Force to trim margins to stand up to competition
Coco Lanka too feels bite of East Asian crisis

Coco Lanka Ltd., Sri Lanka's only liquid coconut milk processor and exporter, has felt the bite of the East Asian crisis and been compelled to reduce prices in the latter part of the last financial year to compete with suppliers from countries benefiting from the devaluation of their currencies.

Nevertheless, the company had reached maximum export capacity although profits were down from the pervious year. The bottom line for the year ended March 31, 1998, was Rs. 23.9 million, down from Rs. 28.6 million a year earlier.

"We feel that even in the coming years too we would need to lower our profit margins to face competition due to the unexpected advantage being enjoyed by our competitors. We had been forced to postpone our expansion programme planned by our subsidiary, Coco Ceylon Ltd.,'' Dr. S.R. Rajiyah, the company's chairman said.

"Nevertheless we are confident that our continued marketing and quality control efforts would help us to sustain our export markets. Since our products have been well accepted abroad, once the currency advantage of our competitors are minimised we could se better profitability.''

Turnover during the year under review at Rs. 133.5 million, was down from Rs. 142.4 million a year earlier. The operating profit before interest was Rs. 20.8 million against Rs. 25.7 million the previous year. Interest charges at Rs. 28,877 (Rs. 41,291 the previous year) was negligible.

With other income of Rs. 3.4 million (Rs. 3.5 million the previous year), the pre-tax profit was Rs. 23.9 million. As the company's export profits are tax-exempt till March 31, 1999, and only its other income is liable to 35% tax, taxation was Rs. 0.2 million, down from Rs. 0.5 million the previous year.

The directors have recommended a tax free dividend of 20% maintaining the previous year's dividend level. This will absorb Rs. 8.4 million. With retained profits of Rs. 24.2 million brought forward, the retained profit for the year of Rs. 15.5 million boosts carry forward profits Rs. 39.7 million.

Earnings per share at Rs. 5.69 during the year under review was down from the previous year's Rs. 6.81.

With an issued share capital of Rs. 42 million, Coco Lanka which has shareholders' funds of Rs. 97.4 million in its books had net current assets of Rs. 45.5 million in its books as at March 31, 1998.

Renuka Agro Exports (Pvt) Ltd. is the major shareholder of the company with 36.3% of its shares. The directors of the company and connected companies of the Renuka group are the other major shareholders.

The directors of the company are Dr. S.R. Rajiyah (chairman and managing director), Mrs. I.R. Rajiyah, Messrs. R.B. Thmbiayah, N.A.L. Cabraal and D.K.C.R. Fernando.