Distilleries June net up amid higher booze sales

Sri Lanka’s listed distiller and the diversified conglomerate, Distilleries Company of Sri Lanka PLC (DCSL) made a net profit of Rs.1.92 billion or Rs.6.41 a share for the quarter ended June 30, 2016 (1Q17) recording an increase of 9.6 percent from a year ago, the interim results shows. 
The performance was predominantly supported by the group’s beverage unit as other segments either weighed over the performance or failed to make a positive impact. 

DCSL saw its beverage business making a profit before tax of Rs.2.77 billion, an increase of 31 percent from a year ago. Revenue was a massive Rs.23.5 billion, up from Rs.17 billion a year ago, but the majority was remitted as taxes to the state. 

Although the group turnover has increased by 35 percent year-on-year (YoY) to Rs.25.9 billion for the quarter, Rs.16.5 billion has been remitted as turnover-based taxes to the state. 

This was in addition to another billion rupees under corporate income taxes for the quarter. 
As a result of successive governments trying to milk the legal liquor industry through excessive taxes, affordability of legal liquor has now been called to question, forcing people to opt for illicit liquor such as moonshine. 

The gross profit was a little over Rs.4 billion, up 21 percent from a year ago. 

DCSL also has interests in plantations, telecommunications, financial services and insurance. 
The group’s plantation segment saw its before tax losses narrowing to Rs.35.3 million from Rs.102.4 million but the telecommunication service business widened its losses to Rs.253.3 million from Rs.156.3 million a year ago. 

The financial services segment, which has a finance company and an insurance entity under its belt, made only Rs.73 million profit, flat from the same period last year. 

Continental Insurance Lanka Limited, the group’s insurance unit, had submitted an application to the Colombo Stock Exchange (CSE) to float the company with an Initial Public Offering of Rs.140.4 million. 

DCSL last week sought legal clearance to make its investment vehicle, Melstacorp Limited, the group’s parent company, in a complex share swap arrangement, which will see DCSL becoming a fully-owned subsidiary of the latter. 

Melstacorp will then be listed on the CSE.  

The group finance cost saw rising by 59 percent YoY to Rs.237 million as the borrowings increased. 
Norges Bank, the world’s biggest sovereign wealth fund, has further accumulated shares in the company from 2.65 million shares in March 31, 2016 to 5.79 million shares in June 30, becoming the seventh largest shareholder with a 1.93 percent stake.