Pandemic sends Ceylon Cold Stores deep into red

The performance at Ceylon Cold Stores PLC (CCC) for the quarter ended June 30, 2020 (1Q21) showed the extent to which coronavirus-related lockdowns had inflicted damage to consumer demand in a period where retail stores remained closed and people’s movements restricted.

The company’s sales fell 26 percent during the Apriljune quarter to Rs.12.4 billion from Rs.16.7 billion in the comparable period of last year, as both its manufacturing and retail operations were derailed by virus-related restrictions. CCC’S revenues rose by 17 percent year-on-year (YOY) to Rs.18.1 billion during the previous quarter ended March 31, 2020, due to revitalised consumer demand seen at the beginning of the year before the pandemic brought it to a halt.

Sri Lanka’s low e-commerce penetration generated much lower revenue in the FMCG category during the pandemic, although the products were made available through online platforms and mobile delivery channels, Fitch Ratings said last week.

CCC had to suspend manufacturing of Elephant House branded beverage and frozen confectionary on March 20 complying with the curfew before resuming operations with the gradual easing of lockdowns.

Meanwhile, its chain of ‘Keells’ retail outlets also remained closed at the height of the pandemic before re-opening for customers with the gradual easing of lockdowns, though they were operating at a reduced scale during most of May.

The company reported a loss of Rs.349.9 million or Rs.3.68 a share for the period compared to a profit of Rs.412.1 million in the comparable period last year.

The company’s share ended Rs.29.90 lower or 4.27 percent at Rs.670.10 at last week’s close.

The three months under review however gave the company the ability to cut its advertising expenditure by 36 percent to Rs.442.2 million compared to last year because advertising made little sense when consumers didn’t have much access to the company’s products or make in-person visits to the retail stores to buy household goods and consumer staples.

However, the cut was insufficient for the company to avoid a loss as the impact on the company’s retail sales was so pronounced as the restricted access deeply cut into people’s ability spend.

The retail sales dropped by about Rs.3.0 billion to Rs.9.97 billion for the three months, plunging the company into a loss, as the operation was heavy with fixed costs such as rent and staff salaries.

Meanwhile, the manufacturing activities of the group saw its revenues declining to Rs.2.5 billion from Rs.3.9 billion.

During the three months under review, the company nearly doubled its short term borrowings to Rs.2.9 billion from Rs.1.5 billion.

It also settled nearly a billion rupees of its overdraft during the period.

John Keells Holdings PLC has 70.66 percent stake in Ceylon Cold Stores.