BPPL Holdings records robust 2Q amid strong brush sales

• Sales up 28% YoY and 51% QoQ
• Says full order book for 3Q

Sri Lanka’s largest brush-ware maker and exporter, BPPL Holdings PLC, is seeing a strong demand for both its generic brushes and own-branded products while the company has also experienced its product and market diversification strategy yielding results. 

BPPL Holdings reported revenues of Rs.892.3 million for the July-September quarter (2Q21), up from the sales in the comparable period, last year and in the previous quarter ended in June (1Q21)—an indication that the company has come out from the coronavirus-related disruptions largely unbruised.  

The sales were 28 percent higher from last year’s levels while on a quarter-on-quarter basis (QoQ), the sales were up by 51 percent, from the Rs.589.6 million revenues in the April-June quarter. 

The company maintains a positive outlook for the ongoing quarter ending in December, its third fiscal quarter, as it has a full order book.

“The outlook for the next quarter remains strong with a healthy pipeline of brush orders. The brush filament extrusion lines are also running at 85 percent of full capacity, with a strong order pipeline from India,” BPPL Holdings CEO Dr. Anush Amarasinghe said. 

“Moreover, the polyester yarn plant is operating at 94 percent of capacity, with a full order book until December,” he added. 

The increase in the top line was assisted by a higher sale of brush and related products, brush filament and polyester yarn. 

Sale of brush and related products, which includes durable brush-ware and cleaning products such as wooden handles, brooms, brushes and mops for both professional and household applications, rose by 3 percent from a year ago while its own-branded brush sales, sold under the brand ‘Tip Top’, soared by 65 percent, the company said. 

The company in April exited the Indonesian market after its own-branded brush-ware faced heightened competition from the already established brands. 

Meanwhile, brush filament sales to external or non-BPPL customers and polyester yarn sales have more than doubled amid capacity increases in the firm’s brush filament extrusion plant and a full quarter’s contributions from the polyester yarn operation. 

BPPL Holdings recently diversified into synthetic filament extrusion and polyester yarn production for customers in both Sri Lanka and overseas, expecting the two product lines to become major contributors to the group financials in the medium term. 

“Brush filament sales to third parties and yarn sales accounted for 20 percent of revenue in 2Q, validating our revenue diversification strategies,” Dr. Amarasinghe added. 

The company also managed to rebalance its market portfolio, as a result of its conscious efforts to reduce the over-reliance on North America, since the market share fell to 58 percent, from 72 percent in the same period, last year. 
However, the slightly less sales to North America were offset by higher sales in the Australia and New Zealand markets. Further, the brush filament sales to India increased due to new clients added to the portfolio. 

The company reported earnings of 44 cents a share or Rs.134.8 million for 2Q21, compared to 34 cents a share or Rs.103.4 million in the comparable period, last year. 

The company has improved its gross margins by 1.4 percent, due to cost controls and rupee depreciation benefits and said its higher margins were more than compensated for the doubling of the depreciation charges and interest cost stemmed from the new yearn and brush filament extrusion plants. 

The profits were also weighed down by the considerably higher taxes, due to an increase in the deferred tax, following the capitalisation of the new filament plant in October 2019 and yarn assets in February 2020.

 
There was also a corporate tax reversal in the same period, last year, which was absent in the current period. 
The company booked a tax charge of Rs.30.8 million for the quarter, compared to a tax reversal of Rs.9.2 million in the year earlier period.