Central Industries expanding at new site near Yakkala

Profits and turnover up despite slowing economy

Central Industries PLC, a Central Finance subsidiary manufacturing and distributing PVC water pipes and tanks, electrical switches and other construction material, is making substantial investments expanding and upgrading its production and warehousing facilities, the company’s executive chairman, Mr. S.V. Wanigasekera, has said in its annual report.

The company has purchased a property close to Yakkala for Rs. 32 million and intends to carry out all future expansion of its manufacturing and storage capacity at this site, he said.

Additionally the company had invested Rs. 4 million expanding buildings at its Kerawalapitiya manufacturing facility with Rs. 13 million invested on plant and equipment to manufacture new products with significant design improvement; a further Rs. 18 million to enhance capacity of existing production lines; and Rs. 22 million on a new generator and power supply augmentation after more than 15 years.

Wanigasekera noted that the company had seen a significant revenue increase of almost 25% to Rs.1.6 billion in the year ended March 31, 2012 despite the slowing of economic activity in the country.

He said that their Krypton range of domestic electrical switches is now becoming popular mainly in rural areas.

The group posted a pre-tax profit of Rs.149.8 million, up from Rs.121.8 million the previous year and an after-tax profit of Rs.105.9 million against Rs.74 million the previous year thanks partly to what the chairman called "the welcome reduction of taxation of profits to 28% compared to 35% last year."

The directors have recommended a first and final dividend of Rs.3 per share for the year against Rs.2.50 paid the previous year.

"All of these (new) investments were carried out of the company’s own internally generated funds and very short term bank borrowings thus avoiding high financing costs," Wanigasekera said.

The development of a second production and warehouse facility at Yakkala would be undertaken in two stages – initially transferring some product and storage facilities utilizing a large extent of space from Kerawalapitiya to the new location.

"New machinery which will provide additional production capacity will also be installed during this first stage, which will be undertaken during the current financial year and is estimated to cost approximately Rs.65 million," Wanigasekera said.

"The second stage to further enhance production capacity for PVC products is planned to be implemented in the next financial year."

He said that Central Industries continued to identify opportunities in the market and introduce quality products. They had recently pioneered the local manufacture of PVC ball valves which are fully manufactured in-house.

"In response to customer feedback we have also introduced a new range of electrical switches and sockets incorporating improved design features which will reduce production costs while improving product performance," he said.

Wanigasekera said that the recent volatility of the Sri Lanka rupee and the uncertainty in the exchange rate will place pressure on margins as they are almost fully dependent on imported raw material inputs.

Although they will be comparatively less affected by the rise in interest rates when compared to others in the industry, he warned that high interest can dampen demand in the construction industry with medium and small investors deferring new investments.

Central Industries has a stated capital of Rs.121.3 million, a revaluation reserve of Rs.159.4 million, a capital redemption reserve of Rs.35.8 million, a general reserve of Rs.65 million and retained earnings of Rs.494.7 million in its books.

Total assets ran at Rs.1.07 billion and total liabilities at Rs.190.3 million.

Net assets per share had grown to Rs.88.65 from Rs.80.43 the previous year and the company’s share traded at a high of Rs.116 and a low of Rs.60 during the year under review.

Central Finance with 44.06% and CF Insurance Brokers with 5.71% are the controlling shareholders followed by Sierra Cables with 15.21%.

The directors of the company are: Messrs. S.V. Wanigasekera (Executive Chairman), E.H. Wijenaike, A.N.P. Wickramasuriya (CEO), G.S.N. Peiris, C.S.W. De Costa, R.E. Rambukwelle, A.K. Gunaratne, N.J. Abeysekere and L.R. De Lanerolle (w.e.f. 20.06.2011).

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