizer and packing material), 50 cts. a kg. on the tea and rubber crop and 7.5% of the profit. The profit is the pre-tax profit excluding depreciation, lease rental, capital expenditure and interest.

According to the last published accounts of Balangoda Plantations, the management fees totalled Rs. 70.6 million and what the shareholders received by way of a 10% dividend was a third of that - Rs. 23.6 million.

The figures vary for different companies. As far as the minority shareholders are concerned, the best deal they get is from Kelani Valley Plantations, a member of the Hayleys Group where the management fees are based on the same criteria under which the private sector took on plantation management on behalf of the government for a straight profit share.

Under that dispensation, if the plantation lost the managers got nothing. If they were profitable, there was a profit share. Given the fact that there was fierce competition to get into the plantation management act, the deal seemed to have appeared worthwhile although plunging tea prices and bottom lines in the red left some management companies wondering they jumped into a sinking ship.

At Kelani Valley, the management agreement gives the managers 40% of the first Rs. 50 million profit and 5% of the balance. Hayleys got Rs. 27.5 million for their management services last year. The shareholders got a Rs. 51 million dividend.

Most management contracts are on the Balangoda model, plus or minus, with a percentage of turnover, supplies, profit and 50 cents on a kg. of crop.

Namunukula charges 3.5% of gross turnover, 2% on supplies, 50 cents per kilo on crop and 5% on profit. The managers got Rs. 51 million for the last financial year. Shareholders got no dividend.

Hapugastenne and Udapussellawa mangers charged 4% on turnover, 10% on profit plus sub-managing agents fees based on a sliding scale of 5% for the first Rs. 50 million profit or part thereof, 15% on the next Rs. 50 mn. (or part thereof), 25% on the next Rs. 50 mn. or part and 15% on the balance.

The Hapugastenne managers got paid Rs. 86.4 million in the year to Dec. 1998. The dividend to shareholders was 10% or Rs. 20 million. At Udapussellawa the managing agents got Rs. 37.1 million, there was no dividend to shareholders..

Maskeliya Plantations, where the share price still tops Rs. 20 in the depressed plantation scene, pays managers fees based on 3.5% of turnover, 2% on supplies, 50 cents a kg. on crop and 5% on profit. The managers collected Rs. 81.8 million fee in the last financial year. The shareholders did somewhat better than in most instances with a 20% dividend absorbing Rs. 54 million.

Madulsima is managed on 3% or turnover, 2% on supplies, 50 cents a kg. on crop and 7.5% on profit. The managing agents collected Rs. 43.2 million in 1998 and the shareholders got a 5% dividend totalling Rs. 14.5 million.

Agalawatte’s managing agents fee is only 3% of turnover. The managers collected Rs. 22 million in 1998. There was no dividend. Watawala’s formula is 4% of turnover and 7.5% of profit. The agents made Rs. 22.5 million last year. there was no dividend.

Bogawantalawa charges 3% or turnover and 10% on profits, Horana 5% on turnover and 10% on profit and Kotagala 30% of the pre-tax profit.

As the old saying goes, win or lose on the estates, the managers stand to gain.

b
Mercantile Leasing Chairman sees it as ‘inevitable’
‘Fierce price war’ predicted in leasing industry

Mercantile Leasing Ltd.(MLL), one of the country’s major leasing companies which in the last financial year trebled its leasing portfolio to over Rs. 1 billion has predicted a "fierce price war" within the industry as "inevitable."

Pointing out that the leasing industry in the country is highly heterogeneous with players of varying sizes offering a spectrum of products, MLL Chairman Nimal Jayawardena said: "A fierce price war thus appears inevitable with all its concomitant risks and dangers."

MLL, now a strategic partner of the National Development Bank (NDB) which together with its subsidiary, Capital Development and Investment Company Limited (CDIC) are the two largest shareholders, has posted a group after-tax profit of Rs.43.1 million in the year ended March 31, 1999, up 7% from Rs.40.4 million earned a year earlier.

The company had during the year under review increased its leasing portfolio by 200% to Rs.1.07 billion, up from the previous year’s Rs.354 million.

MLL’s directors have recommended a 20% first and final dividend to shareholders, up from 15% the previous year.

The company said that the "phenomenal growth" of its leasing business can be attributed to new funding lines, organisational restructuring and improvements in operating procedures.

