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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Plantations hurt E.B. Creasy bottom line

Plantations hurt E.B. Creasy bottom line

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1Plantations hurt E.B. Creasy bottom line Empty Plantations hurt E.B. Creasy bottom line Sat Jun 23, 2012 8:40 pm


Global Moderator
Other sectors & sale of investments mitigating factor

E.B. Creasy & Company PLC, a conglomerate with interests in manufacturing, plantations, leisure, distribution and trading had seen group profits drop during the year ended March 31, 2012 to Rs.1.79 billion from Rs.2.1 billion the previous year.

Net profits attributable to equity holders of the parent (E.B. Creasy) were down to Rs.369.8 million from Rs.681.1 million a year earlier.

The company’s Chairman, Mr. A. Rajaratnam, reported to shareholders that the group had recorded a consolidated turnover of Rs.27.9 billion, up 6.2% from the previous year, and a pre-tax profit of Rs.2.1 billion against Rs.2.3 billion a year earlier.

"The adverse performance of the plantations reflected in the group results was mitigated by the favorable performance of the other sectors of the group and profits from the sale of investments," Rajaratnam said.

He noted that at company level revenue was up 16.5% to Rs.1.8 billion although profits declined by 11.6% from the previous year’s Rs.92.5 million attributing

the lower profit to foreign exchange losses, increased financial charges and lower dividends received from subsidiaries.

The directors have recommended a first and final dividend of Rs.10 per share for E.B. Creasy PLC which has a stated capital of a very modest Rs.25.7 million.

The company with a modest stated capital of Rs. 25.7 million had a capital reserve of Rs.873.5 million, a general reserve of Rs.148.4 million and retained earnings of Rs.1.6 billion in its books as at March 31, 2012.

In a management review, shareholders have been told that the group continues to retain "a satisfactory financial position."

"All our businesses incur large amounts of capital expenditure in order to maintain a strategically important position in their business sectors. This is in addition to the investments in acquiring strategic businesses," the review said.

It explained that funding these capital requirements had been accomplished from internally generated funds and borrowings and the group had been able to raise the necessary debt capital on a cost effective basis due to the company’s adequate equity and asset base.

The review said that the construction industry which had suddenly become dormant after a brief period of hyper-activity consequent to the end of the war, had shown signs of awakening again.

This has helped the paint industry to record commendable growth during the year. Although there was a turnover jump from the previous year, the sharp increase in raw material prices had adversely affected profitability.

The plantation wage hike had resulted in the tea industry having a financially disastrous year with prices too were affected negatively by events in the Middle East and economic instability in the Euro Zone.

Rubber prices had remained strong with heavy Chinese buying and although Agarapatana Plantations lost Rs.550 million, Kotagala Plantations (with a rubber portfolio) had posted "a satisfactory profit" of over Rs.438 million during the year under review.

The E.B. Creasy group is now going into oil palm cultivation. Some old abandoned rubber lands are being planted with this crop and over 1,000 ha. of oil palm plantation is expected to be established by the end of 2014.

The company has also commenced planting rubber in some of the lower elevations estates in the Uva where poor yielding tea is being replaced by cinnamon, a high value crop.

E.B. Creasy subsidiaries in the leisure sector, Sigiriya Village Hotels, Marawila Resorts and Beruwela Resorts have all recorded improved profits and they continued to upgrade their properties and build additional rooms to achieve higher rates and improve sector revenue.

"These investments will greatly improve our profitability from this sector into the future," the review said.

The year under review had also seen the group consolidating its presence in the Southern coast with the purchase of Galle Fort Hotel (Pvt) Limited, a boutique hotel.

Although the current economic downturn in key European markets poses a challenge to the tourism industry in the short-term, they believe that the long-term outlook remained positive and the group is well positioned to be a leading player in the tourism industry.

They also held properties in the East coast, Kandy and Weligama ready to be developed as the need arises to accommodate larger arrivals of tourists.

Their recently acquired C.W. Mackie group of companies had recorded excellent results with export trading and internal distribution activities with a turnover of Rs.9.7 billion and a net profit after-tax of Rs.385.3 million.

The Colombo Fort Land and Building Company with 52.97% is the controlling shareholder of E.B. Creasy followed by Dr. T. Senthilverl with 16.14% and Union Investments with 6.61%. Other members of the Colombo Fort Land & Building Company - Colombo Fort Investments, Colombo Investment Trust and Colonial Moors are also among the 20 top shareholders of the company.

The directors of the company are: Messrs. A. Rajaratnam (Chairman – Alternate Anushman Rajaratnam), S.D.R. Arudpragasam (MD), S. Rajaratnam (Deputy MD), R.C.A. Welikala, R.N. Bopearatchy, P.M.A. Sirimane, A.R. Rasiah and S.N.P. Palihena.

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