Financial Times

Royal Ceramics expands into wall tiles, sanitaryware
Royal Ceramics Ltd (RCL), the tile factory now controlled by the Vallibel Group owned by investor Dhammika Perera, is expanding production with a new wall tile plant and also plans to get into the manufacture of sanitaryware.

The company expects a net profit of at least Rs. 250 million for the financial year ending March 31, 2005. "We're expanding our production capacity," Nimal Perera, Dhamikka Perera's investment advisor, told The Sunday Times FT in a recent interview. "We plan to put up a wall tile plant with an investment of around Rs 175 million and also set up a sanitaryware plant."

Dhammika Perera's Vallibel Holdings has a 51 percent stake in Royal Ceramics and Perera is the single largest shareholder of RCL and its deputy chairman. But A.M. Weerasinghe remains chairman of the firm. RCL's wall tile factory will be set up with a second-hand plant from the Italian firm Sacmi.

This is part of a growing trend where Western tile and ceramic ware manufacturers are closing down their plants because of high production costs and relocating their production bases to Asia where costs are much lower. Nimal Perera also said RCL was holding talks with machinery suppliers to set up a sanitaryware plant by the end of 2006.

In the domestic market, the threat from cheap imports of tiles from China and other low-cost Asian producers had receded after the government effectively increased import taxes, Perera said. The government, in its November budget, imposed a 20 percent cess on tile imports and a floor price of Rs.100 per square metre.

Stock market analysts said the construction boom anticipated because of the cease-fire and subsequent damage caused by the tsunami is expected to increase demand for floor tiles and boost RCL's profitability.

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