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Vision & Strategy | ||||||||||||
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Business Performance | ||||||||||||
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Financial Review | ||||||||||||
Key Principals• Carl Zeiss AG• Carl Zeiss Meditec • Challenger Electronics • Draeger Medical • Infinite Shanghai Communication Terminals Ltd. • Interpower International Ltd. • John Deere Asia (Pvt) Ltd. • Johnson Controls • KHD Humbldt Wedag AG • MTU Asia Pte Ltd. • PK Electronics • Power Source International Pte. Ltd. • Siemens AG • Tognam GmbH • VM MOTORI S.P.A. • Wartsila Seals & Bearing UK |
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| business performance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Telecommunication Solutions, UPS Equipment, Medical Engineering Solutions, Diesel Engines for Marine Propulsion & Rail Traction, Power Engineering and Building Technologies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Industry Overview | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| (Source - Central Bank Annual Report - 2007) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Telecommunications Sector Environment |
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| The growth momentum in the telecommunications sector continued in the year 2007, largely supported by greater expansion in the coverage areas, the introduction of advanced technology in operations and value added services, increased competition and affordability, and higher investments. The subscriber network of the telecommunications sector grew by 47% in 2007, slightly down from the 58% growth seen in 2006. Fixed access telephone connections expanded by 46% during the year, largely due to an expansion of the wireless network with CDMA technology becoming more popular, while the mobile telephone network increased their reach by 48% in 2007. The telecommunications sector presently consists of 4 fixed line operators, 5 mobile operators, 33 external gateway operators and 29 Internet service providers. The Telecommunications Regulatory Commission of Sri Lanka (TRC) licensed a mobile operator to provide fixed lines in 2007. TRC has also licensed a fifth mobile operator in the country in 2007. (Source - Central Bank Annual Report - 2007) |
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Power Systems Sector Environment |
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| The Performance of the Sri Lanka Railway (SLR) has not shown a significant improvement in 2007. Although the railway network of Sri Lanka covers 1,640 km, it currently operates only 1,200 km of that, due to the on-going armed conflict in the North & East of the country. SLR is presently responsible for approximately 6% of total passenger transport and 1% of the goods transport in the country. Overall, the passenger transportation increased by 4.5% and goods transportation increased by 6.3% during the year. The Factory Industry, which is the largest sub-sector of the manufacturing sector; accounting for more than 55% of the total industrial output, grew by 6.7% in 2007, compared to the 5.7% growth recorded in 2006. (Source - Central Bank Annual Report - 2007) |
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Power Engineering Sector Environment |
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| Electricity generation increased by 4.5% to 9,814 GWh during 2007. Hydropower generation decreased significantly in 2007 due to the low rainfall in catchment areas during the first few months of the year. The share of hydropower in the total electricity generation in the country decreased to 40% in 2007 from 49% in 2006. The sales of electricity (which excludes system loss-out of the total generation) increased by 5.7% to 8,276 GWh in 2007. Electricity consumption in the general purpose category and the domestic sector grew by 16.6% and 5.7% respectively, while electricity consumption in the industrial sector grew only marginally. To cater to the growing demand for electricity, the Government has several capacity expansion projects in electricity generation in progress. The construction of the 150 MW Upper Kotmale hydropower project and the first phase of the 300 MW Norochcholai coal power plant have continued in 2007 and is expected to be connected to the national grid by 2011. Another thermal power plant at Kerawalapitiya is expected to be commissioned during the second half of 2008. The Government is also planning to construct 4 medium-scale hydropower plants and another potential coal power plant of 500 MW is under consideration in Trincomalee at present. (Source - Central Bank Annual Report - 2007) The served market of the Power Engineering business includes a part of the construction sector. The industry review of the construction sector is available on page 29. |
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Medical Industrial Environment |
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| Sri Lanka has in recent years achieved a relatively higher rank in the Human Development Index (HDI). However, there is still an untapped potential in the Educational & Health Services sectors. A healthy workforce has the potential to contribute to a faster economic growth of the country. The establishment of the Private Health Service Regulatory Council is an encouraging development in terms of ensuring the quality of private health care provided in the country. In 2007, the Government’s total health budget increased by 18% to Rs. 69 bn, which is about 1.9% of GDP. Over the years, the Government has facilitated the steady growth of the private healthcare sector, while increasingly focusing on improving its own facilities and services to the low income groups. However, as the Government has a broader role to play in ensuring that all patients get the proper medical care, the Private Health Services Regulatory Council was established to regulate the private sector health service providers. To ensure more medical facilities to the people, the Ministry of Healthcare and Nutrition has entered into Memorandums of Understanding with donor agencies such as the World Health Organisation (WHO), the United Nations Children’s Fund (UNICEF) and the Japanese International Cooperation Agency (JICA) to implement various health projects in the country. (Source - Central Bank Annual Report - 2007) |
