Ceylon Leather net profit for 3Q tops Rs. 82.3m

Ceylon Leather Products Plc has recorded a dramatic increase of net profits for the quarter ending December 31, 2007. According to the financial report released recently the group has recorded a net profit of Rs. 82.3 m compared to a loss of Rs. 6.2m for relevant quarter of the 2006 recording an increase of 1428%.

The company has revalued land in extent of 4.7 acres at Mattakkuliya where the tannery is located and the excess amounting Rs. 274m has been credited to reserves.

Consequently the net assets value per share has increased substantially from Rs. 27 to Rs. 59.76. The company sold 3.4 acres of land with factory for Rs. 307 m and made arrangements to relocate the factory and office at Belummahara and purchased an abandoned factory for Rs. 50m with a relocation cost of further Rs. 20m.

The company has obtained the services of Footwear Design and Development Institute Noida for consultancy for designing, installing and commissioning of the factory.

They have done a survey and identified certain critical areas and they are confident that output could be doubled by Rs. 80 m per month by April if the constraints are addressed. Due to other improvements the company expects the turnover to reach Rs. 100 m per month by this December.

The company is expected to commence operations at the new factory from April and carry out a revaluation of the property resulting in a further excess value which would further enhance the net assets value per share to around Rs. 70-72. Further Rs. 93 m retained as security would be made available to the company resulting in a almost debt free position.

The company's cost of funds for three quarters is Rs. 43.2 m and therefore it could save over Rs. 50 m per year. Consequently net profit is expected to substantially increase due to lower financial cost along with above improvements to productivity, quality and more than doubling of turnover.

The management expects to relocate the tannery considered largest in the country outside Colombo where the Government has indicated assistance by offering free land and buildings and other concessions.

The company is in discussion with the Government to obtain concessionary funding from a donor agency.