Tile manufacturers worried over maintaining growth momentum amid declining consumer demand

• Say despite gain due to ban on tile imports, profit margins coming under intense strain
• Import restriction and forex shortage dent ability to access raw materials from foreign suppliers
• Anticipate severe decline in purchasing power of consumers, which is likely to affect demand for tiles 

 Sri Lanka’s tile manufacturers, who continue to gain from the import ban imposed on tiles by the government, are worried whether the momentum can be maintained going forward as challenges mount in sourcing raw material from foreign suppliers.

The latest annual reports of leading businesses engaged in the industry shared that although the companies did gain from strong order pipelines, profitability margins came under “intense strain” due to the ongoing inflationary pressures including the increasing costs of fuel, among other challenges in the economy.

 “The year under review saw the buildup of multiple crises we are facing at present. Import restrictions have been in place for the second consecutive year which has posed challenges in importing raw material and machinery for expansion, but also had a positive impact on demand for tiles as these could not be imported,” Royal Ceramics Managing Director Aravinda Perera said in the company’s latest annual report.

 As of now, 100 percent of demand for tiles and 60-70 percent of demand for sanitaryware are met by local manufacturers. The local tile market is dominated by four large manufacturing companies namely, Royal Ceramics Lanka PLC, Lanka Tiles PLC, Lanka Walltiles PLC and Mactiles Lanka (Pvt) Ltd. 

As the crisis situation in the country is yet to show any signs of easing, Perera noted that raw material prices, energy prices, volatile exchange rates and inflation are expected to strain margins in the year ahead as well.   “Inflation is also likely to lead to put pressure on wages as disposable incomes decline. Maintaining production will be a critical factor. We have increased our stocks of fuel and reduced our dependency on LP gas as the supply issues became apparent,” he added.

Reflecting similar sentiments, Lanka Tiles highlighted in its annual report that the greatest concern is to maintain their supply chain to support the manufacturing process. “The country’s economic conditions, which have impacted the availability of foreign exchange needed for material imports, increasing inflation and unavailability of essential resources, will determine the future of the company and the industry,” highlighted Lanka Tiles Managing Director Mahendra Jayasekera. “Inability to procure raw materials would directly affect our production and our expansion plans would have to adopt a ‘watch and wait’ attitude under current country conditions,” he added. Moving forward, the manufacturers said they anticipate a severe decline in the purchasing power of consumers which will in turn lower the demand for their products in the market.