LMF posts Rs.20.8 million profit in first Q 2006-07

Lanka Milk Foods (LMF), posted a net profit of Rs.20.8 million in the 2006-07 first quarter compared to a loss of Rs.31 million in the 2005-06 first quarter, backed by an increase in the turnover and profit margins together with proper cost control strategies, according to a recent report by the C. T. Smith Stockbrokers.

It said that the company’s net profit for 2006 was Rs.80 million, compared to a loss of Rs.57million in 2005. “More than 90 percent of the group's income is generated through its key milk powder brand, "Lakspray", which has a market share of approximately 15 percent. Net profit from Lakspray for the fourth quarter was Rs.46.7 million, compared to a loss of Rs.40 million in the same period in 2004, resulting in a profit of Rs.95 million at the company level compared to a loss of Rs.32 million in 2005,” the report said.

It also said that last year’s loss was mainly due to intervention by the Consumer Affairs Authority (CAA) to control the retail selling prices of milk powder, "Lakspray" and that the CAA did not approve appeals from the company for a period of 11 months, with the company having to sell Lakspray below its cost of sales.

“With low gearing for 2006, interest on borrowings in the company was well below that of 2005,” an analyst said, adding that the company has a good indication of profitability in future as well. He said that the company is vulnerable to currency depreciation and any price hikes in the cost in inflation price of milk powder in the world market.

Established in 1981 through the government owned Co-operative wholesale Establishment (CWE), the company was privatised in 1991.

The company's other key brands include Daily and Suntop. The company also exports Lakspray and Daily to Maldives, and handles contract packing of milk powder for clients. LMF has a packing plant in South East Asia, with a capacity of 48,000 metric tones per year.

LMF's Ambewela and Pattipola farms breed 1,300 Friesian and Aryshire cattle. Part of the milk produced in these farms is used to produce the’ Gouda living’ cheese. Other value-added milk products of the farms are sterilized goat milk, yoghurt and pasteurized milk.