Sri Lankaâ€™s JKH group December net profit down 13-pct
ECONOMYNEXT – Sri Lanka’s John Keells Holdings said group net profit fell 13% to Rs.4.49 billion in the December 2017 quarter from the previous year with lower earnings from its hotels, property and consumer foods and retail businesses and gains in transportation and financial services.
Sales rose 12% to Rs.31.22 billion in the quarter, according to interim results filed with the stock exchange.
JKH’s quarterly earnings per share were Rs3.24.
EPS in the first nine months to December 2017 were Rs7.97 with net profit down two percent to Rs.11.06 billion from the previous financial year while sales grew 15% to Rs.87.66 billion.
JKH chairman Susantha Ratnayake said the group’s leisure business pre-tax profit fell 34% to Rs.901 million in the third quarter of 2017/18 from the previous year.
“The decline in profitability is mainly attributable to the City Hotel sector which witnessed a decline in occupancies primarily as a result of the increase in room inventory within Colombo,” he said.
“However, it is encouraging that the total number of rooms occupied in the city witnessed a double-digit growth in the quarter under review.”
While JKH’s Sri Lankan resorts saw an improvement in room rates and maintained occupancies, profit for the quarter was lower when compared to the previous financial year which included the operations of “Bentota Beach by Cinnamon” which is now closed for the construction of a new hotel.
The Maldivian resorts saw an improvement in average room rates, although profitability was impacted by lower occupancies and the partial closure of “Ellaidhoo Maldives by Cinnamon” for refurbishments in October 2017, Ratnayake said.
“However, occupancies at our hotels remained above the industry average during the quarter under review.”
JKH’s property business pre-tax profit fell 83% to Rs.34 million in the third quarter of 2017/18 from the previous year, which included recognition of revenue on the “7th Sense” on Gregory’s Road residential development.
Ratnayake said construction of Cinnamon Life is progressing well with the super structure approximately 50 per cent complete.
“Parallel to the ongoing construction work of the super structure, the installation of the façade of the hotel will commence shortly. The construction work on the main access point via a six lane bridge is nearing completion. The pre-sales of both the residential and commercial space continue to be encouraging.”
Ratnayake said the concept design for the new 800-apartment joint venture residential development project, “Tri-Zen”, in Union Place, Colombo, has been finalised with initial bookings very encouraging.
Consumer Foods and Retail
JKH’s Consumer Foods and Retail industry group pre-tax profit fell 26% to Rs.947 million in the December quarter from the previous financial year.
The Beverage and Frozen Confectionery businesses recorded a decline in volumes as a result of continued tapering of demand arising from subdued consumer discretionary spending, Ratnayake said.
“The volume decline in the Beverage business was further exacerbated by the implementation of a sugar tax from November 2017, which resulted in substantial price increases across the industry,” he said.
“Whilst over the years we have taken measures to reduce a significant quantum of sugar in our beverages, we will continue to aggressively expand our low sugar product range by accelerating the launch of such new products.”
Ratnayake said that as a continuing part of JKH’s beverage portfolio strategy, it will also launch more non-carbonated beverages to broaden offerings.
JKH’s transportation industry group pre-tax profit rose 12% to Rs.945 million in the third quarter of 2017/18 from the previous financial year with its South Asia Gateway Terminals (SAGT) seeing growth in throughput of 11 per cent.
“The market share and profits of the Group’s Bunkering business increased as a result of a double-digit growth in volumes,” Ratnayake said.
The group’s financial services business pre-tax profit rose 35% to Rs.1.54 billion in the third quarter mainly on account of the performance of Union Assurance, where gross written premiums recorded strong growth above industry average whilst Nations Trust Bank recorded sound loan growth, he said.
(COLOMBO, January 30, 2018)