Kahawatte Plantations PLC has incurred serious loss of capital, prompting the Board of Directors to call for an Extraordinary General Meeting (EGM) in January 2010 in accordance with the Companies Act No.7 of 2007. In an announcement to the Colombo Stock Exchange (CSE) this week, the company stated that it has in fact incurred losses almost from inception and that the Net Assets to Stated Capital have been below 50% since 1999.
A report prepared by the Board of Directors states that in the first half of the year, the company made a loss of Rs.20.7 million, due to the serious shortfall in crops as a result of climatic factors and the continuing effects of the world economic recession.
The company had to also pay wage arrears of Rs.76 million as a result of the signing of the Plantation Wages Collective Agreement in September 2009 which came into effect retrospectively where wages were increased by an average of 40%. The estimated additional Gratuity Provision as at 31 December 2009 would be Rs.155 million.
The report further stated that while the company made an operational profit before the charge for the additional gratuity, the Net Assets to Stated Capital as at 30 September 2009 has been below 50%. While there have been substantial borrowings, the company has not defaulted settlements.
The report outlined steps being taken to prevent losses such as review of cost structures, studying the possibility of re-valuing tangible assets and working on reducing the present level of interest paid along with its holding company with a view to reduce financial costs.