Grain Elevators faces massive exchange losses due to sudden rupee float

By Nishel Fernando
Falling victim to the sudden float of the rupee, Sri Lanka’s poultry industry leader Ceylon Grain Elevators PLC (GRAN) faces a staggering Rs.2.75 billion in exchange losses.
The US dollar-denominated foreign currency trade dues of the group stood at US $ 28.83 million at the end of 2021 and it was earlier translated to Rs.5.75 billion, under the official rate maintained by the Central Bank up until March 7.

“The Central Bank of Sri Lanka floated the LKR on March 7, 2022 and since then, the LKR has continued to depreciate against the US dollar. 

To date, the LKR has devalued from its initial level of Rs.203 to more than Rs.300 per US dollar, making operations extremely difficult and costlier for players in all sectors,” Ceylon Grain Elevators PLC Executive Director and Chief Executive Officer Cheng Chih Kwong Primus lamented.

Based on the Rs.300 per US dollar exchange rate prevailed by the end of March, Grain Elevators estimated a Rs.2.57 billion impact on the group’s profits before tax and funding position in the financial year 2022. 

However, the rupee continued to depreciate throughout April and it was trading at Rs.342/Rs.355 per US dollar as of yesterday.  Therefore, the company may have to face exchange losses beyond the estimated Rs.2.57 billion.

According to the company’s financials, US $ 27.3 million of its foreign currency trade dues were owed to related companies. Singapore’s Prima Limited is the largest shareholder of the company, accounting for a 45.45 percent stake. If the estimated exchange losses materialise, the company is likely to post losses. For the year ended on December 31, 2021, Grain Elevators reported earnings of Rs.21.63 a share or Rs.1.32 billion.

Bracing for an uncertain year, the company noted that it might have to further curtail production, due to the rising grain prices globally, on top of the unavailability of imported and local raw materials for production.

Further, the due closure of many small to medium-scale restaurants and food retailers, the company expects a significant toll on retail sales, which account for 50 percent of its processed chicken sales.