Financial Times - Kegalle Plantations concerned about non exemption of VAT

Kegalle Plantations has recorded an after-tax profit of Rs.191 million in 2005-06, the highest ever achieved since the inception in 1992 and the management has recommended a first and final dividend of 25 percent, again the highest in the history of the company, to be approved at the annual general meeting.

While acknowledging the government for looking at the possibility of planting rubber in the Moneragala District, the Chairman, Dr. Sena Yaddehige has raised concerns over the non-exemption of value added tax on tea, the economic service charge and the extension of lease period. “There has not been any progress made despite various bodies associated with the tea industry making representations to the relevant authorities. We are now faced with unsubsidised fertiliser prices,” he has said in the annual review.

He said that the government has been subsidising urea fertiliser to all sectors of agriculture up to around April 2006.

“Since then the government has removed the subsidy scheme only for the plantation companies and this removal would cost the companies around Rs.4 on a kilogram of made tea, and Rs.1.25 on a kilo of rubber which is very substantial, and for Kegalle Plantations the additional expenditure would be in the range of Rs.21 million.

This measure may prompt some companies to curtail the use of fertiliser altogether which will have a serious long-term implication to the industry and the national economy,” he has stated.

The company recorded a turnover of Rs.1.5 billion, reflecting an increase of Rs.219 million, or 17 percent, over the previous year. “Towards this increase, rubber contributed Rs.175 million and tea Rs.53 million, or 22 percent and 10 percent respectively,” Dr. Yaddehige has said, adding that the gross profit of Rs.338 million is an improvement of Rs.86 million over the previous year.

He has said that the financial costs have been well contained despite higher working capital requirements as a result of increased cost/valuations of the commodity stocks and debtors.

Meanwhile the company recorded a profit before tax of Rs 205.5 million, the highest ever recorded and an after-tax profit of 191 million, an increase of 53 percent compared to the previous year.