Sterling Products Ltd records continuous growth and success

Upward trajectory achieved despite shocks of external fiscal dynamics
Chairman credits Guyana’s stable macro-economic fundamentals and growth of investor confidence
The longer a business remains in the entrepreneurial realm, the management increasingly becomes cognisant of the thin line between success and failure. Since its establishment approximately 58 years ago, on October 15th 1954, Sterling Products Ltd has recorded both success and failure.  However, consequent upon its takeover by the Beharry Group of Companies in 1998, and under new management overseen by CEO Ramsay Ali, the company has recorded unprecedented growth and expansion.
This was underlined at SPL’s 57th AGM, which was held at the Georgetown Club on Wednesday 18th April 2012.
In the past year, the company achieved commendable performance, recording growth in its turnover and its profits.  According to the Chairman, Dr. Leslie Chin, A.A., there has been continuous growth in the company’s 57 years in existence, despite continuously emerging and extant challenges, with 2011 presenting unique challenges in terms of costs of production, feedstock, and energy, However, despite those challenges, Sterling has reported an increase in business, with consequential fair returns to shareholders.
The company’s economic overview, as certified by auditors, reflects the successes, with the turnover of G$3.0 Billion resulting in a profit before tax of $162.1 million, which is a reduction of G$ 9.7 million, or 5.6 % from the previous year. This was attributed by company officials to sales and marketing expenditure directly associated with enhanced distribution of Sterling products, as well as branding of new and existing products. With additional spending in the area of marketing and distribution, the company saw the relative return on investment as the total business expanded.

Profitability enhanced despite external shocks

After deducting taxation charge for the year of $ 48.7 Million (2010: $ 77.4 M), profit after tax totalled G$ 113.3 million, which is an increase of $ 18.9 million, or by 20 % above year 2010 profits.  A senior company executive credited the increase in profits as being due mainly to increased third-party revenues and a lower tax charge for the year. As a result of financial performance, the Earnings per Share (EPS) increased accordingly to $ 7.42 per share unit from G$ 6.18 per share in year 2010, stated the official.
For the year under review, the company recorded expenses at $ 540.1million, compared to G$ 513.5 Million in year 2010, which marks an increase of $ 26.6 million, or by 5.1 % over the previous year.  The increase in expenses was mainly attributable to the addition of new sales routes and continuous branding of the company’s products.  Increased employment costs based on union negotiations also added to the increase in expenses for the year, reported the company.
This commendable performance was achieved despite the world economic synergies where global growth prospects dimmed and risks sharply escalated during the fourth quarter 2011, as the euro area crisis entered a perilous phase. Also growth in the advanced economies was on the upside as consumers in the United States lowered their savings rate and business fixed investment stayed strong. Additionally, stabilizing oil prices helped support consumption. By contrast, growth in emerging and developing economies slowed more than forecasted, due to macroeconomic policy tightening and weaker underlying growth.

In addition, the near-term outlook has deteriorated, with the main reason being the euro debt crisis, which is interacting with financial fragilities elsewhere. Growth in the euro economy is expected to go into a mild recession.
The company chairman, in his report, stated “Overall activity in the advanced economies is projected by the IMF to expand by 1.5% on average in year 2012-2013.
“Commodity prices generally declined in year 2011: Edible oils were at highs, as seen in year 2008.  Global consumer price inflation is projected to ease as demand softens and prices stabilize or recede.”
He continued his analysis: “The Guyana economy is expected to show growth of 5.1% for 2011. There is some evidence of growth of investor confidence, as evidenced by construction of new homes and commercial buildings and the increase in loans and mortgages by 21.6% and 18.9%, respectively, at the end of the third quarter of 2011.
“There were increases in production of bauxite, gold, rice and sugar for which we also benefited from increases in commodity prices. The export of rice to Venezuela was a boon to rice farmers and rice millers alike as we benefited from specially negotiated prices. Gold prices reached historical highs and gold declarations for small and medium-sized gold mining was 363,083 ounces or 17.7% higher than the previous year.
“Two sub-sectors forestry and fishing in our natural resource sector showed significant decline in production. The decline in fish catch reflects our ability to manage the sector, whether it is unregulated fishing or the control of piracy. Although the country’s inflation was projected at 4.8% for the entire year, the economic growth of 5.1% resulted in expansion of the company’s overall business.”
The Statement of Financial Position at the end of the year recorded that the company is in a liquid financial position, which is reflected in the current ratio standing at 4.2 times. This is reflective of the company’s adequate ability to meet its liabilities.
The availability of liquidity within SPL, as well as the good future prospects projected for the company, the directors have recommended a final dividend of $ 3.50 per ordinary share unit for the financial year 2011 to be paid to shareholders. This represents an increase of $ 0.20 per share unit or 6% over the previous year’s G$ 3.30 per ordinary share unit.

