Kegalle Plantations PLC, a regional plantation company running 21 estates under 10,000 hectares in and around the Kegalle and Kurunegala Districts and in the Badulla District, has seen both turnover and profits after-tax decline in the year ended March 31, 2012 largely on account of the 28% wage increase to workers and related gratuity adjustments that had hurt the bottom line.
The company with a land base of around 5,400 hectares under rubber is the country’s largest natural rubber producer with the year seeing rubber generating revenue of Rs.1.86 billion.
Kegalle Chairman Sena Yaddehige said that favourable weather conditions and attractive prices contributed to the robust performance of the company’s rubber portfolio. However, revenues were down 5% from the previous year which was the most profitable in the history of the company.
The increased wages had cost their rubber segment Rs.181 million and the tea segment Rs.67 million with Yaddehige projecting that the failure to link wages to increase productivity would have an adverse impact on the future cost of production especially of tea.
Kegalle’s tea portfolio comprises 1,400 hectares and coconut 500 hectares.
Yaddehige said that the depreciation of the rupee had contributed positively to increase net sale averages over the last few weeks of the year under review. The tea segment had been affected by dry weather he said.
The year had seen the company investing Rs.250 million as capital expenditure with 34 hectares of tea replanted and maintained at a cost of Rs.3 million and 248 hectares of rubber replanted and maintained at a cost of Rs.145 million. Capital expenditure on coconut replanting and other crops had cost Rs.10 million.
Yaddehige said that natural rubber output in Sri Lanka had been increasing since 2001 and although main rubber producing countries are looking at diversifying to oil palm due to low labour intensity, he was confident that the demand for rubber locally will increase due to short supply and push up prices in the near future.
He said that 60% of the country’s rubber production is consumed internally and as production was relatively low compared to other producers elsewhere, rubber exporters may have a problem on their hands.
Yaddehige concluded his chairman’s review by urging a strategic approach towards future wage negotiations that will determine the survival of the plantations.
Kegalle Plantations operates 21 estates with over 7,100 employees producing 4.2 million kg of rubber and 2.6 million kg of tea inclusive of bought crop.
RPC Plantations Management services, a Richard Pieris company, with 70.37% is the controlling shareholder of Kegalle followed by J B Cocoshell (2.43%), Mr. T.T.T. Al Nakib (1.44%) and Almar Trading Company (1.08%).
The directors of the company are: Dr. Sena Yaddehige (Chairman), Mr. J.H.P. Ratnayeke (Deputy Chairman), Mr. S.S. Poholiyadde (Director/CEO), Prof. R.C.W.M.R.A. Nugawela and Dr. S.S.B.D.G. Jayawardena.