Bad weather, wage hike hurt Watawala bottom line
Sri Lanka’s Watawala Plantations (WATA), a grower of tea, rubber and oil palm, saw its net profit falling 92 percent Year-onYear (YoY) to Rs.11.4 million in the three months ended June 30 (1Q14), amid inclement whether, wage hikes and gratuity payments.
Despite the revenue during the quarter under review rising 14 percent YoY to Rs.1.5 billion, sales costs also rose 36 percent YoY to Rs.1.43 billion along with a 10 percent YoY increase in administrative costs.
The management fees during the period saw a 72 percent YoY decline to Rs.7.8 million. The earnings per share for the three months slid to 5 cents from 62 cents recorded in the corresponding quarter of the previous year.
WATA Group Managing Director Vish Govindasamy attributed the poor performance of the company mainly to unhealthy weather pattern prevailed during the quarter under review.
Palm oil was the least affected by the rain as the business segment contributed a Rs.146 million net profit during the quarter.
“While the fluctuating crude palm oil prices had shown a decrease in revenue and, the increase in wages which came into effect from 1st April 2013 had a significant negative impact on the cost of production n of palm oil resulting in a lower profitability for the quarter under review,” Govindasamy said.
The tea sector recorded a net loss of Rs.156.5 million against a net loss of Rs.8.2 million in the corresponding quarter of the previous year.
According to Govindasamy, tea production was badly affected by continuous rains experienced in the upcountry area resulting in a higher cost of production.
“In the Hatton/Watawala regions, the average number of wet days recorded during the 90 days period was 59 and the rainfall was recorded at 1,950 mm for the period of three months from April to June 2013. The wage increase couple with additional provision for gratuity had a significant impact on the cost of production of tea,” he said. The company also said that due to the floods, stocks were damaged and the estimated costs of tea were Rs.73.3 million, general stocks were Rs.11.8 million and other noncurrent assets were Rs.30.2 million. “The damage is adequately insured. The insurance claim was for Rs.115,488,095 covering all items,” WATA said.
The net loss of the rubber sector also widened YoY to Rs.12 million from Rs.1 million, severely affected by incessant rain.