Manufacturing led blue chip conglomerate reports best ever 2nd quarter results

Robust performances in manufacturing, lower input costs, a strong shift to higher value products and capital gains from portfolio rationalization in the first half of 2009/10 have enabled Hayleys PLC to record a five-fold increase in  attributable profit over the Rs.110 million achieved last year,  following the best-ever quarterly results in the  history of the blue chip conglomerate. Attributable profit increased to Rs.553 million this year, while profit before tax stood at Rs.1 billion reflecting a 48 per cent improvement over the same period, according to figures filed with the Colombo Stock Exchange this week.

The Group’s profit-after-tax increased from Rs.377 million in the corresponding six months of the previous year to Rs.817 million for the first half of 2009-10, while turnover remained more or less at the same level. Commenting on what he described as a “strong performance,” Hayleys Chairman and Chief Executive Mohan Pandithage said that “the Global Markets and Manufacturing Sector continued its robust performance despite the effects of the global recession, due to greater efficiencies and lower input costs in some units and a strong focus on value-added products in others. Both local and overseas operations of Hand Protection and Purification Products generated strong results, and the Fibre sector recovered from a loss situation to achieve a profit during the half year”.

“Despite the many challenges facing the apparel industry and providers of input to this sector, our textiles unit has performed strongly too”. The Group’s Income Statement for the period under review indicates that cost of sales (Rs.12.8 billion), distribution expenses (Rs.638 million) and administrative expenses (Rs.2 billion) were kept on par with that of the first six months of last year despite accounting for Hayleys MGT Knitting Mills as a subsidiary company for two months, while net finance costs were reduced by 23 per cent to Rs.385 million.

The Group’s Earnings per Share increased from Rs 1.47 a year earlier to Rs 7.37 as at 30th September 2009, a five-fold improvement.

Mr. Pandithage said in the Agri Sector, agri products had improved in their results whilst the performance of agri inputs was lower than that of the corresponding period of last year. The Consumer Sector also recorded improved results in the meantime. The Plantation Sector, which had outstanding results last year, was already affected this year by a drop in commodity prices and demand as well as declines in crop yield caused by unfavourable weather conditions, the Chairman of Hayleys noted. “The sector received another setback in the form of a near 40 per cent wage increase to plantation employees. As a result, pre-tax profits reduced by more than Rs.250 million in the second quarter alone, inclusive of the estimated increase in retiring gratuity liability,” Mr. Pandithage disclosed. He added that the Transportation Sector results remain impacted by the decline in global trade and shipping volumes, but added that the Group has seen recent signs of a recovery in both freight rates and cargo shipped. Among the principal contributors to Group performance, Hand Protection accounted for Rs 4,235 million in turnover and Rs 392 million in operating profit, Purification Products Rs.2,543 million and Rs.364 million respectively, and Textiles (Hayleys MGT), now accounted for as a subsidiary business, Rs.1,000 million in turnover and Rs.110 million in profit. Other noteworthy performances in growth terms were posted by the Fibre Sector, which converted a Rs.13 million loss to an operating profit of Rs.79 million; Agri Products whose operating profit grew from Rs.7 million to Rs.88 million, and Consumer Products, whose profit increased to Rs 91 million. Resorts, helped by the divestiture of the Group’s interests in Royal Heritage Hotel (the owning company of Vil Uyana) and Seashells Hotel in the six months reviewed, reported an operating profit of Rs.67 million.

Looking ahead, Mr. Pandithage said: “The interim result provides optimism for the Group’s outlook for the ensuing half of the year. Our focus is clearly on garnering the many new post-war opportunities within Sri Lanka in the fields of agriculture, transportation, logistics and tourism, while other businesses will continue to explore avenues of expansion locally and overseas.”

Rated a Business-to-Business (B2B) Superbrand among Sri Lanka’s diversified conglomerates, the Hayleys Group employs more than 33,000 people, and accounts for 2.3 per cent of Sri Lanka’s export income.

The Board of Directors of Hayleys PLC comprises Messrs A. M. Pandithage (Chairman), L. K. B. Godamunne, J. D. Bandaranayake, A. Hettiarachchy, M. R. Zaheed, A. M. Senaratna, J. A. G. Anandarajah, T. L. F. Jayasekera, K. D. D. Perera, W.D.N.H. Perera and S. C. Ganegoda.