Dipped Products 3Q profits sink as revenues languish, costs rise 

Dipped Product PLC saw its revenues languishing and profits diving amid rising costs in the three month ended December 31, 2021 (3Q22), as the margins came increasingly under pressure in line with forecasts made at the beginning of the current financial year as demand was easing, supply was normalising and commodities prices were soaring. 

Hayleys group’s rubber glove exporter reported revenues of Rs.12.73 billion for its fiscal third quarter, up 3 percent from the same period in 2020. 
The company’s gross profit fell sharply by 32 percent to Rs.2.31 billion as cost of sales rose by 17 percent to Rs.10.42 billion, 

taking much of the company’s revenues to fund its core production raw materials and other direct costs. 
The company’s performance was not entirely out of line with the forecasts made at the start of the current financial year, but it is not immediately clear whether the management expected the impact to be this intense after more than a year of highflying performance since the immediate aftermath of the pandemic in 2020. 

The pandemic fuelled additional demand for the company’s industrial and medical gloves but the demand slowly faded in 2021 with the virus in the world’s major economies being brought under control while the supplies normalised elsewhere.  The ban in place on Top Glove in Malaysia, the world’s largest disposable glove maker, was also lifted by the United States by the middle of last year, potentially regularising the supplies.  The global glove prices also fell sharply putting additional pressure on the company’s margins as seen from the gross profit, which took a dive. 

“The outlook for the sector remains positive through 2021 although demand growth is expected to moderate in the medium term,” said Mohan Pandithage, Chairman and Chief Executive Officer of Hayleys PLC in his annual review of operations last year.  “Capacity expansion by manufacturers in the region will exert pressure on price while commodity price increases will exert pressure on margins,” he added. 

The company reported earnings of Rs.1.35 a share or Rs.811.0 million for the quarter under review compared to earnings of Rs.2.65 a share or Rs.1.59 billion in the same period in 2020, logging a 49 percent decline. 

For the nine months to December 31,2021, the company reported earnings of Rs.5.04 a share or Rs.3.02 billion compared to earnings of Rs.5.86 a share or Rs.3.51 billion in the year earlier period, slipping 14 percent. 

The company’s hand protection segment generated revenues of Rs.30.25 billion for the nine months, compared to Rs.21.21 billion a year ago. The operating profit was Rs. 3.24 billion, down from Rs.4.09 billion a year ago. 

Meanwhile, the company’s plantations - Kelani Valley Plantations PLC and Talawakelle Tea Estates PLC -reported revenues of Rs.12.75 billion compared to Rs.11.57 billion a year earlier while the operating profits were reported at Rs.1.24 billion compared to Rs.1.06 billion. 

Businessman Dhammika Perera controlled Hayleys PLC, together with other group entities held 57.06 percent stake in Dipped Products by December 31, 2021, while the Employees’ Provident Fund had 4.6 percent in the company being its second largest shareholder.