JKH posts stellar 3Q performance

• EBITDA up 32% to Rs. 13.74 b; Group PBT soars 88% to Rs. 5.49 b; bottom line up 51% to Rs. 2.99 b

JKH Chairperson Krishan Balendra

Top blue chip John Keells Holdings yesterday reported impressive results for the third quarter of FY24 with all industry groups recording a growth in profits.

Group revenue improved by 6% to Rs. 72.26 billion whilst for the first nine months it was down by 4% to Rs. 200.15 billion.

Group earnings before interest expense, tax, depreciation and amortisation (EBITDA) grew by 32% to Rs. 13.74 billion, with strong contribution from the Consumer Foods and Insurance businesses.

Cumulative Group EBITDA for the first nine months of FY24 was down 6% to Rs. 31.03 billion. This was mainly on account of the EBITDA of the Group’s Bunkering business in the 2Q of the previous year, which recorded a substantial increase in profitability in its core ship bunkering operations driven by higher margins due to the significant increase in global fuel oil prices. The translation impact on US Dollar denominated revenue streams of the Group stemming from the appreciation of the Sri Lankan Rupee also contributed to this decline.

Group profit before tax (PBT) rose by 88% to Rs. 5.49 billion due to the increase in EBITDA together with the gradual easing of interest rates and normalised working capital requirements, particularly in the Consumer Foods and Supermarket businesses.

Cumulative Group PBT for the first nine months was down 67% to Rs. 6.73 billion. 

Cumulative PBT for year under review includes a net exchange loss of Rs. 1.14 billion including the exchange loss on the $ 225 million term loan facility at Waterfront Properties Ltd., on account of the transition of its functional currency from USD to LKR, whilst the first nine months of FY23 included Rs. 7.61 billion of net exchange gains recorded primarily on US Dollar denominated cash holdings and liabilities at the Holding Company, resulting from the steep depreciation of the Sri Lankan Rupee against the US Dollar during the quarter.

Profit attributable to equity holders of the parent grew by 51% to Rs. 2.99 billion in 3Q and whilst for the first nine months it was down by 74% year on year to Rs. 3.88 billion.

JKH announced a second interim dividend of 50 cents per share to be paid on or before 4 March 2024.

In his review JKH Chairperson Krishan Balendra said the operating environment in the country continued its steady normalisation supported by sustained improvement in the country’s key macro-economic indicators, with a further reduction in interest rates, inflation remaining at low single digits and the Sri Lankan Rupee remaining stable on the back of improved foreign exchange inflows.

JKH said the Consumer Foods industry group recorded a significant increase in EBITDA on account of both the Beverages and the Frozen Confectionery businesses, driven by improved margins, as input costs have normalised from the previous peaks, and reductions in overhead costs.

The Supermarket business recorded a strong performance in revenue during the quarter, with same store sales recording an encouraging growth of 11%, driven by growth in customer footfall of 16%. Despite the revenue growth, EBITDA remained flat primarily on account of electricity cost increases.

In November 2023, the Company partnered with BYD Company Limited, the world’s leading manufacturer of new energy vehicles (NEV), to provide cutting-edge and eco-friendly vehicles to the Sri Lankan market. This new business will operate under the Retail industry group considering its alignment with the business and potential synergies.

JKH said the Sri Lankan Leisure businesses continued to record an improvement in performance, with an increase in occupancies and room rates across properties, on the back of a sustained recovery in tourist arrivals to the country. The Colombo Hotels segment continued its strong performance in restaurant operations whilst recording an increase in the number of events and banquets.

The renewed sales momentum at ‘TRI-ZEN’ is encouraging and shows that the market is beginning to adjust to the new price levels in the industry. The preliminary sales interest for the ‘Viman’ project has been very encouraging with over 70 SPAs signed to date out of a total of 114 units in the first phase of the project.

The profitability of Union Assurance PLC (UA) was driven by the life insurance surplus which recorded an increase against the corresponding period of the previous year. UA recorded encouraging double-digit growth in gross written premiums, driven by renewal premiums, and higher yields on investments. NTB recorded a growth in profitability aided by loan growth, lower impairments and increased trading and fee income.

JKH said the groundwork on the West Container Terminal (WCT-1) at the Port of Colombo is progressing well, with all construction work relating to the first phase of the project (800 meters of quay length) being awarded, including the commissioning of the first batch of operating equipment. The US International Development Finance Corporation (DFC) announced, in November 2023, that it has committed to finance the development of the WCT-1 project through a long-term loan facility of $ 553 million.

It said further to the entering of the Memorandum of Understanding (MOU) with the selected international gaming operator, a significant amount of advanced design work, engineering and other construction and planning related aspects have been completed. The significant groundwork completed by both parties will enable, and pave the way, for a timely and rapid completion of the fit-out of the gaming space, once commenced.

The parties are now working on the final stages of establishing the corporate and administrative framework which will enable commencement of fit-out at the earliest.