Sri Lanka Tea Smallholder Factories expands leaf suppliers

June 06, 2013 (LBO) – Sri Lanka’s Tea Smallholder Factories Ltd, a unit of John Keells Holdings, which produces tea from green leaf bought from independent growers said it had expanded suppliers during the past year.

The company runs a network of eight factories. Last year it had increased suppliers by 2,714 to 11,532 direct suppliers and 12,777 indirect ones.

“The ability of your company to increase the supplier base is attributed to the extension services whilst meeting the needs of the growers, financially as well,” chairman Susantha Ratnayake told shareholders.

He said 89 growers were helped to cultivate 61 acres. A set of 51 growers were now being helped to replant 32 acres.

Suppliers had been paid 1.75 billion rupees in the year to March 2013, up 21 percent from 1.45 billion rupees a year earlier.

A so-called ‘bought leaf’ factory buys green leaf from growers and collectors to make into tea. They are paid on a formula based on an auction price of the final product. The practice also partly hedges the company against global price changes.

In the year to March the firm had posted earnings of 2.86 rupees per share on total profits of 85 million rupees recovering from a 1.2 million rupee loss a year earlier.

Land owner-growers who have small plots typically show very high yields compared to large plantations using paid labour. Large plantations have tried to imitate the model.

About three quarters of Sri Lanka’s tea production is now in the hands of the so-called small holders.

The company said a small holder who has quarter to half acre of tea land supplies on an average 125 to 175 kilograms green leaf per month.