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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Interim Financial Statements 31-03-2013 - RICH,KGAL,NAMU & MASK

Interim Financial Statements 31-03-2013 - RICH,KGAL,NAMU & MASK

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innam


Manager - Equity Analytics
Manager - Equity Analytics
@Arena wrote:

Like wise i have the entire analysis done for last 3 years ( Weekly )
If these prices are not reduces any cost escalation can be absorbed for sure.

I just need your advise on this assumption. ( Chinwi your idea also very important )

Are these magical tea prices translating into the EPS? Remember it's not just wages that are increasing.

If you take Gaja's example AGAL has made a profit of 1.5 million in the March quarter. This is a quarter where you say tea prices are sky high.
According to Gaja's post the management expects additional costs from wages to be 200 million+ and the gratuity provision can be another 100 to 200 million+ (Balance sheet provision figure is 500 million currently).
So how will a company like AGAL absorb nearly 400 million in costs (actual+provisions) when they are only delivering 1.5 million in profits (that too in a quarter with high tea prices)?

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
I agree with your costing analysis.
I am talking about the revenue.

If you take MPRH they are keep on increasing The stock they have for last 2 quarters. Now it is around 600m if i am not mistaken. I dont know whether they want hide the revenue or to keep the higher prices by limiting the supply.

When it is come to AGAL I realy didnt have a look but for sure they have another issue where tea production should be very less compare to the same q in 2012. There is no reason to have a revenue reduction over two quarters.

If you take MAL even i personally know they want to hide the profits since the owner is controlling.

And i am not saying prices are high these figurs are taken from the Forbs tea portal weekly report. At any given time these prices can come down. And also i dont expect any further hike in the profits of these tea companies i just say profits will be sustain or slightly effected due to wage and electricity hike. But i really like to know the Chinwi"s idea on this since his analysis are really deep.

Nigel.Machado


Manager - Equity Analytics
Manager - Equity Analytics
Some tea based plantations rallied today i guess beacause of the presidents request to make ceylon tea readily accessible for the chineese consumers during discussions in china. rather keeping it as a premium product. Some clues about the discussions were given on Sunday times main article.

Nigel.Machado


Manager - Equity Analytics
Manager - Equity Analytics
Sorry, the article was not on the times instead on the sunday leader under the heading "sri lanka & china sighns multiple deals"

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
China is the wold biggest mkt but They consumes green tea than black. Any way 1% of the mkt will be good enough...........

Chinwi

Chinwi
Associate Director - Equity Analytics
Associate Director - Equity Analytics
There are 20 listed plantation companies . It is very difficult to do a study, gathering all data.

I tried to do some study related to wage effect few months ago on these 20 companies . It was a very time consuminng and difficult work. I had to do it personally , gave up .
Somehow, I found some companies face this wage problem better than others and recovered fast.

I think Watawala is one of them . I cannot remember the name but another company performed even better without going red after wage increase. If someone gather and analyze quartely results we may detect them. Last time, mostly oil palm growers cope better but this time we have to consider Tea.

I will let you know the findings if I get time or someone to do it. At the moment I am operating along without any assitant on stock business and engaged in other matters . My plan to recruit some sharp youngsters to train on this was delayed due to prevailed situation in the markets. Not the salaries but due to other overheads .



Extract from WATA 2011 First quarter:

Despite the recent estate wage hike, which increased worker remuneration by 39.6%, your Company was able to report a modest profit. This commendable . cheers

Result was largely due to your companyís balanced portfolio of product range covering Tea, Palm Oil and Rubber together with its Retail and Export business segments.

Second Qtr:

The profitability of the Plantation Industry was adversely effected by a 27% wage increase which came to effect on the 1st of April 2011. Quarter ended with a loss of Rs. 41 Mn for the Group. ! Evil or Very Mad Ayyo !

Third Qtr:
The Group continued to improve its performance over the nine months where it recorded a profit of Rs. 145 Mn. after tax. Company showed a profit of Rs. 28 Mn at the end of nine months, thereby erasing a loss of Rs. 37 Mn. reported at the end of the second quarter. The companies third quarter reported a profit of Rs. 65.7 Mn. The main improvements were recorded in the sectors of Oil Palm and in Retail Marketing. bounce

The average Cost of Production showed an increase of Rs. 34.22 per Kg. -Tea- due to the high wage cost and the enhanced Gratuity provision.


As per above rough data cost of production may increase say 40.00 per kg this time. (assumed)

We have to see what is the increase of the selling price per kg to have an idea about the effects on final results in next seasons.

From 2011 to 2013 what is the increse of the Tea price per Kg ? < 40 or >40 ? .
Is this a realistic way to project the outcome ?

Arena


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Thank you Chinwi..............

If the Avg. Cost increment is around Rs.40 per Kg it is considerable.

Avg. tea price change from last year to this year is around Rs. +75. I pasted these data earlier.

Your 40 is for the entire increment from 2011-2013 or just the proposed wage hike for this year?

Chinwi i will send you the tea 3 year data sheet did but i hv know idea how to attach it to the forum.

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