Financial Times

Lankem expands colour studios
Lankem Ceylon Ltd., the chemicals firm well known for its Robbialac brand of paint, is expanding its paints and consumer products businesses, with plans to launch new products and widen its network of colour studios. The company, which has also diversified into hotels and plantations, wants to raise Rs 180 million through the issue of 18 million preference shares at the par value of Rs 10 each.

The preference shares carry an annual interest of 14 percent paid quarterly and are repayable within three years. The money will be used to pay off short-term loans and fund additional working capital for the expansion of the different business units of the company, Lankem has told the Colombo Stock Exchange.

"We're expanding our paints business and also launching new consumer products," a senior Lankem official told The Sunday Times FT. "Even in the industrial chemicals area we plan to launched new chemicals for the rubber industry." Lankem has four core businesses - agrochemicals, industrial chemicals, consumer products and paints.

The company is expanding its decorative paints business in a big way and plans to roll out a network of colour studios catering to consumers in the upper end of the market.

"We're developing our network of colour studios," the senior Lankem official said. "It's a new marketing trend. The studios will cater to discerning consumers in the upper end of the market who want to buy paints and choose colours at leisure, instead of walking into hardware shops."

Lankem already has two colour studios in Kohuwela and Kandana and plans to open two more this month in Ratmalana and Kelaniya, with another two being opened before the end of this financial year. "We'll have as much as 25 colour studios before the end of the new financial year," the company official said. "We're also investing in new machinery for our paints division."

Lankem also plans to launch new consumer products such as soaps and detergents. Company officials described the market outlook for paints and consumer products as "very positive" given the ceasefire and said they expect turnover to improve.

The rebuilding effort after the tsunami disaster is expected to have some spin off benefit on the market for paints. But it is not expected to be significant as the reconstruction activity is mainly in the lower end of the market and the company has not taken that into account in its forecasts.

In the quarter ended September 2004, Lankem reported group revenue rose 26 percent to Rs 1.2 billion and gross profit was up 76 percent to Rs 297 million. Net profit after tax was Rs 5.6 million for the quarter from a loss of Rs 32.6 million the same quarter the year before.

Lankem is a major supplier of industrial chemicals and bituminous products to the Sri Lankan market and has increased production of bitumen in recent years to take advantage of government plans to improve the rural road network.

Among the group's subsidiaries are Kotagala Plantations, Agarapatana Plantations, Lankem Developments, Sigiriya Village Hotels, and Colombo Fort Hotels.

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