EconomyNext – Expolanka Group has said it is open to further divestment of its international trade and manufacturing businesses as it seeks to improve profit margins and focus on its core business.
The company, in which SG Holdings of Japan acquired a controlling 51 percent stake last year, sold off its tea and herbal pharmaceutical business to concentrate better on its core freight and logistics business.
Expolanka divested “volatile businesses with varying returns” as part of ongoing restructure efforts, especially sectors which were not aligned with core sectors, the company told shareholders in its annual report.
“In the International Trade & Manufacturing sector, the Group will, going forward, continue to consider further divestments should the right value be realised (that exceeding the future value forecasted through business in the long-term) for existing sector businesses,”
The remaining businesses in the sector are perishable products, processed foods and eco-based paper products.
“The strategy going forward will be to consolidate the sector’s business pillars, although the Group remains open to further divestments, should the divestment opportunities supersede forecasted growth for each pillar in the medium term,” it said.
Expolanka Group Chief Executive Hanif Yusoof said the divestment was aimed at better optimization of the group’s resources towards key growth sectors.
“Resources were thus re-allocated for greater returns and know-how integrated to optimise long-term business sustainability,” he told shareholders.
This led to a “series of hard yet high return decisions,” he said. “The intention of the re-engineering efforts was to divest businesses that were falling below performance benchmarks and projected growth patterns.”
The annual report said the group divested its interests in plantations and tea in the third quarter of the 2014-15 financial year owing to the volatility of the tea plantation operations and its inability to yield expected returns.
“Given that the sector concentrated on bulk exports and given the intense volatility of the industry in the global marketplace, the divestment assisted the group to refocus resources towards more critical growth areas.”
The herbal pharmaceuticals business represented by the Baraka brand was also sold during the year, as growth prospects fell short of the group’s strategic requirements.
(Colombo/July 09, 2015)