- Cites short supply of dollars, raw materials as main reasons
- Customers who are unable to meet such payments upfront asked to provide securities instead
Alarmed by the rising short supply of the required raw materials for manufacturing, due to the severe shortage of foreign currency in the country’s banking sector, Sri Lanka’s largest cable manufacturer ACL Cables PLC has decided to sell all its products on a cash upfront basis, as a survival strategy to stay afloat in prioritising the long-term interests of the stakeholders amid the looming crisis.
“Due to the current shortage of foreign currency at banks, we are finding it difficult to source adequate quantities of raw materials from overseas suppliers. The restrictions imposed by all banks under the guise of shortage of foreign exchange will result in a short supply of raw materials very soon and we see the signs of shortage since stocks of raw materials are hardly sufficient to meet the demand for the next two months,” ACL Cables PLC Executive Director Daya Wahalatantiri informed the key stakeholders of the company in a letter issued last Thursday.
While acknowledging the adverse impact of this decision on some customers, he defended the decision to implement strict cash management practices, while noting that it’s vital for the company to muddle through the looming crisis, serving the wider needs of a wider section of the economy as a smooth functioning cable manufacturer in the country, in order serve the long-term interests of all stakeholders.
“The company decided to sell all cables on a cash upfront basis, so that we can convert the limited stocks we have in hand to cash and meet the monthly cash needs to buy more materials from available sources, pay salaries and meet commitments to the banks and revenue collecting authorities on a priority basis,” the letter read.
The customers who are unable to meet such payments upfront are asked to provide securities instead, which will be viewed favourably by banks in the absence of cash payments.
Meanwhile, ACL Cables highlighted that the shortage of foreign currency is only one of the issues faced by the wider manufacturing sector, which include the rapid increase of raw material prices, depreciation of rupee and abnormal shipping rates and delays. Therefore, the letter pointed out that some manufacturing industries are in a “very disturbing situation”, along with ACL Cables.
ACL Cables currently has a 45 percent share of the local cable market and ACL Group of Companies collectively holds a 70 percent share of the country’s cable market. Further, it supplies around 80 percent of the cable requirements of duty free projects owned by the foreign investors registered under the Board of Investment.