Hard decisions and ‘most most inimical macroeconomic conditions in memory’ - Hayleys

Sri Lanka’s Hayleys PLC has reported healthy turnover growth and encouraging improvements in pre and post tax profit from continuing operations in 2007-08, but its chairman described it as a ‘year of hard decisions and one in which it witnessed the most inimical macroeconomic conditions in memory.’

Hayleys Group Chairman N. G. Wickremeratne pointed out that if not for the provisions for discontinued operations, profit attributable to equity holders of the company would have been Rs 865 million, instead of Rs 453 million, 15 per cent lower than the previous year’s Rs 534 million.
“The other critical factor was the impact on the Group’s business of the most inimical macroeconomic conditions in memory which affected the manufacturing businesses of the Group and local value-adding industry with a deadly combination of high inflation, high interest rates and an appreciating exchange rate,” Wickremeratne said, in a statement issued by the company. “The effect of this is difficult to calculate but must exceed a billion rupees or 5 per cent of the revenues of our export manufacturing sector.”

Hayleys said turnover grew 17 per cent to Rs 31 billion in the year ending March 31, 2008, following strong performances in difficult circumstances by its businesses in manufacturing, transportation and plantations. Profit before tax and discontinued operations in the year under review grew 10 per cent to Rs 1,985 million, and profit after tax from continuing operations at Rs 1,520 million, was an improvement of 11 per cent over the previous year, the Group said.

Final profit for the period was Rs 1,090 million, marginally higher than in the previous year. Wickremeratne said businesses categorized under Global Markets & Manufacturing which are engaged in the manufacture of a range of products for global markets accounted for more than half the Group’s turnover. “They performed well under difficult circumstances but in most cases greatly below potential. High domestic inflation and an exchange rate which appreciated rather than depreciating under the circumstances could only result in a loss of profit margin.”

Wickremeratne said Hayleys is spread across Sri Lanka and is moving to access the East and eventually the North of the country with the mix of business expertise that is at its core. “We have the potential to be at the forefront of development everywhere provided there is an enabling environment with normal business risks which allows us to participate on an equal footing. Our pedigree of high integrity in business practices sometimes loses us business but we are standing tall and hopefully we are not alone in this stance,” he said.