Exports top half a billion mark, explores new markets; Revenues up in FY11 but high material cost marginally impacts bottom line
Kelani Cables Plc (KCL) is aspiring to become a world class company as well as explore new export markets whilst consolidating its success locally.
“Kelani Cables has set a clear strategic direction for the next three years and the entire company remains committed to work towards the goal of developing a ‘World-Class company,” Chairman Upali Madanayake has told shareholders in the 2011 Annual Report.
“We envisage achieving our vision by leveraging on the four-pillar total change management strategy, building on the existing rock-solid fundamentals that we possess,” he added.
Madanayake said financial consolidation, discipline, sustainable profits and growth will be derived from all aspects of KCL’s operations, while focus will be to harness the full potential of our most valued asset – employees. “As always, we will strive to make our employees an integral part of the change strategy and its implementation,” he added.
In the financial year ended on 31 March, 2011, KCL posted a net revenue of Rs. 3.83 billion, up by 15.3% over the previous year. However, gross profit was Rs. 616.5 million, down by 16% on net revenue, as compared to the gross profit of Rs. 695.4 million in FY2010, representing 20.9% on last year’s revenue.
“The main reason for the drop in gross profit was the fact that copper prices on the London Metal Exchange averaged at USD 8,140 per MT for the year under review, whereas in 2009/10, the price was USD 6,101 per MT,” the Chairman explained.
Group profit before tax for 2010/11 was Rs. 218.3 million, lower by 5.7% on net revenue, while it was Rs. 279.4 million in 2009/10, approximately 8.4% of net revenue. The profit after tax in FY2011 was Rs. 133.4 million, down by 4.3% from the previous year. “The salient reason for this was the steep increase in material prices,” Madanayake added.
He said that although the company could not meet the set profitability targets due to the steep increase in material prices, turnover exceeded by Rs. 223 million from the budgeted figure.
Group operating expenses (including selling, administration and net finance costs) for FY2011 was Rs. 412 million, up by 3.7%.
Apart from setting sights to become a world class company, KCL is also exploring new export markets. In FY2011, group exports topped the half a billion mark to Rs. 590.47 million from Rs. 432.4 million in the previous year.
During FY2011 KCL had consolidated its position in the Maldives and exported products to several other markets. “We are exploring further market opportunities in the African continent, Middle East and SAARC regions, which we are confident, will deliver results in the years to come,” the company said.
Commenting on the macro environment Chairman Madanayake said FY2011 witnessed notable improvements in the economy, following commendable growth in the first half of the year. The economy succeeded in sustaining this positive growth momentum through the rest of the year, providing a glimpse into its growth potential. It is indeed heartening to see the country engaged in large scale reconstruction and much-needed development projects following decades of conflict that succeeded in stifling the economy and deterred investments in enhancing the country’s infrastructure.
“The positive economic trends were reflected in the industry, with the year under review witnessing increasing demand for electricity supply and thereby generating a clear demand for our products. The reconstruction of roads and highways in the North and East of the island, and other mega construction projects in other areas has created a further demand for cabling,” the Chairman said.
In FY2011 KCL expanded operations in the North and East in tandem with rural development projects, thereby strengthening the brand’s presence in these newly-opened regions.
Given the rapid electrification in the country, KCL created a new product segment power and energy to cater to the specific needs. A dedicated team is already in place to achieve the required sales volumes.
Noting that innovation and new product development are “watchwords” at Kelani, the company said several new products, namely iron cables, rosette cables, boat cables and speaker cables were launched in FY2011. Many new products are in the pipeline and will deliver incremental growth in the years, to come. Aerial bundled cables which was launched in 2009/2010 has recorded success, the company added.
As regards the highly volatile LME prices, the prices for the period October 2010 to March 2011 were above USD 8,000 — much higher than the previous year. Cables industry is a fiercely competitive one and the year 2010 witnessed acceleration in the level of competition, necessitating your company to bring its sales, marketing and brand building expertise to the fore in a bid to stave off competition. During the year the company also saw the exit of Managing Director Hemantha Perera who served for seven years. “His leadership has contributed immensely to the growth of the company and, most notably, winning many awards and accolades under his leadership,” Chairman Madanayake said.
On 1 April, 2011 KCL Board of Directors appointed Mahinda Saranapala as the Chief Executive Officer. “Saranapala brings with him a wealth of corporate experience and his expertise adds heft to our management profile. We are confident that he will be able to carry our rich company legacy forward,” the Chairman added.