Annual Financial Report 2023/2024

FINANCIAL CALENDAR 2023/2024

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ANNUAL REPORT 2023/2024

BOGAWANTALAWA TEA ESTATES PLC

Annual Report 2023/24

online at http://www.bogawantalawa.com

CHAIRMAN'S STATEMENT

It gives me great pleasure to present the audited financial statements for Bogawantalawa Tea Estates PLC for the fiscal year ending March 31st, 2024. In a rapidly changing environment, the Company successfully continues to execute its strategy with the delivery of another strong year.

The strategic measures we have implemented have resulted in substantial profits for our company, even in challenging times. As we progress, we remain committed to the highest standards of environmental sustainability and social well-being for our employees and the communities we serve. Our focus on sustainability

and innovation, alongside sound agricultural and manufacturing practices, continues to drive our various R&D programs and marketing efforts forward.

THE TEA INDUSTRY

Total tea production in Sri Lanka for the year 2023 recorded 256.1 million kg in comparison to 251.5 million kg for the same period in 2022. The production of tea registered a notable increase of 1.8 percent, year-on- year, in 2023, largely due to the strong global demand, availability of fertilizer and favourable weather conditions

• consistent rainfall and optimal temperatures supporting better crop growth. Accordingly, production of high, medium, and low grown tea contributed to around
  22.4 percent, 16 percent, and 61.6 percent of the total production respectively in 2023.

Tea prices at the Colombo Tea Auction reached their highest levels in 2022 and stabilised in 2023 with the gradual recovery in production. The average price of tea decreased by 6.5 percent to Rs. 1,188.33 per kilogramme during the year, from Rs. 1,270.50 per kilogramme recorded in 2022. Accordingly, the average tea prices for high, medium, and low grown tea reported year-on- year decreases of 5%, 4%, and 7%, respectively, in 2023. The average export price (FOB) of tea increased by 8% to USD 5.41 per kilogramme during 2023, compared to USD 5.03 per kilogramme recorded in the preceding year. The average tea prices during the year were stable partly due to the improved production and better economic conditions than in 2022.

The tea sector experienced a rise in production costs in 2022 due to the economic crisis in the country and the costs stabilized due to economic recovery in 2023. Elevated prices continued for chemical fertilizers and other agricultural inputs, as well as utility prices, including fuel, electricity, and water, thereby hampering the country's competitiveness in global tea markets.

Consequently, the estimated cost of tea production increased by Rs. 50 to Rs. 997 per kilogramme in 2023, compared with 2022.

OVERALL PERFORMANCE

Despite a challenging year for the Tea Industry, the company achieved a turnover of Rs 5.0 billion and the profit before taxation was recorded at Rs 483.5 million. The total Sale of made tea was 4.2 Million Kg this year and we have been able to maintain our NSA at Rs 1,038 per kilogramme which is a decrease of 19.1% compared to the previous season.

The consolidated capital expenditure on replanting and factory development has been over Rs. 651 million for the past three years and a total sum of Rs. 287 million has been invested during the financial year 2023/24.

COMMITMENT TO SUSTAINABLE EXCELLENCE: A VISION FOR THE FUTURE

At Bogawantalawa, sustainability is a fundamental value deeply ingrained in our organizational ethos. We are dedicated to aligning our operations with the United Nations' 17 Sustainable Development Goals (SDGs), aiming for a future where environmental integrity, social responsibility, and economic resilience are seamlessly integrated. Despite global challenges, our commitment to sustainability drives continuous innovation and enhances all facets of our business. This dedication is reflected

in our comprehensive Sustainability Policy, which harmonizes our operations with broader environmental and social goals while ensuring long-term economic viability. By focusing on 45 Impact Drivers and 135 Key Performance Indicators (KPIs), we actively track and improve our progress in critical areas, ensuring that our sustainability efforts translate into tangible benefits for the environment, communities, and our industry.

For the sixth consecutive year, Bogawantalawa proudly maintains its Climate Positive status, setting a high standard for sustainability within the tea industry. We have recently achieved the prestigious Climate Neutral Certification (CNC) from the Climate Neutral Group (CNG) in the Netherlands, cementing our position as the world's first tea-growing, manufacturing, and marketing company offering uncompensated Climate Positive Teas from our state-of-the-art Climate Positive Facilities. We have made significant strides in integrating renewable energy solutions and enhancing energy efficiency, contributing to our Net Zero Energy Certification.

Our initiatives include implementing climate-smart agricultural practices, innovative waste management strategies, soil development, and water stewardship, further demonstrating our dedication to minimizing our environmental impact. Additionally, our conservation and social forestry programs advance biodiversity conservation by protecting ecosystems and engaging local communities in environmental stewardship.

Our True Organic Spice Zone, spanning over 500 hectares, represents a significant advancement in our sustainability journey. By cultivating a diverse range of spices and herbs under stringent organic standards, we contribute to environmental conservation and community development. This initiative not only expands our product offerings but also aligns with our goal of fostering sustainable agricultural practices and further enhances our commitment to long-term environmental sustainability.

