Sri Lanka tea factory firm makes loss after price collapse

Feb 06, 2009 (LBO) – The collapse in Sri Lankan tea prices towards the end of last year has caused a loss of 35 million rupees at Tea Smallholder Factories, a listed unit of John Keells Holdings, in the December quarter. Tea Smallholder Factories said net profit for the nine months ending December 31, 2008 was down 48 percent to 64 million rupees from a year ago with sales down 23 percent to 1.3 billion rupees.

The company’s nine month net profit was boosted by capital gains of 44 million rupees on the sale of its Randola tea factory in the Balangoda area south of Colombo for 71 million rupees.

The Randola Tea Factory was disposed of in August 2008 as it was not economically viable to continue with the operations,” the company said. The firm, which operates a series of ‘bought leaf’ factories where green leaf bought mainly from small farmers is processed into black tea, made a profit of 52 million rupees in the December quarter of the previous year.

Sales for the three months ending December 31, 2008 plunged 71 percent to 184 million rupees as Colombo tea auction prices collapsed last October following the bursting of the global commodities bubble.

“The gross loss recorded during the quarter resulted f