Committee Reports > List of Committees > Joint > 1979 > Committee on Commercial State-Sponsored Bodies > Report No. 07 - Arramara Teoranta

MIONTUAIRISC NA FIANAISE

(Minutes of Evidence)

Dé Céadaoin, 27 Meitheamh, 1979

Wednesday, 27 June, 1979

ARRAMARA TEORANTA

Mr. A. Ó Baoighealláin, Chairman and Joint Managing Director; Mr. C. A. Cameron, Director; and Mr. Peter MacIntyre, General Manager of Arramara Teoranta called and examined.

1. Chairman.—Thank you for coming along to talk to us about Arramara. I would like to point out that we are on tape now; that means everything we are saying is being recorded. I would ask everybody to speak up so that he will be properly recorded.

Perhaps I might ask the opening question, that is the question of having two managing directors and neither of them full-time. What was the reason for that?

Mr. Ó Baoighealláin.—It arises from the structure of the company. It is a partnership between a private English firm now gone public and the Irish Government. It is only proper that each side should have the same representation having regard to the shareholding. The Government hold 51 per cent of the shares and Alginate Industries hold 49 per cent. We thought that was a proper way of representing the separate interests on one board.

2. Chairman.—Do the two managing directors have different spheres of authority or are they both dealing with the same area?

Mr. Ó Baoighealláin.—On the Irish side I devote myself mainly to the financial side of the business, grants and the arrangements with the bank and that sort of thing; and my colleague, Mr. Cameron, deals mainly with the operational side.

3. Chairman.—You were originally dealing with sea rods. Was that not the original raw material? That supply began to diminish and you had to move into the other area of rock weed?

Mr. Ó Baoighealláin.—That is correct.

4. Chairman.—First of all, are sea rods still in short supply or have they begun to become more available in recent years?

Mr. Ó Baoighealláin.—No, the supply is still disappointingly small, smaller than it was 15 years ago.

5. Chairman.—It is remaining at a constant level now or is it still diminishing?

Mr. Ó Baoighealláin.—It varies from season to season. It is very hard to forecast what it is going to be. It depends on the action of the wind and tide and if those combinations are not right the sea rods will not be blown ashore, or if they are blown ashore and if the high wind continues they may be washed out again on the next high tide before the gatherers can harvest them.

6. Chairman.—What proportion of your operation is now based on sea rods, approximately?

Mr. Ó Baoighealláin.—About 7 per cent.

7. Chairman.—In regard to the rock weed which is now your main raw material, is there a constant supply of that?

Mr. Ó Baoighealláin.—It regenerates itself, but we have to be very careful in managing the harvesting so as to make sure the holdfast and nine inches of the stem is left growing. If that is done then it will regenerate itself in the space of three or four years’ time.

8. Chairman.—That policy is effective and it is maintaining much the same supply?

Mr. Ó Baoighealláin.—Yes.

9. Deputy L. Lawlor.—Based on your success, would you see your company expanding into additional spin-off activities? At the moment you are exporting the valuable raw material. Would you see any down-stream investment in the future?

Mr. Ó Baoighealláin.—That is a difficult one. There was an effort made some ten years ago to establish an alginate factory in Galway but it ran into difficulties over planning. Alginate manufacture requires very large quantities of water and as a result, of course, there is a very large effluent. The health authority in Galway found the effluent, to put it mildly, a rather dirty effluent and they would not give permission to have it drained off into the bay. So that put an end to the project. Since then alginate manufacture has become more highly automated and to go into it now would require a very heavy capital investment. Its employment content would not be great and it would have to be done on a very large scale to be economic. It is rather doubtful if the supplies received in this country would be sufficient to support a very large capital expenditure.

10. Deputy O’Donnell.—Is it not true to say that the growth and expansion of this industry is limited by the unavailability of the actual raw materials?

Mr. Ó Baoighealláin.—That is correct.

