The Lanka Ceramic group, one of the country’s biggest players in the ceramic tile industry, has clocked a Rs.7 billion turnover during the year ended March 31, 2008 but seen the attributable profit down to Rs.144.6 million from the previous year’s Rs.165.6 million.

The group’s Chairman, Mr. Anthony Page, has reported to shareholders that the ongoing conflict in the North and the East had negatively impacted investment in the industrial and construction sectors. The steep rise in energy prices had affected manufacturing costs.

These problems have been aggravated by high interest rates and weakening currency that had increased the cost of imported goods creating challenges in both the external and internal business environments.

"However, as in past years, your group has succeeded in overcoming these challenges to post improved results in keeping with our expectations," he said.

"Judging by the performance of your group during the first three months of the current year, I expect the retailing, mining and tile sectors to post satisfactory results in 2008/09."

In addition to its ceramic business, the group is also into plantations controlling Horana Plantations PLC with a portfolio of tea and rubber estates and Uni Dil Packaging Limited which is into the manufacturing of corrugated packaging material.

The main activities of the company (as opposed o the group) involved mining and processing of raw materials and retail and wholesale trading in ceramic and allied products.

The group comprises Lanka Walltile PLC, Lanka Tiles PLC, Horana Plantations PLC and Uni Dil Packaging Limited.

The parent company posted a turnover of Rs.215 million during the year under review and a net loss of Rs.2.6 million against a turnover of Rs.137 million and a loss of Rs.88.7 million a year earlier.

The main operations of the parent company comprising the mining of ceramic minerals and the retailing of ceramic finished products had performed satisfactorily during the period under review, Page said.

"The performance was weighed down by the need to make further provisions for amounts receivable from LCL Distributors Ltd (LCLD) of Rs.41.5 million (a wholly-owned subsidiary that was liquidated during the year) and Rs.26 million for a long outstanding receivable from Ceylon Ceramic Corporation in the current year," he explained.

Lanka Walltile PLC, and its 100% subsidiary, Lanka Walltile Meepe Limited had also reported a reduction in profits during the year with the company’s operating profit after-tax, including the performance in the Meepe factory, down 4.5% to Rs.166 million from Rs.173.4 million earned the previous year.

Page said that they planned to invest between Rs.50 million to Rs.75 million during the current year to upgrade facilities at their Balangoda factory to enable higher productivity with the investment to be funded by a combination of internally generated and borrowed funds.

Lanka Tiles posted 14.7% growth and the attributable profit during the year under review with net revenue up 21.6% to Rs.2.5 billion and the gross profit up 20.6% to Rs.726 million.

While gross margins had come under increasing pressure, declining to 29% from 29.3% the previous year largely as a result of increasing energy cost, Lanka Tiles had been able to grow profits for the eleventh consecutive year.

Total production was up 11% to Rs.3.1 million square metres during the year with capacity utilization in the factory improving to 93%.

Page reported that the company had sold its entire production during the year with 90% absorbed by the local market and the balance exported.

""Lanka Tiles is also intending to further expand production capacity. This will add a further 4,600 square metres per day to the factory capacity at a cost of Rs.650 million. This investment, proposed to be funded by a mix of internally generated and borrowed funds, is expected to increase monthly output as from July 2009," he said.

Although Uni Dil Packaging saw its after-tax profit during the year plunging to Rs.15.75 million from Rs.50.12 million the previous year, Page said that it had sharply improved profitability during the first quarter of the current financial year when earnings had improved nearly four-fold from Rs.3 million to Rs.11.1 million due to a decline in cost of raw material.

This had not been the case with UNI Dil Paper Sacks Limited which has run losses due to its high interest borrowings. This company had depressed group profitability, the chairman said.

Lanka Ceramics has a stated capital of Rs.300 million, group reserves of Rs.444.3 million and retained earnings of Rs.488.3 million in its books. Borrowings due after one year stood at Rs.509.2 million and finance leases payable after one year at Rs.274 million.

Net assets per share for the group had grown to Rs.41.08 from Rs.35.46 while those for the company were down to Rs.10.58 from Rs.10.92. The Lanka Ceramics share traded at a high of Rs.60 and a low of Rs.30.25 during the year.

Millers PLC with 39.30%, Royal Ceramics with 22.23% (since disposed) and Ceylon Theatres with 20.86% are the three major shareholders with Ceylon Theatres being the ultimate controlling shareholder of the company.

The directors of the company are: Messrs. Anthony Page (Chairman), P.M. Fernando (Deputy Chairman), P.S.R. Casie Chitty, A.T.P. Edirisinghe, T.D.E. Jayanithie, J.A.P.M. Jayasekera, Prof. C.L.V. Jayatilleke, E.A.D. Perera, K.D.D. Perera (w.e.f. 02.04.2008 & resigned 28.08.08), Dr. T. Senthilverl and Ms. C. Muthukumaru.