Sri Lanka gloves maker profits up despite lower margins

Nov 01, 2010 (LBO) - Sri Lanka's Dipped Products September 2010 quarter profit almost doubled from a year ago as gains from its plantations helped offset margin erosion caused by higher rubber prices, a statement said.

Group net profit for the September 2010 quarter rose 95 percent to 95 million rupees from the year before while sales rose 25.3 percent to 3.8 billion rupees, a stock exchange filing said.

In the six months ending September 30, net profit was up 36 percent to 152 million rupees and sales rose 34 percent to seven billion rupees.

Basic earnings per share for the six months were 2.55 rupees compared with 1.88 rupees the previous year.

An improved performance by its plantations company and higher volumes from local manufacturing have enabled Dipped Products (DPL) to "mitigate reduced margins in its core business" and post healthy profit and turnover growth, a statement said.

Record prices for latex depressed margins on the company’s rubber glove manufacturing operations in Sri Lanka and Thailand by nearly 50 percent.

DPL’s Managing Director J A G Anandarajah said local manufacturing saw a 38 percent increase in FOB (free on board) turnover on a volume increase of 10 percent.

However, the average price for RSS I (ribbed smoked sheet) grade rubber was 401.37 rupees a kilo, nearly double the average price of 207.36 in the same period of last year.

“In this context, the results for the half-year reflect the impact of internal initiatives to improve operational efficiencies and the continuous efforts to reduce cost,” Anandarajah said.

“Although prices were adjusted to counter the increased raw material prices, these increases could not prevent a substantial erosion of margins on our manufacturing operations both in Sri Lanka and Thailand.”

But the high rubber prices boosted turnover and profit of Kelani Valley Plantations (KVPL), the DPL group’s plantation subsidiary.

KVPL's contribution to DPL’s operating profit improved to 197 million rupees from a loss of 183 million rupees in the first half of last year.

KVPL’s turnover from rubber in the six months improved 84 percent to 522 million rupees while revenue from tea increased by 57 percent to 1,358 million rupees.

Dipped Products Thailand, DPL’s medical glove manufacturing company, increased its turnover by 30 percent to 957 million rupees in the review period.

ICOGUANTI S.p.A., the group’s Italian marketing company, posted revenue of 1,768 million rupees, a 15 percent improvement from the previous year, the statement said.

source - www.lbo.lk