Major contracts given to Chinese while imports were preferred over local supplies, equipment
The previous regime not only handed over all the big projects like construction of highways, the Colombo Port City and many mixed development projects to Chinese companies and contractors, but also permitted equipment and material for these projects to be imported while locally manufactured products were not taken into consideration.
Sierra Cables Managing Director, Shamendra Panditha speaking at a media briefing at the Royal Colombo Golf Club last Tuesday said local cable manufacturers have been facing these issues for many years.
Mr. Panditha said, “The former government did not think of the consequences that will arise after handing over the construction contracts to Chinese companies. The government only looked at the way that somehow the projects must be completed with or without using quality products. Locally manufactured cables and other equipment were not considered at all.” The Chinese companies imported their own equipment which is fairly very cheap just like other Chinese products, he added.
He also noted that Sri Lanka’s cable manufacturing technology is far ahead from where it was and priority was not given for locally manufactured products since they were expensive. Due to high production costs the companies have to keep a profit margin and sell the products.
ACL, Kelani and Sierra Cables are the top three players in the industry whereas ACL and Kelani Cables have the largest market share. All three companies manufacture high quality low voltage cables. The cable industry is heavily dependent on prices of imported raw materials as well as a stable exchange rate in managing operational costs. The declining trend in global material prices is unlikely to continue beyond the near term and therefore the challenge will be to control locally incurred costs, in particular labour and electricity costs, which will be essential to sustain the steady momentum in value addition, said Mr. Panditha.
Mr. Panditha also mentioned that value addition for cables is very small in Sri Lanka to make it an export oriented product. There is a boom in the construction industry in Sri Lanka. Indian contractors and property developers in Sri Lanka purchase local products. “The foreign contractor should buy the local material,” he urged.
The company also announced its unaudited interim financial statements for the nine months ended 31st December 2014 reflecting strong profit growth.
Pre-tax profits for the period amounted to Rs. 375 million, sharply up by over 800 per cent from the corresponding period in 2013. Post-tax profits grew in tandem to reach Rs. 334 million, up 709.8 per cent from the corresponding period in 2013.