AFTER closing the 2025 financial year with record revenue but softer profits, Lasco Distributors Limited is shifting focus to rebuilding margins and restoring profit momentum.

Managing Director John De Silva told shareholders last Friday that while revenue climbed to $30.26 billion, up 3.7 per cent, the company’s decision to hold prices in a competitive market came at a short-term cost to profitability.

“This is volume-led organic growth, not necessarily driven by prices because we had to make some strategic decisions around pricing to protect our market share and even gain market share,” he said. “The impact for that in the short term would be a depression in margins, but the objective was to keep volumes and keep revenue growing, and we achieved that,” De Silva continued.

That approach helped Lasco achieve record sales, but gross margins narrowed from 18.1 per cent to 17.3 per cent, reflecting higher input and storage costs. Earnings fell 7.5 per cent to $1.34 billion, even as the company maintained strong liquidity and balance-sheet strength amid ongoing construction activities.

De Silva said the next few months Lasco Distributors will seek to restore profitability through a combination of selective price increases, product and channel-mix adjustments, and efficiency gains once the company’s expanded White Marl warehouse comes on stream.

“We will make selective price increases and we will also make sales, channel and product-mix adjustments, minimising the need to increase prices with the objective of increasing gross profit and gross margins,” he told shareholders.

The first phase of the White Marl expansion — a 64,000-square-foot facility representing a 50 per cent increase in capacity — is nearing completion, with phase two expected to begin early next year. De Silva said the project is critical to reducing storage costs that rose during the year as Lasco carried higher inventory to meet demand and safeguard its business from geo-political or logistical uncertainties.

“This is a significant investment which will enable the company to continue to grow,” he explained. “The first phase includes an extension of the warehousing floor… high enough to allow us to go five or six pallets high. This is what is nearing completion and is going to significantly improve our capability for offloading containers at a much faster rate, carrying high inventory, and you will see a reduction in the storage costs.”

Despite the profit dip, Lasco’s fundamentals strengthened.

Total assets rose 10 per cent to $15.86 billion, with equity of $10.47 billion and a debt-to-equity ratio of only 3.5 per cent, leaving ample capacity to fund new investments. Operating cash flow also surged 49 per cent in what De Silva described as the company’s “disciplined management of our core business”.

“It is not the result of one-off transactions or divestments or asset sales. This is cash flow being generated on a day-to-day basis by the team here and how we are managing the business,” he said.

That liquidity supported a 10 per cent increase in dividend payments, continuing a steady five-year trend of higher shareholder returns, De Silva noted.

Meanwhile, the company’s growing expenses reflected deliberate investments in staff training, technology upgrades and advertising, spending De Silva described as essential for long-term competitiveness. Administrative and selling expenses grew 5.3 per cent to $3.85 billion, driven by higher employee costs, brand promotion, and depreciation from new assets.

The managing director said the broader strategy remains focused on “growing revenue through organic growth” by increasing availability of the portfolio across markets while using service quality and customer experience as differentiators.

“We are making our operations more efficient to redirect resources into executing the service model. With the processes and the systems and the training in place, we will be executing even faster,” he said.