Tuesday, November 30, 2010

Coco Lanka Group executes multiple deals

Sells stakes in subsidiaries for Rs. 224 million; Jamaican shareholder and long standing customer Grace Kennedy ups stake in Renuka Agri Foods to start coconut water and other beverage for export

Coco Lanka Group yesterday announced the execution of several deals including part sale of stake in several subsidiaries to an existing foreign shareholder with whom it has expanded into manufacture coconut water and other beverages for export.

Board of Renuka Agri Foods Plc, whose parent is Coco Lanka, said a decision was made to embark on an expansion to manufacture and pack in aseptic retail packing coconut water and other beverages. As per the existing agreement entered into with the Board of Investment, Renuka Agri  Foods’ (RAF) tax holiday is effective for the manufacture of coconut water, fruit juices, ice tea and isotonic beverages.

The Company has entered into a deal with Grace Kennedy Ltd., to manufacture and package coconut water in 330ml tetra prism packs.

As a condition of the agreement, Grace Kennedy increased its equity holding in RAF by purchasing 3% stake (12.25 million shares at Rs. 6.30 each) for Rs. 77 million yesterday from Coco Lanka Plc.
Grace Kennedy through its subsidiary Grace Foods UK held 22.5 million shares previously and with yesterday’s acquisition now holds 34.7 million shares or 8.6% stake.

Apart from a shareholder Grace Kennedy is also a long standing customer. It is a public listed company on the stock exchanges of Jamaica and Trinidad and Tobago.

The Group comprises a varied network of 60 subsidiaries and associates located across the Caribbean and in North and Central America and UK.

Coco Lanka also disposed of 500,000 shares or 50% stake in Renuka Organics for Rs. 50 million and 2.5 million shares in Renuka Teas (Ceylon) Ltd. for Rs. 96.87 million to its subsidiary RAF. The balance 50% stake in Renuka Organics is held by the business partner in the Netherlands.

Renuka Organics and its subsidiary Kandy Plantations hold the organic certification and provide the organic coconut raw material to RAF apart from its own exports of organic certified products. Renuka Teas is engaged in the export of value added Ceylon Tea and will provide raw material for the beverage expansion project.

RAF Board also approved the setting up a subsidiary in the UK with an investment of Sterling Pounds 250,000 (around Rs. 43 million) to oversee the European marketing operations of RAF, Renuka Organics and Renuka Tea Ltd.

From the sale of stakes Coco Lanka raised Rs. 224 million. RAF’s highest share price was Rs. 8.50 whilst the lowest was Rs. 3.10. Its Net Asset Value was around Rs. 2 per share.  Its share price closed at Rs. 6.10 down by 20 cents. Coco Lanka closed down 10 cents to Rs. 49.

RAF’s turnover grew to Rs. 530.4 million for the six months ended 30 September 2010 compared to Rs. 522.1 million for the corresponding period. Net profit after taxation was down by 17% to Rs. 91.3 million due to erosion of our gross profit margin arising from higher raw material prices due to scarcity of coconuts in the local market.

RAF said as per the agreement with Grace Kennedy the company will be in production by May 2011 or latest within one year of entering into the agreement. The buyer has also agreed to purchase an equivalent of one third of the plants current capacity for Coconut Milk Powder provided terms and specifications are met.
“This Coconut Water expansion is part of the company’s tetra pack expansion project which will see it manufacturing Coconut Water based beverages, Coconut Milk and Ice Tea in tetra packs for the international markets.

The balance funds from the Initial Public Offering of 2009 will be utilised for this purpose,” RAF Executive Director Shamindra Rajiyah said in a note accompanying interim accounts recently.

Coco in the first half recorded a consolidated Turnover of Rs. 769 million, a 23% increase from the corresponding period of the previous year. Profit after taxation was Rs. 245.6 million versus Rs. 115.8 million for the corresponding period of the previous year; of which profit attributable to shareholders was Rs. 189.2 million, up 123%. The company is today an Investment Trust managing a portfolio consisting of investments in equity, debt instruments and biological assets (forestry).

Grace Kennedy Ltd. is one of Jamaica’s largest and most diversified companies, with holdings spanning the food processing and canning, supermarket and other retail sectors, and banking and insurance industries.
Kingston-based GraceKennedy is structured into two primary divisions: GK Foods and GK Investments.
GK Foods represents the company’s food processing and canning operations, with a range of more than 75 products, including basic foods, as well as prepared foods such as ketchup and other sauces, cereals and the like, under the Grace brand. GK Foods also oversees the company’s chain of Hi-Lo supermarkets, as well as the company’s international trade subsidiaries throughout the Caribbean and in the United States, Canada, and the United Kingdom. In 2006, the company acquired its first international production unit, WT Foods, an ethnic foods producer based in the United Kingdom, as part of its goal of establishing itself as a globally operating company by 2020.

Helping to finance that strategy is GraceKennedy’s GK Investments wing.

This division represents the company’s operations in banking, finance, and insurance, through subsidiaries including Allied Insurance Brokers Ltd., a general insurance provider; First Global banking, financial services, and insurance group; GraceKennedy Remittance Services, which serves as a Western Union agent in Jamaica and elsewhere in the Caribbean; and the company’s 30 percent stake in the Trident Insurance group, acquired in 2007. GK Investments also includes Hardware & Lumber Ltd., one of Jamaica’s largest retail hardware chains; a Nissan car dealership; and a subsidiary providing catering to airplanes. GraceKennedy is listed on the Jamaica, Barbados, and Trinidad & Tobago stock exchanges and is led by Chairman and CEO Douglas Orane.

source - www.ft.lk

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