Nimal Jayawardena who succeeded his father, Mr. N.U. Jayawardena, as the company’s new chairman told shareholders that despite an adverse macro economic climate, the company had achieved its objective of stable growth and profitability during a very difficult period.

Group turnover at Rs.338 million was up 39% from Rs.243 million the previous year while the after-tax profit of Rs.43.1 million compared with the previous year’s Rs.40.4 million.

Jayawardena said that there was an "underlying" group profit of Rs.68 million, up from Rs.55.5 million the previous year. This represents earnings before tax and charges for doubtful debts.

"It is the measure of our core business results and it shows that we continue to perform strongly in the fundamental areas of winning customers and running our business effectively," Jayawardena said.

Jayawardena who expressed confidence of maintaining MLL’s rate of growth said that what they have achieved had not been at the expense of compromising asset quality.

"Whilst some of this growth comes from the robust expansion of the total leasing market it is nevertheless self-evident that we have taken market share from our competitors - a trend which I believe will continue," he said.

Jayawardena said that MLL has an unbroken record of profitability and dividend payment and could fairly claim that they have fulfilled the over-riding objective of a public listed company to provide consistent and stable returns to their shareholders.

As a non-deposit taking dedicated leasing company, their biggest challenge was to find new funding sources. In this context, he deeply appreciated the intervention of the International Finance Corporation (IFC) which has provided a syndicated guarantee for a rupee denominated debt instrument for the first time in Sri Lanka.

MLL floated a Rs.220 million debenture issue as a rights offering to existing shareholders. This issue of a listed security was underwritten by the Employees Trust Fund (ETF) and fully subscribed by the renunciation date.

Jayawardena said that they were currently working with an investment bank on a program to mobilise long term funding through the issue of asset-backed securities. Their exposures had increased with a significant growth in the balance sheet. The board has therefore decided to appoint an asset and liability committee to review such exposures on a continuing basis.

Other than the NDB and CDIC the Sri Lanka Insurance Corporation, Hill Top Farm Limited, Thurston Investments, Ceybank Unit Trust, Mercantile Credit, Allied Investments and the DFCC Bank are among the major shareholders of MLL.

The directors of the company are: Messrs. A.N.U. Jayawardena (Chairman), M.N.R. de Silva (Managing Director), R. Senathi Rajah, R.M.S. Fernando, A. Kathiravelupillai and M.O.F. Salieh.

Stassen still short of 20% of Aitken Spence

Mr. Harry Jayawardene’s Stassen Group of companies has not yet acquired the 20% stake in Aitken Spence and Co. Ltd. to enable equity accounting of the Aitken Spence results in the books of the Distilleries Co. of Sri Lanka Ltd (DCSL), the Stassen subsidiary who has been the major buyer.

But the Stassen Group is now the single largest shareholder of Aitken Spence, one of the hotels dominated conglomerates quoted on the Colombo Stock Exchange.

"They’ve come up to about 18%. Aitken Spence was heavily traded last week with 538,200 shares done. The share closed at Rs. 125.50 on Friday, up Rs. 1.25 over the previous day with 88,800 shares traded in 23 transactions", an analyst said.

Jayawardene was not expected to bid up the competition but take his time getting the percentage he needs on the benchmark price he’s willing to pay. Stassens have been buying Aitken Spence principally on the DCSL account but also taking some shares in the name of Milford Exports, a subsidiary.

Doubts on a rapid recovery in East Asia

by Kanes
The upswing in currencies and stock prices, increase in retail sales and current account surpluses, deceleration of corporate failures and financial distress, recapitalization of banks and lower interest rates, inflows of foreign direct investment and better economic performance in recent months, have led to some optimism on the possibilities of a quick recovery in East Asia. True, there has been an improvement in exchange rates; in the last 12 months, currencies have recovered by about 94 per cent in Indonesia, 19 per cent in South Korea, and 13 per cent in Thailand. The recovery in stock markets was even more significant; in the last 12 months stock prices have risen by 197 per cent in South Korea, 96 per cent in Thailand, 86 per cent in Malaysia and 58 per cent in Indonesia. Crisis-hit banks have been closed or nationalized or merged or acquired or recapitalized and interest rates are now lower than a year ago; prime lending rates, for instance, have declined from 65 per cent to 50 per cent in Indonesia, 12.3 per cent to 7.25 per cent in Malaysia, 15.5 per cent to 9.25 per cent in Thailand and 11.5 per cent to 9.75 per cent in South Korea. Lower interest rates were conducive to business revival; they also resulted in a transfer of savings to equities and pushed up stock prices. All countries except Indonesia and Thailand have very low rates of inflation.

