Financial Times

Dividend for CGE shareholders?
Long suffering shareholders of Ceylon Grain Elevator's (CGE) , who have not been paid a dividend for years, may finally be in for some relief given the turnaround in the company's fortunes.

Bartleet Mallory Stockbrokers (Pvt) Ltd. said the company, owned by Prima Limited of Singapore, might consider paying a dividend and reducing its debt now that its financial performance had recovered.

"During recent times, the company has not been able to give any dividends to its shareholders due to its unimpressive financial results (owing to) deteriorating economic conditions in the country," it said in a research report. However, now the economy is booming and the CGE, the only fully integrated poultry business in Sri Lanka, in turn is reaping the benefits of the country's economic development.

"As a result, we envisage that the company may consider a dividend payment to make use of the tax free status it enjoys by giving dividends to CGE's minor shareholders," Bartleet Mallory said. It predicted that CGE might consider the use of reserves to rid themselves of its debt. The company has turned around in the last two years and recorded a Rs. 94 million net profit during the first half of 2003.

According to the company, most of its revenue is derived in the second half of the year. "Therefore we expect the company to record a net profit around Rs.290 million during the current year," the brokers said. In 2001 CGE recorded its biggest loss of Rs. 303 million. It gradually recovered with a marginal bottom line of Rs.7 million in 2002. CGE is the dominant player in the poultry industry with over 60 percent of the market.

"The underdeveloped state of the poultry industry presents vast opportunities for CGE," Bartleet Mallory Stockbrokers said. Annual chicken consumption in the country is yet around 3.5kgs per person, though it has improved from around 1.5kg in the early 1990s. This compares with the over 10kg chicken consumption per person in Western countries and other Asian nations.

CGE is also the leading supplier of chicken to large consumers like tourist hotels and fast food restaurants such as KFC, ensuring a consistent stream of revenue to the company even during poor economic conditions.

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