Apr 05, 2011 (LBO) - Sri Lankan activated carbon manufacturer Haycarb is considering acquisitions to get technology and expand its global distribution channels, a company official said.
Rajitha Kariyawasan, managing director of Haycarb, a subsidiary of the Hayleys conglomerate, they have 15 percent of the global market for their coconut shell-based activated carbon products.
Haycarb is one of the few Sri Lankan firms that have become multi-national, having set up production plants in Thailand and Indonesia.
Haycarb products are used in water and air purification and also in gold mining.
Almost 65 percent of the firm's cost of production is accounted for by its basic raw material - coconut shell charcoal, Kariyawasan told the LBO-LBR CEO forum Monday on placing Sri Lanka on the world map and the role of CEOs.
The forum, organised by Vanguard Management Services, was held at the Cinnamon Lakeside hotel and attended by company chief executives and other senior corporate officials.
A re-branding exercise last year revealed an "overwhelming need" for the company to make acquisitions to extend its distribution channel and acquire critical technology, Kariyawasan said.
The firm has a total production capacity of 25,000 metric tonnes of activated carbon.
"Today there's a crisis in commodities which are becoming scarce resources," Kariyawasan said, referring to sharp increases in the prices of key inputs like cotton and rubber that affect Sri Lankan manufacturers.
Rubber products manufacturers had gone for backward integration in raw materials by buying plantations, he noted.
"The basic raw material for activated carbon, coconut shell, which you throw away after domestic consumption, is becoming a scarce resource.
"So being smart in the supply chain, we have been moving down the line into charcoal manufacturing," Kariyawasan said.
Haycarb already has its own charcoal manufacturing plant but is forced to import charcoal from time to time when local supplies run short.
High charcoal prices and a stronger rupee have also squeezed profit margins in recent quarters.
Last year coconut prices in Sri Lanka shot to record highs owing to shortages of nuts created by a poor harvest.
Coconut crops were reduced by the lagged affects of drought the previous year and lower application of fertiliser.
Kariyawasan said Haycarb was considering acquisitions to expand its marketing channels, citing the manner in which medical gloves maker Ansell, where he had worked previously, expanded its global reach and acquired markets.
"At Haycarb a similar strategy is envisaged. We're looking to potential acquisitions - in the distribution channel, in value additions we could do out of Sri Lank and out of our overseas factories.
"It is very critical for us in acquiring the necessary applications knowledge."
Haycarb now does almost 80 percent domestic value addition.
"We aim to take it up to 90 percent. The importance of the product to Sri Lanka's economy lies in the tremendous value addition we do."
Correction: correcting reference to plantations acquisitions - Haycarb has gone for backward integration by setting up a charcoal making plant in the same way as rubber products manufacturers have bought rubber plantations to ensure raw material supplies
source - www.lbo.lk
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