KVPL records better performance in 2010

A significantly higher tea crop and strong rubber prices have combined to enable Kelani Valley Plantations PLC (KVPL), the Dipped Products (DPL) plantation subsidiary, to end 2010 with a positive performance from a loss of Rs 28 million in 2009.

KVPL has reported that turnover grew 35.6 percent to Rs 3.8 billion, largely as a result of these factors.

The company achieved a 23 percent improvement in its tea output, which generated revenue of Rs 2.5 billion.

Adverse weather resulted in the company's rubber output declining nearly 10 percent, but higher international prices helped generate turnover of Rs 1.3 billion from the commodity, an improvement of 72 percent.

Consequently, KVPL converted a loss after tax of Rs 40.6 million in 2009 to a net profit of Rs 326 million, of which Rs 320.7 million is attributable to equity holders of the company. Earnings per share for the year reviewed amounted to Rs 9.43 from a loss per share of Rs 1.25 in 2009.

On the basis of this performance, the Board of Directors of KVPL has proposed a first and final dividend of Rs 4 per share, payable on April 11, 2011.

KVPL and Hayleys Group Chairman Mohan Pandithage said a substantial proportion of 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, pointing 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.

Pandithage also 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.