11. Deputy O’Donnell.—There are technical and other problems in relation to the harvesting of the sea weed. In other words the application of mechanisation does not appear to be on here by reason of terrain and so forth. Would you like to elaborate on that? What is the present situation in relation to the availability of supplies of seaweed etc.? Are there any plans for improving methods of harvesting and so forth?

Mr. Ó Baoighealláin.—We have developed and exploited almost all the available supplies of seaweed and surveyed the whole coastline. We set up a factory in Donegal specially to utilise the rock weed there; there is very little left now that we have not been able to utilise and that, of course, puts a limit to our expansion.

12. Deputy Kenneally.—What about mechanisation?

Mr. Cameron.—If we ever went into mechanisation I would say it was rather a confession of failure. It is being done in Iceland where there are no men available. At the moment it is cheaper to use hand cutting, and, of course, it is much better for everybody because if you put in a harvester you have two men cutting weed which at the present moment means income to 20 men. If we did not get collectors, people to cut, then we would have to get harvesters and I would consider it rather a failure. Also, you have the difficulty of weed rights because you would have two men cutting and the whole layout might belong to different people.

13. Deputy O’Donnell.—You would have a difficulty there if mechanisation were possible. You would have a strong social reaction to the introduction of mechanisation into what, in fact, has been a very important part of the economy of the small farmers in the area. Because part of their annual income is derived from the collecting of seaweed you would have an immediate conflict there between the economics of mechanisation and the social implications of the introduction of mechanisation. Do you agree?

Mr. Cameron.—Yes.

14. Deputy O’Donnell.—Are you happy then that the present situation is the optimum taking account of the economic and social factors in the western seaboard?

Mr. Cameron.—Yes.

Sea rods are probably more profitable but they are a much smaller part of our production. They are more profitable because they produce a better grade of alginates than the rock weed.

15. Senator Cooney.—I see that between 1977 and 1978 the amount of sea rods collected increased considerably while the amount of rock weed decreased. Is there any reason why there was less rock weed?

Mr. Cameron.—There was less rock weed because Kilkieran factory was out of production for two or three weeks having an overhaul.

16. Senator Cooney.—Did that affect the amount collected?

Mr. Cameron.—As it affected production we had to stop the collection during that time. The rods were good as it happened to be a good winter, so we did much better with the rods.

17. Senator Cooney.—Is the regeneration of rock weed and sea rods entirely natural or is research being done into artificial regeneration?

Mr. Ó Baoighealláin.—It is entirely natural. It does regenerate every three years in a regular cycle. We have been studying that for a couple of years now. In the beginning we thought we would have to wait six years for the weed to regenerate but by experiments over the years we have now proved by the results that it regenerates every three years. That, in effect, doubled the production of the beds because we cut them once every three years instead of once every six years.

18. Senator Cooney.—Do sea rods regenerate themselves?

Mr. Ó Baoighealláin.—Yes.

19. Senator Cooney.—They are becoming scarcer, I gather?

Mr. Ó Baoighealláin.—They have, and it is very hard to know the cause of the fall-off in the harvest.

20. Senator Cooney.—Is there any research going on into it?

Mr. MacIntyre.—Various studies have been made and various theories have been formed. At one time the degree of sunspot activity was related to the amount of sea rods cast ashore. That has a cycle of seven years.

21. Senator Cooney.—Having regard to the profitability of sea rods as opposed to rock weed, would you consider it a desirable development for your company, alone or in co-operation with other companies, to initiate intensive research into the regeneration of sea rods?

Mr. Ó Baoighealláin.—That would be a very useful thing to do. As you say, sea rods are profitable. We do keep in touch with any research that is going on throughout the world of sea weeds in general. We have come across various theories for the fall-off in harvest of sea rods. It is very hard to know from any experiments being carried out and the information we have got whether it is simply due to the fact that the whether has changed and that the winds and the tides are not as suitable as they used to be or whether the sea rods themselves are not as plentiful. I was just reading the other day in a newspaper report that diving by scuba divers and other divers is interfering with the growth of coral, so it may interfere with the growth of sea rods too.

Mr. Cameron.—There is also the same change in the supply of sea rods in Scottish waters.

