LWL ready for expansion plans; clinches market share

Lanka Walltiles Ltd (LWL), owned by the Ceylon Theatres Group, has ambitious expansion plans for 2008, while planning to get market share from its foreign competitors, according to a top official. "LWL has two factories - one in Balangoda and one in Meepe. Both factories are on a 8,200 square metres a day capacity for wall-tile manufacturing. Now we are selling the entire capacity of the two factories and we have plans to increase the capacity by 1,200 square metres per day initially during the first nine months to one year of 2008. After another year it will further increase by another 1,200 square metres a day to make it 10,600 square metres a day," Mahendra Jayasekera, Managing Director, LWL told The Sunday Times FT.

He said the company (both Balangoda and Meepe), made Rs.160 million in profit for the fourth quarter 2007-08. "Lanka Tiles Ltd (LTL) is also a part of us and that made Rs.310 million. These two companies (LWL and LTL) are the ceramics part of the business," he explained, adding that the rest of the company comprise Horana Plantations and Uni Dil Packaging Ltd, together with Parquet Ceylon Ltd (PC).

Jayasekera noted that LTL, LWL and Royal Ceramics Ltd (ROCELL), (which is also into the same business but a different company), has room to gain market share from imported tile manufacturers. "These companies have opportunities to increase capacities, because the market is big enough to take another expansion by all three of them," he added.

Presently the local turnover (floor-tiles business) of LTL is about Rs.325 million a month and ROCELL is about Rs.325 million a month. This is more than a Rs.600 million market for locally produced tiles. I think the two of us have only about 60 percent of the market at present. So, 40 percent is still imported. We are talking of a billion rupee tile market a month. This is why we still have the capacity to expand and the market is big enough for the two companies to increase their capacity," he explained.

He said that LWL's turnover in the local market is about Rs.130 million. "I believe that we have about 50 to 60 percent of the wall-tiles market. LWL can also take an expansion without a problem," he added. When asked about ROCELL's stake in Lanka Ceramics Ltd (LCL), which is also connected to LWL, Jayasekera said, "ROCELL has taken a 25 percent stake in our ultimate holding company, LCL. By virtue of that shareholding they have got a board seat, but down below in the structure, we are operating as individual companies."

When asked whether ROCELL is a competitor, he said, "We are not really competing with each other in the local market, because they have their segment of the market and we have ours." He noted that the challenges of high energy costs in this business are 'huge'. "Within the last two years, the energy costs doubled. There is a limit which we can pass them down to the customers," he added, noting that the company is 'trying very hard' to pass these costs down to the customers.

"We can do it to a very great extent, because there is still room for us to grow in the market and capture market share," he said. He explained further, "All tile-exporting countries have increased their prices and as a result the imported product prices have increased.

Without seeing a drop in demand we can increase prices to a certain extent." He added that LWL has so far been successful in passing the prices down to the customers. "We have not seen a drop in profits despite the costs skyrocketing, but I am not sure whether we can pass this entire cost increase of the most recent hike (kerosene, LPG and diesel) to the customers now," he noted, adding that the inflationary pressures are too high to pass to the customers. "I am not sure to what extent we can pass it down - especially in the short term, but eventually we will have to do so," he said.