Sri Lanka's Tile Manufacturers See Slowing Sales

Colombo, Sri Lanka, March 23, 2009--Sri Lanka's ceramic tile and tableware firms say they have reduced production or may be compelled to do so as sales have fallen sharply.

They forecast lower sales this year because of recession in key markets and also because they have become uncompetitive in international markets owing to an over-valued rupee and high domestic costs.

"All global manufacturers have been faced with a severe downturn in orders," Dankotuwa Porcelain said.

Tile manufacturer Lanka Tiles, which turns out three million square meters of floor tiles a year, said it is currently operating at full capacity because of growing real estate market, which had been booming until last year.

But the company has forecast a slightly lower output this year with the end of the construction boom and bursting of the real estate bubble.

It has forecast sales of just over three billion rupees for the 2009 financial year, up from 2.5 billion in 2008, with export sales expected to rise to 2.14 million dollars from 1.57 million dollars in the 2008 financial year.

Its subsidiary, Lanka Walltile, said it expects a production of 2.5 million square meters in the 2008/09 financial year compared with 2.4 million square metres the year before.

But it said export volumes are expected to fall to 772,100 square metres in 2008/09 from 895,500 square meters the year before with export earnings falling to 634 million rupees from 732 million rupees.

Lanka Walltiles said that with the reduction in the volume of sales, both exports and domestic, there is a build-up of stocks of finished goods.

"We will be compelled to curtail production in the near future until we reduce stocks to acceptable levels. This will result in the reduction of the workforce."

Company officials have warned that if the industry gets into difficulty owing to high domestic costs caused by high energy prices and an overvalued rupee it may be compelled to curtail production.

This, they said, could result in job losses and also reduce government tax revenue as they would have to reduce gas consumption.