Sri Lanka Keells Food trims Indian costs, cuts losses.

Sri Lanka's Keells Foods Products said its lost 5.0 million in the June 2010 quarter down from 8.6 million rupees a year earlier and its Indian distribution unit was being wound down in favour of an agency to cut costs.
Consolidated revenues rose 16 percent to 479.6 million rupees in the June quarter, the firm, which is a unit of John Keells Holdings said in a stock exchange filing.

In the year to March in lost 146 million rupees mostly on write-down at its Indian unit. The firm had decided to set up its own distribution unit in India following increased demand for its products in South India and the growth of self service supermarkets.

Keells Food told shareholders in the annual report for the year to March 2010 that it took a long time to clear the goods from Chennai port and then move the goods to various states. The firm's sales team had also performed below expectations.

It had decided to close its office in India and instead appoint an India wide distributor. It had to provide for 84.6 million rupees in bad debts and a write down on 94.4 million rupees in its investment. It also had to compensate terminated staff.

During the June quarter Keells Food had spent an additional 36.8 million rupees in India. During the quarter the firm had closed its New Delhi office.

"We are now in the process of finalizing the appointment of a master distributor who will serve the Indian market," the firm said.

"In the interim limited stocks are being exported to India based on specific orders received."

It also invested 854,000 in a unit in Mauritius.

The firm had also been hit by shortages of chicken last year. Sri Lanka's poultry industry was hit by state price controls and excessively high price of maize, where imports were restricted to 'protect' maize farmers.

Keells Food had to import chicken - which was also subject to duties and cess - to supply the market last year. Critics have pointed out that Sri Lanka's state interferes heavily in agriculture, pushing up food prices and causing disruptions along the value chain.

Source : lankabusinessonline.com