WATA churns Rs. 262 m PAT for 1HFY15, supported by strong palm oil profits
Wednesday, 29 October 2014 00:00
Watawala Plantations PLC reported revenues of Rs. 3.7 b for the six months ended 30 September 2014 (1HFY15), up 27.9% YoY. Net profit or PAT for 1HFY15 amounted to Rs. 262 m, against Rs. 99 m in the same period last year. WATA was able to post strong bottom line performance in a challenging environment for the plantation sector.
Profit for the 2nd quarter (2QFY15) amounted to Rs. 31 m, down 64.2% YoY due to challenges in the tea sector.
Palm oil contributed Rs. 421 m to the group bottom line in 1HFY15 which helped WATA to cover its losses in the tea and rubber sectors. Profit for 2QFY15 alone amounted to Rs. 237 m, a growth of 26.4% YoY.
Revenue for 1HFY15 amounted to Rs. 822 m, up 7.4% YoY. The growth in revenue is attributed to 5.7% YoY increase in crop which amounted to 4.62m kg, and an 11.2% YoY increase in NSA. The average NSA for 1HFY15 was Rs. 179 per kg. The increase in crop is attributed to better yield as a result of good agri practices, and new fields yielding FFB. Palm oil revenue for 2QFY15 amounted to Rs. 445 m, up 9.2% YoY.
WATA continues to be the single biggest CPO producer in Sri Lanka.
The tea segment, the largest revenue contributor which accounted for over 68.3% of total revenue, increased 37.8% YoY to Rs. 2.5 b in 1HFY15, mainly on the back of improved volumes. Weather conditions were favorable for tea during 1QFY15, but not so much in 2QFY15. For 1HFY15, own crop was up 17.8% to 3.31m kg, and bought crop increased 30.3% YoY to 1.98m kg.
The NSA for 1HFY15 stood at Rs. 396 per kg, down 2% from same period last year. Instability in key export markets such as CIS, and the Middle East has put pressure on auction prices. For 1HFY15, the tea segment had made a loss of Rs. 199 m, compared to a loss of Rs. 234 m in 1HFY14.
Meanwhile, 2QFY15 has been a very challenging period with production volumes being affected by inclement weather and NSA being hit by weak demand at the auction. 2QFY15 loss of Rs. 231 m has completely erased the 1QFY15 profit of Rs. 32 m. Revenue for 2QFY15 amounted to Rs. 1.2 b, up 54.7% YoY. WATA remains the largest single tea producer in Sri Lanka.
The export sector recorded a significant improvement in revenue driven by value added teas sold at a higher price, compared to mainly bulk orders in 1HFY14. Enhanced volumes on herbs and black teas have contributed towards revenue of Rs. 302 m in 1HFY15, up 36.6% YoY. PAT on export amounted to Rs. 13 m in 1HFY15, against Rs. 11 m recorded in the same period last year.
The rubber segment was hard hit by the 25% YoY dip in average NSA which stood at Rs. 271 per kg in 1HFY15 compared to Rs. 363 per kg in 1HFY14. Revenue was further impacted by a 30% YoY drop in volumes. Cultivation extent of rubber was reduced by 19% from 652 ha in 1HFY14 to 521 ha in 1HFY15. The increase number of wet days also had a negative impact on tapping and yield.
Rubber revenue amounted to Rs. 40 m in 1HFY15, down 39.4% YoY. The segment made a net loss of Rs. 41 m in 1HFY15, compared to a loss of Rs. 16 m in the same period last year.
Overall, WATA posted strong results for 1HFY15, mainly driven by palm oil. It expects the palm oil segment to continue its strong performance for 2HFY15.
It is mindful of the demand side issues with buying at the auctions slowing down due to issues in key Ceylon tea markets in CIS and the Middle East. With its long term agri practices in place, it is reasonably confident that it will overcome the difficult environment expected for the rest of the year.
The Board has approved a dividend of Rs. 0.95 per share which amounts to Rs. 225 m in total.
A member of the Sunshine Group, Watawala Plantations PLC is a diversified plantation company in Sri Lanka, managed by the Group’s subsidiary, Estate Management Services Pvt. Ltd., a joint venture with the TATA Global Beverages and Pyramid Wilmar Plantations (subsidiary of Wilmar International).
The company manages a total land extent of over 12,000 Ha in palm oil, tea, and rubber with a workforce of over 11,000 people. The company has the largest palm oil plantation and the largest rubber factory in Sri Lanka to augment the production of almost 10m kgs of Ceylon tea annually.