Cargills (Ceylon) PLC announced a major corporate restructuring of the group, including the transfer of all retail operations to a new subsidiary, Cargills Food Company (Pvt.) Ltd.
With the proposed transfer of retail-specific properties and operations, including the ‘Cargills Food City’ and ‘Cargills Food City Express’ brand names, Cargills (Ceylon) PLC will continue as a pure investment holding company with a portfolio in retail, food, manufacturing, brewery, leisure and property development and strategic investments.
The restructure will be carried out subsequent to shareholder approval at an Extraordinary General Meeting on September 20, 2013, following the group’s scheduled Annual General Meeting.
The announcement of major restructuring came in a backdrop of increased tax liability for retail operations following the imposition of the valueadded tax (VAT) effective from January 1, 2013.
A statement from Cargills Group Chairman Louis Page highlighted the significant impact of the VAT on the retail segment.
“The imposition of VAT on the retail trade was a major stumbling block for this sector which remained on target despite the challenging economic conditions.
The lack of transitional provisions to allow for the claiming of input VAT on the closing stock as at December 31, 2012 saw the second half of the year returning a mediocre performance,” Page stated.
He added that the retail segment would work to improve profitability through a process of internal efficiencies and controls over the coming year.
The group's retail segment posted a profit of Rs.1.48 billion over the last year against Rs.687.4 million in 2012 while revenue crossed Rs.44.3 billion, as compared with Rs.39.2 billion previously.