Financial Times

James Finlay sees good business in cold storage
A modern cold storage, warehouse and distribution facility being built by James Finlay (Colombo) Ltd. is expected to be an important income generator for the company catering to both domestic as well as export businesses.

"It is a new venture that, hopefully, would be a quite important part of our business," James Finlay chairman Dickie Juriansz told The Sunday Times FT. The company already specialises in tea warehousing and getting into cold storage is a further expansion of this line of business, he said. Finlay's warehouse caters to eight plantation companies. The facility would be rented to users involved in food distribution here as well as exporters of sea food, fruits and vegetables.

"We believe there is demand for this type of facility. For example, if anyone wants to get into the shrimp business they would need to build their own storage plant - that's a huge entry barrier." The sophisticated facility would be helpful in the development of the whole economy, Juriansz said. Finlay's parent firm, the Swire Group, a big international operator of cold storage facilities, will provide the required technical expertise with a facility of this type requiring "first class" insulation, he added.

The plant, being built with an investment of Rs 500 million, is expected to be operational on schedule in the first quarter of 2005. Meanwhile in the company's preliminary announcement for the six months ended June 30, Juriansz said the company's financial performance was "encouraging". Provisional, unaudited results of the group showed a 35 percent growth in operating profit compared with the same 2003 period. Group net profit before tax rose 39 percent to Rs 158.9 million.

There had been "significant" improvements in return on capital employed, group cash flow and liquidity largely because of the sale of the company's plantations last year, Juriansz said.

James Finlay (Colombo) exited the unprofitable plantations business last year with the sale of its majority stakes in Udapussellawa Plantations and Hapugastenne Plantations to a subsidiary of James Finlay Limited, Glasgow, its main shareholder. However, this move has been challenged in court by certain shareholders.

Juriansz said the profitability of tea exports had improved in the first half of the year despite the uncertainty caused by the conflict in Iraq with an increase in volumes in markets generating higher margins.

Green tea exports also did well with increased demand for Chinese-type green tea. There was a "robust performance" from the non-tea business with the agencies division, which markets tea bagging machines and tea bag filter paper, doing "exceptionally well", Juriansz said.

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