28th Aug 2014 11:25
LONDON (Alliance News) - Camellia PLC Thursday said it swung to a first-half pretax loss, as it was hit by bad weather, continued difficulties in its engineering division, and higher costs at Duncan Lawrie Private Bank.
In a statement, Camellia said it made a GBP6.9 million pretax loss in the six months ended June 30, compared with a GBP11.9 million pretax profit in the corresponding period last year. Revenue fell to GBP101.5 million from GBP113.8 million. Administrative expenses increased to GBP23.2 million from GBP21.8 million.
Earnings also were hit by the appreciation of the Malawian kwacha against sterling over the period, as its main assets in Malawi, which are agricultural, generate revenue in currencies other than kwacha. The revaluation of the agricultural assets in kwacha generated a loss of GBP3.5 million.
Chairman Malcolm Perkins said the board nonetheless expects the second half to be more favourable than the first, though he said it is difficult to give any indication of the likely outcome for the full year.
"We experienced a number of adverse climatic conditions in the first half of the year which have affected our results. We are still in periods of major harvesting and the impact of climatic conditions in the second half of the year will, of course, have a significant part to play in our results for that period," Perkins said.
Duncan Lawrie Private Bank suffered from "one-off costs associated with specific regulatory compliance matters and a change in the senior management in the company". Lending fell due to a more competitive market, but Perkins said there are signs this business may gradually increase over the next few months.
Camellia's engineering division was hurt by continuing losses at Abbey Metal, where Perkins said the regaining of contracts lost subsequent to a fire in 2010 is proving more difficult than anticipated. In addition, there are supplier programme delays at Abbey Metal's operation in Germany resulting in the start-up costs having to be absorbed over a longer period.
AKD Engineering continues to carry the run-off costs associated with a large contract which remains the subject of a legal dispute, Perkins said.
In addition, Camellia's tea operations suffered from drought in India and Bangladesh.
"There were periods of sustained drought during the first part of the year. This resulted in a substantial crop loss, particularly in Assam, and encouraged the proliferation of pests and disease which further reduced the crop. While tea prices in Assam have been stable those in the Dooars have increased over the same period last year," Perkins said.
"As in India, Bangladesh suffered extensively from drought in April and May which has reduced its production. Tea prices have recovered from low points last year due to an increase in the rate of import tax, but still remain significantly below those prices achieved in the first part of 2013," Perkins added.
Turning to Africa, Perkins said production in both Kenya and Malawi has been good due to the beneficial pattern of rainfall for a large part of the six month period.
"Our operation in Kenya has on occasion been selling its tea at below cost of production. Although remaining volatile, prices have shown an improving trend over the last few weeks, but remain below the average price achieved during 2013," Perkins said.
He noted that tea prices in Malawi are significantly below those achieved in the same period last year.
Camellia maintained its interim dividend at 34 pence per share. Its shares were Thursday quoted down 1.3% at 9,771.00p.
By Samuel Agini; [email protected]; @samuelagini
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