Quality focus cuts tea losses at Sri Lanka Watawala Plantations

ECONOMYNEXT – Sri Lanka’s Watawala Plantations said a shift to focusing on quality helped it reduces losses from tea despite lower production volumes amid the prolonged slump in commodity prices.

Profits from the group’s pal oil business helped cushion losses from tea and rubber, Managing Director Vish Govindasamy said.

“Having focused on maximising yields for a number of years, we commenced a programme for changing the strategic direction last year to a focus on quality in response to the market developments,” he has told shareholders in the firm’s annual report.

Advance pruning to manage rush crop and leaf quality together with selective purchases of bought leaf enabled Watawala to improve the quality of inputs with all estates getting  Rainforest Alliance certification confirming adherence to international standards on social and environmental aspects.

Consequently, Watawala Plantations General Sales Average ranking at the auctions improved from 19th position in 2015 to 5th position in 2016 reflecting the improvements in quality.

This meant the average price per kilogram of Watawala teas increased Rs13 a kilo despite the average market price declining by Rs27, Govindasamy said.

The quantity sold by the firm declined 9 percent to 9,412,650 kg increasing the efficiency of working capital turnover.

“Overall, the paradigm shift from quantity to quality resulted in the tea sector losses reducing by Rs197 million in 2016 to Rs230 million compared to Rs428 million in 2015,” Govindasamy said.

“We were able to maintain profitability in Palm Oil business despite declining prices as the extent bearing fruit increased during the year and negotiating forward contracts for supply of palm oil which facilitated greater stability in pricing.”

Profits from palm oil were Rs685 million which cushioned the losses from tea and rubber despite a decline of 12 percent over the previous year.
(Colombo/June 10 2016)
 

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