Sunshine Group’s Watawala Plantations diversifies further with USD 11.5 million dairy operation

March, 24, 2016

• Watawala Dairy Ltd. set up with FDI of USD 3 million from Singapore-based Duxton Asset Management
• International asset management’s first-ever agricultural FDI in Sri Lanka

Watawala Plantations PLC, a member of the diversified Sunshine Holdings conglomerate and one of Sri Lanka’s largest Regional Plantation Companies (RPCs), has announced plans to set up a mega commercial dairy operation, with a total initial funding commitment of USD 11.5 million.

Of this funding, a majority (of USD 4.3 million) has been committed by Watawala Plantations PLC while a USD 3 million share represents Foreign Direct Investment (FDI) by Duxton Asset Management, a leading Singapore-based international and boutique asset manager. This is the first-ever agricultural FDI in Sri Lanka by Duxton Asset Management, which manages and advises assets of approximately USD 690 million, of which USD 460 million are in agricultural investments.

The new Board of Investment (BoI) approved venture, Watawala Dairy Ltd., is a subsidiary of Watawala Plantations PLC. The dairy operation is expected to further diversify and strengthen the revenue streams of Watawala Plantations, which has benefited from strategic diversification into palm oil.

With the new investments, once it is in full operation, Watawala Dairy will expand its herd to 1,000 dairy cattle and is forecast to generate over Rs. 1 billion in revenue from the fourth year of operation. Thereafter it sees significant potential for further expansion as well.

The state-of-the-art Watawala Dairy farm will utilize the expertise of two South African veterans – who have a combined experience of over 40 years in the dairy industry.

The present small-scale dairy farm operated by Watawala Plantations – consisting of 75 dairy cattle and generating annual sales of Rs. 30 million – has been brought under Watawala Dairy Ltd.

The agreement to set up Watawala Dairy Ltd. was recently signed by Sunshine Holdings PLC Group Managing Director, Vish Govindasamy on behalf of Watawala Plantations PLC and by CIO, Desmond Sheehy on behalf of Duxton Asset Management.

“By attracting substantial Foreign Direct Investment and contributing to the nation’s vision of achieving self-sufficiency in fresh milk production, Watawala Plantations and Sunshine Holdings take pleasure in reiterating our continuous commitment to nation-building industries,” Sunshine Holdings PLC Group Managing Director, Vish Govindasamy said. “Securing another partnership with a leading international establishment of the calibre of Duxton Asset Management also affirms Watawala Plantations’ reputation as a thought leader in the industry. Similar to Watawala Plantations’ existing partnerships with TATA Global Beverages and Pyramid Wilmar Plantations, we are confident that this alliance too will lead to significant synergies beyond financial investments including in technology and best industry practices.”

“We see significant potential in Sri Lanka, particularly in the agriculture and dairy industry of the country, and therefore take pleasure in making this our first of hopefully many agricultural investments in Sri Lanka,” Duxton Asset Management CIO, Desmond Sheehy said. “By drawing from our substantial expertise through involvement in many successful agricultural ventures across several continents, this project has the potential to be a landmark development in Sri Lanka’s dairy industry. We are also pleased to have found an industry leader such as Sunshine Holdings to collaborate with.”

The new investment recognizes the strong economic potential for dairy in the country and is also expected to support the country in its vision of achieving self-sufficiency in fresh milk production.

A leading international player in agricultural investments, Duxton has operating investments on five continents and is currently working on live projects in Latin America, Australia, the Pacific, the Caribbean and Africa for its existing client base. Duxton manages/advises 21 operations that span 540,000 hectares of farmland and over 30 commodities, managed by approximately 500 on-the-ground senior farmers and supported by more than 13,000 farm workers and thereby possesses vast expertise in the sector.

Watawala Plantations has been Sri Lanka’s largest producer of palm oil for several consecutive years. A significantly diversified plantation company, Watawala has interests in palm oil, tea, rubber and cinnamon. Watawala Plantations PLC is a subsidiary of Estate Management Services Ltd. – a joint venture between Sri Lanka’s Sunshine Holdings, TATA Global Beverages Ltd. and Pyramid Wilmar. For the first nine months of the 2016 financial year (9MFY16), Watawala Plantations PLC reported Revenue of Rs. 4.6 billion and Net Profit of Rs. 439 million. Its Total Assets as at 31st December 2015 stood at Rs. 7.9 billion.

Sunshine Holdings PLC is a diversified holding company contributing to ‘nation building’ by creating value in vital sectors of the Sri Lankan economy – including healthcare, agribusiness, fast moving consumer goods and renewable energy. The group, which provides employment to approximately 12,000, generates over US$ 120 million in revenue. Sunshine Holdings is consistently ranked among the LMD Top 50 companies in Sri Lanka and is also one of the country’s largest tax payers – contributing over Rs. 500 million to the state’s coffers annually.

Photo Captions - The laying of the foundation stones for the new Watawala Dairy farm by (from left) Watawala Plantations Chairman – Sunil Wijesinha, Watawala Plantations Director – Bandula Hulangamuwa, Duxton Asset Management CIO – Desmond Sheehy, Sunshine Holdings PLC Group Managing Director – Vish Govindasamy and Duxton Asset Management Vice President – John Simpson

(From left) Duxton Asset Management CIO – Desmond Sheehy, Sunshine Holdings PLC Group Managing Director – Vish Govindasamy and Chairman of the Board of Investment (BoI) – Upul Jayasuriya following the signing of the BoI agreement

Sunshine Holdings PLC Group Managing Director – Vish Govindasamy (second from left) and Duxton Asset Management CIO – Desmond Sheehy exchange copies of the agreement. The others in the picture are (from left) Watawala Plantations PLC Director – Sajjad Mawzoon and Watawala Dairy Farm Manager – Jacques du Plessis