John Keells PLC FY 23/24 performance dips amid tea and rubber challenges

John Keells PLC, the commodities and stockbroking arm of the John Keells group, saw subdued performance for the 2023/2024 financial year, mainly due to the challenges encountered in the tea and rubber industries.
The group recorded an 8 percent decline in the consolidated revenue, amounting to Rs.941.97 million, in comparison to Rs.1,024.59 million recorded in 2022/23. 

Profit after tax for the current financial year declined by 53 percent to Rs.144.00 million, compared to Rs.309.50 million reported in the previous financial year. 
The produce broking segment accounted for 59 percent of the group’s consolidated revenue, while the stockbroking segment and warehousing segment accounted for 24 percent and 16 percent, respectively. 

A breakdown of revenue in the produce broking segment showcases tea and rubber as the main contributors. 
“During the year under review, the group implemented various cost management initiatives aimed at enhancing operational efficiency, which included streamlining processes, upholding a commitment to providing personalised services to producers and continuing to offer value-added services to buyers,” John Keells PLC Chairman Krishan Balendra said in the company’s annual report released yesterday.

Commenting on the way forward, Balendra said the outlook for the industry remains positive, being export-oriented, with the potential to capitalise on the broader global macroeconomic recovery, despite the industry-specific challenges such as unpredictable weather patterns and increased global competition. 

He pointed out that the tea segment is poised for improvement in the upcoming financial year. This is due to the enhanced fertiliser utilisation observed during the year under review, which is anticipated to increase crop production and quality, consequently leading to an increase in auction prices and sales volumes. 
“Global tea markets are expected to expand, driven by increasing worldwide consumption and Sri Lanka stands to benefit from the growing demand, particularly for low-grown tea, both from traditional markets and emerging tea drinking countries,” said Balendra. 

However, he pointed out that the headwinds from geopolitical tensions stemming from the Russia-Ukraine and Israel-Palestine conflicts, present challenges in key Ceylon Tea exporting markets such as Iran and Iraq, including the impact of any currency devaluation in key import markets. 

Fluctuations in the LKR exchange rate also add further risks to the industry. 
The gradually improving conditions of the rubber industry together with the expectations of improved weather patterns in the forthcoming financial year provide a basis for the company’s continued outlook on the growth potential of the rubber segment of the company in the medium to long term. 

“We are optimistic about the opportunities within the rubber industry for both production expansion and the introduction of innovative, high-quality rubber products. 
This involves focusing on enhancing productivity, implementing innovative production techniques and conducting targeted research and development initiatives,” he said.