Lanka Tiles group turnover up despite uncertainties

In an economy that benefited from increased foreign inflows, greater construction and industrial growth, Lanka Tiles Ltd (LTL), part of the Lanka Tiles Group, was able to register a net revenue of Rs.1, 567 million in 2005/06, up 20.8% from 2004/05.

Gross profit also rose by 33.9% to Rs.532 million. The profit attributable to shareholders grew by 25.2% to Rs.205 million. LTL's share performed well during the year under review with 1.42 million shares traded at the CSE at lowest and highest prices of Rs.53 and Rs.75 respectively.

While local sales increased by 25.9% during the year, export sales declined by 12.2% to Rs.149.7 million. This was mainly due to the drop in exports to Australia, which nevertheless continued its dominance as the largest buyer of LTL's products, ahead of Japan.

The company's annual report states it invested Rs.155 million during the year in a state of the art press machine and a glazing line with the aim of augmenting existing old machines with low productivity. The company further invested Rs.300 million on re-commissioning of an idling kiln, signifying a 30% capacity increase from a year ago. The impact of this production increase will be felt partially during the year 2006/2007.

Exports had a good year both at Lanka Walltile Ltd (LWL) and its wholly owned subsidiary, Lanka Walltile Meepe (Pvt) Ltd (LWMPL), part of the Lanka Tiles Group, with sales increasing from Rs.452 million to Rs.481 million for the year under review at LWL and from Rs.120 million to Rs.141 million for the same period at LWMPL. Volumes however increased marginally overall to 899,972 square meters from 853,645 square meters. According to the annual report, the demand for both wall and floor tiles continue to grow in tandem with the growth in the construction industry.

The Local Sales Network continued to increase its performance from last year, both in volume and value at both LWL and LWMPL. Consolidated sales value registered a 27.08% increase from Rs.649.8 million to Rs.825.8 million while volume sales registered a 11.55% increase.

In the aftermath of the tsunami, the growing demand for houses and the accelerating expansion of the urban sector, with continuing population growth saw the housing market expanding rapidly. LWL and LWMPL enjoyed one of the best years, performance wise, particularly in the local market as the products manufactured and marketed catered essentially to the construction industries requirement.

The consolidation of markets throughout the country through regular marketing representatives visits, backed up by executive visits and monthly sales conferences ensured continued supply and service. The LWL Brand was recognized for its strong market presence in March this year when the company was accredited with "Superbrand" status by Superbrand Lanka (Pvt) Limited, a UK based independent authority on branding.

The Lanka Tiles Group turnover increased from Rs.4,210 million to Rs.4,907 million, an increase representing 17% which is indeed satisfactory considering the overall business climate in the country. Group profit after tax, at Rs.282 million represented a 39% increase over the previous year. All of the Group's sectoral activities recorded results very much in keeping with the company's expectations.

Chairman Anthony A Page says the Group is presently involved in four broad sectors, those being ceramics, plantations, packaging and manufacture of wooden flooring. The ceramic sector's main focus is on both wall and floor tiles and performed creditably during the year, mainly due to the surge in demand locally resulting from the growth in construction activity.

The group has already posed a 26% increase in profit in the first quarter of 2006/2007 compared with the corresponding period in 2005/2006 and is busy refocusing its business strategies to overcome certain challenges it is currently facing.

Page says the group performed satisfactorily during the year ended 31st March 2006, posting an after tax net profit of Rs.205 million. However, resumption of hostilities in the North and East of the country and its fallout is being felt in the rest of the country. "Persistent rise in energy prices, surge in prices of construction materials, disturbances in the North and East and its effect on fisheries, agriculture and tourism sectors will all contribute in some measure to slow down the momentum that the economy gained during the past few years," says Page, adding that these factors will naturally challenge the group's ambitious future growth plans.