KFP records higher profits for 3rd quarter on robust sales

Ushering in the much awaited December quarter earnings season, Keels Food Products PLC (KFP) filed its interim results for the three months last week, which showed some robust growth in sales and profits although the margins ticked down due to rising costs experienced by the company across its supply chain. 

KFP, the John Keells Holdings’ processed meat producer, reported sales of Rs.1.34 billion for the October-December quarter, recording a 38 percent growth over the same period last year, as the company’s top line was supported by the recovery in demand and higher prices as producers passed down the higher costs. 

Local producers confronted numerous challenges from supply chain snarls, shortages in raw materials and ingredients, and higher prices interrupting their otherwise smooth production lines. 

Sri Lanka’s producer inflation, measured through the Producer Price Index, jumped 16.3 percent in November 2021, accelerating from the 12.2 percent increase in October. 

Gradual easing of lockdowns from the beginning of October and people venturing out for dine outs and other recreational activities appeared to have helped KFP’s top line growth while the seasonal demand that kicked in provided an additional tailwind to the company. 

However, in line with earnings forecasts, the company saw its gross margin narrowing slightly to 26.5 percent in the period under review from 29.32 percent in the year earlier period. 
The direct costs rose by 44 percent to Rs.986.6 million over the last year. 

Analysts were eagerly waiting for December quarter earnings reports from corporates to parse through the numbers to assess the extent to which inflation, supply chain troubles and foreign exchange issues had affected their normal business operations and thereby their top and bottom lines. 

The three became the hot button issues faced by the Sri Lankan economy since the middle of last year, but analysts are expecting a strong December earnings spell as higher inflation, which translated into higher prices, helped corporates to post robust results. 

Meanwhile, KFP reported earnings of Rs.5.37 a share or Rs.137.0 million for the quarter, compared to earnings of Rs.3.13 a share or Rs.79.8 million in the corresponding period of last year.

For the nine months ended December 31, 2021, the company reported earnings of Rs.8.02 a share or Rs.204.6 million on sales of Rs.3.29 billion, up 3 percent and 26 percent respectively from the comparable period in 2020. 
As at December 31, 2021, the John Keells Group held 89.95 percent stake in KFP.