Earnings per share in the quarter were 4.86 rupees compared with 5.26 rupees the year before. Sales rose five percent to a billion rupees.
Pandithage cautioned that the rubber boom may not be sustained over a long period of time.
“The rubber market has been pushed to its present levels by production shortfalls in major producer countries, increased demand driven largely by the automobile industry – particularly in India and China – and the near total depletion of all major stockpiles,” he explained.
“This is a rare and unprecedented convergence of unlikely circumstances and any expectation of this position being sustained at these levels, for any length of time, would be unduly optimistic.”
Pandithage said that historically, with time, all commodity markets adjust to supply, demand and pricing dynamics.
“In this context, locally, it is important to consider the likely impact of the impending worker wage increase on future production expenses, whilst the recently imposed enhancement in the energy tariff adds a further burden to an industry already weighed down by rising input costs.
"The combined impact of these factors is likely to erode, to a large extent, the benefits that may be derived from improved commodity prices,” he said.
In the financial year ending December 31, 2010, Kelani Valley Plantations made a net profit of 321 million rupees against a loss of 43 million the previous year with earnings per share of 9.43 rupees against a loss of 1.25 the previous year.
Sales rose 36 percent to 3.9 billion rupees.
A company statement said a significantly higher tea crop and strong rubber prices have combined to prop up Kelani Valley Plantations profits.
During the financial year, tea production improved 23 percent generating revenue of 2.5 billion rupees.
"Adverse weather resulted in the company’s rubber output declining nearly 10 percent, but higher international prices helped generate turnover of 1.3 billion rupees from the commodity, an improvement of 72 percent."
Pandithage, who is also Hayleys group chairman, said a substantial proportion of Kelani Valley performance is attributable to the rubber sector, rather than tea.
“With the tea price improvement being only moderate, this highly labour and material intensive operation continues to be hampered by cost escalations in all inputs, whilst the strengthening of the rupee against the dollar diminished earnings in rupee terms,” he said.
He pointed out that unlike in previous years, the impact of wage and other cost increases have not been concomitantly cushioned by rupee depreciation in the year under review.Kelani Valley Plantations manages 27 estates, over 13,000 hectares in extent, divided almost equally in to tea and rubber.