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Kelani Valley Plantations Limited (KVPL) and its subsidiary companies have reported a healthy increase in turnover for the financial year ended December 31, 2005 on the back of strong growth in tea and rubber production.

In its annual report for 2005 the company reported a 10 per cent increase in turnover to Rs. 1.918 billion from Rs. 1.740 billion in 2004. Net assets of the company rose to Rs. 2.576 billion from Rs. 2.450 billion, an increase of 5 per cent.

The increase in group turnover was attributed to a 5 per cent increase in tea turnover and a 27 per cent increase in rubber turnover, stemming from a 10-year high in rubber prices at the Colombo Auction.

Total production in the tea and rubber sectors recorded healthy growths with tea production rising by 6 per cent. The estate crop grew by 4 per cent, registering improvements from all regions. Rubber production grew by 11 per cent reversing the decline seen since 2002.

However, higher costs arising from increased wage rates and an unfavourable impact of indirect taxes, which amounted to Rs. 47 million, resulted in reduced profitability for the year. The company reported a pre-tax profit of Rs. 152 million for the year under review from Rs 218 million reported last year, a reduction of Rs. 66 million or 30 per cent. Post-tax profit at Rs. 152 million was down Rs. 49 million or 24 per cent.

Shareholders funds increased by 7 per cent to Rs. 1.10 billion in 2005 from Rs. 986.3 million in 2004.

Taking into account the prevailing trading conditions, the Board of Directors of the company has recommended a first and final dividend of 20 per cent.

The net assets per share of the company grew to Rs. 31.05 from Rs. 29.01 reflecting a growth of 7.03 per cent. Earnings per share of the company reduced from Rs. 5.94 in 2004 to Rs. 4.54 in 2005.

In his review of the company's performance for the financial year the Chairman of KVPL Rajan Yatawara said the growth in rubber came from the estates and latex bought from smallholders, which accounted for eight per cent and 28 per cent of the total crop.

The growth levels in tea could have been greater if not for the intense rain and inclement weather conditions that prevailed, particularly in the final quarter he said.

KVPL MD Kavi Seneviratne said that the company has made significant progress to enhance its tea manufacturing facilities to bring them to international standards, which also coincided with the enactment of food hygiene legislation by the European Union.

This mandates the application of Hazard Analysis and Critical Control Points (HACCP) based procedures for food processing. The company expects to obtain this certification for 12 factories this year at an estimated cost of Rs. 50 million.

During the year the company also carried out several Corporate Social Responsibility initiatives including the construction of new houses for employees with 5-7 perches, electrification of housing and living quarters and upgrading water supply schemes and the installation of new delivery systems.

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