Ex-pack ‘reasonably of the belief’ on market leader claim

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Responding to doubts cast by the Lanka Corrugated Carton Manufacturers’ Association (LCCMA) on the legitimacy of Ex-pack Corrugated Cartons Ltd. being the “market leader” in the corrugated carton industry, Ex-pack, issuing a letter to the Colombo Stock Exchange (CSE), reasserted their claim to market leadership.
The soon-to-be-listed company stated: “We confirm that we are reasonably of the belief that we are market leaders in the corrugated cartons industry in Sri Lanka.”

Ex-pack 'reasonably of the belief' on market leader claim - Nation Online

The company also explained how they arrived at this conclusion: “The computations of market leadership are based on a combination of methodologies that includes data in terms of: a) sales tonnage of each player by interviewing staff and internal stakeholders of the largest corrugators; b) monthly waste output of corrugators obtained from key players of the waste recycling industry in order to determine the monthly production of individual players; c) the volumes of paper consumed/utilised by us vis-à-vis the estimates of competitors’ usage as extracted from available sources; and d) based on analysis of the published information of a key competitor.”
Ex-pack claimed that except for one competitor, namely Unidil Packaging (Pvt.) Ltd., whose business volumes for the financial year 2020/2021 have been made public via their annual report, none of the other competitors in the industry have done so, but on the contrary, have chosen to closely guard such information from the public.

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Ex-pack also submitted their “highly confidential” documented internal research to the CSE in order to provide evidence in this regard along with the sources of data, the methodology of collection, as well as the analysis of information. 

The LCCMA, on Saturday (16) sent a letter to the CSE, casting doubts on the legitimacy of the information provided by Ex-pack during their Investor Forum for their upcoming Initial Public Offering (IPO), alleging that some of the information is misleading. 

The allegation was that Ex-pack has misinformed the CSE by stating that the company is the market leader in the corrugated cartons industry with a market share of 18.3% in 2021. 

With regard to their specific market share, Ex-pack noted in their letter to the CSE: “We have at all times maintained that the figure of 18.3% in 2021 is an approximation and/or an estimate. The words used at Page 28 of the prospectus are: ‘Ex-pack has been able to lead the industry with a market share of 18.3% in 2021.’ Further at Page 62 we state: ‘Ex-pack has been at the forefront in the industry, accounting for approximately 18.3% of the market share.’ The fact that it is an estimation has been deliberately and manipulatively suppressed in the complaint referred to you.”

The letter of complaint that was presented to the CSE by the LCCMA said: “The company is, in fact, not the market leader, but only one of the larger corrugated companies in the industry.” Thus, the LCCMA claimed that Ex-pack’s claims are false and misleading. 

However,  Ex-pack stated in this letter, which was seen by The Morning Business, that the prospectus and research report of the company were released to the public following approval granted from the CSE on 6 October 2021, which was 11 days prior to the LCCMA casting doubts, alleging some information as “grossly misleading”.

Ex-pack further said that the “teaser” document of the company was also shared one month earlier to the general public, which is 40 days prior to the LCCMA casting doubts. 

The letter further mentioned that even though the LCCMA cast their doubts a day prior to their letter to the CSE during a forum, no information whatsoever has been provided to Ex-pack to refute the assertions. 

“The real motives behind the complaint are patently visible in the fact that the LCCMA and/or certain key corporates acting under the guise of the LCCMA have chosen to wait for the weekend prior to our public issue in order to raise these allegations with us and/or with the CSE,” the letter noted. 

Ex-pack also denied several allegations in the complaint letter, including that there is no factual basis for the statements made by them, that they have not exercised reasonable care to ensure full and fair disclosure of information regarding the company’s profile, and that they have knowingly made any misrepresentation in their prospectus. 

Meanwhile, LCCMA Secretary General Sydney Gajanayake told The Morning Business that the association informed Ex-pack to make changes to the misleading statement on Friday (15) by 6 p.m., but since they had not done so even by 9 p.m., the association had no other option but to write to the CSE.

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