Strong consumer drives Ceylon Cold Stores September performance

Ceylon Cold Stores PLC (CCS), the company behind Keells supermarkets and Elephant House brand line of products, reported a solid top-line performance for the three months ended in September.

The performance reinforced the consumers are becoming stronger as their disposable incomes improve while the prices remained largely range bound. CCS performance is one of the key tests of consumer health and the company is also the proxy for the retail sector in the country as well as the discretionary spending by the consumer. The John Keells Holdings company reported revenues of Rs.44.95 billion for the July- September quarter, up 17.6 percent from the same period last year, on the back of a solid performance in its retail business as well as the manufacturing arm, which is Sri Lanka’s one of the largest processed food makers.

The Keells supermarkets did revenues of Rs.36.0 billion for the quarter, up 17.7 percent from a year ago, reflecting the rising same store sales. It appears that the basket values are rising while the customer footfall is also improving since there is a shift from general trade to modern trade as incomes and lifestyles improve as the economy does well. Anecdotal evidence also suggests that its bakery and action station are gaining momentum as the company has been able to offer cooked food at affordable rates under one roof, offering added convenience to the consumer. Meanwhile, the manufacturing business of the group, which is known for household names such as Elephant House carbonated drinks and ice creams, also did well with revenues of Rs.9.83 billion, up 16.5 percent from the same period last year. The two segments reported operating profits of Rs.1.43 billion and Rs.2.03 billion, respectively for the quarter, up by a strong 17.2 percent and 20.0 percent, respectively. However, at consolidated level, the margins came under a bit of pressure, where the gross margin slipped to 13.9 percent, from 14.7 percent a year ago, while the operating margin slid to 6.0 percent, from 6.4 percent in the same period last year. The detailed earnings review by John Keells Holdings PLC, which is due soon, would shed more light on what caused the margins to come under some pressure during the quarter.

Against this backdrop, the company reported earnings of Rs.1.42 a share or Rs.1.35 billion for the September quarter, compared to Rs.1.32 a share or Rs.1.25 billion in the same period a year ago, translating into an 8.0 percent increase. John Keells Holdings PLC holds a 70.66 percent stake in the company while Whittall Boustead (Pvt.) Ltd held a 10.70 percent stake in CCS.