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Distilleries toasts profits despite depressed sales

Revenue down due to unfavourable market conditions; bottom line up thanks to raw material sourcing strategy

Distilleries Company of Sri Lanka (DCSL) has succeeded in boosting profits thanks to a smarter raw material sourcing strategy despite the top line being impacted by unfavourable market conditions.

For the quarter ended 30 September 2018, DCSL’s gross revenue was down 11% to Rs. 19.8 billion and net revenue by 5% to Rs. 6.67 billion. However, the cost of sales was lower by 17.4% to Rs. 4.18 billion.

Industry and company analysts said DCSL had pursued a new strategy of sourcing raw materials, the benefit of which is being reflected in the reduction in the cost of sales. In the first half, the cost of sales was down by 19%.

In 2Q, profit from operations was up 28% to Rs. 2.08 billion despite other operating income declining to Rs. 29.5 million from Rs. 115.6 million a year earlier. Pre-tax profit at DCSL was Rs. 2.05 billion, up by 39%. Lower finance costs, down by 72.6% to Rs. 66.5 million, had a positive effect on the bottom line as well. Post-tax profit had improved by 30% to Rs. 1.2 billion.

In the first half, gross revenue was down 10.5% to Rs. 39.07 billion as higher retail prices and relatively cheaper alternatives had depressed sales. Net revenue was down 4.4% to Rs. 13 billion. Gross profit was up 39.6% to Rs. 4.7 billion after the cost of sales saw a 19% dip to Rs. 8.4 billion. Profit from operations improved by 43% to Rs. 3.96 billion and pre-tax profit jumped 56% to Rs. 3.87 billion. Finance costs were down 62% to Rs. 152 million in the first half. Post-tax profit rose 51% to Rs. 2.26 billion.

(FT)

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