CORPORATE

Lanka Tiles profit, highest in 25 years

In its recently released Annual Report, Lanka Tiles PLC says that for financial year 2009/2010, the Company's profit after tax increased 34 percent to Rs. 379 million, the highest in its 25 year history.

These figures are proof of Lanka Tiles' commitment to strong corporate governance, operational efficiency, prudent investments, and shareholder value creation.

The Company's shares performed exceptionally well.

The Company also paid out the highest amount of dividends in its recent history, rewarding its shareholders for the trust they had reposed in it. Lanka Tiles Chairman, Anthony Page, commented that shareholders can "expect this trend to continue in the future."

The Company's gross revenues increased by 10.9 percent to Rs. 2.852 billion, despite an economy-wide slowdown in foreign demand for Sri Lankan products. Its exports increased by 20 percent during the year under review, an achievement driven primarily by demand from Australia.

The global recession made the Company to continue the carefully-managed expansion of its domestic operations. The company invested Rs. 200 million towards upgrading plant and machinery in order to more efficiently meet consumer demand.

This focus on improving the Company's fixed assets succeeded in maintaining production capacity and increasing the cost-effectiveness of its manufacturing processes.

The company was able to achieve greater operational efficiency and improve its gross profit margins to 30 percent.

During the period under review, the Company also unveiled its brand new warehouse complex in Biyagama, built at a cost of Rs. 200 million.

These ultra-modern facilities, erected on a 2-acre property, will give Lanka Tiles an additional 40,000 sq. ft. of warehouse space.

As the warehouse complex is connected online to all of the Company's showrooms, it will greatly improve Lanka Tiles' inventory management.

Lanka Tiles has also diversified its product portfolio, with tile grout and mortar being marketed under the 'Swisstek' brand name.

The Company will also be introducing premium-quality marble and granite flooring in the coming year, which will give customers an even wider range of flooring solutions.

These changes look certain to herald an even more successful year for Lanka Tiles, with the Company posting impressive results in the first two months of the current financial year.

Lankem Ceylon rated A-/P2 by RAM Ratings Lanka

RAM Ratings Lanka has assigned long-and short-term corporate ratings of A- (with a stable outlook) and P2 to Lankem Ceylon PLC.

The ratings reflect stable demand for agrochemicals and dominant market positions in most business lines; however the ratings are pressured by an increased debt burden and persistent losses in the consumer segment.

Lankem was incorporated in 1964 as a private limited company, before converting into a public listed company in 1968.

Although Lankem's initial focus had been on agrochemicals, it has since ventured into various sectors, including industrial chemicals and bituminous products, paints, consumer products, construction, plantations and leisure.

Lankem's revenue is chiefly derived from the plantation sector, closely followed by the chemicals segment.

However, the latter's contribution to the group's bottom line over the past five years has been relatively stable compared to the volatile performance of the plantation sector.

RAM Ratings Lanka notes that the assured revenue from agrochemicals is derived from its herbicidal products, which is a crucial input in paddy cultivation. Since rice is the country's staple food, paddy is an essential crop in the domestic agricultural economy, occupying nearly 29 percent of the agricultural land in the country. As such, the demand for herbicides is anticipated to remain relatively stable.

The group holds dominant market positions in most of its business segments.

As such, Lankem is the market leader within the agrochemical industry, commanding 29 percent of the domestic market owing to its aggressive marketing and technically superior products. In addition, Lankem is the second-largest player in the paints industry, accounting for 20 percent of the market share; this has been achieved through Lankem's extensive distribution network and high product quality.

Meanwhile, the group also controls 60 percent of the thinner market owing to its exclusive dealership agreements and distribution fleet.

Elsewhere, Lankem is a leader in the bitumen industry, backed by its established name.

The group also stands among the country's largest tea and rubber producers, accounting for a respective 4.23 percent and 4.02 percent of Sri Lanka's tea and rubber output.

However, the group's gearing ratio of 1.31 times as at FYE March 31, 2010 is relatively high. Its debt burden increased from Rs 3.04 billion as at end-March 2009 to Rs 4.46 billion a year later; a share of the additional borrowings had been taken on to finance the acquisition of CW Mackie PLC in FY Mar 2010.

Concurrently, Lankem's operating cashflow debt coverage ratio ameliorated year-on-year from 0.15 times in FY Mar 2009 to 0.22 times in FY Mar 2010.

