Richard Pieris reports Rs. 1.1 billion 1H profit

The Richard Pieris Group recorded a turnover of Rs. 6.4 b and an Operating Profit of Rs. 809 m for the three months ended 30 September 2010.

The turnover for the six months ended September 2010 was Rs. 12.7 b, resulting in a Group operating profit of Rs. 1.4 b and a profit before tax of Rs.1.1 b. This is a bold statement of the Group’s strong profitability growth.

During the last 12 months Group Debt levels reduced by Rs.1.4 b to Rs. 4.3 b by end September 2010 with finance costs reducing to Rs. 347 m compared against Rs. 594 m incurred in the corresponding period of the last year.

The Retail Sector continued its steady performance with a turnover of Rs. 4.9 b and an operating profit of Rs. 344 m during the six months ended 30 September 2010. The turnover of this segment grew by 18% when compared to the previous year with an increase of 69% in the Operating Profit.

The key thrust will be aggressive store expansion with focus on growing sales whilst controlling overheads and inventories. Two large Arpico Super Centres are expected to be opened in Wattala and Kadawatha soon.

The Tyre Sector recorded a turnover of Rs. 1.2 b, a growth of 22% and an Operating Profit of Rs. 125 m during the six months ended 30 September 2010 compared to an Operating Profit of Rs. 164 m reported in 2009.

The increase in natural rubber prices affected margins during the period under review. Several new tyres were introduced to the market during the last quarter. The volumes and market share of the Tyre Sector continued to increase during the period under review which augurs well for the future.

The Plantations Sector had very successful results recording a turnover of Rs.3.7 b and an Operating Profit of Rs. 761 m during the six months ended 30 September 2010 reporting a healthy growth of 37% in turnover and a staggering growth of 928% in operating profits.

It is pertinent to note that in the prior year the plantations sector absorbed a cost of Rs. 659 m on account of gratuity and back wages consequent on the revision of the collective agreement.

Tea prices which declined during the first quarter improved in August and the upward trend continued in September as well. All three plantation companies experienced sharp increases in production of tea in comparison to the same period last year.

The Group’s plantations that have the flexibility of changing the grade mix to cater to varying market conditions took maximum advantage of such escalating prices, and is confident in improving yields and performance in the future.

The rubber prices in the market remained strong in the second quarter in spite of the increase in production. Kegalle and Namunukula Plantations the largest producer of natural rubber in the Country benefited from high rubber prices to register healthy profit growth.

The Plastics Sector recorded a turnover of Rs. 1.8 b and an Operating Profit of Rs. 184 m for the six months ended 30 September 2010. Turnover was 40% higher than the corresponding period of the previous year and the Operating Profit increased by 65% compared to last year.

Improved performance was mainly due to volume and market share increases coupled with reduction in overheads and other margin enhancement initiatives taken by the Sector. During the period under review, Arpico Plastishells, pioneer in plastic water tanks in Sri Lanka, achieved another milestone when it exported specifically designed septic tanks.

The Rubber Sector continued its poor performance during the second quarter recording a turnover of Rs. 1 b and a marginal Operating Profit of Rs. 15m during the six months ended 30 September 2010.

The global increase in natural rubber prices adversely affected raw material costs, although there was much focus on cost reduction and marketing which helped record marginal operating profits. The shoe soling and latex foam businesses which are still a concern were restructured recently expecting improved results. Richard Pieris Group, which boasts of a solid business base in Sri Lanka, continues to capitalise on numerous opportunities created with the recovery of the Sri Lankan economy.

The Group’s key sectors of Retail, Tyre and Plastics are expected to further improve performance in the near future with aggressive expansion plans lined up. The Plantation Sector will thrive on high commodity prices and opportunities for expansion both in Sri Lanka and overseas is being pursued.

Although the Group is focused on its core businesses, diversification into financial services during the fourth quarter is planned. The Group would continue to place importance on overhead, working capital and cash flow management and to further reduce borrowings. A spokesman for the Company stated that the outlook for the rest of the financial year is very promising.