JKH’s food sector drops as inflation, high prices hurt consumers

A top Sri Lankan conglomerate says that whilst the environment for business here has many challenges, there are also many opportunities too.

“The continuing volatile and uncertain environment created by the conflict in the North and East, high inflation and the resultant high interest rates are a concern. Notwithstanding these challenges, the group continues to be optimistic and is aggressively pursuing several investment opportunities in Sri Lanka and the region to further strengthen and supplement our existing portfolio and is also driving and monitoring various internal initiatives to generate cost efficiencies and increase productivity,” Susantha Ratnayake, Chairman of John Keells Holdings (JKH) stated in the company report for the six month period to September 2007.

Group profits for quarter and the six month-period were Rs. 1.03 billion and Rs. 1.85 billion respectively, up from the previous, corresponding periods. Group revenues were Rs. 18.14 billion in the first half.

Transportation continued to be the single largest contributor to group profits. Although the leisure industry showed an improved performance over the previous quarter recording a loss of Rs. 66 million as against a loss of Rs. 351 million in the first quarter, it was still well below the industry group's performance in the second quarter of FY 2006-07. This was mainly the result of lower tourist arrivals to Sri Lanka and, the closure of Ellaidhoo Island Resort (Ellaidhoo) for refurbishment, partial closure of Dhonveli Beach and Spa Resort (Dhonveli) for refurbishment and the pre-opening operating costs of Cinnamon Island, Alidhoo, all in the Maldives. In the last couple of months, tourist arrivals to Sri Lanka have shown an improvement, relative to the first quarter, the company said.

The Consumer Foods and Retail industry group's performance was lower than the corresponding period with high inflation and spiralling prices of essential items having a significant impact on consumer spending patterns which has considerably affected the volumes of the company’s carbonated soft drinks.