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Arpico Gears For Expansion

Aug 7, 2010 3:08:57 PM - thesundayleader.lk

Richard Pieris Group recorded a Rs.6.3 bn. turnover, up 29% and a Rs.605 mn. operating profit, up 33% for the first quarter (1Q) ended June 30, 2010.
The resulting Profit after Tax amounted to Rs.343 m. a 343% year on year (YoY) growth. The Group has kept its promise of a turnaround and a positive outlook where it cut its excesses and poor performing businesses and focused on its core business activities to take advantage of the economic upturn.
During the last 12 months Group Debt levels reduced by Rs.1.4 bn., from Rs.6.2 bn. as at June 2009 to Rs.4.8 bn. by end June 2010 with finance costs reducing to Rs.181m. compared against Rs.334 m. incurred in 1Q 2009/10.
Retail Sector continued its steady performance with a Rs. 2.4 bn. turnover and a Rs.175 mn. operating profit in 1Q 2010/11. This segment’s turnover grew by 20% YoY with a 75% increase in operating profit YoY. During the review period the sector took over the business operations of five retail stores in the central province and during such period it also started trading activities at its first stand alone furniture unit in Colombo. The key thrust will be aggressive expansion with focus on growing sales whilst controlling overheads and inventories.
The Tyre Sector recorded a Rs.570 m. turnover, a 23% growth and a Rs. 46 m. operating profit in 1Q 2010/11 compared to a Rs. 64 m operating profit reported in 2009. Increase in natural rubber prices affected margins during the review period. Tyre Sector volumes and market share continued to increase during this period which augurs well for the future.
The Plantations Sector had a successful Q, recording a Rs. two bn. turnover and a Rs. 348 mn. operating profit during 1Q 2010/11, reporting a 50% growth in both turnover and operating profits YoY.
Kegalle Plantations, the largest natural rubber producer in the country took advantage of the increased demand and attractive rubber prices to register healthy profit growth.
Multi crop Namunukula Plantations with its rubber, palm oil, low country and uva tea estates thrived on high commodity prices to enhance profitability.
Rubber Sector performed poorly recording a Rs. 429 m turnover and a Rs. 17 m. operating loss during 1Q 2010/11. Global increase in natural rubber prices adversely affected raw material cost although there was focus on cost reduction and marketing which helped to minimize losses.  Shoe soling business is still a concern.
Plastics Sector recorded a Rs. 812 m turnover and a Rs. 76 m. operating profit in 1Q 2010/11. Turnover was 35% higher YoY and Operating Profit increased by 127% YoY. Improved performance was mainly due to volume and market share increases coupled with overhead reduction and other margin enhancement initiatives taken by the Sector. During the review period Arpico Flexifoams set up a new manufacturing unit to produce sofas and the Plastishells factory in Dambulla, geared to cater to the demands of the North and East markets in producing “Arpico Water Tanks.”
Sri Lanka’s economic recovery provides opportunities to domestic businesses and the Group’s key sectors of Retail, Tyre and Plastics are expected to boost its performances in the near future. In the retail arena expansion plans are underway for the Group to double its retail space and turnover in the next 24 months. Plantations sector will thrive on high commodity prices expected and expansion opportunities both in Sri Lanka and overseas are being pursued. Tyre sector continues to increase its volumes and market share and although high rubber prices affect its margins, the Sector is focused to report yet another successful year. Whilst the Group would continue to concentrate on its core business, emphasis is placed on overhead, working capital and cash flow management to reduce borrowings further.