Global supplies exceed demand, China looks for alternative markets in face of prohibitive U.S. duty
The Chairman of Kelani Tyres had warned that the global outlook for tyres originating from manufactures like Sri Lanka looks bleak due to supply being substantially over demand.
"This situation has been further aggravated with the US Government imposing prohibitive duties on Chinese tyre imports which has forced Chinese manufactures to start dumping in alternate markets in Africa, the Middle East and Asia including Sri Lanka," Mr. Chanaka de Silva, Chairman of Kelani Tyres has said in the Company’s annual report.
"Although we did not experience the negative effects of this in Sri Lanka up to now, it is possible that this situation would have serious repercussions on volumes and margins in our business beginning in the next financial year (2015/2016)."
While production in the year ended March 31, 2015 by the Joint Venture (JV) company, CEAT Kelani Holdings (Pvt) Ltd (CKH) which handles the manufacturing business for Kelani Tyres was down slightly to 15,440 mt from 15,469 mt the previous year, the JV’s average profit after tax was slightly over Rs.1.5 billion against Rs. 1.3 billion a year earlier.
De Silva said that the JV was able to maintain its top market position in truck/bus, three-wheeler, tractor tyres and passenger car/van tyres and the second position in motorcycle tyres. CEAT is by far the highest selling tyre in the local market and continues to be placed as the ‘best value’ quality tyre locally.
The year under review had seen 20 new sizes introduced to the market with a state-of-the-art passenger car radial tyre manufacturing facility declared open in June last year.
"We have been able to capture 30% in the domestic radial car tyre segment," de Silva said. "The production of radial tyres would increase to 37,000 monthly with the new facility and we are looking at further expansion and growth in sales in the local market with the introduction of 32 new sizes expected to be introduced to our range in the coming financial year."
He said that the board of the JV continues to take a positive outlook of the industry and they are taking several decisions which would have a positive impact on Kelani Tyres as and when economic opportunities and trends emerge.
The JV had increased its capacity for the manufacturing of motorcycle tyres this year and had commissioned its new state-of-the- art facility in Kelaniya. The initial capacity will be 162,000 tyres a year in 17 sizes, some with all new tread patterns suitable for local conditions.
"This is expected to enhance the CEAT product portfolio in two-wheel segment," de Silva said.
They were investing Rs.365 million on a new compounding/mixing line with most of the items needed for this already ordered. The line will be functional by the end of the next financial year. A further Rs. 165 million is being invested to expand two-wheeler tyre production with the resulting increased production expected before the close of the current financial year.
De Silva thanked the Ministry of Finance for its continued support towards bringing them closer to achieving their objective of import substitution of the country’s total tyre requirement with a quality product on par with international standards and brand names.
He said that based on the performance of the company in the year under review and a subsequent dividend received by JV, the directors have declared an interim dividend of Rs. 1.50 per share amounting to a payout of Rs. 120.6 million for 2015/16.
The Kelani Tyre Group’s share of the results of the joint venture for the year under review was Rs. 750.2 million, up from Rs. 693.3 million a year earlier. Group earnings per share at Rs.8.92 was up to from Rs.8.19 a year earlier while the company’s earning per share was up to Rs.2.07 from Rs.1.65 per year earlier.
Kelani Tyres has a stated capital of Rs. 402 million, and group retained earnings of Rs. 2.23 billion in its books. At company level, retained earnings stood at Rs. 141.2 million. Total group assets stood at Rs.3.2 billion and total liabilities Rs. 188.15 million.
Silverstock Ltd with 41.69% followed by Ceybank Unit Trust (9.69%) Mr. M. Ganaraja (7.88%) and Messrs M.M. and H.M. Udeshi (5.4%) are the principal shareholders of Kelani Tyres. The EPF (2.008%) and the Bank of Ceylon (1.55%) are also among the main shareholders.
The Directors of the Company are Messrs Chanaka de Silva (Chairman), Rohan T. Fernando (MD), Lasantha P. Fernando (Executive Director) T. Bevan Perera (Executive Director) D.S.K. Amarasekera and Ms. S.S. Jayatilaka.
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