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Sri Lanka´s Ceylon Glass makes loss on high energy, raw material costs

Post Time:Aug 27,2008Classify:Company NewsView:390

High energy, raw material and packaging costs caused a June quarter loss of 120 million rupees at Sri Lanka´s Ceylon Glass Company compared with a 44 million rupee profit a year ago.

The company, a unit of India´s Gujarat Glass, said in a statement that sales rose 44 percent to 679 million rupees in the first quarter of the 2008/2009 financial year from 469 million rupees a year ago.

The statement quoted Ceylon Glass chief executive Sanjay Tiwari as saying that the management is confident that strong local and export sales growth and plans to raise prices to cover part of the increased costs should help the firm turnaround.

"The major reasons contributing to the loss are energy cost, Soda Ash prices and other domestic raw material and packing material prices," the statement said.

The cost of energy, constituting of furnace oil, liquefied petroleum gas (LPG) and electricity, amounts to almost 40 percent of the cost of production.

"Thus, the steep increase in the tariff of any of (these) sources of fuel directly impacts the performance of the company," the statement said.

Furnace Oil prices shot up by 70 percent, LPG by 74 percent electricity by over 30 percent in the first quarter of the current financial year compared to the same quarter of the previous year.

Most of the raw materials used for glass are found locally in the central province but transport costs went up owing to higher diesel prices.

"The international price of Soda Ash, an imported raw material alone has gone up by 55 percent till the first quarter of the current financial year," the statement said.

The firm´s interest cost and depreciation has also gone up substantially as compared to the previous year with its investment of 3.7 billion rupees in its new factory at Horana, south of Colombo.

But this investment should yield gains in future as it has more than doubled production capacity, giving the company sufficient capacity to meet the demand of the local market as well as to pursue "lucrative" exports market, the statement said.

"In terms of exports, the company will be focusing on specialty food and beverage bottles i.e. short run food and beverage bottles with colouring or decoration for value addition.

"The company is in a unique position in the Asian market exporting boutique wine and specialty liquor bottles for leading brands in India. It’s in the process of developing several such products for markets like UK, Australia, South Africa and USA."

Export sales grew 229 percent in the period under review. Exports also now make up 16 percent of the total turnover as against the seven percent in the same period the previous year.

Domestic sales grew 31 percent in the period.

"The management is positive about the future of the company," the statement said.

"The initial loss situation is a temporary phenomena in the glass industry or industries with such a high capital expenditure as apart from the initial gestation period."

The statement also said the company is in the process of "unlocking the value / commercial exploitation" of the recently vacated 21 acres of land at its former plant site in Ratmalana, a Colombo suburb.

Source: Ceylon Glass Co. Ltd.Author: admin

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