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Kelani Valley Plantations
reports strong profit growth in 2006
-10-03-2007-
-92
per cent growth in profit; 68 per cent improvement in its bottom
line;turnover up by 21 per cent
-Work disruption in last quarter likely to hamper both volume and
quality in the first quarter of this year
Robust rubber prices have added bounce to the 2006 financial performance
of Kelani Valley Plantations Limited (KVPL), the subsidiary of Dipped
Products Limited (DPL), enabling the company to post a 92 per cent
growth in pre-tax profit and a 68 per cent improvement in its bottom
line.
In its annual report now in the hands of shareholders, KVPL has reported
that turnover grew 21 per cent to Rs 2,330 million over the previous
year, with increases of 11 per cent from tea and 44 per cent from
rubber, despite drops in production in the last two months of the year
as a result of trade union actions over wage negotiations.
KVPL’s profit before tax of Rs 291 million was made possible by an
increase in the average prices of rubber at the Colombo auctions in the
year under review. Profit attributable to equity holders of the parent
company grew 66 per cent to Rs 256.6 million.
Mabroc Teas, an associate company engaged in marketing of tea,
contributed Rs 18.6 million to KVPL profits in line with its performance
of the previous year.
On the basis of these results, the Board of Directors of KVPL has
recommended payment of a first and final dividend of 35 per cent, as
against 20 per cent paid in 2005.
Reviewing performance in the year, KVPL reported that the estate
‘go-slow’ and strike spanning a 30-day period in support of the wage
negotiations seriously affected all Regional Plantation Companies.
Division of opinion between the trade unions with regard to the quantum
of wage increase prevented the companies from reaching an early
settlement to the dispute, significantly depressing both tea and rubber
outputs.
As a result KVPL’s tea production registered a decline of 6 per cent.
Had normalcy prevailed during the latter part of the year, production
would have exceeded that of the previous year, the company said. Rubber
production however had been on par with that of 2005, notwithstanding
the exceptional wet conditions in October and November 2006. KVPL had
also increased the quantity of bought latex by 15 per cent.
Referring to the impact of the wage increases which became effective in
November 2006, KVPL has disclosed that the company incurred an
additional expenditure of Rs 64 million for the year under review, and
that it will impact 2007 earnings by more than Rs 200 million. “To
afford the wage settlement the Company would need to achieve a
significant productivity increase, though agreement was not reached on
this matter at the negotiations, along with a concurrent improvement in
prices,” the company’s Chairman, Mr. N. G. Wickremeratne said.
Commenting on the prospects for the company in the current year, he
said: “The work disruption in last quarter is likely to affect both
volume and quality in the first quarter of this year. The paucity of
quality Western teas in the first quarter could adversely affect buying
patterns in the medium and long term, as buyers may be compelled to look
to other producer countries for equivalent products.”
“Rubber prices are expected to remain strong for the first half of the
year and likely to stay high on account of continued demand from the
large Asian economies.”
KVPL’s parent company Dipped Products Limited (DPL) is the Hayleys
Group’s multinational hand protection company. DPL’s turnover for the
nine months ending December 31, 2006 was Rs 7.2 billion.
The Board of Directors of Kelani Valley Plantations Limited comprises
Messrs N. G. Wickremeratne (Chairman), J. A. G. Anandarajah, G. K.
Seneviratne (Managing Director) R. W. Soysa, , Dr. W. S. E. Fernando, B.
P. W. Jayasekera and A. M. Pandithage (Alternate: R. A. Ebell).
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