Financial Times

Dankotuwa puts off Rs. 2 billion expansion plans

Ceramic tableware exporter Dankotuwa Porcelain has postponed plans to build a new plant that would have doubled its production capacity owing to the current political uncertainty and will resume the Rs 2 billion project once a new government is in power and its economic policies are known.

However, the company, which is having a surge in orders, is going ahead with plans to install a new kiln in a Rs 200 million project that will reduce energy cost and improve efficiency and quality.

It also expects some benefit from recent European Union tariff concessions for Sri Lankan exports.

Under the new project, Dankotuwa was to have set up a subsidiary under the Board of Investment to increase capacity to 1.6 - 2 million pieces a year from 0.8 million - 1 million now.

"Current demand for our products is so high we cannot accept all the orders we get because we do not have enough capacity," said the company's chief executive officer, Kithsiri Wijesundera.

"We were thinking of the expansion project but because of the current political situation, have put it on hold until a new government comes to power to see what their economic policies are. But we definitely need new capacity to meet the orders coming our way."

He also said that the company was going in for a new kiln.

"This year we're replacing our energy guzzler, our diesel fired glost kiln with a gas fired kiln. With petroleum prices going up, it will help save energy cost."

Glost kilns are used in the manufacture of porcelain tableware for a second firing at much higher temperatures that gives the product its beautiful whiteness and glossy finish.

Ceramic firms are on the look out for ways to reduce energy costs given the energy-intensive nature of their production process and the high cost of energy in overall costs.

Dankotuwa expects over Rs 50 million savings a year from the new technology. The new kiln is to be commissioned by September.

Recent EU import duty reductions given to Sri Lanka for following good labour practices are also likely to give some benefit to Dankotuwa exports.

The effective import duty rate has come down to 7.6 percent from 8.4 percent owing to the concessions.

Wijesundera said that even a marginal benefit would be useful in such a price competitive market as ceramic tableware.

By comparison, he pointed out that Bangladesh does not pay any import duty on its ceramic tableware exports to the EU.

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