Lanka Rating Assigns Initial Entity Rating to Ceylon Tea Brokers PLC

The tea brokerage industry in Sri Lanka operates within a regulated market structure. At present there are eight licensed tea brokers, all overseen by the Sri Lanka Tea Board under the Tea Board Act No. 14 of 1975 and Produce Broker Act No. 9 of 1979. The tea brokers act as intermediaries between tea producers and exporters, facilitating price discovery and sales through centralized Colombo Tea Auction (CTA). Tea production in Sri Lanka has declined in recent times, primarily due to rising input and labor costs, the prevalence of aging tea bushes with inadequate replanting, and increasing climate-related volatility.
Ceylon Tea Brokers PLC (“CTBL” or “the Company”) is a limited liability company engaged primarily in tea brokering, warehousing, and financing activities in Sri Lanka. The rating reflects CTBL’s long-standing track record in the tea brokerage business, where it is regarded as one of the top two players in the industry. CTBL’s strong parentage, through direct ownership by the ultimate shareholders of the Capital Alliance Group, also underpins the rating. CTBL demonstrated healthy performance in its core tea brokering business during FY24 and FY25, supported by an increase in market share within the industry. As of FY25, CTBL maintains a strong position in the low-grown segment with a commanding market share of ~20% and handles over ~16% of total sales at the CTA. CTBL also provided supplier finance to growers and has a lending portfolio of approximately LKR 1.4Bn as at end-FY25. Credit risk remains low, due to access to underlying stock for sales in case of default and debarring of the defaulter from future auctions. The rating remains constrained by the weak financial profile and highly leveraged capital structure of CTBL's wholly owned subsidiary, Logicare (Pvt) Ltd, which reported a loss of LKR ~105Mn in FY25 (FY24: LKR ~71Mn loss ).
CTBL has modest profitability as it reported a Net Profit (PAT) of LKR ~143.2Mn for FY25 (FY24: LKR ~141.9Mn). At the consolidated level, PAT was impacted by operational losses from Logicare (Pvt) Ltd, which were recorded at LKR ~38.2Mn in FY25 (FY24: LKR ~69.8Mn). CTBL recorded a ~15.5% growth in brokerage revenue, increasing income from tea brokering to LKR ~499Mn in FY25 (FY24: LKR ~433Mn). However, income from interest on supplier credit declined by ~35% during FY25, attributed to the low-interest rate environment, resulting in overall revenue of LKR ~1,001Mn in FY25 (FY24: LKR ~1,082Mn). CTBL has a leveraged capital structure which as at end-FY25 stands at ~77% with borrowings peaking in tea season. These funds are used to extend financing to tea growers and processing factories across the country.
The rating remains dependent on CTBL's ability to maintain its strong market position in the core business, sustain profitability and maintain a healthy financial profile. Any deterioration in the credit quality of the lending portfolio or operational losses would negatively impact the rating. Meanwhile, curtailing losses of the subsidiary and reduce its financial exposure is important for the rating.

About the Entity
Ceylon Tea Brokers PLC (“CTBL” or “the Company”) is a public limited liability company which was established in 1999. It was listed in the Colombo Stock Exchange (“CSE”) in 2010. The controlling shareholder of the Company is Mr. W A T Fernando, who is a NED. CTBL has a twelve-member-board consisting of eight Non-Executive Directors (NEDs) and four Executive Directors. six of whom are independent. Mr. Niraj De Mel, who is an Independent Director, is the Chairman. Mr. Dinesh Fernando heads the management team as Director/CEO.