Pittards hit by 'stubbornly high' cost of hides
20/09/2012
It said it was not a surprise, with chairman Stephen Boyd explaining: “As a result of the 150% tariff on crust leather exports imposed by the Ethiopian government, we expected the company to achieve a break-even position in the first half of 2012.”
He called profits £100,000 in the first half “exceptional”, taking into account restructuring costs of £200,000, including redundancy payments at the Yeovil, UK, site after more sheepskin production was moved to Ethiopia.
“We noted previously that raw material prices had remained stubbornly high in Ethiopia,” Mr Boyd said. “There are now signs of prices easing which should contribute to improved gross margins in the second half.”
The Ethiopian business faced raw material shortages and delays to chemicals and machinery coming through Djibouti port. Net borrowings at the end of the first half of £6.2m were higher than 2011 figure of £4m, due to higher skin prices and “the increased value of stock in Ethiopia now being taken to the finished stage plus the carrying value of chemicals now needing to be duplicated at the two main sites”.
Mr Boyd added: “Our glove making factory in Ethiopia, PPM, is becoming progressively more efficient as our expertise grows. We will complete our first dress glove orders in the next few months, which represents the next step forward now that the manufacture of industrial gloves has been successfully established.”
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