Sri Lanka’s Cargills Ceylon posts successful 1H by helping local production.
Daily FT: Cargills (Ceylon) has announced the Group was able to deliver a steady performance in the first half of FY23 amidst a challenging environment, particularly considering rising interest and raw material cost as well as increasing cost of operations.
The Group recorded a cumulative revenue of Rs. 97,181 million (66% YoY) for the 1st half of the year while revenue increased to Rs. 49,206 million (70% YoY) during the quarter under review. Group EBITDA for the 1st half of the year was Rs. 9,410 million (65% YoY) and Rs. 4,969 million (74% YoY) for the quarter under review. The Group recorded an operating profit of Rs. 6,527 million (102% YoY) during the 1st half of the year while operating profits grew to Rs. 3,521 million (116% YoY) during the quarter under review.
Profit after tax was Rs. 2,737 million (127% YoY) for the 1st half of the year and reached Rs. 1,186 million (69% YoY) for the quarter under review. The Group declared an Interim Dividend of Rs. 3.50 per share for the reporting period, which is higher than the Rs. 2 per share declared during the previous financial year.
The Group’s performance was driven by all three major business segments of the Group – retail, food manufacturing, restaurants.
In the retail sector, higher revenue and transactions were driven by offering availability in addition to the best prices and quality, which enabled the company to expand its market position.
“We see encouraging same-store sales growth as the sector is poised to achieve its highest recorded sales in its 39-year history over the coming months. Though price increases impacted volume growth during the first few months of the year, we have been able to curtail price increases below the national food inflation, which has reduced the impact to customers and supported a pickup in volumes of certain essential food categories,” Cargills (Ceylon) said in a statement.
Cargills Retail added 19 new stores during the 1st half of the year under review, with the landmark 500th Cargills Retail store being opened in October.
The food manufacturing business recorded another strong quarter, despite challenges with raw material availability, fuel shortages, rising input costs, and rising cost of factory operations. All categories recorded strong volume growth except the confectionery business where the price component led sales growth.
“We have seen an increase in demand for our brands, although supply challenges have limited the ability to meet customer demand from time to time. Our team is currently working on building local production in order to ensure the Group continues to serve the nutritional needs of our customers,” the Company said.
It said the management is focused on driving the top line while investing in building its key resources such as talent. Strategic investments will be made to increase capacity and touchpoints across the country while the Group works towards improving its cashflow position and managing debt amidst the high interest rate environment.
These strategic investments will be made to support the country’s objective of achieving food security while ensuring the investments yield the required returns, both in the near-term and long-term.
OSL take:
The performance recorded by Sri Lanka Cargills during the first half of this year despite challenging economic conditions, is a clear indication of the growing business potential in engaging in Sri Lanka’s local production process. Infact, the ongoing economic crisis has opened up new business/investment opportunities in the local production process, especially in the food sector. The expansion of the Cargills network within the country, even amidst economic challenges is yet another indication of the resilience of local business enterprises as well as the overall economy. The increasing demand for goods, especially food, present a financially viable business investment in Sri Lanka. Foreign businesses/investors while exploring the expanding opportunities in the country, could also look at forming partnerships or joint ventures with local businesses with the aim of expanding operations.
| Article Code : | VBS/AT/18112022/AT_2 |