Guyana Stockfeeds Limited Trinidad operations and Mr. Robert Badal

Apr 18, 2009 Letters

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Dear Editor,
Further to NICIL’s letter (SN 10th April 2009 ; KN 9th April 2009; ) and Mr.
Badal’s response in SN (April 15th), a fitting reply would be to simply advise persons to examine the just released 2008 Annual Report of GSI (Guyana).
In the last Five years, there were substantial related party transactions conducted with the Trinidadian registered company, Guyana Stockfeeds Ltd. as summarised in the following table: Year Monies paid to Mr. Badal’s Trinidadian company (G$)
2008 $2.065 B
2007 $1.126 B
2006 $0.972 B
2005 $1.274 B
2004 $0.819 B
Mr. Badal attempts to explain the nature of these payments in his response featured in SN 15th April 2009, but the facts are that in the last five years, over G$6.25 B has been paid to a company that we now know is entirely owned by Mr. Robert Badal, based on the latest disclosure in the 2008 audited financials.
In his response, is Mr. Badal, Chairman of the Board of Directors of GSI, telling NICIL (as a minority shareholder) that GSI Guyana, being a strong financially performing company has no credibility or access to credit facilities locally or internationally that it cannot secure the supply of raw materials, spares etc, on its own?

Is there any contract between GSI and Guyana Stockfeeds Ltd (Trinidad) that identifies who are the ultimate suppliers, what is being supplied, why is it being supplied and what prices are they supplied at?
What evidence is there to indicate that GSI Guyana is not being charged another price set by Mr. Badal, since after all, he owns this company which acts as a middleman?
When the above mentioned payments are looked at against GSI’s profitability, it is reasonable for a minority shareholder to be concerned. Please see table below.
Sales Profit after Tax Net
Profit on Sales (%)
1998 900,423,564.00 72,989,893.00 8.11%
1999 1,209,812,554.00 106,915,714.00 7.09%
2000 1,337,246,220.00 46,080,836.00 3.45%
2001 1,873,366,847.00 163,300,901.00 8.72%
2002 1,983,842,006.00 75,515,401.00 3.81%
2003 2,230,092,453.00 46,472,021.00 2.08%
2004 2,853,430,272.00 110,577,434.00 3.88%
2005 3,081,892,730.00 44,955,669.00 1.46%
2006 3,303,840,850.00 38,511,375.00 1.17%
2007 4,755,815,450.00 99,342,194.00 2.09%
2008 6,553,176,986.00 122,663,951.00 1.87%
Average 2,734,812,721.09 84,302,308.09 3.08%

Maybe Mr. Badal can explain the correlation between related party transactions and the consistent fall in profitability of GSI (Guyana) (measured as a % of sales).
In 1997/1998, the net profit on sales averaged G$89 M or 8.45% while in 2008, the figure is down to 1.87%. If we are to consider the economies from size and growth, then the % return on sales should have risen, not decreased.
Further, had GSI maintained its average profitability in 2008 relative to the average of 1998/1999, (the first two years after privatisation), then the profit in 2008 should have been G$553M. Instead, it was G$122M or G$431M less than the average of 1998/1999.
It is therefore reasonable to ask the following questions: Is GSI being poorly managed, or are the shareholders of GSI being shortchanged by Mr. Badal’s related company dealings, particularly the Trinidad company of the same name?

With regards to the Board of Directors, as a shareholder NICIL maintains that the Board is not independent; there are four directors, including Mr. Badal and his wife.
However, what was not mentioned is that according to the by-laws of the Company, Mr. Badal as Chairman has a casting vote – Where is the independence?
With reference to other members of the Board, a reasonable person examining the published Annual Reports and documents of GSI will understand the previous statements made by this minority shareholder.
Notwithstanding all of the above, as the second largest shareholder of GSI, NICIL has repeatedly requested copies of corporate documents including the Minutes of previously held Annual General Meetings where NICIL representatives were present and questioned transactions in the audited financials. Letters dated as far back as 31st August 2005 to as recent as 11th November 2008 have been sent making these requests, none of which have received a response from GSI.

If a mere letter from a shareholder asking for copies of documents to which it is entitled, has not received a response from the management of GSI, how can
NICIL or any other minority shareholder have a real voice at an AGM or otherwise, where Mr. Badal as Chairman and the largest shareholder has the last word.
Notwithstanding all of the above the facts are clearly stated in the Annual
Reports which, Mr. Badal can be assured of, have been thoroughly analysed and reviewed – Total dividends paid by GSI over the 1998/2008 period amounted to $198.9M of which NICIL received $20.9M; when total profits of GSI were G$927M; and total related party transactions in the last five years exceeded G$6B. In the meanwhile, the profits are dwindling and the payments to Mr. Badal and/or his companies are rising.
Marcia Nadir-Sharma
Company Secretary
NICIL

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