June 10, 2011 (LBO) - Sri Lanka's Haycarb has called for a long-term strategy to expand coconut plantations to ensure raw material availability to make activated carbon and said it is diversifying into wood- and coal-based carbons.
Shortages of coconut shell charcoal, which account for almost 65 percent of the firm's cost of production, and high prices have squeezed profit margins in recent years.
"We need to devise a long-term strategic framework for the protection and growth of coconut plantations and ensure the survival and growth of value adding industries such as ours in Sri Lanka," chairman Mohan Pandithage said.
"As the pioneer in setting up activated carbon manufacturing in Sri Lanka and Asia and as the largest coconut shell-based activated carbon manufacturer in the world, your company has an overwhelming interest in protecting this valuable national asset."
Haycarb will partner with stakeholders in endeavours that will ensure the sustainability of coconut plantations in the country, Pandithage told shareholders in the firm's annual report.
Managing director Rajitha Kariyawasan said that during the financial year ending March 2011 the company faced "very challenging cost pressures, particularly coming from its key raw material," with shortages and consequent high prices of coconut shell charcoal.
Charcoal prices continued to rise in all three company manufacturing locations - Sri Lanka, Thailand and Indonesia.
The Sri Lanka plant was affected the most with about a 50 percent increase during the year "that could be passed on only partially and that too with a time lag," Kariyawasan said.
He called for a "clear policy and immediate action" addressing issue of dwindling supplies of key raw material.
Sri Lanka's traditional coconut growing areas such as Kurunegala is seeing rapid development and in the past the state has used laws against farmers who wanted to put their ancestral land to more productive uses.
However analysts say use of the coercive power of the state against the economic freedoms of owners of coconut growing land have not been fully successful.
Haycarb's long-term plan is to diversify its product portfolio and raw materials mix by manufacturing coal- and wood-based carbons to mitigate exposure to coconut shell charcoal and benefit from opportunities in the much larger coal-based activated carbon market segment, the report said.
Procurement of coconut shell and charcoal is considered to be the single largest risk for the group and it is working on a wider supply base for coconut shell charcoal.
source - www.lbo.lk
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