Despite what its chairman called "reasonably good profits," the directors of Lanka Milk Foods (LMF) has recommended a first and final dividend of only 6% for the year ended March 31, 2004 although the group profit after-tax was up 15.2% to Rs. 151.2 million while the company profit was down 4.4% to Rs. 95.9 million.

LMF Chairman V. P. Vittachi said that the main reason for the low dividend was the steep hike in international milk powder prices which they faced today and was "a well calculated precautionary measure" in that context.

Vittachi attributed the marginal reduction in profits at company level to the increase in CIF prices of full cream milk powder in the world market further compounded by the fall in the rupee against the US dollar.

"However due to the vigilant and meticulous practices of the management of your company, the negative effects of the said criteria were minimized to a large extent," he said.

Despite the low dividend, the chairman noted that shareholders of LMF have received a total of 143.5% in dividends during the last 13 years after the privatization of the company.

LMF imports, packages and sells full cream milk powder under the Lakspray brand, skimmed milk powder, and also Happy Cow cheese and Mars chocolates. Its fully owned subsidiary, Lanka Dairies (Pvt) Limited continues to pack and sell ultra heat treated flavoured milk packs and a range of fruit drinks.

Vittachi claimed that their Ambewela farm fresh milk packs were the best produced in Sri Lanka at present.

"Since the milk is from our own cows that are scientifically bred in our own farms, the quality of milk is definitely unmatched by any other milk pack," he said.

He also reported that the company which runs the Ambewela and New Zealand dairy farms have increased milk production 157% since privatization and also produces international quality milk.

"A large extent of the farmland is brought under cultivation of specially imported Rye grass, which has converted Ambewela Farms to a picturesque luscious farmland, to live up to its popularly known name of New Zealand Farm," he said.

At Ambewela a range of value added products including four kinds of cheese, goat milk and yoghurt are produced.

The controlling shareholders of LMF are Milford Exports (Ceylon) Limited (30.93%) and Mills Enterprises Limited (20.4%), both Stassen related companies. Additionally, the Distilleries Company of which LMF is a major shareholder (with nearly 38 million shares) owns 1.91% of LMF.

Other than the Stassen related interests, the Kuwaiti investors of the Al Nakib family own approximately 14% of LMF.

Net assets per share of the company had grown to Rs. 33.28 during the year under review from Rs. 31.58 a year earlier. LMF shares traded at a high of Rs. 39 and a low of Rs. 10 during the year under review closing on March 31, 2004 at Rs. 22.50. This compared with a trading range of Rs. 12.75 do Rs. 7.75 the previous year.

LMF has an issued share capital of Rs. 300 million, reserves of Rs. 215.1 million and retained earnings of Rs. 309.1 million in its books.