Improved 2011-12 operating results by Dipped Products

Strong operational performances from hand protection combined with capital gains and better contributions from plantations have generated healthy revenue and profit growth for Dipped Products PLC (DPL) in the year ending 31 March 2012.

The Hayleys Group’s globally-ranked rubber glove manufacturing business has reported turnover growth of 33 per cent to Rs. 19.8 billion and profit before tax of Rs. 2.38 billion inclusive of capital gains of Rs. 1.14 billion, achieving three-fold growth over the previous year’s pre-tax profit of Rs. 748 million.

The hand protection sector’s contribution to profit before tax increased from Rs. 374 million to Rs. 728 million excluding capital gains, while Plantations increased its contribution to Rs. 515 million from a profit of Rs. 374 million in the previous year.

Excluding capital gains, DPL’s pre-tax profit of Rs. 1.24 billion for the year reviewed represents an improvement of 66 per cent. Consolidated net profit after tax for the year was Rs. 2.09 billion, inclusive of capital gains, DPL said in a filing with the Colombo Stock Exchange.

The profit attributable to equity holders of the Company improved to Rs. 1.87 billion. Basic earnings per ordinary share for the year totalled Rs. 31.18, versus Rs. 7.46 for 2010-11.

Commenting on these results, Dipped Products and Hayleys Chairman Mohan Pandithage said, “DPL’s performance has demonstrated its underlying capability to generate sustainable business growth by delivering a profit before tax exceeding Rs. 1 billion, excluding capital gains. This is a significant milestone for DPL in a year during which traditional markets in the Eurozone and America were battling a slow-down in their economies.”

He said a “cooling off” of rubber prices in the year reviewed in comparison with the unprecedented increases of 2010-11 had helped DPL’s Sri Lankan glove manufacturing operations to improve on the deteriorated margins of the previous year, thereby contributing significantly to the better performance of the business.

“The Plantation sector registered significantly better profitability mainly due to its rubber business,” Pandithage said. The dominant contributor in the Plantation sector was Kelani Valley Plantations PLC (KVPL). DPL’s second plantation company Talawakelle Tea Estates PLC (TTEL) contributed negatively to the sector’s profit due to low tea prices. “Both plantation companies were affected by the worker wage increase that became effective in April 2011,” Pandithage added.

Dipped Products Managing Director Dr. Mahesha Ranasoma said the year under review comprised of a “good” first three quarters and a challenging fourth quarter.

“By the last quarter of the year, rubber prices bottomed out and commenced an upward trend. The last quarter also saw rapid increases in fuel and electricity costs which when combined exerted severe pressure once more on margins,” he said.

“This was further exacerbated by the fact that our traditional markets in the Eurozone and America were slowing down, which directly and indirectly affect our business growth and profitability: it seemed that low cost products were once again gaining ground in these markets against the higher quality gloves manufactured by DPL.”

Reporting on DPL’s overseas subsidiaries, Dr. Ranasoma said Dipped Products Thailand (DPTL), the Group’s medical glove manufacturing operation, increased turnover by 14 per cent to Rs. 2.3 billion but posted a loss of Rs. 112 million due to a drop in margins and shift in demand for synthetic gloves.  

Sales of ICOGUANTI S.p.A, DPL’s Italian marketing company rose 16 per cent to Rs. 3.92 billion. The company recorded a profit of Rs. 244 million against Rs. 171 million in 2010-11.

 Dr. Ranasoma said continued commitment to implement lean manufacturing processes, invest in team building and intensified efforts to understand market responses and extract new business opportunities were among the key measures that were deployed by DPL during the year. In addition, DPL also undertook strategic capital investments to defray rising fuel costs by switching over to renewable bio-mass energy and implemented measures to improve supply chain efficiency including latex supply management.

Looking ahead, he said many of the challenges that the business encountered during the second half of the past year, particularly during the last quarter, are likely to continue, at least through the first half of the new financial year. “In particular, the local operations will be subjected to severe cost increase pressures consequent to all factors of production being impacted by recent increases in fuel and electricity as well as the overall escalation in labour wages,” Dr. Ranasoma said.

Nevertheless, the company looks forward to the financial year ahead with confidence, he added.

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 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.