Although its cashflow-generating ability has improved this year, RAM Ratings Lanka views with concern the Group's potentially heavier debt burden following the capital investment plans and its reliance on short-term borrowings.

The group's consumer segment has been suffering persistent losses for the past four years except for FY Mar 2009; it incurred another Rs 71.99 million pre-tax loss in FY Mar 2010. Despite owning strong household brands, the division has failed to turn around due to its inability to pass on raw-material cost increases to its customers amid the highly competitive market.

RAM Ratings Lanka remains concerned about these segmental losses and their overall impact on Lankem's performance.

New CEO/Gen. Manager People's Bank

People's Bank has appointed H.S. Dharmasiri as the new CEO/GM following the retirement of P. V. Pathirana. H. S. Dharmasiri, a student of Hokandara Vidyaraja College and Vidylankara Pirivena Pannipitiya, joined the People's Bank as a Management Trainee, after having obtained a first class B. A. Hons degree in Economics and B. Phil degree with a first class from the University of Colombo. He has served the Bank in various capacities varying from Branch Manager, to Asst. Regional Manager and Chief Manager before serving as one of the Senior Deputy General Managers of the bank prior to this promotion.

During his tenure he acquired many professional qualifications including an AIB and also a Diploma in Bank Management from the Institute of Bankers of Sri Lanka (IBSL).

KPMG Sri Lanka appoints new partner

KPMG Ford, Rhodes, Thornton & Co., recently announced the appointment of G.A. Upul Karunaratne as a partner of the firm effective October 1, 2010. Karunaratne is an Associate Member of the Institute of Chartered Accountants of Sri Lanka and holds a Bachelor's Degree in Business Administration from the University of Sri Jayewardenepura. He has been associated with the firm for over 14 years. Prior to this appointment he served a long-term secondment with Audit Services of KPMG LLP in the United Kingdom and subsequently as a Director for Audit Services in their local practice in Sri Lanka.

Lakshman joins FCCISL

A veteran financial management professional, S.W. Lakshman joined the Federation of Chambers of Commerce and Industry, Sri Lanka (FCCISL) recently as its head of Finance. Prior to joining FCCISL, Lakshman was Country Finance Manager, Plan International Sri Lanka, a UK based NGO carrying out child centered community and economic development activities.

He is an associate member of the Chartered Institute of Management Accountants UK, a member of the National Institute of Accountants, Australia, and the Association of Accounting Technicians UK.

Next Finance rebrands as Kanrich Finance

Next Finance introduced a new corporate identity by changing the name to Kanrich Finance Limited following the change of ownership from Aspic Corporation Limited to Mutual Holdings Limited. "Kanrich" is a Sinhala name giving the meaning "Collective Consent" signifies the company's new strategy of collaborating the thinking of stakeholders, customers, regulators and professionals in dotting the road to mutual growth and prosperity.

Incorporated in 1971 as Mutual Finance and Investment Limited, the company has been in existence for over 40 years in Sri Lanka as a Registered Financial Company with the Central Bank of Sri Lanka. Currently the company is undergoing significant changes overlaying the way for a growth strategy accompanied by greater transparency and professionalism. Subsequent to the recently concluded private share issue, the majority shareholder, Aspic Corporation Limited exited and the Mutual Holdings (Pvt) Limited emerges as the single largest shareholder of Next Finance Limited.

Two new directors at SMB Leasing

SMB Leasing PLC (SMBL) has appointed Umesh Gautam. CEO of Lanka Ashok Leyland PLC (LAL) as an Independent Non-Executive Director and Jagath Chandrawansa Korale as a Non-Executive Director with effect from September 30, 2010.

Gautam has been at the helm of LAL for nearly two-and-a-half decades. Under his guidance the company has become a market leader in commercial vehicles in Sri Lanka and posted turnover of more than Rs. 6 billion in the first half of 2010 Gautam, who is also the Head of SAARC Region of Ashok Leyland India, has had affiliations with the leasing industry for many years.

A Chartered Accountant and a Management Consultant by profession, Korale has held key positions in many diverse sectors including medical services, education, construction and insurance broking. He holds a Master of Science (Project Management) from the University of Moratuwa and was the founding Director of the Advanced Construction Training Academy of Sri Lanka.