Hayleys reports mixed fortunes in 2006-07

The Hayleys Group, Sri Lanka’s predominantly manufacturing and agriculture oriented multinational conglomerate, reported a modest growth in the financial year which concluded March 31, 2007 with strong performances in key sectors undermined by setbacks in two areas of business.

The group had problems in the fibre and consumer durables sector.

The blue chip reported profit before tax of Rs 1,608 million, up 8 per cent over the previous year, on a consolidated turnover of Rs 27.6 billion, which represented a growth of 15 per cent. Profit after tax at Rs 1,089 million was up 11 per cent, but profit attributable to equity holders of the company fell 9 per cent to Rs 534 million.

In a statement Hayleys said a good performance was marred by adverse situations in two areas. The first was the failure of Onril in the Fibre sector, a new joint venture. A spokesman for the Group said the problems in this company, in which Hayleys held 49 per cent of the equity, arose from irreconcilable differences that emerged as to the cost and pricing of the joint venture’s production.

The deterioration of the relationship of the joint venture partners compelled the Group to sever connections with the joint venture partners as well as with Onril including the resignation of its nominees on the Board of Directors of Onril. Hayleys said it has also taken some of the issues with this company to court.

The second major factor impacting on performance is the on-going restructure of the Group’s Consumer Durables business, to strengthen the management of the business and address issues that caused this segment to under perform. Outside Consumer Durables, Hayleys has a rich portfolio of solid, internationally acclaimed brands in its Consumer segment, which contributed to the turnover of Rs 3,703 million recorded in the year under review.

The cumulative effect of the setback faced by Onril and the restructuring of Consumer Durables on Hayleys’ attributable profit was nearly Rs 380 million, the spokesman noted.

Among the main positive contributors to Hayleys’ performance were Dipped Products Ltd., (DPL) whose Hand Protection and Plantations businesses contributed a turnover of Rs 9,413 million to turnover and Rs 742 million to profit, and the Transportation sector represented by Hayleys Advantis with Rs 3,160 million to turnover and Rs 495 million to pre- tax profit.

The Textiles business of Hayleys MGT Knitting Mills also produced good results with a creditable gain in profitability, contributing Rs 190 million to profit while the Purification Products business did well to reverse the loss of Rs 149 million incurred in the previous year and make a pre tax profit of Rs 104 million.

In other business segments of the Group, Fibre, with the exception of Onril, made worthwhile improvements in performance and contributed Rs 3,142 million to turnover. The Group’s Plantations companies which were affected in the latter part of their reporting period by the go-slow and strike in November and December turned in commendable results, with Kelani Valley Plantations Ltd., (KVPL) improving its profits vastly on the back of high rubber prices. Talawakelle Tea Estates Ltd., (TTEL), being totally tea- based, did less well but made a noteworthy contribution.

The Agri Input business’ profits were lower than in the previous year due to a poorer Yala season and disruptions to agricultural activity in the Eastern Province, arising out of the security situation.

However, the performance of Hayleys enterprises engaged in Agri Products, including gherkins, flower seeds and exotic vegetables showed a marked improvement over the previous year.