Tea production up, prices buoyant

National Tea Production was 318.4 million Kg 13.8 million Kg higher than in previous year.

Tea prices were buoyant to end of September, and recorded a year end average of Rs. 310.81 Kg (Rs. 279.44 Kg in 2007) at the Colombo Tea Auctions; at US$ 2.86 Kg this was the highest price at tea auction centres in the world, said the chairman N.G. Wickremeratne in his Annual report.

Net Profit After Tax (NPAT) of Rs. 108.0 million is a commendable performance in the crisis the industry faced with the collapse of commodity prices. Turnover at Rs. 2.2 billion was 114.5% and NPAT was 109.8% of the previous year.

A strong performance up to end September on the back of a buoyant tea market and the unremitting focus on producing quality tea, mitigated the adverse impact of the fourth quarter on the year’s results.

The year was also impacted by the wage increase in November 2007 and by very high fertilizer prices. An increase of other operating income and containment of finance costs however had a favourable impact on the year’s results.

Estates’ profitability declined by 9.5% during the year due to a steep decline in low grown estates’ profitability. High grown estates recorded an increased level of profitability.

Tea production during the year was 6.9 million kg and this reflected an increase of 0.65 million kg, mainly from the high grown estates. Conducive weather in the first half of the year, and good agricultural practices, contributed to the higher production.

TTE PLC estates again ranked Number One on prices amongst Regional Plantation Companies in the high and low grown elevations at the Colombo Tea Auctions, for the eighth consecutive year.

This distinction is directly attributed to the attention to quality and consistency in the value chain from harvesting to manufacture, and the quality assurance systems in place, which ensure production of a quality tea. Nine of our high grown estate marks and two of our low grown marks recorded prices above the national elevation averages in 2008.

The Company continued to implement and upgrade quality assurance systems in its factories. ISO 22000 accreditation was accorded to Dessford, Deniyaya and Great Western Estates and stipulated MRL levels were maintained in field operations.

The Company continued its capital expenditure program to develop its agricultural potential, factories and social/infrastructure facilities. The total capital expenditure in the year was Rs. 349.3 million, Rs. 209.2 million on field development and Rs. 140.1 million on non-field development. The investment in field and factory development was part financed by ADB concessionary funding. The cumulative investment since privatisation has reached Rs. 2,591 million.

Investments in improving housing, water and sanitation and related social welfare programs totalled Rs. 29.4 million in the year, the cumulative investment to-date is Rs. 162.8 million. An extensive road rehabilitation program on estates was also undertaken from grant funds amounting to Rs. 44.3 million.

The Company invested Rs. 27.4 million in hydro power projects in 2008, with an investment to-date of Rs. 93.2 million.