22. Senator Cooney.—Are sea rods found universally, or are they confined to these islands?

Mr. Cameron.—They are confined to the west coast and the north of Scotland—the Orkney Islands. You will not get so many of them on the east coast of Britain or on the east coast of Ireland.

23. Senator Cooney.—Are they found in other seas?

Mr. Cameron.—They are not the same kind. You get something like them in South America and in Tasmania.

Mr. Ó Baoighealláin.—California has a giant sea weed which grows in the gulf of San Diego. It is an enormous weed with a stem of 80 feet in length. The leaf spreads on the surface of the ocean and it is harvested from barges.

24. Senator Cooney.—You say you have surveys going on the whole time. Is that literally so?

Mr. Ó Baoighealláin.—That is literally so.

25. Senator Cooney.—How many companies are engaged in the collection of sea weed?

Mr. Ó Baoighealláin.—Ourselves, Clew Bay, Maam Cross, and Irish Marine Products, Kilrush.

26. Senator Cooney.—Do they cover the entire coast?

Mr. Ó Baoighealláin.—Just the west coast, from Loop Head to Malin Head.

27. Senator Cooney.—Are the Kerry and Cork coasts not covered?

Mr. Ó Baoighealláin.—They are not very interested down there. There is a little bit done in west Cork by Clew Bay, but we found it very difficult to get them interested.

28. Senator Keating.—Is the raw material there?

Mr. Ó Baoighealláin.—It is not as extensive or as rich as around Connemara and Donegal, but there is some there. It is very hard to get them interested in harvesting it.

29. Senator Cooney.—From Loop Head to Malin Head—is it shared among the companies?

Mr. Ó Baoighealláin.—Yes. We are the only ones who harvest sea rods because they are most expensive and are far too expensive to use for anything other than our operation. We operate in County Clare for rock weed. Clew Bay operates in County Mayo and Sligo Bay. We operate from Sligo Bay to Malin Head.

30. Senator Cooney.—Is this arranged by agreement?

Mr. Ó Baoighealláin.—By agreement.

31. Senator Cooney.—How is the price paid to the collectors fixed?

Mr. Cameron.—The price paid to the collectors originally is what one can afford to pay and it goes up each year by the same amount as wages. We have to keep the payment to what one can afford to pay and to what will, at the same time, induce them to go out and collect. So an increase is given each year, roughly equivalent to a wage increase.

32. Senator Cooney.—What do you mean by “how much one could afford to pay”?

Mr. Cameron.—We cannot price ourselves out of the market. One could not pay the earth for seaweed.

33. Senator Cooney.—You sell to Alginate in Scotland, an associated Company?

Mr. Cameron.—Yes.

34. Senator Cooney.—So Alginate can set the price?

Mr. Ó Baoighealláin.—Not really because they need the product. As long as we charge reasonable prices and give good quality they are prepared to buy.

35. Deputy L. Lawlor.—Would there be a better down-stream price if you were to go into seaweed meal as an animal feed?

Mr. Ó Baoighealláin.—No, far less.

36. Senator Keating.—I understand that the alginate is a proportion of the total bulk of the seaweed and that the end producer. who is a 49 per cent shareholder, wants alginate? Is it not possible to do both simultaneously? Do you not have a residue?

Mr. MacIntyre.—There is a residue but it goes back into the sea. It is just effluent.

37. Senator Keating.—What is the demand for alginate?

Mr. Ó Baoighealláin.—It has been quite buoyant for a number of years past.

38. Senator Keating.—Are there synthetic substitutes?

Mr. Ó Baoighealláin.—Yes, there are. Carboxylmethyl cellulose is one and then there are the natural gums which are all competitors: pectin, the locust bean gum, gum tragacanth and so on.

39. Senator Keating.—Let me put this another way to try and elicit a comment. You have small independent gatherers working substantially for themselves. The only purchaser in their bit of coastline is one company. It is not unthinkable that—it has been said a long time ago that where people meet together, they fix prices—that you do not compete with the others. It is thinkable that you should pass on at the lowest possible price ex Kilkieran to Alginates so that you leave the maximum profit in Scotland and not in the west of Ireland. That is a thinkable scenario. I am not saying that it is happening but would you like to react to it?

