John Keells PLC, the commodity broking firm that grew to become the JKH conglomerate, has posted its lowest attributable group profit in five years with an earning after-tax of Rs.128.1 million, down from Rs.135 million the previous year with the company posting a profit after-tax of Rs.158.6 million, down from Rs.255.1 million a year earlier but higher than the Rs.111.6 million earned in 2006.

John Keells own JKH’s headquarters building at Glennie Street, Slave Island.

John Keells which is into produce and share broking, real estate ownership and warehousing saw two of its three subsidiaries in profit while the third, John Keells Stock Brokers, posting a pre-tax loss of Rs.6.9 million, down from a profit of Rs.74.1 million earned the previous year.

John Keells Warehousing grew its pre-tax profit to Rs.24.4 million from the previous year’s Rs.19.3 million while Keells Realtors saw its 2009 profit falling to Rs.32.4 million from the previous year’s Rs.53.7 million.

The company’s Chairman, Mr. Susantha Ratnayake, said in the annual report that the tea industry had experienced a year of mixed fortunes in 2008 benefiting from the global commodity boom early last year but being hit by the financial crisis during year end.

Rubber too suffered the same fate with healthy profits in the first half of the year under review while prices dropped in the second half, sometimes to levels below the cost of production.

Ratnayake said that the fallout from the global economic crisis had depressed turnover on the Colombo Stock Exchange last year with the daily turnover adjusted for the one-off large transaction of SLT, declining 18.5% during the year under review.

Share prices had fallen and equity broking revenue had reduced significantly during the year. However, Ratnayake was optimistic that with the country on the brink of an era of peace and rapid economic development, activity on the Colombo Stock Exchange would improve.

The company’s CEO, Mr. Sudath Munasinghe said that when tea prices collapsed and factories had no funds to meet their green leaf payments and other operational costs, brokers came to their assistance stretching their own resources to the limit.

"The key role played by the broker in propping up producers was much appreciated and acknowledged by all the stakeholders in the industry," he said.

Munasinghe also noted that as a result of investment in rubber plantations during the previous good years, production was up from 12,000 mt. to 129,000 mt last year with producers enjoying lucrative prices in the first half but taking a hard blow following the global economic crisis.

For two and half year, producers had enjoyed healthy profits and most of them had ploughed them into their rubber fields, fertilizer and better agricultural practices helping to boost production.

During the second half of the year, there was no demand from large rubber users like the tyre industry where sales nearly halved due to slow motor vehicle sales. The demand for non-essential rubber products too had dropped further.

In Sri Lanka, industries cut back heavily on consumption of rubber with some factories closed from time to time due to low overseas orders.

"The demand for natural rubber is expected to stay low for some time until the main consuming countries come out of the current economic recession," Munasinghe said.

Their warehousing business had suffered due to escalation of input cost with no increase in storage charges for tea and rubber. In the second half of the year, arrivals of tea and rubber for storing had dropped drastically due to dry weather. Warehouse space utilization was therefore very poor.

John Keells Limited is controlled by JKH owning 86.9% of its equity as at March 31, 2009, up from 76% a year earlier with JKH taking up a nearly 11% holding from two Carson’s companies, Ceylon Investment Company and Ceylon Guardian Investment Trust.

The John Keells share traded at a high of Rs.84 and a low of Rs.58 during the year under review against a trading range of Rs.98 to Rs.76.50 the previous year.

Net assets per share had grown to Rs.69.06 from Rs.68.65 and the directors have recommended a final dividend ofRs.5 per share on top of an interim dividend of Rs.5 per share already paid.