Cargills Ceylon ramps up expansion plans

• Capital investments will focus on expansion of retail stores, restaurants, Cargills Square malls and digitalisation initiatives across supply chain

Cargills Ceylon PLC will ramp up the expansion efforts this fiscal year, pivoting from its earlier strategy to slow footprint growth.

In the previous financial year, Cargills Ceylon decided on a slowdown, largely due to Sri Lanka’s uncertain operating environment and the high interest rates that prevailed. 

“With renewed optimism in the economy and a gradual pickup in consumer sentiment coupled with single-digit interest rates, we will look to accelerate our expansion plans during the ongoing financial year,” Cargills Ceylon Chairman Louis Page said.

In the freshly released annual report, Page said capital investments would focus predominantly on the expansion of its retail stores, restaurants, Cargills Square malls and digitalisation initiatives across the supply chain. “Our focus remains on driving business growth and market share through increased volumes across all sectors. We aim to enhance profitability and margins through improved procurement strategies, efficient working capital management, productivity enhancements and optimal capacity utilisation,” he said.
Page noted that the anticipated benefits of the March 2024 electricity tariff reduction, effective from April 2024, are expected to further bolster margins.

Focusing on other segments, Cargills Ceylon said its FMCG facilities have sufficient capacity at the moment and therefore does not foresee the need to add significant capacity in the near term. The report highlighted that the management may also consider exploring long-term funding opportunities, given the current low interest rate environment.

For the 2023/2024 financial year, the group recorded a revenue of Rs.223,440 million, a 14.2 percent year-on-year (YoY) increase. 

The EBITDA increased to Rs.20,185 million, recording a growth of 2.5 percent from the previous year. Profit after tax (PAT) was Rs.5,936 million, marking a 10.3 percent YoY increase. 

Though the revenue recorded a healthy growth, the EBITDA margins were impacted by the upward revisions to the Value Added Tax and electricity tariffs. 

The latter significantly impacted the operating costs, especially in the retail and dairy sectors, which rely heavily on refrigeration and an extensive cold chain. 

PAT improved due to the lower net finance costs and a favourable gain in the fair value of the group’s investment properties.