Losses at CIC Holdings continue as key biz profits narrow

CIC Holdings PLC reported a net loss of Rs.87 million or 92 cents a share for the April-June quarter (1Q18) from a profit of Rs.250 million or Rs.2.64 a share for the corresponding quarter last year as key segments such as fertilizer and livestock continued to face challenges, the interim financial accounts showed. 

This is the second consecutive quarter where the group reported a loss. In 4Q17, the group reported a loss per share of Rs.2.11, which was caused by the draught and the heavy finance cost. 

At last market week’s close, CIC share ended Rs.1.00 or 1.45 percent higher at Rs.70.00. 
The group revenues fell little under 4.0 percent year-on-year (YoY) to Rs.8.17 billion weighed down mainly by the plunge in fertilizer revenues.

The group has interests in agri businesses, livestock, construction, consumer products, industrial raw materials, pharmaceuticals, packaging and personal healthcare products. 

The group operating profit for the quarter under review was Rs.369 million, down from Rs.814 YoY.
The group’s crop solutions segment, which houses fertilizer business, reported revenue of Rs.2.4 billion compared to Rs.3.5 billion YoY. The segment made an operating profit of just Rs.56.20 million compared to Rs.409 million YoY. This is believed to have been caused by the prolonged drought, which dampened the volumes.  BRS Equity Research, the research arm of Bartleet Religare Securities expected the decline in volumes to continue through the 2Q18 before recovering in the 2H18. 

“On a conservative note, we have factored in a 10 percent and 2 percent volume drop for Q1 and Q2 FY 2018E as we believe that the drought which prevailed for the most part of last year could still have an impact on CY 2018 Yala cultivation. 

The volumes are expected to recover thereafter, with normal rainfall anticipated for the next Maha season”, said BRS, estimating 1H18 revenue of Rs.5.4 billion and Rs.6.6 billion for 2H18. 
Meanwhile, the group’s livestock segment reported virtually flat revenue; the profit fell sharply to Rs.112 million from Rs.188 million YoY. 

This could be attributed to the higher input costs, where the local maize prices have risen substantially due to import restrictions. 

Recently Ceylon Grain Elevators PLC, the owner of Three Acre Farms, sought government approval to directly import maize due to local supply shortages and the high cost associated with third party importers. 

CIC group’s health and personal care segment, which sells Link Natural products and pharmaceutical managed to increase its revenue to Rs.2.1 billion from Rs.1.8 billion YoY. But the operating profits narrowed to about Rs.100 million from Rs.103 million YoY. 

While the volume growth may have pushed the revenues, the higher selling and distribution expenses are expected to have impacted the margins. As at June 30, 2017, Paints and General Industries Limited held 53.31 percent stake in CIC Holdings while the Employees’ Provident Fund (EPF) held 9.06 percent stake being the second largest shareholder.

EPF further held 12.70 percent stake in the group’s non-voting shares being the largest shareholder.