Watawala Plantations diversifies with $ 11.5 m dairy operation

From left: Duxton Asset Management CIO Desmond Sheehy, Sunshine Holdings PLC Group Managing Director  Vish Govindasamy and Board of Investment Chairman Upul Jayasuriya exchanging the agreements signed between the Company and BOI

Watawala Plantations PLC, a member of the diversified Sunshine Holdings conglomerate and one of Sri Lanka’s largest Regional Plantation Companies (RPCs), has announced plans to set up a mega commercial dairy operation, with a total initial funding commitment of $ 11.5 million.

Of this funding, a large portion ($ 4.3 million) has been committed by Watawala Plantations PLC while a $ 3 million share represents Foreign Direct Investment (FDI) by Duxton Asset Management, a leading Singapore-based international and boutique asset manager. This is the first-ever agricultural FDI in Sri Lanka by Duxton Asset Management, which manages and advises assets of approximately $  690 million, of which $ 460 million are in agricultural investments.  

The new Board of Investment (BoI) approved venture, Watawala Dairy Ltd., is a subsidiary of Watawala Plantations PLC. The dairy operation is expected to further diversify and strengthen the revenue streams of Watawala Plantations, which have benefited from strategic diversification into palm oil.  

With the new investments, once it is in full operation, Watawala Dairy will expand its livestock to 1,000 dairy cattle and is forecast to generate over Rs. 1 billion in revenue from the fourth year of operation. Thereafter it sees significant potential for further expansion as well. 

The state-of-the-art Watawala Dairy farm will utilise the expertise of two South African veterans – who have a combined experience of over 40 years in the dairy industry.

The present small-scale dairy farm operated by Watawala Plantations – consisting of 75 dairy cattle and generating annual sales of Rs. 30 million – has been brought under Watawala Dairy Ltd.   

The agreement to set up Watawala Dairy Ltd. was recently signed by Sunshine Holdings PLC Group Managing Director, Vish Govindasamy on behalf of Watawala Plantations PLC and by CIO, Desmond Sheehy on behalf of Duxton Asset Management.

The new investment recognises the strong economic potential for dairy in the country and is also expected to support the country in its vision of achieving self-sufficiency in fresh milk production. 

A leading international player in agricultural investments, Duxton has operating investments on five continents and is currently working on live projects in Latin America, Australia, the Pacific, the Caribbean and Africa for its existing client base. Duxton manages/advises 21 operations that span 540,000 hectares of farmland and over 30 commodities, managed by approximately 500 on-the-ground senior farmers   supported by more than 13,000 farm workers and thereby possesses vast expertise in the sector.

Watawala Plantations has been Sri Lanka’s largest producer of palm oil for several consecutive years. A significantly diversified plantation company, Watawala has interests in palm oil, tea, rubber and cinnamon. Watawala Plantations PLC is a subsidiary of Estate Management Services Ltd, a joint venture between Sri Lanka’s Sunshine Holdings, TATA Global Beverages Ltd. and Pyramid Wilmar. For the first nine months of the 2016 financial year (9MFY16), Watawala Plantations PLC reported Revenue of Rs. 4.6 billion and Net Profit of Rs. 439 million. Its Total Assets as at 31st December 2015 stood at Rs. 7.9 billion.        

Sunshine Holdings PLC is a diversified holding company contributing to ‘nation building’ by creating value in vital sectors of the Sri Lankan economy – including healthcare, agribusiness, fast moving consumer goods and renewable energy. The group, which provides employment to approximately 12,000, generates over $ 120 million in revenue. Sunshine Holdings is consistently ranked among the LMD Top 50 companies in Sri Lanka and is also one of the country’s largest tax payers – contributing over Rs. 500 million to the state’s coffers annually.