Royal Ceramics March net up over healthy gains from tiles and aluminium

Royal Ceramics Lanka PLC reported earnings of Rs.889.7 million or Rs.8.03 a share for the January –March quarter (4Q17), recording an increase of slightly over 17 percent year-on-year (YoY) due to healthy growth in profits from tiles, sanitary ware and 
aluminium segments.

According to the interim financial accounts filed with the Colombo bourse, the performance was supported by the virtually unchanged cost of sales during the 12 months, drop in distribution costs and the 40 percent fall in income tax.
Royal Ceramic subsidiaries, Lanka Tiles PLC and Lanka Walltiles PLC, have been successful in curtailing cost for the last two years, partly due to the reduction in LPG prices, Bartleet Religare Securities (BRS), a leading stock broker said in a research note. However, the group’s administration and finance costs rose sharply by 64 percent and 55 percent YoY respectively. The main reason for the finance cost to rise was the 13.7 percent YoY increase in total borrowings to Rs.12.37 billion and the rising interest rates.  The group top line recorded a modest growth of 3.9 percent YoY to Rs.7.8 billion due to much slower growth in sales of tiles and associated products but the cost of sales remained at little over 
Rs.4.0 billion.
“Top line grew marginally by 2.6 percent YoY to Rs. 6.95 billion, albeit posting a 6.9 percent variance from our forecast due to a lower than expected contribution,” BRS said.   According to BRS, the March quarter profit was about 10 percent less than what they had forecasted due to lower than expected contribution from tiles and associated items. 
Tiles and associated products account for as much as 65 percent of Royal Ceramics’ group revenue and 63 percent of its net profits. Meanwhile, the group’s aluminium segment continued to be a sturdy top and bottom line contributor, albeit aluminium prices have been on the rise since late last year, the BRS’ analysis of segmental results showed.     
Dhammika Perera-controlled Royal Ceramics group commands a virtual monopoly in Sri Lanka’s tiles, ceramics and sanitary ware market but the budget 2016 reduced the import duties on tiles, ceramic, and sanitary ware and removed such products from the negative list of the Board of Investment. Meanwhile, for the year ended March 31, 2017, the group reported earnings of Rs.3.23 billion or Rs.29.16 a share, up 10 percent YoY.  This was made on a top line of Rs.29.3 million which rose by a modest 8 percent YoY.  As of March 31, 2017 Perera’s investment holding company, Vallibel One PLC, held 55.96 percent stake in Royal Ceramics while the State controlled private sector pension fund, Employees’ Provident Fund, held 13.79 percent stake, being the second largest shareholder.