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Monday, May 9, 2011

Distilleries expanding from sugar to agri?

By Indika Sakalasooriya

Business tycoon Harry Jayawardena controlled Distilleries Company Plc has incorporated two new subsidiaries, probably to further expand into the agriculture business following its recent acquisition of Pelwatte Sugar Industries Plc.

The two companies that have been incorporated are, Southern Green Agro (Private) Limited and Northern Green Agro (Private) Limited.

However, no high-ranking official was available for comment on the exact purpose of the incorporation of the two companies. Industry sources say that Distilleries may get lands from the government , under long -term lease arrangements for agricultural purposes, particularly in the Northern Province.

“Agriculture is one area that has high potential. Unfortunately, only a few companies are looking at it. So, if Distilleries is stepping in to the agriculture business, they will definitely get the support of the government,” a market analyst on the grounds of anonymity said.

Harry Jayawardena currently functions as the Chairman of the state-owned Ceylon Petroleum Corporation (CPC).

“Further, the company going into agri-business makes sense, as it can draw synergies with Harry J-owned Stassen group, as it already markets a number of imported FMCG products in the country ” he said.

He also pointed out that the acquisition of Pelwatte Sugar also allowed Distilleries to be the owner of a land stretch of approximately 6000 acres, where about 4000 acres were not cultivated.

In a deal worth Rs. 880 million, Distilleries’ subsidiary Melstacorp Ltd recently bought 47% stake of Pelwatte Sugar Industries from its majority shareholder Ariyasheela Wickramanayake. He had 86 percent holding in the Pelwatte, and Distilleries is expected to up its stake to 51 percent following the mandatory offer announced.

According to information available, Pelwatte supplies 70% of the local alcohol industry’s ethanol requirement, whilst catering to 10 - 20% of the country’s sugar consumption.

Distilleries also holds nearly Rs.6.2 billion cash in hand, as the government intents to pay back in cash instead of treasury bills as agreed. This was subsequent to the Sri Lanka Insurance case verdict and the sale of NAMAL stake to Union Bank.

source - www.dailymirror.lk