Richard Pieris and Company PLC saw its first quarter profits plummet by 127 percent from a net profit of Rs. 343.3 million a year earlier to a loss of Rs. 91.1 million for the three months ending June 30, 2011, results posted with the Colombo Stock Exchange showed.
Issuing a statement last week announcing its interim financials, the company spoke of strong turnover growth, operating profits and post tax profits. It highlighted the fact that the recent upward revision to plantation sector wages had impacted the bottom line, but made little or no mention of the after-tax loss of Rs. 91.1 million.
The company’s statement in full:
"The Richard Pieris Group recorded a Turnover of Rs.7.2bn during the 1st quarter of 2011/12 which signifies a healthy growth of 15% when compared to the previous year. The Group’s Retail Sector continued to grow with the opening of new Super Centres Island wide which enabled a Turnover growth of 27% and Plastics Sector recorded a turnover growth of 29%. The Group is well poised to achieve its targets during the year with plans underway for an aggressive expansion of its large format retail outlets and diversification plans into the financial services sector.
During the 1st quarter the Group reported an Operating Profit of Rs.148m. The results were affected due to a charge of Rs.627m consequent to a wage increase in the Plantation Sector in June 2011. This comprised a gratuity provision of Rs.469m and wage arrears of Rs.158m which resulted the Group Reporting a Profit Before Tax of Rs.3.4m. If not for this impact which had to be absorbed in the current quarter, the Group would have recorded an Operating Profit amounting to Rs.775m and a Profit Before Tax of Rs.630m for the three months ended on 30th June 2011.
During the last 12 months Group Debt levels reduced from Rs.4.8bn as at 30th June 2010 to Rs.4.2bn by end June 2011. This reduction in debt levels and the increase in the overall profitability over the last two years have significantly reduced the level of Gearing of the Group. The resulting finance costs have reduced to Rs.170m compared to Rs.181m incurred in the three months ended on 30th June 2010.
Plantation Sector
The quarter under review posed many challenges to the Plantation Sector. The negotiations for a wage increase for estate workers were concluded with over 25% increase retrospective from 1st April 2011. The entire financial impact amounting to Rs.627m was absorbed during the three months ended 30th June 2011 which resulted in the sector reporting an operating loss of Rs.230m. This contained an increase in the Gratuity provision which amounted to Rs.469m and salary arrears of Rs.158m for the period April 2011 to June 2011.
Retail Sector
The Retail Sector continued its steady performance with a turnover of Rs.3.1bn and an operating profit of Rs.245m during the three months ended 30th June 2011. The turnover of this segment grew by 27% when compared to the previous year with an increase of 40% in the Operating Profit which was Rs.175m in the 1st quarter of 2010/2011. During the period under review the sector opened its 12th Large Format retail outlet in the town of Kadawatha which has become a focal point in the region.
Tyre Sector
The Tyre Sector recorded a turnover of Rs.631m, a growth of 11% and an Operating Profit of Rs.43m during the three months ended 30th June 2011 which reflected a marginal drop when compared to an Operating Profit of Rs.45m reported in 2010. The high natural rubber prices affected margins during the period under review. The volumes and market share of the Tyre Sector continued to increase which augurs well for the future. During the first quarter the sector introduced two new brands of radial tyres in expanding its product portfolio and extended its activities by entering the "Battery Market".
Rubber Sector
The Rubber Sector reported a Turnover of Rs.481m and a marginal Operating Profit of Rs.9m during the three months ended 30th June 2011. The global increase in natural rubber prices adversely affected its raw material cost although there was much focus on cost reduction and marketing which helped to report positive results when compared to the loss incurred in 2011. With the opening of the markets in the North and East the sector focused its concentration to the domestic market to explore further opportunities. The latex foam business continued to improve its internal KPIs in challenging market conditions making savings in terms of wastage levels and overheads.
Plastics and Distribution Sector
The Plastics Sector recorded a Turnover of Rs.1bn and an Operating Profit of Rs.117m for the three months ended 30th June 2011. The Turnover was 29% higher than the corresponding period of the previous year and the Operating Profit increased by 54% compared to last year. During the quarter Arpico Flexifoam commenced a new production line in manufacturing office furniture and expanded its sofa manufacturing operations. Several improvements were also carried out in the water tank operation.
The recovery of the SriLankan economy provides numerous opportunities to domestic businesses and the Group’s key sectors of Retail, Tyre and Plastics are expected to boost its performance in the near future. In the retail arena aggressive expansion plans are underway for the Group to double its retail space and turnover in the next 24 months. Plantations sector is geared to thrive on the high commodity prices expected and opportunities for expansion both in SriLanka and overseas is being pursued. The Tyre sector continues to increase its volumes and market share and although the high rubber prices affect its margins the Sector is well focused to look forward to yet another successful year. Whilst the Group would continue to concentrate on its core business the expansion into financial services sector is well underway. The Group is planning to enter the insurance business in its own identity and financial services in the ensuing months. Emphasis is placed on overhead, working capital and cash flow management and to reduce borrowings further. A spokesman for the Company stated that the outlook for the rest of the financial year is very promising," the statement issued by the company concludes.
source - www.island.lk
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