Mr. Cameron.—Firstly, it is not correct to say that we divide the coast up. We do with Clew Bay, but we do not with Marine Products nor with Maam Cross. We buy it in a different condition. We buy weed wet, straight from the sea. The other two firms buy it air dried which means it has got to be air dried. Also, we insist on weed being fresh, cut off the rocks. The other two firms, who use it for seaweed meal, could buy cast weed which is much easier to collect. It is slightly difficult to compare prices but if we did not pay enough, there is no doubt about it, the gatherers would go collecting for the other two firms much more than they do. We are up against competition like that.

40. Senator Keating.—Is there genuine competition for the product? A man who gathers a few rafts or whatever they are called—does he shop around or does he go traditionally to one person?

Mr. MacIntyre.—He can shop around. He may find that his seaweed is not up to our standard and then he can go to one of the others. He can air dry it and sell it to them.

41. Senator Keating.—Would people prefer to sell to you if possible?

Mr. MacIntyre.—I think they would. If the weather is good, they can air dry it or sell it to us.

42. Deputy Kenneally.—Is it a tradition with families to go to particular companies?

Mr. MacIntyre.—I do not know if they are long enough in the business to have a tradition.

43. Senator Keating.—Have they not a tradition of gathering even if there was no processing and burning for kelp?

Mr. MacIntyre.—Yes, certain areas have a traditional supply, Kilrush for instance.

44. Deputy L. Lawlor.—Geographically, your position on the stretch of coastline from which you get most of your product when you are looking for it fresh, means that there is a limited outlet for the people gathering in that area. I am sure they do not come in to offer a price for the product.

Mr. Cameron.—No, that is right. The reason why they do keep it settled is because if we had a free-for-all in an area the weed in that area would be cut out in a year. There would be nothing left there for two years so we try to regulate it so that it is a full-time job for people year in and year out.

45. Deputy L. Lawlor.—At the end of the day the percentage profit margin system operating in Scotland is very flamboyant compared with the margins you are making in Co. Galway?

Mr. Ó Baoighealláin.—It is very hard to compare them. Ours is a different operation. We are doing this job of organising harvesting and collecting, bringing into the factory, drying under controlled conditions. We sell to the chemical manufacturer who is drawing supplies of the weed from Scotland, Norway, Iceland, Chile, Tasmania, different types at different prices. He produces the alginate which is the result of a highly complicated process, requiring heavy capital investment, the addition of expensive chemicals. Then he goes out into a highly competitive market and sells. I think there is a bigger risk factor involved in the operation over there than there is in our operation so that we would expect they would look for a higher return.

46. Senator Keating.—What percentage? You have named a number of sources of raw materials for the parent company. What percentage of their stuff comes from Ireland?

Mr. Ó Baoighealláin.—About 25 per cent from Arramara.

Mr. Cameron.—I am told this year it is 25 per cent.

47. Senator Cooney.—How do the Irish and the Scottish prices for seaweed collecting compare?

Mr. Cameron.—About the same.

48. Senator Keating.—I have a figure in my head from casual reading that the most recent profit figures for Alginate broke through £1,000,000 in the recent period of report. Is that approximately right?

Mr. Ó Baoighealláin.—Yes, of that order.

49. Deputy L. Lawlor.—Obviously, if people are interested in taking them over, there must be profit.

Mr. Cameron.—Profit is down a good deal this year compared to last year.

50. Chairman.—You did have a certain market in carrageen at one stage, did you not?

Mr. Ó Baoighealláin.—Yes.

51. Chairman.—You went out of that business?

Mr. Ó Baoighealláin.—Yes, we found there was much less available than we had hoped at the beginning. It was too small and too difficult to market. There was a number of private merchants engaged in the operation. We could not see any point in our continuing.

