# BALANGODA PLANTATIONS PLC Financial Summary Canonical URL: https://pal.lk/updates/bala-financial-summary Symbol: BALA.N0000 Company: BALANGODA PLANTATIONS PLC Sector: Food, Beverage & Tobacco Published: 2026-08-15T09:33:45Z Last updated: 2026-08-15T09:33:45Z # Balangoda Plantations PLC Financial Summary and Investment Analysis ## Executive Overview Balangoda Plantations PLC is a plantation company engaged principally in **tea, rubber, forestry products and other crops**, operating 21 estates across Balangoda, Badulla and Ratnapura. The Company manages approximately **3,931 hectares of tea and 1,858 hectares of rubber**, with total tea, rubber, timber and other crop fields spanning about 9,076 hectares. Melstacorp PLC is the parent company. **Periods covered:** Q3 2023 through Q2 2026, audited CY2025 Annual Report, historical annual information through CY2020, and market context through 2026-08-14. The central financial trend is a sharp weakening of **core plantation margins** after the strong 2024 period. Audited CY2025 revenue declined 11.6% to Rs.4,279.555 million and gross profit fell 52.6% to Rs.411.506 million. H1 2026 deteriorated further, recording a **gross loss of Rs.12.983 million**, although biological-asset fair-value gains and other income preserved a Rs.130.122 million net profit. The balance sheet is considerably stronger than several years ago: equity reached Rs.4,627.987 million by 2026-06-30, there were no term borrowings, and NAV rose to Rs.97.90/share. However, H1 2026 operating cash generation almost disappeared and overdraft usage increased. ## Financial Performance ### Revenue and Profitability Trends *Rs.'000; quarterly numbers are those reported in each interim. Later audited annual totals supersede unaudited year-end totals.* | Period | Revenue | Gross Profit | Net Profit/(Loss) | GP Margin | NP Margin | | ------- | --------: | -----------: | ----------------: | --------: | --------: | | Q3 2023 | 1,017,306 | 131,080 | 42,081 | 12.9% | 4.1% | | Q4 2023 | 835,510 | 27,847 | 15,477 | 3.3% | 1.9% | | Q1 2024 | 1,116,660 | 166,557 | 167,733 | 14.9% | 15.0% | | Q2 2024 | 1,343,982 | 360,347 | 289,108 | 26.8% | 21.5% | | Q3 2024 | 1,237,654 | 288,365 | 265,172 | 23.3% | 21.4% | | Q4 2024 | 1,175,524 | 30,303 | 50,785 | 2.6% | 4.3% | | Q1 2025 | 997,385 | 82,215 | 132,248 | 8.2% | 13.3% | | Q2 2025 | 1,221,326 | 152,952 | 240,477 | 12.5% | 19.7% | | Q3 2025 | 1,157,941 | 142,617 | 123,784 | 12.3% | 10.7% | | Q4 2025 | 902,903 | 47,174 | 124,097 | 5.2% | 13.7% | | Q1 2026 | 843,154 | (117,724) | (41,165) | -14.0% | -4.9% | | Q2 2026 | 1,089,427 | 104,742 | 171,288 | 9.6% | 15.7% | Q2 2026 showed a meaningful sequential recovery from Q1: revenue increased 29.2%, gross profitability returned, and the Rs.41.165 million Q1 loss became a Rs.171.288 million profit. Nevertheless, Q2 revenue remained **10.8% below Q2 2025** and net profit was down 28.8% YoY. For H1 2026, revenue fell **12.9% YoY** to Rs.1,932.581 million and PAT declined **65.1%** to Rs.130.122 million. More significantly, H1 gross profit moved from Rs.235.167 million in 2025 to a **Rs.12.983 million gross loss**. Audited CY2025 results were: * Revenue: **Rs.4,279.555 million**, -11.6%. * Gross profit: **Rs.411.506 million**, -52.6%. * Operating profit: **Rs.944.947 million**, -15.1%. * PBT: **Rs.858.495 million**, -10.3%. * PAT: **Rs.596.685 million**, -19.5%. * EPS: **Rs.12.62**, versus Rs.15.68. * Net margin: **13.9%**, versus approximately 15.3%. The 35% plantation wage increase added approximately **Rs.266 million** of annual labour cost. ### Profit Quality and Segments Profit increasingly depends on non-core/non-cash valuation income. CY2025 biological-asset fair-value gains were **Rs.518.890 million**, exceeding reported gross profit. Excluding this gain, PBT would have been approximately Rs.339.605 million before other adjustments. This became more pronounced in H1 2026: PBT was Rs.201.018 million while