Favourable market conditions boost Cargills 3Q

Cargills Ceylon PLC delivered a strong performance for the quarter ended December 31, 2019, as the leading consumer foods and retail player saw business recovering from the Easter attacks amid positive consumer sentiments following the presidential polls in November.

The group reported revenues of Rs.27.9 billion for the October-December quarter (3Q20), up nearly 19 percent year-on-year (YoY).

Growth in direct costs decelerated compared to the sales growth and gross profits and the operating profits rose nearly 40 percent YoY and 67 percent YoY to Rs.3.4 billion and Rs.1.8 billion, respectively. 

“The market conditions this past quarter have been favourable, with consumer confidence moving past the April Easter Sunday attack. Following the conclusion of the presidential elections, favourable fiscal policies in terms of tax savings aimed at boosting consumption were introduced,” an earnings release by the company stated. 

The group, which has over 402 retail outlets spread across the country, reported earnings of Rs.2.15 a share or Rs.553.5 million for the three months under review, compared to the earnings of Rs.1.21 a share or Rs.311.4 million reported for the corresponding period, last year. 

“The group endeavours on passing on the benefits to our consumers. Due to these benefits accrued via the tax savings, the core businesses of Cargills delivered strong performances at industry-best growth levels,” the earnings release added. 

Meanwhile, for the nine months ended December 31, 2019, the Cargills group, which produces the Kotmale-branded dairy products such as ice cream, cheese and curd, reported earnings of Rs.6.48 a share or of Rs.1.7 billion, compared to Rs.6.00 a share or Rs.1.5 billion reported for the same period, last year.

“Rising consumer demand, matched by category expansion in the cheese and butter categories and better marketing strategies, led to dairy being the strongest performing FMCG segment. 

Furthermore, partnering with the government schools’ milk programme increased consumption of the sector’s UHT milk categories as well. The sector’s ice cream sales also recorded strong numbers,” the earnings release said. 

During 3Q20, the group’s fast-moving consumer good (FMCG) segment generated revenues of Rs.4.8 billion, compared to Rs.4.0 billion in the year earlier period. 

The retail business saw its top line expanding to Rs.21.9 billion, from Rs.18.4 billion while the restaurants segment, which consists of KFC and TGIF franchises, increased its revenues slightly to Rs.1.2 billion, from Rs.1.0 billion. 

The performance of the group subsidiary, Cargills Bank, had remained subdued during the period under review.

“Cargills Bank’s performance in this period has been below par. Nonetheless, there was a growth in the loan portfolio with an increase in the issuance of payment cards.” 

CT Holdings PLC has a 70.2 percent stake in Cargills while the Page family separately holds approximately another 10 percent in Cargills Ceylon PLC.

The Employees’ Provident Fund (EPF) has a 3.27 percent stake in the Cargills group, being its third largest shareholder. 

Norway’s central bank, Norges Bank, has a 2.04 percent stake in the company, as the sixth largest shareholder.