Abans to set up TV assembly plant

Abans Electrical Ltd, a quoted public company of the Abans Group, is planning to launch Sri Lanka’s largest TV assembly plant next month, Aban Pestonjee, Group Chairperson, said.

“We took forward to initiate our new project in early November 2007 in the existing premises, which is to set up a new TV assembling plan. The company expects to obtain external funding of Rs.470 million which consists of Rs.350 million representing letters of credit and short term loan facilities, Rs. 40 million for machinery loan and Rs.80 million to fund the working capital requirements. In addition the company will be providing Rs. 85 million as equity for the project” she told shareholders in the group’s 2006-07 annual report.

Abans is the second company to set up a TV assembly plant in Sri Lanka after Singer. The Singer plant however was shut last year due to losses.

Abans Electrical reported a net profit of Rs. 24.4 million for the year ended March 31, 2007, up by 56.4 percent over previous year reported profit of Rs. 15.6 million. The company’s turnover for the period rose to Rs. 1.9 billion compared to that of Rs. 1.1 billion a year ago, up by 72 percent.

The report said the Sri Lankan economy is expected to achieve a 7.4% growth compared to 6% last year irrespective of the rapid increases in the oil price, steel price and the political instability as a result of the north –east conflicts. The average inflation has escalated to 13.7% compared to 11.6% last year. This was mainly due to the unanticipated rise in fuel prices which dramatically raised the prices of the raw materials and has compelled local suppliers to increase the prices of their products.

“Due to the recurrent relationship between interest rates, inflation rates and exchange rates, the boost in the other two variables is inevitable given the increase in anyone of the aforesaid variables. As a result of the hike in the rate of inflation, the deprecation of the national currency against other major trading currencies was unavoidable. Since the company imports most of its raw materials the continuous deprecation of the local currency is one major factor that threatens the company’s operations,” she said.

Pestonjee was also critical about the tax system saying, “constant introductions and increases of tax rates imposed on importers also threaten the company’s operation. For instance the Excise Duty was introduced through a Gazette in 2004, from which date the company has been paying Excise Duty on schedule. In addition the industry is anticipating upward revisions to the present tax rates which need to be addressed at this instance,” she said.

Commenting on the company’s strategies and the current external environment, she said that “this complicated situation was indeed a challenge to the company since it was highly influenced by the organization’s external environment. However the company was able to successfully face the risks posed by these unpredicted situations through strategies carefully initiated and implemented after through scrutiny, which mitigated these risks considerably.”