Kotmale posts Rs 57 million profit at 3Q

Strong growth in the liquid milk based product segment has enabled Kotmale Holdings PLC to post a pre-tax profit of Rs 57 million for the nine months ending December 31, 2009, despite a slowdown in the powdered milk business.

Figures released to the Colombo Stock Exchange reveal that Kotmale, the owner of one of the largest dairy product portfolios in Sri Lanka, maintained pre-tax profit on par with that of the corresponding period of last year, although turnover for the period at Rs 1 billion was marginally lower. The company reported a profit after tax of Rs 42 million, which represented a 10 percent decline due to a deduction of Rs 9.4 million on account of withholding tax on inter-company dividends.

Commenting on these results, Kotmale Holdings Director and CEO Jude Fernando said rising world market prices for powdered milk at a time when domestic retail prices were capped and increased import duties prevailed, compelled the company to curtail import and sales until conditions were more favourable. A volume-driven business, powdered milk previously accounted for about a third of Kotmale’s turnover. Nation Building Tax, which became an additional charge to the bottom line this year due to the nature of the business also impacted on the company’s figures, he said.

However, improved efficiencies had enabled Kotmale to reduce cost of sales by 5 percent and finance expenses by a hefty 68 per cent during the review period. The liquid milk based product segment recorded a strong performance improving turnover by 23 per cent and posted a remarkable profit growth of 149 per cent, Fernando disclosed. Administrative expenses reduced by a marginal 2 percent.

Net profit after tax, discounting the withholding tax on inter-company dividends, would have reflected a growth of 9 percent over the first nine months of last year, he said. “The Group’s operational performance at the end of the third quarter is encouraging and cause for optimism,” he said. “We have achieved noteworthy volume growth in the local market, strengthened our skills base and expanded our distribution network. We also believe our portfolio is now better balanced for good long term prospects,” he said.

Kotmale’s net assets per share at consolidated level stood at Rs 16.26 as at December 31, 2009, as against Rs 12.99 a year earlier. The Kotmale Group of companies traces its beginnings to 1979 and the cool climes of Bogahawatte in upper Kotmale, also known as the Kotmale valley where it began business as a manufacturer of cheese.

Today, the company is the local market leader for liquid milk, employs 370 people at three manufacturing plants in Bogahawatte, Mulleriyawa New Town and Kalutara, and purchases more than 10 million litres of fresh milk per annum, from 7,000 dairy farmers.