Business

Industrial Asphalts profit declines in FY 20/21

Industrial Asphalts (Ceylon) PLC has recorded a drop in its profits, which were recorded as Rs. 117.2 million in the 2020-21 financial year (FY) ended 31 March 2021. The said record is down by about 34% from a year ago. 

The drop in profitability can be attributed to the 73.1% Year-on-Year (YoY) decrease in revenue – down to Rs. 108.1 million in FY2020 from Rs. 402.4 million in FY2019 – and increased operating and administrative expenses. 

The challenging business landscape due to Covid-19 has deteriorated the financial position of the company’s customer base, and resulted in a 20.0% YoY decrease in revenue from its paint and coatings segment. It has also resulted in 82.6% YoY decrease in revenue from its Bitumen segment. However, rent income derived from its investment property in Peliyagoda continued to be a revenue driver for the company, generating Rs. 35.4 million in FY2020. 

The investment property in Peliyagoda continues to be the primary value driver for Industrial Asphalts (Ceylon) PLC. The past five years have resulted in the transformation of Peliyagoda into one of the most important hubs in the country, with the consolidation of the Manning Market, Central Fish Market, and the hardware/building materials businesses in Peliyagoda, combined with the planned relocation of part of the public transportation hub of Colombo. As a result, the value of the investment property has increased exponentially over the period and further increased by Rs. 80.5 million during FY2020. 

Industrial Asphalts (Ceylon) PLC conducted a thorough analysis of its paints and coatings division, which had experienced a declining trend in sales volumes over the past few years, to determine the viability of continuing to operate in the segment in the future. Accordingly, it was identified that, based on the turnover generated for the company by the division, the market share of the company in the Rs. 12.5 billion Sri Lankan Protective Coatings Market was around 2%, thereby classifying the company as a small-scale operator in the multi-billion-rupee paints and coatings industry of Sri Lanka. 

Therefore, on July 30 2021, the company sold the entirety of its paints and coatings division to K. Naveenkanth for a consideration of Rs. 15 million. 

With this disposal of the paints and coatings division, Industrial Asphalts (Ceylon) PLC has effectively become an investment holding company with over 90% of its assets being held for investment purposes. This change in the identity of the company is in line with the amendments made to the primary objectives of the company in 2019 with the purpose of evolving into a holding company.