The reduction of inflation and interest rates, stable exchange rate and lower taxes for the second half of the 2010/11 financial year saw retail activity and construction pick up in Sri Lanka which helped Central Industries PLC record strong revenue growth, but escalating raw material costs and complicated taxes dragged down the bottom-line.
"After three decades of civil strife there are visible signs of significant recovery in the economy. A reduction in the rate of inflation and in interest rates also helped further to spur economic activity. For the company, this increase in economic activity was mainly visible initially in the retail market. Medium to large scale building projects commenced only during the latter part of the year. Infrastructure projects undertaken mainly by the Water Supply and Drainage Board also increased. As a result gross revenue increased by 11 percent to Rs.1.29 billion from Rs.1.1 billion last year," the company’s chairman S. V. Wanigasekera, told shareholders.The company manufactures a wide range of water management and electrical products.
"Despite the increase in demand for PVC products, the higher raw material costs resulted in lower profit margins being achieved. This feature is especially apparent with regard to tenders to government projects where offered prices have to be held valid for the minimum specified period of the tender, usually 4 months. Despite the increase in revenues the impact of higher raw material costs resulted in Profit before tax being Rs. 121.8 million this year compared to Rs. 141.2 million last year. Although the company was liable to a nominal tax rate of 35% on its profits, until 31st December 2010, two-thirds of Nation Building Tax (NBT) which was charged at 3% of revenue, had to be added back to profits before applying the nominal rate. Hence, Profit after tax was Rs.74 million, compared to Rs. 85.5 million recorded last year," Wanigasekera said.
He expressed optimism given the expected construction sector boom, steady exchange rate and reduced tax rates.
"We welcome the reforms in the tax structure introduced at the last budget, specifically the revocation of Provincial Council Turnover Tax, the reduction in the Corporate Income tax rate, the reduction in the NBT rate, the removal of the 85% ceiling on VAT input claims, and the relaxation of the almost punitive provisions of disallowing two-thirds of NBT and one-half of all advertising expenditure for income tax purposes. We believe that all of these taxes hitherto restricted business development in the country.
"The relative stability of the rupee / US dollar exchange rate in the recent past, single digit inflation and stable interest rates enables businesses to plan and implement future action with a greater degree of certainty. We anticipate that this will aid revival of the construction industry and hope that government policy will ensure this environment continues to improve.
The construction industry will obviously be in the forefront of any rapid economic growth. As a major supplier of several locally manufactured specialized products for this industry, we are confident that demand for the company’s products will continue to increase. The company also continues to explore opportunities to expand the portfolio of products we could offer the construction industry, which would create synergies within the company and value for our customers. Due to space constraints at the company’s only manufacturing facility in Kerawalapitiya, Wattala we are exploring several options to set up a new manufacturing facility outside the Colombo District," Wanigasekera said.
source - www.island.lk
No comments:
Post a Comment