One-off gains, business growth boost Melstacorp March profit

Profits at Melstacorp PLC surged mostly due to one-off gains amid mixed performance in its business segments as the former Distilleries group is still undergoing a far- reaching restructuring process with buying and shedding entities. 

Melstacorp PLC reported Rs.29.6 billion in revenue for the three months ended in March (4Q18), compared to Rs.27.4 billion in the same period, last year.

However, revenue net of taxes, excise duties and levies mainly related to the group’s distillery business, was only Rs.12.5 billion, up 19 percent year-on-year (YoY).
As part of the group restructuring exercise, in August 2016, Melstacorp – the then investment holding arm of the Distilleries group – became the ultimate parent of the group with Distilleries becoming the wholly-owned subsidiary of Melstacorp, through a complex share swap. 

The group has interests in alcohol, plantations, telecommunications, insurance, power generation, leisure and logistics. 

Meanwhile, the group increased its operating profit by as much as Rs.131 percent YoY to Rs.3.2 billion, mostly on account of a significant increase in the other operating income. 

Melstacorp PLC disposed its fully-owned subsidiary, Melsta Regal Finance Limited on March 31 and its gain on disposal was booked under other operating income.
Melstacorp reported earnings of Rs.2.86 a share or Rs.3.3 billion in total earnings for the January-March period, compared to 12 cents a share or Rs.140.3 million in the same period in 2017. 

The earnings included Rs.853.5 million profit from the group’s associate companies, up significantly from Rs.454.7 million a year ago. 

Further, there was a one-off gain on bargain purchases of Rs.825 million. 

Meanwhile, for the year ended in March 31, 2018, Melstacorp reported earnings of Rs.6.62 a share or Rs.7.7 billion in total earnings, compared to Rs.6.29 or Rs.7.3 billion in the previous year. 

The total gross revenue rose slightly under one percent YoY to Rs.110 billion and the net revenue was up 11 percent YoY to Rs.44.7 billion. 
The operating profit was down by 8 percent YoY to Rs.9.0 billion, due to the higher direct and indirect costs. 

Melstacorp reported an impairment of Rs.1.6 billion in its subsidiary, Milford Holdings (Pvt.) Ltd, the immediate parent of Lanka Bell Ltd. 

In September last year, Melstacorp gained control in Madulsima Plantation PLC by acquiring a 10 percent stake in the company, taking the group stake to 55.91 percent. 

Further, the group increased its stake in Balagoda Plantations PLC to 58.61 percent, from 43.23 percent. 

The segmental performance showed the group’s beverage business revenues declining by about Rs.2.0 billion to Rs.97 billion. The operating profits also declined by a similar amount to Rs.8.1 billion. 

Plantations returned to profits while the telecommunications business expanded its losses to Rs.1.6 billion, from Rs.1.3 billion. 

Meanwhile, the group’s financial services and other diversified businesses performed well in their top and bottom lines. 

Harry Jayawardena-controlled Milford Exports, Lanka Milk Foods and other connected entities hold close to a 60 percent stake in Melstacorp.