Wednesday, August 17, 2011

Pelwatte acquisition is strategic- Harry J

The 47 percent acquisition of Pelwatte Sugar Industries PLC in March for Rs.884 million was a strategic investment in terms of reverse recovery, as spirits produced is an essential input for the Distilleries Company’s (DIST) business of manufacturing alcohol, DIST Chairman Harry Jaywardena said in the company’s latest annual report.

“As a result of this  acquisition,  Pelwatte  Sugar  Industries  PLC  and  its  subsidiaries:  Pelwatte  Sugar  Distilleries  (Pvt)  Limited;  Pelwatte  Agriculture  &  Engineering  Services  (Pvt) Limited;  and  Pelwatte  Dairy  Industries  (Pvt)  Limited,  were ushered into the fold of the DCSL Group” he noted.

He also pointed out that the ethanol market is now in a very volatile state as more and more producers are switching to the relatively less sophisticated but more lucrative bio-fuel industry.

“Therefore,  it  was  essential  for  the  Company  to  think  in  terms  of  producing  its  own  ethanol  and  reduce  its  dependence on imported ethanol. 

With this acquisition, 1/3 of our requirement of ethanol can now be sourced from Pelwatte, thus enabling the Company to make long -term strategies without the need for price adjustments” Jaywardena stated.

For the financial year 2010/11 DIST posted a turnover of Rs.47 billion which marks an increase of 17 percent YoY.

The Group’s Net Profit after Tax of  Rs.  8.3 billion  represents  a  3  fold  increase  over  the  corresponding period last year. However this includes  a  capital  gain  on  disposal  of  shares  of  Rs.  3.9 billion.  Thus, profit earned from core business amounts to Rs. 4.4 bn which is an increase of 105%.

“The  performance  of  DCSL  is  commendable,  given the  fact  that  the  industry  faced  several  challenges through FY 2010/11. During the year under review, the government  took  a  decision  to  increase  Excise  Duty twice  over,  while  the  corporate  income  tax  for  the alcohol sector was incr

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