Watawala Plantations sees fall in profits; but remains confident of palm oil, dairy sectors

Watawala Plantations PLC (WATA) reported subdued financial performance for its most recent quarter, as the group which specialises in palm oil, suffered a setback in both top and bottom lines while the start-up losses of the group’s dairy business erased further profits. 

Releasing the first interim results after it spun off the group’s upcountry tea business, WATA reported earnings of 85 cents per share or Rs.202.1 million for the December quarter (3Q18), a decline of 57 percent year-on-year (YoY). 

The group revenues for the period also dropped by 57 percent YoY to Rs.616 million as the upcountry tea business revenues were recognized under the new entity, while the palm oil revenues also fell due to lower net sales average. Palm oil is the group’s largest business by revenue 
and profits. 

For the quarter under review, palm oil business reported earnings of Rs.204.4 million on revenue of Rs.462.8 million, down from Rs.237.7 million and Rs.508.0 million in earnings and revenues, respectively, reported a year ago. “The fluctuations in the import duty component in the sale price and the volatile Malaysian palm oil prices resulted in the lower net sale average for the period”, WATA’s Managing Director Vish Govindasamy said in an earnings release.  

WATA in September 30, 2017, cleaved off its up country tea business under a new entity – Hatton Plantations Limited – which was listed in the Colombo Stock Exchange on February 2, 2018 by way of a share introduction. 

The new arrangement resulted in shareholders of WATA receiving a mirrored shareholding in Hatton Plantations PLC based on their shareholding as of September 30, 2017, resulting in both companies having the same number of shares—236.7 million.

The management unbundled its upcountry tea business in order to keep away its volatile tea business from having an adverse impact on the group performance. 

The new entity will be managed by a new team of managers. 

Meanwhile, the group’s dairy business which commenced under Watawala Dairy Limited in 2017/18, suffered a loss of Rs.39.3 million on a revenue of Rs.61 million, the segmental information of the group showed. 

“The operations of the dairy have now been consolidated with the arrival of the genetically superior second herd of 500 cows from Australia. The existing herd now exceeds 1000 cows, including 500 milking cows. 

The number of milking cows will increase when the second herd starts calving resulting in higher yields. Yields will also be greater when the second lactation cycle of the first herd of 400 cows begins in the ensuing months”, Govindasamy said. 

Meanwhile, for the nine months ended in December 31, 2017, WATA reported Rs.4.00 a share on a profit of Rs.945.5 million, down 7.0 percent from the same period last year. 

The revenue for the group was Rs.4.38 billion against Rs.4.74 billion last year.  

As of December 31, 2017, Estate Management Services (Private) Ltd held 75.64 percent stake in WATA followed by the high net-worth investor, Dr. T. Senthilverl with a 10.28 percent stake.