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The Dipped Products Group, comprising rubber glove manufacturing operations and plantations, has posted a healthy 19 per cent growth in turnover at the end of the third quarter of 2002-03, but reported only marginal growth in pre tax profits due to challenging conditions that impacted on the export of gloves.

Group profit before tax for the nine months grew 1 per cent to Rs 172.7 million, while post tax profits at Rs 161.8 million reflected a negative growth of 5 per cent.

Figures for the nine months ending December 31, 2002 show that profit from operations in the rubber products segment grew 6 per cent to Rs 166 million whereas profit from operations of its plantation company Kelani Valley Plantations (KVPL) grew 31.4 per cent to Rs 64.2 million.

Results from the rubber gloves business of Dipped Products were affected by recessionary conditions in North America and Europe in the period under review which were exacerbated by competition from China and other low priced producers, the company said.

Higher raw material prices, particularly latex, and increased energy costs could not be fully absorbed by adjustment of selling prices in view of the intense competition, forcing Dipped Products to sell below desired price levels to maintain its market share.

A spokesman said there is some evidence of these producers being subsidised in contravention of WTO rules. One positive development for the group's rubber gloves business was a contribution of Rs 261.3 million to turnover from ICO Guanti Spa, the Genoa, Italy based distribution and marketing company in which Dipped Products acquired a controlling interest in the second quarter of the year.

However, the spokesman said the rubber market that was in depression from 1997 due to the East Asian crisis has shown positive sentiments since the latter part of last year. The anticipated improvement in rubber price levels augurs well for KVPL given the company's strong corporate fundamentals.

KVPL was one of three plantation companies to be categorised as a 'strong' company in a recent report released by the Asian Development Bank (ADB).

Twenty plantation companies were classified by the ADB into three categories Strong, Moderate, and Weak based on their financial performance including earnings, debt service capacity, liquidity, interest cover and asset cover.

DPL Plantations, the Managing Agent of KVPL has acted with restraint on the issue of management fee, the spokesman said. The ADB has reported that KVPL is the plantation company charged with the lowest management fee by its Managing Agents.

In the assessment of solvency, KVPL again came in equally strong with sound fundamentals. KVPL's interest cover, which reflects its ability to meet its interest obligations, and its debt equity ratio were among the best in the plantation companies.

These healthy indicators reflect its financial stability and liquidity, which places KVPL at an advantage to face the challenges of the industry, the spokesman said.

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