Richard Pieris reports Rs. 2 Billion Profit before tax for nine months

The Richard Pieris Group recorded a Turnover of Rs.7.3bn, and an Operating Profit before finance cost of Rs.1.1bn for the three months ended 31st December 2010. The Turnover for the nine months ended December 2010 was Rs. 20bn resulting in a Group operating profit of Rs. 2.5bn before finance costs and taxation.

During the nine months ended on 31st December 2010 the Group Turnover increased by 22% with a 98% staggering growth in Profits from Operations before finance costs. Thus the Group has continued its steady performance reporting substantial profits and growth. The reported results are solely from operating businesses and do not include any gains which are of a capital nature.

During the last 12 months Group Debt levels reduced by Rs.854mn to Rs.4.3bn by end December 2010. The reduction on Borrowings had a direct impact on finance costs where a saving of finance cost of Rs.518m has been made year to date when compared to the corresponding period of the previous year.

Sectoral performance 

The Retail Sector continued its steady performance with a turnover of Rs. 8bn and an operating profit of Rs. 617mn during the nine months ended 31st December 2010. The turnover of this segment grew by 19% when compared to the previous year with an increase of 55% in the Operating Profit. December 2010 would be a month to remember in the “Retail History” where a 50,000 square foot super centre was opened in Wattala. This super centre was the focal point in Colombo during the festive season with its car parking capacity of 150 vehicles and the diverse product range. In being a greener organization its infrastructure was put up with “sky lighting” and “rain water harvesting” being introduced to a project of such magnitude. In to the final quarter the key thrust will be aggressive store expansion with focus on growing sales whilst controlling overheads and inventories.

The Tyre Sector recorded a turnover of Rs. 1.9bn, a growth of 24% and an Operating Profit of Rs. 196m during the nine months ended 31st December 2010 compared to an Operating Profit of Rs. 244m reported in 2009. This is a remarkable achievement considering the fact that natural rubber prices were at its highest during the period under review and continue to increase. During the quarter the tyre sector entered a new market segment and now caters to “Radial Truck Tyres”. The continuous increase in rubber prices is a concern but the sector is well placed to overcome this by various mitigating strategies.

The Plantations Sector had very successful results recording a Turnover of Rs. 5.6.bn and an Operating Profit of Rs. 1.3bn during the nine months ended 31st December 2010 reporting a growth of 20% in turnover and a significant growth of 323% in operating profits. It is pertinent to note that in the prior year the plantations sector absorbed a cost of Rs.659m 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 last year and continued to increase from the second quarter to the third quarter. All three plantation companies experienced increases in production of tea in comparison to the previous quarter.

The rubber prices in the market remained strong even during the third quarter and recorded highest prices ever mainly due to the short supply in the global market. Both Kegalle and Namunukula Plantations benefited from high rubber prices to register healthy profit growth.

The Plastics Sector recorded a Turnover of Rs. 2.8bn and an Operating Profit of Rs. 344m for the nine months ended 31st December 2010. The Turnover was 37% higher than the corresponding period of the previous year and the Operating Profit increased by 60% 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 installed the first ever Arpico Green Gas unit of 5,000 litres at a leading hotel in Colombo.

The Rubber Sector continued its mediocre performance during the third quarter recording a Turnover of Rs. 1.6bn and a marginal Operating Profit of Rs. 42m during the nine months ended 31st December 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.

Richard Pieris Group which boasts of a solid business base in Sri Lanka continues to capitalize 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 was successfully ventured with the launch of RPC Securities (Pvt) Limited a fully owned subsidiary of the group which would engage in stock broking and other related activities. 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.