Finlays Tea Estates Sri Lanka, the holding company of Udapussellawa and Hapugastenna regional plantation companies, released the annual reports of the two plantation companies last week and reported strong profit growth in 2010.
In the financial year 2010, Udapussellawa Plantations reported its highest profit since privatisation in 1992, with a profit after tax increase of 352% over 2009, for a profit after tax of Rs 139 million, said Finlays Tea Estates in a press release. Udapussellawa Plantations’ Tea production increased by 22%, against the previous year.
Extensive restructuring
“The strong performance by Udapussellawa Plantations is due to extensive restructuring since 2005. As part of this process, large tracts of Tea were replanted, especially in the Nuwara Eliya region, which generated yields of 4,000- 4,500 kgs per hectare per year. This has helped increase the overall Tea yield significantly. In addition, Udapussellawa Plantations’ new CTC Tea factory in Matale helped boost production by increasing the intake of out-grower leaf by 34% during the year,” said Naresh Ratwatte, the Chairman / Managing Director of Finlays Tea Estates Sri Lanka.
Meanwhile, Hapugastenne Plantations reported a Rs 287 million profit after tax, which is an increase of 196% compared to 2009. Tea production by Hapugastenne increased by 21% and Rubber by 18% compared to 2009. The contribution by Rubber increased significantly during the year. From a 4%-5% share of profits in the past, the contribution from Rubber increased to 35% of Hapugastenne Plantations’ annual profit in 2010. Hapugastanne Plantations has introduced Rubber in their Passsara group of estates for an additional 702 hectares of Rubber. These fields have now started contributing towards the profits of the company. Therefore, the company is expected to continue to benefit from rising global Rubber prices in the future. “We are confident that Rubber will help mitigate any future fluctuations in Tea prices. In addition, the location of Hapugastenna Plantations’ Rubber extent, in the semi-dry zone, in the eastern belt of the country, will be an advantage, because when the Rubber supply in the wet zone reduces during the monsoons, Hapugastanne will still be able to supply Rubber,” said Mr Ratwatte.
Strong tea, rubber prices
“We expect Tea prices to remain at 2010 levels in 2011. While Rubber prices have seen some fluctuations with the recent tsunami catastrophe in Japan, prices are expected to stabilise in the short term,” said Ratwatte.
In 2010, the Passara group of estates, belonging to Hapugastanne Plantations, became the first Sri Lankan plantation company to acquire the Rainforest Alliance Certification.
The Rainforest Alliance Certification is the most stringent socio-environmental standard for the agro-industry in the world. Udapussellawa Plantations’ Nuwara Eliya group of estates and Hapugastenne Plantations’ Hali Ela group of estates are in the process of acquiring the Rainforest Alliance Certification in 2011.
Adverse weather
The plantation sector was hit by extreme weather conditions at the start of 2011, hurting Tea and Rubber production in all parts of the island.
More bad weather, later during the year, could adversely impact company and overall industry profitability, said Finlays Tea Estates.
The wage increase due from April, if over-inflated, could also increase cost of production, said the company. In addition, the electricity tariff increase of 11% and the increased cess, levied on Tea and Rubber industries of 3.5% and 4% respectively, could stifle industry growth prospects due to the increase in the cost of production.
“We take every strategic decision and action in line with identified group sustainability commitments, by which we now guide our actions and evaluate our success. We have four key strategic objectives to focus on over the next few years; first and foremost, we need to increase the shareholder return on invested capital, secondly, we need to reduce complexity and risk, thirdly, we need to add more value and get closer to our customer and fourthly, we need to, and must, build a more sustainable future for our business. Work on these objectives has commenced and we have been making good progress over the years with most of the key indicators moving in the right direction,” said Mr. Ratwatte.
Finlays Tea Estates says it will continue its accelerated programme of planting Timber and Rubber in the east and Cinnamon, Pepper and Areca nut in other parts of the country, to diversify the company’s plantation product portfolio.
source - www.dailymirror.lk
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