Ceylon Cold Stores 3Q signals improving consumer demand

Ceylon Cold Stores PLC delivered robust performance for the quarter ended December 31, 2019, as the country’s largest consumer food company by revenue managed to sustain its top line growth.

The company grew its top line by 18 percent year-on-year (YoY) during the three months under review to Rs.17.9 billion, signalling strengthening consumer demand.

Sri Lanka’s consumer goods companies faced multiple headwinds during the last couple of years as heavy taxation eroded disposable incomes of the people and the overall economic growth came to a standstill.

Consumers also showed some signs of shifting their tastes from carbonated drinks and processed foods towards healthier alternatives.

But Ceylon Cold Stores had to withdraw its whole range of sugar-free carbonated soft drinks range last year due to lack of appeal from the consumer, in less than a year since it was launched.

The company is a leading manufacturer of food and beverage under its famed Elephant House brand.

The company generated operating profit of Rs.1.26 billion for the three months, up 130 percent YoY.

The finance cost rose by 140 percent YoY to Rs.480.7 million as the company accumulated long-term debt to the tune of Rs.6.3 billion and short-term debt of nearly a billion rupees since March 2019.

The tax bill rose substantially to Rs.224.6 million from Rs.9.7 million in the year earlier period due to the deferred tax component.

As a result, the company reported earnings of Rs.5.99 a share or Rs.569.2 million for the quarter under review compared to earnings of Rs.3.70 a share or Rs.351.5 million reported for the corresponding period, last year. For the nine months ended December 31, 2019, the company reported earnings of Rs.13.25 a share or Rs.1.26 billion compared to earnings of Rs.8.23 a share or Rs.781.8 million in the corresponding nine months in 2018.

The revenue for the nine months rose 17 percent YoY to Rs.50.9 billion. During the nine months, Ceylon Cold Stores’ manufacturing operations increased revenues by a billion rupees to Rs.10.9 billion while the after-tax profit rose to Rs.1.2 billion from Rs.941.9 million a year ago. The retail business under Keells brand name numbering over 100 outlets reported revenues of Rs.40.3 billion against Rs. Rs.33.9 billion a year ago. The segment’s earnings rose to Rs.352.1 million from Rs.119 million. John Keells Holdings PLC and Whittal Boustead (Pvt.) Ltd together hold 81.36 percent of Ceylon Cold Stores.