Dankotuwa to improve its finances

By Duruthu Edirimuni Chandrasekera

Dankotuwa Porcelain Ltd (DPL) is planning to reduce its debt to equity ratio (gearing ratio) to 15.10 from the current 76.10 by raising Rs.226 million through a rights issue, which will settle some of its high interest bearing loans.

"These funds will be used to settle Rs.268 million worth of short term loans of the company. What we are settling (Rs.226 million) is only part of the loans, because we have good interest rates on the other loans," a company official explained, adding that the loans DPL will not settle immediately command an interest rate of 10 percent, which is a good rate.

The company spent Rs.220 million on the fast firing kiln which is not utilised anymore. Last July DPL announced a capital reduction from Rs.476 million to Rs, 232 million, which brought down ordinary shares to 22.6 million from 45.2 million.

A stock market analyst said that DPL decided on this because they underwent a production interruption, lower yield in production and increases in their cost per unit.

In 2005 they switched to a fast firing kiln because DPL had a problem with their production capacity, but with the issue faced with the new kiln, they had to switch back to what they originally had. The rights issue of 22,617,870 shares will be in the proportion of one new ordinary share for each ordinary share held by DPL at an offer price of Rs.10 per share. "This is subject to approval at the EGM which we hope to hold on May 14," the DPL official said.