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Kelani Tyres sees low demand despite curfew lifting

27 May 2020

By Madhusha Thavapalakumar Kelani Tyres PLC, which imports and sells tyres in addition to its joint venture businesses,has seen lower demand even after the removal of a prolonged curfew, except in two districts. "Although the curfew was lifted in many areas in Sri Lanka (other than Colombo and Gampaha), the demand for tyres was very soft and we expect the demand to be not more than 50% of the usual demand for the month of May 2020," said Kelani Tyres Managing Director Rohan Fernando in a disclosure to the Colombo Stock Exchange (CSE). The lower demand is not only confined to the company but also to its joint venture CEAT Kelani Holdings (Pvt.) Ltd. (CKH), which forms an integral part of the company.  In addition to the lower demand, the company is significantly affected by the import restrictions that were announced by the Government in mid-March and early-April, to prevent a possible foreign exchange crisis in the country.  As Fernando noted, tyre import trade has been classified as a nonessential item as per Gazette Extraordinary 2171/5 of 16 April 2020. Accordingly, the importation of tyres is not permitted for three months, until 15 July this year.  Even though CKH was given special permission on 20 April to start production under strict restrictions, the company was unable to get their full workforce and as a result, within a week’s time, the company was able to reach production of approximately only 50%. However, Fernando stated that this is improving gradually at the moment.  He further noted that CKH declared a dividend on 26 March and 17 April 2020, and Kelani received a sum of Rs. 315.8 million as their share of the dividend, which has now been placed in an interest earning term deposit until a further decision could be reached by the directors. Kelani Tyres PLC is a public limited liability company. In 1999, the company transferred its tyre manufacturing assets to a joint venture company, namely CKH, which commenced its activities in July 1999. The company owns 50% of the equity shares issued by CKH. Associated CEAT (Pvt.) Ltd., CEAT Kelani International Tyres (Pvt.) Ltd., and CEAT Kelani Radials (Pvt.) Ltd. are wholly owned subsidiaries of CKH. The other joint partner of the joint venture is Associated CEAT Holdings (Pvt.) Ltd.  A new company, Asian Tyres (Pvt.) Ltd., was formed as a fully owned subsidiary of CEAT Kelani International Tyres (Pvt.) Ltd., to manufacture radial tyres.  The company consists of seven directors in its board and Chanaka de Silva is the Chairman of the company. 


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