Bad weather drives Maskeliya to the red, but investment sustained

Plants rubber in Bandarawela, citrus and cinnamon on tea estates

Dr. Sena Yaddehige, Chairman

Maskeliya Plantations PLC, a member of the Richard Pieris group, has posted a loss of Rs.92.2 million in the year ended March 31, 2014 against a profit of Rs.151.7 million a year earlier but had boosted capital expenditure to Rs.230.3 million from Rs.211.4 million the previous year.

The company’s Chairman, Dr. Sena Yaddehige attributed these results to unfavourable weather including excessive rainfall and continued gloomy conditions from May to July with some of their estates recording only 40% of the estimated crop during this period.

Also the wage hike and short supply of key inorganic fertilizer during the financial year had hurt the company with the situation worsening with dry weather in the last quarter of the year under review.

Production was down 8% during the year to 8.25 million kg. of tea and despite better prices, turnover was down 4% to Rs.3.4 billion.

The crop was the lowest ever due to adverse weather conditions in the Maskeliya, Upcot and Talawakelle regions. However, they have maintained good quality in the tea produced.

Capital expenditure covered replanting and maintenance of tea (Rs.164 million), Rs.39 million for rubber planting, Rs.14 million for fruit cultivation and Rs.2 million for cultivating cinnamon.

Maskeliya had planted rubber in poor tea land and cultivable bare land in the Bandarawela region and expected that dendro power (gliricidia) and fruit cultivation projects undertaken will give long-term benefits upon completion of the crop diversification process.

"Maskeliya Plantations PLC commenced harvesting of timber in accordance with the Forestry Management Plan during the year under review. Action has already been initiated to

plant timber species in the areas where timber has been harvested in order to establish the same canopy in the plantation and to generate income in the future," Yaddehige said.

"The company plans to introduce more effective methods to improve productivity and to eliminate losses due to the shortage of workers during high cropping periods."

Maskeliya controls 10,561.33 ha of land in Upcot, Maskeliya, Talawakelle and Bandarawela.

The company has a stated capital of Rs.673.7 million, a general reserve of Rs.540 million, timber reserves of Rs.517.4 million and retained losses of Rs.321.8 million in its books. Total assets stood at Rs.4.2 billion and total liabilities at Rs.2.79 billion.

RPC Management Services (Pvt) Ltd with 83.40% is the major shareholder followed by David Pieris Motor Company (2.15%) and Mr. C.P. de Silva (1.45%).

A management fee of Rs.150.4 million, down from Rs.184.1 million a year earlier, had been paid to the parent company, the report revealed.

The directors of the company are: Dr. Sena Yaddehige (Chairman), Mr. J.H.P. Ratnayeke (Deputy Chairman), Mr. S.S. Poholiydde (CEO), Dr. H.S.D. Soysa, Mr. E.M.M. Boyagoda and Dr. L.S.K. Hettiarachchi (w.e.f. 02.05.2014)

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Three production lines in new Biyagama factory operational

DPL profitable despite Rathupaswela disaster

A.M. Pandithage, Chairman

Dipped Products PLC, one of the world’s leading manufacturers and distributors of protective gloves, has completed what its Chairman called "the most challenging period the company ever endured" as a result of the forced closure of its Rathupaswala factory.

DPL Chairman A.M. Pandithage, has told shareholders in the company’s recently released annual report, that their hand was forced despite independent investigations confirming that the factory’s treated effluents were not the cause of alleged ground water quality issue.

Despite the factory closure costing the company tidily, DPL saw group revenue down only by a marginal 2% to Rs.23.1 million although the group’s after-tax profit was down 35% to Rs.1.16 billion and the profit attributable to equity holders of the parent down 44% to Rs.795.1 million.

Focusing on overcoming multitude of challenges that followed the closure of the factory, DPL took a strategic decision to incorporate a new glove manufacturing facility at the BOI’s Biyagama industrial zone.

"The closure of the factory unfortunately led to severe losses across the value chain, from rubber farmers to our global customers, apart from the loss of foreign exchange to the country," Pandithage and DPL’s Managing Director K.I.M. Ranasoma said in a joint statement in the annual report.

The contribution by the group’s hand protection sector to the bottom line was down to Rs.910 million during the year under review from Rs.1.34 billion a year earlier.

Profits from plantations too were down to Rs.747 million from Rs.962 million a year earlier, the statement said. This was as a result of the depressed rubber market, adverse weather conditions and a 20% wage increase effective during the year under review.

"Profit before tax decreased by 32% at Kelani Valley Plantations PLC compared to the previous year, while Talawakelle Tea Estates PLC recorded its second highest earnings since inception," the statement said.

Mabroc Teas, a branded tea exporter, had delivered improved results during the year with revenue up 7% to Rs.2.47 billion and the pre-tax profit up to Rs.49 million.

Pandithage and Ranasoma said that the new factory at Biyagama involved a total investment of Rs.1 billion and this fast tracked project had seen three manufacturing plants already into commercial production.

"This strategic investment decision also supports adding new capacity to cater to DPL’s future growth," they said.

DPL expressed its gratitude for the understanding and cooperation extended by their customers worldwide during a difficult period and thanked them for the trust placed on the company. Their endurance in continuing with DPL despite the tremendous pressures within their own business operations, arising from supply disruptions for more than 10 consecutive months, was highly appreciated.

The new Biyagama factory owned by DPL Premier Glove Manufacturing Limited, approved by the BOI, was expected to reach steady production by the third quarter of the current financial year.

