Sep 16, 2021 News
…as local manufacturing giant reports losses, to now cut costs wherever possible
Kaieteur News – The escalating cost for freight services for shipping raw materials into Guyana is beginning to take its toll on local businesses, eating away at profit margins.
This much is being reported by leading domestic manufacturer, Sterling Products Limited in its interim Financial Report for 2021 made public yesterday.
In that report, Sterling’s Chairman of the Board of Directors, Andrew Pollard, S.C., reported that during the first half of this year, “we have seen an increase in the cost of production which affects our Gross Profit margin considerably.”
According to Pollard in his Chairman’s report to shareholders, “this increase was due to the escalating freight cost on the global market which increased the landed cost for key raw and packaging materials.”
As such, Pollard reported that expenses for the period ending June 30, was some $501.3M, an increase of some $26.6M over the corresponding period last year.
“The main reasons for the increase are employment costs, marketing and distribution expenses, depreciation and maintenance expense,” according to Pollard.
The Chairman in his report noted that while there was an 8.4 percent increase in turnover amounting to some $143.7M more than the corresponding period last year, profit before tax was recorded at $81.4M.
According to Pollard, this represents a downward result from the $85.7M earned for the corresponding period last year.
Profit after taxation for the period under review was recorded at $56.9M compared to $59.9M for the same period in 2020.
Pollard in his Chairman’s report noted too that the Board and the entity’s management “…are actively pursuing consolidation of the company’s current business and development of new product lines in addition to employing strategies to reduce our cost of operations and cut costs wherever possible in order to deliver acceptable returns to you.”
The report by Sterling comes even as the administration earlier this year put measures in place aimed at cushioning the effects of the increased cost of shipping items into Guyana.
On August 9 last, the Office of the President issued a press release stating that President Irfaan Ali had instructed that freight charges were to be reduced to pre pandemic levels (March 1, 2020) in the calculation of Customs Duties, Excise Taxes and Input Vat on goods imported.
The public missive had stated that the government had been monitoring the socio-economic impact of the COVID-19 pandemic on household income, the private sector and the economy as a whole and had noted the marked price increase in shipping costs from various countries.
It was noticed that in some cases, the price for a 20-foot container moved from US$2,500 to US$15,000 while the price for a 40-foot container moved from US$3,500 to over US$20,000.
The administration at the time noted that these price increases are due to increased shipping and freight fees as a result of the global COVID-19 pandemic were being passed on to the consumers.
“Due to having observed that Guyanese were being forced to pay these increased prices, the President had decided to announce the tax relief. Consequently, the relief is to be applied to any invoices from August 1, 2021 and is set to run until January 31, 2022,” the release added.
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