Keells Food gains from Sri Lankaâ€™s fuel, electricity price cuts
COLOMBO (EconomyNext) – Keells Food Products has reported a sharp increase in March 2015 quarter and annual net profit as disposable incomes rose after the Sri Lankan government cut fuel and electricity prices and raised public sector pay.
The firm, a unit of the John Keells Holdings group, said March 2015 quarter net profit rose 34 percent to 79 million rupees from a year ago while sales rose 24 percent to 680 million rupees.
Annual earnings per share were 10.25 rupees with net profit up 467 percent to 261 million rupees and sales went up 15 percent to 2.6 billion rupees, a stock exchange filing said.
Keells Food Products chairman Susantha Ratnayake attributed the result to higher consumer disposable incomes and lower costs for the company which the previous year had shed staff through a voluntary retirement scheme and shifted production to a new factory.
“The rebound in consumer sentiment and spending witnessed in the latter part of 2013/14 maintained its momentum in to the first half of the year under review,” he told shareholders in the company’s annual report.
“Whilst there was a temporary setback to consumer demand on account of the rolonged drought and severe flooding witnessed across the country in the third quarter, the reduction in electricity tariffs, fuel prices and the increase in public sector salaries resulted in an increase in disposable incomes.
But Ratnayake said the full benefits of these measures introduced in early 2015 on discretionary spending of consumers will only be felt in the forthcoming financial year.
“Whilst (these) factors contributed towards a growth in volumes, the reduction in tariffs and the decrease in the Value Added Tax (VAT ) rate by 1 per cent, reduced the overall cost base of the company,” Ratnayake said.
“These cost reductions combined with measures taken to improve the revenue mix and manage costs ranging from procurement to all classes of overheads ensured an increase in the profitability of the company.”