RPCs lose Rs. 2.7 billion on tea in 2011/12
Horana Plantations PLC, a member of the Ceylon Theatres group, is planning to diversify into oil palm commencing from next year planting around 500 hectares over a 5-year period, the company’s Chairman Anthony Page has told shareholders in its annual report.
A nursery has already been established for this purpose at Neuchatel Estate in Neboda, the company’s annual report reveals.
The diversification is part of the company’s strategy to diversify against risk attached to the main crops of tea and rubber grown on its plantations both upcountry and low country.
The company is also investing in planting cinnamon with 12.2 hectares already in production while 24 hectares of coconut previously planted on this estate have come into bearing during the year ended March 31, 2012.
Page has told shareholders that the year under review had been a challenging one for the tea segment and, based on the published results of all listed regional plantation companies, it is estimated that the tea sector of these companies have collectively posted a loss of Rs.2.7 billion during the period under review.
Page said that this was largely due to the 27% increase in wages and the resulting gratuity top-up which came into force in April 2011 aggravating unfavorable market conditions.
However, despite the numerous challenges Horana had remained profitable posting a pre-tax profit of Rs.84.4 million which, although down from the previous year’s "phenomenal" earning of Rs.338.4 million pre-tax, was a cause for satisfaction.
Page said that the downturn in profitability was a clear indication of the unprecedented challenges faced by the country’s tea sector as a whole. Horana lost Rs.160.8 million on its tea segment during the year, the highest in its history. But its rubber portfolio had made good this loss.
Rubber had continued to do well earning a profit of Rs.267.4 million which was however lower than the previous year’s Rs.339.8 million.
The decline was mainly due to reduction in market prices and increased cost of production due to the wage increase, Page explained.
Despite adverse weather, the yields per hectare had improved to 802 kg. from the previous year’s 739 kg., thanks to innovative agricultural practices and stringent management controls.
Horana has continued accelerating its rubber replanting program with 116 hectares planted on its estates during the year with 25 hectares of tea also replanted.
Horana has completed a program for planting acacia mangium and mahogany as "enrichment planting" in Frocester and Millakanda estates. A new species of acacia had also been introduced on a trial basis, the company said.
Horana has a stated capital of Rs.250 million, a sinking fund of Rs.35 million, development reserve of Rs.35 million and retained profits of Rs.725.1 million in its books.
Total assets were running at Rs.2.4 billion, non-current liabilities at Rs.897 million and current liabilities at Rs.467 million.
A sum of Rs.11.5 million net of VAT has been paid to Ceytea Plantation Management Ltd, the controlling shareholder of Horana as a management fee, down from Rs.15 million the previous year.
The directors have proposed a dividend of Re.1 per share for the year under review.
Ceytea Plantation Management Ltd, a Ceylon Theatres company, owns 51% of Horana with all other shareholders individually owning less than 3%.
The directors of the company are: Messrs. Anthony A. Page (Chairman – Alternate V.R. Page), R. Casie Chitty (MD/CEO), L.J. Rubera, L.J.A. Fernando, V.R. Page, Sunil Mendis, Dr. S. Selliah, A.T.P. Edirisinghe and Dr. R.D. Bandaranaike.