SPL’s Turnover

A company official noted the phenomenon that, for the first time in the company’s long history revenue surpassed $ 3.0 Billion, which reflects an increase of G$ 428.2 Million, or by 16.6 % over year 2010 revenues.  He attributed this to the direct result of the consolidation of SPL brands over the previous three years
This increased revenue, he explained, was due to improved demands during the year for Golden Cream Margarine, Mighty Foam Powdered and Laundry Detergents, Dish Washing Liquid, Igloo Ice Cream, Novelties Ice Cream and Sterling’s new Royal Ripple Premium Ice Cream, along with Sterling’s dish washing liquid with hand sanitizer.
.      This market share expansion he credits to product diversification, a strategy that he claims is bearing fruit, as with the company’s new lines of powdered and liquid laundry detergents he stressed that there has been appreciable market acceptance.
He asserted “We have re-examined the market for ice cream and found that Royal Ripple Premium Ice Cream will meet the needs of a customer segment at an affordable price.  The company is satisfied that this market gap is being filled with a high-end ice cream made up of local formulation inputs.

Exports and market share expansion

Export sales for the company grew by 5.5%, or by G$ 9.9M over year 2010 sales. Although there has been growth in some Caribbean countries, explained the official, others present problems with respect to competitiveness. However, he stressed that SPL continues to explore ways and means to have its products on the shelves of businesses in the Caribbean.
In managing market risk, the company has created a new Strategic Business Development Unit, which is mandated to expand the company’s business in new markets and targeting new customers.

Pursuing Excellence

The chairman stated: “Our commitment to quality is unshakable. The company is registered to the International Organization for Standardizing (ISO) 9001:2008 quality standard. In February 2012 an annual audit was conducted by SGS on the Quality Management System (QMS) in Sterling Products Limited for the manufacturing and distribution of Edible Fat products and we were found to be in continued compliance with the ISO 9001:2008 standard. The Quality Management System continues to add value and provide the potential for additional market access. The System allows us to measure processes and make scientific decisions to our advantage. The staff complement understand their roles in quality and how they contribute to meeting  customers’ requirements. There is also a wider benefit, which encompasses a change in the culture of process owners that the company views as a motivational tool.

Corporate Social Responsibility

SPL has demonstrated over the years that the company takes its social responsibilities seriously, because it is fully committed to the development of  local communities. To this end, it has re-crafted its CSR Policy to address some of the prevalent issues that the company has positioned itself to undertake as it continues on a path to good corporate citizenship,
The Chairman asserted, “We believe our involvement in social initiatives and community enhancement is an investment in our future and that of the communities. An important initiative that the company is involved in is sponsorship to numerous sports organizations namely,the Georgetown Football Association; the Guyana Cricket Board; the Guyana Badminton Association; the Guyana Rugby Football Union; the Guyana Olympic Association; the Guyana Swimming Association and the Guyana Hockey Association.
“We continue our work with the Linden Care Foundation, which assists and cares for HIV/AIDS infected persons and children orphaned by HIV/AIDS.
“As an extension of our efforts to address the impact of HIV/AIDS in society today, the company has signed a Memorandum of Cooperation with the Guyana Business Coalition on HIV/AIDS. The Memorandum states that we have agreed to address workplace stigma, promote action on HIV/AIDS in the community and beyond, support partnership and collaborative efforts to strengthen the local and national response to HIV/AIDS and to facilitate and promote the development of leaders to take a stand against stigma and discrimination.
“Our support continues to flow to the Phoenix Recovery Project. This Project assists persons to be trained in skills to be able to function in society in a positive manner.
“The company’s CSR policy also addresses its concerns in the cottage industry as it seeks to facilitate and support some (micro enterprise) initiatives so that they can become viable and expand, in consonance with our company’s objectives.”
Crediting Guyana’s stable macro-economic fundamentals for SPL’s many successes, one official noted: “The Outlook of the global economy is dim; we are faced with stagnant growth and mild recessions in the world’s advanced economies.  The Global Recovery is threatened by intensifying strains in the Euro area and fragilities elsewhere. Financial conditions have deteriorated, growth prospects have dimmed and downside risks have escalated.  Growth in emerging and developing economies is expected to slow because of the worsening external environment and a weakening of internal demands; but although we are faced with many challenges and uncertainties in year 2012, we believe that we will be able to meet all the challenges facing us and deliver value for all whom we serve.