The tax holiday enjoyed by Royal Porcelain (Pvt) Limited, a Royal Ceramics Lanka PLC subsidiary is expected to come to an end in 2013 which could at least result in a 20% dip in the group profits, the company sources said.
“The ten year tax holiday which commenced in 2002/2003 for our ceramic tile manufacturing facility located in Horana comes to an end next year. So we expect at least a 20% dip in our group profitability”, said the Head of Finance and Treasury of Royal Ceramic Lanka PLC, Haresh Somashantha.
When asked what measures have been taken to minimize the impact on the bottom line of the group he said that the profit from the investment made last year in the associate company, L B Finance PLC with a capacity expansion project in the same facility would enable them to strengthen the group profits.
“We expect at least Rs.500 million as share of profits from our 25% associate LB Finance PLC. Further we are nearing the completion of a 35% to 40% capacity expansion project in December this year in our Horana factory with an investment of Rs. 575 million. So I think we are well prepared to face the normal corporate tax rate at 28%”, he said. For the year ended 2011/12 the group recorded a profit before tax of Rs. 2 billion while an income tax provision of Rs. 53 million was made in comparison to Rs. 94 million in the previous financial year. In addition, Rs. 933 million was paid to the government by way of direct sales taxes during the year.
The ceramic tile manufacturing facility which started operations in 2003 is the largest of the group with a capacity of 11,000 square meters a day. Similarly, Rocell Bathware Limited, another subsidiary in the group which presently enjoys a six year tax holiday is expected to finish it in 2016 and thereafter any profits shall be taxed at a concessionary rate of 15%. (DK)