PLANTATION SECTOR

This will delay the hopes for a plantation rally 

Teller wrote:I have to revise my WATA and RICH target. You can collect BALA @ 8

Will it fall that much? even when all time low is 9.20/=

Sri Lanka’s listed plantations lose Rs2.6bn in six months ahead of mandated wage
Friday February 21, 2020 11:07:10


ECONOMYNEXT- Sri Lanka’s publicly traded plantations companies, growing commercial crops such as tea, which have been asked by the government to pay higher wages to workers have lost 2.6 billion rupees in the six months to September amid erratic weather and low commodity prices.

The plantations represented by the Planters Association of Ceylon are now negotiating with the government on how to pay a wage floor of 1,000 rupees a day mandated by the cabinet of ministers.

Government spokesmen have said a wage supplement from the Treasury or some other support may come.



Publicly listed plantation firms have posted losses totaling 2.26 billion rupees for the six months ending September, interim accounts show.

Revenue at regional plantation companies (RPCs) fell 3.6 percent to 28.47 billion rupees in the six months to September, while cost of sales grew 3.2 percent to 28.8 billion rupees, leading to losses at gross margin levels.

The plantations were privatized in the mid-1990s, after running large losses and the Treasury was forking out 400 million rupees a month to pay wages.

Despite the losses, plantation stock prices have risen 3.4 percent from end-March to end-December, although the entire stock market had risen 10.3 percent during the same period with elections and a general rise in business confidence.

Companies that produce tea, which is most labour intensive, usually suffer bigger losses than firms that have more rubber and oil palm. Oil palm is tax protected and tends to draw higher prices and is also less labour intensive.

Rising Costs

Excessive rains have pushed up operating costs in 2019.

“It has been a challenging year for all tea producers,” Planters’ Association of Ceylon Spokesperson Roshan Rajadurai told EconomyNext.

“Plantations were severely impacted by unfavorable weather. Excess rain brought with it additional costs like more chemicals to fight fungal growth, weeds and other problems like soil erosion.

“This condition made plucking harder since workers couldn’t pluck if the ground was too wet.”

Costs have meanwhile also been escalating amid constantly rising wages over the past decade.

Plantation wages grow every two years, following collective agreements signed between RPCs and labour unions.

Wages were last revised in 2019, when the wages were set at 700 rupees a day with a 50 rupee price supplement, increasing from 500 rupees, which had collectively increased costs by 9 billion rupees for all regional plantations companies.

However, the current government has forced a wage high a year earlier, after ordering the planters to hike the minimum wage to 1,000 rupees by March 01.

Research at the Institute of Policy Studies, a leading think tank, shows that under the 2019 wage agreement, plantation workers are paid 3,055 rupees below a ‘living wage’.

A living wage is defined as the ability to procure basic nutrition, water, housing, education, healthcare, and transportation.

Plantations workers usually reside inside an estate are given some additional facilities.

Wage Model

Rajadurei said there is a need to move from the current attendance-based model, in which workers are paid for attending 25 days even if they do not work a full day, to a productivity-based model.

He said RPCs private companies, plantations and trade unions had already agreed to migrate into a revenue cum productivity model by abandoning the daily wage model.

Other countries have already transitioned into productivity based models which gives better incentive to workers and boost productivity, he said.

“The bottom-line is, ours is an industry which is highly regulated on labour but we do not receive a compensating output from our labour force,” Rajadurai said.

“However, at the end of the day, producers remain unsatisfied as we are only price takers and have no other option but to sell at the auction price.”

Under longstanding rules Sri Lanka tea farms have to put up their produce for auction preventing the development of regional brands, some sector analysts have said.

Some tea companies are now selling limited quantities of tea directly, developing international and local marketing skills and brands.

In Sri Lanka workers pluck 16-18 kilogram’s a day, and if they pluck over 18 kilogrammes they are paid an ‘over-kilo’ rate to reward productivity.

Meanwhile in Kenya and India, pluckers average 36-60 kilogrammes a day, and get paid an over kilo rate for plucking above 24-40 kilogrammes.