biological-asset fair-value gains were **Rs.200.195 million**. Core plantation operations therefore generated very little pre-tax profitability independently of valuation gains and other income. | Segment | CY2025 Revenue | Gross Profit/(Loss) | Gross Margin | H1 2026 Gross Margin | | ------- | -------------: | ------------------: | -----------: | -------------------: | | Tea | 3,834,986 | 482,007 | 12.6% | 2.8% | | Rubber | 444,569 | (70,501) | -15.9% | -27.2% | Tea remains the earnings engine, but its margin has compressed sharply. Rubber remains structurally loss-making at gross-profit level despite stronger selling prices. ## Balance Sheet Analysis | Rs.'000 | 2024-12-31 | 2025-12-31 | 2026-06-30 | | ------------------- | ---------: | ---------: | ---------: | | Total assets | 8,059,127 | 8,954,100 | 9,166,221 | | Current assets | 764,572 | 777,801 | 827,609 | | Current liabilities | 914,686 | 744,084 | 728,779 | | Total equity | 3,717,021 | 4,498,048 | 4,627,987 | | Cash | 43,273 | 17,139 | 3,269 | | Bank overdraft | 302,058 | 103,930 | 174,289 | | NAV/share | 78.63 | 95.15 | 97.90 | | Current ratio | 0.84x | 1.05x | ~1.14x | Equity strengthened 21% during CY2025, supported by profitability and revaluations. CY2025 included a Rs.386.678 million building revaluation surplus before related deferred tax. Term borrowings were fully repaid, materially reducing financial leverage. However, H1 2026 liquidity quality weakened: cash fell to only Rs.3.269 million while the overdraft increased 67.7% from year-end to Rs.174.289 million. Biological assets remain exceptionally material: bearer and consumable biological assets totaled about **Rs.5.582 billion**, approximately 61% of assets at 2026-06-30. ## Cash Flow Analysis CY2025 operating cash flow declined from **Rs.1,110.382 million to Rs.481.752 million**. Capital investment was approximately Rs.154 million, implying free cash generation of roughly **Rs.327 million**. H1 2026 deteriorated sharply: | Rs.'000 | H1 2025 | H1 2026 | | ------------------------------- | --------: | --------: | | Operating cash flow | 226,467 | 4,434 | | Investing cash flow | (7,231) | (50,651) | | Financing cash flow | (169,247) | (38,012) | | Period-end net cash/(overdraft) | (208,795) | (171,020) | Approximate H1 2026 free cash flow after Rs.71.739 million capital expenditure was **negative Rs.67 million**. Receivables, inventories and lower payables absorbed cash. ## Key Financial Ratios and Growth Indicators | Indicator | CY2025 | | ------------------------- | -------: | | Gross margin | 9.6% | | Operating margin | 22.1% | | Net margin | 13.9% | | Approx. ROE | 14.5% | | Reported return on assets | 11% | | Current ratio | 1.05x | | Quick ratio | 0.39x | | Interest cover | 10.69x | | Debt/total assets | 0.02x | | Asset turnover | 0.5x | | EPS | Rs.12.62 | | NAV/share | Rs.95.15 | | Year-end P/E | 5.7x | Revenue increased only about **1.8% CAGR from CY2023 to CY2025**, while earnings were highly volatile. Historical PAT moved from a Rs.1.720 million loss in 2021 to Rs.556.927 million in 2022, Rs.69.069 million in 2023, Rs.741.216 million in 2024 and Rs.596.685 million in 2025. ## Economic and Market Context Sri Lankan tea production was broadly flat at **264 million kg in 2025**, but national average tea prices declined to Rs.1,167.72/kg from Rs.1,225.17/kg. Rubber production declined from 69 million kg to 66 million kg. Company performance was pressured by lower crop volumes, adverse weather, labour shortages, the 35% wage increase, higher fertilizer/chemical/fuel costs and geopolitical disruption. Rubber production fell 15%, although its net sale average improved 12% to Rs.878/kg. ## Future Potential and Outlook Management's 2026 strategy centres on: * Expanding digitalisation from five estates across the estate network, including drones for foliar spraying and crop mapping. * Conversion of Rye/Wikiliya into a fully organic tea garden. * Expansion into cinnamon