Sri Lanka’s soaring inflation has set the foundation for larger firms to be ruthless in wiping out their smaller counterparts. “The larger companies that can manage supply chains better will be ruthless in taking prices higher in this high inflationary environment,” said Mahendra Jayasekara, Managing Director Lanka Tiles PLC and Lanka Walltiles PLC. Another manufacturing [...]

Business Times

Larger firms swallow smaller ones

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Sri Lanka’s soaring inflation has set the foundation for larger firms to be ruthless in wiping out their smaller counterparts.

“The larger companies that can manage supply chains better will be ruthless in taking prices higher in this high inflationary environment,” said Mahendra Jayasekara, Managing Director Lanka Tiles PLC and Lanka Walltiles PLC.

Another manufacturing company’s CEO agreed to say that larger companies process the ability to tackle price hikes easier than their smaller counterparts. Mostly smaller hotels are struggling to survive along with the moratorium on loans ending this month they are dealt with a double blow, a small-time hotelier said.

Domestic supply shortages, global commodity prices increase, the Sri Lanka rupee depreciation against the US dollar, and the impact of aggregate demand pressures have all contributed to aggravated hyperinflation which in turn has seen rapid and unrestrained price increases in the economy, typically at rates exceeding 50 per cent each month over time in essential commodities. Inflation hit 29.8 per cent in April with food prices up 46.6 per cent year-on-year.

Analysts point out that the recent reintroduction of new taxes has exacerbated the situation. Higher corporate taxes decrease the net profitability of companies and income taxes consumer demand.

Analysts predict that taxes will be introduced further to combat the country’s deficit and to meet debt payments.

With inflation hitting 40 per cent this month, many firms in the manufacturing sector, retail, leisure, food, and beverage industry are in the market for sale. They have also approached big-timers to buy them over. A CEO of a manufacturing firm having been approached by a smaller counterpart said that the particular entity did not have the cash to pay the salaries of employees next month.

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