Annual Report 2009/2010 - Colombo Stock Exchange

R e v i e w o f O p e r a t i o n s
8
OPERATIONS REVIEW
In terms of financial results, CIPL remains in the red and
will continue to do so in the short term. This is expected
since the Company is still very much in an investment
phase. The Indian beer industry is both competitive &
investment intensive & thus a long term perspective is
crucial for success. Those that have the patience &
courage to see through the initial phase of operations in
India are likely to reap significant rewards in the
medium to long term.
India is poised for a period of sustained economic
growth in the years ahead. The election concluded in
2009 has resulted in a stable, single party dominated
administration that has the opportunity to drive
through much needed reforms and all indications are
that the government is ready to do so. Thus there is
every hope that the economy of India will continue to
grow at the impressive rates of the recent past.
The outlook for the Indian beer industry is no different; it
will continue to grow at double digit rates in the
immediate future. Not only will CIPL benefit and take
advantage of such organic growth but it will also
aggressively seek to take share from its competitors in
the market. That Company's brand portfolio, distribution
reach, manufacturing footprint & management
competencies give every confidence it will reach a
strong position in the Indian beer industry in the not too
distant future.
The Year Ahead
Without doubt Sri Lanka is poised for an era of
peace, stability & prosperity. An end to armed
conflict, a stable government, a popular & credible
presidency & administration; it is a window of
opportunity the likes of which this country has not seen
in three decades. The credit for positioning Sri Lanka
at this gateway to opportunity must rest with the
President & his administration. Yet, it is only that; a
gateway to opportunity.
In the short to medium term, the prevailing “feel good”
factor will drive Sri Lanka's economy forward. Tourist
arrivals will continue to grow at a healthy pace,
investment will flood in & so will remittances. The ongoing
infrastructure modernization & expansion
program will continue, possibly at an enhanced pace.
Managing inflation within reasonable levels will pose a
challenge due to both external & internal factors & for
this & other reasons, interest rates will reach & stay at
double digits over the medium term horizon. However,
overall, we foresee a sense of optimism galvanizing the
Country's economy towards a period of high growth in
the short to medium term.
Sustainability of high growth over the longer term
though will depend on the Nations ability to successfully
address core issues. Building an inclusive & equitable
society that respects & abides by the law, win the peace
in the North & East, invest in infrastructure, overcome the
fiscal challenges and reform the public sector and
education & health services are a few such priorities.
The historic gateway to opportunity that is upon the
country now will translate to tangible outcomes only if
these core issues are addressed & resolved in a nation
centric manner. On two counts the country can be
optimistic that such will be the case; firstly, the Nation is
led by a President who has tremendous resolve as was
on display when in the face of immense pressure he
provided leadership in eradicating terrorism and
secondly, he and his administration have earned the
trust of the people and with it the ability to push through
tough but necessary reforms.
Opportunity & credibility are pre-requisites to making
lasting change & these ingredients are available to the
present administration to a degree not available to
others of the past three decades. Similarly expectations
are also high. A stressed out Nation & her people
deserve nothing less.
Your Company welcomes the opportunity to conduct
its business in a stable & peaceful environment. The
prevailing optimism, the opening up of the North &
East, the increase in tourism, the expected growth in
the economy, are all opportunities that will help grow
its operations. It is also expected that a stable country
environment will usher in a less conservative, growth
oriented, policy framework.
As with all opportunity, challenge follows closely
behind. Indeed the greater the opportunity, the greater
the challenge & this applies to your Company as well. It
must prepare itself to meet growth in the market. In such
circumstances to maintain its position of undisputed
market leadership the Company needs to expand
ahead of the growth curve. The first phase of such a
program is now under implementation. By the end of this
year, your Company's production capacity would have
increased by 30%. Expansion plans beyond 2010 are
currently being finalized by management.
Your Company's brand portfolio is geared to meet most
opportunities. Brands have been developed internally in
the event the portfolio needs expansion to meet market
demand. The Company also has access to Carlsberg's
large portfolio of successful world class brands.
Similarly the Company is well prepared to upscale
distribution in the event the need arises.
Most importantly, your Company's management retains
the aggressive intent that has helped secure its
undisputed position of market leadership. In the past,
the strategies adopted by the Company have ensured
strong foundations & market leading performance even
in the face of significant adversity.
Some challenges remain, particularly in relation to the
alcohol policy framework within which the Company
operates. Yet there is every indication that the company
is well poised to take advantage of the new
opportunities presented by the Sri Lankan market during
the coming year.