and other diversified crops. * Pineapple projects, which generated **Rs.3.7 million profit in 2025**. * Potential conversion of selected Ratnapura/Kiriella land to oil palm if the government planting restriction is removed. * Flexible production between crepe rubber and RSS according to market demand. * Continued factory and field investment; CY2025 capex included Rs.70 million for factories and Rs.49 million for field development. Product quality remains a competitive strength: the Company recorded **100 tea top prices and 50 rubber top prices** during 2025, while Telbedde received major tea-quality awards. ## Risks and Challenges The principal investment risks are **weather/climate sensitivity, political and geopolitical risk, labour availability and wage inflation, weak rubber economics, commodity-price volatility, and declining core margins**. The audit opinion for CY2025 was unmodified. Key audit matters nevertheless highlight material estimation sensitivity around **Rs.3.886 billion of consumable biological assets**, Rs.1.258 billion retirement-benefit obligations and Rs.576 million investment properties. Biological-asset valuations are particularly important because valuation gains materially affect reported earnings. ## Shareholder and Corporate Information Melstacorp PLC owned **72.21%** at 2026-06-30. Public holding was **27.79%**, represented by 18,611 shareholders; none of the directors or CEO held shares. The parent holding has decreased from 74.61% reported in Q3 2023, increasing the public float. Dividend history was Rs.2.00/share for CY2022, nil for CY2023, Rs.1.00 for CY2024 and **Rs.0.50 for CY2025**. CY2025 payout ratio was only 3.96%. The latest supplied market snapshot shows a **Rs.62.00 close on 2026-08-14**, a 90-session range of Rs.59-69 and a 3.33% return over those 90 sessions. Trading liquidity remains modest, with median daily turnover of approximately Rs.223,190. Foreign ownership was approximately 0.91%. ## Investment Decision Indicators **Strengths** * Stronger equity and NAV; NAV reached Rs.97.90/share. * Very low conventional financial debt and substantially lower finance costs. * High-quality tea positioning and demonstrated premium-price capability. * Significant biological/land-related asset base. * Diversification, digitalisation and productivity initiatives provide longer-term optionality. * Q2 2026 recovered strongly from the Q1 operating shock. **Weaknesses** * H1 2026 core gross margin turned negative. * Tea margins have compressed sharply and rubber remains gross-loss-making. * Reported profits depend materially on biological-asset fair-value gains. * Operating cash flow collapsed to Rs.4.434 million in H1 2026. * Cash balance is minimal and overdraft usage is increasing. **Opportunities** * Recovery of tea pricing and crop volumes could produce significant operating leverage. * Wage-cost productivity initiatives, drones and automation could restore margins. * Cinnamon, organic tea, pineapple and possible oil-palm diversification can reduce dependence on traditional crops. **Threats** * Wage inflation, labour scarcity, adverse weather and disease. * Commodity-price and currency volatility. * Geopolitical disruptions affecting export demand and imported inputs. * Further deterioration in cash conversion despite accounting profitability. **Overall assessment:** Balangoda Plantations PLC presently combines **strong asset backing, low term debt and valuable tea franchises with rapidly weakening underlying plantation profitability and cash generation**. The most important indicators to monitor are tea gross margins, rubber losses, operating cash flow, overdraft usage and the proportion of earnings generated from biological-asset revaluations. A sustained restoration of positive core gross margins and cash flow would materially strengthen the financial case; continued dependence on valuation gains while cash generation weakens would materially increase risk.