Watawala profit soars in Q3 2012/13 to Rs. 286 m

Watawala Plantations PLC (WATA), Sri Lanka’s leading agribusiness group, recorded a Profit After Tax (PAT) of Rs. 286 million for the quarter ending 31 December 2012 (3Q 2012/13), a 54% increase on trailing quarter (Q2), mainly driven by increase in profitability in palm oil.

Revenue was up 29% to LKR 1.78 billion in 3Q2012/13 (Q-o-Q) mainly due to production and productivity increase in palm oil; quality of crop for tea helped with tea prices remaining high.

The Group’s PAT for the Q3 ending 31 December 2012 (3Q2012/13) increased 54% to Rs. 286 million, compared to PAT of Rs. 187 million for the previous quarter (Q-o-Q).

For the nine months ending 31 December 2012 (year-to-date), revenue was Rs. 4.4 billion with a PAT of Rs. 630 million.

Almost 45% of the profit contribution was recorded in the 3Q 2012/13, a direct reflection of the good agricultural practices that has been institutionalised during the past year.

The increase in production and yields in the palm oil has contributed significantly to the bottom line growth, while strong demand for tea has stabilised the profitability for the company and it is confident the momentum can be maintained for the last quarter.

Palm oil

The palm oil sector, which is the single largest profit earner for the company, posted a PAT of Rs. 146 million for the quarter.  Compared to same quarter previous year, this is a growth of 118% due to the increase in production. Revenue for Q3 was Rs. 352 million, showing a growth of 60% Y-o-Y. Production has grown to 1,965 MT for the Q3 2012/13 against 1,636 MT for the same period last year.

Palm oil year-to-date has recorded Rs. 488 million profits (9M2012/13).  This is a 75% improvement over the same period last year. The production of palm oil improved as the company adopted several modern agricultural practices, which is now producing results. Further several new fields came in for harvesting during this quarter.

Tea

Tea experienced a renaissance in Q3, posting a PAT of Rs. 137 million on a revenue of Rs. 1.2 billion. A significant turnaround given the segment posted a loss of Rs. 51 million during the same quarter last year.

Tea sector, which account for 69% of the company’s turnover, was able to take advantage of the good sales averages recorded throughout the quarter. The company’s own production of tea too improved though an extended dry period which prevailed towards the latter part of 2012. Improved agronomical practices implemented by the company, now appear to be showing good results.

Production was 2,710 MT for Q3 2012/13 against 2,604 MT for the same period last year.

Year-to-date, profit on the tea sector recorded an all-time high of Rs. 109 million for 9M2012/13.

 Rubber

Rubber experienced a revenue growth of 62% Q-o-Q to post Rs. 64 million for Q3 and a PAT of Rs. 13 million.  This is once again a significant improvement given a loss of five million in the previous quarter and a PAT of Rs. 2.5 million

Rubber production dropped by 14% over the same period last year and the net sale average dipped by Rs. 101, thus creating a Rs. 6 million profit in the first nine months of the year. Some of the rubber area has now gone out of production and is due for uprooting.

Production was at 176 MT for Q3 2012/13 against 177 MT for the same period last year.

The company’s cash flow showed much improvement subsequent to the restructuring program, which is now depicted in the finance cost. The finance cost of the company has now reduced by almost 40%. This is despite the interest rates moving up at least 400 BP compared to the previous period. 

The Group achieved extraordinary results in spite of volatile market conditions in decreasing yields in rubber and falling palm oil prices. Despite the uncertainties in the global economy, the Group remains positive on its long term prospects due to continued increase in the production of palm oil.