• Records Commendable financial results for Q2 results which resulted in a turnaround performance for the first half of the financial year
• Aggressive pricing strategies which contributed towards improving the product margins together with the cost optimization initiatives which were adopted across all segments is said to have enabled the Group to achieve this feat
November 14, Colombo: Lankem Ceylon PLC, a well-diversified conglomerate reputed for its market dominance in the areas of agriculture, consumer products, hotels, industrial chemicals, industrial flooring, decorative paints, printing & packaging and pest control posted a noteworthy second quarter (Q2) results which resulted in a remarkable turnaround performance for the first half (H1) of the financial year 2022/23. This was based according to the latest financial results released to the Colombo Stock Exchange recently. At a time when Sri Lanka as a country is facing economic downturn with businesses facing economic hardships within a highly volatile business environment, achieving these results are indeed progress towards sustainable growth.
During the quarter ended 30th September 2022, the Lankem Ceylon as a Group recorded a profit of LKR 958 Mn which was a 73% growth compared to the 1st quarter of 2022/23 and a total change over compared to the LKR 19 Mn loss made in Q2 of the last financial year ( 2021/2022). Q2 revenue was LKR 8.3 Bn which was a 58% growth compared to the same period last year whilst Gross Profit (GP) for the said period was LKR 2.7 Bn, a 210% growth compared to the LKR 882 Mn achieved during the same period last year. During the quarter under review, Profit Before Tax (PBT) was LKR 1.15 Bn, a 4046% growth compared to the corresponding quarter in the previous year.
From a level of breakeven during the financial year 2021/22 to profitability in six months, the Group recorded a net profit of LKR 1.5 Bn for the first half (H1) of 2022/23 when compared to the loss of LKR 91 Mn incurred during the corresponding period last year. Group revenue in the first half stood at LKR 15.9 Bn, a 64% increase, when compared to the LKR 9.7 Bn, achieved during the same period last year. Further, the Group achieved a Gross Profit (GP) of LKR 5.1 Bn which was a 198% compared to LKR 1.7 Bn achieved for the first half of the financial year 2022/2023. The Profit before Tax (PBT) for Lankem Ceylon as a Group, was LKR 1.85 Bn, a commendable achievement when compared to the loss of LKR 4 Mn incurred during the H1 of the previous financial year 2021/22. Aggressive pricing strategies which contributed towards improving the product margins together with the cost optimization initiatives which were adopted across all segments is said to have enabled the Group to achieve this feat.
From a Q2 perspective, Lankem Ceylon PLC as a Company posted a revenue was at LKR 1.7 Bn, an increase of 83% in the comparative period of last year. The Company’s PBT achieved was LKR 880Mn, an increase compared to the LKR 132 Mn achieved, whilst net profit for the said period was LKR 879 Mn for the quarter under review, which was an increase of 568% against the comparative period of last year.
A successful Q2, resulted in the Company posting a cumulative revenue of LKR 3 Bn, an 81% growth for the H1 under review compared to LKR 1.7 Bn achieved last year for the same period. After a gap of nine years, the Company made a significant contribution to the Group’s bottom line by achieving a net profit of LKR 1 Bn in H1 of the year, a 1,232% growth compared to LKR 77 Mn achieved during the same period last year. PBT for the company was LKR 1Bn for H1 of the year, an increase compared to LKR 77 Mn in the corresponding periods in the last financial year. These notable achievements enabled the Group to turn around the business remarkably well.
The commendable performance of the Company which includes Paints, Agro Chemicals, Industrial Chemical and Pest Control, was a result of the continuous focus on restructuring the Company’s cost base to reduce production costs and minimize operational inefficiencies which enabled the Company to improve the gross profit margin when compared to 2021/22. While the increase in distribution and administrative expenses were kept less than par with the growth of revenue, the finance costs increased significantly by 68% due to the continuous increase in the lending rates and liquidity issues faced by the financial institutions which restricted the restructuring of some of the borrowings. Despite facing severe working capital constraints through restricted credit lines, increased borrowing rates, shortage of foreign reserves, and extended collection periods, the leaner and efficient operations brought about through cost optimization strategies, innovative marketing initiatives, and focus on core competencies enabled to negate the adverse impact to a great extent.
The packaging cluster, which includes JF Packaging (Pvt) Ltd, Acme Printing and Packaging PLC and recorded an outstanding performance during these six months to achieve an operating profit of LKR 1 Bn compared to the minor loss reported last year. The cluster, which underwent a complete transformation during the period of review, worked diligently towards reducing the production costs by 50% which brought in a significant improvement at the contribution level.
The Consumer cluster of the Group which comprise of C.W. Mackie PLC almost doubled their revenue during the first half of 2022/23 in comparison to the previous period to achieve LKR 3.6 Bn. The cluster further reported an operating profit of LKR 702 Mn which was a commendable improvement from that of last year’s H1. During the quarter ended 30th September 2022, the cluster recorded Revenue of LKR 1,812 Mn and operating profit of LKR 361 Mn respectively. which was a 102% growth in revenue and a 106% growth in operating profit compared to the first quarter of 2022/23. Change of marketing strategies to give customers value for money during trying times in addition to the change of pricing structures is said to have worked well for the cluster which enabled it to contribute positively towards the Groups’ achievements.
Despite the downturn in the tourism industry over the past few months, the Leisure cluster also saw a revenue growth of 53% and 52% for H1 and Q2 ended 30th September 2022 respectively. However, the segment was not able to achieve profitability given the lower occupancy. The Group is optimistic and is confident that with the slow but certain turnaround of the industry, the leisure segment will also be able to reduce the operating losses and look towards profitability.
Lankem Ceylon PLC was initially incorporated as Shell Chemical Company of Ceylon Limited in 1964. Originally formed as a crop protection company, it has grown its core operations to include Coatings and Industrial Chemicals. The Company also has invested in the packaging industry through J.F Packaging Limited, in the FMCG space through its investment in C.W. Mackie PLC and in leisure through its investments in Colombo Fort Hotels.
Lankem Ceylon PLC is a subsidiary of The Colombo Fort Land and Building PLC. The eminent members of the Board of Directors are Mr. S.D.R Arudpragasam (Chairman), Mr. A. Hettiarachchy (Deputy Chairman), Mr Suren Goonewardene (Managing Director), Mr. A.C.S Jayaranjan, Mr. R. Seevaratnam, Mr. P.M.A. Sirimane, Mr. Anushman Rajaratnam, Mr. G.K.B. Dasanayake and Dr. A.M.Mubarak.