LAUGFS Gas Plc gears up for long-term growth backed by strong investment

LAUGFS Gas Plc recorded healthy growth of 49% in turnover for the first half of 2017/18 driven by the group’s long- and medium-term strategic growth drivers. 

The group’s operating profit is down by 14% and Profit After Tax (PAT) was down by 85% in comparison to the corresponding period of the previous year. This is mainly attributed to a combination of market factors, mainly the rapid increase in global Liquefied Petroleum Gas prices and upward trajectory of world steel prices. 

Further, the depreciation of the value of the rupee against the US dollar and rising interest rates have impacted profitability quite significantly. While international prices of Liquefied Petroleum Gas have been rising sharply since October 2016, domestic gas prices, which are regulated in the country, have not been adjusted accordingly in the absence of a pricing formula. This has significantly eroded the short-term profitability and shareholder value of the group and the company has already made representations to the relevant authorities to rectify the situation with a long-term sustainable solution.

“In spite of the modest results of this quarter, we remain positive about our future outlook. We are focusing on aggressive yet strategically well placed investments for LAUGFS Gas Plc, which will enable us to strengthen our regional presence further in the power and energy sector. With a single-minded focus on ‘Investing for growth’, we have identified emerging market trends with tremendous growth prospects that will yield long-term returns in safeguarding our stakeholder interests,” commented LAUGFS Gas Plc Chairman W.K.H. Wegapitiya. 

“While we remain focused on the long-term growth strategy backed by strong investments, we expect the support of the relevant authorities to implement a fair and transparent pricing mechanism for LPG that will safeguard local enterprises so that we can continue to contribute to the economic growth of the country,” he stressed.

With the anticipated growth potential for LPG in South Asia, LAUGFS proactively took steps to invest in a LPG Import & Export Terminal at the strategically-located Hambantota Port. Apart from being the first and the largest investment in the Hambantota Port, this terminal will be one of the largest LPG import and export terminals in its class in South Asia in terms of storage capacity as well as the most strategic in terms of its location with access to a population of around half a billion within neighbouring countries. Value generation from the LPG Import and Export Terminal is expected from the second half of 2018.

With LAUGFS becoming Sri Lanka’s first energy brand to become a multinational with the acquisition of Petredec Elpiji Ltd. and the establishment of LAUGFS Gas (Bangladesh) in 2015, the company is all set to receive the returns of its investments in one of the most lucrative emerging markets for LPG in Asia. 

In the backdrop of the Government’s support to popularise LPG in Bangladesh as an energy alternative with the rapid exhaustion of natural gas reserves, the market potential for growth in Bangladesh remains very promising.

In January 2017, LAUGFS Maritime purchased its third LPG vessel ‘Gas Courage’ which now operates under the Sri Lankan flag. This strategic step strengthened the company’s LPG fleet to support the fast expansion of LAUGFS’s LPG’s downstream activities in Sri Lanka and Bangladesh and to cater to growing demand for LPG across the region.

In line with its visionary and global approach to sustainability and business growth, LAUGFS has been continuously focusing on sustainable energy solutions. LAUGFS’ investment in solar power generation aims to capitalise on this global trend in terms of business growth while contributing to the Government’s efforts to increase the contribution of renewable energy by 20% to the total energy requirement in the country by 2020.

“Apart from the interplay of various local and global financial and economic trends, the challenges we faced during the first half of the financial year can be attributed to the increase in finance cost triggered by the rise of general interest rates and the disparity between the world LPG price and local consumer price. We hope that the relevant authorities will take this into account and introduce a pricing formula linked to the world market price trends. Nevertheless, we are confident that our strategic direction and timely investments will steer us towards vigorous growth within the planned timeline,” commented LAUGFS Gas Plc Group Managing Director Thilak De Silva. 

LAUGFS Gas Plc is a diversified conglomerate listed on the Colombo Stock Exchange. With a strong presence in the power and energy, logistics, services, leisure and real estate sectors, the company has expanded its presence overseas, setting up operations in Bangladesh and Dubai.