Hapugastenne Plantations lost 214.00 million rupees in the year to March 2012, reversing a profit of 281 million rupees a year earlier.
Chairman N K H Ratwatte said Colombo's tea auction average prices fell 10.72 during the year while a 27.0 percent wage hike had pushed up labour by 373.00 million rupees to the firm.
Erratic weather had reduced production and uncertainty in the Middle East had depressed prices.
"Due to the financial burdens created by the drop in revenue, and the shortfall of working capital during the year, we were compelled to cut back on our tea replanting," Ratwatte told shareholders in the annual report.
However the firm had invested 130.00 million rupees in rubber and other crops like cinnamon, pepper and cocoa to diversify revenues. Eighty five hectares were planted with timber to increase future fuel wood production.
Chief executive Dayan Medawala said average tea prices had fallen by 20.00 rupees a kilo and cost of production had risen to 415.00 rupees a kilogram but overall cost of production was lowered to 375.56 rupees with out-grower leaf.
One factory had been converted to the crush-tear-curl (CTC) type of production.
Efforts were also under way to improve productivity.
"We have also continued our mechanisation programme with shear harvesting where 35.0 percent of the pluckers are on shears and this has gained popularity amongst the younger generation which augurs well for the future," Medawala said.
At Udapussellawa Plantations, another firm controlled by Finlays, about 25.0 percent of pluckers were using shears instead of plucking by hand.
Though rubber production was down 7.0 percent due to bad weather, prices were higher by 105.00 rupees a kilogram at a sales average of 452 rupees.
"As a result, our rubber sector made a significant profit and the revenue generated helped mitigate the loss on tea to a great extent," Medawala said.
"With the buoyancy in the rubber sector, planting of new rubber was expedited and several marginal tea lands too were diversified into rubber, and almost 188 hectares were planted during the year.
"We see a global shortfall of natural rubber in the future, with corresponding firm prices, which augurs well for this sector."
Rubber is also less labour intensive.