For Tri-Pack Films Limited, it was a downhill journey in terms of gross margins in the first half of CY10.
The increase of 29 percent in the firms revenues is a commendable feat, especially since the company faces the competition from smuggled BOPP, a special packaging material, which is available at lower prices.
The rise in sales can be accredited to the de-bottlenecking of a manufacturing line, which was successfully completed in April 2010, adding about 2,000 tons to the existing BOPP film manufacturing capacity.
However, the rise in sales was largely offset by an increase in the cost of sales, which was amplified by a hefty 39 percent over the same period last year.
A possible reason for this increase in sales costs could be a surge in resin prices internationally, a raw material used to manufacture BOPP and CPP, two major products of Tri-Pack Films.
Consequently, gross profits of the company fell by nearly 10 percent.
Administrative expenses appear to be another weakness of the company, increasing by 21 percent over the previous year, highlighting an area where the company can introduce some cost-cutting measures for supporting its bottomline.
Tri-Packs profits may be falling, but the growing trend towards consumption of packaged goods is a positive sign for the companys future. As flood relief efforts are being carried out in full zeal, the demand for plastic packaging is likely to increase for the coming months, indicating a ray of hope for the near future.
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Tri-Pack P&L
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(Rs mn) 1HCY10 1HCY09 % chg
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Net Sales 3,481 2,704 29%
Cost of sales 2,968 2,138 39%
Gross profit 512 566 -10%
Distribution cost 68 62 10%
Operating profit 392 461 -15%
Finance cost 407 491 -17%
PAT 187 227 -18%
EPS (Rs) 6.23 7.57
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Source: KSE notice
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