Improved country conditions and the resulting pick-up in the construction industry last year helped Lanka Aluminium Industries Ltd. to increase sales and profits during the year ended March 31, 1998, when it posted a profit of Rs. 24.4 million, up 37% from a year earlier.

The company's chairman, Mr. S.T. Nagendra said that the higher growth last year gingered more construction activity mainly in renovation and refurbishment of existing buildings and the construction of new houses. This helped the company to increase its sales volume by about 30% and turnover by 36% to Rs. 361 million from Rs. 265 million a year earlier.

The interest rate reduction and good management of stocks and debtors had helped reduce interest charges. This, combined with the sales increase and a reduction in scrap had helped boost profits enabling the directors to recommend a first and final dividend of 10% for the year.

Nagendra warned that the South East currency crisis that had affected countries like Indonesia, Thailand and Malaysia could hurt their business. These countries had considerable installed capacity to manufacture aluminium extrusions. With lower domestic demand they are seeking export markets.

"Their devalued currencies have made their products most competitive and this could affect our market,'' Nagendra said.

This had led Lanka Aluminium to rethink its strategy of searching for export markets within the SAPTA region. For the same reasons, the company has postponed efforts to seek markets for value added products in Europe.

"Our intention during the forthcoming year is to dominate the market for aluminium extrusions in Sri Lanka by producing a wider range of sections and by improving our product quality. Our aim is to continue to reduce our production cost and eventually become a lower cost, high quality producer,'' Nagendra said.

"This strategy will enable us not only to maintain our growth trend but also to successfully overcome threats from imports.''

Current year's performance indicated achievement of these objectives with the first quarter's results circulated to shareholders ahead of the comparative period the previous year. If this trend continued, the company could expect a satisfactory performance in the current year, the chairman said.

The first quarter of this year saw turnover grow to Rs. 77.4 million from Rs. 57.9 million a year earlier and profits to Rs. 4.6 million from Rs. 2.1 million from the first quarter of the previous year.

The company's investment in a subsidiary, Castalloys (Pvt.) Ltd. had not been a success and efforts to find alternative businesses for it had also failed. A suitable resolution is being sought, Nagendra said.

Lanka Aluminium has floated a fully owned subsidiary, Comark Lanka (Pvt.) Ltd. to import and supply aluminium accessories and other allied products to the local market. A "modest profit'' from this venture is expected.

"In the long term, the future of our company, which is dependent to a great extent upon the construction sector, will ultimately depend on the country's growth. The continuing hostilities and the high level of defence expenditure is unlikely to afford opportunities for substantial growth, Furthermore, the unrest in the north tends discourage direct foreign investment,'' Nagendra said.

The directors of the company are S.T. Nagendra (chairman), H.L. de Witt, N. Ratnasabapathy, J.S. Mather, V.R. Chandaria and J.D. Peiris (general manager/alternate to V.R. Chandaria).