Cargills Ceylon records steady results for 2Q, first half

Cargills (Ceylon) PLC recorded steady results for the six-month period ended on September 30, 2022 (1H23), despite the challenging environment, particularly considering the rising interest and raw material cost as well as increasing cost of operations. 

The group recorded a cumulative revenue of Rs.97.1 billion for 1H23, up 66 percent year-on-year (YoY) while the cost of sales rose 64.8 percent YoY to Rs.86.3 billion, resulting in a gross profit of Rs.10.8 billion, up 78.4 percent YoY.

The group EBITDA for the first half was Rs.9.4 billion, up 65 percent YoY and the operating profit was Rs.6.5 billion, up 102 percent YoY.

The group recorded earnings of Rs.10.67 per share or Rs.2.8 billion for the period under review, compared to earnings of Rs.4.69 per share or Rs.1.19 billion recorded for the corresponding period, last year.

Meanwhile, for the quarter ended on September 30, 2022 (2Q23), the group reported earnings of Rs.4.63 or Rs.1.25 billion, compared to earnings of Rs.2.71 per share or Rs.703.2 million a year ago, on a revenue of Rs.49.2 billion, up 70 percent YoY.

As a result of higher interest rates, the group saw a sharp increase in the finance cost during the period, as the net finance cost for the quarter rose 127 percent YoY to Rs.1.5 billion and by 85 percent YoY to Rs.2.4 billion in the first half.  The group’s expansive retail operations under the Cargills brand reported a revenue of Rs.35.5 billion for the quarter under review, up from Rs.21.4 billion and a pre-tax profit of Rs.901.5 billion, against a loss of Rs.3.8 million a year ago.

“Though price increases impacted volume growth during the first few months of the year, we have been able to curtail price increases below the national food inflation, which has reduced the impact to customers and supported a pickup in volumes of certain essential food categories,” Cargills said in an earnings release.  Cargills Retail added 19 new stores during the first half of the year under review, with the landmark 500th Cargills Retail store being opened in October. The manufacturing and distribution business of the group reported a revenue of Rs.15.3 billion for 2Q23, up from Rs.8.4 billion in 2Q22. The segment reported a pre-tax profit of Rs.1.03 billion, compared to Rs.820.5 million a year ago. The group’s restaurant business recorded a revenue of Rs.2.1 billion for the quarter under review, up from Rs.1.1 billion and a pre-tax profit of Rs.317.7 million, against Rs.119.4 million a year ago.  The group said strategic investments would be made to increase capacity and touchpoints across the country while it works towards improving its cash flow position and managing debt amid the high interest rate environment.  

The group declared an interim dividend of Rs.3.50 per share for the reporting period, which is higher than the Rs.2.00 per share declared during the previous financial year.

Cargills share closed at Rs.212.00 yesterday, up by Rs.11.75 or 5.87 percent from the previous close. 
Over 80 percent shares of the company are held by the Page family and entities controlled by them. The Employees’ Provident Fund has a 3.26 percent stake in the company, as the third single largest shareholder.