Elpitiya Plantations Plc Annual Report 2010/11 - Colombo Stock ...

Chairman’s Statement
It gives me great pleasure to submit this report for the year ended
March 2011 where the highest net profit before management
fees of Rs 386 mn was recorded, for Elpitiya Plantations Plc (EPP)
for the year under review. Attractive prices for rubber and palm oil
were the main contributors to this commendable performance.
There were several other significant events that took place in EPP,
all of which were responsible for improving the bottom line. The
shareholders of the company subscribed to a rights issue, which
helped to restructure the balance sheet resulting in a lower
interest for the year compared to the previous year. We thank
them for their support and confidence in the company. Further
our efforts in diversifying the asset base contributed significantly
to the operational results. The investment in palm oil both at field
and factory level, and the diversification into hydropower
contributed to sustaining the company’s profits by being a good
balance to fluctuating commodity prices.
The company is committed to protecting the environment and
developing a sustainable model of plantation practices, covering
both the field and the factories. Several initiatives have been
undertaken at estate level to improve the condition of the soil, to
contain water, and mitigate the effects of global warming. The
gradual replacing of artificial fertilizer with organic fertilizer to
minimise soil impact, and site specific fertilizing, providing only
the required nutrients without excessive chemicals, are some of
the other initiatives towards sustainability. Compost pits are
maintained on the estates, with the long term goal of replacing
one round of artificial fertilizer on estates with organic products.
Further the company has a continuous forestry management
programme to improve the biodiversity in the plantations and
enhance the value of the environment. Currently over 700 ha of
commercial forest has been planted by the company.
Energy efficiency has also taken primary focus with several
energy efficient initiatives being implemented covering the head
office to the factories. These investments have given adequate
results not only in terms of cost reductions but also in terms of
lower energy use, thus making a contribution to reducing carbon
emissions. Among the micro level efficiency improvements
carried out are fuel switching and power factor correction systems
and fibre reinforced plastic fan installation. A comparison of
energy saving on the estates in the last 3 years shows a saving of
approximately 1000 KVA units per month, which have been
achieved with no production cutbacks or outsourcing of
production. Energy savings have also been enabled through
process redesign and efficiency improvements.
Global warming and climate change will be a major risk that has
to be addressed by the plantation industry and whilst we have
taken a few steps to mitigate these effects, I believe that a clear
consciousness and commitment to overcoming these effects
must be addressed by all employees and stakeholders in the
industry. Or else, all plantation crops in particular will be affected
by its ill effects.
We have also been in a position to develop five of our factories to
obtain ISO 22000 underlying our commitment to quality, as well
as customer commitment. Several other factories will also fall
within this initiative in the next year.
Despite the significant profits this year, the contribution from the
tea sector particularly the up country estates were far below
expectations. This was caused by a combination of events, i.e.
inconsistent weather resulting in lower tea production and a tea
market that was lower than the previous year. The low grown tea
prices were somewhat better, although nowhere near the
previous year levels. It was only in the month of March 2011 that
both tea production and prices improved culminating in the
company being able to reduce the losses on tea before the close
of the financial year. It was fortunate that profits from rubber, palm
oil and hydropower compensated to the poor performance from
the tea sector.
The future for EPP is very challenging. On one side, with the
government’s thrust and priority towards plantations and
agriculture, the estates show great promise for diversification into
other crops and industries. On the other hand, the industry is
faced with twin problems of rising cost and lower productivity
particularly for high and mid grown tea. This has been an area of
concern for the past several years as Sri Lanka’s competitiveness
as a tea producer has declined with each successive wage
increase and it is unfortunate that there does not appear to be a
visible solution in sight to resolve this issue. All stakeholders must
realize that unless each stakeholder acts with responsibility and
Elpitiya Plantations Plc Annual Report 2010/11
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