Dankotuwa Porcelain reduces capital

Dankotuwa Porcelain Ltd (DPL), in a bid to clean up the balance sheet, has announced a capital reduction from Rs.476 million to Rs.232 million and also reduced the company’s ordinary shares to 22.6 million from 45.2 million.

“By wiping off the retained losses the company will enhance its solvency test that is stipulated by the new Companies Act,” Indika Rajakaruna, Senior Analyst, Asha Phillip Securities Research told The Sunday Times FT. The solvency test stipulates that assets should be greater than the liabilities and the stated capital (reserves) of a company.

S. Umasudhan, Senior Analyst, S.C. Securities said that with this capital reduction, Rs.244 million worth of the company’s accumulated losses (which appeared in the balance sheet as at March 31, 2007) will be made zero.

“The approval from the shareholders for the above decision of capital reduction will be sought in the forthcoming EGM of the company on August 15,” he added.

The stockbroker said that DPL had to take this decision because they underwent production interruption, lower yield in production and increases in cost per unit increases. “In 2005 they switched to a ‘fast firing’ kiln because they had a problem with their capacity, but with the issues they faced, in 2006 DPL had to switch back to what they originally had,” he said.