Cargills Ceylon PLC’s revenues languished and profits shrank mostly on the decline in basket values of its namesake supermarket chain, while the margins also narrowed as the group was seen striving to contain the costs to maintain profits.
Cargills Ceylon PLC, a diversified retailer, reported Rs.23.3 billion in revenues for the three months ended September 30, 2018, up 2.83 percent over the same period, last year, while the gross profits declined 11.08 percent year-on-year (YoY) to Rs.2.4 billion.
“Despite an increase in footfall, the de-growth in basket value — in real terms — weighed down the performance of the sector. Nevertheless, the sector has partially cushioned this negative impact through operational efficiencies,” the company said in its earnings release to the Colombo Stock Exchange.
Sri Lanka’s corporate earnings have experienced a bumpy ride so far during 2018 and the retail sector in particular, which stands as a close barometer of the soundness of the economy, has continued to fall short of expectation, due to weaker consumer sentiment.
Almost all the listed retail firms have recorded poor bottom and top line performances so far during this year. Cargills Ceylon PLC runs 363 supermarket outlets and is the largest private sector owner of retail outlets after state-run Sathosa.
Ceylon Cold Stores PLC, which runs the country’s second largest supermarket chain under the Keells brand, turned a loss for the September quarter.
Marking its entrance, Softlogic Holdings PLC last week opened its first supermarket in Delkanda, under the name Softlogic Glomark.
Cargills Ceylon said it was aware of the fluctuations in consumption during business cycles, which is an inherent part of retailing and is committed to continue with investments into the business. Despite the weak basket values, the foot traffic in the stores have grown, Cargills noted. During the quarter under review, the group’s operating profit plunged to Rs.1.1 billion, from Rs.2.5 billion a year ago, as the year earlier period included a billion rupee gain from the disposal of a freehold property owned by Cargills’ subsidiary Dawson Office Complex Private Limited, for Rs.4.2 billion.
The earnings for the three months was Rs.1.98 or Rs.475.9 million, compared to Rs.6.85 a share or Rs.1.54 billion reported for the year earlier period.
Meanwhile, for the six months ended September 30, 2018, the Cargills group reported earnings of Rs.5.14 a share or Rs.1.22 billion, compared to Rs.10.21 a share or Rs.2.29 billion reported for the corresponding period last year.
The revenue for the period was Rs.47.7 billion, up 4.89 percent YoY.
The retail sector recorded a growth of 4.9 percent YoY to Rs.37.6 billion for the period. This resulted in an operating profit of Rs.859 million, down 47 percent YoY.
The FMCG sector recorded a growth of 5.7 percent YoY to Rs.8.2 billion for the period. This resulted in an operating profit growth of 13 percent YoY to Rs.1.4 billion.
“We are particularly proud to have taken market leadership in the dairy ice cream category, where every day we support dairy farmers through the purchase of local fresh milk,” the company said.
Meanwhile, the group’s restaurants sector reported a marginal growth in revenue to Rs.1.9 billion, resulting in an operating profit of Rs.200 million for the period, a decline of 8.5 percent YoY.
“While the subdued consumer environment had a bearing on same-store performance, the freshly-prepared offering of KFC continues to garner a strong following. This has been reflected in the encouraging performance of newly opened outlets,” the company added.
As of September 30, 2018, CT Holdings PLC held a 70.2 percent stake in Cargills Ceylon, while the Employees’ Provident Fund held a 3.28 percent stake being the third largest shareholder.