Carsons profits high but not having best of both worlds

Overseas Investments bear fruit as local Portfolio deals with Macro Pressures

Carson Cumberbatch & Co. Ltd. reported a group profit after tax of Rs.1.1 billion for the first quarter of the current financial year. This represents a growth of over 124 per cent when compared with the first quarter profits of Rs. 490.2 million of the previous year.

The group’s total asset base grew to Rs.27.6 billion at the end of the quarter from Rs.22.1 billion as at the comparable date last year. The growth has been financed from internal generations and borrowings. A significant proportion of cash generated from operations has been re-invested in the business, thus building capacity for future profitability. The group now stands ready to move into a new phase of growth and expansion.

The overseas oil palm plantation business of the group performed beyond expectations benefiting from higher prices for the commodity in world markets; as well as economies of scale resulting from the expansion of the plantation base that led to effective cost management. Commodity prices were boosted by the growing demand for palm oil fuelled by its increased usage in growing markets such as China and India for value added products and as a renewable energy source.

The other key business segments of the group, namely, investments, beverage, real estate and leisure experienced slower growth due to sensitivities in the local environment. The beverage business performance continued to be affected by high taxes, retailing restrictions and proliferation of illicit liquor that led to lower demand in the local market. Though the low-alcohol segment volumes dropped, the company managed to maintain its market share. South Asia Breweries, the group’s Carlsberg led joint venture in India just commenced construction of its third brewery in that country. Located in Maharashtra, this green field plant will join the already operational Himachal plant acquired a few months ago.

The real estate sector has embarked on an ambitious plan to undertake extensive development projects in the suburban housing market and these projects are now in progress. Carsons Real Estate is the newest player in the market and is expected to reach the hearts of those searching fashionable, hassle-free housing solutions. Two new schemes are scheduled to be launched during the calendar year. In spite of the adverse conditions posed by high interest rates affecting both housing loans and project financing, slowing down of local expatriate investments in the country and developer-unfriendly regulations imposed by the relevant authorities – the group is moving ahead with its ambitious development plans. The group’s property rental business brought in modest profits during the period, whilst recording occupancy of 90 per cent.

The investments sector – though vested with a substantive portfolio of listed equities in high growth listed companies – was affected by the low level of activity in the bourse. Though showing correlated decline, investment sector’s short-term and long-term portfolios performed marginally better than the ASPI during the quarter under review.
In general terms, all operations have been negatively affected by the high cost structures resulting from steep energy costs, petroleum prices and the escalating costs of financing. The company is hopeful that its investments in the brewing industry in India together with Carlsberg, plus, its entry into active real estate development would contribute to the bottom line over time.