Piramal Glass Ceylon ups profits, exports despite challenging times

Piramal Glass Ceylon Plc (PGC) has reported its results for the first half of FY 2017-18, with revenue of Rs. 3,082 million and Profit After Tax (PAT) of Rs. 154 million against revenue of Rs. 3,129 million and PAT of Rs. 73 million during the corresponding period of the previous year.

At the half-year mark the company’s domestic sale was lower by 15% at Rs. 2,184 million as against the Rs. 2,586 million of the previous year while export sales stood at Rs. 898 million as against the previous year’s Rs. 543 million, reflecting 65% growth. 

Sales during the second quarter of FY2017-18 was Rs. 1,679 million, which reflects a growth of 16% when compared to the figure of Rs. 1,445 million during the corresponding period of the previous year.

Domestic sale stood at Rs. 1,100 million as against Rs. 1,239 million during the same quarter of the previous year, reflecting de-growth of 11%.  A dip in the overall domestic market was experienced which impacted sales mainly in the food and beverage segments.

The management made special efforts to expand in the export market to offset the domestic setback. Thus the high growth seen in the export market is an outcome of the initiatives proactively converted to sales in the newer markets. PGC has demonstrated its capability by achieving export sales of Rs. 579 million for the quarter against the Rs. 206 million received in the same quarter of the previous year, which depicted growth of 181%.

Amidst the adverse sales impact, the company showed improvement in its profitability indicators. Gross profit has risen to 21% during the quarter under review compared to the 7% in same quarter of the previous year. During the first half of the year the gross profit was 23% compared to 13% in the same period of the previous year whilst the operating profit moved up to 14% from the previous year’s 4%.

The incremental operational profit margin improvement was possible due to the reduction of trading sales. With the new facility now well-stabilised, the domestic market is being supplied mainly with in-house manufactured bottles, which has replaced imported bottles. Last year due to capacity constraints a considerable portion of the domestic sale was done through imports.

PGC completed its relining and expansion project during the previous year with an investment of over Rs. 3 billion. During the relining and upgradation, the furnace capacity was increased by 20%, taking into account expected domestic market growth and potential export sales.

With the unforeseen drop in the domestic market, the company is looking towards international shores to bridge the gap. Sales to the US, Canada and Australia showed an exceptional increase which partly helped shorten the gap. PGC is focusing on developing these potential markets to liquidate the additional capacity.

PGC also commenced an export trading business to Myanmar which opened up a new dimension of international business for the company. This helps PGC offer its international customers a complete range of bottles.

The cost of production during the period remained under pressure due to higher LPG prices, input raw materials and ever-increasing international packing material prices.

Further, it is concerning to note that the Ceylon Petroleum Corporation has not revised the rates of Furnace Oil for the past four years. The crude oil prices, which hit $ 120 a barrel in 2011, are now hovering below $ 60 since the last four years. However, the corresponding furnace oil prices have not been addressed accordingly. This is affecting the company’s competitiveness in the international market. 

The company has been requesting the Government to introduce formulae pricing based on the international crude oil price which will be a fair and transparent pricing mechanism.