The Island - September 15, 2012, 6:08 pm
HVA Foods PLC, which describes itself as "a truly global company dealing in every kind of tea and tea based products," has posted a lackluster year ended March 31, 2012 with the profit after-tax down to Rs.9.3 million from the previous year’s Rs.46.4 million despite a healthy turnover increase to Rs.741.7 million from the previous year’s Rs.561.6 million.
The directors said in their report that the decline in profitability was mainly because of an exchange loss of Rs.14.3 million in comparison to an exchange profit of Rs.18.8 million the previous year and an increase in distribution and administration expenses.
The directors have not recommended a dividend for the year under review.
HVA had a very successful IPO during the previous boom on the Colombo Stock Exchange. The company has a stated capital of Rs.333.9 million, revaluation reserve of Rs.147.3 million and retained losses of Rs.9.7 million in its books.
Its chairman, Mr. Rohan Fernando said in the annual report that the turnover increase coming from business expansion in new markets had the potential to generate a healthy bottom line in the medium to long-term.
"However venturing into new markets involves a substantial entry cost in the initial years, overriding the gross profits," he said.
He added that the continuous depreciation of the rupee against foreign currencies had a negative impact on the bottom line with the company having to provide a substantial book value for exchange losses.
Fernando noted that the year started with a strong rupee of Rs.110 to the USD sliding to Rs.127 to the dollar at the end of the last financial year.
He was optimistic for the future by pointing out that the company’s Heladiv brand has seen increased demand in established markets in Russia and the Far East and gained new entry points for their brand in the Far East and elsewhere in the world.
They had installed tea bagging and packaging machines and production line equipment enhancing quality and controlling production cost and laid a strong foundation to meet the increase in demand for Heladiv teas around the globe.
He said that their tea extract plant had also made progress by exporting bulk tea extracts to several Asian and Far Eastern markets for trials as well as introducing several new products in the form of "ready to dilute and drink" tea mixes.
"These products are still considered novel and require further marketing efforts to grow into regular businesses," he said.
"It is hoped that before too long the tea extraction plant will return impressive results to be recognized as a novel business model and boost bottom line profitability of the company."
HVA Lanka Exports (Pvt) with 61% of the company is the dominant shareholder followed by Divasa Equity (Pvt) Ltd (2.4%) and Lankem Ceylon with 1.4% are the major shareholders.
HVA Lanka Exports is owned by Mr. Rohan Fernando, Chairman of HVA Foods PLC with 7.6 million shares and his wife, Mrs. Varuni Ahangama Fernando with one share.
Its total assets ran at Rs.938.5 million and total liabilities at Rs.467.9 million.
The directors of the company are: Messrs. Rohan Fernando (Chairman), W.I.H.J. Fernando, J. Raddalgoda, Mrs. V.S.A. Fernando, N.C. Vitarana and J.H.P. Ratnayeke.