Dankotuwa shrugs off losses, looks to the future

Dankotuwa Porcelain, after two years of losses, has turned around and is expected to end 2007 on a profitable note.

The company’s first profits in 2-plus came in the first (January-March) quarter of 2007 and latest figures – the nine months to 2007 – show a post-tax profit of Rs 7.1 million, against a loss of Rs 112.7 million for the same 2006 period. A spokesperson said the final fourth quarter 2007 figures are being audited but expected to show a profit as against the fourth quarter in 2006.

Turnover during the nine months also increased by 11% over the corresponding period in 2006 while manufacturing costs have declined. In dollar terms too the turnover increased but the major increase was from the depreciation of the rupee. Dankotuwa is also planning on a Rights Issue.

The company said in a statement that in a recent letter to the Colombo Stock Exchange it had stated that the board has decided to revalue the land as per the Sri Lanka Accounting Standard SLAS 18 and accordingly the value of the land has increased by 227 to Rs 133,997,000 which will be reflected in the balance sheet as at 31 December 2007. This has led to a revaluation surplus of Rs 92,997,000.

Dankotuwa is mainly export oriented with 85% of its production being exported to over 25 countries. “The order situation has considerably improved due to a number of reasons,” said Chairman/Managing Director, Sunil G Wijesinha noting that the financial recovery, improvement in timely deliveries and improvements made to the factory have induced more confidence amongst the buyers. “The period when we made losses caused some concern to the foreign buyers because they were unsure about their future supplies, but now we are past that, and the buyers are now increasing their orders.”

Dankotuwa has been gradually upgrading its products towards the upper end of the market and this too seems to have paid off. The whiteness of the products produced by Dankotuwa and design development has been the competitive advantages of Dankotuwa.

Although costs have been going up continuously with steep increases in gas and diesel, Dankotuwa has been gradually improving its productivity and yield, thereby overcoming the cost escalations, the company said.

Dankotuwa added Pakistan, Egypt and the Czech Republic to its marketing network last year and also found that some of the newer markets such as Dubai and India were growing extremely well.

Although only 15% is put out locally, the market has begun to accept Dankotuwa for its body, quality and design variety. “The B to B market has expanded significantly and we do quite a lot of special orders for hotels, embassies, corporate gifts etc, and this seems to be a growing market because more and more people want customized products with their own design or logo,” says Wijesinha.

Recently, Dankotuwa commenced supplying to big retail chains like Arpico and most of the local market designs would be available through Arpico Showrooms.