Pittards grows revenue but raw materials prices affect profits
20/03/2012
Revenues were up by 6% compared to 2010 to £38.2 million and its profits from trading were the same as in 2010, £2.7 million.
On announcing the results, group chairman, Stephen Boyd, commented: “The group succeeded in significantly strengthening its balance sheet, extending its brand and increasing revenues in 2011 but against a backdrop of rising raw material prices, as I advised earlier in the year. This, coupled with structural changes in the supply chain, has caused the unadjusted trading profit to remain at £2.7 million.
“Raw material prices rose steadily, in line with many other commodities around the world as demand exceeded supply, and we sought to pass this along the supply chain with price increases.”
Mr Boyd pointed out that a change in the leather sector in Ethiopia affected Pittards as much as its competitors there. In September 2011 the Ethiopian government announced a tariff of 150% on exports of crust from mid-December. “This sharply increased prices as tanners in Ethiopia all tried to buy and process for export as much material as possible before the tariff took effect,” he said, “with a consequent adverse effect on margins. We were determined that supplies to major customers should not be disrupted while we accelerated the transfer to finished production at our Ethiopia Tannery Share Company (ETSC), the logical response to this situation, hence we had to buy additional stock at the prevailing prices which reduced gross margin in the second half of the year.”
He said Pittards’ purchase of ETSC in late 2009 has put the group in a position to benefit from the tariff situation and he said the tannery, named the inaugural Tannery of the Year by World Leather magazine in 2010, has responded positively to the challenge of taking more of sheepskins to the finished stage for direct export to customers.
He added that Pittards is making adjustments to its cost base at its headquarters at Yeovil in the south-west of England. As a result of the tariff, the company will no longer process Ethiopian crust skins in Yeovil, and he said the Yeovil factory is being backfilled with more bovine and goatskin products. “We are utilising our extensive contacts around the world to source new raw material supplies for technically advanced products to be made here,” the chairman said.
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