Overview
Union Chemicals Lanka manufactures and trades waterborne polymers, adhesives, coatings and specialty chemicals serving paint, textile and adhesive customers in Sri Lanka. Its latest quarter showed a strong below-the-line outcome: the gap between operating profit and net profit narrowed to LKR 14 million, indicating that finance costs, tax and other items absorbed less operating profit than in the preceding quarter.
Price performance
The share closed at LKR 2,426 on 11 August 2026. It gained 23.3% over three months and 179.6% over one year, while the ASPI fell 7.0% and gained 9.4% over those same periods. The three-month advance occurred with no company news in the last 30 days, so the data does not establish what drove it.
The price sits at 71.9% of its 52-week range, 20.1% below the high. Recent volatility is running above the company's own annual norm, while 20-day volume is 94.2% below its 60-day average, pointing to a sharp but currently quiet market in the shares.
Valuation
At LKR 2,426, the P/E of 12.78 is close to the manufacturing median and sits at the 55th sector percentile. The P/B of 2.41 is richer, at the 74th percentile, although the latest audited ROE was a solid 19.2%.
The 3.4% dividend yield is above the manufacturing median and the payout has been rising rather than shrinking: dividend per share increased from LKR 45 in FY2023 to LKR 63 in FY2024 and LKR 82 in FY2025. The latest payout ratio was 43.2%, providing some earnings cover for the distribution.
News and sentiment
Coverage is thin: two material company articles appeared in the past 90 days, both positive and none negative. The main disclosed event was the FY2025 final dividend of LKR 44 per share, which went ex-dividend on 15 June 2026 and was payable on 3 July 2026.
Financials
The latest quarter ended 25 June 2026 on a company basis. Gross margin was 26.0%, operating margin 18.7% and net margin 14.9%, compared with 28.0%, 19.8% and 15.2% respectively in the June 2025 filing. Those June filings use different bases, company versus group, so the changes are not like-for-like. On the valid same-basis record, the latest gross and operating margins ranked second of five comparable June quarters, while net margin was the best of five.
Revenue was LKR 365 million and net profit LKR 54 million in the latest quarter; the June 2025 group filing reported LKR 380 million and LKR 75 million, but that comparison cannot establish year-on-year growth. In the latest audited company year to 25 December 2025, revenue fell 3.6% while net profit grew 14.9%, with annual operating and net margins of 21.8% and 17.3%.
Owners' equity increased to LKR 1.43 billion from LKR 1.27 billion over the comparable audited years, with the share count unchanged at 1.5 million. The latest quarter's LKR 14 million below-the-line drag was lower than LKR 32 million in March, helping explain why net margin remained strong despite softer operating margin.
Risks
Cash conversion is the most important financial risk: operating cash flow covered only 0.66 times operating profit in FY2025, so accounting profit did not fully arrive as cash. This was weaker than 0.83 times in FY2024.
The balance sheet otherwise limits financial risk. Gearing was 0.0% of owners' equity, interest cover was 417 times and the current ratio was 6.05 at FY2025 year-end. The manufacturing backdrop still includes a 7.9% rupee depreciation and fuel costs up about 47%, which can pressure imported chemical costs and working capital even without balance-sheet leverage.
Outlook
The next company-specific event is the filing for the period ending 30 September 2026. As at 11 August 2026, the exchange history places that filing between 30 October 2026 and 26 January 2027; it will supersede the June figures used here and is the clearest test of whether the recent earnings quality persists.
Manufacturing is the company's full reported sector exposure. Export activity is improving, but labour shortages and currency-sensitive input costs remain part of the operating environment. The available data cannot separate demand effects from pricing, product mix or inventory timing, so the next filing is needed to explain the recent share move and the gap between strong net profit and weaker cash conversion.