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Watawala Plantations 3Q profit soars amid strong palm oil, tea gains.

 

Diversified plantation company, Watawala Plantations PLC (WATA), saw its performance improving during the December quarter (3Q17) due to strong gains from the palm oil segment and improving tea prices, the interim financial accounts filed with the Colombo Stock Exchange showed.

The company posted Rs. 1.97 profit per share or Rs.466 million for the quarter ended December 31, 2017 (3Q17), up 163 percent year-on-year (YoY) The group earned a revenue of Rs.1.43 billion, recording a 5 percent increase YoY. For the nine months to December, WATA recorded a net profit Rs. 4.28 a share or Rs.1billion, an increase of 131 percent YoY. This is the first time the company surpassed the billion rupee profit milestone. The consolidated revenue for the period was Rs.4.74 billion, an increase of 3 percent YoY.

The group’s palm oil business performed exceptionally well due to price and volume growth. During the quarter, this segment earned a revenue of Rs.508 million, an increase of strong 62 percent YoY. The segment’s net profit was Rs. 237.7 million, an increase of 96 percent YoY.

“The growth in revenue is primarily driven by price and volume growth that were recorded at 25 percent and 19 percent respectively”, said Watawala Plantations Managing Director Vish Govindasamy.

However, the recent reduction in the import duty by Rs.20 a kilogram has resulted in some negative impact on the selling price of crude palm oil, the company added. The group’s tea business also saw a turnaround due to signs of rising prices as the segment narrowed its net losses to Rs.63.2 million for the nine months to December 2016 from a loss of Rs.213 million YoY.

Govindasamy said the company is now focusing more on quality over quantity to fetch higher prices going forward, which now appears to be WATA’s formula to stay afloat in the tea business plagued by legacy issues in the sector. “…the management continues to lead on the decision to change the tea sector strategy by driving through the perspective of quality instead of quantity. This change of strategy has reaped benefits by gaining higher NSA over the last year and above the budget,” Govindasamy said. During the period, tea saw a crop loss of 1,325,010 kgs (18 percent) YoY, the company said. Meanwhile, for the quarter ended December 2016, the tea segment’s the net profit reached Rs.194.2 million, increasing from a net profit of just Rs.30 million a year ago. The revenue was Rs.847 million. Tea remains WATA’s largest segment in terms of revenue.

As of December 31, Estate Management Services (Pvt) Ltd held 75.65 percent of WATA followed by a 9.05 percent stake held by the high net worth investor, Dr.T.Senthilverl.

Date : 30 January 2017