John Keells owned tea processing subsidiary’s 2Q in red

Sri Lanka’s Tea Smallholder Factories PLC reported a loss for quarter ended September 2018, extending the losses made from the beginning of the financial year as production and auction prices fell from a record high last year. 

Tea Smallholder Factories, which operates seven factories in the low-grown region, recorded a net loss of Rs.31.8 million or Rs.1.06 a share for the July-September period (2Q19) compared to a net profit of Rs.10.8 million reported for the corresponding quarter, last year.  

The finance cost doubled to Rs.1.7 million from Rs.844, 000 a year ago. 

The top line fell by 28 percent year-on-year (YoY) to Rs.512.2 million during the period. 

The modest growth in production and the higher prices fetched at the tea auctions last year by Ceylon tea helped the John Keells Holdings subsidiary to report positive results during the financial year ended in March 31, 2018.  The fortunes of the company as well as the tea industry change on production, prices and worker wages, which are not linked to productivity. 

According to the latest production data released by Sri Lanka Tea Board, tea output for September fell to its lowest level since 2001 due to unfavourable weather conditions. 

September is the fourth consecutive month where production declined—24.9 percent YoY to 19.3 million kilograms. 

Meanwhile, the production in the first nine months of the year fell by 4.0 percent from the same period, last year. Earnings from tea exports for the first seven months declined by 2.0 percent YoY to US $ 854 million.   

Tea Smallholder Factories PLC operates seven factories located in Galle, Ratnapura and Ginigathhena and caters to a green leaf supplier base of over 17, 600, which accounts for 5.8 percent of the total tea smallholders registered in Sri Lanka. 

The company produced 4.32 million kilograms of made tea in the financial year ended in March 2018.  Meanwhile, for the six months ended September 30, the company reported a net loss of Rs.28.8 million compared to a net profit of Rs.45.2 million, on revenue of Rs.1.1 billion, down 17 percent YoY.

John Keells Holdings holds 37.62 percent in Tea Smallholder Factories while Akbar Brothers Limited and Central Finance Company PLC hold 24.39 percent and 22.85 percent stakes in the company respectively.