Dankotuwa Porcelain to buy 76% of Royal Fernwood for Rs. 300 m
Wednesday, 4 December 2013 00:00
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n First corporate deal to be announced citing 2014 Budget proposal of support for acquiring brands
Dankotuwa Porcelain Plc (DPL) said yesterday it plans to buy a 76% stake in Royal Fernwood Porcelain Ltd. (RFPL) for Rs. 300 million subject to the controlling shareholder Lanka Century Investments Plc (GREG) agreeing to provide financing.
The stake amounts to 305.3588 million shares and the proposed deal reflects a price of 98 cents per share.
DPL said the proposed acquisition of RFPL is to implement a broader strategy to transform the company from being a low margin contract manufacturer of porcelain tableware to an internationally-renowned porcelain tableware brand.
This is by building sufficient scale in production output to be able to economically invest in acquiring and developing international porcelain tableware brands.
In addition DPL will also invest and develop new international distribution channels specifically in the rapidly growing Asian, Middle Eastern and African markets to complement these brands.
The company’s future will be focused on harnessing the significant growth in spending power of the rising middle class consumers in these emerging markets. DPL also expects that there will be a significant benefit to the company by the recent 2014 Budget proposals with respect to the cost of acquiring international brands and exemption on royalty income derived from such brands.
In 2012, Sri Lanka was ranked 19th globally in terms of exports of porcelain tableware. “It is the fervent wish of the Board that the country’s ranking could be enhanced in the near future by adopting the above strategies in keeping with the Government’s policies in seeking higher value addition exports and developing Sri Lanka into a regional hub,” DPL said.
The purchase price of RFPL is over 20% of DPL’s asset base of Rs. 1.4 billion and almost half of its equity and reserves of Rs. 792 million. DPL at present has Rs. 326 million in current interest bearing loans and borrowings and Rs. 26 million in long-term borrowings.
For the six months ended on 30 September 2013, DPL posted a loss of Rs. 4.7 million, as against a profit of Rs. 39 million a year earlier. Turnover was up by 7% to Rs. 807 million whilst gross profit was down by 37% to Rs. 134 million. Pre-tax loss was Rs. 5.3 million as against a profit of Rs. 45 million in the first half of last financial year.
Lanka Century Investments Plc holds a 58.3% stake in DPL and related party Ceylon Leather Products holds a further 8.3%. Japanese investor Kokyo Tatemono Company holds 8.6% and Japan Petroleum Trading Company a further 3%.
