"Sri Lankan businesses were challenged by the shifts in macroeconomic variables that took place within the (2011/12 financial) year under review. The significant devaluation of the currency, the rise in interest rates caused by rapid credit growth and a consequent drying up of liquidity in the monetary system, coupled with the overall energy cost increase, proved to have a compounding effect on cost escalations, which if followed by inflation will further lead to cost pressures," Carson Cumberbatch PLC Chairman Tilak de Zoysa told shareholders in the company’s latest annual report.
"Having experienced a two year run of increased profits in 2010 and 2011 driven by the post war boom, the business community will now have to go through a period of adjustment to the new reality of high cost structures. While changes in macroeconomic variables are inevitable, we hope that in future they would be allowed to take on a more gradual adjustment process so that businesses can deal with the changes at a slower pace. We do believe that the measures taken to correct the situation will stabilise interest rate and currency pressures in the months ahead. Although these measures will slow GDP growth initially; in the long run, the tightening of controls will enable us to manage the development phase of the economy better," he said.
Economists had warned that a balance of payments crisis was looming as far back as June 2011 but nothing was done to prepare for it except hope that foreign investment inflows would improve. The government did depreciate the rupee to a limited extent last November, but this did little to stall the crisis. The depreciation announcement which came at the 2012 Budget Speech also dented the Central Bank’s credibility.
"The Carson’s Sri Lankan businesses were able to manage these impacts well and continue investing in their growth plans, after building in the necessary contingency plans for dealing with the changing economic variables. It must be noted that both the brewery and investment businesses, which recorded encouraging performances within their respective market conditions, will be the key local businesses for the Group into the future. The brewery sector exited from its investment in India to focus more on the local market, which has better prospects for immediate growth," De Zoysa told shareholders.
"Our brewery business invested Rs1.35 billion during the year under review on capacity enhancement and working capital, in anticipation of booming demand due to tourism and increased market access. The investments sector also likewise invested almost Rs.900 million as seed capital into new growth segments like private equity, our in house country fund and unit trusts floated through a joint venture partnership, to build up these businesses for the future. We assess both sectors to be in the initial stage of their life cycle and therefore well positioned to benefit from the medium to long term growth of the economy," he said.
Group revenue had increased 99 percent to Rs. 69 billion during the year under review while net profits increased 5 percent to Rs. 10 billion.
The group has interests in the plantations, oils and fats sector, beverages, real estate, leisure, management services and investment and asset management.
Carson Cumberbatch PLC Board of Directors comprise; T. de Zoysa (Chairman), H. Selvanathan (Deputy Chairman), M. Selvanathan, I. Paulraj, D. C. R. Gunawardena, S.K. Shah, P.C.P. Tissera, V.P. Malalasekera, M. Moonesinghe, F. Mohideen and an Alternate Director in K. Selvanathan (for M. Selvanathan).