Sri Lanka rubber producer warns boom unlikely to last

Feb 11, 2011 (LBO) – The boom in rubber prices, that helped prop up profits at Sri Lanka’s Kelani Valley Plantations, is unlikely to last, its chairman Mohan Pandithage has warned, according to a stock exchange filing. The company, the plantation subsidiary of Dipped Products, the rubber manufacturing arm of the Hayleys group, said December 2010 quarter net profit fell eight percent to 165 million rupees from a year ago.

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 adju