CIC to divest dairy business

CIC Holdings Plc is to divest its dairy business as part of a restructuring move to focus on core competitive sectors. 

The Group has classified its investment in CIC Dairies Ltd., and another as held for sale since the

Board of Directors had decided to proceed with selling the assets of the companies. The assets of these two (the other being CAL Exports Lanka) are worth Rs. 1.97 billion at the Group level.

The dairy subsidiary is within CIC’s agri produce sector which in FY18 reported a pre-tax loss of Rs. 796 million, up from Rs. 464 million in FY17. A total of five million kilos of raw milk was procured by the company in FY18.

However, the dairy business is the largest contributor to the Agri Produce sector, accounting for nearly 38% of revenue. 

In FY18, the agri segment’s turnover was Rs. 1.9 billion and dairy amounted to Rs. 722 million.

CIC has been pursuing a restructuring exercise to improve its performance. 

The Group is being structured to respond more effectively to the changing market dynamics and embarked on ‘CIC re-strategizing 2020’, a re-calibrating exercise aimed at creating a more efficient and fluid organisation. 

The re-strategising exercise was also accompanied by a Group-wide VRS scheme, which proved to be a further draw-down on the Group profits for the year under review. Consequently, the losses incurred as a result of the re-strategising and the VRS together saw the Group’s PBIT decline to Rs. 1.3 billion in 2017/18.

CIC’s bottom line in FY18 was a Rs. 413 million loss as against a profit of Rs. 533.5 million. Profit from continuing operations was Rs. 192 million, down from Rs. 1.1 billion.

CIC’s Diary production segment, which operates mainly in the fermented Diary market, in FY18 reported a consistent performance with revenue and GP margin for the year showing no material change from the previous year, and volume-based market share holding firm at 14% amidst stiff competition.

Challenged by growing competitive pressures, the main strategic thrust for the year for the diary operation was to grow market share. CIC in its 2018 Annual Report said steps taken in this regard were aimed at strengthening the distribution network, which saw a 13% increase in the island-wide retail network. This was coupled with aggressive below-the-line marketing activities to improve product availability in the market, particularly at a rural level. 

In parallel to these market development activities, the procurement model was also strengthened to ensure greater supply chain security. 

Amidst severe challenges facing a majority of businesses within the segment, the performance of the Agri Produce sector reported a revenue decline of 8% on a year-on-year basis.

The other business segments under the agriculture portfolio are rice, grains, farm produce and high tech agriculture.