Saturday 7 June 2014

No dividend for liquidity reasons following heavy capex

Tea prices help Hapugastenne to boost profits 172%

Hapugastenne Plantations PLC has substantially boosted profitability in the year ended December 2013 posting an after-tax profit of Rs.199.3 million, up 172.39% from the previous year’s Rs.73.17 million.

However no dividend has been recommended for the year due to the liquidity position of the company after capital expenditure of Rs.340 million.

According to a 10-year summary published in the recently released annual report of the company, the 2013 profit had only been surpassed in 2010 when an after-tax profit of Rs.286.8 million was posted.

The company’s Chairman, Mr. Naresh Ratwatte, attributed the performance during the year under review to a healthy tea market and prudent cost management despite the company having to surmount the challenges of erratic weather and the 20% wage increase granted to estate workers during the year.

"2013 could be considered an extraordinary year with prices for Ceylon Tea seemingly out of sync with the rest of the world. The prices were boosted mainly due to the Orthodox Black Tea, a unique product from Sri Lanka, which attracted strong demand throughout the year," Ratwatte said.

"This is despite the turmoil in the Middle East, our biggest market apart from the CIS. This price trend is expected to continue into the New Year."

He however said that rubber prices had unfortunately declined throughout the year with the RSS1 prices crashing from a high of Rs.403 per kg to Rs.343 per kg in December. The national average for the year at Rs.380 compared to Rs.504 in 2011 when rubber prices boomed.

The company manages 3,945.89 ha of tea and 1,107.52 ha of rubber land totaling 5,053.41 ha. Its portfolio also includes timber and minor crops.

The company’s CEO/Director Dhayan Madawala said in his review that Hapugastenne has been able to dispose a large number of trees from the wealth of timber resources on company estates raising revenue of Rs.31 million helping to boost the bottom line.

"We continue with our policy of replacing old timber woodlots with new plants and are continuing with our quest to convert uneconomical and marginal lands to profitable strategic assets over the years," he said.

"We have planted almost 100 hectares during the year which has added to our vast timber/fuel wood base. With our commitment to enhance the quality of plants being propagated for planting, a selection process is in place for cultivars from first progeny competitive trial plots."

Hapugastenne is also into minor crops and had harvested a cinnamon crop in one of its estates for the second year and have commenced harvesting during the year on other estates although production was modest in initial years.

"During the year we planted a further extent of 32.50 hectares of cinnamon, and we expect our production to grow year on year," he said.

They have also been planting pepper and have harvested 1,236 kg of pepper, planting this crop both as a mono culture and also in tea fields where the available shade trees are used to support the vines. Small extents of cocoa continue to be planted annually with 5 ha planted in 2013 under rubber trees.

Hapugastenne is also into hydro power generating a healthy income of Rs.48 million during the year under review.
Hapugastenne Plantations has a stated capital of Rs.550 million and accumulated profits of Rs.917.6 million in its books. Total assets ran at Rs.4.16 billion, non-current liabilities at Rs.1.29 billion and current liabilities at Rs.0.9 billion.

James Finlay Plantation Holdings (Lanka) Ltd with 58.87% of the company is the controlling shareholder followed by James Finlay Limited with 21.06% and Jacey Trust Services with 11.90%.

Earnings per share were up to Rs.4.23 from Rs.1.62 the previous year and net assets per share had grown to Rs.41.70 from Rs.36.93 the previous year.

The directors of the company are: Messrs. N.K.H. Ratwatte (Chairman/MD), D.H. Madawala (CEO), R.A.D.R. Ramanayake Finance Director), C.L.K.P. Jayasuriya (Resigned 29.08.2013), E.R. Croos Moraes, R.J. Mathison, S.C. Swire, J. Molligoda, J.M. Swaminathan (Resigned 29.08.2013), M. Vamadevan, A.N. Wickramasinghe and J.M. Rutherford (w.e.f. 01.02.2013)
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