Downstream liquefied petroleum gas (LPG) operator Laugfs Gas PLC turned a net loss of Rs.455. 8 million for its April – June quarter (1Q18) against a profit of Rs.25.8 million reported during the same period last year, the interim financial accounts released by the company showed.
The company reported a loss per share of Rs.1.18 from a profit of 7 cents a share a year ago.
The losses were mainly blamed on the controlled LPG prices in Sri Lanka. Despite higher global LPG market prices, the company has been unable to pass the price changes to the consumers.
The company has been in talks with the government and said it remains confident of a positive outcome over the issue.
The profits were also hurt by the hefty finance costs as the company made new borrowings to expand its core and non-core businesses.
The group finance costs jumped from Rs.247.9 million to Rs.534.4 million for the quarter.
Laugfs share ended Rs.1.20 or 4.41 percent lower at Rs.26.00 at yesterday’s trading.
“Whilst investments made in some areas such as renewable energy sector are already yielding profits, certain other long-term investments will be of longer gestation periods”, Laugfs group Chairman W. K. H. Wegapitiya said.
Although Laugfs group has diversified into renewable energy, real estate, leisure and maritime services, its key LPG distribution business remains a distant cash cow from other businesses.
Therefore any negative impact on its gas distribution business has overarching consequences on the group’s other businesses, working capital, debt servicing and new investments.
“……the company’s core business of LPG downstream activities having to continue under the prevailing retail price restrictions whilst LPG prices in the global market are surging, has resulted in the finances for this quarter recording a loss”, Wegapitiya said.
The group reported a revenue of Rs.5.2 billion, up 32 percent year-on-year (YoY) but the cost of sales rose by a faster 48 percent YoY to Rs.4.4 billion leaving with a gross profit of Rs.782.3 million, down 18 percent YoY.
“In order to effectively address this situation, which we believe is temporary, the company is in a continuous dialogue with the relevant regulatory authorities in order to ensure that LPG retail prices are in line with global LPG market prices, so that the Company’s main source of revenue is secured.
“We are confident that we will receive a positive response in this regard very soon”, Wegapitiya added.
Meanwhile, the group’s leisure and hospitality segment which runs hotels under Anantaya brand, doubled its net losses to Rs.121 million but sales also doubled to Rs.125 million.
The group’s property development unit made a net profit of Rs.15.2 million compared to a loss of Rs.864 million a year earlier.
In June, the group announced the incorporation of a subsidiary called Laugfs On Reid Private Limited to undertake residential apartment complex projects.
By June 30, 2017, Laugfs Holdings Limited held 73.45 percent stake in the company while the Employees’ Provident Fund (EPF) held 17.28 percent stake being the second largest shareholder.
EPF holds a further 34.69 percent stake in the group’s non-voting shares being the number one shareholder.