Critics have blamed plantations for not innovating on production techniques to lower costs as well as downstream supply chains to boost revenue.

Price Takers

Tea prices goes through cyclical commodity price booms and busts, along with other food commodities sometimes linked to Federal Reserve monetary policy.

In Sri Lanka the rupee price may pick up due to currency depreciation. In 2018 the rupee fell from 153 to 182 to the US dollar amid liquidity injections.

A weak dollar tends to push up prices of commodities while tighter policy which contracts credit tends to push down commodity prices measured in nominal currency, analysts say.

The Colombo auction average had fallen from 637.75 rupees a kilo (4.16 US dollars) in January 2018, to 512 rupees a kilogram (2.88 dollars a kilo) by September 2019.

Prices have picked up to 588.8 rupees a kilo (3.17 dollars) by January 2020.

Rajadurei said buyers at the tea auction were not offering good prices for tea leaves, although the buyers were getting premium prices at the world market for their brands.

“We have to deal with the risks of climate change and rising wages, but we are price takers at the auction,” he said.

Tea Board Chairman Jayampathy Molligoda said it is “an integrated productivity and quality problem.”

“We have noticed a gradual decline in quality of the green leaf. The good leaf count, which has come down, needs to increase subsequently.”

Auction prices fall if the plucked leaves are of lower quality.

“If the quality of raw material continues to deteriorate, we are in trouble,” Molligoda said.

Planters in Sri Lanka believe that the ‘Ceylon Tea’ brand would ensure survival of the industry.

However, traditional tea brewing is facing severe competition globally with blended ready-to-drink beverages such as iced-tea and drinks with tea extracts gaining popularity.

Molligoda said Sri Lanka’s planters cannot hold on to a belief that the Ceylon Tea brand will continue to provide dividends.

“People are no longer interested in the country of origin as long as the quality of tea is maintained,” Molligoda said.

“It has come to a point where we have to ask all industry stakeholders to adhere to the parameters of raw material standards.”

“Regarding the price factor, yes there is some truth to the price taker mindset in the context of this commodity trap.”

“However, you cannot generalize because you do receive a higher price if the quality is maintained,” Molligoda said.

Kenya, which had overtaken Sri Lanka as the top tea exporter in the world with CTC (crush, tear, curl tea) is now attempting to break through into the orthodox black tea Sri Lanka is famous for.

Sri Lanka tea industry is now trying to prevent stakeholders from losing out through new plans and reforms maximizing quality and productivity in the product.

“The CTTA has given a roadmap and the Chamber has also contributed with plans, thereby we are hopeful for this new year to turn out better than the last,” Rajadurai said.

The new tea industry roadmap for 2030 envisions growing export earnings to 3.5 billion US dollars after fluctuating between 1-1.6 billion rupees between 2007 and 2018. (Colombo/Feb21/2020)

We can not pay upto 1000 rupees per a day. Its a bullshit decision. india still pays 345 rupees for a day.

Plantation sector wages: Stand-off continues

The stand-off between plantation companies and trade unions continues despite the D-Day for the proposed Rs. 1,000 daily wage hike for estate workers lapsing today.
The increase of the daily wage of plantation workers to Rs. 1,000 from March 1 was proposed by President Gotabaya Rajapaksa last year and it received Cabinet nod early this year.
However, when contacted, the Plantations Association of Ceylon (PA), the umbrella organisation for Regional Plantation Companies (RPCs), its sources said that a wage hike model based on the daily norm for picking was presented to the Secretary to the President and added that there is no other way that they could increase the daily wage to Rs. 1,000.
Discussions on the proposed Rs. 1,000 wage hike have been going on with no party seeing eye to eye so far.
“We presented a proposal to the Treasury Secretary but to-date there has not been a response. We are ready to discuss the matter based on the proposal,” sources said.
RPCs turned down the request of workers to increase the daily wage to Rs. 1,000 given the sharp dip in tea prices in the global market from around Rs. 637 per kg in 2018 to around Rs. 580. Plantation companies have been reiterating the need to shift away from the old attendance based wage model to a productivity based, self-managed wage model which will enable workers to earn more and plantation companies sustain operations in a competitive market.

