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Ceylon
Glass suffer Rs. 120 m loss in 1Q; Sales up by 44%
The Ceylon Glass Company Limited (CGCL) has reported a Sales
value of LKR 679 million in the first quarter of the financial
year 2008/2009 as against LKR 469 million in the corresponding
quarter of the previous year. This reflects an impressive
over all growth of 44% over the corresponding quarter of the
previous year.
The Company said it was indeed unfortunate that amidst such
steady growth, the company had to report a loss of LKR 120
million for the period under review as against the profit
of LKR 44 million during the corresponding quarter of the
previous year.
According to CEO CGCL, the major reasons contributing to the
loss were soaring energy costs, rising Soda Ash prices and
other domestic raw material, as well as and the increasing
costs of packing material. “The energy cost is constituted
of Furnace Oil, LP Gas and Electricity which amounts to almost
40% of the cost of Production. Thus, the steep increase in
the tariff of any of the above sources of fuel directly impacts
the performance of the Company. The Company has experienced
an increase of 70% in Furnace Oil prices, 74% in LP Gas prices
and over 30% in Electricity prices in the first quarter of
the current financial year alone as compared with the corresponding
quarter of the previous year”.
Tiwari said that most of the raw materials used for glass
are found locally in the central province. Thus the high increase
in diesel costs had negatively impacted on the raw material
prices by over a minimum of 20% which constitutes a very high
component of the Company’s transport costs. “The
international price of Soda Ash, an imported raw material
alone has gone up by 55% upto the first quarter of the current
financial year” he said.
With an investment of LKR 3.7 billion towards its new factory
at Horana, the interest cost and depreciation had also gone
up substantially as compared to that of the previous year.
According to Tiwari, the Company has continued to show its
continuing potential at exports. A 229% growth over last years
exports were achieved during the year under review. Also exports
constituted 16% of the total turnover as against the 7% achieved
during the same Quarter of the previous year. Domestic sales
too had shown a positive trend with a growth of 31% as compared
with the corresponding quarter of the previous year.
Whilst more than doubling it’s capacity, the company
is now capable of meeting the demands of the local market,
as well as pursue lucrative export markets. “In terms
of exports, the company will be focusing on specialty food
and beverage bottles i.e. short run food & beverage bottles
with colouring or decoration for value addition”. Tiwari
said that CGCL was in a unique position in the Asian market
to export boutique wine and specialty liquor bottles for leading
brands in India. He said the Company in fact was currently
in the process of developing several such products for markets
like the UK, Australia, South Africa and USA.
“The initial loss situation is a temporary phenomena
in the glass industry or any other industries with high capital
expenditure; as apart from the initial gestation period, there
is a substantial increase in finance costs and depreciation
initially”.
With all the infrastructure now in place, Tiwari said that
the Company’s Management was confident that they would
attain even greater heights not just in the local market,
but in the global markets as well in the near future. He also
emphasised that in order to arrest the recent inflation and
cost increases, the Company apart from adopting all initiatives
for cost optimisation, the correction of the prices both in
the domestic as well as international markets would be undertaken
to part set off the inflation.
He also said that the Company was currently in the process
of unlocking the value/ commercial exploitation of the recently
vacated 21 acres of land at Ratmalana.
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