The year 1998 saw current account surpluses in the East Asian countries; Thailand for example which had a current account deficit of $4.2 billion in 1997 showed a surplus of $9.7 billion in 1998. Strangely enough there has been a slight increase in foreign direct investment inflows into East Asian countries like South Korea and Thailand. South Korea received a record $8.9 billion in 1998. This was mainly the result of purchase, mergers and acquisitions of domestic assets by foreign investors facilitated by the desire of Koreans and Thais to secure foreign funds to overcome their heavy indebtedness. These transactions, however, were on a relatively small scale. In the period January 1998 to April 1999, foreigners invested $27 billion in 115 separate deals with South Korea and $10.6 billion in 81 separate deals with Thailand. Mergers and acquisitions by foreigners were insignificant in other East Asian countries such as Hong Kong, Indonesia, Malaysia, Philippines and Taiwan.

Economic growth in the first quarter of 1999 shows an improvement over the last quarter of 1998 in most countries: Indonesia, Malaysia and Hong Kong had negative growth in the first quarter of 1999, but lower than in the last quarter of 1998: South Korea, Philippines and Singapore had negative growth in the last quarter of 1998, but positive growth in the first quarter of 1999. The most remarkable performance is that of South Korea which made a qualitative leap from negative growth of 6.6 per cent in the last quarter of 1998 to a positive growth of 4.6 per cent in the first quarter of 1999. On the basis of these figures, estimates ‘have been made for the whole year 1999 showing positive growth for most East Asian countries and slight negative growth for Indonesia, Thailand and Hong Kong. South Korea for instance is estimated to have a 5 per cent economic growth in 1999 compared to minus 5.8 per cent in 1998 and Thailand is expected to reduce its negative growth of 8.0 per cent in 1998 to a negative growth of 0.5 per cent in 1999. Malaysia is estimated to show a positive growth of 2 per cent in 1999 in contrast to minus 6.8 per cent in 1998.

These encouraging statistics, however, do not reveal the whole story and may give a more optimistic picture than the actual situation warrants. Higher economic growth in the first quarter of 1999 was fuelled mainly by government deficit financing than actual business investments. Thailand’s budget deficit in 1999 is expected to be 6 per cent of GDP; so is Malaysia’s; the stimulus provided by deficit financing however tends to wane after the initial impact and may not result in continued higher growth. In Japan, for instance, deficit financing equal to 8 to 9 per cent of GDP has repeatedly failed to boost the economy as it met with little success in reviving self-sustaining domestic demand. Current account surpluses have resulted from a drastic constriction of imports and not from an expansion of exports; actually declined in value in the first quarter. The current account surpluses in turn have contributed partly to the appreciation of exchange rates which are still below the pre-crisis levels. While there has been a rise in inflows of foreign direct investment to South Korea and Thailand, there has been a net outflow of short-term funds - mainly bank funds. Foreign banks have reduced their exposure in East Asia and have stopped lending to the region and South Korea and Thailand have also begun to repay their bank loans. Portfolio investment by foreigners in East Asia is only a trickle of former inflows and the rise in stock prices has been driven mainly by domestic investors.

Obstacles to Recovery
There are several factors, however, which cast a gloomy shadow over East Asia and throw doubts on the optimistic forecasts of economic growth for 1999. The major factors which may hinder rapid economic recovery are banks overburdened with bad debts, tight credit, rising unemployment, shaky confidence in the future, weak domestic demand, world economic recession, declining commodity prices, fears of a weaker yen and a devaluation of the renminbi.

