COLOMBO: The diversified regional plantation company, Watawala Plantations PLC, saw its September net profit jumping to Rs.309.3 million from Rs.131.1 million a year ago, an increase of 136 percent, as the palm oil business pushed both top-line and the bottom-line performance. The company made Rs.1.31 a share profit against 55 cents during the same quarter last year.
Sri Lanka’s plantation companies saw their financial performance being severely impacted particularly by the low volumes and prices of tea. In recent times, the production was affected due to estate sector workers resorting to trade union action demanding higher wages. The matter was resolved last week when the workers agreed for a Rs.805 a day wage, an increase of 17 percent effective from October 15 under the new plantation workers’ wages collective agreement.
Meanwhile, the adverse weather conditions also impacted the tea production of the company leading to a crop loss of 873, 098 kilograms during the six months to September from the corresponding period last year. As a result the Watawala Plantations said it was shifting its tea strategy to focus on quality from quantity. “The management made a decision to change the tea sector strategy and adopted the quality drive instead of quantity drive in order to gain advantage in a sliding market,” said V. Govindasamy, Managing Director of the company. According to the segmental analysis, tea, still the largest segment of Watawala Plantations saw its net losses widening to Rs.178.3 million from Rs.106.3 million.
The revenues narrowed to Rs.818.6 million from Rs.896.4 million recorded a year ago. The company said it would continue to enhance the quality of its teas to gain a price advantage. Watawala Plantations, a Sunshine group company, in total earned a revenue of Rs.1.65 billion, an increase of 5 percent from a year ago. Cost of sales rose by 8 percent year-on-year to Rs.1.23 billion, resulting in a gross profit of Rs.421.7 million, a 79 percent jump from a year ago. Meanwhile, the palm oil segment posted a net profit of Rs. 446.7 million from Rs.209.5 million a year earlier on a revenue of Rs.719.6 million vis-à-vis Rs.396.7 million earned during the same quarter last year.
“The growth in revenue is primarily due to the higher NSA recorded as result of increase in duty component and 15 percent growth recorded in volume”, Govindasamy said.. Exports, the next largest segment of the company, saw its net profits sliding by 54 percent Year-on-Year to Rs.10.3 million while the revenue dropped 61 percent to Rs.101.6 million from a year ago amid slowing orders. The company saw its net profit for the six months ended September 30, 2016, rising 109 percent to Rs.547.9 million from a year ago with an earnings per share of Rs.2.31. The revenues for the six months were up by 2 percent to Rs.3.3 billion.
As of September 30, Estate Management Services (Pvt) Limited held 75.65 percent stake in the company while the high net worth investor, Dr. T. Senthilverl held 10.93 percent stake being the second largest shareholder.
