Financial Times

Kelani Cables increasing production capacity
Kelani Cables Ltd., manufacturer and trader of cables and enamelled winding wires, is gearing to increase its production capacity within the next six months to meet the local and overseas demand.

"We doubled our production capacity with the same machinery, but now we are at our optimum level," Managing Director, Hemantha Perera said in an interview, adding that they are in the process of fixing new machinery.

The company's net sales increased by 60 percent this year from Rs. 73.8 million last year, as a result of production being doubled, without any significant investment. The company, which has its overseas presence in India and Maldives, is looking at the African countries to expand its overseas presence.

"There is a lot of demand for power and telecommunication cables in Africa and we see a lot of potential in these countries," Perera said, adding that the company is exploring the possibilities of exporting to African countries. Kelani Cables has increased its profit before tax to Rs. 167 million for this financial year, a 209 percent compared to the Rs. 55 million in 2003/04.

Kelani Cables' share, which traded around Rs. 30 a few months ago, hit Rs. 128 last week. However, for this year the company does not see any significant business arising due to the tsunami, but is looking at the overseas market actively. "There are a couple of orders which we have got due to the tsunami, but there is no significant growth to talk about," Perera said.

However, he said that when the rebuilding exercise starts, things may change for cable manufacturers. "So far, only about five percent of the tsunami construction has started and with time there might be more demand for cables locally," he added.

Stock analysts said that the company will see a forecast growth in its earnings per share of nearly 400 percent for the financial year 2004/2005. They said that this growth could be even higher with the reconstruction effort of the country.

Stock analysts said that the exchange rate movements have had a mixed effect on the company, because even whilst reducing the cost of imported raw material it will also bring down its export revenue in local rupee terms. "The value of foreign currency reserves held by Kelani Cables will also be translated at a lower rupee value," a stock analyst said. However Perera said that overall, the company does not expect an adverse or favourable effect.

He said that after the peace process, the company saw a lot of potential in the North and the East, but did not have a proper distribution system. "We have a proper distribution in place now and we get a fairly good contribution from that area," he said, adding that contribution from those areas has been satisfactory.

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