Despite achieving what its chairman called a "significant increase in turnover'' during the year ended March 31, 1998, Central Industries Ltd. saw its bottom line shrinking to Rs. 2.5 million from the previous year's Rs. 11.4 million enabling the declaring of only a 5% dividend against 15% a year earlier.

The company's chairman, Mr. C. Wijenaike, has explained that the operating profit before interest and finance charges was down to Rs. 19 million from the previous year's Rs. 27 million due to several reasons. World market prices for PVC resin, the basic raw material used by the company to produce a range of piping, had escalated.

There had been a considerable slowing down of on-going telecommunication projects during the year under review resulting in a marked fall in turnover from this sector which materially affected profitability. Also, intense competition for Water Supply and Drainage Board tenders resulted in a marginal contribution from this sector although turnover growth was exceptional.

But Wijenaike remained upbeat about the future with new telecommunications projects which the company hopes to supply coming on stream next year. They have also ordered new equipment to manufacture high density polyethylene pipes and the plant will be commissioned shortly. The company will also be marketing several internationally known products in keeping with its core business.

"I am confident your company can look forward to a brighter future provided there is no downturn in the economy,'' Wijenaike told his shareholders.

The year had seen the company redeeming Rs. 36 million of convertible debentures by obtaining a long-term bank loan which had to be at a higher rate due to prevailing market conditions. The resulting higher cost together with the need for added working capital to maintain a higher turnover pushed up interest costs from Rs. 12 million in the previous year to Rs. 16 million in the year under review.

"In view of these adverse factors, net profit after tax dropped from Rs. 11.4 million in 1996/97 to Rs. 2.5 million in 1997/98,'' Wijenaike said.

The company is continuing an advertising and promotion effort to promote a new range of fittings and also seeking to further penetrate the home-builder market. It has achieved the distinction of becoming the first domestic manufacture to be awarded the SLS 659 certification for its range of fittings.

Wijenaike said that they have taken a series of measures during the year to drastically prune fixed overheads and a major reduction had been achieved by relocating the head office to a Colombo-7 address at Albert Crescent from Valiant Towers in Colombo-2. The mid-term termination of the lease had been amicably settled with no penalties.

Discussing the future, the chairman said that cutting overheads, a phased restructuring of cadre and stringent control of working capital would have beneficial results next year. Also, they expect the demand for uPVC products to grow and raw material prices to moderate. Also some major telecommunication projects are coming on stream and Central Industries was confident of supplying the major projects.

"Strategic advertising and promotion has been planned and this is expected to increase our market share in the entire construction sector,'' the chairman said. "We have planned to introduce a new range of products to the market next year. In this connection a plant to manufacture high density polyethylene pipes has already been ordered and will be commissioned shortly. This will enhance the company's capability of providing a complete service the telecommunications sector as well as well as introduce flexibility to manufacture range of products for different purposes.''

The directors of the company are Messrs. C. Wijenaike (chairman), S.V. Wanigasekera, T.M. Dunuwille, G.S.N. Pieris, E.M. Wijenaike, E.H. Wijenaike, A.R. Peiris (nominee of the NDB) and C.S.W. de Costa.