Sri Lanka rubber estate hopes for eco-friendly premium

July 28, 2010 (LBO) - A Sri Lankan rubber estate said it was expecting premium prices for a specialist rubber it was making after being certified for environmental growing and production standards.

Horana Plantations, a unit of Sri Lanka's Ceylon Theatres group, said its rubber and timber plantations had been certified for good forest management practices by the Forest Stewardship Council, an European organization helping guide 'fair trade' buyers.

The firm's rubber estates have been awarded Non-Timber Forest Products (NTFP) Certification by the FSC, the first for a Sri Lankan firm, it said.

"This certification has enabled the Company to obtain premium prices for the export of crepe and sole crepe rubber under the Fair Deal Trading agreement." Chief executive officer Rajiv Casie Chitty told shareholders in the annual report.

"This recognition has further encouraged HP-PLC (Horana Planations PLC) to continue our efforts to make plantation sustainable and eco-friendly."

Sri Lanka's is a niche producer of 'crepe' rubber which commands high prices in world markets.

The firm's timber and forestry cultivation has also been certified by the FSC.

The certification is given for "for managing and harvesting non-timber products from the raw material and rubber latex produced in our properties to minimise biodiversity loss and preserve sustainable rural life through responsible business practices," the firm said.

Horana Plantations had said it was increasing timber planting as prices for fuelwood rose.

Last year it had planted 29.5 hectares of timber trees and 55 hectares of rubber. Horana Plantations said rain reduced latex production last year to 1.4 million kilograms which was the lowest recorded "in many years."

"Despite the reduction in production, the Company recorded significant profits due to the strong market for Rubber in the world market and stringent management controls," Casie Chitty said.

The rubber prices at auctions in Colombo auction had increased from an average of 160 rupees to around 300 rupee levels by December 2009. The net sale average was 279.15 rupees per kilogram for 2009 up from 209.74 a year earlier.

Cost of production had increased to 208.16 per kilogram from 170.16 per kilo a year earlier, with labour and energy pushing up the total.

Gross profits from rubber had increased 71 percent to 102.3 million rupees from 59.6 million a year earlier.

"This sector is expected to perform consistently well in the future with the recovery from the global financial slump likely to renew and increase demand for rubber in the world market," Casie Chitty said.

The firm which also makes tea and small amounts of cinnamon posted net profits of 94 million rupees for the year ended March 2010 up from 55.2 million rupees a year earlier.

Gross revenues rose to 1.78 billion rupees from 1.38 billion rupees. The firm only paid 13.4 million rupees in management fees.

(lankabusinessonline.com)