Sri Lankan diversified multinational Carson Cumberbatch has signalled that it may opt out of the Indian brewery market where it has a 22.5% stake in the Indian joint venture with Carlsberg to focus more on the domestic market as well as exports to India by Lion.
According to comments in the group's Financial Year 2011 annual report by its Chairman Tilak De Zoysa, who indicated that faced with a choice between more investment in the "long haul" Indian market, or the "fairly lucrative" local market, the "likely" option would be a sell out of its Indian stake to Carlsberg.
Mr. De Zoysa also revealed that the company had just concluded a 30% expansion to its capacity which saw the total volume brewed during 2010-2011 to 80 million litres, in response to increased domestic demand which he identified as arising from "new regional markets, higher disposable incomes, growth in tourism and a conducive environment for entertainment events." In total, this segment had witnessed a 61% year-on-year growth to Rs. 1.0 billion in PAT.
Additional comments by Mr. De Zoysa also hinted at a possible shift in the strategy of Carson's plantation business, especially considering a recent US$ 36 million acquisition of a palm oil processing facility and specialty fats manufacturing unit based in Malaysia with production facilities in India. He noted that the "Indian market in particular, will offer vast growth opportunities due to its population, growing incomes and better lifestyles. This acquisition compensates the sector’s risk exposure to the vagaries of the commodity business by opening up a market with more predictable demand supply conditions and greater price stability.
The speciality fats production units in Malaysia and India supply the bulk of their produce as input into the processed food industry and thus move our plantation business closer to the value added consumer end of the industry. Meanwhile, our upstream expansion continues to grow with hectarage increasing to 97,823 ha, helping us secure further economies of scale leading to lower unit costs. Scaling up of operations has also secured us the opportunity to further mitigate our cost structures by having our own logistics and supply chain arrangements, R&D facilities, bulk buying economies, which would otherwise have not been possible with a smaller scale of operations."
This business had shown a 83% year-on-year growth to Rs. 6.7 billion in PAT.
Attributing the successes of Carson's investment arm to what he called the "superlative performance of the Colombo Stock Exchange for the second year running," Mr. De Zoysa indicated that the group had increased its "discretionary portfolio within the investment sector to Rs. 15 billion," a situation he attributed to "[branching] out into several business segments that complemented its original focus on managing a listed portfolio. |
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