Financial Times

Commodity prices may take long to recover - DPL MD

Commodity prices are not expected to recover in the near term with rubber being slower to regain previous price levels while tea may pick up sooner as the economic tsunami recedes, according to Dipped Products PLC (DPL) Managing Director J. A. G. Anandarajah.

His comments were made in the DPL Group’s year end (2008-09) report which was released to shareholders and the stockmarket this week. The report described the year as ‘highly uncertain’ in terms of the business environment that prevailed, with a profit performance that matched that of the previous financial year.

The Hayleys Group’s multinational rubber gloves business, its subsidiaries and associates have reported consolidated Group profit before tax of Rs 616 million, the same figure recorded for 2007-08, on a Group turnover of Rs 11.9 billion, an improvement of 7 %.

A strong final quarter enabled the Group, which also has a significant interest in plantations, to generate a profit of Rs 302 million from local manufacturing operations, a growth of 14 %. “The turnaround of Dipped Products (Thailand) Ltd stands out as the most noteworthy development of the year. Though the company ended the period under review with a net loss, its performance particularly since August 2008 has been encouraging. The operations reached breakeven point in the last quarter of the year and have now completed the first quarter of the current year as at end March 2009 with a significant net profit,” Mr Anandarajah said.

DPL’s plantation company Kelani Valley Plantations PLC (KVPL) and its subsidiaries posted a turnover of Rs. 3,109 million, a growth of 10 %, with revenue from tea increasing by 13.6 %, and from rubber by 2.9 %. However, KVPL’s pre-tax profit declined by 31 % to Rs. 300 million following the collapse of the commodity markets in the last quarter of the year.

Among the most serious adverse factors affecting performance in the Hand Protection segment of DPL was the escalating cost of production. “The meteoric rise in oil prices and the consequent escalation in cost of rubber and all other inputs during the first half of the year exerted an unprecedented degree of pressure on the performance of this sector,” Mr. Anandarajah said.

"In spite of the unusually large upward price adjustments agreed with customers, a substantial portion of the extra cost had to be still absorbed over and above similar cost absorptions in the previous year.”
Dipped Products developed 14 new products and versions to broaden its offer to customers, he said. At least three of the new products are believed to entail innovative features and attributes or unique manufacturing processes leading to the company filing patent rights both in Sri Lanka and overseas.


 
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