Bata Shoe’s sensational recovery17 February 2009
Having suffered a massive loss in profits, following a four month strike by the unionized workforce, in July 2004, Bata Shoe Company of Ceylon Limited, Sri Lanka, have bounced back to profitability in 2008 under the managing director R J Mollo. In addition to the strike and the resulting severe losses, the company also suffered a fire which gutted a warehouse full of school shoes in preparation for the peak back-to-school sales period in December/January 2005.
Mollo took over the reigns of the company in February 2006 at a time when the company was burdened with severe cash constraints following the aftermath of the strike and also the imposition of a cess tax on imports of footwear. 90% of the raw material used in the production of footwear is imported into the country as are some finished goods.
Bata retail outlets in major towns sell their imported shoe line. Excessive taxes and cheap imported footwear together with contraband which flooded the local market posed a big problem to Bata who were the vendors of quality footwear and did not compromise on quality.
Bata Shoe Company of Ceylon Limited continued with steadily reducing losses over the period from 2005 to 2007 as a result of carefully planned strategies for improvement of all aspects of the business from procurement of requirements, through to the production line. All systems were gradually improved and renovated to meet the ever changing fashions.
Despite many obstacles (steep in crease in furnace oil and electricity; the sharp rise in transport costs resulting from increased fuel costs; the steady rise of the rupee parity rate against the US dollar and sharp increases in bank lending rates) the company have successfully turned the corner. By the end of 2008 they had made an improvement of 100% in excess of that recorded for the year 2007.
Mollo attributes the recovery of the company to the dedication and commitment of all staff, including the production workforce and thanks all for their commitment and support towards this end. ‘Year 2009 will be a challenging year for the company', said Mollo, ‘with the steady rise of the rupee parity rate against the US dollar, import tax and cess tax increases coupled with increasing bank lending rates etc, to keep production costs at a manageable level is going to be an arduous task.' However, the management is confident that this can be achieved.
Source: Daily Mirror