Financial Times

Talawakelle produces green and organic tea
Talawakelle Tea Estates Ltd has recorded a turnover of Rs 1.62 billion and a profit after tax of Rs 105.3 million in calendar 2005, the company said in its annual accounts.

This also reflected an 8 percent increase on the previous year’s tea production in accordance with higher volumes in production and improved tea prices.
The company made a provision for income tax and deferred tax expenses amounting to Rs 6.8 million. The proposed dividend rate to shareholders is 15 percent while total dividend payable is Rs 35.6 million. The share prices of the company were in the top three amongst listed companies in the sector throughout 2005, it said.

The company will focus on quality to benefit from the buoyancy in the tea prices during the season. “Current prices at the auctions are remunerative, and a crop shortfall in Kenya is giving a fillip to prices as per industry analysts,” said Rajan Yatawara, Chairman, Talawakelle Tea Estates Ltd. According to him the unfavourable events in Iran can have a negative impact on demand while the increased (buying) activity in the CIS and in Middle Eastern countries is due to higher oil revenues.

He said they are optimistic that the authorities will be mindful of a need for an exchange rate which is competitive for exports. The exchange rate made a significant impact on the company’s performance affecting tea prices, especially over the first three quarters of the year.

Despite many representations made, the company is still concerned that tea is exempt from VAT and that on inputs this has to be absorbed as a cost. This imposes a heavy burden on the industry along with the tea to be sold in the domestic market. Tea being a cyclical industry, the company will pursue a strategy to add value to their tea, reduce costs and diversify the earnings which also includes an accelerated fuel wood planting programme to develop their dendro and hydro resource potential to reduce the dependence on fossil fuels. The anticipated savings are substantial and already two factories have been converted, with additional five this year.

The diversification will be done by moving into green and organic teas. “We see a potential for increasing production of bell peppers, and have made additional investments to raise production to 20,000 kg in 2006,” said Yatawara.

The company continued to invest in its core business investing Rs 140 million for long-term sustainability and growth. The Talawakelle Tea Estates Ltd was top ranked amongst RCPs (Regional Plantation Companies) for the fourth consecutive year in its prices at the Colombo Auctions, reflecting its status as a premium tea producer.

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