JKH - Q2 falls 43 pct to 575 mln rupees

Conglomerate John Keells Holdings JKH.CM, Sri Lanka's largest company by market capitalisation, on Thursday reported an expected drop in September quarter profits, which swelled last year due to a one-off sale.

Net profit fell 43 percent to 575.5 million rupee ($5 million) in the quarter ending September 30, though revenue rose 5 percent, the company said.

Keells' diversified profile has made it one of the most attractive stocks in Sri Lanka for foreign investors.

"This drop is mainly due to a nearly 1 billion rupee capital gain the company posted a year ago," said Channa Amaratunge, director at CT Capital.

Keells lost 4.3 million rupees in operations categorised as others this year, after earning 1.08 billion in 2008 largely due to gains realised through the sale of its shares in the now-delisted Associated Motorways.

The results showed performance in the conglomerate's most profitable sector, transportation, recorded a 594.9 million rupees profit compared to a 13.5 million rupee loss a year ago, when it lost a monopoly on bunker fuel in a court case.

Analysts said the conglomerate's tourism unit should be a strong earner this year after the end of the 25-year war. The tourism division recorded a loss of 110.8 million rupees in the second quarter, compared to a loss of 195 million rupees a year ago.

"On the basis of our predictions for the tourism industry, several proects are being evaluated, details of which will be unveiled shortly," Keells Chairman S.C. Ratnayake said in a statement.

Sri Lanka's tourism industry has recovered with arrivals rising by more than 25 percent in the five months since the government defeated the Tamil Tiger rebels in May.

Shares in John Keells Holdings are up 184 percent so far this year, compared to a 98 percent rise in Colombo Stock Exchange .CSE. They closed down 1.56 percent on Thursday.

Keells shares shed 11.7 percent in the three sessions after the Oct. 16 arrest of Sri Lankan-born Raj Rajaratnam, who holds the second largest stake in the company with 8 percent and has been charged in an insider trading case.

Rajaratnam, founder of the Galleon Group hedge fund is one of the largest investors in Sri Lanka's bourse and holds stakes in several blue-chip firms. He denies wrongdoing.