The Distilleries Company of Sri Lanka (DCSL) is waiting for the Secretary to the Treasury to make a conclusive determination of the amounts due to the DCSL Group as per the June 4, 2009 Supreme Court order on the privatization of Sri Lanka Insurance Corporation (SLIC).
The company stated in its interim financial statements that it is unable to finalize the accounting treatment in respect of the disposal of the investment. Therefore, the effect of the disposal has not been reflected in the financial statements for the quarter ended 31 December 2009. Adjustments in respect of the Supreme Court judgment of 4 June 2009 regarding the privatization of Sri Lanka Insurance Corporation Ltd (SLIC) have been made according to the notes to the notes to the financial statements.
The company has separately discosed the net book value of assets held in SLIC as at 31 March 2009 in the consolidate balance sheet.
The balance sheet shows the consolidated total assets as being Rs.38 billion as at 31 December 2009. The company added that the Supreme Court judgment does not qualify as a prior error under Sri Lanka Accounting Standards (SLAS) 10 as confirmed by the Urgent Issues Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka (ICASL) and therefore, no adjustments have been done in respect of prior period financial statements.
The notes fu rther states that in December 2009, the company invested Rs.500 million in its fully owned subsidiary, Continental Insurance Lanka Ltd. Consolidated net profit at DCSL fell by 45.66% for the nine months ended 31 December 2009 to Rs.2 billion over the corresponding period in 2008. According to the interim financial statements, gross turnover also decreased by 35.89% to Rs.29.9 billion from Rs.46.7 billion while profit from operations declined by 34.58% to Rs.3.2 billion.
According to the segmental information for the period under review, the beverages sector showed a profit before tax of Rs.3.063 billion, a slight increase from Rs.3.042 billion the previous year.
Profit before tax for the plantation management sector also showed an improvement to Rs.186 million from Rs.169 million in 2008. The telecommunications and diversified sectors showed losses before tax of Rs.373 million and Rs.55 million, respectively.
Stock market analysts say that the company, on top of losing SLIC and the Colombo Apollo Hospital, is fast losing another growth driver in the company, with its telco arm Lanka Bell losing money.
"The removal of SLIC and Apollo has affected the company and it is estimated that around Rs.1 billion is lost from this at the profit before tax level," one analyst said, adding that the most serious issue is their telecommunication sector comprising Lanka Bell, which recorded a loss before tax of Rs.373million last quarter.
He said that at a time Lanka Bell was one of the main growth drivers of DCSL, but questions are raised as to what may drive it in the future. Another analyst said that DCSL made most of its investments through SLIC, which it lost. "Further they have lost the potential earnings or earning expectations from those investments. Apollo and considerable stakes in listed commercial banks were made through SLIC," he said.
The analyst said that the price war and new additions to Lanka Bell will also have a negative impact towards the company. "However DCSL being one of the cash rich blue chips in the market could improve their profitability with the latest additions such as Continental Insurance coming into play soon," he said. |
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