Financial Times

Yatawara to steer Hayleys on same course as Mendis
Sunil Mendis, chairman of the Hayleys conglomerate, has announced his retirement after 10 years at the helm of the diversified blue chip, and is being replaced by his deputy, Rajan Yatawara, on July 1.

N.G. Wickremeratne, chief executive officer of Dipped Products Ltd., and head of the group's rubber sector, becomes deputy chairman on the same day, Mendis announced in his annual report to shareholders.

The Sunday Times FT exclusively reported plans for the changeover in its April 4 issue although the company, known for maintaining a low profile, would not confirm it at the time.

Mendis became chairman of the diversified blue chip in December 1993 after the sudden demise of its first Sri Lankan chairman D.S. Jayasundera. The 126-year-old company accounts for 2.3 percent of the island's total export income and 1.3 percent of its Gross Domestic Product.

It has carved a niche for itself in international markets in some of its core businesses such as rubber gloves, activated carbon and coir products. Yatawara, who became deputy chairman in October 2001, joined Hayleys in 1966 and has been the CEO of Haycarb, the subsidiary that exports activated carbon made from coconut shell charcoal, since its inception in 1973.

He was appointed to the group's board in 1984. He is a member of the American Institute of Chemical Engineering. Yatawara told The Sunday Times FT that he would "pursue the same course" as Mendis, who he said wanted to retire early for personal reasons, there being no age limit.

"I, as the next senior director, will take over the burden and carry forward the same policies of value added exports and developing the rural economy." Hayleys aim is to become a Sri Lankan-based multinational, Yatawara said.

"Our intention is to become global in areas we have specialities in. We have to get global because Sri Lankan resources are limited." The company will focus on value adding both here and abroad, using its know how by investing overseas.

"Even in coir we may go out of Sri Lanka to other potential coir-based countries because raw material here is limited," Yatawara said. Also, competition can be heavy and costs are rising.

Beyond a certain level of growth we have to diversify outside but still, the funds will come into the country." Hayleys will help to develop the rural economy through its agriculture businesses by improving product quality and by associating with international seed producers and growers.

"We have been backward in productivity in agriculture, yields, with excess dependence on weather. We need to look for drought resistant varieties of seed. We hope to start small."

In the activated carbon business, where Yatawara was involved with the Hayleys subsidiary Haycarb since its inception, he said the company expects a recovery this year and hopes to partly overcome the charcoal shortage with its Recogen charcoaling and power generation plant whose launch has been delayed.

"We had a bad year because of the dependence on weather but our Thai factory did ok. Demand for activated carbon has gone up internationally and there's a squeeze on supply."

Asked about plans to work with Calgon Corporation USA, which outbid Haycarb to buy up the latter's exclusive distributor in the US, Barnaby USA, after it went bankrupt, Yatawara said: "It will be an alliance of sorts and we will try to share the profits equitably."

Calgon has expertise in marketing and would rely on Haycarb to make the product from Sri Lanka and Thailand and perhaps elsewhere. "Our specialty is production and quality control. It is expensive for them to do that here. We hope to transfer some value adding technology from there to here," Yatawara said. "The end-user is usually unknown to the manufacturer which is not a good thing as we need to know their requirement. We hope to breach that barrier."

Haycarb was the first activated carbon manufacturer in any coconut producing country. Calgon is the world's second largest activated carbon supplier and a Haycarb competitor which "has expressed a desire to continue with the existing supply arrangements, working closely with Haycarb, and even go beyond these," Mendis told shareholders in his annual report. Such an arrangement has the potential to "significantly boost" Haycarb's performance in the future, Mendis said.

Haycarb's results were "severely affected" by the shortage and high prices of its raw material, coconut shell charcoal, which Mendis said was beyond the company's control. Haycarb's Thai subsidiary helped cushion the downturn although it was forced to meet up to a quarter of its charcoal requirements through imports.

Hayleys Ltd reported that profit before tax rose 8.5 percent to Rs 1.37 billion in the year ended March 31, 2004 while group turnover rose 24 percent Rs 15.5 billion. After-tax profit was up 9.5 percent to Rs 1.06 billion. Mendis described the performance of the group's Dipped Products subsidiary as "outstanding" with rubber gloves manufacturing and plantations making "very substantial contributions" to profit.

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