Weak domestic demand is perhaps the most crucial factor. High unemployment has sapped people’s confidence in the future to spend freely. Business spending is also stagnant partly because of inadequate bank credit and partly because of depressed consumer demand. Thus, there is excess capacity in most sectors of the economy - automobile factories, chemical plants, restaurants and office and residential buildings. In Thailand for instance about 50 per cent of the factory capacity remains unused. Empty offices and apartments and partly finished or unfilled mega projects abound in Bangkok, Kuala Lumpur and Jakarta. The Petronas Tower in Kuala Lumpur - the tallest building in the world - is only two-thirds occupied. Plans for building 500 golf courses for the millennium, in Thailand, have now been indefinitely postponed. Business firms are also saddled with heavy debts and consequently find it difficult to obtain bank credit to revive their business. Corporate domestic debt in South Korea is about $ 590 billion; the financial crisis wiped out more than 10,000 companies in Thailand and the survivors, steeped in debt, are not repaying their loans and unable to get new credits. The fall in value of the Rupiah has caused Indonesia’s corporate foreign debts of $80 billion to triple in local currency terms, making them unpayable. According to a recent survey about 43 per cent of the firms in Thailand, South Korea, Indonesia, Malaysia and the Philippines are illiquid and 17 per cent are insolvent.

Domestic banks themselves are in serious difficulty partly because of the high proportion on of bad loans and partly because of heavy foreign debts. Nonperforming loans of Korean banks are about $ 98 billion and of Indonesian banks $23 billion. Many banks have closed their doors and others were merged or acquired by the state or foreign investors while some of them were bailed out and recapitalized by the governments. In Thailand for instance, the government closed or seized two-thirds of the nation’s financial houses and seized or forced the sale of most of its 15 major commercial banks. In Indonesia, of the 245 banks, 66 have been closed, 12 taken over by the government, four merged into one and 8 slated for recapitalization. The cost of recapitalization is $35 billion and the authorities are seeking foreign buyers to ease the recapitalization burden. South Korea has infused $ 26 billion into selected banks giving the government control of 38 per cent of total bank assets, closed down five banks and merged or acquired others; four banks have been partially purchased by foreign banks. Most banks, however, are operating at a loss and are reluctant to lend. Thus, credit growth which is so essential to investment -has not yet recovered. Past experience shows that banks generally take a long time to recover from a serious financial crisis; in Mexico for example, banks have not yet fully recovered even five years after the crisis.

Reform and Restructuring

South Korea and Thailand have faithfully followed the IMF’s prescriptions and taken several measures to reform and restructure their economies. Both countries have been commanded by the IMF. The South Korean economy has been liberalized and opened up for foreign investment: some 11,000 rules on foreign investment have been cut by half; foreign companies are allowed to mount hostile take-overs of local companies; restrictions on foreign ownership of land were scrapped; restriction in foreign exchange transactions was lifted; generous tax benefits, government subsidies on land leases and expeditious approval procedures were offered to foreign investors. As a result, several Korean firms including banks have passed into foreign hands, as mentioned earlier, and the country received $ 8.9 billion in foreign direct investment in 1998. Treatment of foreign investors has been so favourable that there is a hostile reaction against increasing foreign ownership of local assets.

Corporate reforms in South Korea, however, have been slow, particularly in the case of the major chaebols. Although the big chaebols are reported to have disposed of 35 of their affiliates in 1998, they are resisting to shed 91 more in 1999 as agreed with the authorities. Qverall debt-to-equity ratio of the top 30 conglomerates has fallen from 519 per cent a year ago to 380 per cent now but that of the five largest chaebols has increased. While they agreed with the government to down size and reduce their loans from the government, privately, they have expanded their share of non-bank financial institutions and securities firms from 22 per cent in March 1997 to 35 per cent now - gaining a "private purse" to finance their projects.

Liberalization in Thailand, like South Korea’s has resulted in an inflow of foreign direct investment of $9 billion since August 1997 - mainly to purchase Thai assets at rock bottom prices. There has been some inflow of portfolio investment too in 1999 in anticipation of a rapid economic recovery. On the other hand, foreign creditors are taking money out of Thailand at the rate of about a billion dollars a month and the current account surpluses are used to repay these foreign debts. The government, on IMF’s pressures passed new bankruptcy and foreclosure laws but bankers are reluctant to test traditionally weak counts. Borrowers, consequently, do not fear banks and non-performing loans are still growing, to some 50 per cent. The government is coaxing businessmen to repay their loans with promise of future loans; borrowers are demanding conversion of bad debts into long-term loans and some are demanding discounts for loan repayments. Bank credit is still tight; about 12 per cent of the firms who apply for credit are rejected; further 22 per cent of the businesses say that they cannot service their debt obligations. Creditors sued 57 Thai companies that failed to meet a court-imposed deadline for signing debt-restructuring agreements. Some 173 other firms could face suits too. The Thai economy also faces some major structural problems such as inadequately educated and trained labour force, high labour costs and low productivity and lack of arrangements to transfer technology from foreign investors which have given rise to fears whether it will remain a gigantic foreign dominated export processing zone.

