Fernwood CEO's knack for …
Turning around troubled companies
By Iromi Perera
When Jagath Anil Peiris took over as Chairman of
Royal Fernwood Porcelain in January 2000, the company was almost
on the verge of bankruptcy. Its net asset value was negative; there
were problems in marketing, problems in production, severe financial
problems. Today, the company is making profits and is the recipient
of many awards.
decided that the best way to turn around the company was to get
the product right first to suit the global market. He handpicked
some people who were in the industry in other companies as he had
had experience in working in other porcelain companies. "I
handpicked the correct technical guys and they did a fantastic job
in getting the correct product and we had a lot of contacts in the
market and we went to the markets showing them the products we had,"
Peiris told The Sunday Times FT.
buyers were happy with the products and the company continued to
supply them even though the price they were willing to offer for
the products were less than the cost of production.
strategy that made a big difference in the company's turnaround
was cost cutting. Peiris went on a mission to cut costs wherever
possible and operated the company with a very low fixed overhead.
They moved to a small office but still continue to work from there
even though they can now afford a bigger one.
to Peiris, the company improved productivity by mainly cutting costs
in energy. The company is one of the largest consumers of LP Gas
in the country, consuming around seven tonnes everyday. With the
assistance of the National Engineering Research & Development
Centre (NERD), they were able to cut down the cost of gas by recycling
the waste feed. For this effort, the company was honoured by the
government for energy saving, winning the Ceylon Petroleum Corporation
Award and also an award from the Sri Lanka Association for the Advancement
of Science, and was the only private sector company to have been
employees of the company also played a big role. Everyone worked
harder because they were told that the company was not doing well.
They all worked with one common goal - to make sure that the company
does not close. Peiris said that from the top-level employee to
the bottom level employee, everyone worked together in the same
office, ate in one place and even dressed in identical shirts, even
up to today. In 2003, the company made its first profits and continued
to make profits. At the end of March 31, 2004 financial year, the
company's profits were Rs 110 million.
said that the profits for last year could fall owing to the rupee
depreciating. Last year, the company went on a massive expansion
with an investment of Rs 120 million. This gave a 40 per cent expansion
in capacity and the company has been able to market out that production
as well. Currently, they manufacture 1.2 million pieces of porcelain
every month, exporting 90 percent of that production to 38 countries.
Some of the countries are the US, UK, Italy, France, Germany, Japan,
India and Pakistan.
said that they are hoping to upgrade their technology and maybe
diversify their investments into tiles. At present, the company
only trades tiles and this was in order to get some idea of the
market. They import tiles and the quality is tested in their own
laboratories. Some Rs 30 million is also being invested for a new
kiln for the factory in Kosgama.
of the competition from China, Peiris said that they are looking
at it differently. "We need not compete with Chinese products
because we are of superior quality," said Peiris. He added
that they (Royal Fernwood) give better service to the customers
and even though the price is higher compared to the Chinese products,
it is easy to convince customers, as the quality is better.
company has won many awards, including the National Productivity
Award by the Department of Labour and the National Quality Award
by the Sri Lanka Standards Institution - the only company is Sri
Lanka to win both these awards.
the recently concluded CIMA Janashakthi Pinnacle Awards, Peiris
won Gold in the Medium Scale category for the Business Leader of
the Year award. Out of the three porcelain companies in Sri Lanka
- Noritake, Royal Fernwood and Dankotuwa, Royal Fernwood Porcelain
is the only 100 percent Sri Lankan owned porcelain company. Before
Peiris took over at Royal Fernwood, he was the Managing Director
and Chief Executive Officer of Dankotuwa Porcelain for eight years.
was not doing well at the time Peiris took over, but under his guidance,
the company become one of the most profitable companies and listed
in the stock exchange in 1994 and was oversubscribed. Before he
joined Dankotuwa, Peiris was the Managing Director of Lanka Ceramics.