DIPPED PRODUCTS PLC / ANNUAL REPORT 2008—2009

Managing Director’s Review
“The performance
of the Group can be
regarded as satisfactory
in the context of
the highly uncertain
environment…”
“The meteoric rise
in oil prices and the
consequent escalation
in cost of rubber and all
other inputs… exerted
an unprecedented
degree of pressure…”
“…speed and the extent
of changes in cost were
too intense to be dealt
with promptly.”
OVERVIEW
DPL achieved a profit before tax of
Rs 616 million similar to the previous
year. The performance of the Group
can be regarded as satisfactory in
the context of the highly uncertain
environment that prevailed
throughout the year.
The Hand Protection operations
in Sri Lanka having faced serious
erosion of margins in the wake of
rising costs over the first half of
the year, recovered remarkably to
register a profit of Rs 302 million
representing a 14% increase over
Rs 264 million recorded in
2007/2008. Under the Export
Development Reward Scheme
announced by the Government,
the Group will qualify to receive an
estimated Rs 34 million in respect of
exports in the fourth quarter. This
will be accounted on receipt.
The medical glove facility in Thailand
reduced its losses significantly by
over 41% from Rs 271 million in the
earlier year to Rs 159 million as its
operations steadied from August
2008.
The marketing company in Italy,
ICOGUANTI S.p.A. improved its
profits by 23% to Rs 185 million
compared to Rs 151 million last year.
Profits of Kelani Valley Plantations
PLC and its subsidiaries declined by
31% to Rs 300 million compared to
the best performance on record of
Rs 435 million in 2007.
PERFORMANCE
Hand Protection
Turnover of this sector grew by 7%
to Rs 9, 463 million, up from
Rs 8,845 million in the previous year.
The turnover of glove manufacturing
activities increased by 5% to
Rs 6,896 million from Rs 6,542
million in the comparable period
last year. While the improvement in
revenue from Sri Lankan operations
was limited to only 1%, the medical
glove business in Thailand grew by
28% to Rs 1, 367 million. The latter
is directly attributable to increase in
output and more so to higher sales
volumes of nearly 13% over the
previous year.
Sales of ICOGUANTI climbed 12%
to Rs 3,036 million from Rs 2,710
million in rupee terms on the back
of a 7% expansion in the Euro
currency.
The meteoric rise in oil prices and
the consequent escalation in cost of
rubber and all other inputs during
the first half of the year exerted an
unprecedented degree of pressure
on the performance of this sector.
Though the mitigatory measures
initiated from the previous year as
the adverse trends began to unfold
helped somewhat, the speed and the
extent of changes in cost were too
intense to be dealt with promptly.
At the peak of oil and rubber price
increases in July/August 2008, the
direct costs alone exceeded 50%
in some products, while in others
it surpassed 35%. In spite of the
unusually large upward price
adjustments agreed with customers,
a substantial portion of the extra
cost had to be still absorbed over
and above similar cost absorptions in
the previous year. Naturally, during
this period retention of margins was
almost impossible. This approach was
however necessary to prevent loss
of market share of DPL and our
customers.
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