Higher latex prices, plantations hamper Dipped Products 1Q

Hayleys group rubber glove maker Dipped Products PLC (DPL) saw its June quarter (1Q20) earnings impacted by increases in latex prices and subpar performance of its plantations cluster, the interim accounts released to the Colombo Stock Exchange showed.

The earnings halved to Rs.1.70 per share or Rs.101.6 million for the quarter under review compared to earnings of Rs.3.59 a share or Rs.215 million reported for the same period last year.

The revenue for the period edged up 3 percent year-on-year (YOY) to Rs.7.8 billion. But cost of sales stemming from higher latex prices rose 4 percent YOY to Rs.6.7 million resulting in a gross profit of Rs.1.1 billion, down 5 percent YOY.

The hand protection cluster contributed Rs.4.4 billion to the revenue, up from Rs.4.1 billion a year ago. However the segment results fell slightly to Rs.269.5 million from Rs.284.6 million. The plantations segment reported an operating profit of Rs.52.5 million, down from Rs.120 million a year ago.

A company earnings release said the plantation segment performance was affected by wage adjustment and low tea/ rubber prices that prevailed during the period.

It also said revenue and profitability of Icoguanti S.P.A, DPL’S Italian marketing company, remained stable for the period despite higher cost of sales due to depreciation of euro against US dollar during the quarter.

DPL said its medical glove manufacturing operation suffered due to price pressure from regional manufacturers holding on to prices on rising latex rates.

“The outlook for 2019/20 remains positive. We hope to drive volume growth in specialized gloves to mitigate the cost impact of increases in latex prices which will lead to narrowing of margins.

“Also the group will continue to focus on productivity and TPM/LEAN initiatives to eliminate waste,” DPL Managing Director Ng Soon Huat said. Established in 1976, Dipped Products is one of the leading nonmedical rubber glove manufacturers in the world, and accounts for a 5 percent of the global market. The company’s products now reach 70 countries.

Hayleys group has 57 percent stake in Dipped Products while Employees’ Provident Fund has 12.76 percent stake being the company’s second largest shareholder.