LASCO Distributors Limited increased September-quarter profit by 83 per cent while affiliated company Lasco Manufacturing Limited lifted earnings by 13 per cent, as both businesses extracted more profit from growing sales despite higher insurance and other operating costs.

The distributor earned $505.1 million in the three months, up from $275.8 million a year earlier, on revenue growth of six per cent to $8.62 billion. Manufacturing’s quarterly profit rose to $806.8 million from $712.1 million, while sales increased 6.2 per cent to $3.38 billion.

The gains came through wider gross margins, with both companies retaining more of their sales revenue after accounting for the cost of goods. At Distributors, higher volumes, pricing adjustments and changes in the mix of products sold helped drive the improvement. Manufacturing increased sales while reducing its quarterly cost of sales by 2.6 per cent.

The performance extended gains made during the first quarter, taking Distributors’ profit for the six months to September to $947.1 million up 63.4 per cent. Manufacturing earned $1.48 billion over the same period, an increase of 11.3 per cent.

Distributors reported growth across its divisions and key product categories, with nutrition, food and beverages expanding faster than the business overall. Its pharmaceutical division also benefited from demand across key therapeutic categories, while home and personal care products recorded improved performance.

“Improved sales volumes across several key product categories, targeted pricing adjustments and a favourable sales mix supported this result,” the company said in its report to shareholders.

Half-year revenue rose 10.7 per cent to $17.05 billion, while gross profit grew 22.8 per cent to $3.19 billion. Its gross margin widened to 18.7 per cent from 16.9 per cent.

Lasco Distributors also kept the growth in operating expenses below the increase in sales. Expenses rose 6.3 per cent to $2.15 billion, reflecting spending on sales execution, brand visibility and market development. Operating profit climbed to $1.17 billion from $718.3 million.

The company is continuing to expand its warehouse capacity, though financing that project has added to its costs. Finance charges increased to $32.5 million from $17.3 million over the half-year, which management attributed primarily to the warehouse expansion.

Total borrowings stood at approximately $790 million at September 30, up from $681 million a year earlier. Management expects the investment in warehousing and distribution to improve inventory management, operating efficiency and customer service.

At Manufacturing, cost of sales increased just 1.5 per cent over the six months, against revenue growth of 6.7 per cent to $6.51 billion. Gross profit consequently rose 15 per cent to $2.69 billion, lifting the gross margin to 41.2 per cent from 38.3 per cent.

Management attributed the improvement to its focus on operating efficiency and cost control. However, selling and administrative expenses, including marketing and promotion, rose 16.4 per cent to $949.0 million, taking a larger share of revenue.

“This increase was driven primarily by temporary increases in logistics and insurance costs, together with increased investment in marketing initiatives to strengthen and support our brands,” managing director of Lasco Manufacturing James Rawle said in the report.

Operating profit nevertheless increased 12.4 per cent to $1.94 billion. Finance costs rose to $38.0 million from $14.2 million, while the tax charge increased to $417.5 million from $378.5 million.

Manufacturing ended September with $9.33 billion in cash, bank balances and short-term investments, up from $6.59 billion a year earlier. It said its financial position gave it room to invest in productive capacity and efficiency while pursuing further growth.

Both companies also made distributions to shareholders during the half-year. Manufacturing paid an interim dividend of 20 cents per share in August, totalling approximately $829.6 million, while Distributors declared a nine-cent dividend payable that month.