Committee Reports > List of Committees > Joint > 1980 > Committee on Commercial State-Sponsored Bodies > Report No. 07 - Arramara Teoranta

APPENDIX 1

MEMORANDUM FROM ARRAMARA TEORANTA

1. Background:

The Company was established in 1947 by Alginate Industries Ltd., a British firm, in partnership with T. McDonogh & Sons Ltd. of Galway, to harvest, dry and mill searods previously exported unprocessed. In 1949 McDonogh decided to withdraw and to obviate a closedown of the operation and loss of employment, the Government purchased their 51% shareholding. Of the 77,000 £1 shares issued to date, the Government at present holds 39,000 and the remainder is held by Alginate Industries Ltd. The authorised share capital is 100,000 shares at £1 each.

2. Board and Management:

Arramara Teoranta is a private company incorporated under the Companies Acts. The Articles of Association provide that as long as the Minister holds a majority of the shares he shall have the right to nominate three of the five Directors and that Alginate Industries Ltd. shall have the right to nominate two Directors as long as they hold the remaining shares. There are two Managing Directors, one representing the Minister for the Gaeltacht (51% shareholding) and the other Alginate Industries Ltd. (49% shareholding). Both are part-time on Arramara business. The Board meets usually at intervals of six weeks, that is, eight or nine meetings yearly. Two of these meetings are held at the Company’s factories, one meeting at Kilkieran, Connemara, and one at Meenmore, Co. Donegal. The remaining meetings are held in Dublin.

There is a General Manager, who is full-time Chief Executive, a Company Accountant, two Factory Managers and three Weed Managers. The duties of the Secretary of the Company are discharged on a part-time basis by a H.E.O. on the staff of Roinn na Gaeltachta. With regard to reimbursing the Department of the Gaeltacht, the position is that this officer works outside normal office hours as far as necessary to carry out his entire duties for both the Department and Arramara. As the Department suffers no loss of services the question of reimbursement does not arise.

3. Nature and Extent of Activities:

In the early years of the Company, its activities consisted solely of harvesting searods and drying and milling them at its factory at Kilkieran, Co. Galway. From 25 to 30 hands were employed at the factory and many hundreds were engaged in harvesting and air-drying. Annual harvests of searods varied from 2,500 to 4,000 tons (air dried).

Searods grow at a depth of several fathoms and are torn from their holdfasts by winter storms and deposited on the beaches in large “casts”. In the early 1960’s the harvest began to decline, due, it would appear, mainly to unfavourable wind and weather patterns. The Directors decided to embark on harvesting and processing Ascophyllum Nodosum, or rockweed. The product, asco meal, was initially sold as animal feed but trials indicated that it was eminently suitable for alginate production and the entire output was very soon switched to that outlet.

Harvesting and production expanded steadily. In 1968 a second factory for the production of asco meal was established at Meenmore, Dungloe, Co. Donegal. Despite the absence of a tradition of seaweed harvesting in Donegal the factory has been very successful; and production has expanded to absorb all available ascophyllum resources in the entire county.

The collection and processing of searods still continues, but the harvests now average only about 1,200 tons annually.

The drying and milling of seaweed under carefully controlled conditions, represents the initial process in the production of alginates. Arramara’s entire production is sold to Alginate Industries Ltd. who carry out the final process at chemical factories in Scotland. Alginate Industries purchase seaweed meal from Norway, South Africa, Tasmania, Iceland and Chile to supplement the limited supplies available from Ireland and Scotland. To maintain its market, Arramara must compete with these other sources in quality and price.

The final product, alginates, has a wide variety of applications including use in textile printing pharmaceuticals, food production and paper manufacture. Alginates are classified as hydrocolloids, and must compete on world markets with a variety of other products, including the natural gums, synthetic and semi-synthetic hydrocolloids, and inorganic products.

Tables are attached showing (a) trends in direct and overhead costs, and (b) trends in annual weed harvests and processing.

4. Personnel and Industrial Relations:

Factory staff is organised by the I.T.G.W.U. Good relations are maintained between management and workers.

Below management level, staff consists of office staff (5) and factory staff, comprising shift charge-hands, drivers, mechanics, electricians and general workers.

There are no members of staff organised by trade unions, other than the I.T.G.W.U.

5. Financial Performance and Capital Structure:

The history of Arramara is a history of steady expansion and profitability. In 1950, the first year of operation as a semi-State Company, sales were £32,790, profit £1,871, issued share capital was £10,000 and wages and payments to seaweed gatherers totalled £20,000. By 1960 sales had increased to £71,000 and wages and payments to gatherers had also doubled. These gatherers are paid on a contract basis.

