Financial Times

DPL slams proposed rubber cess
Dipped Products Ltd. (DPL), which more than doubled profits last year, has described as "scandalous" recent proposals to impose a cess on rubber, saying estates that had suffered years of low prices needed the increased income as a buffer against the next cyclical downturn.

"We view with considerable concern proposals mooted recently to impose a cess on the sale of rubber," DPL chairman Sunil Mendis said. Rubber plantations in the estate and smallholder sectors have come through a period of nearly five years of depressed earnings which threatened their survival, he told shareholders in the firm's annual report for the financial year ended March 31, 2004.

"There was no help provided by any quarter. It would be scandalous if the profits accruing to these plantations are now siphoned for bureaucratic purposes as they are sorely needed to ward against the next down turn in the cycle."

DPL group profit before tax soared 150 percent to Rs 427 million while turnover rose 34 percent to Rs. 4.9 billion on the back of better earnings from gloves exports and plantations.

The year saw the first full year's consolidation of the accounts of ICO Guanti SpA, the Italian distributor acquired by DPL in the previous year. DPL managing director N.G. Wickremeratne said profits of the hand protection segment increased 52 percent to Rs 289 million with a "significant" contribution from ICO Guanti SpA.

ICO Guanti generated a turnover of Rs. 1.5 billion and pre-tax profit of Rs. 65 million, which Wickremeratne called a "splendid performance" that came in the second year in which DPL has been involved in management and followed losses incurred in the year prior to acquisition.

Earnings were also boosted by focussing on the production of more higher value gloves. There was a 52 percent increase in profitability from the hand protection operation and DPL had "amply demonstrated its ability to meet competition from China," Mendis said.

The company suspects this competition to be a product of domestic protection which may perhaps attract the attention of the WTO, he added. DPL's new medical gloves manufacturing plant being built in Thailand should hopefully start contributing to earnings from the next financial year.

Earnings from exports of gloves, tea and rubber are seen increasing this year. "Early indications are that this would be a good year for tea as world demand picks up and stronger currencies in Europe will help prices as will bountiful oil revenues reaped by traditional Middle Eastern markets," Mendis said.

Profits from plantations increased by more than 75 percent owing to higher rubber prices and improvement in operational efficiencies. "China is a voracious consumer of rubber and this has indeed helped our plantations," Mendis said.

"We expect this trend to continue though some abatement in the steep rise in prices is to be expected and welcomed by those in the industry." Export of high value gloves to North America showed a "robust increase" while Europe, the largest market, grew by four percent in volume for the year.

Growth in the Asia-Africa region exceeded 50 percent followed by a 10 percent increase in South America. DPL secured 17 new accounts in six new countries, including Russia.

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