Cargills ups net profit by 73% to Rs. 852m, turnover by 21% to Rs. 27.5 b

Cargills (Ceylon) Plc yesterday announced a strong performance for the 9 months ended 31 December 2010 with profit after tax of Rs. 852 million, up 73% over the corresponding period last year.

Net profit attributable to equity holders in the third quarter grew by 53% to Rs. 290.7 million. Nine months pre-tax profit amounted to Rs. 1.15 billion and for the third quarter it was Rs. 400 million.

The turnover for the period under review was Rs. 27.5 billion, higher by 21% over the first nine months of 2009/10 financial year. Of the Rs. 27.5 billion, nearly Rs. 10 billion had come in the third quarter.

“The substantial growth in profit and volume is a result of a continued investment in industry growth, brand consolidation and leadership in innovation,” Cargills (Ceylon) Plc CEO Ranjit Page said.

According to him all existing businesses have performed exceedingly well and the expansion programme in Cargills Retail is on track.

The period under review also saw the Group looking to further expand its businesses in line with its core business interests in retail and FMCG. Cargills is of the view that the anticipated high economic growth in the medium term and the consequent growth in per capita income provides vast opportunities for the FMCG business.

In November 2010 Cargills acquired a 73% stake of Kotmale Holdings Plc. A mandatory offer, as per regulations for the balance shares closed on 30 December 2010 and Cargills has increased its stake to 82%.

The total cost of the Kotmale acquisition was Rs. 1 billion. With the change in ownership, the Kotmale Holdings Plc Board of Directors was reconstituted on 5 January, 2011 and Stuart Young was appointed as Chairman.

The acquisition consolidates Cargills’ interest in the dairy industry enabling the Group to enhance its dairy product range which is currently spearheaded by Cargills Magic, Sri Lanka’s No 1 dairy ice cream. This would also provide the Group the opportunity to expand its dairy outgrower base and thereby further empower the local dairy industry. Kotmale at present collects over 12 million litres of fresh milk per annum.

Cargills entered the biscuit category in November with Cargills Quality Foods (Pvt) Ltd. with the acquisition of Diana Biscuits Manufactures Ltd. The investment to acquire the production facility located in Nalanda, Matale totalled Rs.352 million. Diana Biscuits Manufactures Ltd. is engaged in the manufacturing, marketing and distribution of a range of biscuits which fits in well with the current portfolio of products manufactured and marketed by the Cargills Group of Companies. The biscuits range hitherto marketed under the ‘Helan’ brand is to be rebranded and repositioned.

Sri Lanka is amongst the highest per capita consumers of biscuits in the South Asian region. Cargills therefore sees great potential for expansion and innovation in the biscuit category and is keen to become a key player in this industry.

Subsequent to 31 December, 2010, the newly incorporated subsidiary, Millers Brewery Limited entered into an Agreement for the Sale and Purchase of the business and business assets, including the brands, of McCallum Breweries (Ceylon) Ltd., McCallum Brewing Company Ltd. and Three Coins Company Ltd., at a purchase consideration of Rs. 1,425 million. In relation to this transaction, Millers Brewery Limited has obtained the relevant licences dated 7 February, 2011 from the Excise Commissioner (Revenue) of the Excise Department of Sri Lanka.

The acquisition included renowned brands such as ‘3 Coins’ ‘Sando Stout’ ‘3 Coins Riva’ ‘Irish Dark and ‘Grand Blonde’. Stuart Young was also appointed Chairman of Millers Brewery Limited.

“We envisage a consumer shift from hard liquor to soft alcohol and a rapidly growing demand from the tourism sector would see growth in this category of business. Millers Brewery Limited would be catering to both mass and niche clientele by developing high quality beverages with local roots but with an international outlook,” Page said.

“The ready these brands would have to distribution channels including linkages with institutional customers provides a strong platform from which Millers Brewery should certainly develop into a strong player in the medium term,” he added.

The Cargills CEO also said the Group identifies branded consumer goods to be a thrust in its future expansion and diversification. “The competitive advantage of being the leader in the modern trade industry through its Cargills Food City supermarket chain and its islandwide marketing and distribution subsidiary Millers Limited provides Cargills the opportunity to achieve the full potential of these newly acquired businesses,” Page added.