Tea export earnings could potentially top US$ 1.5 bn this year: HVA Foods

• Says competitive interest rates and other financial instruments vital to achieve target
• Stresses govt. and policy-making bodies must look at other tea exporting countries for lessons

Sri Lanka’s tea export earnings could potentially top US$ 1.5 billion this year, if the country’s banking sector and the government extends the required supportive measures to the industry including a competitive interest rate regime, according to one of the leading tea exporters in the country.

“The Sri Lanka tea exporters along with HVA Foods PLC can surpass US$ 1.5 billion in export revenue during the year 2020, if competitive interest rates and other financial instruments being made available,” HVA Foods PLC, COO, Charithra Hettiarachchi said in a recent filing to the CSE.

Sri Lanka Tea Board (SLTB) has set a target to earn US$ 1.3 billion from tea exports this year. 

Hettiarachchi stressed that Sri Lanka’s the government and policy-making bodies must look at other tea exporting countries for lessons on how they have helped their local industry to manage during the current health crisis and the support extended to them for accelerated growth in the post pandemic period.

HVA Foods stated that its first quarter performance would remain on target due to strong performance in May despite no revenue being recorded in April.

“We have a full order book for months of June, July and August and the numbers will be better than expected,” Hettiarachchi added.

The company cited its fast adaption to new way of working and the increase in global demand for tea-based beverages as reasons for attracting a higher number of export orders. 
Further, the firm highlighted that the shift from 120-year old traditional auction system to a digital e-auction system was the single most positive impact that COVID-19 pandemic forced upon the industry.  

“The e-auction will enable greater process efficiencies and cost savings of HVA Foods PLC in the medium and long term,” Hettiarachchi noted. 

According to Forbes & Walker Tea Brokers, achieving higher productivity and cost reduction remains a key challenge for Sri Lanka’s tea industry to enhance the competitiveness of Ceylon Tea in the world market in the medium to long term.

The rising input costs, declining productivity, uneconomic age profile in tea bushes and high social costs have led to declining profits.

Therefore, the tea broker emphasised that global competitiveness of Ceylon Tea would largely depend on how quickly the industry addresses these vital issues.

Meanwhile, HVA Foods noted that despite the initial liquidity crisis triggered by COVID-19 pandemic related disruptions, in particular in April, the company has paid full salaries to all their employees in April and May while supporting their supply partners.

According to Sri Lanka’s Export Development Board (EDB), the country’s tea export earnings up to May this year declined by 20 percent YoY to US$ 457 million, which was due to the COVID-19 pandemic and adverse weather conditions. 

However, with showers returning to key tea growing regions of the country, tea planters expect the tea output to bounce back shortly. 

In May, the FOB value of tea exports recorded the highest ever value for a calendar month of Rs.897.67 per kg surpassing the previous best of Rs.855.62 realised in November 2018.
During first five months of the year, Sri Lanka’s tea exports to almost all key markets declined with UAE and Libya showing fairly significant decreases. In addition, Japan lost its place among the top 10 importers of Ceylon Tea.

However, Ceylon Tea exports to Chile nearly doubled during the period, emerging as 7th biggest importer of Ceylon tea. Further, tea exports to Saudi Arabia and Azerbaijan have also made modest gains during the period. Iraq emerged as the biggest importer of Ceylon Tea followed by Turkey and Russia.