After a disappointing first half of 2004 where the Company made a loss of Rs. 8.5 million, Dankotuwa’s change of business model and style of management has resulted in good results in the second half. The after tax profit of Rs. 38.5 for the year 2004 has been earned without any "exchange gains" unlike in the past few years where a significant portion of profits were made through "exchange gains". Furthermore the profit in 2004 is without the benefit of extraordinary amounts unlike in 2003 where Rs. 15.7 out of the total net profit of Rs. 27.4 came from a reversal of taxation provision. 2004 also saw Dankotuwa reaching the One Billion Rupee turnover milestone. Shareholders will receive a 10% dividend after the formal resolution is passed at the AGM on 31 March 2005.

Since the commencement of the Company 20 years ago, its business strategy had undergone several changes in response to the changing external environment. Chairman Sunil G. Wijesinha says, "It is a good case study in management strategy and management style. There are many lessons we have learnt and hopefully not to be repeated". Wijesinha has been non-executive Chairman of the Company from 1990 to 1994, and again since end 1999.

As a state enterprise in its early years, the Company almost closed down but later recovered well in a sellers market. After privatisation and becoming an associate company of International Ceramics Incorporated of Japan in December 1990, it made good headway and made a name as one of the world’s finest producers of high quality heavy gold and platinum decorated tableware which was very difficult to produce.

With the decline in demand for such formal tableware and with an increasing trend for easily produced casual-ware, the Company’s fortunes declined. More recently Dankotuwa embarked on a drive to produce trendy shapes, commissioning world renowned designers and simultaneously launching an aggressive branding campaign. While the turnover improved significantly, profits were not forthcoming while administrative costs skyrocketed and teamwork declined.

"We have taken a long hard look at our strategies and how we have managed the Company, and have now embarked on a new model. In our eagerness to make a mark in the international market we spent too much money, with even disagreements among the senior management on the strategies being adopted. All that is behind us now. Hopefully we will have a better 2005", Wijesinha added. Dankotuwa which was a debt free company a few years ago has borrowings of about Rs. 350 million today.

Acting CEO Sarath Mallawa Arachchi says, "We have rationalised our exports, giving priority to the most profitable markets. We may not be able to satisfy all our buyers with the volumes they require but we hope to develop relations with more buyers in more countries and sell more under our own brand. We will continue with foreign designers on a different basis; more on royalty and less upfront costs. We are also trying to match our strong points in production with certain market niches without trying to produce a massive range creating huge logistic and production problems. We may even cut down on the range of shapes we now have. We will be cautious on our marketing costs although we will continue to maintain a high profile stand at the Frankfurt Fair every year.

An expert in porcelain manufacture and a pioneer at Dankotuwa, Mallawa Arachchi has been acting CEO and running the operations since August last year. "I know the buyers very well for a long time. We work with them on projects to develop their ideas into marketable products. Therefore relationships and responsiveness are the most important criteria. If you can prove that you can produce a good quality product, and maintain reliability, you will build a strong bond.`A0 I have been able to re-establish the reputation that Dankotuwa had earlier, as a Company that delivers its promises. This reputation was severely ruptured in late 2003 and early 2004", he added.`A0`A0`A0`A0`A0`A0`A0`A0`A0`A0`A0`A0`A0

Dankotuwa is contemplating the commissioning of an external agency to further refine its strategy and stay competitive in an environment with Chinese factories improving quality by the day and producing at unbelievably low prices. Dankotuwa also believes that its capacity is insufficient in terms of the overheads it has to incur. The new fast firing kiln which will add to the capacity, is undergoing trial production. The Company is looking forward to a good year if all its plans fall into place.

The Board consists of Messrs Sunil G Wijesinha (Chairman), Hiroshi Shimano, Mitsuhara Fujisawa, Ken Sawayama, M Miyauchi, Tetsuzo Sato, Nihal Abeysekera, and Ashley T Herath.