52. Chairman.—When sea rods became scarce, you found rock weed and you were doing very well. Have you any other kind of seaweed in reserve that you would move on to if you find your existing supplies dwindling?

Mr. Ó Baoighealláin.—No, I do not think so. There is one other weed that is plentiful enough—fucus vesiculosus but there is no alginate in it. It is useless except for cattle food.

53. Senator Keating.—I was going to ask the use for which you were gathering carrageen. Was it in small packages as human food, traditional usage or——?

Mr. Ó Baoighealláin.—We were marketing it.

54. Senator Cooney.—The only customers for the seaweed are the alginate industries. Are there other possible customers?

Mr. Ó Baoighealláin.—I do not know of any for that particular product, which is prepared to specification for their purposes.

55. Senator Keating.—Is there anyone else in Europe manufacturing an alginate-type product for sale to food and pharmaceutical industries?

Mr. Ó Baoighealláin.—There is in Norway and there is a small amount in France. There are very big manufacturers in America.

56. Senator Cooney.—You mentioned too that to maintain a market, you have to compete with other sources in respect of quality and price. That would be principally Scotland. This is the only comparable one: what is got from Chile and such places is a different product?

Mr. Ó Baoighealláin.—Yes, in the sense that you produce different quantities of alginate from it.

57. Senator Cooney.—From the point of view of alginate which is the best raw material?

Mr. Ó Baoighealláin.—I think Tasmania bull kelp.

Mr. Cameron.—Tasmania bull kelp is by far the biggest; it is most expensive to ship over but the fact that it has got twice as much alginate as weed here means they can afford to do it.

58. Senator Cooney.—Could they afford to do it to the exclusion of local seaweed?

Mr. Ó Baoighealláin.—No.

59. Senator Keating.—Are there other products of a minor kind that are commercial as well as the alginate?

Mr. Ó Baoighealláin.—No. There is no other product.

60. Senator Keating.—Is the plant in Scotland producing 5 per cent of something else?

Mr. Cameron.—No.

61. Senator Cooney.—You have a 7-year contract with them and are about halfway through it?

Mr. Cameron.—Yes.

62. Senator Cooney.—Has there been any variation in it or is the price fixed?

Mr. Ó Baoighealláin.—It has worked out quite well. It is a costing arrangement.

63. Deputy L. Lawlor.—Your turnover was £1,108,000 in 1978, is that correct?

Mr. Ó Baoighealláin.—Yes.

64. Deputy L. Lawlor.—Your gross profit margin was £55,400? The percentage profit on the turnover is quite small really.

Mr. Ó Baoighealláin.—Yes. It is a large turnover.

65. Deputy L. Lawlor.—If you added 10 to 15 per cent to your price as and from the beginning of next month, what would be the reaction?

Mr. Ó Baoighealláin.—It would depend on how we justified it. If we said that our costs had increased, that we had to pay more for the raw material, that would be a good reason.

66. Deputy L. Lawlor.—At the moment the profit figure is rather low. You could justify a considerable increase based on the return on investment and turnover?

Mr. Ó Baoighealláin.—The return on investment is quite good. It fell back a bit last year to 13.8 per cent. The previous year it was 17.9, and the year before that it was 18.1. This is return on the net capital employed and not the return on the share capital. The return on the share capital is far higher. The issued share capital is only £77,000 and the profit of £55,000 on a share capital of £77,000 is a respectable figure.

67. Deputy L. Lawlor.—Do you foresee yourselves increasing prices considerably?

Mr. Ó Baoighealláin.—No. We will increase to keep pace with costs. Our returns will be of the same pattern. I cannot see any great increase because the market will not take it.

68. Senator Cooney.—The market is in alginate?

Mr. Ó Baoighealláin.—Yes.

69. Senator Cooney.—Is it not a question of Alginate not paying? Have you any control over Alginate’s prices to Arramara?

Mr. Ó Baoighealláin.—The return on the capital invested is good and the use of local raw material gives good employment. We think the price is fair.

