Cargills 2Q revenues and profits slip as lockdowns cut into supermarket sales

A group of 10 French tourists was seen exploring famous Malwaththa Street Hawkers Stall Complex in the Colombo Fort area, yesterday. They have arrived in the country two days back and said they decided to tour Sri Lanka as the spread of COVID-19 has been controlled in the island.
Pic by Pradeep Pathirana

Cargills (Ceylon) PLC saw its revenues slip in the three months ended on September 30, 2021, as the virus-related lockdowns reimposed half way into the quarter weighed on the recovery momentum seen in the retail sales of the largest private sector retailer
by revenue. 

The group reported revenues of Rs.28.96 billion for the July-September period, its fiscal second quarter, down by 0.55 percent from the same period last year, while the earnings fell by 2.2 percent to Rs.699.4 million or Rs.2.71 a share. 

For the six months ended in September, the group reported earnings of Rs.4.69 a share or Rs.1.21 billion on revenues of Rs.58.46 billion, up 30.5 percent and 12.6 percent, respectively from the comparable period last year.  Cargills’ retail sector sales for the quarter was Rs.21.4 billion, compared to Rs.22.3 billion in the year earlier period. The segment reported an operating profit of Rs.515.3 million, slightly down from Rs.537.6 million in the year earlier period.  

The slippage in the sales of the retail operations during the quarter under review was a reflection that even the big retailers such as Cargills weren’t immune to the disruptions caused by the virus-related lockdowns, albeit the effects were far less than at the beginning of the pandemic last year.

John Keells Holdings, which operates the second largest privately owned retail chain, also reported dampened sales and profits for the quarter, due to the same reasons. 

While the retailers, including Cargills, ramped up their e-commerce operations, such platforms didn’t compensate for the fall in footfall in their physical stores.

Cargills in August 2020 invested in a new e-grocery store titled ‘Cargills Online’ to better handle the growing online orders. As an indication of its evolving physical retail strategy, Cargills recently expressed its desire to expand its convenience store-style outlets, which makes easier for the company to penetrate into the bigger grocery market, with relatively less per store capital expenditure. 

Cargills currently has over 450 brick-and-mortar stores islandwide.  Meanwhile, the group’s food and beverage manufacturing and distribution business, which has an expansive range of dairy, frozen and other confectionaries, reported revenues of Rs.6.39 billion for the three months, up from Rs.5.79 billion in the same period last year. But the operating profits fell sharply by 20 percent, reflecting higher costs contended by this division. 

Meanwhile, its restaurants business, which has the KFC and TGI Fridays franchises, reported revenues of Rs.1.13 billion, slightly higher than Rs.1.01 billion in the year ago period, as people continued to patronise such places through takeaways and delivery services, even during the mobility restrictions prevailed in the latter half of the quarter, after a surge seen in indoor dining from July through mid-August, when there were no restrictions.

However, this segment’s operating profits declined to Rs.141.8 million, from Rs.173.9 million a year ago. 
Cargills promoters, C T Holdings PLC held a 71.05 percent stake in the company, besides the individual holdings by the Page family members. The Employees’ Provident Fund held a 3.26 percent stake being its third largest shareholder.

After the September reporting date, the company along with C T Holdings decided to set up a real estate subsidiary company by transferring properties designated for development and other unlisted real estate and property development subsidiaries under the new subsidiary. It has also been decided to make an equity infusion of Rs.550 million by C T Holdings into the said subsidiary.