Lanka Tiles Ltd., the Lanka Walltile subsidiary, has reported what its chairman called a "very satisfactory'' year ended March 31, 1998, with the group returning to profitability from the previous loss making year with both exports and local sales contributing substantially to the turnaround.

The chairman, Mr. B. Mahadeva, said that despite an unfavourable external business environment during the year under review for the ceramic tile industry, Lanka Tiles and its two wholly owned subsidiaries, Ceredec (Pvt) Ltd. and Lanka Tiles Trading (Pvt) Ltd. had done very well. The group had posted an after-tax profit of Rs. 41.9 million against a loss of Rs. 4 million a year earlier.

According to the company's annual report, export sales had grown 45% to Rs. 164.6 million, local sales had grown 25% to Rs. 376.8 million and total turnover was up 31% to Rs. 541.4 million. During the year under review 13.2 million sq. ft. of tiles had been produced against 13 million sq. ft. in the preceding 15 months period.

Explaining the modest 7.5% dividend recommended by the directors, Mahadeva said tier conservative dividend recommendation was influenced by the heavy capital investment programme planned for the next year or two. In the current financial year and the next, this investment would be in the order of Rs. 25 million. This would include a new computer system, high capacity power generator and a new glazing line at Ceredec.

"We consider it undesirable to finance this capital expenditure by extensive borrowing. Instead, we propose to utilize retained profits for this purpose. The new items of machinery and equipment to be installed would substantially improve productivity, performance and profitability of the company in the years to come,'' Mahadeva said.

He reported that the anticipated flood of cheap ceramic tiles from East and South East Asia following the financial crisis in that region did not materialise. There had been fears that this would destroy the export potential of Sri Lanka tile manufacturers. Fortunately, this did not happen.

Mahadeva attributed this partly to the confidence of foreign buyers to the proven quality of their product and partly due to a strenuous marketing effort. The company had participated in the International Tile and Stone Exposition held in Orlando in April 1997, one of the world's largest windows for exhibiting ceramic tiles. The show attracts buyers from all over the world, he said.

"As a result of our participation in this exhibition, we were able to secure new orders not only from our traditional buyers who visited the exhibition but also from new buyers. The company also sent its marketing executives on nine overseas trips during the year under review. We intend to further intensify our foreign marketing effort in the coming years to develop and expand our export sales,'' the chairman said.

He said that while pushing exports, they did not intend to neglect local sales. The BOI status of the Ceredec project meant that only a small fraction of that subsidiary's production could be sold locally. They therefore sought to be released from the agreement and Ceredec is no more a BOI outfit. The restriction on local sales would therefore no longer apply.

The directors of Lanka Tiles are Messrs. B. Mahadeva (chairman), P.L. Amerasinghe, A.R. Peiris, J.B. Wimalsekera, Ms. R.S. Jayasekera, M. Perera, J.A.P.M. Jayasekera and J.C.P. Jayasinghe.