- It is well aware that the Govt has already decided and implemented a complete ban on chemical fertilizers, pesticides, and weedicides.
The decision threatens large-scale commercial agriculture, particularly plantations companies. Their output is largely determined by the use of fertilizers/agrichemicals. The situation is extremely serious for TEA (experts in the field anticipate a near-term drop of output by 35-50%). Rubber and other commercial crops will also get affected considerably.
As a result of this ban, we could anticipate adverse impacts to revenue and extremely serious impacts to profitability in next 2-3 years.
- Apart from all the planation companies listed in CSE, many conglomerates with exposure to plantation sector would affect by this. I have listed below some of the holding companies which have exposure to planation sector (Please add if I miss any).
RICH --- via MASK, KGAL & NAMU (the highest exposure among all)
MELS – via BALA & MADU
LCEY/LDEV – via KOTA & Agrapathana Plantation (unlisted)
DIPD/HAYL – via KVAL & TPL
LWL/RCL/VONE – via HORA
ASPM/SPEN – via EPL
SUN – via WATA
RHL – via Kandy Plantation (unlisted)
JKH & CFIN – via JKL & TSML (although not involved in plantation management)
To understand the relative exposure of plantation business in the parent company reasonably, need to do a little more work to compute the share of revenue and profits generated from plantation business. Also, it might need to consider effective shareholding in the plantation company(s) by the parent which indeed determines by %holding directly/indirectly, etc.
I invite veterans in the plantation industry share their thoughts ……..
Declaration: I have little exposure to the plantation companies directly, however, indirectly exposed quite significantly through most of the holding companies mentioned above.