Industrial Asphalts to transfer operations to subsidiary

• Signs 10 year lease of Peliyagoda property to Siam City Cement

Industrial Asphalts (Ceylon) PLC has announced plans to restructure the company, including transfer of operations to a fully owned subsidiary, from 31 March.

The Company’s operations focus on lines of coatings and bitumen activities, and would be taken over by a newly incorporated subsidiary, Industrial Asphalts Ltd. The parent would continue to own the Intellectual Property Rights of the brands of the products. The subsidiary would have a non-exclusive right to manufacture, distribute and market the products under brands owned by the parent. The parent will cease the manufacture, distribution and marketing operations of its traditional product range at the present location after close of business on 31 March and will be initially relocated at No 321 Negombo Road, Peliyagoda under the subsidiary company from 1 April.

To facilitate the transfer of business operations, the manufacturing plant would be transferred to the subsidiary at the current carrying value of the relevant assets. Where the management is of the view that certain plant and machinery are un-useable or it is not viable to relocate, then such items would be scrapped and disposed by the parent. Debtors outstanding at the time of transfer of business to the subsidiary will continue to be collected by the parent, and the new trade debts will be booked under the subsidiary. Carrying stocks would be sold to the subsidiary at open market prices, or would be sold to third parties.  Nine permanent staff under the parent will be seconded to the subsidiary.

Until the operations are self-funding, from time to time and when required, the parent would provide working capital finance to the subsidiary at commercial rates as an arm’s length transaction. Interest bearing liabilities and leases outstanding in the books of the parent would continue to be serviced by the parent, primarily from the cash flow arising from the rental income of the 10-year lease of the parent’s property at 28/1 New Nuge Road, Peliyagoda to Siam City Cement, subject to meeting the conditions precedents as per the agreement.

The major shareholder of the Company is G. Ramanan, holding 67%, whilst Dr. T. Senthilverl holds 6.55%.

For the nine months ended 31 December 2017, the Company’s revenue rose by 61% to Rs. 33 million and pre-tax loss was Rs. 13 million, as against Rs. 9.7 million loss a year earlier. The Company has Rs. 20 million in retained losses.