Expanded capacity makes Lanka Floortiles biggest in country

Demand falls in first quarter of 2012/13

Lanka Floortiles PLC, a member of the Ceylon Theatres group, has invested Rs.600 million in a new modern plant expanding production capacity by 40% to 135,000 square metres per day, the company has announced in its recently released annual report.

The company’s Chairman Mr. Anthony Page, said that this increase in production capacity now commissioned, "will make our company the largest producer of ceramic floor tiles in the country,"

"We are confident of selling this increased capacity as the requisite infrastructure and logistics are now being put in place and the required brand investment is also being done," he said.

Page was confident that with production expanded the company which has consistently increased profitability over the last five years will continue to report growth in earnings in forthcoming years.

The year ended March 31, 2012 saw revenue up 18.8% to Rs.3.57 billion and the net profit up 18.8% to Rs.600.1 million.

Exports sales were down 6.8% to Rs.150.6 million but this lag was taken up by local sales up 20.2% to Rs.3.4 billion.

Page reported that dividends of Rs.4 per share had been paid from profits during the year under review with the dividend payout of Rs.212 million for 2011/12 being the highest in the history of the company.

"I expect this trend of increase in dividend payout to be maintained in the years to come," he said.

The company’s Managing Director, Mr. Mahendra Jayasekera, said that the year’s results had been achieved in the face of formidable challenges, the chief among them being a drop in production of 121,000 square metres caused by having to dismantle a kiln to make way for a newer unit with a higher production capacity.

The drop in the value of the rupee by 14% last February, though helpful to the company in the long-term, had an immediate negative impact with a net exchange loss of Rs.24 million for the year under review.

The production expansion program, commissioned in January this year three months behind schedule had unavoidably disrupted factory operations. Also, labour unrest in the sorting department of the factory had adversely impacted on production, unit cost and profitability.

Jayasekera said that the increased capacity will be used to manufacture glazed porcelain tiles.

He also reported that their associate, Swisstek (Ceylon) PLC had made satisfactory progress during the year and had returned to profitability after seven years with tile mortar and grout manufactured and marketed by this company faring well.

"At the time of writing the demand for your company’s products remain sluggish, perhaps due to the sudden fall in value of the Sri Lankan rupee against the US dollar that has driven local cost up. However, LPG prices that went to record highs have also fallen in international markets, directly benefiting your company. With the stabilization of the rupee we expect economic activity to gather momentum sooner rather than later," Jayasekera concluded.

The company has a stated capital of Rs.901 million, retained earnings of Rs.1.4 billion and an amalgamation reserve of Rs.460.2 million in its books. Total assets ran at Rs.4.46 billion and total liabilities at Rs.1.5 billion.Lanka Walltile PLC, a CT Holdings subsidiary, is the controlling shareholder with 54.5% of Lanka Floortiles followed by EPF with 8.8% and three companies of the Arunodhaya group with approximately 2.5% each.

Net assets per share had grown to Rs.52.11 from Rs.31.61 and the share traded at a high of Rs.140 and a low of Rs.64.90 during the year. This compared with a trading range of Rs.143 to Rs.87 the previous year.

The directors of the company are: Messrs. Anthony A. Page (Chairman), Dr. S. Selliah (Deputy Chairman), J.A.P.M. Jayasekera (MD), P.L.K. Amerasinghe, J.C. Page, A.T.P. Edirisinghe, V.R. Page and S. Mendis.

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