Labour problems drove Meepe factory into the red
Ceramics and plantations help double Lanka Walltile profits

Lanka Walltile Limited, a Ceylon Theatres group company, has substantially boosted profits during the year ended March 31, 2001 with an after-tax profit of Rs. 66.5 million — over twice the Rs. 25 million earned the previous year.

However, Lanka Walltile Meepe (Pvt) Limited, also engaged in the production and sale of ceramic wall tiles like the parent company, lost Rs. 10.9 million during the year compared to a profit of Rs. 25.9 million a year earlier as a result of a prolonged labour unrest in the Meepe factory.

The company’s Chairman, Mr. Baku Mahadeva, said that a 3-month go-slow was followed by a full scale strike lasting two months that brought production to a complete standstill.

However, after prolonged negotiations with the union, an amicable settlement had been arrived at and the factory "is now working satisfactorily".

The Lanka Walltile group comprises three segments with two companies engaged in the production and sale of ceramic wall tiles, a second manufacturing and selling ceramic floor tiles and a third involved in the plantation industry.

The floor tile companies, Lanka Tiles Limited, in which Lanka Walltile owns a controlling 51% and its two wholly owned subsidiaries have done "remarkably well" in the year under review, Mahadeva said noting that Lanka Tiles and its subsidiaries had increased its profits "steadily and rapidly over the past four years".

"In this period, the profit (before tax) has increased more than threefold from Rs. 60.47 million in the year ending March 31, 1998 to Rs. 189.68 million in the year under review. The profits of the Lanka Tiles group (after tax) in the financial year 2000-2001 amounted to Rs. 112.69 million," he said.

Rs. 57.5 million of these profits accrued to shareholders of Lanka Walltile.

The plantation segment, comprising Ceytea Plantation Management Limited and its subsidiaries controlling Horana Plantations Limited, had like the Lanka Tiles group doubled profits from Rs. 23.1 million to Rs. 46.2 million in the year under review.

Mahadeva said that Rs. 23.6 million of these earnings accrued to shareholders of Lanka Tiles Limited against a sum of Rs. 11.8 million the previous year.

He said that the companies of the Lanka Walltile group had performed satisfactorily during the year under review despite an unfavourable business environment both at home and abroad. This was an achievement in which the group can take legitimate pride.

Mahadeva reported that the sale of ceramic tiles, both in local and foreign markets, had become increasingly competitive with large volumes of cheap tiles from countries such as India, Thailand and Indonesia flooding the Sri Lankan market.

In the export market too, ceramic tiles are being sold at prices that are much lower than those of two years ago. The price decline was particularly severe in South East Asia due to the economic slow down and substantial currency devaluation.

Mahadeva said that Lanka Tiles was presently selling all the floor tiles its factories can produce. The domestic demand for these floor tiles is increasing and the full demand cannot be met by the two factories of the group already running at near capacity.

Although they had decided to expand production capacity by installing new machinery and equipment, this project has been put temporarily on hold in the context of unfavourable business environment in the country.

However, Lanka Walltile has decided to produce floor tiles in addition to wall tiles at Meepe and market these tiles through Lanka Tiles, Mahadeva said. Experimental production at this factory had shown that high quality floor tiles can be produced at Meepe.

"Production of floor tiles in the Meepe factory will utilise the surplus capacity presently available in this factory and at the same time help to increase the total turnover of Lanka Walltile Meepe (Pvt) Limited," he said.

He reported that Lanka Walltile had earned a little over 50% of its total revenue on export sales. Noting that export turnover during the first four months of the current financial year from April to July, 2001 had been slightly higher than a year earlier, Mahadeva hoped that exports will increase further during the remainder of the current financial year.

Mahadeva said that under two collective agreements signed in July 2000 and January 2001, wages of the workers at Meepe were increased by Rs. 1,200 a month and those at Balangoda by Rs. 2,000.

Meepe workers had demanded that "the so-called profit sharing bonus," paid to them annually should be increased from Rs. 5,000 to Rs. 14,000. The company could not agree to this demand since the bonus has to be paid irrespective of whether a profit was earned or not.

The Meepe company had made profits only in two of its eight years of existence, Mahadeva said, reporting that after negotiations a collective agreement was signed in February increasing the annual bonus from Rs. 5,000 to Rs. 9,000 in the first year and Rs. 10,000 in the second year provided the workers increased production in the factory from 60,000 square metres to 90,000 square metres per month.

"Harmonious labour relations have now been fully restored at the Meepe factory and the production in the factory is proceeding satisfactorily. The company has instituted regular and frequent meetings between the senior executives and representatives of the workers to enable any problems or complaints that the workers may have, or any suggestions they wish to make, to be discussed. I hope that these measures will considerably improve employer-employee relationships," he said.