July 08, 2014 (LBO) – Demand for water pipes and electrical switches have weakened during the past year, but appear to have bottomed out, Central Industries, a maker of plastic-based water supply and electrical products has said. “The PVC industry is currently plagued with overcapacity as anticipated growth in demand in the post conflict era has not materialized as expected,” chairman Central Industries chairman G S N Peiris said.
“We believe that many industries, including us, invested in enhanced capacity in anticipation of this growth.
“However, lukewarm consumer demand has resulted in severe competition amongst the manufacturers, resulting in progressively lower profitability.”
Sri Lanka is emerging from a burst credit bubble fired by a period of low interest rates where the Central Bank resisted an interest rate rise with sterilized foreign exchange sales eventually resulting in a balance of payments crisis.
Extended periods of low interest rates lead to malinvestment financed with unsustainable bank credit, which in turn creates an overcapacity after the credit bubble is burst.’
Central Industries however said its finances were sound.
Several Sri Lankan businesses which became overleveraged