70. Senator Cooney.—Do you compare your price to Alginate with what they make?

Mr. Ó Baoighealláin.—It would not be comparing like with like as the two operations are different. The price that we have to contend with is the price that Alginate pay for similar material from Scotland or Norway. We must remain competitive.

71. Deputy L. Lawlor.—As they are depending on you for 25 per cent of their product does it not seem that you should be able to get a better price?

Mr. Ó Baoighealláin.—We have to be very careful because this is a valuable industry and we do not want to do anything to upset it. Ireland is not the only source for this raw material and we have to keep that in mind. Alginate have been able to find very extensive supplies in places like Chile and Tasmania in the last ten years. We cannot afford to be too greedy.

72. Deputy L. Lawlor.—How would you compare the price of what you sell with the cost of the Chilean product?

Mr. Ó Baoighealláin.—I am not sure but I think that ours is slightly less.

73. Chairman.—You have a sales agreement with Alginate for seven years?

Mr. Ó Baoighealláin.—Yes.

74. Chairman.—What form does that take, or what is the purpose of that if you are selling to Alginate at the going price, whether they buy it from Norway or anywhere else? If they are merely paying you market prices, what is the purpose of the sales agreement?

Mr. Ó Baoighealláin.—We have bound them to us for seven years. They have undertaken to give us each year an order for a whole year’s production in advance, which is a big advantage.

75. Chairman.—They take what you offer them?

Mr. Ó Baoighealláin.—Yes. They bind themselves two years in advance for the sea rod material. Under the agreement we are free to increase our prices to take account of increases in our costs and at the same time to preserve our profit at a reasonable figure. We are not tied to a set profit figure for seven years. It provides for a cash flow which enables us to finance heavy capital expenditure and to keep ourselves efficient.

76. Chairman.—It is a guaranteed market?

Mr. Ó Baoighealláin.—Yes.

77. Chairman.—At a price to be negotiated between you?

Mr. Ó Baoighealláin.—Yes.

78. Deputy L. Lawlor.—What is the dividend policy of the company?

Mr. Ó Baoighealláin.—For a number of years we have ploughed back profits into the company to improve our production facilities and expand business. In 1975 we thought the time had come to remunerate the capital and we declared a dividend of 10 per cent net. We have paid that 10 per cent each year. The profits have been sufficient each year to cover the dividends three times.

79. Deputy L. Lawlor.—Have you a major capital investment programme?

Mr. Ó Baoighealláin.—We have.

80. Deputy L. Lawlor.—Is the criterion for investment vis-à-vis grant aid £ for £— approximately 50 per cent Government aid?

Mr. Ó Baoighealláin.—No. It is 35 per cent.

81. Senator Cooney.—Have you considered increasing the price to your collectors at a cost to your dividends?

Mr. Ó Baoighealláin.—No. we have not.

82. Senator Cooney.—What is the average payment figure for each collector? Would you have that figure?

Mr. Maclntyre.—It is difficult to make an average figure. Based on actual tonnage brought in and paid for and the number of individuals concerned it would probably be between £40 and £60 per week. As regards being seasonal a person can continue to collect all the year round. That upsets the average. There are others who collect only in the summer.

83. Senator Keating.—I have been trying to work out some figures from the Alginate figures and the figures in front of us. Perhaps the witnesses would check if I am right and make any comment they want. In 1978 production, that is the dried milled bagged stuff, was fractionally over 8,000 tons. The profit on that after taxation was £36,000. Let us call it £5 a ton. That was the order of magnitude. That 8,000 tons went to Scotland as a quarter of Scotland’s intake. Scotland had on its total intake a profit of around £1 million, so on that 8,000 tons it earned £¼ million which is of the order of £30 a ton. The profit per ton in Kilkieran was of the order of £5 a ton. The profit per ton in Scotland—I do not know where the plant is—is of the order of magnitude of £30 a ton. One figure is six times the other. Is there six times as much work in added value in Scotland as there is in Kilkieran?

