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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Laugfs retires all debt with IPO cash, grows profits

Laugfs retires all debt with IPO cash, grows profits

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Director - Equity Analytics
Director - Equity Analytics

Strategizes for greater LPG penetration

Laugfs Gas PLC has grown group revenue 30% to Rs.9.17 billion in the year ended March 31, 2012 and the profit after-tax 9% to Rs.930.3 million. At company level, revenue was up 29% to Rs.8.4 billion and the profit after-tax was down 16% to Rs.569.4 million from Rs.676 million earned the previous year, its annual report revealed.

Rs.2.5 billion cash was infused to the company through a very successful IPO in December 2010 enabling Laugfs to settle all debts, invest in the expansion of LP gas storage capacity and increase investment in the leisure and property development sectors, the report said.

"With the interest rates increasing again by the year end and the expected increase in the future too, the company has an advantage due to reduced finance cost through the settlement of all bank loans," it said.

Laugfs Chairman W.K.H. Wegapitiya said that their latest annual report was especially significant since it presented the performance of the company for the full year of business operations after its IPO in December 2010.

He described the performance as solid with pre-tax earnings up 10%. Group earnings before-tax would have been more attractive but for the negative impact arising from the depreciation of the rupee against the US dollar, he said.

"As you are aware, your company imports major portion of its LP gas requirements from overseas destinations and this makes it vulnerable to the adverse exchange rate fluctuations, especially from the time since the Central Bank allowed greater flexibility in the exchange rates with its limited interventions in the domestic foreign exchange market, from the beginning of last quarter of the financial year," he said.

Wegapitiya said that their financial position was robust with the company’s net asset value up Rs.343 million to Rs.6.4 billion.

They were working on a property development project at Maya Avenue, Colombo 6, expected to be completed ahead of schedule by early next year and be ready for occupation by the middle of 2013. He said that market requirements will determine the use of the 10-storey building with a total floor area of 79,500 sq. ft.

The petroleum industry here comprised four distinct market segments – petroleum fuels, LP Gas, bunkering and lubricants, Wegapitiya explained. The industry was almost totally import dependent and vulnerable to global supply and demand, international politics and even seasonal conditions in respect of some products.

He estimated that over 85% of total LP Gas demand in the country through 2015 is expected to occur in just two end-use sectors – domestic and commercial with only modest growth expected in other end-use markets for LP gas.

"LP gas plays a pivotal role in the transition towards a more secure, sustainable and competitive energy model that has to be promoted extensively in our country in its path to sustainable economic development," Wegapitiya said.

In this backdrop the Indian experience will be a role model for Sri Lanka as 130 million households in India or 700 million of its population has access to LP gas, he said. This is a 58.3% penetration level against Sri Lanka’s 30%.

Laugfs had completed mapping out its strategy to achieve the highest possible level of penetration here for LP Gas in the ensuing years, Wegapitiya said.

Laugfs has a stated capital of Rs.3.29 billion, a revaluation reserve of Rs.1.04 billion and retained earnings of Rs.2.08 billion in its books. Total assets were running at Rs.10.64 billion and total liabilities at Rs.4.24 billion.

Laugfs Holdings Ltd with 67.80% of the company and the EPF with 17.28%, up from 5.60% the previous year, are the two biggest shareholders. The Laugfs Holdings percentage was down from the previous year’s 77.61%.

The EPF with 34.69% is the biggest non-voting shareholder followed by the Bank of Ceylon with 6.18%.

Laugfs paid a first and final dividend of Rs.1.50 on August 2, 2012 for the year under review.

The directors of the company are: Messrs. W.K.H. Wegapitiya (Chairman/CEO), U.K. Thilak de Silva (MD), H.A. Ariyaratne, T.K. Bandaranayake, C.L. de Alwis and P.M. Kumarasinghe.

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