Sri Lanka JKH profits drop 44-pct

Jan 29, 2009 (LBO) – Profits at Sri Lanka’s John Keells Holdings group fell 44 percent to 764 million rupees in the December 2008 quarter, with revenues dropping 16 percent to 9.3 billion, its interim accounts said. In the 9-months to December profits fell 19 percent to 2.6 billion rupees, while revenue grew 7 percent to 29.2 billion rupees.

The group’s transport division saw a steep fall in pre-tax profits to 343 million rupees from 677 million rupees.

The division includes Lanka Marine Services, a bunkering firm, which was hit by a court order that reversed a tax holiday and returned a tank farm to the state.

JKH chairman Susanthe Ratnayake told shareholders that there was a one of charge of 904 million rupees and the business model was changed.

“This format, which combines floating and land based storage operations are still in a nascent stage and is the subject of regular fine tuning as LMS seeks to establish optimum operating efficiencies.”

The company also returned cash to shareholders via a share buy-back losing interest income and its lucrative South Asia Gateway Terminals container terminal at Colombo port was operating at near full capacity.

“The short term outlook for the company remains challenging,” says Channa Amaratunga, chief executive of CT Capital.

“With even South Asia Gateway Terminals, is reaching optimal capacity levels, growth in the trasportation sector may slowdown.”

The leisure sector recovered from a low base to show profits of 109 million rupees against 83 million but property profits feel steeply to 64.2 million rupees from 162.2 million rupees.

The information technology division extended its losses from 8.1 million rupees to 34.8 million rupees, while the remaining businesses also saw profits fall to 148 million rupees from 764 million.

Amaratunga says the group’s gearing is still low and it could chase acquisitions. The firm has raised its stake in SAGT.

Ratnayake said the firm would “cautiously pursue opportunities” to expand its “existing portfolio” while growing internally.