Lanka Ceramic PLC, a member of the Ceylon Theatres group, had seen a downturn in group turnover and profitability in the year ended March 31, 2009 but at company level posted a net profit of Rs.25 million against a loss of Rs.2.6 million the previous year.

"The mining of ceramic minerals and retailing of ceramic finished products, the two main operations of the company, performed satisfactorily during the period under review and maintained similar levels of activity, despite the downturn in economic activity," Mr. Anthony Page, the company’s Chairman said.

At group level turnover was down to Rs.6.8 billion from Rs.7 billion the previous year and the profit to Rs.133.3 million from Rs.144.6 million a year earlier.

The slight downturn at group level was largely attributable to a 9.8% dip in profits of its subsidiary, Lanka Tiles PLC – the first time in 11 years that it had been unable to grow its previous year’s profit indicating, Page said, the unfavourable market conditions which it had to grapple with during the year.

He said that the group’s two walll tile manufacturing units, Lanka Walltile PLC (LWPLC) and Lanka Walltile Meepe (Pvt) Limited (LWMPL) had recorded a combined turnover of Rs.2.05 billion, fractionally above the previous year’s Rs.2.03 billion with the combined production of the two factories up 6.1% to Rs.2.5 million sq. ft.

"The profit after tax of LWPLC & LWMPL dropped 13% to Rs.202 million from Rs.233 million in the previous year,’’ Page reported. He explained that the economic slowdown in the USA and Europe and an adverse exchange rate, increased energy prices and interest costs had pushed down profitability.

No major investments had been made at the Meepe factory during the year although a Rs.400 million expansion was planned. This was not implemented due to a slowdown in sales both locally and internationally.

While the expansion will be reviewed when market conditions improve, Page said that a decision had been taken to invest Rs.60 million to modernize an existing production line to manufacture wall tiles of a larger size than at present. This project was due to be commissioned this month.

Lanka Tiles had posted a profit of Rs.282 million for the year pushing up revenue 2.7% to top Rs.2.5 billion.

Total production for the year was down 3% to three million sq. ft. largely on account of lower capacity utilization at the factory.

"The company was able to sell 95% of its production during the year. 90% of production was sold locally, and the balance exported," Page said.

Horana Plantations, another subsidiary, saw its profit plunge to Rs.55.5 million from Rs.152 million the previous year. However this performance was regarded as satisfactory given the challenges faced by the plantation industry during the year with a collapse of the commodity market and a severe drought.

The dry weather had erased the outstanding performances recorded by both tea and rubber in the first half of the year.

A fourth subsidiary, Uni Dil Packaging Limited manufacturing corrugated paper packaging had seen profits decline to Rs.48 million from Rs.50.1 million the previous year, Page said. Their diversification to manufacture paper sacks for the cement and tea industry commissioned in 2007 was still struggling due to a sharp slowdown in the cement industry.

Page announced that the boards of Lanka Walltile and Lanka Tiles have set a long-term goal of merging operations of these two Lanka Ceramics subsidiaries while keeping the legal structure of both companies unaffected.

"The overall idea is to lay the groundwork to combine the operations of the front and back offices of the two companies, so that only the two factories will function as separate units," he explained saying this would enable substantial cost savings.

Post balance sheet date, Horana Plantations recorded a marginal loss in the first quarter of 2008/09 but due to strong tea prices and a steadily recovering rubber market for the rest of this year would hopefully improve on the previous year’s profitability.

Two interim dividends of Rs.1.25 each had already been paid and no final dividend for the year has been recommended by the board.

Lanka Ceramic has a stated capital of Rs.300 million, reserves of Rs.468 million and retained earnings of Rs.680.2 million in its books. Borrowings due after one year were running at Rs.489 million, borrowings due within a year at Rs.259.4 million while short-term borrowings were Rs.337 million and secured bank overdrafts Rs.550.5 million were also on the balance sheet.

Ceylon Theatres with 81.19% is the predominant shareholder of Lanka Ceramic followed by Mr. Anthony Page (5.42%) and Dr. T. Senthilverl (4.79%).

The company’s share traded at a high of Rs.66 and a low of Rs.28 during the year under review.

The directors of the company are: Messrs. Anthony A. Page (Chairman), Air Vice Marshal P.M. Fernando (Deputy Chairman), P.S.R. Casie Chitty, Prof. C.L.V. Jayatilleke, A.T.P. Edirisinghe, J.A.P.M. Jayasekera, Ms. C. Muttukumaru, E.A.D. Perera, Dr. T. Senthilverl, J.C. Page (Alternate to Anthony A. Page w.e.f. 28.05.2008), T.D.E. Jayanithie (Resigned 02.01.2009) and K.D.D. Perera (Resigned 28.08.2008).