A combination of wage-related operational inefficiencies, shrinking markets and branding issues have led Dankotuwa Porcelain PLC (DPP) to forecast a loss this year, but its Chairman Sunil G. Wijesinha says the company has re-thought DPP's business model in a bid to sustain the business for next year. "We are doing pretty badly. We have budgeted a loss for this year, but hope that we can survive till next year. The signs are that things are improving," he told the Sunday Times FT.
He said the company is doing badly for a number of reasons such as export orders declining by 30%; local sales reducing drastically; high labour, energy, material and finance costs; rupee depreciation and high competition with countries which have lower cost structures.
"We have restructured to survive this year and have cut out down costs drastically. We are not getting the staff to do overtime (OT) and also reduced welfare facilities," he said. He explained that DPP has been quite generous to its work force and the benefits to them have been above industry average. "In Japan , Germany and England , ceramic industry employees are the lowest paid, but here they are one of the highest paid in manufacturing industries. Such a wage structure is unsustainable and if we have reasonable wages, we can survive,” he explained.
Mr. Wijesinha noted that DPP is looking at a voluntary retirement scheme in the shorter term, while in the next five to 10 years it plans to recruit employees at lower wage levels in order to replace the workers who retire. "When we started we had certain minimum educational qualifications when recruiting, but we have decided to lower these minimum requirements," he said, explaining that with good training such workers will be as good, if not be better at their jobs. "This is due to people with higher qualifications having higher expectations as well as having attitudinal issues. But we see that those with lower qualifications really value the opportunity and have better attitudes."
DPP turnover in the last quarter fell to Rs.25 million from Rs. 29.7 million in the same quarter in 2008. "We cannot arrest the turnover fall this year, which is why we stopped OT (which was very costly).” Mr. Wijesinha noted that there are certain labour market changes in the country and the unemployment rate is declining. "It will be more difficult to find those with higher qualifications in this situation (for manufacturing jobs), but it is easier to recruit those with lower ones. “
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