Cargills group profit down 16% in terror hit Q2

Cargills (Ceylon) PLC on Friday (16) reported a profit after tax of Rs. 660 million for the second quarter of 2019, a dip of 15.95% year-on-year. Although, revenue grew 5.9% YoY to Rs. 25,916 million and operating profit rose 16% YoY to Rs. 1,720 million.

Announcing its quarterly results in a stock exchange filing, the group management however noted that the FMCG sector showed resilience in an extremely challenging period to drive group performance, supported by the group’s retail presence across the country.

The sector recorded a revenue growth of 19% YoY to Rs. 4,833 million and operating profit growth of 29% YoY to Rs. 856 million.

“Growing demand for our national dairy brands ‘Kotmale’ and ‘Magic’ has resulted in Cargills becoming the second-largest milk collector in the country over the past year, while our national brand ‘Kist’ reported over 20% top-line growth in the beverage sector,” the report said.

However, net finance costs rose 101% YoY to Rs. 639 million, while share of associate profit was recorded at -Rs. 82 million from Rs. 3.8 million in Q1 2019.

The sharp growth in net finance cost (which includes a charge of Rs. 291 million for interest cost on lease liabilities) is due to the adoption of SLFRS 16 leases in the preparation of financial statements, the company noted.

The group has adopted the modified retrospective approach, and therefore, the prior period financial information has not been restated. The impact to group profit after tax from the adoption of the new financial reporting standard is -Rs.36 million for the quarter, and the impact is mainly to the retail and restaurant segments.

Meanwhile, the retail sector recorded a growth of 3.3% YoY to Rs. 20,138 million for the period, resulting in an operating profit of Rs. 714 million, up 13.1% YoY.

The restaurant sector reported a 2.9% YoY growth in revenue to Rs. 945 million, resulting in an operating profit of Rs. 60 million for the period, a decline of 44.1% YoY. Both sectors were impacted by the market conditions that prevailed during the quarter, Cargills said.

Cargills (Ceylon) PLC said that it would continue to focus on FMCG growth, expanding its manufacturing operations while continuing to grow its retail footprint led by Cargills Food City.

The expansion of the cheese plant will be completed during this quarter, further strengthening the group’s presence in this category, which is currently dominated by imported brands.

Consumption is gradually recovering towards normal levels, and the group said it is confident of an improved performance from all businesses in the coming quarters.