Watawala Plantations triples 1H net profit to Rs. 157 m

Watawala Plantations Plc, has achieved a significant improvement in its financial performance with more than a tripling of its net profit attributable to equity holders to Rs. 157 million in the first half of 2010/11 financial year in comparison to Rs. 47 million in the corresponding period of last year.

Consolidated profit after tax grew by 245% to Rs. 157 million whilst pre-tax profit rose by 219% to

Rs. 164.5 million from Rs. 51.4 million in the first half of 2009/10 financial year.

Profits made include an extraordinary Rs. 72 million gain on the disposal of Net Assets of the FMCG division to Watawala Marketing Ltd.

The profit recorded in Watawala Plantations Plc (WPPLC) shown in the company does not include FMCG profits as it is now shown in the Group and is now carried out by a fully owned subsidiary in the name Watawala Marketing Ltd.

At Company level, after tax profit was Rs. 154 million, up by 201% in the first half whilst pre-tax profit was Rs. 161.3 million reflecting a 183% growth over the first half of last year.

For the quarter ended on 30 September, 2010, Group post-tax profit was up by 25% to Rs. 10.7 million and for the Company it was up 179% to Rs. 33 million.

Watawala Plantations Group managing Director Vish Govindasamy in a review accompanying interim accounts said the Tea production showed a growth of 14% compared to the previous year while the turnover of tea grew by a similar percentage. A 1% drop in NSA was recorded and the loss in the Tea segment was Rs. 140 mn, a 15% improvement from the same period last year.  The cost of production (COP) of Tea declined due to better productivity.

Turnover of Rubber grew by 173% to Rs. 122.5 mn as the Rubber prices improved by 114% during the period under review. The slight weather improvements in the Udugama area resulted in a marginal improvement in production as well.

Govindasamy said Palm Oil recorded a reasonable profit as the company continued to develop this crop in the Udugama area. Recording Rs. 135 mn in the first half of the year the profits showed a 10% growth over the first half of last year. The company has now begun to refine Crude Palm Oil to market its own bottled produce sold under the brand name of Oliate.

Exports during the period consisted of a small quantity of bulk tea exports to Tetley of UK and the loss was due to the export division being unable to meet the fixed overheads. The gross margins on bulk tea exports were minimal. However, the company has now been able to secure a large order of value added tea to Tetley and the first container has already left Sri Lanka this month.

Watawala Marketing Ltd. now handles the value added teas to Australia and is reported in their accounts. The absence of palm oil exports during the current period also shows a deficit in the export profits. Recording a turnover of Rs. 612.3 mn, 23% higher than the same quarter of the previous year, the bulk of the turnover was recorded from the sale of their main products Zesta and Watawala Kahata. Gift Shop Sales continued to grow with a steady influx of tourists into the country.