Sri Lanka gloves maker June net dips on high rubber prices, stronger rupee

Aug 03, 2010 (LBO) - Sri Lankan rubber gloves manufacturer Dipped Products said net profit fell 10 percent to 57 million rupees in the June 2010 quarter from a year ago as high rubber prices and a stronger rupee squeezed margins.

The Hayleys group subsidiary said in a stock exchange filing that sales rose 47 percent to 3.3 billion rupees during the period while basic earnings per share fell to 0.95 rupees from 1.06 rupees the year before.

Sales from the gloves business rose 37 percent to 2.6 billion from 1.9 billion although profits fell to 107 million from 150 million rupees.

Sales from its plantations subsidiary almost doubled to 947 million from 490 million rupees and it made a profit of 133 million rupees against a loss of 37 million rupees the year before.

"Dipped Products Group (DPL) has posted healthy turnover and profit growth in the first quarter of 2010-11, although margins in rubber glove manufacturing operations were eroded by a sharp increase in natural rubber prices," a statement said.

Dipped Products Thailand, DPL’s medical glove manufacturing unit, reported a 52 percent increase in turnover to 524 million rupees, while ICOGUANTI S.p.A. the group’s Italian marketing company, saw revenue rise 17 percent to 901 million rupees.

"The principal contributor to profit growth was DPL’s plantations company Kelani Valley Plantations (KVPL), which posted a pre-tax profit of 78 million rupees compared to a loss of 48 million rupees in the first quarter of 2009-10," DPL Managing Director J A G Anandarajah said.

In the rubber gloves business, "unprecedented" high rubber prices in the domestic and international markets and the stronger rupee adversely impacted profit growth in local manufacturing operations as well as on the growth expected out of DPTL, he said.

Anandarajah said that latex prices at the Colombo auctions during the quarter reviewed had been consistently 13 to 14 percent more than international prices which were also 77 percent higher on average than the prices that prevailed a year previously.

The unsustainably high local prices and a shortage of rubber in the local market had compelled DPL to import latex for its manufacturing operations in Sri Lanka during the quarter, he said.

“The abnormal increase in local rubber prices could not be passed on to customers, and resulted in reduced margins for our manufacturing operations,” Anandarajah said.

But he added that this situation could ease in the months ahead if weather improved, allowing particularly the local rubber production to increase.

In contrast, DPL’s plantations sector businesses, helped by the higher rubber prices and better tea crops, contributed 947 million rupees to turnover inclusive of inter-segmental sales.

The plantations unit sales from tea doubled to 652 million rupees, and that from rubber went up 86 percent to 307 million rupees from the year before.

Dipped Products said it is one of the top non-medical rubber glove manufacturers in the world and accounts for a five percent share of the global market.

source - www.lbo.lk