Annual Report 2009/10 - Colombo Stock Exchange

6 Sierra Cables PLC - Annual Report 2009/10 Connecting Sri Lanka to Progress
Executive Director’s Review of the Operations
I present this Annual Report with a great sense of satisfaction at a
time when our country is recording positive development trends
with peace and political stability being regained subsequent to the
historical achievement of defeating terrorism that plagued our country
for three long decades. The recessionary trends in the global economy
which were considered to be the worst since the great depression of
the 1930’s also showed improvement this year and these two factors
put together helped Sierra Cables to raise its head once more and
increase profits after the marginal performance during the year that
ended on 31st March 2009.
Several macro-economic factors have had a significant impact on the
cable industry in the country.
The continuous flow of post war funds to the country for providing
electricity to the rural areas has energized the Ceylon Electricity
Board (CEB) to initiating a large number of power utility projects.
These projects have facilitated cable manufacturers in Sri Lanka to
strengthen their market presence. More investments have also been
clearly visible in the construction area especially in the household
sector. Yet another positive outlook where market openings are clearly
apparent for industries such as ours, is the opening up of a new era in
the construction industry where several opportunities are springing up
for the reconstruction and redevelopment of the northern and eastern
regions of the country where the infrastructure has been suffered by
30 years of war. Further, the pledge of 160 million US dollars in loans
to Sri Lanka from the Asian Development Bank (ADB) for expansion
and upgrading electricity services, especially to the poor and those
living in conflict-affected areas will have a constructive and direct
effect on the cable industry in the country.
Post-war development that has a direct impact on the Hotel industry.
Sri Lanka’s hotel owners are racing to refurbish and add thousands
of more rooms as foreign holidaymakers pour into the country.
Millions of dollars are expected to be spent by leading hotel groups on
refurbishment and redecoration for the influx of tourists attracted to our
dream island where sunshine, beaches and magnificent landscapes
are plentiful. This new development in the hotel industry has a direct
impact on the construction industry and this invariably has a significant
effect on the cable and building material industries.
To maintain our position in the forefront of the cable industry, we have
constantly upgraded and strengthened our product quality. This year we
were granted ISO 9001: 2008 Certification reflecting our commitment to
quality. Our dedication to our customers, design and customer service
were amply rewarded and recognized when we achieved awards from
the Sri Lanka Chamber of Small and Medium
Industry and the Industrial Excellence Award
2009 (Large Category - Gold Award).
We also organized the Excon 2009
Exhibition, the Annual Construction Fair
that possessed an international flavour and
had participation from several overseas
delegates.
Our vision goes beyond just what we already came to accomplish
so far. Whilst maintaining our status-quo as one of the leading cable
manufacturer in the country, we have been able to raise the bar. This
year our technical achievements have been many, where we continued
to innovate to become healthier competitor in the cable market. We
were able to break the monopoly in the industry with ABC which is
known as Arial Bundle Cable (ABC). Our In-house developments in
machineries contributed a lot towards this achievement.
Customer tailor made solutions enabled us to satisfy our customers
to a greater extent. Thus Customers such as CEB, LECO has been
satisfied throughout the years with their requirements.
During the year under review our company has become an increasingly
reliable partner in the cable business with sales from tenders alone
increasing by 22% in comparison to the sales from tenders in the
previous year in spite of heavy competition from rivals in the market.
During the past two years the company has also encouraged the Sales
Reps that are spread around different regions of the country to search
for construction projects in their regions. Company’s continuous
encouragement & Sales Reps commitment shows increasing project
sales through direct Reps by 21% this year when compared to the
sales in the previous year. Figure 1 shows the total sales fluctuations
in last 5 financial years.
Millions
1,600
1,400
1,200
1,000
800
600
400
200
0
2005 2006 2007 2008 2009 2010
Figure 1
With the company’s strong growth outlook and focus on profits our
profits increased by 4 times when compared to the previous year
even though the sales dropped by 32% during the same period. This
demonstrates the positive effects of the company’s strategic move
towards more profit making areas such as tenders and projects.
Figure 2 shows the profitability boost in the financial year 2009/10
compared to the previous year.
The profit increase is even more significant in the light of increasing
raw material prices. In the financial year 2008/09 the price of copper
decreased by 57%, aluminium by 55% and PVC by 30%. In strong
contrast to these decreases this year we witnessed an increase in the
price of copper by 55%, aluminium by 44% and that of PVC by 20%.
Figure 3 provides the evidence for that.