Watawala Plantations winds up loss-making banana subsidiary

Watawala Plantations Plc has decided to wind up fully-owned subsidiary Watawala Agro Ltd., which has been exporting bananas, though at a loss.

The move follows shareholders of subsidiary passing a special resolution on Monday.

Waduge Nalith Suranjaya Fernando and Samanthi Haddegoda, who is also Watawala Plantations’ Jt. Company Secretary, have been appointed as liquidators of the Watawala Agro Ltd.

Watawala Plantations owns a 75% stake in Watawala Agro Limited. As at end 2008/9 financial year, the investment in the subsidiary amounted to Rs. 16.1 million, including Rs. 0.3 million as provision for impairment of investment. In 2009/10, the investment in the subsidiary was fully provided. Watawala Agro has been incurring continues losses and operations have been scaled down significantly.

In 2009/10 the attributable share of loss of the subsidiary was Rs. 3.2 million, up from Rs. 1.3 million in the previous year.

In 2009/2010 financial year, the subsidiary’s banana exports amounted to Rs. 3.4 million, up from Rs. 2.5 million in the previous year. However, the business suffered a Rs. 9.6 million gross loss, up from Rs. 2.3 million in 2008/9. In 2009/10 there was Rs. 6.7 million due from the subsidiary to Watawala Plantations.

Watawala Agro Limited enjoys a tax holiday period of five years from the year in which the enterprise commenced to make profits or any year of assessment not later than two years reckoned from the date of commencement of commercial operations whichever is earlier, under Section 17 of the Board of Investment of Sri Lanka Law No. 4 of 1978 and as per the provisions of the Inland Revenue Act, No. 10 of 2006. The tax holiday will expire this year.