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| Operational Review | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Telecommunication System |
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| We market a range of products including Enterprise Networks in voice communication and related applications, solutions for call centres, telephone instruments, solutions in IP telephony, wireless data solutions and uninterrupted power supply systems (UPS). We also provide solutions in after sales needs of customers. During the year, turnover increased by 29%, while a 6% increase was seen in the installed capacity of the business. However, the profit before tax fell short of the budgeted amount for the year. The main focus of this business was the strengthening of strategic relationships formed with telecommunication service providers. Our concerted effort to improve working capital management paid dividends this year, and we were able to achieve improvements in the management of debtors and stocks. One of the faster moving products HiPath 1100 series did well during the year. It is perceived in the market as a ‘value-for-money’ product, and as such generated a fair demand. Another contributor to profitability of the business was the Siemens HiPath 4000 series, which is well received by our customers. The future holds good potential for this sector as seen in the growth of the industry. Thus, the Company has plans to introduce the HiPath 8000 series and WLAN/VoW (Voice over wireless LAN) products. We are also exploring opportunities available to market solutions to new Call Centre projects. |
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Power Systems |
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| This business unit markets products for Rail traction, marine propulsion and industries segments. The key driver of growth in this business remains the sale of propulsion systems. This business unit also provides refrigeration solutions for production processes & storage facilities. During the year, the unit made heavy investments to train engineers to provide the best possible DIMO after-care for the new MTU 4000 series engines. The business saw an increase in turnover by 20% during the year 2007/08. The main contributor to this increase was improved sales in marine propulsion systems. This business unit performed exceptionally well during the financial year 2007/08, and is expected to achieve the budgeted results during the ensuing year as well. |
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Power Engineering |
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| This business serves two major sub-sectors; Power engineering solutions and Building Technologies. The Building Technologies sub-sector performed reasonably well by securing many projects and achieved recognition by securing the contract to install & commission a Building Management System to the British High Commission in Colombo. The Power Solutions sub-sector in collaboration with Siemens, one of the largest players in the world in the power segment, succeeded in securing two major power development projects in Sri Lanka. We have also recently commenced the installation of two sub-stations for the Kerawalapitiya power plant for CEB. Dimo together with Siemens is also to commission and install a state-of-the-art SCADA system for the CEB. In addition to the power development projects of the CEB, we also carry out work on Medium voltage power systems for high-rise buildings and industries. |
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This business achieved a turnover increase of 86% in 2007/08, (198 % in 2006/07). This success is attributable to the rapid expansion into new business ventures while simultaneously strengthening and growing its existing businesses. As expected, the business has succeeded in achieving its budgeted levels of growth. Having increased its profits by commendable levels, the unit looks forward to further improvements in financial results in the ensuing year. |
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Medical Engineering |
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| DIMO is a key provider in the Medical Solutions on Radiology, Ophthalmology, Neurology, Cardiology and Anesthesiology to the local healthcare sector. We market products from leading suppliers including Siemens, Carl Zeiss & Drager Medical. The year was a difficult one for this business, with some of the expected projects not materialising. Therefore, the performance of this business was below expectations. The business however, kept its focus on providing the Sri Lankan healthcare sector with the best possible products and successfully introduced and installed the ISO centric C-Arm X-Ray System, the first such system in Sri Lanka, at the National Hospital of Sri Lanka. Furthermore, the first Linear Accelerator in the country installed by Dimo at the Ceylinco Healthcare Centre is being maintained by trained Dimo engineering staff, providing latest technological access to the Sri Lankan community. The future for this business seems bright. The Company has received a letter of intent to supply medical equipment to a major project in the healthcare industry in Sri Lanka. This, together with the substantial new investments that are expected in the healthcare industry augurs well for the growth of this business unit in the ensuing year. |
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