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| Thursday, 25 September 2003 |
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Keells Foods to outsource production to Grain Elevators? Keells Food Products (KFP) rose by Rs. 3 to a new one-year high of Rs. 28 when trading began yesterday amidst market speculation that the company was close to signing a deal with a competitor to outsource production, with Ceylon Grain Elevators (CGE) tipped as the likely candidate. Despite dominating the processed meats market, Keells Foods has suffered losses during the past two years due to depressed economic conditions, industrial disputes and high operating costs. Analysts have pointed out that KFP's relatively high cost structure and lack of backward integration have hampered the company. Market sources argue that some form of outsourcing arrangement with CGE would be a win-win situation for both companies, as KFP would benefit from a lower cost of production while CGE would gain from Keells marketing expertise. CGE's own processed meat products under the Prima brand, despite being much cheaper, are thought to have under-performed due to inadequate distribution and marketing support. Following yesterday's exclusive story in the Daily News on a potential bonus at Central Finance the share once again headed the day's top performers, gaining a further Rs. 33.50 to close at Rs. 299 on continued retail buying. Hotel Developers, owners of the Colombo Hilton, also was subject to strong buying interest amidst widespread speculation that the government was looking to sell its controlling stake in the company. The share gained Rs. 11 during the day to close at Rs. 56. Foreign buying continued to be noticeable in National Development Bank (NDB) and analysts pointed out that the share remained undervalued when compared with its competitor DFCC Bank. Foreign buying was also evident in Sampath Bank with over 590,000 shares being traded. Among the sellers are believed be parties connected to business tycoon Harry Jayawardena Sri Lanka Telecom (SLT) continued to be heavily traded, with over 6.4 million shares being traded during the day at between Rs. 23 and 24. While domestic units were seen to be topping up their exposure to SLT, foreign funds were however on the sell side. The All Share Index closed at an impressive 30.9 points (provisionally) to close at 1,285.3 points while the Milanka Index closed up 64.6 points to close at 2,431.3 points. The day's turnover was over Rs. 1 billion for the fourth consecutive day, at Rs. 1,109 million, with foreigners however being net sellers to the tune of Rs. 107 million. (RL) |
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