We have performed poorly in 2017 mainly because of crop loss due to pest attacks andbad weather. Fortunately our investment portfolio with one exception has performed wellto cover these losses and keep the company in sound financial health. The exceptionrelates to our investments in Warren Steels.
Our 22% stake in Warren Steels had to be sold at face value to its promoters. This wasa poorly managed castings business which did not have the size or economies of scale tobe a viable proposition.
Although 2017 was a bad year we have outperformed our erstwhile parent company by 3.9xcumulatively over the past 5 years. This is to say that our PAT is almost 4 times that ofWarren Tea since the High Court approved our demerger in December 2013. I believe thatthese results are a clear vindication that the demerger was in the best interests of allstakeholders.
This outperformance has come through the shared values illustrated in our mottoIntegritateet Industria. We have also invested heavily over the past 5 years in ourplantations. The irrigation colour sorts and nurseries are all new. We are uprooting andreplanting like never seen before.
A few matters still lie unresolved following the demerger. One of the most troublingrelates to TDS during 2013 when we were a division of Warren Tea and lacked autonomy inmany matters relating to statutory payments accounts and technology.
Nevertheless the past 5 years have seen us increase our exports from virtually nilincrease our Orthodox production to 50% and increase our quality. Whilst all the timeimproving the Executive team in Kolkata and Assam.
The risk of wages hikes out of step with prices is making our outlook uncertain. Tomitigate this risk we need to become more operationally efficient and for this our Unionsneed to work together with Management. A ridged adherence to labour levels set 50 yearsago holds back the industry. Productivity is key and mechanization has to be the answer.
There is also an imbalance in Assam between the costs of production for small teagrowers and organised companies such as ours. Our compliance with the multitude ofregulations governing us means that we are not operating on a level playing field. Inaddition our commitment to quality means that we do not dilute our own leaf with thisbought leaf of unknown origins.
A lack of enthusiasm from our banking partners has meant that the benefits ofdemonitisation have hit a plateau. We need the banks to take this seriously if we are toencourage savings and an end to the poverty trap.
Recently reformed electricity tariffs in Assam have brought us some relief. We now needto turn the attention to gas where we suffer from low pressure and irrational billing.
Despite these challenges we remain hopeful and optimistic about the future of ourcompany and Assam tea.
Akhil Kumar Ruia
Chief Executive Officer