Sri Lanka's LAUGFS Gas PLC to engage with Consumer Affairs Authority to exercise the new price formula in a consistent manner to end LPG price controls.

“In Sri Lanka, we will continue to engage with the Consumer Affairs Authority to exercise the price formula in a consistent manner the new pricing formula expected to bring in shortly,” Laugfs Chairman W.K.H. Wegapitiya told shareholders in its 2018/2019 annual report.

"Price regulation of LPG in the local market remained a key consideration as it did not move with global markets which moved up sharply during the year, resulting in decreasing operating margins. LPG price have declined since reaching a peak in September 2018 although the lag effects of price changes are evident in the financial performance of the Group. High interest rates were also a concern due to high levels of debt to finance expansion of our businesses. At present we are exploring options for resolving the high levels of debt through a strategic alliance with potential partners with the technical expertise and networks to accelerate our growth trajectory,” Wegapitiya said.

“This is perhaps the most important opportunity that we need to explore with due diligence to ensure that long-term visions, and goals are aligned and corporate values are compatible,” he added.

In Sri Lanka, low penetration levels presented an opportunity while the price ceiling deterred growth.

“We have carefully managed to increase our penetration into the market by targeting appropriate customer segments that supported increased penetration while enabling us to manage profitability.”

“This has been a key challenge during the year as we needed more flexibility to accommodate fluctuations in LPG prices in global markets,” Wegapitiya added.

Wegapitiy further noted that, the company has continue to grow its franchise both in the domestic market and in Bangladesh while it’s trading and transportation subsidiaries consolidate their positions, supporting companies regional aspirations.

“Bangladesh operations recorded significant volume growth of 12% and is the fifth largest player in a market of 20 players. We are excited about our opportunities for growth in this market and have enhanced our capacity with new spherical with 3,000 MT being built that will enable volume growth and cost optimization.”

Speaking further Wegapitiya said that the Energy sector has improved profitability despite the prevailing price ceiling in Sri Lanka, recording a profit of Rs.47mn in comparison to a loss of Rs.769mn in the previous year.

“Operations of SLOGAL Energy DMCC grew its revenue by 38% despite subdued growth of downstream operations in Sri Lanka and is positioned for growth with the enhancement of our business model as LAUGFS Storage Terminals becomes operational,” he added.

Wegapitiya also noted that, LAUGFS Maritime had a challenging year due to the need to co-ordinate shipments for the new terminal at agreed times which resulted in an unusually high level of idle time which is a non-recurrent event.

This is reflected in the decline in turnover and profitability which is expected to resume an upward trajectory with the commencement of operations of the LAUGFS LPG Import/ Export Terminals.

“LAUGFS LPG Import/Export Terminal forms a vital link in our business model supporting a new revenue stream and cost efficiencies for our downstream operations, The facility was completed at a cost of USD 65 million marks a milestone in the history of the Group and stands testimony to our vision and execution capability as this was completed despite several significant challenges,” Wegapitiya said.

“LAUGFS Gas PLC is well positioned for growth with a broad presence across the LPG value chain that has enabled us to move into a different league amongst regional players,” he added.