Cargills records profits despite new investments

Cargills Ceylon PLC posted record results for the quarter and nine months ending December 31, 2010 despite heavy investments in dairy, confectionary and soft liquor, stated its interim financial results.

The group profits after tax for the quarter grew by 53% to Rs 291 million as at December 31, 2010.  This is in the backdrop of gross profits increasing by Rs 1 billion for the quarter from Rs 719 million in the previous period. Cargills recorded a nett profit of Rs 855 million for the nine months against Rs 491 million recorded for the same period last year.

The group profits soared due to strong performances from its food and beverages section which contributed Rs 1.6 billion to the gross profits against Rs 1.1 billion for the same period last year.

The borrowings for the company increased sharply due to its acquisitions and expansions and as at December 31, 2010 borrowings stood at Rs 4.1 billion compared to Rs 1.9 billion as at December 31, 2009. The increase is a staggering 211%.

Intangible assets of the company increased to Rs 994 million subsequent to the acquisitions where the intangible assets stood at Rs 293 million at the end of last year.

According to the company report Cargills went on a buying spree purchasing a strategic stake of 82% in Kotmale PLC after triggering a mandatory offer in November 2010. The stake was made in order to leverage its ice cream and dairy business with Kotmale which collects over 12 million litres of fresh milk per annum. The total cost of the Kotmale acquisition is Rs 1 billion.

The company also acquired Diana Biscuits for Rs. 352 million citing Sri Lanka has the highest per capita consumption of biscuits in the region, and also with accelerated economic growth this line of business fits well with the groups current portfolio the statement added.

According to Cargills there is a consumer shift from hard liquor to soft alcohol and hence Cargills took control of Millers Brewery for Rs 1.4 billion. Cargills in its statement said they will cater to the mass market and the niche clientele and hopes to cash in on the expected tourism boom in the future. The company has received the go ahead from the Excise Department and plans to sell beer brands such as Riva, Three Coins, Irish Dark  among others taking advantage of its wide distribution channels.    

A major share purchase by Employee Provident Fund (EPF) has made it the fourth largest shareholder of the company with a stake of 2.75% amounting to 6,169,600 shares. Also Sri Lanka Insurance Corporation sold off its shares in the company and now holds only 0.17% of the company where it had 4.03% earlier.

source - www.dailymirror.lk