Financial Times

LWL profits grow, warns of clay shortage
The Lanka Walltile Group has increased pre-tax profit by 62 percent to Rs. 476 million for the 2004 / 05 financial year and reported optimistic growth prospects but voiced concern over shortages of Ball Clay and rising energy costs.

“Growth prospects in the industry are likely to stimulate continued demand for tiles and tiling products,” said Anthony Page, chairman of LWL, which is part of the Ceylon Theatres Group.

Sri Lanka’s housing demand is expected to increase at a rate of 80-100,000 units apart from the existing pent-up demand. Page said in his annual report to shareholders that he was looking at the future with optimism and LWL was expanding capacity with an investment of Rs 300 million.

Lanka Walltile Group revenue hit an all time high of Rs. 4.2 billion for the year ended March 31, 2005, up 20 percent over the previous year. After tax profit was Rs. 203 million against Rs. 149 million last year, a 36 percent increase.

However, at company level turnover dropped slightly to Rs. 701 million from Rs. 718 million the previous year and after tax profit to Rs. 52.01 million from Rs. 61.36 million.

“Profits would have been higher were it not for a labour dispute and the resulting work stoppage at the Balangoda Factory,” Page said. LWL Managing director Lucky de Chickera said the government policy on mining for minerals has put a brake on Ball Clay and Silica Sand supplies while Calcite and Kaolin are also adversely affected.

Supplies of Ball Clay, which is mined from abandoned paddy fields, have come to a complete standstill with Lanka Ceramics, from which the firm buys Ball Clay, not being issued with mining licenses for the last one and a half years.
If the situation continues, the company and the industry would have to considerably downsize or import Ball Clay which will “drive the cost of production to extreme levels and the finished product beyond the affordability of the ordinary consumer,” de Chickera said.

However, he said that it appeared the government was moving to settle the matter and resume issuing of licenses. Exports to India, which the company felt held great promise with the free trade deal and zero import duty, did not come up to expectations because of cheap Indian tiles and imports from China and Indonesia.

Group performances were boosted by a 18 percent improved contribution from Lanka Tiles Limited, the Horana Plantations profit after tax and after minority interest of Rs. 93 million, and a Rs.67.89 million profit after tax increase by Lanka Walltile Meepe (Pvt) Limited.

De Chickera expressed serious concern for the industry due to galloping energy costs which now stands at an estimated 38 percent of production cost.
Another serious issue he said was the import of poor quality cheap tiles.
He urged the authorities to clamp down on such imports to safeguard the customer and the local industry.

Lanka Walltile declared a 15 percent interim dividend during the financial year and additionally the Board has recommended a final dividend of 15 percent bringing the total dividends to 30 percent for the year. Both dividends are tax free.

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