Sri Lanka’s Cargills profits boom on demand recovery

ECONOMYNEXT- Cargills (Ceylon) Plc, which operates Sri Lanka’s largest supermarket chain, said profits for the December quarter grew 77.7 percent to 553.5 million rupees on rising consumer sentiment.

Interim financials of Cargills, a unit of the Page family’s CT Holdings Plc, showed the group posting 2.15 rupees in earnings per share. The Cargills share closed trading on Tuesday at 195 rupees.

For the nine months to December, the group earned 6.48 rupees per share on profits of 1.7 billion rupees, up 8 percent.

Revenue for the quarter grew 18.8 percent to 27.9 billion rupees while cost of sales rose at a slower 16.4 percent to 24.5 billion rupees, leading to gross profits accelerating 39.4 percent to 3.4 billion rupees.

In an earnings release, Cargills said rising consumer sentiment with the elections and the stimulus package extended in November had contributed to topline growth.

Net finance costs grew 80.3 percent to 676.2 million rupees, mainly on the change in accounting standards for operating leases.

The group recorded 9 billion rupees in long-term interest bearing borrowings at end-December from negligible levels at the start of the financial year nine months ago due to the SLFRS 16 switch.

Short-term borrowings grew to 20 billion rupees from 16.8 billion rupees over the nine months.

The group’s retail segment pre-tax profits grew 144.2 percent to 349 million rupees in December from a year earlier on revenue which grew 19.1 percent to 22.1 billion rupees.

Cargills’ Food City supermarket chain grew its outlets by two to 402 at end-December. Same store sales had grown 10.7 percent from a year earlier, with same-store transactions growing 8.4 percent, showing higher spending.

Fast moving consumer goods (FMCG) pre-tax profits rose 23.8 percent to 598.7 million rupees on revenue of 6.9 billion rupees, up 18.8 percent.

The FMCG sector performance was driven by better sales in the dairy segment, especially on cheese and butter products, which benefited from marketing strategies, Cargills said.

Ice Cream consumption had grown, while the government procured milk from the group under a school milk program.

Meanwhile, restaurant sales grew 72.4 percent to 159.3 million rupees on revenue growth of 16.3 percent to 1.2 billion rupees. The group operates 40 KFC outlets.

The TGIF restaurant which was relocated to the popular One Galle Face mall during the previous quarter was generating better sales, Cargills management said.

Cargills said the outlook for the consumer sector was positive with a further gradual recovery expected. (Colombo/Feb12/2020)