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Sri Lanka Tata tea unit makes Rs183mn profit in December quarter
01 Feb, 2010 11:04:08
Feb 01, 2010 (LBO) – Sri Lanka's Watawala Plantations said it has bounced back from recession and a wage hike last year with a net profit of 183 million rupees in the December quarter.
The firm, which made a loss of 36 million rupees in the same period a year ago, said in results filed with the stock exchange it begun refining Crude Palm Oil to market its own bottled produce called ‘Oliate’.

Sales shot up 73 percent to 1.7 billion rupees with earnings per share at 7.71 rupees in the quarter compared with a loss of 1.54 in the same period a year ago.

G Sathasivam, chairman of Watawala, a unit of India's Tata Tea, said its diversification strategy of multiple crops, value addition and brand building was paying dividends.

“(The) company has bounced back from the global recession and plantation sector wage price hike due to its well thought out diversification strategy, encompassing multiple crops, value addition and brand building,” he said in a note accompanying the results.

Watawala Plantations’ net profit in the nine months to December 2009 shot up 253 percent to 229 million rupees from a year ago with sales up 34 percent to 4.2 billion rupees.

The profits during the nine months came from the firm’s palm oil, exports and retail marketing businesses while its main tea and rubber businesses made losses, according to a segmental analysis accompanying the accounts.

But all business segments showed “strong top line growth”, Sathasivam said.

“While the outlook for commodity prices remains broadly positive, your company is exploring various options to increase shareholder value further in the longer term.”

Sathasivam said Watawala Plantations’ tea business performance “improved remarkably, despite the 40 percent wage hike over the previous period.”

Most Sri Lankan plantations companies reported losses after a wage hike wrested by estate labour unions in September 2009.

“The company’s concentration on sound agricultural practices continued to pay dividends as tea prices also remained high at the Colombo tea auctions,” Sathasivam said.

Rubber prices have also stabilized at more remunerative levels, he added.

However, he said, higher rainfall restricted the number of tapping days as a result of which the company was unable to fully capitalize on the higher prices.

The wage hike that came in to effect from April 1, 2009 also reduced the firm’s rubber business profitability.

Sathasivam said its palm oil business recorded “remarkable growth” in profits over the same period last year, as both yields as well as prices improved.

“Significant focus on new customers has also resulted in better price realization. Your company has meanwhile moved one step closer to the end customer by beginning to refine Crude Palm Oil to market our own bottled produce ‘Oliate’.”

Watawala Plantations’ export business profits in the nine months fell from a year ago as there were no palm oil exports during the period.

But it continued exports of bulk tea to Tetley of the UK and the export of value added tea to Australia.

Sathasivam said Watawala’s association with Tata Tea once again paid dividends as the parent firm introduced new buyers world wide.

Profits from Watawala’s retail market business increased marginally during the nine month period compared to the previous period with its Watawala Kahata, Zesta and Ran Tea brands improving their market share in the branded tea sector.

“However, the increase in tea prices had an impact on the profitability of this division,” Sathasivam said.

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