Thursday, June 6, 2013

Cargills posts stable performance in tough FY13

◾Revenue up15% to Rs. 55.4 b

◾Bottom line down 46% to Rs. 595 m

◾Operating profit up 3% to Rs. 2.3 b

◾Net financing cost up 94% to Rs. 1.2 b; Borrowings double to Rs. 14 b

Cargills (Ceylon) PLC has reported a stable performance for the year ended 31 March 2013, despite a substantially challenging market environment attributed to policy changes coupled with higher borrowing costs and a slower overall macro-economic growth.

 Group revenue recorded a growth of 14.8% in FY13 at Rs. 55.4 billion. Operating profit grew by 3.3% to reach Rs. 2.3 billion, despite the VAT impact and the soft alcohol and biscuits segments performing below potential. Profit-after-tax for the year ended 31 March 2013 declined by 45.6% to Rs. 594.8 million.

  “The steep rise in finance costs and increased debt levels also contributed to this decline,” Cargills said.

 Finance cost for the year concluded amounted to Rs. 1.2 billion up from Rs. 630 m in FY12 while total Group debt at the year-end stood at Rs. 14.1 billion, up from Rs. 7.4 billion a year earlier.

The Company said the lack of transitional provisions to allow for the claiming of input Value-Added-Tax (VAT) on the closing stock as at 31 December 2012 had a significant impact on the Group’s retail business which enjoys peaks sales during the third and fourth quarters.

 Despite the inadequate time provided to adjust to the new policy, the retail team partly mitigated the adverse one-off impact of the policy change by curtailing inventory.

“While the challenges in the external environment remain, ‘Cargills Food City’ is committed to maintaining its consistent ‘low price’ positioning across all categories and has not passed on the VAT to its customers,” the Company said.

 Its established businesses in consumer brands and restaurants segments have continued to report a steady performance in terms of volume and transaction growth respectively. The restaurant sector’s diversification into the entertainment-dining segment with the launch of TGI Friday’s in Sri Lanka is in pre-operation stage and the flagship restaurant is set to open in the new financial year. Meanwhile, the KFC chain experienced a significant increase in input costs and steps have been taken to modify its value-for-money range to offer a lower entry price for KFC customers.

  “While the overall Group results for the year are below expectation, the management has already initiated measures towards turning around this performance. In the year ahead, Cargills would be increasingly focused on building the value-for-money advantage in its product portfolios while rationalising inputs costs and enhancing efficiencies to sustain profitability.

 The Group remains confident of the long term potential of its businesses and continues to be steadfastly committed to its ethos of creating sustainable value for all its stakeholders,” Cargills said.

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