　

"In the medium term, DPL Premier Gloves factory will add new production capacity for unsupported latex gloves with a view to expanding DPL’s market footprint in this segment. Likewise, we will gear up to expand our supported glove output in order to improve our product portfolio to cater to the industrial sector hand protection needs," the report said.

DPL accounts for approximately 5% of global production of non-medical rubber gloves. A predominantly Sri Lankan owned company it has many overseas shareholders, a production facility manufacturing medical examination gloves among others in Thailand and a marketing company based in Italy.

DPL has a stated capital of Rs.598.6 million, capital reserves of Rs.457.3 million and revenue reserves of Rs.6.3 billion in its books. Total assets ran at Rs.20 billion and total liabilities at Rs.10.4 billion.

Hayleys with 41.61% followed by the EPF with 13.06% and Volanka (Pvt) Ltd (a Hayleys company) with 8.14% are the other major shareholders. Haycarb, a subsidiary of Hayleys owns 6.8%.

Earnings per share during the year under review were down to Rs.13.28 from Rs.25.53 the previous year with net assets per share growing to Rs.122.40 from Rs.114.34 a year earlier.

The directors have proposed a final dividend of Rs.3 per share for the year under review on top of an interim Rs.2.50 per share paid in March.

The directors of the company are: Messrs. A.M. Pandithage (Chairman), Dr. K.I.M. Ranasoma (MD), R.K. Witanachchi (Deputy MD w.e.f. 01.01.2014), N.Y. Fernando (Retired 12.12.2013), R. Seevaratnam (Resigned 30.07.2013), F. Maiden, K.A. Fernando, L.G.S. Gunawardena (Resigned 28.02.2014), S.C. Ganegoda, Dhammika Perera, M. Bottino, R.M.T. Premarathna (Resigned 20.11.2013),V.R. Gunasekara, S. Rajapakse (w.e.f. 30.07.2013), G.K. Seneviratne (Retired 08.04.2013) and Ms. D.S.N. Weerasooriya (Alternate to Dhammika Perera - appointed on 01.12.2013).

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Equity One Chairman sees "exciting prospects’’ ahead

Sale of six acres in Mt. Lavinia enables capital gain and debt release

Mr. D.C.R. Gunawardena, the Chairman of Equity One PLC, a listed real estate and property developer, sees "exciting prospects and opportunities" flowing into their business from economic fundamentals that are in place assisting the real estate segment of the economy.

Equity One has closed the financial year ended March 31, 2014 on what the Chairman called a "high note" with overall occupancy at group level rising to 91% from 85% a year earlier.

"However the key highlight for the year was the addition of further 44,000 square feet to the group’s rentable property portfolio with the completion of renovation and refurbishment of the building held by subsidiary company, Equity Two PLC, at assessment No.55, Janadhipathi Mawatha," he said.

"We also succeeded in sourcing a tenant to occupy the entire floor area of the said building, immediately upon completion."

As a result they expect this property to generate what he called "a decent contribution" to the group’s rental income and future earnings although the impact on incremental cash flows will be limited.

This is because the company has received rent advances and deposits against payments due on occupation by the tenants and such funds have already been deployed to finance the project.

The sale of six acres of land in Mount Lavinia during the year under review had helped Equity One to substantially reduce debt by way of repayment.

The decision to sell this land was strategic to reduce borrowings that arose mainly from the cost incurred to pay this land.

"From the losses incurred by the group from property development activities, we have now consolidated to a greater extent with the settlement of a significant portion of the company’s debt," Gunawardena said.

During the year under review Equity One saw the profit after-tax up 48.47% to Rs.127.2 million. However, if the one-off gain on the sale of land and appreciation in fair value of investment property is discounted, the net profit was Rs.47.4 million against the previous year’s Rs.42.1 million.

The one-off gain on the land sale amounted to Rs.79.8 million while the fair value gain on revaluation of investment properties amounted to Rs.68.8 million.

"With the burden of debt affecting the balance sheet eased to a greater extent during the year, your company is well positioned to reap maximum benefits from the real estate sector growth envisaged and reach new heights in time to come," Gunawardena said.

He also reported that the issue of restricted access to Janadhipathi Mawatha remains unresolved up to now. This has an adverse impact on the value potential of their two properties located there.

"However, considering the develop　

ment projects taking place in the Fort area coupled with the admirable level of beautification and township development activities underway in the vicinity, we are optimistic that our properties will be able to realize their full potential in the near future," he said.

Equity One is a member of the Carsons group with a stated capital of Rs.1.09 billion, capital reserves of Rs.13.2 million and revenue reserves of Rs.771.5 million. Total assets ran at Rs.2.44 billion and total liabilities at Rs.497.1 million.

Carson Cumberbatch with 96.27% is the dominant shareholder with all other shareholders owning less than one percent.

Net assets per share had grown to Rs.46.38 from Rs.41.93 the previous year and the share traded at a high of Rs.35.70 and a low of Rs.25.40 during the year under review. This compared with trading range of Rs.41.20 to Rs.22 the previous year.

The sale of the Mount Lavinia land for Rs.571.2 million yielded a net gain of Rs.79.8 million. The renovation of the Janadhipathi property owned by Equity Two PLC, a subsidiary of Equity One, cost Rs.199.6 million and added 44,000 sq. ft. to the group’s total rentable area.

The directors of the company are: Messrs. D.C.R. Gunawardena (Chairman), S. Nagendra, K.C.N. Fernando, E.H. Wijenaike, A.P. Weeratunge, S. Mahendrarajah and P.D.D. Fernando.

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