Financial Times

With ambitious plans to set up a processed meat plant in India and planning to enhance capacity for beverage production, John Keells Holdings is gearing for an exciting era, according to its Chairman, Susantha Ratnayake.

On the back of posting an after-tax profit of Rs.3.05 billion last year (2005-06), as against Rs.2.27 billion in the previous financial year, Ratnayake in his annual review has said that the company has earmarked many other projects are on the cards. “We will be rolling out more supermarkets this year and will have 30 outlets and by the end of the next financial year, we will be having 50,” he told The Sunday Times FT.

He said that there will be a negative impact on the bottom line this year and the next with the commencement of Business Process Outsourcing (BPO) operations both in India and Sri Lanka in July 2006, because this venture, as with all start-ups will incur expenditure in building its capacity and capability. “We decided to invest in this venture after a lengthy strategic study of the industry and its potential and we are confident that it will make a significant contribution to the group profits over the medium and long term,” he said.

Transportation was the single largest contributor to the group’s profit, with Rs.2.21 billion, being 63 percent of the total profit. “The ports and the shipping businesses continued to perform well with Lanka Marine Services and South Asia Gateway Terminals (SAGT) leading the way,” he said, adding that the leisure sector recorded Rs.619 million, despite a Rs.170 million repositioning cost and special incentives offered to stimulate the leisure industry.

He said that the property sector contributed Rs.832 million to the group profit while the company has received many pre bookings for their ‘The Emperor’ apartments at Crescat City and the formal sales will start this month. Food & Beverages’ (F&B) contribution to the group was Rs.191 million. “The sales volumes and, therefore, the profitability of processed meat products suffered because of the adverse publicity on the processed meats industry in Sri Lanka and the avian flu threat in the region,” Ratnayake said, adding that company has invested Rs.1 billion to enhance the capacity of its beverage production The company was assessing the viability of setting up a processed meats plant in India.

“India is a big market and we are evaluating the feasibility of venturing into India,” he said. The company’s financial services sector has contributed Rs.250 million to the profit, resulting from a strong performance from Union Assurance Limited, an improved performance from Nations Trust Bank and a good performance from John Keells Stockbroker’s Limited, while Information Technology has performed better than the previous year with a profit of Rs.83 million, but KBSL, had a poor year though still contributing positively.

JKH has invested US$ 24 million to construct an up-market 100 room resort hotel at Alidhoo Island, Maldives, which is expected to commence operations next January.