Dipped Products sustains sales, profits in difficult year

Higher contributions from plantations coupled with internal measures to counter rising raw material costs helped Dipped Products PLC post healthy revenue growth in 2010-11 and maintain profitability in a year of contracting margins in its hand protection businesses.

In financial statements filed with the Colombo Stock Exchange, the Hayleys Group’s globally-significant rubber glove manufacturer has reported that turnover grew by Rs. 3 billion or 26% to Rs. 14.9 billion in the 12 months ending 31 March 2011, while cost of sales increased by 31%, largely as a result of unprecedented increases in the price of rubber. The consequent narrowing of margins in its rubber gloves manufacturing operations in Sri Lanka and Thailand was compensated to some extent by the impact of the same factor on the fortunes of DPL’s plantation sector interests, enabling the company to achieve a pre-tax profit of Rs. 748 million, up 1% over the previous year.

Describing the DPL Group’s performance as “robust in the context of the challenges that prevailed in the year under review,” Managing Director Dr. Mahesha Ranasoma observed that DPL had had to execute “a fine balancing act” to maintain equilibrium between profitability and the longer term imperative of retaining customers.

“Our figures show that the Group did not succumb to the conditions and that it had the ability to withstand adverse circumstances and deliver profit despite the extraordinary escalation in rubber prices and other cost elements,” he said.

The Hand Protection sector increased turnover by 25% to Rs. 11.7 billion, with revenue from glove manufacturing operations improving 32% to Rs. 8.8 billion. Turnover from DPL’s Sri Lankan manufacturing operations was up 34% to Rs. 6.8 billion, while Dipped Products Thailand, the Group’s medical glove manufacturing operation, increased turnover by 26% to Rs. 2 billion. Sales of ICOGUANTI S.p.A., DPL’s Italian marketing company rose 8% to Rs. 3.4 billion.

In the Plantations sector, turnover from the Group’s subsidiary Kelani Valley Plantations PLC (KVPL) grew by Rs. 1 billion or 36% to Rs. 3.9 billion. KVPL ended the year with a pre-tax profit of Rs. 356 million.  Hayleys Plantation Services (Pvt) Limited, the holding company of Talawakelle Tea Estates PLC (TTEL), contributed Rs. 22 million to profit before tax during the year under review.

Hayleys Group Chairman Mohan Pandithage commented: “Under the circumstances, DPL’s Hand Protection Sector is aiming to consolidate its manufacturing operations through the coming year. The sector is also looking to increase the range of its glove products as well as add complementary products in order to add further value to its customers.”

“Furthermore,” he said, “the Group has confirmed its commitment to a continued interest and involvement in the Plantations Sector with its investments in Talawakelle Tea Estates PLC and Mabroc Teas (Pvt) Limited.

These investments will significantly add to the performance of the sector in the coming year and beyond.”

The Hand Protection sector’s contribution to pre and post tax profit declined in the 12 months reviewed, despite the significant increases in turnover. This was principally as a result of escalating costs of production attributable to record rubber prices.  Sri Lankan glove manufacturing operations posted a profit of Rs. 205 million, down 50% over 2009-10, while Dipped Products Thailand recorded a profit of Rs. 15 million against Rs. 101 million.

Looking ahead, Dr. Ranasoma said: “While high rubber prices will remain a challenge in the short term, the Group is confident that internal measures to drive lean manufacturing processes, reduce waste and enhance value addition to customers will enable it to maintain the balance between profit and customer retention.”

He disclosed that Dipped Products Thailand had expanded capacity by 50% with the addition of three new plants, to achieve better economies of scale in an environment of thinning margins.

On the basis of the Group’s performance in 2010-11, the Board of Directors of DPL has proposed a final dividend of Rs. 1.50 per share, making a total dividend payout of Rs. 3 per share for the year. These dividends are being paid out of the dividend received by the Company and therefore would not be liable to 10% dividend tax.

Established in 1976, Dipped Products is one of the leading non-medical rubber glove manufacturers in the world, and accounts for a 5 percent share of the global market. The company’s products now reach 68 countries.

The Board of Directors of Dipped Products PLC comprises A. M. Pandithage (Chairman), Dr. M. Ranasoma (Managing Director) J. A. G. Anandarajah,  G. K. Seneviratne, N. Y. Fernando,   R. Seevaratnam, F. Mohideen , K. A. L. S. Fernando, L. G. S. Gunawardena, S. C. Ganegoda , K. D. D. Perera and M. Bottino.