Chairman’s Review
Dear Shareholder,
Swisstek (Ceylon) PLC delivered a remarkable performance during the year recording a revenue growth of 54% and profit growth of 93%. The notable improvement in operational and financial performance was driven by the unwavering commitment of its dedicated team and farsighted strategy. It gives me great pleasure therefore to present our Integrated Annual Report and Financial Statements for the year ending 31 March 2022.
Operating Environment
Following the sharp decline in economic activity in 2020, the global economy witnessed a strong rebound in 2021 recording a GDP growth of 6.1% compared to a contraction of 3.1% in 2020. Going into 2022 however, progress has been significantly impacted by the ongoing conflict in Ukraine due to spill overs through commodity markets, trade, and financial channels. In addition to the war, frequent and wider-ranging lockdowns in China—including in key manufacturing hubs—have also slowed activity and continue to cause new bottlenecks in global supply chains.
The Sri Lankan economy recovered in 2021 from the pandemic-induced contraction in 2020 recording a growth of 3.7% in 2021 compared to the contraction of 3.6% in 2020. The recovery was supported by a number of extraordinary policy measures by the Central Bank and the Government aimed at cushioning the impact of the pandemic on a broader segment of stakeholders. The ultra easy macroeconomic policy package which included monetary policy easing, liquidity provision to the markets and the Government and several external sector and financial sector policies however led to some unintended effects on macroeconomic stability in 2021, which were further aggravated in early 2022. Persistent pressures on the exchange rate amidst high debt service obligations and a weakened balance of payments (BOP) position resulted in a measured adjustment in the exchange rate in early March 2022. Further to this adjustment however, the Sri Lanka rupee which depreciated by 7.0% in December 2021, depreciated significantly by 33% by end March 2022 reflecting the significant liquidity pressures that prevailed in the domestic foreign exchange market as well as the delay in market correction. Inflationary pressures too increased since the second half of 2021 as a result of local and global supply shortages and the lagged impact of extraordinary monetary accommodation.
Construction activities witnessed a rebound during the year recording a 1.9% growth in 2021 compared to the contraction of 13.2% recorded in 2020. Credit to the private sector granted by Licensed Commercial Banks (LCBs) for construction activities, including personal housing construction activities, also recorded a growth as of end December 2021, denoting an increased availability of funds for construction activities. Demand for locally manufactured building materials meanwhile continued to benefit from import restrictions aimed at supporting import substitution in the local manufacturing sector.
Sustained value to our stakeholders
The Group’s agility and adaptability in seizing emerging opportunities enabled it to deliver a resilient performance, ensuring continued value creation to stakeholders. The Group recorded an impressive performance during the year, recording a revenue growth of 77% and profit growth of 41%. Basic earnings per share increased to Rs. 6.16 from Rs. 4.36 in the previous year. Responding to evolving customer requirements the Group strengthened its digital presence while introducing several innovative products. A “People First” approach meanwhile provides employees an inclusive, engaging and supportive work environment. Continuous engagement with business partners including suppliers has fostered strong partnerships that create mutual value. Meanwhile an ongoing focus on sustainable manufacturing practices and targeted CSR activities create long term value to our communities.
Corporate Governance
The Board provided effective leadership to the Group during the year. Accordingly, the Board maintained a high level of engagement with the business through digital platforms ensuring they remained updated on emerging risks and opportunities that could potentially impact the Group’s ability to generate value. In addition, key areas of board focus included ensuring employee safety. addressing liquidity pressure. the competitive environment and supply chain implications, among others.
Dividends
The Company continued to deliver on its shareholder commitments during the year: the first interim dividend of Rs.0.80 per share was paid in November 2021. followed by Rs.1.00 per share as the second interim dividend in March 2022. With the 3rd interim dividend of Rs.0.90 per share to be paid in June 2022. the Group’s dividend per share amounted to Rs.2.70 per share for the financial year ended 31 March 2022.
Looking Ahead
At the time of writing, the country is in the midst of its worst ever economic crisis whilst also grappling with a political crisis. Short term prospects would therefore largely depend on the success of the recovery measures adopted and political consensus achieved. Notwithstanding these uncertainties the Group remains focused on its long-term strategies of achieving operational excellence, product and geographical diversification, people development and sustainability. Being agile and responsive to rapidly evolving market developments meanwhile will enable us to take advantage of emerging opportunities.
Appreciation
In conclusion I would like to express my deep appreciation to my colleagues on the Board for their continued support and counsel in these trying times. On behalf of the Board, I congratulate the Swisstek team, ably led by Managing Director- Mr.Mahendra Jayasekera and acknowledge their untiring efforts which has enabled delivery of the results amidst numerous challenges. Finally, I take this opportunity to thank all our valuable stakeholders, including shareholders, customers, suppliers, distributors and other partners for their continued support.
