Distilleries Company sales, profits up in December quarter

Distilleries Company of Sri Lanka PLC reports a strong financial performance for the three months ended in December 2024, its third fiscal quarter, on the back of higher sales and margins, which appear to have been possible from the easing in direct costs.

The company, which commands over a 70 percent share in the alcoholic beverage market in Sri Lanka, reported revenues of Rs.37.16 billion in the October-December period, up by a robust 22.9 percent from the same period a year ago and 5.9 percent from the previous quarter.

The higher sales appear to have been possible from the year-end festive demand and also the higher tourist arrivals, which may have brought additional demand for the company’s suite of alcoholic beverages.
However, it would be interesting to see how the January 2025 increase in excise tax by 5.9 percent would affect the topline in the ongoing quarter, as the prices of liquor further went up.  

The successive governments have targeted the liquor, soft liquor and cigarette industry to muster as much as possible tax income for the government, when its coffers look to run dry.

The company has booked a total tax expense of Rs.26.77 billion for the quarter, up 28.7 percent from the same period a year ago. The company’s gross profit margin also expanded to 25.3 percent, from 21.4 percent a year ago, likely due to the easing cost base, as a result of the cooler inflationary environment.

The operating margin too stretched to 22.2 percent, from 18.5 percent, reflecting a closer tab on its overheads, as seen from the fixed costs-to-sale ratio, which hasn’t budged much between the two periods.The company meanwhile reported earnings of Rs.1.04 a share or Rs.4.79 billion for the three months, up from 76 cents a share or Rs.3.48 billion for the same period in 2023.

For the nine months, the company reported earnings of Rs.2.67 a share on total profits of Rs.12.29 billion.
Despite an increase in total borrowings, the company’s finance cost fell for the quarter by 72.7 percent to Rs.11.66 million, potentially due to the decline in the borrowing costs.

The late Harry Jayawardena-controlled Melstacorp PLC, Milford Exports (Ceylon) Private Limited and Lanka Milk Foods Limited together held a 96.63 percent stake in Distilleries Company.