Ceylon Glass: new plant will boost exports

Ceylon Glass Company Ltd. will invest in a new production facility in August 2006 to double production capacity and help boost its export market, according to the company“s chief executive.
“The pla…

Ceylon Glass Company Ltd. will invest in a new production facility in August 2006 to double production capacity and help boost its export market, according to the company“s chief executive. “The plant is likely to be operational within 12 months and we are targeting to export at least 15%-20% of our products over the next two years”, said Sanjay Tiwari. Ceylon Glass, a 54%-owned subsidiary of India“s Gujarat Glass, is Sri Lanka“s only glass packaging manufacturer. The company signed a deal in the week commencing 17 July 2006 with Sri Lankan government body the Board of Investment to build a production plant in southern Horana at a cost of USD 20 million. Mr. Tiwari said they will start building work on the plant in August and the project will be funded entirely by borrowings. The new plant is expected to double the company“s production capacity to over 200 metric tons per day when it becomes operational in mid-2007. For the local market, “we will be able to offer a wider range of products which will include new products and different colors”, said Tiwari. Ceylon Glass accounts for around 80% of domestic demand while the remainder is imported. The company makes “flint” or clear glass, amber and colored glass products for pharmaceutical, cosmetic, liquor and carbonated drinks manufacturers. Less than 5% of output is exported, mainly to European markets. In the long term, Mr. Tiwari said the company is looking to venture into power generation which will complement its operations. “Since glass manufacturing is energy intensive, we are exploring ways to generate our own power”, he said, adding that planned power-sector investments are only at “a conceptual stage”. The company“s pretax profit for the year to 31 March 2006 was down nearly 20% to LKR 273 million, mainly because of a near-17% increase in production costs as high oil prices pushed up the cost of raw materials and packaging. However, the company“s revenue rose 22%, helped by higher export sales and increased local demand. Mr. Tiwari gave no earnings forecast for the current financial year. Analysts say continuing high fuel prices will hit profits, but add that the new plant will help. “Although production costs will have an impact on profits this year, the new plant will add value to the company over the long-term and boost export growth”, said Dilhara Haputhanthri, analyst at CT Smith Stock Brokers.