Sri Lanka’s Piramal Glass Domestic Sales…

Sri Lanka’s Piramal Glass Ceylon Plc (PGC), a unit of India’s Piramal group said domestic sales fell and profits were hurt despite a pick-up in exports in the December 2013 quarter.

The firm said after tax profits rose to 395 million rupees in the December 2013 quarter from 204 million rupees a year earlier helped by a 355 million rupee capital gain.

But revenue dropped 8.9 percent to 1.38 billion rupees, costs rose 5.9 percent to 1.2 billion rupees sending gross profits down 51 percent to 188 million rupees.

The company said domestic sales fell 18 percent to 967 million rupees in the December quarter with aerated water and beer segments being hit.

Exports were 244 million rupees, on par with the previous year, the company said.

The firm said raw material, energy and indirect costs have also risen.

“The export volumes bailed out the company amidst the drastic domestic sales decrease,” the firm said.

“Yet these additional export volumes which were done on mass international markets did not fetch realisations as high as the present niche market exports, thus affecting the profit figures as against last year.

Exports helped utilized capacity in the furnace which would have otherwise increased costs further, Piramal Glass said.

“In the present economic environment it seems imperative that the domestic bottle prices would have to be revised to absorb the high cost increase,” the company said.

“PGC has absorbed the major portion of these costs during the year which has affected the company’s performance and continuation of same would affect the company in the long run rather adversely.”

Sri Lanka’s rupee fell sharply in the 2012 following a credit bubble after the massive volumes of bank loans were taken by state energy utilities for subsidies, partly accommodated by printed money (central bank credit). Energy prices were then raised.
Following the burst credit bubble, the economy has slowed.

A weakening currency can give temporary profits to an exporter as long as wages are not raised and water and electricity tariffs are not raised.

Eventually all costs catch up.