Q: Could you explain how last year’s unprecedented business environment impacted the plan- tations sector in general?
A: We’re in a business where we have very little or no control over prices, the weather and now even costs. When you lose control over these vital elements, it becomes a major challenge.
For example, with global warming and sustainability issues, our produc- tion is always challenged since we’re in an agriculture-based business. This means that we need to constantly improve our game to be able to miti- gate the adverse effects of weather related issues.
Similarly, where price is concerned, our main commodities – viz. tea and rubber – are based on global market prices. Even though many of our companies try to add value, this is ultimately dictated by the internation- al market where we exert little control over prices, meaning we’re ‘price tak- ers.’
The final element that we should be able to control is costs, which is also dictated by production or output. About 65 percent of our costs relate to wages and when someone else decides this, sustaining the business becomes a major challenge.
Q: Can business weather the impact of the pandemic?
A: This calls for novel and innovative thinking, and to always be ahead of the curve to survive in this challeng- ing business.
The plantations sector is among the least affected by the pandemic – unlike many others that had to shut down, it was not on lockdown. In fact, when it comes to agriculture, opera- tions cannot be shut down because it deals with growing and living plants. Unless the produce is harvested and made use of, it goes to waste.
This meant that we had no alterna- tive but to continue operations. We managed the crisis quite well and until the second wave, not a single COVID-19 case was reported from estates – this was achieved by restrict- ing the presence of outsiders. Our workers remained on the premises; and by creating this safe space and having all basic needs delivered to their doorstep, operations were able to run smoothly.
We were also able to offer short- term contracts for those who had to return to the estates from Colombo, providing them with jobs and places to reside. This was doubly beneficial, helping employees as well as produc- tivity.
Another way the sector was able to weather the impact of COVID-19 was through its ability to pioneer a new method of selling tea. Sri Lanka was the first country to conduct an online auction to sell tea and overcome the effects of the long lockdown. This innovative thinking certainly helped us during the pandemic.
Despite the precautions taken how- ever, plantations found themselves in a difficult situation where much of the produce could not be sold as Colombo remained locked down.
Q: What are Elpitiya Plantations’ medium-term priorities given the prevailing environment?
A: As mentioned before, we work in a challenging environment with little or no control over the external factors surrounding us. Given this, our main priority has been to get involved in less cyclical business thereby ensuring that we have better control over such factors.
As such, we have moved into many non-core businesses including the cultivation of all four types of berries.
We developed a sustainability strat- egy based on our impact on the envi- ronment and the UN Sustainable Development Goals (SDGs). This strategy encompasses all our estates and helps mitigate global warming by harvesting rainwater – adding value to our soil for better water retention – while also investing more in renewable energy and rapid mech- anisation.
Moreover, we hope to expand oper- ations into the value addition of cin- namon, which is still in its prelimi- nary stages.
We’re among the few plantation companies in Sri Lanka attempting to move away from pure commodities and towards more innovative think- ing. To this end, our latest brainchild is an investment in an adventure park in collaboration with a Malaysian business partner.
Q: And how is the company far- ing under existing macroeco- nomic conditions?
A: At the moment, some macroeco- nomic conditions are favourable to us – lower interest rates and the depreciation of the rupee, for exam- ple.
One outcome in particular we would like to see come to fruition is the development of consistent poli- cies that will provide confidence to both local and international inve- stors.