With several State-Owned Enterprises currently undergoing structural changes, Milco, Sri Lanka’s State-owned dairy producer, is reaching an improved financial position.
In an interview with The Sunday Morning Business, Milco Chairman G.V.H. Gotabhaya highlighted the financial growth, structural changes, and key developments undergone by the institution in order to improve its standing.
Following are excerpts:
What are Milco’s key development plans and targets for the coming years, and what are the main challenges it currently faces?
At Milco, the Board assumed its current responsibilities in October 2024. At that time, Milco was facing several challenges. There was financial instability, since there were outstanding supplier payments totalling approximately Rs. 1.7 billion and bank debts of around Rs. 1.8 billion. The supply of raw milk was also low, as dairy farmers were hesitant to provide milk and the overall milk supply was not improving at that point.
Milco has successfully settled the Rs. 1.7 billion in supplier payments and a portion of its bank overdraft. Compared to 2024, we are now in a considerably stronger financial position, although we acknowledge that more work remains to be done.
Another challenge stemmed from widespread frustration among employees. This is due to the fact that the institution was to be leased to the Indian company Amul, which created uncertainty among staff regarding their future. This had cultivated a disorganised environment that we urgently had to address.
While there were concerns about employee morale, it was addressed when the current Government declared its commitment to not shut down important State enterprises. This message enabled us to provide reassurance to our team and we are now working together with improved synergy, and while not yet at 100% efficiency, we have improved it to approximately 80%.
Milco is also identifying any skill gaps at both the company and individual levels, and is at the same time developing training and development plans.
There were also concerns involving a stock of unsold products valued at around Rs. 1.5 billion held in our warehouse. In order to implement solutions to this issue, it was required to sell the majority of these stocks; we actually achieved our highest-ever sales in October 2024 and we are currently sustaining this positive momentum.
Milco, as a milk-processing company, has established a network to collect milk from farmers through 95 chilling centres. The raw product is chilled and then transported to the factories, where various milk products are manufactured. These products are then distributed and sold to customers through our proprietary sales network.
There are several key development plans and three main areas will be focused on. Milco aims to increase revenue significantly, targeting at least twice the amount of the existing monthly turnover within the next five years.
The institution is also focused on improving profitability. While we recorded losses from 2021 to 2024, we have successfully minimised these losses over the past three months. Hence, Milco hopes to achieve profitability soon, transforming it from a loss-making entity into a profit-making one.
Another area is milk collection with milk serving as our primary raw material. In 2024, the daily collection of Milco was approximately 60,000 litres. This has since improved significantly. However, it is still insufficient and we hope to double the collection volumes within the next five years.
Another key focus is factory modernisation. We have a very capable milk powder factory utilising our own technology. In fact, Highland milk powder can effectively compete with imported brands and is popular since it is fresh and produced from 100% local milk. However, there is a need to upgrade a few of our factories.
Moreover, there is also the matter of the construction of a factory in Badalgama, which commenced in 2015 but was halted in 2022 due to financial constraints. It remained abandoned for nearly four years. The Government has now taken steps to recommence construction and its completion is expected within this year. This is a large factory that will enable us to supply milk products utilising the latest European technology.
Furthermore, we are improving our workforce through targeted training programmes and human resource development initiatives, while establishing specific benchmarks to improve overall efficiency.
How much progress has been made in resolving Milco’s debt complications? What is the debt situation as of 2025, and what measures are being undertaken to address this matter and any other financial inefficiencies?
We have successfully completed all supplier payments and the Rs. 1.7 billion that was initially due in October 2024 has now been fully settled. Regarding the Rs. 1.8 billion bank overdraft, we have settled approximately Rs. 0.8 billion to date, with another Rs. 1 billion to be settled which we expect to achieve within this year.
We are also pleased to announce that all supply payments are now being made on time. There is also a hope of increasing the milk purchasing price/farmgate price for farmers within the next few days to improve financial stability.
With privatisation being halted, how is Milco handling its investment requirements and working towards gaining profits and favourable financial performance?
With Milco being a 100% Government-owned entity, all capital investment is provided by the Government. Unfortunately, unlike private entities that manage their working capital and operational expenses to generate profit, the previous management did not operate at a comparable level of efficiency, despite substantial Government investments, which led to losses.
