Dipped Products PLC, the Hayleys subsidiary which is one of the world’s biggest non-medical glove manufacturers, is embarking on converting some of the production lines in its factory in Thailand for manufacture of synthetic medical examination gloves.
The Thai factory, Dipped Products Thailand Limited, was set up some years ago to break into the manufacture of natural rubber medical examination gloves. This facility had suffered a loss during the year ended March 31, 2012 both on account of the shift in demand for synthetic disposables as well as the drop in margins.
Dipped Products Managing Director, Dr. Mahesha Ranasoma, explained that the shift in demand for synthetic gloves was triggered during the time natural latex prices were rapidly rising. But this demand did not reverse to natural latex when rubber prices were cooling off.
"In responding to the new situation, DPTL embarked on converting some of its production lines to synthetic products. Whilst these efforts were successful, it was not possible to generate sufficient orders to compensate for orders lost in natural latex disposables, and the result was a loss making year for DPTL in 2011," Ranasoma said.
The year under review had been one of the best in the history of the Dipped Products group with turnover up 33% to Rs. 19.8 billion and the group after-tax profit surging 258% to nearly Rs. 2.1 billion from Rs.585.6 million earned the previous year.
Profits were boosted by a capital gain of Rs. 1.14 billion as a result of the company selling off a long held stake of 3.5 million Hayleys shares.
These shares had cost a total of Rs. 194.5 million and were sold to Mr. Dhammika Perera, the controlling shareholder of Hayleys.
Dipped Products Chairman A.M. Pandithage said that the hand protection segment’s contribution to the group profit, excluding capital gains, increased to Rs. 728 million from the previous year’s Rs. 374 million with the plantation sector too posting a profit of Rs.515 million, up from Rs. 374 million a year earlier.
He said that the profit attributable to shareholders of the company had improved to Rs. 1.87 billion from Rs. 447 million the previous year.
The year had seen a cooling off period for rubber prices compared to 2010/11 where prices had bounced to unprecedented heights. This helped the Sri Lankan glove manufacturing operation to cushion business margins that had fallen the previous year, making a significantly higher contribution to the better performance of the business during the year under review.
Dipped Products Thailand had made a negative contribution with measures taken to enhance production of synthetic latex examination gloves being insufficient to avert a negative result.
DPL’s Italy based marketing company, ICOGUANTI S.p.A., had made a ``worthy contribution’’ to the hand protection sector despite marketing conditions that prevailed in the Eurozone.
The plantation sector had registered significantly better profitability thanks mainly to its rubber portfolio with Kelani Valley Plantations being the dominant contributor. DPL Plantations had acquired a further one-third stake in Hayleys Plantations Services which owns 75% of Talawakelle Tea Estates, Pandithage said.
Hayleys Plantations Services, previously an associate, had thus become a subsidiary of DPL Plantations now owning 66.6% of the former.
Announcing that the directors have proposed a first and final dividend of Rs. 6 per share to shareholders, Pandithage said that the performance during the year had demonstrated the company’s 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," Pandithage said.
He expected these global economic challenges, particularly in the Eurozone including volatility of the euro, to continue during the current year and made the further point that there was considerable uncertainty about both rubber and oil prices that would have significant influence on gross margins this year.
However Dipped Products track record speaks for its ability to weather such challenges, he said.
Dipped Products has a stated capital of Rs. 598.6 million, capital reserves of Rs. 236.8 million and revenue reserves of Rs. 4.46 billion in its books. Total assets ran at slightly over Rs. 18 billion and total liabilities at slightly over Rs.11 billion.
Hayleys PLC with 41.39% is the biggest shareholder followed by the EPF with 12.57%. Hayleys subsidiaries, Volanka (8.14%), Haycarb (6.80%) and Ravi Industries (1.67%) are also among the 20 top shareholders.
The directors of the company are: Mr. A.M. Pandithage (Chairman), Dr. Mahesha Ranasoma (MD), Messrs. J.A. Anandarajah, G.K. Seneviratne, N. Fernando, R. Seevaratnam, F. Mohideen, K.A.L.S. Fernando, L.G.S. Gunawardena, S.C. Ganegoda, K.D.D Perera and M. Bottino.