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Industry association casts doubts on Ex-pack

18 Oct 2021

 
  • Carton Manufacturers’ Assoc. disputes industry leader’s claim 
  • Calls to postpone upcoming IPO
  • Ex-pack says competitors spreading ‘malicious’ information out of ‘jealousy’    
  BY Shenal Fernando The Lanka Corrugated Carton Manufacturers’ Association has, by a letter dated 16 October to the Colombo Stock Exchange (CSE), accused corrugated carton industry leader Ex-pack Corrugated Cartons Ltd. of making “misleading statements” in its initial public offering (IPO) prospectus. The letter has been seen by The Morning Business, and the CSE confirmed that it received said letter from the aforementioned association.  The alleged misleading statements by Ex-pack include that it is the market leader in the corrugated cartons industry with a market share of 18.3% in 2021.  “(The) company being the undisputed market leader manufacturing one-in-five cartons produced in Sri Lanka is grossly misleading and inaccurate,” the letter noted. According to the Lanka Corrugated Carton Manufacturers’ Association, these statements are not an accurate reflection of Ex-pack’s position within the local market. “The company is, in fact, not the market leader, but only one of the larger corrugated companies in the industry,” stated the association. The association further alleged that the sales figures set out in the charts provided in the prospectus – representing Ex-pack against other competing firms – are completely false. In the letter to the CSE, the association claimed that the members of the association, who are in fact the market leaders in terms of sales volume, are willing to disclose their sales figures to the CSE in order to refute the statements made. As per CSE Rule 3.1.21, when a company makes a declaration, the directors and managers are required to make a declaration that such facts declared, constitute the full and true disclosure of all material facts about the issue and issuer. If these allegations prove to be true, the directors and managers of Ex-pack could be held liable for making such misleading statements.   Considering the fact that these statements are material to the issue and will be relied on by the public in making decisions, the association has requested the CSE to postpone the IPO until Ex-pack has had the opportunity to correct the prospectus and re-circulate the corrected prospectus among the public. However, according to a message sent by Ex-pack to brokers, issued by Asia Securities, the company claimed: “From the start of the IPO process, certain competitors have been circulating malicious messages questioning all of Ex-pack’s financial and other information including the reasons to IPO. This is due to personal issues the competitors have with Ex-pack and pure jealousy.” The company further claimed that the market share data published is based on the following facts and data points: Unidil which is well known as the second largest player in the industry had a revenue of Rs. 3 billion in FY2021 and a production volume of 23,292 metric tonnes (MT) as per published information; in contrast, Ex-pack’s revenue is Rs. 3.3 billion (excluding Neptune Papers) and has a production volume of 23,532 MT. Moreover, the company has the identified production and sales tonnage of each player in the industry by interviewing staff and internal stakeholders of the largest corrugators in the industry, and has also referred to the monthly waste output of corrugators from key players of the waste recycling industry and the Customs information of paper imports and local purchase information of paper imports of its competitors, in order to determine the monthly production of individual players. Despite attempts by The Morning Business to contact the company for a statement on the allegations made by the association, no comment was available by the time this edition went into print. Ex-pack started its operations as a profit centre of Expolanka Ltd. in 1998 and was incorporated as a separate legal entity fully owned by Aberdeen Holdings (Pvt.) Ltd in 2002. Under its IPO, it will be offering 25% of its shareholding for subscription to raise Rs. 700 million. The IPO shall consist of 83.3 million shares at an offer price Rs. 8.4 per share and the minimum subscription limit is 100. The issue is expected to open on 22 October and close on 11 November. The funds raised from the IPO will be utilised to instal a new state-of-the-art manufacturing facility with a monthly capacity of 4,000 MT per month.


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