Udapussellawa Plantations PLC, a James Finlay company, has posted a substantial loss of Rs.199.1 million, the highest ever, in the year ended December 31, 2011, down from a profit of Rs.138.9 million the previous year, according to the company’s recently released annual report.
This was the first loss posted by the company since 2005. In 2006 a string of loss making years ended with a modest earning of Rs.2.6 million after-tax.
Udapussellawa Chairman, N.K.H. Ratwatte has told shareholders that the tea industry is currently going through one of its most difficult periods with the average sale price of tea continuously under pressure to keep pace with the escalating cost of production.
The year under review however saw the average sale price of tea inadequate to meet rising cost of production resulting mainly from crop shortfall due to erratic weather conditions and the unprecedented increase in the daily wage of workers.
The wage increase cost the company an added Rs.194 million during the year with the massive wage hike creating serious concerns about the future viability of the plantation industry.
"With Sri Lanka’s cost of production being substantially higher than that of its competitors, it is imperative that the wage is linked to productivity to enable our industry to be globally competitive and ensure the long-term viability and sustainability of the plantation industry," Ratwatte said.
Financial burdens created by the drop in revenue and the shortfall of working capital during the year had compelled the cut back of tea replanting in the Nuwara Eliya District, Ratwatte said. However, the timber, rubber and minor crop programs had continued with an investment of Rs.21 million.
The company’s CEO, Dhayan Madawala, said the year had seen unprecedented rainfall in January and February where four times the usual precipitation was averaged. Thereafter dry weather continues to prevail for long periods with an adverse impact on production during the year.
"Due to the tea sector going through a tough period, a decision was taken to curtail our planting program for the year, and it was mainly the maintenance of the existing new plantings that was undertaken," Madawala said.
With total production of tea down to 3.7 million kg, the cost of production had reached dizzy heights with the estate COP being Rs.362.34 per kilo which was somewhat reduced by the intake of out-grower leaf which brought down the overall cost to Rs.341.74 for the year.
During the year they had planted only seven hectares of fuelwood as the company does not have much bare land for planting. But they were embarking on planting minor crops such as cinnamon, pepper and cocoa in small extents so that they will have a wider mix of crops to sustain their business going forward.
"In the meantime we have also generated much needed revenue by disposing of the mature timber trees where we generated a sum of Rs.11 million during the year," he said.
Udapussellawa which has a stated capital of Rs.340 million carried a revaluation reserve of Rs.242.3 million and a general reserve of Rs.108.5 million. Accumulated losses were running at Rs.435.5 million.
Total assets ran at Rs.1.48 billion, non-current liabilities at Rs.845.6 million and current liabilities at Rs.377.4 million.
James Finlay Plantation Holdings (Lanka) Ltd with 57.78% and James Finlay with 19.02% are the major shareholders of the company which had over 11,800 shareholders, majority of whom own less than thousand shares each.
Net assets per share were down to Rs.13.17 from Rs.23.43 the previous year and the company’s share traded at a high of Rs.43.30 and a low of Rs.27 during the year. This compared with a trading range of Rs.63 to Rs.26 the previous year.
The directors of the company are: Messrs. N.K.H. Ratwatte, C.L.K.P. Jayasuriya, E.R. Croos Moraes, R.J. Mathison, P.R. Henson, J. Molligoda, J.M. Swaminathan, M. Vamadevan, D.H. Madawala and R.A.D.R. Ramanayake.