Energy costs eat into CGCL profits

Ceylon Glass Company Limited (CGCL) declared the results for the quarter ended June 30, 2008.

The company has reported a sales value of Rs. 679 mn in the first quarter of the financial year 2008/2009 as against Rs. 469 mn in the corresponding quarter in the previous year. This reflects an impressive overall growth of 44% over the corresponding quarter of the previous year. It was indeed unfortunate that amidst such a steady growth the company having to report a loss of Rs. 120 mn for the period under review as against the profit of Rs. 44 mn in the corresponding quarter of the previous year.

The major reasons contributing to the loss is energy cost, soda Ash prices and other domestic raw material and Packing material prices.

The energy cost constitutes of Furnace Oil, LP Gas and electricity which amounts to almost 40% of the cost of production.

Thus, the steep increase in the tariff of any of the above source of fuel directly impacts the performance of the company. The company has experienced an increase of 70% in the furnace oil prices, 74% in LP Gas prices and over 30% in electricity prices in the first quarter of the current financial year as compared to corresponding quarter of the previous year.

Most of the raw materials used for glass is found locally in the central province. Thus the high increase in diesel cost has negatively impacted the raw material prices by over 20% minimum which have a very high component of transport cost.