Profits shrink as turnover grows at Makita Manufacturing
Volatile exchange rates, high staff numbers and the internal absorption of rising materials costs have been attributed to costing Makita Manufacturing Europe more than £1m in profit in its year-end results.
Profit after tax at the Telford-based company sunk from £2.2m in 2010 to £855,000 at its 2011 financial year-end, Insider can reveal.
The company's turnover rose from £45.1m to £71.3m over the year to 31 March, but the cost of sales increased from £38.4m to £64.5m.
Makita Manufacturing, which is controlled by Japan-based Makita Manufacturing, specialises in the supply of electrical power tools.
The manufacturer said that it was faced with commodity markets making post-recession gains, but said it wanted to "maintain a constant selling price; therefore, we absorbed all the costs internally".
Makita said that in the early months of the fiscal year, it experienced "rapid growth" coming out of the recession. It added that it had to recruit "a considerable number of staff" in all departments to deal with the volume of demand in the first few months of the year.
Through its accounts submitted to Companies House, Makita stated it hired an addition 73 members of staff throughout the year, costing the company £1.8m in wages and associated staff costs.
Makita said it also struggled with high volatility in exchange rates throughout the fiscal year, in particular the Euro against the Pound in the third and final quarters of the year which the company said affected its operating income.
Within the 12-month period, Makita said it owed creditors £14.6m, a hike on its 2010 level of £6.8m which was owed within one year.
However, the amount owed to the company by debtors stood at £18.8m, which also rose from last year's level of £12.3m.
Over the year, Makita said its order books increased substantially and it managed to double its 2010 production levels, but still fell short of the previous three years' results.
Despite its parent company being based in tsunami-stricken Japan, Makita said the natural disaster had "little impact" on its supply of components.
A final dividend of 211p per share was paid at the year end, the company directors confirmed.
