Dipped 2Q boosted by plantation segment performance; gloves still in red

Dipped Products PLC’s (DIPD) September quarter was supported by its plantation sector performance— mainly the higher tea prices— and for a lesser degree by the glove manufacturing business. 

Releasing its interim financial accounts, the Hayleys group subsidiary reported earnings of 69 cents a share or Rs.41.3 million for its 2Q18, compared to 46 cents a share or Rs.27.3 million profit reported in the same period last year. 

This is a 51 percent leap in the bottom line. DIPD has been battling poor plantation sector performance and tough global market conditions with regards to its glove making business. 

Although the group made a profit, Dipped Products, the glove manufacturing division, turned in a net loss of Rs.48.04 million from a profit of Rs.29.8 million reported an year ago. 

Dipped Products PLC is one of the world’s largest non-medical glove manufacturers and supplies 5.0 percent of the global market share. The company is one of the major exporters and its products reach 68 countries.

The group’s hand protection business lost some of the clients after it had to suspend the manufacturing at its Rathupaswala plant in Sri Lanka in 2014 for alleged contamination of water, which created a furore among the inhabitants in the 
surrounding area. 

Ultimately, no evidence for contamination of water was found anywhere in the vicinity but the factory was relocated within the Biyagama industrial processing zone and since then the company has been catching up for its lost business. 

Its regional competitors have also become very aggressive as of late through extremely competitive pricing. 

Meanwhile, the group top line grew by 16 percent year-on-year to Rs.7.1 billion for the quarter supported by both business segments. 

This growth in the top line for the six months was as high as 26 percent over the same period last year to Rs.14.6 billion, of which Rs.8.0 billion coming from the hand protection unit. 

This is an increase of Rs.1.0 billion during the 12 months to September. 

However, the steeper increase in the latex prices has shrunk its contribution to the bottom line resulting in a net loss for the group. 

Meanwhile, the plantation business, which has tea and rubber and also engages in manufacturing of ready-to-drink tea, increased its revenue for the six months from Rs.4.6 billion last year to Rs.6.6 billion in 2017. 

The operating profit of the segment for the same period was Rs.351.5 million from a loss of Rs.292.1 million in the same period last year. 

The group’s associate company’s losses also widened significantly during the period. 

The only associate company is DIPD subsidiary Kelani Valley Plantations PLC’s 40 percent stake in Hayleys Global Beverages, which makes ready-to-drink tea. 

As of September 30, 2017, the Hayleys group held slightly over a 57 percent stake in DIPD in concert with related parties, while the Employees’ Provident Fund and Employees’ Trust Fund held 12.76 percent and 2.22 percent, respectively.