In Indonesia, interest rate of 50 per cent have pushed hundreds of companies into default of domestic debt. Weak bankruptcy laws and enforcement have allowed owners to hold on to companies despite failure to repay and restructure debt. The government is dependent on the IMF to pay for its day to day operations. Under IMF’s recommendations, a number of domestic assets have been sold to foreign investors: PT Telecom, Surabaya port and Bank Bali, but foreign direct investment in 1998 was less than in 1997. The Indonesia Bank Restructuring Agency - IBRA - controls 90 per cent of the country’s banking assets, 200 trillion rupiah of bad debt and shares in companies valued at $12.5 billion. Its mandate is to sell these assets to the highest bidder to defray the costs of the government’s $ 35 billion bank recapitalization programme. It plans to sell assets worth $2.3 billion in 1999. Indonesia’s foreign debt is $138 billion; its inflation rate of 31 per cent is the highest among the crisis-hit countries of East Asia. Indonesia has 164 state-owned firms worth $60 billion and employing 700,000 workers. They showed a combined pre- tax profit of $1.2 billion in 1997. Although the IMF wants them privatized, it will not be an easy matter, particularly in the context of economic nationalism and fear of unemployment. Indonesia is still in the midst of an economic crisis and there is little evidence of a recovery in the near future.

Unfavourable External Factors

Apart from the weak domestic demand, the global economic downturn has reduced the external demand for East Asian exports and slowed its recovery. Economic growth prospects of the main export markets are not encouraging. Japan which experienced negative growth of 2.1 per cent in 1998 is estimated by the IMF to have negative growth in 1999 too - minus 1.4 per cent. Consequently, there will be no Japanese demand to stimulate export growth in East Asia. Opinion is divided on the future of the yen. Some analysts forecast a weaker yen which would stimulate Japanese exports to assist its recovery and such recovery is expected to stimulate demand for imports from East Asia. Other analysts, however, fear a weaker yen would tend to weaken other Asian currencies. It may cause difficulties for China whose exports have declined by 7.8 per cent in the first quarter of 1999 over last year’s first quarter. Further, banks in China are also facing difficulties on account of overlending and non-performing loans. If China decides to devalue the renminbi, it will lead to another round of currency deprecation and create chaos in Asia. Apart from Japan, other Asian countries are also in a recession still and intratrade which is quite large in East Asia, is unlikely to provide a stimulus for Asian recovery.

The United States - which is the largest market for Asia - will experience lower growth of 3.3 per cent in 1999 as compared -to 3.9 per cent in 1998. Many analysts fear that the US economy is overheated and the recent increase in US interest rates is an expression of concern by the US authorities. Higher interest by slowing growth may weaken the demand in US for Asian exports and a fall in the US stock market is likely to adversely affect Asian stock markets. Thus, there is a big question mark about the US economy. The European Union is also expected to experience a fall in growth from 2.3 per cent in 1998 to 2.0 per cent in 1999. Latin American demand for Asian exports is expected to fall drastically as most of Latin America is in recession with Brazil, Argentina, Chile, Columbia and Venezuela experiencing negative growth.

The sluggish world demand and expanding supplies are depressing world commodity prices. The percentage decline in world market prices of commodities of interest to East Asia, in the last 12 months was as follows: palm oil 39 per cent, soya beans 30 per cent, rice sugar and coffee 22 per cent, cocoa 20 per cent, rubber, copper and corn 15 per cent, gold 13 per cent and tin 6 per cent. Petroleum prices have risen by 47 per cent but this increase is expected to be temporary and the price is estimated to fall soon. Generally commodity prices are not expected to rise in the near future: at most they may remain flat.

East Asia had a 8 to 10 per cent average annual growth before the crisis on account of high investment equal to 40 per cent of GDP met from equally high domestic savings and substantial inflows of foreign capital. Such levels seem unlikely in the near future. There can be a modest recovery in 2000, but the substitution of the American/lMF model for the East Asian model is expected to create complications which may prevent the re-emergence of the East. Asian tigers.

Two Hotel Services directors quit

Two directors of Hotel Services Ceylon Limited, the controlling interest of which was recently acquired by Multivision Chairman U.K. Sharma, resigned from the board of the company last week after having sold out their interest.

