Cargills (Ceylon) PLC announced, Monday 31st May 2021, its consolidated financial results for the year ended 31st March 2021. The Cargills Group played a pivotal role during the COVID-19 pandemic as an essential service provider, stepping up to serve the needs of the Sri Lankan consumer. Staying true to its commitments to the agricultural and dairy farming communities, Cargills continued its collection of fruits, vegetables, and dairy without disruption, providing a consistent marketplace for farmers. Cargills generated direct income of over Rs 9.5 Bn for local fruit, vegetable, and dairy farmers during the year, sourcing over 39,000 metric tons of fresh produce and over 58,000 metric tons of fresh milk from smallholder dairy farmers across the country. In the context of national contribution, the Group’s sourcing operations account for 12% of the domestic fresh milk supply and 2% of the country’s vegetables and fruits production.

The Group maintained its capital investments during the quarter, continuing to invest in manufacturing facilities which produce locally sourced consumer foods that compete with international brands and expanding the retail footprint with a focus on providing a safe shopping experience. Cargills is committed to ensuring customers receive international standard products at affordable prices. The Group’s capital investment for the year was Rs. 6,404 Mn vs. Rs 5,519 Mn in the previous year.

Financial Performance

The Group recorded a turnover of Rs. 112,607 Mn for year ended 31 March 2021, a 5.2% increase YoY. Group turnover was driven by healthy growth in the Food & Beverage Manufacturing and Distribution sector and a steady performance of the Food Retailing Sector.

The Food Retailing sector was the most impacted business in the Group given its vast distribution network. As the largest supermarket chain in the country by revenue and the only private supermarket to serve every district of the country with over 450 outlets island wide, the sector faced unprecedented challenges during the year including lockdown related outlet closures and some impacts to the supply chain. Despite over 12% of business hours being lost due to lockdowns, which had a 11% impact on turnover, the Food Retailing sector posted a turnover of Rs. 87,148 Mn for year, a growth of 3.7% from the previous year. It is noteworthy to mention that 103 of the Group’s supermarket outlets were closed for a period of 50 days during the year, highlighting the impact of the pandemic. Sector revenue was driven by higher basket sizes as consumers consolidated purchase patterns by reducing the frequency of visits due to virus concerns. We expect this trend of higher basket sizes and lower frequency of visits to continue until virus related concerns subside. Despite the challenges faced, the Group continued its investments in the Food Retailing sector, adding 43 new stores which represents 8.8% of the retail space. The Group’s new e-grocery store ‘Cargills Online’ commenced operations in August 2020 and currently serves the greater Colombo area. Sector operating margins declined on account of the impact on topline growth and was further impacted by the imposition of maximum retail prices on selected imported commodities.

The Food & Beverage Manufacturing and Distribution sector recorded a gross turnover of Rs. 29,911 Mn, a 9.5% increase YoY, driven by performance of the dairy, confectionery, culinary & convenience food categories. The Group’s brands have become sought-after national brands which provide high quality consumer foods that compete with international brands in the local market. The popularity of the Group’s brands is clearly indicated by the performance of the sector during the year. The Group invested in capacity enhancements, new product development, as well as in securing and strengthening the supply chains during the year.

The Restaurants sector recorded a turnover of Rs. 3,423 Mn, a 17.6% decline due to the COVID-19 situation and customer concerns about dining out. All outlets remained closed during the lockdowns, operating only via the delivery channel. Following the relaxation of restrictions, a clear shift was seen in the channel mix with more customers preferring take-away and delivery options. KFC operations added 2 new outlets during the year with drive-thru facilities to facilitate the growing demand for the take-away channel.

Group operating profit increased 3.5% YoY to Rs. 7,308 Mn for the year, as efficiency improvements and product mix led to margin expansions in both the Food & Beverage Manufacturing and Distribution sector and the Restaurant sector. Group profit after tax increased 26.2% during the year to Rs. 3,484 Mn.

For the quarter ended 31 March 2021, the Cargills Group recorded a turnover of Rs. 30,007 Mn, a 6.6% increase from the corresponding period last year. Quarter performance was driven by the Food & Beverage Manufacturing and Distribution sector and the Restaurant sector. Group profit after tax increased 65.9% during the quarter to Rs. 1,752 Mn.

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