Chemrez net profit up 28% to P205 million in Q1

MANILA, Philippines - Chemrez Technologies Inc., the country’s top biodiesel, resins and oleochemicals producer, has posted a net income after tax of P205 million in the first quarter of the year, up by 28 percent from P160 million in the same period 2010.

In a disclosure to the Philippine Stock Exchange (PSE), Chemrez said its net profit margin increased from 11 percent in 2010 to 14 percent in the first quarter of this year – mainly because of successful measures to bring down raw material costs.

ChemrezTech’s consolidated sales for the period under review improved seven percent to P1.49 billion from P1.40 billion in the first quarter of 2010.

Exports accounted for 14 percent of revenues in the first quarter of 2011.

The revenue mix was steady at 63-percent oleochemicals, 32 percent resins, and five percent powder coating.

Cost of goods sold as a percentage of sales was relatively lower than in the first three months of 2010. ChemrezTech said this was because of lower overhead and raw materials costs.

This was a result of ChemrezTech’s ongoing effort to reduce its production costs while increasing efficiency and good timing in the purchase of raw materials.

The firm explained that its profit was higher in the first quarter of 2011 because of its material sourcing strategy, where ChemrezTech was able to correctly predict that material costs will be going up this 2011.

While raw material costs were not yet very high, ChemrezTech beefed up its inventories towards the end of 2010.

According to Chemrez, this is significant since raw material cost is around 90 percent of the company’s total cost.

Since cost of sales increased by only five percent while sales increased by a faster rate of seven percent, higher margins resulted-translating to a 15-percent expansion in gross profit to P264 million in the first quarter versus P229 million in the same period last year.

Marketing expenses increased by 11 percent to P25.5 million in the first quarter of the year from P22.9 million in the same period in 2010 but, as a percentage of sales, it was steady at 1.7 percent.

Administrative expenses increased by 10 percent to P26 million from P23.7 million in the first quarter of 2010 but, as a percentage of sales, it was also steady at 1.7 percent.

Both of these increases in operating expenses are driven by increase in sales.