By Chandeepa Wettasinghe
The present construction boom and the thrust on exports will result in strong tile sales, but the local ceramic industry led by Royal Ceramics PLC faces the risk of losing the protection against imports, an equities brokerage report noted.
Leading brokerage Bartleet Religare Securities (BRS) upgraded its recommendation of Royal Ceramics Lanka PLC stocks to ‘Buy’ based on the company’s 2016 first quarter earnings per share increasing 242.6 percent year-on-year.
BRS estimates Royal Ceramic revenue to grow by an average 10 percent from 2016 to 2018.
BRS said that the increasing number of hotels and condominiums being constructed, Royal Ceramic’s exports to the UK and the US and the setting up of an operation in Australia will help the company maintain revenue. However, BRS cautioned, “The risk of the industry’s protected status being removed, however, looms.”
Business tycoon Dhammika Perera controls over 80 percent of the local tile and ceramicware manufacturing through Royal Ceramics and other associate companies.
Sri Lanka has import duties exceeding as high as 74 percent slapped on foreign tiles and ceramic products.
Speaking at a ceramics and glass symposium, President Maithripala Sirisena said that going forward, taxes will be adjusted to provide customers with cheaper and higher quality products.
Finance Minister Ravi Karunanayake while speaking at the Sri Lanka Economic Summit pledged to break the protectionist monopolies, specifically referring to ceramics.
Despite protectionism, the importation of foreign products was on the rise and the latest Royal Ceramics annual report called for further action to reduce imports.
Foreign ceramic products are becoming higher quality and cheaper due to intense competition in the world market—a luxury not enjoyed by average Sri Lankans due to protectionist measures curtailing such competition in the local industry, as well as increasing prices.
A Countervailing Duties and Safeguards Bill is currently in the making to stop foreigners from excessively dumping in the local market. However, it is not yet clear whether ceramic and tile products will be included in the bill.