Two of the country's public companies, Guyana Stockfeeds Inc (Stockfeeds)
and Sterling Products Limited (Sterling), both manufacturing entities, are
reporting modest performances for the year 2005. These results are contained
in the annual reports of the companies sent out to shareholders for
consideration at their respective annual general meetings, first Stockfeeds
on June 21 (after re-scheduling), followed two days later by Sterling. In
his report to shareholders, Chairman and CEO of Stockfeeds, Mr Robert Badal,
has asked shareholders to note that despite the Government of Guyana being a
"substantial" shareholder, it "continues to attempt to frustrate the
company's investment" and cites as examples that it was only after an
approach to the courts that the company was able to obtain its environmental
permit, and that the Central Housing and Planning Authority is in contempt
of a court order for the issue of a building permit. Whether this affected
the building plans of the company is not clear since in his 2004 report Mr
Badal reported that upon receipt of the ruling, "the company recommenced."
As the executing body responsible for protecting the interest of the
Government, the Privatisation Unit headed by Mr Winston Brassington should
surely clarify these issues without in any way being confrontational and
exacerbating an already strained relationship and an unfavourable image.
Coming on the heels of the bauxite bonds debacle, such accusations are
extremely harmful to the Government's investment image and surely require a
response, particularly if they are a misrepresentation. Recall that two
years ago, the Government passed the Investment Act 2004 amid much fanfare,
and frequent court actions against the Government and its agencies, even on
frivolous issues send unfortunate signals to potential investors. On the
other hand, Sterling's non-executive Chairman Dr Leslie Chin's report is
typically uncontroversial, even for his assertion of the reduction of
consumer purchasing power. Dr Chin deals, if only blandly and superficially,
with issues directly relating to the unremarkable performance of the company
As principally manufacturing companies, the performance of these
companies is a crucial indicator of the ability of the country to wean
itself away from its dependence on traditional commodities. Along with Banks
DIH and DDL, these companies serve the wide spectrum of consumers and the
average performance of these four companies perhaps reflects fairly the
state of the economy and the impact of the floods in early 2005.
Stockfeeds (See table 1)
Source: Annual Reports:
A profit decrease of 53% or $99M in 2005 follows a 140% increase in 2004,
which the Chairman attributes to large increases in the price of local raw
materials and the cost of electricity which the company self-generates.
Poultry production decreased marginally from 54M to 53M pounds in 2004 but
more worryingly, exports, already insignificant, fell further even as the
company aims to meet its foreign exchange requirements out of export
The company reports significant increases in investment and plans to open
its "state of the art" parboiled rice plant during the first half of 2006.
Investment in property, plant and equipment at December 2005 amounted to
close to $1.8B including $1.2B of work in progress on the rice plant.
Manufacturing is all about capacity utilisation and from some of the
glorious plans announced yearly by the Chairman, particularly for exports,
it seems that the company is probably operating at well below capacity.
Despite lamenting the absence of "any clearly devised energy policy on
our national agenda" and the consequent difficulty of foreseeing "any
economic growth of Guyana's national economy within the framework of the
CSME," Mr Badal expects 2006 to be a record year with the company being on
the threshold of a rapid increase in sales and profitability - just where it
was at the end of 2002! And among the reasons given for his expectation that
2006 will be a record year is the expansion of Caricom markets through the
establishment of the CSME and strangely, the competitiveness of local rice
production, which he earlier identified as one of the causes of the decline
Mr Badal who owns/controls 85% of the shares - a matter that is also the
subject of some controversy with the Government - is an extreme optimist and
the minority shareholders would no doubt be hoping that this year will
vindicate that optimism.
Sterling (See table 2)
Source: Annual Reports:
Net sales showed an increase of 11.47% over 2005, described as
"substantial," mainly from growth in detergents and ice cream. Like
Stockfeeds, Sterling seems to have a problem with plant utilisation with
fixed assets of just $Â¾B, and sales of $1.6B. The restructuring of the
board and executive management with a view to expanding its export markets
is yet to produce positive results, and both sales and profit on operating
activities in the export markets have fallen even as operating costs have
Last year, Business Page noted that with Guyana's static population, the
company needs to increase export sales substantially to enhance its
prospects, and the small growth of export sales (in 2004) must be troubling
the directors and main shareholders. The situation is even more troubling
now. Last year we also commented on the dramatic increase in administration,
marketing and general expenses by more than $100M; this has stabilised in
2005 but still consumes 81% of gross profit. With the bulk of these costs
being fixed, the company's prospects depend heavily on its ability to
increase (export) sales.
In 2004 the company paid a dividend of $4 per share which it is now
reducing per share to $3.30, hence the reduction in dividend cost.
The two companies disclose the compensation paid to key management
personnel differently, with one falling short of the requirements of
accounting rules including whether directors should be included in the
definition of key management personnel. They should. In addition,
Stockfeeds' key management personnel including two full-time service
directors are reported as receiving average compensation including short and
long-term benefits of $134,673 per month. Sterling reports that the
compensation of its key management personnel is a more credible average of
$500,000 per month.
Both companies are majority controlled - in Sterling by the Beharry Group
which owns 58% of the shares and in Stockfeeds by Mr Badal with 85% either
directly or through associates. Practically, however, it does not seem to
matter in Guyana whether the control is 51% or 99% - like our politics, the
majority takes all. Instead of directors being elected they are nominated by
the major shareholder. They are not accountable to stakeholders, and
shareholders' meetings are largely meaningless with only basic questions put
to the directors once a year.
An important element of accountability and good governance is timely and
meaningful reports. That these companies stretch their AGMs to the deadline
set under the Companies Act rather than the more rigorous Securities
Industry Act does not help to foster a reputation for good corporate
citizenship. Whatever the problems in Guyana - and we all know how pervasive
they are - our few public companies need to do much better both in
performance and governance, two not unrelated matters.