Distilleries Company of Sri Lanka PLC reported a surge in profits for its January-March quarter (4Q18), as the country’s largest and oldest spirit maker increased the prices to pass on higher taxes on alcoholic beverages in November, last year.
The company for the quarter reported Rs.1.9 billion in earnings or 41 cents a share, an increase of 134.3 percent from the same quarter last year. The gross revenue or sales with taxes and other duties rose by 7.4 percent year-on-year (YoY) to Rs.24.3 billion, while the net sales grew by 15 percent YoY to Rs.8.2 billion for the quarter. “The increase in profit for the quarter is a reflection of adjustments that have been made in November 2017 to recover the increase in taxes imposed in November 2016,” Distilleries Company Chairman Harry Jayawardena said in an earnings release, last week.
The Distilleries Company share ended 30 cents or 1.36 percent higher at Rs.22.40 on Friday’s market close.
The company’s market capitalization is estimated at Rs.103 billion and ranks among the top five blue chips with highest market capitalizations in the Colombo bourse.
Distilleries Company is the world’s largest and oldest distiller of pure coconut arrack, the company says.
However, the spirit maker’s profits reduced by nearly 10 percent for the full financial year ended in March 2018, as the company had partially absorbed the taxes on liquor imposed by the government from March to November 2017.
The company reported total earnings of Rs.4.48 billion for the year on a net revenue of Rs.29.2 billion, up 8.0 percent YoY.
The pioneer distiller in Sri Lanka underwent a complex share restructuring process in 2016 after which the company abandoned its holding company status to become a 92.5 percent subsidiary of Melstacorp PLC.
After the restructuring, Melstacorp PLC became the holding company of all entities earlier held under Distilleries Company to better reflect their business operations under an investment holding company not directly linked to any specific business.
Before restructuring, all businesses listed under Distilleries Company were overshadowed by its namesake liquor business.
Melstacorp PLC is the investment holding company of Jayawardena.
Meanwhile, among the 20 largest shareholders Milford Exports Ceylon Private Limited, Lanka Milk Foods Limited and Stassen Exports Private Limited—three other firms controlled by Jayawardena, held another 3.2 percent, 0.98 percent and 0.05 percent, respectively, in Melstacorp PLC.
After the restructuring, the company has also revised its dividend policy as the board proposed to payout as much as 70 percent of the profit as dividend.
“This revision was made due to the fact that non-liquor investments of the group will now take place at the holding company level and the need of funds for liquor sector-related expenditure will be minimal,” Jayawardena said.