Kelani Valley Plantations posts best year on record in 2007

A record output of rubber combined with high prices for both tea and rubber in 2007 has enabled Kelani Valley Plantations PLC (KVPL), the Hayleys Group plantation company, to post its best-ever performance in a financial year.

The company which is owned and managed by Dipped Products PLC has reported that pre-tax profit grew 52 percent to Rs 442 million in the year ending December 31, 2007. Profit after tax at Rs 412 million represented a growth of 61 percent on a turnover of s 2.83 billion, which was up 21 percent, according to figures released by the company.

Profit attributable to equity holders of the parent company increased by 62 percent to Rs 416 million, the highest return generated by KVPL since its incorporation in 1992.

Based on these results, the Board of Directors of the company said it has recommended the payment of a first and final dividend of 55 percent for 2007.

KVPL Chairman N. G. Wickremeratne, also chairman of Hayleys Group, said a significant development in the year concluded was a decision by the parent company to waive its management fee of Rs 38 million in its entirety, from 2007.

“The performance of KVPL is particularly noteworthy in the context of the substantial crop losses in tea that the company incurred as a result of the work stoppages late in 2006, and two wage increases in the year which cost the company an additional Rs 236 million,” Wickremeratne said.

Tea production fell by 10 percent over the previous year and by 16 percent over 2005 primarily due to the long gestation period prior to normal growth following the month long work stoppage in 2006. The situation was worsened by adverse weather conditions in the Nuwara Eliya and Hatton regions.

However, the company’s average prices for high and low grown teas improved by 24 per cent and 48 per cent respectively largely on account of strong demand for Ceylon tea boosting revenue from tea by 18 per cent.

KVPL’s marketing associate Mabroc Teas contributed Rs 28 million to profit, up by 50 percent over 2006.

Rubber production grew by 12 per cent to register the highest ever output in a year, with yields surpassing 1000 kilograms per hectare. Sole crepe production increased by 32 percent while output of centrifuged latex grew by 19 percent. With RSS price up 27 percent and sole crepe prices rising 35 percent, turnover from rubber grew by 30 percent in the year under review, the company said.

Wickremeratne said robust tea prices are likely to continue in the early part of 2008.

The prospects for rubber would depend on global economic conditions, but while an economic slowdown has been observed in advanced economies, no significant changes have been evident in China, India, Russia, the Middle East and other emerging countries, he noted. However, an upsurge in oil prices and local currency devaluation could positively impact on tea and particularly rubber prices, he said.

Kelani Valley Plantations manages 27 estates with an extent of more than 13,000 hectares, divided almost equally into tea and rubber.