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Dockyards recorded a 70% increase in profits, despite a decline in turnover, during the nine months to September 30, 2002, as compared to the first nine months of 2001. The decline in turnover to Rs. 3,883 million is mainly due to the decline in the number of orders recognised. Dockyards accounts for long-term contracts on a work completion basis. According to the company, many contracts have been taken up in 2001 but only some were completed during the current period. As a result the turnover growth is not seen; nevertheless, profitability has improved.

Gross profit increased by 6.6% due to a 10.5% reduction in cost of sales and profits from contracts in previous periods recognised during the current period. Operating profit is up by 31.3%, as other operating expenses have reduced considerably by 65% to Rs.17.7 million. The drop in other operating income (which includes, exchange losses and provision for stock losses) can be largely attributed to the reduction in exchange loss, due to a lower depreciation in the rupee. Furthermore, the administration expenses have increased only marginally, by 1.06%.

The 77.8% increase in PBT is also aided by a 49% decrease in the finance cost to Rs.44.6 million, with long-term loans declining by 39%. The company's overdraft has been at a lower value during most of the quarter, even though it picked up to Rs.1.7 billion as at the balance sheet date. This was between Rs. 300 million to Rs.1.2 billion most of the year. Dockyard has not benefited from tax reduction as shown by its tax liability, which has increased by 100% to Rs.82 million. Dockyards did not experience any advantages from the removal of the surcharge as it is not applicable to the company's foreign sales. The overall result is that its net profit is up by a lower 70%.

We expect the company to continue its profitability during the last quarter, from increased profit recognition from ongoing projects. However a significant growth in turnover is unlikely, since the demand is not expected to grow immediately. We believe that the lower depreciation in the rupee to further reduce other operating expenses and more completions of contracts will enable dockyards to earn higher profits.

Grain records Rs.36.5 million profit during 3Q 2002

Ceylon Grain Elevators is starting to make profits again after a lapse of three years, with a profit of Rs.36.5 million for the three months to September 30, 2002.

The net loss of Rs.94.5 million, incurred during the first half of the year has been partly wiped off to Rs.58 million during the quarter. Turnover has grown by 7% mainly due to the increased sales in the local market.

The company recorded an operating loss during the first nine months of 2001 but has managed to convert it into a profit of Rs.19.76 million, during the period under review. Due to the introduction of the VAT system Grain Elevators have started to make a profit of almost Rs.9 per chick sold.

This has resulted in a 15% jump in the Gross profit to Rs.161 million. The increase in operating profit is also due to a 44% decline in the other operating expenses.

The 7% increase in the interest cost, to Rs.122.4 million has managed to reduce the loss before tax to Rs.96.8 million from a loss of Rs.144.9 million previously. The Group borrowings have declined by 8% to Rs.894 million as at the balance sheet date. However the borrowings were around Rs.950 million during most of the year, and this can be identified as the reason for the increase in the finance cost. Minority interest has increased by 129% to Rs.31.4 million.

We expect the losses of the first half to be completely wiped off during the second half and the company to break even during the last quarter. The company's eight year tax holiday will expire on December 17, 2002. To make use of the tax holiday, Grains would do well to distribute its retained profits within one year from the expiry date of the tax holiday. The company's retained earnings were Rs.288 million as at September 30, 2002, which constitute to Rs.4.80 per share.

(Source: HNB Stockbrokers Pvt Ltd)

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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