ISSN: 1391 - 0531
Sunday September 9, 2007
Vol. 42 - No 15
Financial Times  

Ceylon Leather reviving DI

By Duruthu Edirimuni

The Ceylon Leather Products Ltd (CLPL), Sri Lanka’s largest domestic leather manufacturer, is cleaning up its debt by selling off valuable land and reviving the once-popular DI brand which has lost its shine. Officials said the company plans to sell one of its lands at Mattakkuliya in a bid to clean the loan book and be debt free, begin the modernisation process and better manage its working capital.

Nimal Samarakkody, CLPL Chairman, told The Sunday Times that the company will sell either the factory or the tannery at Mattakkuliya within the next two weeks at the best price. “We want to become a debt free company and negotiations for one if the lands to be sold are going on,” he said.

CLPL’s factory and office located in a 3.4 acre plot is estimated at Rs. 340 million while the 4.75 acre tannery is valued at Rs. 380 million, according to stock market analysts. Both are located at Mattakkuliya.

One analyst said the company plans to settle its liabilities of Rs. 180 million to state banks together with other liabilities of Rs. 20 million and shift the factory to Gampaha or Kadawatha. However Samarakkody declined to comment on whether the company was being relocated.

The analyst said the company felt that the two large lands is not earning anything for the company and this was the main reason it has decided to sell them and shift a factory to Gampaha or Kadawatha. He said CLPL would be spending Rs. 65 million on the new property. “They have a monopoly of business from the forces and the company will improve tremendously by this move because they will be better able to manage their work load,” he added. Samarakkody said the company’s order book is filled till end of 2008 and the company after cleaning its loan book will start on the modernisation of the plant. “We will revive the DI brand. Our strategy is to increase exports and to expand on our leather products area such as accessories,” he said, adding that the company has taken Dr. Uditha Liyanage, a renowned marketer, onto the board in a bid to revive the DI brand, valued at Rs.15 million.

DI was once a popular brand and held a strong market share against Bata and other brands but petered out due to problems in the company. Presently CLPL export shoes to Japan, Italy, U.K., India, Netherlands and China.“We are of the opinion that only companies with low gearing and low working capital cycle will survive in the long term due to the escalation of interest charges. Investors should look for companies, which are debt free,” Samarakkody said.

He also said that the government’s initiative to make leather a trust industry and the GSP + status (a duty free status) that leather products have received early this year when exporting to Europe will enable the company to be better positioned in the market.

 

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Copyright 2007 Wijeya Newspapers Ltd.Colombo. Sri Lanka.