BPPL delivers strong 1Q as diversification strategy yields results

BPPL Holdings PLC, Sri Lanka’s largest brush-ware maker and an exporter, continued to see robust sales and profits during the three months ended in June 2021, as the group is seeing its portfolio diversification strategy, initiated few years ago by its venturing into polyester yarn manufacturing, is working strongly as intended. 

The maker of brush-ware and cleaning products for overseas retailers as well as under its own brand reported revenues of Rs.1.0 billion in the three months to June, its first fiscal quarter, up 70 percent from the same period last year, which was largely hamstrung by virus-related factory closures and order cancellations.

The most striking development is its recycled polyester yarn manufacturing, a fairly a recent foray intended at rebalancing its portfolio mix, aimed at minimising any overreliance on any particular product or market.  

According to BPPL Holdings Chief Executive Officer Dr. Anush Amarasinghe, brushes, its long time staple, now accounts for 70 percent of sales, down from 91 percent a year ago while polyester yarn has gained its share to 22 percent of revenue, from just 4 percent a year ago. 

The balance 8 percent of the revenue came from the brush filament sales to third parties, which was up from 5 percent a year ago. 

The company’s core business has long been to manufacture brush-ware and cleaning products such as wooden handles, brooms, brushes and mops for both professional and household applications. 

But since of late, the company 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. 

With the growing prospects for polyester yarn made out of recycled PET flakes, the company in February broke ground for its second plant for polyester yarn manufacturing at its Horana facility, which has 20 percent more capacity than the existing facility, which is expected to become operational by April 2022. 

With the commissioning of the second plant, the company will more than double its existing polyester yarn production capacity, enabling further inroads into this line of business, which has very high prospects in the domestic and international markets, as demand for recycled yarn is on the rise from global fashion brands, which mostly sourced through their nominated Sri Lankan fabric mills. 

The group’s filament and yarn sales more than tripled during the quarter to Rs.375.2 million, from Rs.107.3 million a year ago, reflecting the business’ immense potential. 

Gradually achieving another goal of reducing its over-reliance into its North American market, the company managed to cut its revenue share to 57 percent, from 71 percent a year ago, “as robust filament and yarn sales boosted revenue from Sri Lanka to 25 percent (up from 8 percent) and India to 6 percent (up from 2 percent),” Amarasinghe said.  

“The Sri Lankan sales were all indirect exports to domestic fabric mills and component suppliers catering to the apparel industry. Brush filament sales were largely to Indian brush makers,” he added. 

The company however faced pressure on their gross margins, which declined by 2 percent, stemming from having to resort to imports to meet orders, due to the lack of production capacity at home. 

Further, the drop in container availability and reduction in shipping lines serving Sri Lanka continued to impact costs. 

“This remains an area of concern to BPPL’s cost structures although we are starting to see some improvements in recent weeks,” Amarasinghe said. 

The BPPL group reported earnings of 32 cents a share or Rs.98.5 million for the April-June quarter, compared to 19 cents a share or Rs.59.8 million in the corresponding quarter last year.