RPCs had proposed the ‘Revenue Sharing Wage Model’ several years ago to replace the old model which has been proved unsustainable.
Sri Lanka exports around 95 percent of its tea but has failed to be competitive due to the staggering cost of production (COP) compared to its competitors in the global market. The daily average of plucking in Sri Lanka which is around 18-20 kgs per day is low compared to 40 in India and 60 by Kenya.
The new wage model will guarantee workers 10 days work per month on the current estate wage model and for the rest of the day’s wages to be paid on a productivity based scheme where for every kilogram plucked a specific rate will be paid as it is done in the tea smallholder sector. - LF

1000 rupees salary hike is the biggest lie in 2020. Gov can not command such a way.

May be the time has finally come for Plantations with the new President very keen in Plantations and foreign exchange through plantation  

Kenya and India being down with CORONA 
Sri lanka is getting good orders and chances to REe build its heavy weight in the TEA market 

Post Corona more people getting addicted to TEA ..

Tea market attraction for Sri Lanka may be one of the good things that CORONA brings in for Sri Lanka

Still most of the TEA related good stocks are Rock bottom priced

hmm interesting.

Time to collect tea plantation shares before the rally starts,

What really ???

MAL , 
KOTA
BALA
MADU
ELPL
MASK
HPL
WATA
LDEV
TPL
HORA
BOPL
KAHA
UDPL

sureshot wrote:MAL , 
KOTA
BALA
MADU
ELPL
MASK
HPL
WATA
LDEV
TPL
HORA
BOPL
KAHA
UDPL

HORA lol

[size=34]BOGAWANTALAWA TEA ESTATES PLC [/size]

Amazing qtr result will be released soon., 100Mn+ net profit. Today good to buy Plantation sector.

Super performance by MAL.

WATA now dont have Tea, they are now 100% Oil palm and Dairy Business

xhora wrote:WATA now dont have Tea, they are now 100% Oil palm and Dairy Business

Are You Sure?

Nandun wrote:

xhora wrote:WATA now dont have Tea, they are now 100% Oil palm and Dairy Business

Are You Sure?

Yes Check their annual reports, Oil Palm is very profitable with margins near 50%

xhora wrote:

Nandun wrote:

xhora wrote:WATA now dont have Tea, they are now 100% Oil palm and Dairy Business

Are You Sure?

Yes Check their annual reports, Oil Palm is very profitable with margins near 50%

Yes but still they're doing tea

Nandun wrote:

xhora wrote:

Nandun wrote:

xhora wrote:WATA now dont have Tea, they are now 100% Oil palm and Dairy Business

Are You Sure?

Yes Check their annual reports, Oil Palm is very profitable with margins near 50%

Yes but still they're doing tea

No please check June 2020 Quarter financials "Segmental Analysis - Group" No revenue from tea.
That Watawala Tea, Zesta and Rankahata brands available in the market are under Sunshine Holdings and nothing to do with Watawala Plantations. Sunshine buy tea from other plantations, pack and sell both locally and internationally

Again a run will start today

xhora wrote:

Nandun wrote:

xhora wrote:

Nandun wrote:

xhora wrote:WATA now dont have Tea, they are now 100% Oil palm and Dairy Business

Are You Sure?

Yes Check their annual reports, Oil Palm is very profitable with margins near 50%

Yes but still they're doing tea

No please check June 2020 Quarter financials "Segmental Analysis - Group" No revenue from tea.
That Watawala Tea, Zesta and Rankahata brands available in the market are under Sunshine Holdings and nothing to do with Watawala Plantations. Sunshine buy tea from other plantations, pack and sell both locally and internationally

You are correct . I checked only annual report .But why tea is in that segmental analysis 2019/2020 annual report

Highly recommend NAMU and KGAL.

KavinduTM wrote:Highly recommend NAMU and KGAL.

Not for trading. Make a investment on plantation sector. Future is bright. Also hope a good dividend yield (>10%)

How is the BALA for Mid term investment? Is the current price is good for collect?

i think o k below16