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The Hayleys Group has reported a drop in profits for the
first quarter of 2005-06, despite a respectable 27 per
cent growth in turnover for the period. An inflation
rate disproportionate to the strength of the Rupee, and
shortages of charcoal and fibre which affected the
bottom lines of the Group's Activated Carbon and Fibre
segments, took the shine off an otherwise healthy
overall performance.
In results released to the Colombo Stock Exchange this
week, Hayleys reported pre-tax profits of Rs 320
million, down marginally from the Rs 322.3 million of
the first quarter of the previous year. Profit after tax
and minority interest was down 10 per cent to Rs 102.3
million. In contrast, Gross Turnover grew 27 per cent to
Rs 5.1 billion.
Conceding that historically, the first quarter results
have been lower than those of the quarters that follow,
Hayleys Chairman Rajan Yatawara has acknowledged that
these results may yet create anxiety in the context of
expectations expressed in the last annual report of a 50
% improvement in Group results in 2005-06. He pointed
out that "If my projections are to hold good, inflation
must be curtailed in line with the strength of the
Rupee. It has not been so in the year so far.
"Productivity and capacity increases, innovative
products and new markets have enabled survival over the
many years this imbalance has endured," Yatawara added.
In segments not affected by raw material shortages and
the resultant increased costs of production, the Group
has reported results ranging from exceptional to
satisfactory: Profit from operations in the
Transportation sector (recently re-branded Hayleys
Advantis) grew 171% to Rs 166.3 million; in Agri Inputs
by 130 % to Rs 75.6 million; in Consumer Products by 47
% to Rs 61.5 million; in Plantations by 30 % to Rs 65.8
million, and in Hand Protection by 11 %to Rs 98.2
million.
The share of pre-tax profits from associates grew 78 %
per cent to Rs 77.6 million in the quarter under review,
with Hayleys MGT Group, Dimo and Talawakelle Tea Estates
being notable contributors.
Elaborating on the raw material shortages that affected
the Activated Carbon and Fibre sectors, Hayleys Finance
Director Richard Ebell said a drop of 20-30 % in coconut
production in the first six months of 2005 had depressed
the supply of the fibre and shell used by these sectors.
The Group's activated carbon company was compelled to
vastly increase its imports of charcoal from Indonesia
at high freight costs to feed its capacity, and the
increased cost of production had to be absorbed as
producers in other countries get their raw material at
less than half the price, he explained.
Ebell said the situation is expected to reverse in the
rest of the year and coconut production in 2005 is
expected to be on par with production in 2004,.
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