Decline in domestic sales and higher energy costs hamper Piramal Glass 1Q
The slowdown in domestic sales and higher energy and other input costs hampered the bottom line of Sri Lanka’s only glass bottle maker, Piramal Glass PLC during the quarter ended June 30, 2018 (1Q19), the interim financial accounts released to the Colombo Stock Exchange showed.
The company reported earnings of 5 cents per share or 46.6 million for the April-june quarter, compared to earnings of 11 cents or Rs.105.5 million reported for the same quarter, last year.
The revenue for the quarter under review rose 17.5 percent year-on-year (YOY) to Rs.1.65 billion. However, the gross profit for the period fell to Rs.286 million from Rs.351.1 million as cost of sales rose by Rs.311 million to Rs.1.36 billion.
“The LPG rate was an all-time high for the past three years.
The diesel rate increase by Rs.24 per litre impacted the cost of production in several fronts including increases in raw material prices, packing material cost and transportation costs,” Piramal Glass said in an earnings release.
The operating profit for the period also fell to Rs.168.4 million, from Rs.214.9 million.
The company said the domestic sales impacted by the liquor segment fell 8 percent YOY to Rs.1.01 billion.
“The major impact came through the liquor segment. Over the past two years a shift of consumption was observed from the highend locally filled foreign liquor segment to the low-end liquor.
This was further aggravated with the heavy taxes imposed on the liquor industry,” the earnings release said.
The high-end liquor segment of the industry uses the new bottles whilst the low-end uses the used scrapped bottles. Thus, this shift has impacted the demand of fresh bottles.
Meanwhile, Piramal Glass has entered into the local retail segment with the launch of glass bottles within the category of food and water. The company said several innovative designs and options are now available for household consumption at leading retail outlets in the country.
The export sales for the quarter grew by 98 percent to Rs.633 million, which accounted for 39 percent of the overall sales value as against 23 percent in the same period of the previous year.
“The company did its best to fill the excess capacity created with the decline in the domestic market through exports.
Most of the orders obtained at short notice from the mass market as capacity fillers did not yield the same attractive margins as the domestic and high-niche segment of the exports.
The company continuously strives towards gradually shifting the volumes from the mass market to the premium segment,” the earnings release noted.
Presently, Piramal Glaas exports to the USA, Canada, New Zealand, Australia, India, Pakistan, Myanmar and several other markets. The company said significant growth has been experienced in the USA and Canadian markets.
Meanwhile, the company said the final phase of its capacity expansion project is likely to be completed with the installation of the sixth production line, by the end of the current financial year.
The total additional investment for this project will be Rs.1 billion. This investment will facilitate the company to utilise its installed capacity to maximum.
With the successful installation of 3MW rooftop solar power plant, which is the largest single location installation in the country, the company is further exploring various alternatives to bring down the energy cost, which is the major cost component in glass manufacture.
In this regard, the company is seeking support and approvals from the relevant regulatory authorities.
During the period under review, the company upgraded its existing ERP system by implemented SAP HANA 4. The management hopes to have more efficient work environment and timely information for decision-making.
The parent, India’s Piramal Group, has a 56.45 percent stake in the firm, while Sri Lanka’ staterun pension fund, the Employee’s Provident Fund, has 9.51 percent. Norges Bank, the giant wealth fund operating under Norway’s central bank, also has a 2.93 percent stake in Piramal Glass being the third largest shareholder.