Financial Times - Kotagala Plantations to concentrate on quality, upgrade factories

Kotagala Plantations, part of the Lankem group, is gearing to meet the increased tea production in the world market by concentrating on quality and on being competitive by upgrading factories while establishing new channels of revenue and business in the form of direct sales and exports and computerising all estates in the next financial year.

A. Rajaratnam, Chairman of the company in his annual review has said that during the last 10 years, the company has invested over Rs 1.47 billion on tea and rubber replanting, in-filling and other capital expenditure to enhance the value of the properties.

D. S. Abeyratne, Chief Executive officer, Lankem Tea and Rubber Plantations (Pvt) Ltd Managing Agents has said that the main focus of the company was to maintain a high quality end product which was one of the critical success factors during 2005.

“We have identified the inherent risk in the shortages of labour for land cultivation in our estates in the future. We have engaged in mechanisation of certain areas in our field and factory operations and will continue to look at further possibilities of mechanisation in the future,” Abeyratne said, adding that the company has also initiated diversification programmes by planting timber in 19 estates.

The company generated a turnover of Rs 1.7 billion which was an increase of 13.9 percent when compared with the previous year’s Rs 1.5 billion.

Revenue generated from tea was Rs 1.2 billion an increase of 9.5 percent over 2005, while revenue generated from rubber was Rs 592.3 million an increase of 23.5 percent over last year.

The post tax profits of Rs 141.5 million were a 13.9 percent improvement when compared with last year’s Rs 124.4 million.

Rajaratnam has said that the company is concerned over the rising cost of fuel, electricity and the wage increases and all tea and rubber producing companies are concerned that tea has been categorised under non-exempt categories for value added tax (VAT) purposes.

“Tea is an export item but the burden of absorbing the input VAT of about Rs.5 per kilogram has been passed onto the producer.

The issue has been taken up at various forums and no decision on this matter has still been taken. We need to focus especially, in the tea industry, on the long-term and global issues rather than looking at it in a myopic manner, and assuming that the industry which has existed for over 100 years, will survive for another 100 years,” he has said.