Mr. Ó Baoighealláin.—We would have to examine the Alginate accounts to answer that in detail. Generally it is a very highly developed chemical process with high technology. There are about 120 kinds of alginates produced for different markets. There is heavy investment in research and development, heavy investment in marketing; material is sold worldwide. That is the kind of operation it is as compared to this one here. As far as our link with Alginates is concerned, it is true that we are an important supplier. But we need them as much as they need us.

84. Senator Cooney.—Is there any parallel process or is there any element which could add to the value of the product before it leaves this country?

Mr. Maclntyre.—Going towards the stage of alginate manufacture?

Senator Cooney.—Yes.

Mr. Maclntyre.—We have been looking at that many times to see if there is a halfway stage to which you can develop it but no, it has to be all the way.

85. Chairman.—Is the seaweed gathered throughout the year?

Mr. Maclntyre.—The rockweed is gathered throughout the year. The sea rods are from about October to March.

86. Chairman.—Do you have to give special incentives to have it gathered at an even rate throughout the year?

Mr. Maclntyre.—No, we do a certain amount of controlling here ourselves. We regulate it so that the areas supply us fairly. It can be affected by weather. We also keep an eye on the possibility of overcutting in case we run out of weed in certain areas.

Mr. Cameron.—We had the same trouble in Scotland, short of weed at one time and an over-supply of weed at another time of the year. We have given it lots of thought. We were only thinking about it a week ago, as to how one can get over it. We did at one time try in Ireland I think and certainly in Scotland to pay a higher price in the winter-time and when it came to 31 March, naturally all the collectors objected to the price going down and said can you not wait until 30 April because the weather is just as bad. Then the next year they said could you not wait until the end of May and then they said, please do not do it at all. We found in the end that it did not work. We have tried a bonus system whereby we gave extra pay to people who collected regularly throughout the year. That worked for two or three years and definitely improved the collection. Then it stopped working and everybody asked that it should be abolished. So we abolished it. We have tried. In this way you can get too many collectors in the winter and then you are going to get far too many in the summer. We in the factory cannot cope with it. It gives us trouble. It is a problem which we are facing all the time and trying to find some way out of it. There is going to be shortage of supply in the winter. The main problem is the short days for collecting and the risk of losing the weed once it is collected. It is a problem and it is one on which we will always take advice and try to find a solution.

87. Chairman.—Financial incentives do not seem to work?

Mr. Cameron.—No. Sometimes, no matter how much you offer they cannot collect because the weather is impossible. Financial incentives are not the only thing.

88. Senator Cooney.—Have you any idea how your profitability would compare with your competitors in Ireland?

Mr. Ó Baoighealláin.—No. They know how we do.

89. Senator Cooney.—On the question of price and the price you pay to your suppliers, you are to some extent constrained by your seven-year contract which fixes a basic price and permits certain cost increases to be added from time to time. How was the basic price established when the contract commenced? Secondly, what are the cost considerations that are taken into account to be added from year to year?

Mr. Ó Baoighealláin.—We started off with the price that had been ruling and from there we provided for the cash flow that would be needed if we spent so much by way of capital expenditure. We projected that ahead. We would need to remunerate the capital and to pay tax. All those and our profit margin plus the facility to increase our basic cost as we increased the price to gatherers, as the price of fuel oil went up, as ESB charges went up, as all charges went up we would increase the basic price correspondingly.

90. Senator Cooney.—Does the gatherer get an annual increase?

Mr. Ó Baoighealláin.—Usually he does.

91. Senator Cooney.—What is that related to? Is it related to an inflation figure?

Mr. Ó Baoighealláin.—Generally it is related to the going increase in wages. We take the national agreement as a guideline.

92. Deputy O’Donnell.—The factories here are located in Kilkieran and Dungloe. Has the feasibility of establishing a plant on the south coast ever been considered and has there been any recent review of that situation, bearing in mind the fact that the seaweed has to be hauled from the southwest up to Kilkieran, Westport and so on?

Mr. Ó Baoighealláin.—No. we have no such plans. We found it very difficult to get supplies from there.