The two directors who resigned were the Mercantile Investments Group Chairman Ondaatjie and the Renuka Hotels Group Chairman/CEO Ravi Thambiayah.

Ondaatjie had held his slice of Hotel Services somewhat longer than Thambiayah. Stock watchers said that both businessmen who are hotel operators - Ondaatjie with Tangerine Beach at Kalutara, Nilaveli Beach at Trincomalee and Royal Palms also at Kalutara and Thambiayah with the Hotel Renuka and the newer Renuka City Hotel at Kollupitiya.

They both bought into Hotel Services at fairly low levels a couple of years ago on account of the value of the Hotel Ceylon Intercontinental which is Sri Lanka’s oldest 5-star hotel and is relatively debt free.

Stock market sources said that both Ondaatjie and Thambiayah made substantial capital profits by selling out at the Rs.26 price per share paid by Sharma who is now obliged to offer the same price to the remaining shareholders.

Thambiayah recently bought 500,000 shares in Ondaatjie’s Royal Palms at Rs.9.75 from the NDB. These shares are now trading at Rs.10 and above.

Two loss making years at asset rich flagship
Structural repairs swallow Ceylinco’s insurance money

Ceylinco Limited, the owners of Ceylinco House carrying a book value of Rs.36.2 million and a market value of Rs.190 million, has reported losses of Rs.32.2 million and Rs.27.3 million for the financial years ending March 31, 1997 and March 31, 1998 for which the annual reports have been submitted together to shareholders.

The company was carrying Rs. 62.8 million retained losses in its books as as at March 31, 1998. As owners of Ceylinco House, the asset rich company which has an issued capital of just over Rs. 1 million, owns a property on which a market value of Rs. 190 million has been placed although the real value is considered to be higher.

Ceylinco had received Rs.200 million on soft loan terms from the Strikes, Riots and Civil Commotion and Terrorism Funds to reinstate their bomb damaged property and have mortgaged their building to the Bank of Ceylon for Rs.200 million as security to obtain these funds.

Additionally, the company has received Rs.224.5 million insurance money as a final settlement for damage suffered in the first bomb blast in January 1996 and Rs.11.9 million for damage caused by the second bomb (Galadari) in October 1997.

The directors have reported that structural repairs of Ceylinco House, twice damaged in the bomb blasts and the fighting that followed the Central Bank bombing when terrorists fired rocket propelled grenades into the building, have been completed at a cost of Rs.243.3 million.

The directors said that a specialist contractor, L & M Concrete Specialists Pte. Ltd. of Singapore under the technical guidance of Scott Wilson Kirkpatrick & Company of London had undertaken the structural repairs. The British firm has guaranteed the structural integrity of Ceylinco House.

They said that Design Consortium Ltd, a leading architectural practice, here had been entrusted with the architectural, mechanical and electrical designs for the repair and reinstatement of Ceylinco House.

Kithwoods Engineering (Pvt) Limited has been selected as contractor for the first stage of this work comprising mainly of covering the external facades, waterproofing and drainage of all terraces and roof slabs.

A Malaysian company, ALCOM, will supply the aluminium cladding for the building. This company has extensive experience in such work having handled the aluminium cladding systems and curtain walls for the 88-storey Petronas Twin Towers in Malaysia - the world’s tallest building.

The Ceylinco directors said that Kithwoods had already commenced work at site and are expected to complete the first stage costing about Rs.78 million by next month. Tenders for the final stages of reinstatement covering electromechanical services and the architectural finishes have also been called.

"When the reinstatement work is complete, Ceylinco House will begin a new life, as a modern office complex with all the facilities required to carry on business in today’s highly competitive environment. An office or a shop in this building will have an address that is well known in Sri Lanka and even well outside our shores," the directors said.

The directors also said that Ceylinco House is being insured with the Sri Lanka Insurance Corporation Limited for a value of Rs.498.5 million at present rising to Rs.964.25 million on completion of the reinstatement.

The directors of the company are: Deshamanya J.L.B. Koltelawala (Chairman/Managing Director), Mrs. S.P.C. Kotelawala (Deputy Chairman), Mr. S.R. Wijesinghe (Chief Executive Director), Mrs. C.A. Gunewardene, Mr. K.H.S. Jayatissa, Mrs. P.K. Karunanayake and Mr. T.N.M. Peiris.

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