Social sustainability is equally central to our mission. We are devoted to enhancing the quality of life for our employees and surrounding communities through comprehensive programs in healthcare, education, and infrastructure development. Our initiatives focus on improving health and nutrition, empowering youth, enhancing living environments, building community capacity, and providing exceptional child care services. These efforts reflect our commitment to making a positive, lasting impact on the lives of those we serve. As we continue to advance our sustainability agenda, we remain focused on fostering positive social impact alongside our environmental achievements. Looking to the future, we are excited about the opportunities that lie ahead and are committed to driving progress through our core values of Trust, Commitment, and Teamwork. Our journey towards a more sustainable and equitable future continues, and we are honored to share this path with our stakeholders and communities.

FUTURE OUTLOOK

At Bogawantalawa, our oil palm sector remains a testament to our unwavering commitment to sustainable agriculture and land use efficiency. Currently, we manage cultivation across 203 hectares, where we implement sustainable practices, including responsible land management, water management, biodiversity enhancement, climate smart agriculture practices and

a deliberate reduction in fertilizer use. These practices not only optimize land use efficiency but also contribute positively to Sri Lanka's vegetable oil sector. This

dedication supports crop diversification and further solidifies our ongoing commitment to environmental stewardship and sustainable growth.

In response to evolving market conditions and environmental challenges, we have strategically expanded into spice cultivation through our ambitious True Organic Spice Zone project. Covering over 500 hectares, this initiative is one of the most substantial and impactful undertakings in our company's history. By cultivating a diverse array of herbs and spices under stringent organic standards, we are not only broadening our product offerings but also reinforcing our commitment to sustainable agricultural practices. This project is in alignment with our objectives of maximizing land use efficiency, promoting environmental conservation, and fostering community development through job creation and economic opportunities. Our venture into spice cultivation represents a significant milestone in our growth trajectory, underscoring our dedication to innovative and responsible farming practices.

CONCLUSION

As we reflect on the progress made during the past year, I extend my sincere gratitude to the Board of Directors for their commitment and confidence. We are also grateful for the commitment and dedication of our people who have been instrumental in our continued success. We are confident in our ability to overcome the obstacles in our path and deliver on our commitments. I take this opportunity to thank our Shareholders, business partners and our valued customers for their commitment and continuous loyalty. With a clear vision, a resilient business, and a talented team, we are well equipped to navigate and seize the opportunities that lie before us.

Sgd.

L J Ambani

Co-Chairman

28th August 2024

For the year ended 31 March

2023/24 Rs. '000s

2022/23 Rs. '000s

Change

%

For the year ended 31 March

Turnover

Other Income

Total Revenue

FINANCIAL REVIEW

PRODUCTION

Bogawantalawa Tea Estates tea production comes mainly from Up Country region 93% and balance 7% from Low country region.

The total extent in bearing in the Up Country region is 3,366.60ha with 61% of the extent in the Bogawantalawa Region and 39% in Hatton region. The yield for the year for the Up country region was 1,101 per kg with Bogawana Estate achieving the highest yield of 1,282 per kg for the Company. The total production for the year was 4.1 MTs as against 3.8 MTs previous year. The total production for the Company increased by 6% from last year due to our concerted efforts in adopting climate smart agronomic practices combined with data analytics enabled us to be resilient and fortify our operations.

PROFITABILITY

BPL's total revenue reached Rs. 4,970.43 Mn from Rs. 5,427.13 Mn in previous financial year. The rate of revenue growth, which was 61% in previous year, declined to 8% in the current year due to lower revenue across the sectors during the financial year 2023/2024.

TURNOVER

(Rs. Mn)

The net sales average decreased by 19.1% against previous year, last year market price increase due to the favorable dollar appreciation. The overall increase in Cost of production per kg was 5.3% compared to last year. However, with stringent cost controls the total cost of sales was increased by Rs 586 Mn.

The growth rate of the gross profit declined against the previous year's recorded growth rate of 610%. The gross profit decreased from Rs. 1,595 Mn to Rs. 553 Mn which is a year-on-year decline of 65%.

Reflecting overall lower revenues and increasing costs, profit growth moderated in the current financial year compared to the large increase in the previous year. The Profit before Tax decreased by 66% to Rs. 484 Mn, compared to the 3,257% increase in the last year. The lower interest rates on average for the current financial year, supported positively for the growth. The Net Finance Expenses for the year was Rs. 117 Mn compared to Rs. 257 Mn, in the previous year.

The company recorded a Net Profit of Rs. 581 Mn for the financial year 2023/2024, compared to the Rs. 1,228 Mn of 2022/2023.

PAT

(Rs. Mn)

SEGMENT ANALYSIS

Tea remained the largest contributor to total revenue, according for 97% of revenue. Although Tea outputs decreased by 1% year on year, total revenue from tea declined by 8% compared to previous year due to lower NSA.

The contribution to gross profit from Tea was Rs. 494 Mn, while Oil Palm contributed Rs. 58 Mn. The sustained growth in gross profit was mainly due to higher outputs