LAUGFS Gas PLC gears for long-term growth

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By 2017-11-15

LAUGFS Gas PLC recorded a healthy growth of 49 per cent in turnover for the first half of the year 2017/18, driven by the group's long and medium-term strategic growth drivers, stated a press release. The group's Operating Profits are down by 14 per cent and Profit After Tax (PAT) was down by 85 per cent in comparison to the corresponding period of the previous year. This is mainly attributed to a combination of market factors; mainly the rapid increase in global Liquefied Petroleum Gas (LPG) prices and upward trajectory of world steel prices. Further, the depreciation of the value of the rupee against the US dollar, as well as rising interest rates, has also impacted profitability quite significantly.

While international prices of LPG have been rising sharply since October 2016, domestic gas prices, which are regulated in the country, have not been adjusted accordingly in the absence of a pricing formula. This has significantly eroded the short-term profitability and shareholder value of the Group and the company has already made representations to the relevant authorities to rectify the situation with a long-term sustainable solution, added the release.

"In spite of the modest results of this quarter, we remain positive about our future outlook. We are focusing on aggressive yet strategically-placed investments for LAUGFS Gas PLC, which will enable us to strengthen our regional presence further in the power and energy sector. With a single-minded focus on 'Investing for growth', we have identified emerging market trends with tremendous growth prospects that will yield long-term returns in safeguarding our stakeholder interests," commented LAUGFS Gas PLC Chairman W. K. H. Wegapitiya. "While we remain focused on the long-term growth strategy backed by strong investments, we expect the support of the relevant authorities to implement a fair and transparent pricing mechanism for LPG. This will safeguard local enterprises so that we could continue to contribute to the economic growth of the country."

With the anticipated growth potential for LPG in South Asia, LAUGFS proactively took steps to invest in a LPG Import & Export Terminal at the strategically-located Hambantota Port. Apart from being the first and the largest investment in the Hambantota Port, this terminal will be one of the largest LPG import and export terminals in its class in South Asia. This is in terms of storage capacity as well as market potential, stemming from its strategic location with access to serve a population of around half a billion. Value generation from the LPG Import & Export Terminal is expected from the second half of the year 2018.

With LAUGFS becoming Sri Lanka's first energy brand to become a multinational with the acquisition of Petredec Elpiji Ltd and the setting up of LAUGFS Gas (Bangladesh) in 2015, the company is all set to receive the returns of its investments in one of the most lucrative emerging markets for LPG in Asia. In the backdrop of Government support to popularize LPG in Bangladesh as an energy alternative with the rapid exhaustion of natural gas reserves, the market potential for growth in Bangladesh remains very promising.
In January 2017, LAUGFS Maritime purchased their third LPG vessel 'Gas Courage' which now operates under the Sri Lankan flag. This strategic step strengthened the company's LPG fleet to support the fast expansion of LAUGFS's LPG downstream activities in Sri Lanka and Bangladesh and cater to the growing demand for LPG across the region.

In line with its visionary and global approach to sustainability and business growth, LAUGFS has been continuously focusing on sustainable energy solutions. LAUGFS' investment in solar power generation aims to capitalize on this global trend in terms of business growth while contributing to the Government's efforts to increase the contribution of renewable energy by 20 per cent to the total energy requirement in the country by 2020.

"Apart from the interplay of various local and global financial and economic trends, the challenges we faced during the first half of the financial year can be attributed to the increase in finance cost, triggered by the rise of general interest rates and the disparity between the world LPG price and local consumer price. We hope that the relevant authorities will take this into account and introduce a pricing formula linked to world market price trends. Nevertheless, we are confident that our strategic direction and timely investments will steer us towards vigorous growth within the planned timeline," commented LAUGFS Gas PLC Group Managing Director Thilak De Silva.

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