Brush maker BPPL Holdings’ June net flat
The profits of brush maker BPPL Holdings PLC remained flat during the June quarter (1Q19), although the company said its margins improved considerably compared to the previous quarter (4Q18), with the clearing up of some supply-side constraints.
For the quarter under review, BBPL recorded earnings of 26 cents a share or Rs.79.8 million, compared to earnings of 29 cents a share or Rs.78.5 million reported for the same quarter, last year.
The consolidated revenue for the period was Rs.581 million, up 5 percent year-onyear (YOY), while the gross profit stood edged up 4 percent YOY to Rs.212 million.
The gross margins were 37 percent, similar to the margins seen in the previous year.
“These margins, however, had improved significantly compared to the 31 percent recorded in the January to March 2018 quarter, following the regularising of timber supply and increased use of less expensive recycled plastics for producing brush backs and filaments,” BPPL CEO/MD Dr. Anush Amarasinghe said.
The company’s gross margins, which were declining since the second quarter of the last financial year, improved in the time period as the regularising of timber supply and increased use of less expensive recycled plastics for producing brush backs and filaments.
Dr. Amarasinghe said the high timber prices caused by floods and high overtime and labour costs impacted the gross margins of the company during the last financial year.
Meanwhile, the group profit before tax improved by 7 percent to Rs.93 million for the period, compared to Rs.86 million in April to June 2017 quarter, following the relocation of North American sales management to Sri Lanka and parking of expansion plans into Malaysia.
However, the group’s profits were adversely impacted by higher income taxes and expansion of exchange loss due to faster depreciation of the Sri Lankan rupee against the US dollar.
The income tax expense increased by 65 percent YOY and the group’s finance cost saw an increase of 41.2 percent YOY during the period.
“The exchange losses, however, were higher for the period, caused by faster depreciation of the Sri Lankan rupee vs. the US dollar. The group borrowed in US dollars for both its yarn and brush filament expansion projects.
As a result, its overall dollar exposure exceeded cover provided by its dollardenominated receivables. The interest expenses were also slightly higher due to these borrowings, compared to the April to June 2017 period,” Dr. Amarasinghe stated.
He also said the production was disrupted in April due to the New Year holidays.
Dr. Amarasinghe stated that the financial performance of the group is likely to improve in the following quarter as the two plants are set to commence production, while reiterating that the group is moving forward with diversification efforts.
He noted that the production of newly commissioned Rs.800 million yarn extrusion plant of the company is likely to commence production in the September to December quarter of 2018, while the third brush filament extrusion plant is also likely to be commissioned in the same quarter.
“We also see tremendous potential for growth from both these plants in the subsequent quarters, which will help to diversify the group’s dependency otherwise on a single brushware-related business line,” he emphasised.
Dr. Amarasinghe earlier said that BPPL was planning to invest around Rs.1-1.5 billion in another state-of-the-art yarn production plant next year, further expanding the yarn production capacity and targeting local apparel makers as well as exports.