Ceylon Cold Stores PLC (CCS), best known as Elephant House, which leads the Sri Lanka market in soft drinks and frozen confectionary (ice cream etc) has resorted to offering consumers smaller pack sizes for both products to make them more affordable to hard-pressed customers, the company’s annual report reveals.

CCS has closed the year ended March 31, 2009 growing group revenue 25% to Rs.12.7 billion although the company’s Rs.5 billion revenue was up by a lesser Rs.0.7 billion. However, the company’s after-tax profit had nearly doubled to Rs.243.2 million while the group saw profits dip to Rs.139.6 million from the previous year’s Rs.175.9 million.

Mr. Susantha Ratnayake, Chairman of CCS which is a JKH group company, has reported to shareholders that they had done "exceedingly well" with both carbonated soft drinks and frozen confectionary given the challenging environment in which the company operated.

"We did so because of the resilience of our brands buoyed by a brand-heritage of over a century, the fine-tuning that went into our business processes and the perseverance of our employees," he said.

Noting that the company’s revenue growth of 16% was well over the 6% growth over the previous year, Ratnayake said this was mainly on account of "careful adjustments to the sales and price mix in the beverage and ice cream markets."

JayKay Marketing Services (Pvt) Limited, a fully owned subsidiary of CCS had seen revenue grow 25% as a result of the opening of additional outlets while the consolidated profit after tax was down 21% to Rs.139.6 million.

Ratnayake said that the directors have been pleased to recommend a final dividend of Rs.4 per share for shareholder approval at the company’s forthcoming AGM.

CCS has a substantial real estate portfolio with nearly five acres of land in its Slave Island complex within the Colombo city, over 26 acres at Kaduwela where its soft drink factory is located and over an acre at Trincomalee.

Its real estate holding is worth approximately Rs.1.5 billon, nearly five times the company’s stated capital.

Ratnayake said that the brand value of Elephant soft drinks had helped the company to face a tough environment in the carbonated soft drinks market and they continued to dominate frozen confectionary with a market share of 65% also largely due to their brand name and the reach of their distributor network across the country.

He expressed disappointment with the performance of their retail business which had to contend with low consumer purchasing power, increased power tariffs and interest rates that were up sharply.

They have been doing well in the Maldives where their ice creams have a 44% market share against competition from internationally reputed brands, the chairman said.

Ratnayake said that they would continue industry level representations to the tax authorities to reduce the rate of VAT on carbonated soft drinks which was higher than the standard rate and also lower excise duties which will enable them to offer their products to the consumer at a more affordable price.

CCS had deferred launching new products during the year in an adverse economic environment and focused on operational and sales efficiencies.

CCS has a stated capital of Rs.270.2 million, capital reserves of Rs.1.16 billion and revenue reserves of Rs.1.1 billion.

The company carried Rs.380.3 million non-current interest bearing liabilities in its books along with amounts owing to related parties, income tax liabilities, etc.

JKH with 69.73% and Whittal Boustead (also a JKH subsidiary) with 10.7% are the dominant shareholders of CCS with no other shareholder owning over 2% of the company in which the EPF has a 1.41% stake.

Ceylon Guardian Investment Trust Limited and the Ceylon Investment Company Limited of the Carsons group which owned 20% of CCS disposed of their holdings last year.

The CCS share traded at a high of Rs.140 and a low of Rs.69.50 during the year against a trading range of Rs.155 to Rs.120 the previous year.

The directors of the company are: Messrs. Susantha Ratnayake (Chairman), A.D. Goonewardena, J.R.F. Peiris, J.R. Gunaratne, A.R. Rasiah, P.S. Jayawardena, M.D. de Silva (Resigned 31.03.2008) and Dr. U.P. Liyanage.