Turf Director

Public Enterprise Minister Mary O'Rourke hailed it as the most important piece of legislation affecting Bord na Mona since its foundation in 1946. Bord na Mona managing director Paddy Hughes is a little more measured: "It will put us on a commercial footing." Both were referring to the Turf Development Bill which reached its second stage in the Dail this week. The Bill will grant the company plc status. Its four divisions will operate individually and will have their own boards.

The Bill is another step towards knocking the company into shape. Earlier this year the Government brought forward the second tranche of an EU-approved cash injection into Bord na Mona. It brings to £100 million the total amount invested by successive governments in the company since 1995.

It means that the company no longer has to labour under a crippling debt burden, once deemed "unsustainable" by independent consultants.

For Mr Hughes, who took over as managing director of Bord na Mona in 1995, the Bill and the cash injection give the company a mandate to seek partnerships and investment to boost what he admits is a low margin business. It also allows Bord na Mona to borrow against its own assets without having its loans guaranteed by the Government.

"Our survival in what is extremely competitive businesses, depends on constantly increasing productivity," says Mr Hughes, "that is the only basis on which we can survive." But he says there is a clear understanding in the company, which has seen employment fall from 4,700 to 1,900 in recent years, about what has to be done.

Bord na Mona is facing dwindling demand for its products as a homeheating fuel. They are switching to more convenient forms of heating such as oil and gas. Hughes is a realistic. "The customer is king," he says.

Although perceived very much as a peat provider, Bord na Mona's other main areas of operation such as horticulture and its environmental division show the most promise for growth. But these divisions face intense competition in all their markets.

Nevertheless, Mr Hughes believes that these operations can become highly profitable. The environmental division has grown its turnover from £3 million to £5 million within two years.

He says this division has the potential to increase its turnover to £10 million within three years. The division markets odour control products and provides consultancy for firms on emissions from their plants. It is also working in the US where the market shows tremendous potential according to Mr Hughes. It employs around 100 staff there.

The horticultural division has an annual turnover of £45 million and employs around 330 staff. Intensely competitive, it is a business which splits into two segments - the retail and the professional grower business. Multiples such as B&Q and Texas Homecare have forced down horticultural peat prices, Mr Hughes says.

"Its performance has not been satisfactory," he admits, "but margins have been extremely tight."

He says the only solution is to further improve efficiency and output. "Having said that I would be very conscious that we have an extremely good resource that is developed in Ireland and we must utilise that to the fore."

He says the horticultural sector has great potential. "The Germans, for example are rapidly running out of white peat, as its called, and are now using black peat." Holland too is an extremely important market. ona's horticultural products. He says Bord na Mona has a good reputation in the sector. For now Paddy Hughes is content for this sector's turnover to remain static, on condition that its bottom line is improved.

The horticultural division will also need a major revamp. It is envisaged that up to £7 million could be spent on upgrading its operations. He says Bord na Mona will seek partners in projects.

Bord na Mona's peat energy division, whose main customer is the ESB, is set to get a boost when the Europeat station is built in the midlands. Five consortia are currently vying for the EU part-funded £120 million project.

The ESB will supply one million tonnes of peat to it each year, for the generation of electricity. Although Bord na Mona was not allowed join a consortium, Mr Hughes says the company hopes to become a shareholder.

Bord na Mona has already invested more than £2 million preparing for the station and on feasibility studies.

Although Bord na Mona's balance sheet has been cleaned up, there is a catch: it will have to reduce the price per tonne it supplies peat to the ESB from £19 to £14.40. This will probably begin from next April, by which time Bord na Mona expects to have received the final £10 million tranche. (The price per tonne has already been adjusted to around £17.)

This will mean a consequent fall in revenue which will have to be made up elsewhere. However, offsetting that is the fact that the company will have to pay lower interest to service its debt, which is currently running at around £50 million.

As for the domestic consumption market, Mr Hughes believes that this will level out eventually. "The Irish have a great affinity for an open fire and this is something which we have been marketing strongly," he says.

In 1995, Bord na Mona bought CDL, the coal distributors for £3.7 million, a move which caused some surprise. Mr Hughes says despite the shrinking market the company has managed to increase its sales.

There were also synergies to gain, such as savings in marketing and distribution. Bord na Mona was able to increase its distribution of peat briquettes using the established CDL network.

Overall, the solid fuels market is decreasing by 6-8 per cent per annum. Through good branding and marketing, Mr Hughes says Bord na Mona has been able to slow the decline to 3-4 per cent per annum. "The market will settle at a certain level and we will have to be able to respond to that," he says.

The company made it highest profits in a decade last year, turning in a net figure of £7 million. If the accounts are restated - allowing for the full £110 million injection - then the profit falls to £2.1 million.

An added difficulty for the company is that it had one of the worst summers on record this year, only achieving 50 per cent of its production target.

Mr Hughes declines to predict what profit level he hopes to achieve in 1996/ 1997. The company is said to be aiming for around £2 million again, but analysts say this will be difficult to achieve.

Another issue facing Bord na Mona is that it is involved in extractive industries, which are by definition, finite. Mr Hughes says around 25-30 years supply of peat is left in the bogs it operates commercially.

"Bord na Mona will constantly have to reinvent itself," he says, "the company will have to change rapidly over the coming years."

This will include utilising bogs for tourism and also developing wind power. Hughes says only one wind power plant is used commercially for generating electricity - Ballycorrick in Co Mayo, where Bord na Mona has an 89 per cent stake.

One thing is certain, whatever lies ahead Bord na Mona has discounted one possible option: "We won't be going back to the Government to look for more money," says Hughes.

For now, Mr Hughes can allow himself a wry smile as the Turf Development Bill winds its way through the Houses of the Oireachtas. He was chairman of a Bord na Mona committee back in the late 1980s which recommended that the company be divided and put on a public footing. The final element of that is now being put into place.