Maskeliya Plantations PLC, a member of the Richard Pieris group, has posted a loss after-tax of Rs.370.4 million in the year ended March 31, 2012, down from a profit of Rs.42.5 million the previous year and has attributed the negative result largely to the 28% plantation wage increase.
The company’s Chairman, Dr. Sena Yaddehige, has told shareholders in the annual report that the labour rate has increased 986% between 1991 and 2011 and that the wage rate here is the highest in relation to the average auction price of tea.
Yaddehige noted that the wage rate here is 137% of the average auction price whereas India’s was 93% and Kenya’s 79%.
"In comparison to the wage rate in Kenya, Sri Lanka’s wage rate is 60% higher and the daily wage rate is 150% more than the per kg price sold at the Colombo Tea Auctions," he said.
Maskeliya has been further burdened as it is one of the few regional plantation companies which grow only tea and Yaddehige said that mono-crop companies such as Maskeliya will be forced to search for new strategies "if they are to survive in this extremely competitive and volatile market."
He also complained that although the company had adequate fuel wood resources on its plantations, getting regulatory approval to harvest available stocks was most cumbersome compelling factories to purchase fire wood from other sources. However, they did not use any fossil fuel for their manufacturing, thereby reducing the carbon footprint towards cleaner production.
Yaddehige was critical of the bureaucracy prevailing in the regulatory institutions not only reducing employee productivity but also affecting the bottom line with the escalated costs.
Among the negative factors the company had to contend with was unproductive labour including non-workers living in the plantations, inability to harvest fuel wood even under supervision and the non availability of concessionary interest and funds for capital expenditure. These factors collectively depressed the growth of agricultural industry, he said.
He urged that the concerned authorities should support timber harvesting according to the forestry management plan saying it would enable companies to ease their cash flow requirements.
Maskeliya has begun diversifying into rubber in Poonagala and Ampitikanda Estates where 28 hectares has been planted with assistance and advice of the Rubber Research Institute at a cost of Rs.16 million. Further, Hapugastenne and Ampitikanda Estates had been identified as feasible for growing cinnamon and Rs.18 million had been invested on 28 hectares for planting cinnamon on these properties.
A segmental analysis published in the report indicates that while the net sale average of tea prices in the Upcot, Maskeliya and Talawakelle regions where the company had estates had achieved average prices above the cost of production, this has been not the case in Bandarawela where the cost of production was Rs.331.30 per kilogram against the net sale average of Rs.285.51 per kilogram.
The report indicated that political upheavals in the Middle East had created adverse market conditions and prices which had shown an upward trend with past wage increases had not materialized as expected.
Extreme and erratic weather conditions had continued to hamper production in the high grown areas with the rainfall lower by almost 1,642 mm over the previous year.
Grappling with the 28% wage increase and a 5% decline in the net sale average price of tea, the company’s estates had embarked on a major initiative to improve productivity with increased norms. This had helped improve plucking averages, the report said, estimating that the plucking average should be increased from 30 kg to 35 kg for Maskeliya Plantations to break even.
Maskeliya manages and operates 18 estates upcountry with an extent of 5,511 hectares of tea.
The company has a stated capital of Rs.350 million, a general reserve of Rs.540 million and accumulated profits of Rs.290.9 million in its books with total assets running at Rs.660.9 million and liabilities at Rs.2.75 billion.
RPC Management Services with 73.48% is the controlling shareholder of the company with Mr. C.P. de Silva owning 2.89% and David Pieris Motor Company with 2.26%.
The company’s share saw net assets down to Rs.43.78 from the previous year’s Rs.57.51 and the share traded at a high of Rs.31 and a low of Rs.13.50.
The directors of the company are: Dr. Sena Yaddehige (Chairman), Mr. J.H.P. Ratnayeke (Deputy Chairman), S.P. Jayakoddy, Dr. S.A.B. Ekanayake and Dr. H.S.D. Soysa.