Keells Foods 2Q profit down despite higher top line

Keells Food Products PLC (KFP), the processed food maker of John Keells group, reported lower profits for the quarter ended September 30, 2019 (2Q20), despite gains at the top line level, signaling somewhat improved consumer sentiment.

KFP, the manufacturer of Keells branded sausages, meatballs and crumbed items reported earnings of Rs.2.42 per share or Rs.61.8 million for the quarter under review, down 6 percent from a year ago.

The revenue for the period rose 5 percent year-on-year (YoY) to Rs.901.7 million, while cost of sales also increased at a similar percentage to Rs.647 million, allowing a the company to report a gross profit of Rs.254.7 million, up 4 percent YoY.

However, the gains made at the top line were negatively impacted by the higher administrative and selling & distribution expenses, resulting in the company reporting an operating profit of Rs.80.1 million, down 9 percent.

Globally, the processed food makers are facing multiple challenges from upcoming small-scale organic food producers as consumer preferences appear to be shifting towards healthier alternatives. 

Sausages make up of nearly 50 percent of overall KFP volumes.

KFP reaches the in-home consumer segment through modern and general trade channels while hotels restaurants and catering establishments (HORECA) constitute the firm’s largest customer segment. 

Meanwhile, for the six months ended September 30, 2019, KFP reported earnings of Rs.3.76 per share or Rs.95.9 million, down 21 percent YoY.

The revenue for the period rose 4 percent YoY to Rs.1.7 billion. 

John Keells group has about 90 percent stake in KFP.