93. Deputy O’Donnell.—Would the supply of raw material sustain other plants?

Mr. Ó Baoighealláin.—No.

Mr. Cameron.—Senator Staunton had plans for establishing a plant in Cork. We did not want to compete with him. When he went into it he found that it would be easier to take the seaweed from Cork to his present plant than it would be to install new plant in Cork. He now collects seaweed in Cork and transports it to his plant. It is part of the arrangement that we leave it entirely to him.

94. Deputy O’Donnell.—How many people are employed in gathering seaweed and what would be their average annual income?

Mr. Ó Baoighealláin.—We have about 300 gatherers of rock weed and possibly the same number gathering sea rods. It is very hard to give an annual figure as they come and go. Some of them do extremely well and make a lot of money; others go in only for a short time. Some gatherers supply, say, 10 tons a year and earn £80 or £100 for it.

95. Deputy O’Donnell.—Is the transport of the seaweed organised by the company or by the farmers, or is it done by contractors?

Mr. MacIntyre.—In Kilkieran it is done by a haulage contractor.

96. Deputy O’Donnell.—On contract to the farmer or to the company?

Mr. MacIntyre.—He is paid by the company. He is controlled by the company in the amount he brings in. He liaises with the company and the collectors. In Donegal we do the haulage.

97. Senator Cooney.—On the proposed takeover by Merck, what stage is it at?

Mr. Ó Baoighealláin.—Merck made an offer which was accepted by the shareholders. It had to be referred to the authorities in England. Having looked at it, they decided that it should go to the Monopolies Commission to be cleared. While it was being referred to the commission, another American company expressed an interest. They said that they would be prepared to make an offer, which is also before the Monopolies Commission. Our latest information is that a decision from the Monopolies Commission is expected towards the end of next month.

98. Senator Cooney.—Assuming that permission is given for the takeover, how do you look forward to dealing with Merck as opposed to dealing with Alginate? Do you think it will make any difference?

Mr. Ó Baoighealláin.—Basically, there should not be any difference. As long as we can continue to produce what is wanted at the right price, we should stay as we are. So far as Alginate are concerned, it would probably be of benefit to them to be taken over by a very large company like Merck with very large funds at their disposal and a lot of market expertise.

Mr. Cameron.—Merck and FMC have made it quite clear to Alginate Industries that they are going to leave them as an autonomous company, that there will be no change in personnel. The only change with Merck was that they were going to have a new chairman. Otherwise there will be no change and it will still be an autonomous company. So Arramara will still be dealing with Alginate Industries rather than with Merck or FMC.

99. Senator Cooney.—What is the advantage for Alginate Industries owning 49 per cent of Arramara?

Mr. Ó Baoighealláin.—It is not so much an advantage. Historically, it started like that and it stayed like that.

100. Senator Cooney.—Would there be any advantage or disadvantage to either party for the State to take over Alginate’s 49 per cent?

Mr. Ó Baoighealláin.—I do not know. It hasn’t arisen.

101. Senator Cooney.—The level of dividend which Alginate have got has not been big?

Mr. Ó Baoighealláin.—No.

Senator Keating.—It is worth about £15,000 cumulatively to date.

102. Senator Cooney.—Is there any financial advantage for Alginate to stay at 49 per cent?

Mr. Ó Baoighealláin.—I do not see that there is.

103. Senator Cooney.—Is there any other advantage?

Mr. Cameron.—The only advantage is that they can guide the running of the factories. The seaweed has to be very carefully dried and milled to specification. We have learned a lot of lessons through hard experience and can therefore run the Irish factories with the lessons which we have learned from the Scottish factories. That is where I come in because I run the Scottish factories as well as the Irish factories. As Alginate buy 100 per cent of the production, they would like to have a certain amount of control of the factory.

104. Senator Cooney.—It ensures control of quality and continuity of supply?

Mr. Ó Baoighealláin.—It is fair to say that Arramara has been the beneficiary of a lot of technical help from AIL without charge.

Chairman.—Thank you, gentlemen.

The witnesses withdrew.