Net Profit of Sri Lanka’s Cargills Group has declined by a sharp 60% to Rs. 649.6 million for the year ended 31st March 2014 from Rs. 1.6 billion a year ago, financials showed. Acknowledging the performance was below expectation, the Chairman of the group said it was largely due to the change in fair value of investment property, which was substantial in the previous year while group results were also impacted by increases in operating costs, taxation and finance costs.
“The 25% restriction on VAT exempted supplies imposed in the Budget of 2014 presented a substantial challenge to the core Retail sector. Further, the slowdown in the Agriculture sector combined with Construction sector growth not resulting in short-term consumer benefits has adversely impacted consumption across sectors,” the management noted.
According to Chairman of Cargills (Ceylon) PLC, Louis Page the Supermarket business of the group during the period under review was particularly challenged by the restriction on VAT exempted supplies. Page noted that at the time of imposition more than 40% of the business constituted of VAT exempted items such as rice, sugar, milk powder as well as fruit and vegetables which are also not price-marked. The additional VAT impact attributed to the 25% cap on VAT exempted turnover was Rs. 122.5 Mn from January to March 2014, the management pointed out.
“However the Company remained aligned to its price leadership positioning and did not pass this cost to the consumer. This resulted in the profitability of the sector being negatively impacted in the last quarter of the financial year,” Page told stakeholders in the company’s Annual Report 2013-2014 released last week.
He added that they were of the view that the cap on VAT exempted turnover only applicable to the retail trade should be reviewed with a more macroeconomic perspective taking into account the need to create and expand formalized and sustainable markets for VAT exempted local products. Meanwhile, Cargills Chairman Louis Page claimed that post-harvest practices adopted by the group has reduced food waste within its agriculture supply chain to 3-4% compared to national post-harvest waste that is as high as 30%.
“It is heartening to see other players in the industry taking the same route with ultimately the consumer and the local producer benefiting from these efficiencies,” he pointed out.
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“The 25% restriction on VAT exempted supplies imposed in the Budget of 2014 presented a substantial challenge to the core Retail sector. Further, the slowdown in the Agriculture sector combined with Construction sector growth not resulting in short-term consumer benefits has adversely impacted consumption across sectors,” the management noted.
According to Chairman of Cargills (Ceylon) PLC, Louis Page the Supermarket business of the group during the period under review was particularly challenged by the restriction on VAT exempted supplies. Page noted that at the time of imposition more than 40% of the business constituted of VAT exempted items such as rice, sugar, milk powder as well as fruit and vegetables which are also not price-marked. The additional VAT impact attributed to the 25% cap on VAT exempted turnover was Rs. 122.5 Mn from January to March 2014, the management pointed out.
“However the Company remained aligned to its price leadership positioning and did not pass this cost to the consumer. This resulted in the profitability of the sector being negatively impacted in the last quarter of the financial year,” Page told stakeholders in the company’s Annual Report 2013-2014 released last week.
He added that they were of the view that the cap on VAT exempted turnover only applicable to the retail trade should be reviewed with a more macroeconomic perspective taking into account the need to create and expand formalized and sustainable markets for VAT exempted local products. Meanwhile, Cargills Chairman Louis Page claimed that post-harvest practices adopted by the group has reduced food waste within its agriculture supply chain to 3-4% compared to national post-harvest waste that is as high as 30%.
“It is heartening to see other players in the industry taking the same route with ultimately the consumer and the local producer benefiting from these efficiencies,” he pointed out.
www.nation.lk/
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