Ceylon Grain Elevators stung by Fx crunch, drop in local harvest

• Welcomes removal of maximum retail prices on chicken 

The foreign exchange crunch and the drop in local harvest weighed on the performance of Ceylon Grain Elevators PLC as the company saw its revenues decline and costs escalate in the three months to December 2021 (4Q21) prompting it to curtail production. 
The poultry industry leader reported revenues of Rs.4.90 billion for its fourth quarter ended December 31, 2021, down 11 percent from the same period in 2020, while the cost of sales rose by 14 percent on year to Rs.4.09 billon.  

This and other overheads weighed on the company’s profits resulting in a 2 percent decline in the operating profits to Rs.637.6 million for the quarter under review. 
However, the removal of maximum prices prevented a steeper hit on its top and bottom lines, which was welcomed by the company. 

The company reported earnings of Rs.15.59 a share or Rs.962.6 million for the October-December quarter, compared to earnings of Rs.5.65 a share or Rs.312.4 million in the corresponding quarter in 2020. 

For the full year ended December 31, 2021, the company reported earnings of Rs.21.63 a share or Rs.1.32 billion compared to earnings of Rs.15.73 a share or Rs.917.2 million.  The annual revenues grew by 30 percent to Rs.24.06 billion. 

“The group’s revenue growth for the year as compared to the previous year was mainly due to the price increases driven by soaring raw material prices,” said Cheng Chih Kwong, Primus, the company’s Executive Director and Chief Executive Officer in an earnings release. 

“The group was able to increase its profitability for the quarter under review due to the retraction of maximum retail price restriction on chicken prices and optimisation of its product range. 
The improved profitability for the year was mainly due to selling price increase and the costing of imported raw materials at a fixed USD/LKR exchange rate prevailing in the market towards the end of 2021 and income tax concessions and exemption granted by the Inland Revenue (Amendment) Act No. 10 of 2021,” he added. 

Fixing of currency helped the company to book and order raw materials it needed at the official exchange rate, preventing it from having to pay at a devalued rate which could have sent its costs spiralling up. 

However, this comes at the cost of numerous challenges having to be faced when opening letters of credit with the banks due to the dollar shortage. 
Meanwhile, the company isn’t also completely immune to the currency risk as a significant amount of its credit is in US dollars.

“The total foreign currency trade dues of the group denominated in US dollar as at 31 December 2021 amounted to US$ 28,330,455, which would translate to Rs.5,751,082,365 converted using the official rate published by the Central Bank of Sri Lanka which prevailed at the financial year-end,” the company said. 

“Any adverse fluctuations in the exchange rates and /or the non-availability of foreign currency at such rates could have a material impact on the group/company profitability”, it added.
Singapore’s Prima Limited held 45.45 percent stake in the company followed by Employees Provident Fund with 8.92 percent stake.