KARACHI, March 17: Reckitt Benckiser Pakistan Limited proposes to sell off its manufacturing facilities that produced "Robin Neel" for lump sum consideration of Rs 255 million.

At the end of June last year, the company had already closed down the factory at Korangi, Karachi that had been producing ultramarine blue (under the brand name of Robin Neel) for nearly half a century.

A company source said that the Ultramarine Blue Factory had been shut for past eight months and it did not employ any person. But the company clarified that it continues the business of marketing, distribution and selling the product under the company's brand name "using for this purpose ultramarine blue procured from other sources."

Asked whether the company had out sourced production within the country or would import from outside, a company official said that it would utilize the "most economical and best possible sourcing."

The decision to sell and dispose of the "asset surplus to the requirements of the company," was made at the board meeting held on March 16. These comprised factory bearing Plot No 15, 16, 23, 24, Sector 16, Korangi Industrial Area, Karachi and the factory buildings and other structures and kilns.

In a price-sensitive material information statement released at the stock exchanges on Wednesday, the company said that the discontinuation of manufacturing operations had become necessary due to the high cost of manufacturing compared to the cost of procuring ultramarine blue from other sources.

"Furthermore, the ultramarine blue manufacturing facility required additional investment if it were to be made compliant with Good Manufacturing Practices," the company said.

The company official would not, however, disclose the name of the purchasing party or how much contribution 'Robin neel' makes to the overall sales and profit of the company.

In the last four years, Reckitt Benckiser (previously Reckitt & Colman of Pakistan Limited)- the fast moving consumer goods company (FMCG)- appears to have made considerable progress so that the loss of staggering sum of Rs 213 million that it had suffered in 1999 (the first deficit ever encountered by the company) seem all but a distant nightmare.

For the year ended December 31, 2002, the company posted after tax profit amounting to Rs166.2 million, up from Rs79.1 million the previous year. Sales stood at Rs2,502 million which enabled the company to post highest ever pretax profit of Rs272.2 million.

In the household product segment, the company reported growth of 25.7 per cent with product sales at Rs1.3 billion, up from Rs1.1 billion the previous year. Gross margin improved 10 per cent in this segment.

Sales in the pharmaceutical segment increased by 6 per cent but operating profit dropped by Rs7.8 million, the latter ascribed to sales mix and to one-time restructuring costs.

The company complained of competition from smuggled goods, under- invoiced imports and counterfeit products which continued to affect performance of some of the key brands.

The sale of 'Robin Neel' manufacturing facilities looks in line with the company's strategy of restructuring certain business activities, through outsourcing some functions and by refining some other processes.

Earlier on January 30 this year, shareholders in Reckitt Benckiser had authorized the repurchase of 4 million of its own shares by the company at price of Rs90 per share.

Like most multi-national blue chips, the Reckitt stock is illiquid. At the last count on December 2002, the controlling 58.11 per cent shares were vested in the holding company: Reckitt Benckiser plc, UK and its nominees.

The price of the 10-rupee share in Reckitt Benckiser has galvanised 112 per cent from around Rs40 in January 2003 to Rs85, currently. The 4m shares that the company is out to repurchase would measure up to 12.5pc of company's outstanding stock. At Rs90, the company would require to pay Rs360m.

Does the company propose to sell the 'Robin Neel' manufacturing facilities at Rs255 million to raise much of the money it would require to pay for the repurchase of shares?