Financial Times

RPC mulls tea futures, becomes biggest plantations group with Namunukula
The Richard Pieris group has become the largest plantations group in the island with a total plantation land extent of 32,110 hectares of tea, rubber, coconut and oil palm, after it acquired Namunukula Plantations, and group units are mulling plans for tea futures.

The acquisition of Namunukula Plantations, for Rs. 330 million from the John Keells Holdings conglomerate, further diversifies the crop mix of Richard Pieris & Co. (RPC) adding four million kilos of low grown tea to its portfolio of high and mid grown teas while ensuring a constant supply of latex to its rubber value addition operations.

The Group will produce 20 million kilos of tea and 8.5 million kilos of rubber, 6.7 percent and nine percent of the national output of tea and rubber. “We bought Namunukula mostly because we wanted a better mix of our plantation crop,” said Ravi Kumararatne, CEO of RPK Management Services (Pvt) Ltd. and President/CEO of Asia Siyaka Commodities. “RPC is one of the few companies that add value to rubber and Namunukula has a fairly large hectarage of rubber. The RPC group also controls the largest rubber producer which is Kegalle Plantations.” Namunukula’s rubber is already being consumed by RPC production plants and companies like Ansell and others.

Kumararatne said other RPC firms, Asia Siyaka and Asia Capital, were planning to create a futures market for tea which he said was the only way to stabilise commodity price fluctuations that led to poor returns in some years.
“It was believed that in tea it was difficult to trade in the futures market because of the variables it has – the quality and standard of tea can vary because of elevation and weather,” he said.

“There are many factors that impact on the quality of tea. We believe it is possible to find a mechanism to standardise tea and hopefully we would see tea being quoted in the Chicago and Bombay commodity exchanges.”
Kumararatne also said RPC plans to launch an international brand for tea and would be taking part in some of the key international food fairs in the next few months.

RPC acquired control of Namunukula Plantations when JKH last week sold its controlling interest in Keells Plantation Management Services, which has a controlling stake in Namunukula, to RPC Management Services, a fully owned subsidiary of Richard Pieris.“Our plantations group did not have an adequate balance between high grown and low grown teas,” Kumararatne said. “Namunukula really balances our crop mix, since we’ve got the best high growns in Maskeliya Plantations, which is one of the largest producers of tea in the high grown sector.”

Richard Pieris is also aiming at the world's edible oil market and Namunukula has planted 1,000 hectares of oil palm which have come into bearing, with a 10 metric tonne crude palm oil mill, in which it has a stake through a joint venture, scheduled to be completed in October 2005.

The acquisition of Namunukula Plantations comes in the wake of Richard Pieris' previous acquisition of controlling interest of two other plantation companies from the John Keells Group in 2004.

Following RPC taking over the control and management of Maskeliya Plantations and Kegalle Plantations in 2004, the plantations experienced a turnaround performance in the 2004/05 financial year, Pravir Samarasinghe, RPC Chief Operating Officer, said in a statement.

Maskeliya Plantations profits increased by 211 percent to Rs. 81 million in 2004/05 from Rs. 26 million in 2003/04, while Kegalle Plantations profits rose 56 percent to Rs. 125 million in 2004/05 from Rs. 80 million the year before.

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