Dhammika Perera gains control of tile industry

The duo does have a knack for it or perhaps it is in their DNA, as the market saw yet another DNA as one analyst coined it the Dhammika – Nimal Acquisition.

Giving a major boost to the country’s corporate sentiment, which had been under gloomy weather for some time, Dhammika and Nimal yesterday effected their 18th acquisition when related parties acquired a controlling 80% stake in Lanka Ceramics Plc, from CT Holdings Plc of the Ceylon Theatres Group.

High net worth investor and Director Dr. T. Senthilverl also sold his 7% stake.

The acquisition was via Royal Ceramics Plc, which picked up 76% stake along with Vallibel One (3.3%), Nimal Perera (3.3%) on his personal account, and Lanka Ceramics Chairman Anthony Page (3.3%), Dr. Sellaiah and Managing Director Rajiv Casie Chitty. Page previously had a 1.17% stake.

RCL’s acquisition of Lanka Ceramics is part of consolidating its dominant position in the ceramics tiles and bathware market in addition to wooden flooring business and packaging. With Hayleys’ and Dhammika’s interests, the Group also gets control of the aluminium industry which is booming in tandem with post-war construction spree. Additionally is the stronger foothold in rubber plantation business.

Nimal Perera told  that after Hayleys Plc, this was the most important acquisition under the D&N combination. The duo to date has made nearly 20 acquisitions or strategic investments.
Nimal, who is the Managing Director of RCL and Chairman of Pan Asia Bank, also said that the deal was finalised within a week largely on the goodwill of and the strong ties with Anthony Page, whose was appointed to Pan Asia Bank in April 2008 even when he was serving on the Board of Lanka Ceramics.

The entire acquisition is financed by HNB, whose Acting CEO Jonathan Alles was commended by Nimal for agreeing to the deal via a call over the weekend.

Direct subsidiary of Lanka Ceramics is Lanka Walltiles Plc in which it holds 62% whilst other indirect subsidiaries are Horana Plantations Plc (17%), Ceytea Plantation Management Ltd. (33%), Lanka Floortiles Plc (34%), Uni Dil Packaging (33%), Uni Dil Paper Sacks (33%), Swisstek (Ceylon) Ltd. (23%) and Swisstek Aluminium Ltd. (20%).

RCL said in a filing to the CSE that it acquired a 76.1% stake or 22.83 million shares between Rs. 86.90 and Rs. 120 per share with bulk done at the latter price. A mandatory offer will be made by all parties acting in concert shortly.  In total 26.92 million shares of Lanka Ceramics traded for Rs.3.2 billion via 419 trades with an intra-day highest price of Rs. 120 and a lowest of Rs. 82 before closing at Rs. 120, up by Rs. 40.

Lanka Ceramics’ asset per share is Rs. 17 (at Company level) and Rs. 83 (at Group level). Earnings per share is Rs. 5.47 down from Rs. 8.90 at group level at the end of third quarter of FY13. Last week Lanka Ceramic figured among the top five gainers percentage with near 18% or Rs. 12 to close at Rs. 80 though only 241,338 shares traded.

Related party Lanka Floortiles Plc closed up by Rs. 4 to Rs. 69 after hitting a peak of Rs. 70. Investors also toasted RCL in anticipation of major boost with its share price up by Rs. 3.30 to Rs. 100.50 whilst the share touched an intra-day high of Rs. 105. Horana Plantations gained by Rs. 2.30 to Rs. 28.30 with a peak of Rs. 29.80. Seller CT Holdings saw its share price jump by Rs. 8.70 to Rs. 148.20 after peaking to Rs. 150.

In the first nine months of FY13, Group turnover rose by 22% to Rs. 8.8 billion whilst profit from operations was up 17% to Rs. 1.08 billion. After tax profit was Rs. 525 million, down by 5% and profit attributable to equity holders of Lanka Ceramics was Rs. 164 million, down by 39%.
Lanka Ceramics Group assets as at 31 December 2012 was Rs. 14.3 billion, up from Rs. 12.3 billion a year earlier and Rs. 13 billion as at 31 March 2012.

Capital and reserves were Rs. 7 billion including Rs. 1.6 billion in retained profits. Liabilities amounted to Rs. 4.4 billion including Rs. 3 billion in non-current.
In FY13, Lanka Ceramics has obtained a loan amounting to Rs. 610 million from the Parent Company (C T Holdings) at the rate of interest 10% p.a. which was utilised for the purchase of Lanka Walltile PLC shares.

The Company in FY12 recorded a profit after tax of Rs. 71.4 million, a marginal decrease from the Rs. 73.7m reported in the previous financial year. The decrease was due to the sharp increase in financial costs incurred during the latter part of the year on account of investment in its subsidiary.
The Group recorded a consolidated profit attributable to shareholder of Rs. 522.7 million. This was a significant increase over that reported in the previous year of Rs. 254.9 million.