Cargills 1Q12 group revenue, PAT up
http://www.sundaytimes.lk/110821/BusinessTimes/bt10.html
Sri Lankan food and retail conglomerate Cargills recently reported a group revenue of Rs. 11.2 billion, up 25% year-on-year, and a profit after tax (PAT) of Rs. 330 million, a 6% year-on-year increase, for the three months to end-June 2011, the first quarter (Q1) of its 2011/2012. This was also said to include a “pre-operating cost of approximately Rs. 100 million excluding the interest cost incurred to fund new investments during the last two quarters of the previous financial year.”
Additionally, according to Managing Director Abdul Wahid, the company revealed that it had “now fully revamped its biscuit facility and re-engineered the product range which would be launched during the upcoming quarter.”
Further noted by Mr. Wahid, “‘Cargills Food City’, Sri Lanka’s No 1 modern retail chain continued to maintain a steady growth in transactions and volume while consolidating its position in the industry with the opening of its 4th outlet in the Northern region in Kilinochchi, taking the total number of stores to 164. The retail sector invested Rs. 250 million to increase it’s modern trade footprint during the quarter.”
He also added that “FMCG brands comprising, Magic, Kist, Finest, Sams, Goldi and newly acquired Kotmale , reported volume growth in excess of 20%… Millers Brewery Limited, the new investment, commenced limited production during the 1st quarter and market acceptance of the renowned ‘3 Coins’ brand indicates a promising off take. Aggressive expansion has been planned for the brewery.”
In addition, capital expenditure in terms of additions of property, plant and equipment for Q1 2011/2012 was shown to have more than doubled, to Rs. 491 million, compared to the corresponding period the year before. While a segmental analysis highlighted the fact that revenues in food and beverages, wholesale distribution and leisure businesses all grew year-on-year by 25%, 12% and 7%, respectively, with photo processing being the only segment to fall, by 29% year-on-year. At the same time, segment related profitability dropped for all businesses except the food and beverages unit which witnessed of 25% year-on-year growth in the “Segmental profit before unallocated overheads” line item.
Comments Off
CB guide to bakers; bread flour imports increase
http://www.sundaytimes.lk/110703/BusinessTimes/bt36.html
Sri Lanka’s Central Bank held a workshop last Thursday to get the input of bakery owners regarding steps to more widely promote rice-flour based bakery products locally where it was revealed that bread flour imports had more than doubled over the last year, from US$ 2,000 million to US$ 5,000 million, and, as a result, this was a bigger drain on reserves than even milk powder. Additionally emerging, rice flour was a cheaper alternative to bread flour by as much as Rs. 10, without the sugar levels that made bread flour a cause for diabetes and other ailments. It was also stated that many of the perceived shortcomings of rice flour, such as a shorter shelf life, were false.
As such, the Central Bank suggested that bakeries should educate customers on rice flour by labelling products using rice flour, etc. Also proposed, advertising the names of bakeries using rice flour as well as a branding initiative to increase awareness of rice flour and its ayurvedic and other health benefits.
According to the Central Bank, rice production has been rising after the end of the country’s 30-year conflict due to a 24% increase in the extent of paddy lands and there was currently more than enough to facilitate its use in baked goods, etc. Further, the Central Bank also highlighted an prediction by the country’s Department of Agriculture that, once paddy lands in the Northern and Eastern Provinces were fully cultivated, paddy production would increase substantially.
53% YoY 3Q 10/11 group net profit for Cargills, post 3 Coins, Kotmale
http://www.sundaytimes.lk/110220/BusinessTimes/bt13.html
Sri Lankan food retailer Cargills has released third quarter financial results which indicate significant year-on-year profitability for the three months and nine months to end-December 2010, stating; "All our existing businesses have performed exceedingly well and the expansion programme in Cargills Retail is on track."
At the same time, group net profit for the three months to end-December 2010 grew 53% year-on-year to Rs. 290.73 million, while the same line item for the nine months to end-December 2010 rose by 73% year-on-year to Rs. 855.00 million. Additionally, group turnover for the stipulated periods also showed double digit growth with the former being Rs. 9.86 billion and the latter at Rs. 27.45 billion.
According to chief executive Ranjit Page, who was quoted in its financials; "The period under review 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." A strategy already exceedingly demonstrated by the group’s recent shopping spree which saw it pick up ice cream and dairy brand ‘Kotmale’ (Rs. 1 billion), biscuit maker ‘Diana’ (Rs. 352 million) and, most recent of all, an agreement to acquire several local beer brands, including ‘3 Coins’, ‘Sando Stout’, ‘Irish Dark’ and ‘Grand Blonde,’ for Rs. 1.42 billion.
