John Keells Stock Brokers (JKSB), in a report on the first quarter 2009 highlights of Distilleries Company of Sri Lanka (DCSL), says the 'court case on the company, which is alleged that when SLIC was privatized, Distilleries who had been the successful bidder did not pay the true value of SLIC, is still pending and might have a negative impact on the company's performance.'
The report states that DCSL's March quarter group profits dropped by 16.2 % to Rs.1.15 billion from Rs.1.37 billion previously, on the backdrop of increased operating costs while turnover in the quarter increased by 9.5 % to Rs.16.07 billion. DCSL shares as of this past Thursday were trading at Rs.79.75.
According to JKSB, growth in revenue was predominantly seen from the beverage sector where over 46 % of the total revenue for the quarter came from this segment, reaching Rs.7.3 billion, 21 % higher than the corresponding quarter. The beverage sector's net earnings increase of 13.6 % compared to the previous year, was geared by a marginal price increase and there is no significant increase in sales volume.
The report further stated that Lanka Hospital contributed Rs.552 million in revenue and Rs.17.5 million in net earnings, an increase of 29 % and 150 % respectively compared to the akin previous quarter. The turnaround of LHCL is mainly attributable to the liquidation of a significant portion of its debts through the funds received from the rights issue and consequently reducing its finance costs by 138 % to Rs.16 million for the quarter.
During FY08 SLIC's post-tax profit (PAT) fell by 58 % and LankaBell's PAT dipped by 13 %. Nevertheless, the company claims that there has been no significant change in the performance of SLIC and LankaBell during the 1Q09. However, the report states that the FLAG project of LankaBell which was commissioned in 2008 has not yet yielded the expected results and it is yet to realize the benefits. Due to the finance cost of this US$27 million investment, the company's net earnings would be affected.