BPPL Holdings PLC announced its unaudited financial results for the three month period July to September 2022. Net earnings for the quarter were Rs.223 million or Rs. 0.73 per share, up by 75% compared to the corresponding period in the previous year where the net earnings were Rs.127 million.

YoY revenue growth was 49% to Rs1.7 billion. Brush revenue was up by 38% to Rs1.6 billion whilst Yarn and Filament revenue grew by 60% to Rs618 million over the Jul-Sep ’21 period prior to group eliminations.

The net earnings increase for the period was due to a combination of the increase in revenue and profit margins.
Profit margins improved due to product price increases in Jan’22, higher manufacturing margins due to falling commodity prices, lower freight rates, reduction in electricity costs as interruptions to electricity supply reduced considerably towards the later part of the quarter and the availability of fuel which resulted in more locally sourced timber and waste PET bottles which are cheaper than imported materials.

BPPL’s Apr-Sep’22 cumulative earnings were Rs523 million, a YoY growth of 131%.

Earnings for the July-September’22 period fell though by 26% compared to the Rs300 million recorded in the Apr-Jun’22 quarter. The Apr-Jun’22 period benefited from Rs67 millions of exchange gains as the Sri Lankan Rupee depreciated in the months of April and May vs the US Dollar whereas Jul-Sep’22 recorded an exchange loss of Rs5 million. If these exchange gains/losses were to be eliminated, earnings were similar to those recorded in the Apr-Jun’22 quarter.

However, revenue growth is likely to face some headwinds in the upcoming Oct-Dec’22 quarter as all three of our brush, yarn and filament revenue segments face uncertainties caused by growing concerns about possible recessions in all our key markets. Customers are likely to reduce purchases during such times whilst running down their product inventories.

The impact on group earnings will, however, be lesser due to continuous improvements to our operating environment with better availability of key timber and PET bottles locally, further reductions in freight rates and falling commodity prices, largely driven by slowing global demand.

With regards to the pending US Dollar 15 million, 10 year term loan from the United States Development Finance Corporation (DFC), the regulatory authorities have finally given their views on how the loan could be structured which the DFC lawyers are now evaluating. We are hoping to complete the remaining work around the agreements soon and are targeting 31st Dec’22 for closing this round of funding.