Coco Lanka profits ease due to duty inconsistency

Coco Lanka Ltd, a coconut-related products manufacturer, saw a 21 percent decline in profits with Rs.2.6 billion for the quarter ended December 31 compared to the corresponding period in 2006, which posted Rs.3.3 billion.

An industry analyst noted that this decline is mainly due to increasing imported edible oil duties from November to December last year.

“From October to April every year there is a reduction in coconut crop. Sri Lanka is a net importer of edible oil. When the government increases the duties of imported edible oil such as palm oil and coconut oil, it impacts our sustainability as a whole," an industry analyst explained.

He said the normal trend is that when crops start decreasing in October, the government stabilises the market by reducing import duties of edible oil. “This helps the country to preserve its coconuts for local industry and consumption. This trend has to prevail for our local companies to ‘come out of the woods’,” he explained.

He said from November 15 to December 31 last year, edible oils saw an increase of 65 percent in duty from a zero duty status. “This needs to decrease to maximum 10 percent," he added.

Coco Lanka Ltd's consolidated accounts saw a Rs.288, 000 profit for the quarter ended 31st December 2007, as opposed to Rs.18, million in the same period in 2006. “This was due to inconsistencies in the duty structures in the industry, amongst other external factors,” a company official said.