Net profit of Cargills Ceylon PLC group fell 2.0 percent year-on-year (YoY) to Rs.751 million or Rs.3.35 a share during the April – June quarter (1Q18) due to higher finance costs stemming from fresh borrowings made and the rising interest rates, the interim financial accounts of the company showed.
The retail giant, which also has commercial banking operations under an associate company, reported a revenue of Rs.22.9 billion compared to Rs.20.9 billion a year earlier, an increase of 9.14 percent.
“The performance of the group during the period under review was satisfactory in light of the weak consumption environment, and external weather challenges including flooding and landslides and a severe drought that continues to impact the Eastern, North Central and North Western Provinces”, Cargills said in an earnings release.
The bulk of the revenue was generated by the retail business, which posted a revenue of of Rs.18.3 billion, up from Rs.16.7 billion recorded for the same quarter a year ago.
The segment’s operating profit rose by a little under 8.0 percent YoY to Rs.895.7 million.
“Cargills Food City added 5 new outlets during the quarter, taking the total number of outlets to 320 as at June 30, 2017”, the company said.
Meanwhile, the group net finance cost rose by as much as 86.2 percent YoY to Rs.367 million due to increase in fresh borrowings made to add new assets and the increase in market interest rates.
“Additions to property, plant and equipment rose 130 percent yoy to Rs.937 million. Net debt contracted 3.9 percent vis-à-vis the previous quarter to Rs.13.1 billion as at June 30, 2017, resulting in a net debt to 12 months trailing EBITDA of 1.84X”, the company said.
The Cargills group associate company, Cargills Bank’s share of profits rose to Rs.14.1 million during the quarter from a loss of Rs.29 million YoY.
The group’s fast moving consumer business (FMCG) recorded a revenue of Rs.3.8 billion, up 7.7 percent YoY while the operating profit grew by 10 percent YoY to Rs.616 million.
“The FMCG business has enhanced market share amidst what have been tight market conditions. Furthermore, the biscuit sub-sector has now reached sustainable operating capacity and is contributing positively to the sector”, the company said.
The group’s restaurants business led by its KFC chain recorded a turnover of Rs.871 million, up 14 percent YoY while the segment’s operating profit rose 64.6 percent YoY to Rs.83 million.
The business unit had opened three new KFC outlets during the final quarter of the last financial year.
As of June 30, 2017, CT Holdings PLC held 70.20 percent stake in Cargills.
The state-controlled private sector pension fund, the Employees’ Provident Fund held 3.28 percent stake being the third largest shareholder of Cargills.