Explaining away this slew of new acquisitions, Mr. Page indicated that they "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… these brands [having] 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 also revealed ‘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 island-wide marketing and distribution subsidiary Millers Limited provides Cargills the opportunity to achieve the full potential of these newly acquired businesses.’
Comments Off
Buy SL govt bonds, t-bills, recommends HSBC
http://www.sundaytimes.lk/100718/BusinessTimes/bt31.html
A research report by a group of strategists and economists at global banking giant HSBC is encouraging the buying of Sri Lankan government bonds and treasury bills. Titled “Pax Sri Lanka: Buy bonds, long LKR on near-term macro-financial stability”, the report, authored by HSBC’s Virgil Esguerra, Frederic Neumann, Dominic Bunning and Prithviraj Srinivas, states “HSBC recommends re-establishing longs on T-bills and Sri Lankan government bonds (SLGBs). Although nominal yield levels on Sri Lankan bonds have declined, reduced event risks – coupled with a benign macroeconomic and policy outlook – should keep bond investments stable over a six-month holding period. Moreover, HSBC expects capital inflows to offset Sri Lanka’s chronic current account deficit in the near term, contributing to continued modest appreciation in the Sri Lankan rupee (LKR) from 113 to 111 by year-end”. However, the report indicates a preference for “short-dated T-bills and bonds maturing less than two years due to relatively rich valuations on long-end SLGBs”.
This is after a “buy” recommendation was withdrawn by the bank several months ago coloured by speculation about parliamentary elections and the 2010 budget as well as the International Monetary Fund (IMF) decision to postpone the third tranche of its Stand By Agreement to Sri Lanka. In fact, HSBC’s new position specifically acknowledges the role of a “decisive” victory by the ruling UPFA coalition; balance of payment support due to the release of the third tranche of US$ 408 million by the IMF; as well as “the administration’s intention to gradually narrow the fiscal deficit (FY10 target: 8% of GDP, versus 9.8% in FY09). The FY10 budget plan assumes 7%-growth in expenditures and 17%-revenue growth based on lower interest payments, improved economic growth and tax rationalisation measures. The budget plan’s credibility is boosted by the government’s recent efforts to reduce subsidies and control public sector wages”.
Further outlined in this report is that long term inflation is expected to be fixed: “HSBC Economics forecasts inflation to average 6.5% over the next 12 mths (versus a three-year average of 12.8%) due to improved agricultural production, slower public sector credit growth and low global commodity prices. Near-term, an increase in the price of key consumer items (e.g. milk powder, cooking oil) could add short-term inflation pressure”. It is also predicted that the Central Bank of Sri Lanka will not cut interest rates as private sector credit growth increased along with greater business and consumer confidence.
Additionally, the report indicates that the “foreign appetite” for these instruments will remain strong and close to the 10% investment limit outlined. This is because of “attractive nominal yields (6mth and 12mth T-bills weighted average yields of 8.90% and 9.20%, respectively)”. However, fresh inflows in this area are dependent on increased numbers of outstanding bills and bonds, which, based on the government’s plans, “HSBC estimates outstanding bills and bonds to increase LKR200-250bn this year, implying that foreigners will only be able to raise net holdings by LKR20-25bn over last year”. Also noted is that this 10% limit on foreign investors is unlikely to be increased in the future.
While the CBSL estimates a Balance of Payments surplus of US$ 200 million, HSBC’s position is that “the capital account is most likely to do all the heavy lifting in erasing the persistent deficit pressures in the current account”. It also notes that “[fundamentally], the LKR is vulnerable due to its twin – current account and fiscal – deficits”. It however suggests that capital outlook in the near term has been improved due to investor confidence and the IMF’s Stand By facility, saying “HSBC Economics expects capital inflows to sufficiently offset the current account deficit”.
The report also asserts that the “current account is likely to deteriorate further in 2010 as infrastructure spending and reconstruction activities gain in strength. Broad policy measures aimed at increasing private consumption would push-up import requirements as well. Unfortunately, the downward pressure on the trade balance due to strong imports growth would not get a reprieve from growth in exports… The capital account will stay in surplus this year supported by strong growth in portfolio inflows, FDI, overseas aid and government borrowing. HSBC expects to see the capital account post a surplus of nearly USD2.2bn”. It also states that “[overall, HSBC estimates a current account deficit of USD2bn (4.4% of GDP), slightly wider than official estimates (USD1.8bn) but much larger than in 2009 (USD300m)”.
Jagdish Hathiramani's Portfolio 