Melstacorp 3Q profits jump on higher revenues across business lines

• Distilleries adds to half of group’s Rs.61bn revenue for the quarter, up 20.2%

Melstacorp PLC reported some solid top and bottom line performances for the three months ended December 2022 (3Q23) as the group was riding on the robust sales from its liquor business and others, although the rising finance costs somewhat weighed on the profits. 

The diversified conglomerate, which also has interests in plantations, insurance and telecommunications reported revenues of Rs.61.05 billion for the quarter under review, up 20.2 percent from the same period in 2021. Distilleries Company of Sri Lanka PLC alone brought in half of the consolidated revenues of Melstacorp group. The company is Sri Lanka’s largest distiller accounting for about 70 percent share of the alcohol market. 

The Melstacorp share added Rs.3.60 or 6.94 percent to settle at Rs.55.50 yesterday while the Distilleries Company share ended 10 cents or 0.73 percent higher at Rs.13.80.  

Just like many other manufacturing entities, the group also had to ramp up its working capital requirements last year due to enormously challenging market conditions which required more financing to ensure smooth operations. 

For instance, the group saw its short-term borrowings rising by Rs.12.2 billion in the nine months through December. The inventory rose by Rs.7.57 billion, receivables by Rs.7.38 billion while it left another Rs.5.9 billion in other short-term financial investments. 

The group settled payables of Rs. 6.36 billion.  Besides the borrowings for working capital needs, the group also saw its long term borrowings also rising by nearly Rs.6.0 billion at a time when the rates were soaring. These conditions more than tripled the group’s finance cost from Rs.1.32 billion to Rs.4.30 billion during the quarter under review. 

The group made an operating profit of Rs.13.82 billion for the quarter, up 103.8 percent. Except the group’s telecommunication business, the rest grew at both topline and operating profit levels, the segmental information for the nine months showed. 

Melstacorp generates mostly defensive cash flows given the diversified nature of its businesses and its distilling business provides a massive bulwark against any outsize market moves as demand largely remains sticky for alcoholic beverages. 

The group reported earnings of Rs.4.99 billion or Rs.4.29 a share for the October – December 2022 quarter compared to earnings of Rs.1.90 a share or Rs.2.22 billion in the year earlier period. Harry Jayawardena-controlled Milford Exports, Lanka Milk Foods and Stassen Exports together hold 56.58 percent stake in Melstacorp.