With the inception of Ascophyllum processing a period of prolonged and rapid expansion began, so that to-day the Company’s production and exports are £1 million annually. Wages and payments to gatherers in 1978 amounted to £534,736. Issued share capital has been increased to £77,000, of which £39,000 is held by the Minister for the Gaeltacht and the remaining £38,000 by Alginate Industries Ltd. Fixed assets stand at £336,694 written down value on the Balance Sheet. This reflects the heavy investment in buildings, plant and machinery required to effect the expansion in production and to keeping the high standard of efficiency and quality production which is essential to hold the market. This investment was financed mainly by ploughing back profits, and to a limited degree by the issue of additional share capital. Bank accommodation has also been availed of. In 1975 the Directors considered that in the light of the results to date and the future prospects the time was opportune to remunerate the capital invested. Accordingly a dividend of 10% was paid that year and has been paid each year since. The Balance Sheet shows that the Company is in a sound financial position.

The key financial statistics for the years 1974-78 are provided on page 14 of the Reports and Accounts for the year ended 31 December 1978 (copies forwarded).

Attached is a brief history showing the occasions on which additional share capital was issued since 1949.

6. Future Plans

The Company has expanded rapidly over the last 10 years. In that period, an additional factory has been established at Meenmore, Co. Donegal, and an organisation successfully built up to initiate and develop seaweed harvesting for commercial use in an area where this operation was previously unknown.

During that period sales have risen from £96,567 to £1,108,169, an elevenfold increase; net profit before taxation from £5,400 to £55,411, an elevenfold increase; fixed assets from £108,087 to £336,694, an increase of 300 per cent. Share capital has been increased by £27,000 from £50,000 to the present figure of £77,000. The turnover in 1978 at £1,108,169 was fourteen times the issued share capital. Employment has risen from 42 to 62 and wages, salaries and payments to seaweed gatherers has increased from £103,000 to £534,736, a five fold increase. This sustained activity has heavily engaged the Board and management and absorbed much time and energy.

The Company is at present concentrating on consolidating the progress made to date, by ensuring continued efficiency at all stages in order to safeguard the market against the continual competition from suppliers in other countries. The question of carrying out the entire process of alginate manufacture has been looked at from time to time but the history of previous attempts to set up alginate factories is not encouraging. However, the company maintains contacts with developments in this field, and is ready to study any promising propositions that may come forward.

In December 1978, a U.S. firm Merck & Co. Inc., made a take-over bid for Alginate Industries Ltd. The matter was referred to the Monopolies Commission. Subsequently a second U.S. firm, F.M.C. of Chicago, indicated that they proposed to make an offer, and this proposition has also been referred to the Monopolies Commission. A decision from the Commission is expected towards the end of July 1979.

Future development of the activities of Arramara Teo. will clearly be influenced by the outcome of these approaches from the U.S.A.

Meanwhile, it is planned to refine the existing process by an improved system of milling, at an expenditure estimated at £100,000, to be spread over the years 1979-80.

May 1979

(a) Trends in direct and overhead costs of Arramara Teoranta

(b)(i) Trends in Annual Harvest of Arramara Teoranta

(b)(ii) Trends in Production

ARRAMARA TEORANTA: HISTORY OF ISSUED SHARE CAPITAL

1950: In 1950, it had become clear that the Company was under-capitalised at £6,000, and 4,000 additional £1 shares were issued at £1 each, to bring the total issued share capital to £10,000.

1955: It was decided to install a new drier for searods, and to undertake the harvesting, cleaning, grading and sale of carrageen moss. These developments were financed by an issue of 26,000 £1 shares at £1 each, to bring the issued share capital to £36,000.

1964: In 1964, additional drying capacity for processing Ascophyllum Nodosum was installed. This additional plant was financed by the issue of 10,000 £1 shares at £1 each, to bring the issued share capital to £46,000.

1968: A second factory was established at Meenmore, Co. Donegal, and a new rotarytype drier installed at the Kilkieran factory. These developments were financed by a loan from the Industrial Credit Company, a grant from An Foras Tionscal and the issue of 4,000 £1 shares at £1 each.

1973: To finance an extension to the Meenmore factory, an additional 27,000 £1 shares were issued at £1 each.

Note: Present Authorised Share Capital: £100,000 (Ordinary £1 shares). Present Issued Share Capital: £77,000 (Ordinary £1 shares).

ARRAMARA TEORANTA: STRUCTURE OF MANAGEMENT