Financial Times

The Hayleys Group said last week that it was concerned about the impact of the recent go-slow in the Port of Colombo, other threats of disruption in vital utilities and predatory foreign competition.

Hayleys Chairman Rajan Yatawara, in a report on the group’s first quarter 2006-07 results, said the performance during the quarter was very encouraging and he expected the favourable trend to continue over the remainder of the year.

But he pointed out: “We remain concerned, however, about issues such as the impact of the recent go-slow in the Port of Colombo, other threats of disruption in vital utilities and the advent of probably predatory foreign competition."

The crisis at the port adversely affected imports and exports while the petroleum distribution crisis – which is not yet over with trade unions flexing their muscles for another agitation over the appointment of a new chairman – has raised costs for many companies. The issue of ‘predatory foreign competition’ is an issue that Hayleys has raised in the past after the BOI allowed the entry of foreign investors in the activated carbon industry, a pioneering project by the Hayleys Group.

The company has posted a healthy 82 per cent increase in profit attributable to equity holders in the three months ending June 30, 2006.

Led by noteworthy contributions from transportation, hand protection and plantations, the blue-chip conglomerate has achieved a 78 per cent growth in profit after tax from Rs 201 million in the first quarter of 2005-06 to Rs 358 million in the first quarter this year, on a turnover of Rs 6.3 billion, which was up 24 per cent.

According to a company statement, Hayleys pre tax profit for the quarter reviewed had grown by 45 per cent to Rs 464 million, while profit attributable to equity holders of the parent company was up 82 per cent to Rs 186 million. This is the highest attributable profit recorded by Hayleys in a first quarter.

Yatawara said the transportation sector continued to perform creditably, and Hand Protection improved significantly on the previous year. Plantations performed strongly, and Agri Inputs and Consumer Products sustained their worthwhile performances. Industry Inputs contributed strongly as well. Purification Products showed welcome improvement, as did Fibre. Among the Associates, Hayleys MGT continued to do well, and Colombo Dockyard, which shareholding was sold in July, made a useful contribution, while Talawakelle Tea Estates also performed well.

The Group's Purification and Fibre sector businesses, which were adversely affected throughout the previous year by raw material shortages and the post-tsunami strength of the Rupee, were helped by an improvement in the supply situation and a marginal improvement in the exchange rate.

Of the main contributors to Group profits before finance charges, the Transportation sector generated Rs 141 million (a decline of 15 per cent over the first quarter of last year); Hand Protection Rs 131 million (up 33 per cent); Plantations Rs 99 million (up 51 per cent) and Industry Inputs Rs 28 million (a growth of 148 per cent). Noteworthy contributions were also made by Consumer Products (Rs 56 million), Agri Inputs (Rs 60 million) and Purification Products (Rs 42 million).

The share of profit from associates rose by 6 per cent to Rs 82 million.