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Wednesday, 2 June 2010






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Kegalle Plantations reports profits

Kegalle Plantations managed by Richard Pieris reported healthy performance for the year 2009/10 on the back of strong rubber and tea prices. Group profit before tax amounted to Rs 399 million, an increase of 108 percent from last year, a commendable performance given the wage increase of 42 percent and the consequential gratuity provisioning of Rs 81 million.

The company possesses a strong Balance Sheet, with surplus cash of Rs 720 million invested in treasury bills, thus being well positioned to capitalize on growth opportunities.

The company’s consolidated turnover for the year was Rs 2216 million, an increase of 15 percent compared to the previous year’s Rs 1928 million. The gross profit from operations improved by 8 percent to Rs 454 million.

Favourable market for tea and rubber during the second half of the year and changing of tea and rubber grade mix to suit market conditions contributed to this achievement. Profit after tax after charging the loss on discontinued operations amounted to Rs 366 million compared to Rs 205 million in the prior year. The Board of Directors recommended a dividend of Rs 3/- per share; which amounts to a distribution of Rs 75 million.

Rubber prices continued to escalate due to a global shortfall in production by most producer countries as a result of adverse weather conditions. Escalating petroleum prices which had a direct impact on the cost of synthetic rubber and the recovery of China and India from the global recession also had a positive impact on rubber prices.

Kegalle Plantations PLC maintained its position as the largest producer of natural rubber in the country with a production of 4578 MT. Despite the reduction in production the gross profit attributable to rubber was Rs 366 million. Optimum results were obtained from price fluctuations by changing the grade mix to suit market conditions. The direct export of sole crepe on fixed prices and control of expenditure also contributed to this achievement.

The production of tea in Sri Lanka in the year 2009 dropped by around 9 percent from the year 2008. Kegalle Plantations PLC reported a marginal drop of below 1 percent, with a crop of 2479 MT, due to improved yields. Tea prices were buoyant throughout the year due to the global supply shortage and increased purchasing power of our major buying countries which are the Middle East and the Russian Federation.

The investments made to equip factories in the Udapusellawa Region for different types of manufacture paid dividend with flexibility to respond to fluctuations in tea prices.

During the year the company incurred Rs 183 million on capital expenditure. The company focused on long-term benefits and incurred Rs 114 million on field development including replanting and maintaining rubber and tea. The total rubber extent planted during the year was 121 ha; bringing the total extent replanted since 2004 to 780 ha.

With increasing petroleum prices it is expected that both tea and rubber prices will continue to rise.

The company will continue to take maximum advantage of the fluctuations in market prices with effective management of grade mix. Planned replanting of rubber will continue to have priority.

A company spokesman said that “with the strong balance-sheet and liquidity position options of expanding both in Sri Lanka and overseas will be pursued. The outlook is very promising and the Company is optimistic of strong growth and improved profitability.”



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