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The Supreme Court of Sri Lanka has anulled an agreement with Lanka Marine Services (Pvt) Ltd. (LMS), ordering its owners to pay back taxes and give up land used for refuelling ships.

All agreements, including tax exemptions, between the island nation's investment statutory corporation, the Board Of Investment (BOI), and Lanka Marine Services (Pvt) Limited (LMS) were nullified by the Supreme Court earlier this week.

John Keells Holdings Ltd., Sri Lanka's largest diversified company and owner of former state-run bunkering unit Lanka Marine Services since it was privatized in 2002, will now be required to vacate the land where it currently carries out bunkering operations and pay taxes on its ship refuelling activities.

The land that houses the bunkering infrastructure will be returned to the Sri Lanka Ports Authority, which owns the port of Colombo. Keells has 30 days to return the 8-acre plot, which houses 12 tanks with a total storage capacity of 30,000 metric tones.

The ruling looks set to have a knock-on effect on the profits of John Keells Holdings. Market analysts estimate the company's profits could fall as much as 1.25 billion rupees ($11.6 million) this year as a result of the Supreme Court's decision.

With sales of marine fuel being one of the main contributors to profit, investors are likely to question how Keells will operate without the land it has been using to carry out its bunkering activities. Analysts say the company could enter into a new agreement with the port of Colombo to use the land. Alternatively, it could opt to use tanker barges as floating storage like a number of its competitors.

Keells said it was reviewing options to ensure the continuity of Lanka Marine Services Ltd. and assessing the financial impact of the judgment on the group.

Shares in the company dropped by 8 percent yesterday on the Colombo Stock Exchange following news of the court ruling.