COLOMBO – September 8, 2026 – Eastern Merchants PLC (CSE: EMER), a prominent Sri Lankan trading and export house, has released its Annual Report for the financial year ended March 31, 2026. The report highlights a significant operational turnaround, with the Group moving from an operating loss to a profit, despite navigating a complex economic environment and recording a net after-tax loss.
The company, with roots tracing back to 1945, demonstrated resilience through strategic adjustments, improving underlying business economics while pursuing a more focused and competitive platform for future growth. The Board of Directors authorized the release of the comprehensive financial statements and annual review on August 28, 2026.
Operational Resilience Drives Turnaround to Operating Profit
For the financial year 2025/26, Eastern Merchants PLC reported a Group revenue of Rs. 2.73 billion, a modest decline from Rs. 2.80 billion in the previous year. However, the focus on higher-quality revenue and enhanced efficiency bore fruit at the operational level:
- Gross Profit surged by 27.5% to Rs. 392.74 million (FY24/25: Rs. 308.15 million).
- The gross margin significantly improved from 11.0% to 14.4%.
- Critically, the Group moved from an operating loss of Rs. 116.61 million in the preceding year to an operating profit of Rs. 22.95 million in FY2025/26.
- This was primarily achieved through greater selectivity in trading activities, improved procurement and product mix, and a substantial 27.9% reduction in distribution expenses.
Despite these operational gains, elevated finance expenses of Rs. 46.99 million (FY24/25: Rs. 64.63 million) and a tax charge of Rs. 26.34 million resulted in a Group loss before tax of Rs. 19.37 million (an improvement from Rs. 149.63 million in FY24/25) and a loss after tax of Rs. 45.71 million (compared to Rs. 114.27 million in FY24/25).
Chairman’s Perspective: A Year of Renewal
Mr. J. B. L. de Silva, Chairman of Eastern Merchants PLC, emphasized the year as one of “renewal.” He stated in his message to shareholders:
“It was not a year in which we could declare the work of recovery complete, but it was a year in which the direction of travel improved meaningfully. Beneath a modest decline in Group revenue, we strengthened gross margins, reduced distribution costs and returned the business to an operating profit. Those improvements provide an important foundation on which to rebuild sustainable shareholder value.”
The Chairman acknowledged the complex operating environment, citing pressures from international competition, customer caution, exchange-rate movements, and geopolitical disruptions affecting global trade. He reinforced the Board’s clear strategic priorities: focusing on higher-quality revenue, stronger gross margins, and business models that provide a defensible position in chosen markets, alongside investments in responsible sourcing and environmental compliance.
Managing Director’s Review: Strategic Shifts and Future Focus
Mr. C. S. L. de Silva, Managing Director, provided further insight into the operational improvements. He highlighted the tangible progress in rebuilding margins and controlling expenditure across core businesses. While Group revenue saw a slight decline, the Managing Director noted, “the quality of that revenue improved.”
The balance sheet expanded, with total assets increasing to Rs. 3.14 billion. However, this coincided with a sharp reduction in cash balances from Rs. 279.19 million to Rs. 47.55 million, and an increase in total interest-bearing borrowings to Rs. 646.09 million. The Group’s current ratio consequently declined from 2.93 times to 1.43 times.
Key strategic and operational priorities outlined by the Managing Director for the upcoming year include:
- Protecting and expanding gross margins through selective procurement and disciplined pricing.
- Improving the cash conversion cycle by reducing slow-moving inventory and strengthening collection disciplines.
- Rebalancing the funding structure through tighter capital expenditure approval and a sharper focus on returns from each Group company.
- Strengthening the rubber-products business (Microcells (Pvt) Ltd.) through higher-value technical applications and improved efficiency.
- Developing the fresh-produce platform (Eastern Harvest (Pvt) Ltd.) with greater control over sourcing, quality, and cold-chain execution.
- Maintaining robust environmental, product-safety, and supply-chain compliance.
Navigating Balance Sheet Dynamics and Market Realities
The report detailed the performance of key subsidiaries. Microcells (Pvt) Ltd., the manufacturing arm, remained a significant contributor to Group revenue and gross profit (Rs. 789.10 million revenue, Rs. 228.96 million gross profit) but recorded an after-tax loss, underscoring the need to convert healthy gross profit into net profitability. Eastern Harvest (Pvt) Ltd. continued its early-stage development in greenhouse agriculture, with significant investment in land acquisition, aiming for consistent, high-quality crops for domestic and export markets.
Commitment to Governance and Sustainability
Eastern Merchants PLC reaffirmed its commitment to transparent reporting, effective oversight, and compliance with the Colombo Stock Exchange (CSE) Listing Rules and Corporate Governance requirements. The report detailed the functioning of its Board Committees, including Nominations and Governance, Remuneration, Audit, and Related Party Transactions Review, ensuring robust internal controls and ethical conduct.
The Group also highlighted its dedication to responsible business practices, including ISO certifications for quality, environmental management, and greenhouse gas emissions, along with FSC Chain of Custody certification for responsibly sourced rubber.
Outlook: Building for Sustainable Growth
Looking ahead to FY2026/27, the Group’s objective is not merely turnover growth but a return to sustainable profitability, restoring balance-sheet flexibility, and improving return on capital employed. Management expressed confidence in its established relationships, sourcing capabilities, and manufacturing expertise to build on the operational progress achieved during the year and translate it into stronger financial returns.
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