WATA posts highest-ever Q1 profits; PAT of Rs. 230 m

Wednesday, 30 July 2014 00:13 - - {{hitsCtrl.values.hits}}

Watawala Plantations PLC reported revenue of Rs. 1.8 b for the quarter ended 30 June 2014 (1QFY15), up 25% YoY. Net profit or PAT for the quarter amounted to Rs. 230 m in 1QFY15 against Rs. 11 m in the same quarter last year. Management attributes the strong topline growth mainly to its tea segment which saw higher volumes aided by favorable weather and increased quantities of bought crop. Other income also grew in 1QFY15 to Rs. 28 m, up 28.5% YoY. Palm Oil segment The Palm Oil segment registered a revenue growth of 5.6% YoY to reach Rs. 377 m in 1QFY15, which accounted for 20.0% of the company’s revenue during the quarter. The Crude Palm Oil (CPO) production remained flat marginally flat to post 2.08m kg for 1QFY15 from 2.05m kg recorded same quarter last year. This came on the back of better yield as a result of good agri practices, and new fields yielding FFB. The segment maintained its position as the highest contributor to company profitability, having made a net profit of Rs. 185 m for 1QFY15. WATA continues to be the single biggest CPO producer in Sri Lanka. Tea segment

The Tea segment, the largest revenue contributor which accounted for over 69.4% of the total revenue, increased 25.1% YoY to Rs. 1.3 b in 1QFY15, mainly on the back of improved volumes. Weather conditions were favorable for tea during 1QFY15, compared to last year which saw high levels of rains and floods. Own crop was up 18% to 2.01m kg and bought crop increased 95% YoY to 1.43m kg. As a result the company was able to bring its COP down by 8% YoY as a result of fixed costs being absorbed by higher volumes of tea. Profit from tea stood at Rs. 32 m in 1QFY15 compared to a loss of Rs. 156 m previous year. Given FY15 being a non-wage year, management expected the tea segment to break even during 1QFY15. But due to the impressive yields as a result of favorable weather conditions, the segment was able to make profits, exceeding management expectations. Rubber segment The Rubber segment which only accounted for 1% of the total revenue in 1QFY15, experienced a 29.0% YoY drop in revenue to Rs. 22 m, from Rs. 31 m recorded in the same quarter last year due to a decline in production by 16.9% YoY. NSA for rubber stood at Rs. 276 per kg, compared to Rs. 345 in 1QFY14. The drop in production is primarily due to reduction in the rubber extent by 131 Ha during the current season. The net loss for rubber amounted to Rs. 24 m in 1QFY15against a loss of Rs. 10 m recorded same quarter last year. Export segment Export sector recorded a significant improvement in revenue driven by value added teas sold at a higher price, compared to mainly bulk orders in 1QFY14. Enhanced volumes on herbs and black teas have contributed towards revenue growing three folds in 1QFY15. PAT on export amounted to Rs. 9.5 m in 1QFY15 against Rs. 2.6 m recorded in the same period last year. The profit is mainly from export of the value added tea and herbs to Australia. Further the bulk tea export to Russia, Pakistan, India and UK also contributed for the export profit during the period. Outlook With its resilient agri practices and innovation culture, the company is reasonably confident that it will overcome the difficult environment it continues to operate in.