LRA Assigns Initial Entity Rating to Laxapana PLC

Laxapana PLC ("the Company" or "Laxapana") is a limited liability company principally involved in import and trading of LED and CFL bulbs, dry-cell batteries, rechargeable torches, industrial lighting and hardware products in Sri Lanka. The Company pioneered manufacturing of dry-cell batteries of AA and AAA in Sri Lanka in the past. The rating reflects the Company's strong brand name (Laxapana) and market position, growing supplementary income and robust distribution network for consumer products. Laxapana enjoys synergies being part of E. B. Creasy Group in the consumer and retail segments. The Company has diversified its product range though trading in hardware products and solar power for group companies. In terms of its relative positioning, the Company is among top players accounting for ~25% market share in dry-cell batteries and ~15% of the market share in LED bulbs in FY24. The core business segments of the Company has healthy margins but they have decreased on YoY basis due to lower margin in LED bulbs and demand drop as price points have increased for its products recently. Laxapana is exposed to currency risk, being import dependent, and has seen its working capital requirements increase as well due to increasing costs and higher receivables days. E. B. Creasy and Company PLC is the parent company with a shareholding of ~68.28% whereas the ultimate parent company is the Colombo Fort Land and Building PLC. The gross profit margin of the Company has decreased to ~27.32% in FY24 (FY:23 ~40.10%) resulting in operating loss from core segments. The profitability of the Company is supported by supplementary income from Solar power solutions and other income. The Company has also invested in group real estate assets and acquired a steel company. The leveraging of the Company is low (~26.9%) but has increased during FY24 compared to FY23 due to bank borrowings for the acquisition of subsidiary Bluescope Lysaght Lanka Private Limited. Going forward, the Company expects to expand its production capacity of LED bulbs assembly function and intends to focus on hardware products to augment profitability.
The rating is dependent on the management's ability to improve margins and sustain profitability from its core operations. Continued support from group in terms of distribution and other synergies is important. Meanwhile, effective management of working capital requirements and prudent financial management is critical.

About the Entity
Laxapana PLC (“Laxapana” or “the Company”) is a listed public limited company incorporated and domiciled in Sri Lanka since 1956. The Company was listed on the Colombo Stock Exchange in 1982. The largest shareholder of the Company is E B Creasy and Co. PLC ,with an ownership of ~68.28%. The Board consists of nine Non-Executive Directors (NED) and out of which three are Independent Directors. The Chairman of the Board Mr. S. D.R. Arudpragasam is a Non-Independent, Non-Executive Director.