Madulsima Plantations has posted a loss of Rs.105.4 million during the year ended December 31, 2008, down from a profit of Rs.26.4 million the previous year, and regretted that the company was unable to pay its shareholders a dividend for the seventh year running.

``I regret very much to inform you that for the seventh consecutive year your directors are not recommending a dividend for the year ended Dec. 31, 2008,’’ the company’s Chairman, Mr. Harry Jayawardena, told shareholders in the just released annual report.

Madulsima has however paid Jayawardena-controlled Stassen Exports Ltd., its major shareholder, a managing agent’s remuneration of Rs. 52 million for the year, up from the previous year’s Rs. 46.4 million.

Jayawardena said the year under review began well with prices increasing sharply due to the decline in production in Kenya. Low growns had seen their prices shoot by Rs.70 to Rs.80 above the previous year’s prices thanks to booming income in the oil producing countries.

This trend had continued during the first three quarters of the year when low grown prices hit a record of Rs.391.27 per kg. and the national average was reaching a record Rs.341.35 per kg.

"This remarkable price increase lost its momentum by the end of August 2008 and the national average dropped sharply during the final quarter of 2008," Jayawardena said.

"The emerging global financial crisis and the sharp drop in oil prices from US$ 150 to US$ 40 within a short space of time affected the demand for tea from the CIS, Iran and Dubai particularly for our low grown teas. The demand was so low that about 50% of the teas remained unsold at the auctions in October and November 2008."

Government intervention to stabilize prices with the Sri Lanka Tea Board acting as a buyer did not achieve the desired results, with the Colombo Auction prices remaining at a very low Rs.214.96 per kilo in December 2008.

"The national average which stood at Rs.341.35 dropped to Rs.310.81 by December 2008," Jayawardena said.

He said that Madulsima had done quite well up to September 2008 earning a profit of Rs.24 million but the crash in the tea market from October onwards not only wiped out this profit but also caused a big loss.

The actuarial valuation of the retiring gratuity liability of the company’s employees, which is done every two years, was completed for the period up to December 31, 2008.

"The latest valuation of the liability had increased by as much as Rs.39 million over the last valuation carried out as at 31st December 2006. This significantly increased the total expenditure and contributed to the big loss incurred by the company for the year ended December 31, 2008," Jayawardena said.

They had also to contend with seven strikes, each a day long, resulting in a crop loss of nearly 16,000 kg. of made tea worth approximately Rs.4.4 million.

The year also saw the company facing a 19.2% increase in its wages bill which rose by Rs.113.1 million with holiday pay increasing slightly and the retiring gratuity liability almost doubling to Rs.81.6 million from Rs.42.2 million.

Inputs too moved up with the cost of fertilizer, fuel for driers, electricity and packing materials going up significantly.

Madulsima had diversified 100.8 ha. in to fuel wood and 4.5 ha into avocado during the year under review.

During the first quarter of this year there had been a marginal improvement in tea prices with the balance supply and demand equation in global tea production emerging according to analysts, the chairman said.

Following the death of Dr. V.P. Vittachi last September, Mr. D.H.S. Jayawardena was elected Chairman of Madulsima Plantations and will continue holding the post of Managing Director, the directors said.

Stassen Exports with 35.17% of the company, Distilleries with 31.03% and the Secretary to the Treasury with 13.12% are the major shareholders of Madulsima.

Net assets per share had dropped to Rs.7.13 during the year from Rs.10.76 a year earlier and the Madulsima share traded at a high of Rs.24 and a low of Rs.5.50 during the year under review. This compared with a trading range of Rs.11.75 to Rs.5 a year earlier.

Madulsima has a stated capital of Rs.290 million, a general reserve of Rs.45 million and retained losses of Rs.128.3 million in its books.