LRA Assigns Initial Entity Rating to E.B. Creasy & Co PLC

The rating reflects E.B. Creasy & Co. PLC's ("EBC" or "the Company") sustainable business profile and established position in Sri Lanka over the past 145 years. EBC operates both as an Operating Company and a Holding Company for the Group. Over the course of time, it has invested in 11 subsidiaries, dealing in multiple sectors. Through diversification, EBC has reduced its concentration risk by moving into Fast Moving Consumer Goods (FMCG), Healthcare, Food and Confectionary, Steel, Energy and Lighting, Solar & Rubber. Its dominant presence in the FMCG sector has enabled the Company to position itself well in the market. EBC has faced challenges in terms of profitability but its performance improved since FY21. The Company has shown resilience during the economic turbulence in the island to earn a Profit After Tax (PAT) of LKR~769mn and LKR~1.5bn at the Company level and Group level, respectively, during FY23. However, the performance of the first six months of FY24 lagged behind the same period of the previous financial year. EBC recorded a net loss of LKR~114mn in 1HFY24 (1HFY23: PAT of LKR~610mn). Meanwhile at the Group level, the PAT reduced by ~78% to clock in at LKR~243mn (1HFY23: LKR~1,122mn). The margins at gross and net levels were impacted by increased selling & distribution expenses and higher finance costs during the period under consideration. The Company focuses predominantly on the FMCG sector with prominent brands such as Amritha (joss sticks), BIC (razors), Denta (toothbrushes), Ninja (pest control) etc. In terms of capital structure, EBC's debt portion constituted ~38% of the Company's debt and equity mix (As at End-Sep'23). However, the mix of debt is inclined towards Short-term Borrowings due to which the funding cost of the Company had significantly risen during the outgoing fiscal year (FY23). The Group's Equity base was recorded at LKR~7.1bn as at End-Sep'23 (End-Mar'23: LKR~6.8bn) due to a growth in the retained earnings. EBC has managed to maintain its Company and Group’s leverage at a moderate level, which is expected to remain under check. However, the debt coverages of the Company as well as the Group, have recently come under pressure due to lower profitability and rising finance cost.
The rating is dependent on the Company's ability to navigate its way through tough operating environment by improving its margins and improve profitability. It will be critical for the Group to maintain a balanced portfolio with sustained performance of its existing core and strategic investments. Any future rating action will be dependent on managing its costs, while sustaining margins and improved debt coverages to ensure sustainability.

About the Entity
E.B. Creasy & Company PLC ("EBC" or "the Company"), is a Public Limited Company incorporated and domiciled in Sri Lanka. The Company was founded in 1878 by Mr. Edward Bennet Creasy. It was incorporated in 1929 as a Limited Liability Company and later listed in the Colombo Stock Exchange in 1968. The largest shareholder of the Company is The Colombo Fort Lands & Buildings PLC with an ownership of 53%. The Board of Directors has 10 members, out of which four are Independent Non-Executive Directors. The Chairman/ Managing Director and Joint Managing Director of the Company are Mr. Arudpragasam and Mr. S Rajaratnam respectively.