Sri Lankaâ€™s CIC Holdings Sept net profit down 36-pct
ECONOMYNEXT – Sri Lanka’s CIC Holdings said September 2016 quarter net profit fell 36% to Rs164 million from a year ago mainly because of a sharp increase in finance costs on borrowings to fund increased capital expenditure, investments and working capital requirements.
Group sales rose 44% to Rs9.3 billion during the period, according to interim results filed with the stock exchange.
Earnings per share for the September quarter were Rs1.73. CIC Holdings’ EPS for the six months to September 2016 were Rs4.37 with net profit down 27% to Rs414 million although sales rose 38% to Rs17.8 billion from the year before.
CIC Holdings chairman Harsha Amarasekera attributed the slump in profits to “a steep increase in finance costs.”
This was because of a 28% increase in total borrowings and an underlying industry wide increase in borrowing rates, he said in a note accompanying the results.
“The rise in CIC’s debt balances are due to increased capex, new investments and additional working capital required for increased business volumes,” he said. “The revenues from the capex and new investments will begin to flow from the beginning of the next financial year.”
Amarasekera said that despite the increase in debt, CIC reduced its financial leverage measured by debt to annualized EBITDA to 3.4x, compared to 4.3x as at FY16.
“We are also confident that the payoff from the investments would both in terms of financial returns and improved group synergies will be significant,” Amarasekera said.
“Our strategy is focused on long term and sustainable growth, and have already factored the expected near term increases in interest costs as a result of the investments into our corporate planning.”
Amarasekera said CIC Group expects to improve on last year’s performance given that CIC’s earnings in the second half are materially higher than the first half, due to the inherent seasonality of CIC’s agri dependent businesses.
(COLOMBO, Nov 16, 2016)