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Financial crisis hits Sterling Products hard
…Chairman reports 74 per cent drop in after-tax profit
Chairman of the Board of Directors of Sterling Products Limited Dr Leslie Chin delivers his annual report
The effects of the global financial crisis severely hampered Sterling Products Limited as was reported by the Chairman of the Board of Directors of the company, Dr Leslie Chin, yesterday.
He told stakeholders that in 2008 the company recorded an after tax profit of $27.3M, a decrease of $78.9M or 74 per cent below the previous year.
Dr Chin was speaking at the company’s 54th Annual General Meeting held at the Georgetown Club on Camp Street.
According to the company chairman, turnover for 2008 was $2.2B resulting in a profit before tax of G$50.7M, a decrease of $62.4M or 55 per cent less than 2007.
He explained that the decline in profit was due to several factors that affected the company such as record increases in cost for raw materials such as palm and other vegetable oils.
This, he said, eroded the company’s profit projections severely given that the price of palm oil on average during 2008 increased by 63 per cent over prices paid the previous year. He posited that all of the increased costs could not have been passed on to the consumer due to competition and as such the company had to absorb the majority of it.
This according, to Dr Chin, reduced the gross profit margin by 3.9 per cent from 21.5 per cent in year 2007, to 17.6 per cent in year 2008.
“The edible fats product line represents 57.1 per cent of turnover for 2008 which means that a significant aspect of the Company’s operation was negatively affected by external forces influencing prices on markets.”
Dr Chin also reported that expenses for last year were $356.3M compared to $369.8M the previous year which represents a decrease of $13.5M or 3.7 per cent from the previous year.
He credited this to stringent management of expenses.
The Chairman also reported to stakeholders that other income decreased by some 36.5 per cent to $ 7.2M.
This, he pointed out, was due to a recorded gain of $7.M in 2007 from proceeds of a disposal of investments in CARICOM (Caribbean Community) Sovereign Bonds.
He added also that prices for petroleum and its by-products increased steadily during the year due to several factors which caused a huge financial strain on manufacturers locally. Dr Chin said that given that the company generates its electricity for its production plants the increases caused energy costs to increase by some $38.3M over the previous year which in turn had a direct negative impact on the Company’s operations during the year.
“We continue to implement measures to conserve energy and have saved considerably… Unfortunately, these gains have been outstripped by ever higher prices for fuel…With oil prices at their highest ever plastic and other packaging materials used by the Company also increased during the year as our suppliers were affected by this.”
He emphasized, however, that in spite of the constraints faced the company has remained financially sound, and maintained adequate working capital to carry on business.
Dr Chin presented to the stakeholders for the vote a dividend of $1.25 per ordinary share which the stakeholders approved.
Other items on the agenda included the adoption of the audited accounts, re-election of two directors as well as the board’s remuneration as well as the auditors which were all approved by the stakeholder.
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