However, following the Badalgama factory investment, Milco hopes to develop its capacity to self-fund any future investment requirements from its own financial resources. We are committed to reaching this level.
It is also important to emphasise that as a Government entity, Milco plays a critical role in determining both farmer prices and milk product prices while also maintaining quality standards. Highland products are both cost-effective and of high quality.
Private companies have to benchmark our products, which ensures that overall milk product prices remain at reasonable levels with high quality. This is an important function for a Government institution in exercising market control to benefit both farmers and consumers.
Given that Highland is a popular product, what further product diversification and value-addition efforts will be made to enhance the brand and increase its reach?
Milco is currently concentrating on expanding its product portfolio. We are also looking at relaunching our high-quality ice cream range while maintaining its quality and have also developed a new yoghurt drink featuring different packaging and flavours, which is already available in the market. Our efforts are now focused on moving this product to mass production.
The pipeline includes several other products planned based on market requirements and evolving trends. Next year, with the development of the Badalgama factory, we also hope to launch three more new products. Therefore, within the next 10-15 months, significant growth is expected.
After commencing new operations with improved team synergy and efficiency, we were honoured to receive the Most Popular Dairy Brand award at the ‘SLIM-Kantar People’s Awards 2025,’ and the LMD Most Loved Brand award in both the dessert and dairy categories, indicating the popularity and strength of our brand.
What is the progress so far in establishing 500 milk sales outlets across Sri Lanka?
Since there were public complaints regarding product unavailability due to weaknesses in the existing distribution network, establishing exclusive Milco (Highland) outlets in 500 towns throughout the country was initiated. The project is currently in progress with over 50 outlets operational.
Milco is also planning to initiate e-selling products within the next few months before year-end, which will allow customers to order Highland products online. This will also address product availability issues and strengthen the distribution network.
There is another project still in the planning stages that is planned to benefit both milk development and farmers, which we hope to commence this year.
How do these projects aim to boost domestic milk production, support involved entrepreneurs, and benefit farmers?
Our farmers face several challenges. They lack adequate breeding support and there are issues with the availability of proper cattle feed in Sri Lanka. There are also significant health concerns and a need for effective risk mitigation strategies for cattle.
We are developing solutions for all three areas, providing enhanced breeding support, addressing the cattle feed issues, and introducing cattle insurance programmes to assist farmers in mitigating risks arising from diseases or accidents. While the Department of Animal Production and Health is working diligently, farmers require additional assistance, which we intend to provide through these projects.
Milco is also focused on improving milk quality throughout the entire supply chain, from farmers to milk collection societies, chilling centres, and factories, in order to prevent adulteration and minimise quality losses.
How many farmers are involved with Milco and how does the institution contribute to the farmer economy?
Annually, Milco disburses approximately Rs. 10 billion to farmers for their milk and is one of the largest companies in Sri Lanka contributing significantly to the rural farming economy.
Many milk farmers are economically vulnerable and their financial condition is not strong. Our payment system and collection network play an important role in improving their livelihoods.
Milco is working towards an objective of assisting our farmers in achieving at least a middle-income economic status and supporting farmers in achieving economic improvement.
Are there infrastructural and capacity hurdles faced by Milco? If so, what solutions and measures are required to address them?
No, the primary issue is not infrastructure or capacity, but rather a lack of sufficient supply of milk to operate at full capacity. However, with the new Badalgama factory included, our total processing capacity would represent almost 50% of the country’s overall local milk processing capability. The scarcity lies in the milk supply itself, which is why we are engaged in numerous projects aimed at improving milk collection.
Moreover, the market has undergone many changes and customer behaviour patterns are also evolving as consumers now expect improved packaging and more engaging promotions. As a Government entity, we always uphold great quality and freshness, utilising 100% local milk without any imported milk powder. Our products typically reach customers within five days of milk collection, which is different from imported products that can take three to four months.
We are also collaborating with our marketing team to revise promotion strategies, refine product appearance, and implement other necessary changes to meet modern customer expectations. At the same time, we are developing several distribution channels. While there is still work ahead, Milco is currently making considerable improvements.