Sri Lanka’s leading blue chip, Hayleys Group heads this year’s LMD 50, the roll of corporate honour prepared by the popular business magazine, Lanka Monthly Digest. In what the magazine describes as “Sri Lanka’s version of the Fortune 500", LMD 50 lists out the country’s leading listed companies ranked on the basis of turnover and profits, assets, shareholders’ funds and market capitalisation.
Recording a turnover of Rs. 5, 508 million in 1995/96 (25% over the previous year) and profit after tax of Rs. 321 million (an increase of 5%), Hayleys topped the list over John Keells, which held the top spot for two years in succession. Hayleys achievements also included a 21% increase in the Group operating profit (Rs. 395 million) and a 17% increase in profit before tax (Rs. 487 million).
The Group’s businesses recorded significant improvement last year in certain sectors notably in environment, coir, rubber and transportation. This is attributed to the economic expansion of several important export markets, strengthening of marketing efforts, continued emphasis on value addition and enhanced productivity within core operations.
Reviewing the annual performance, Hayleys Chairman Sunil Mendis states that the excellent contributions made by Haycarb Group (activated carbon, coir fibre pith and effluent treatment engineering) recording a turnover of Rs. 1082 million and profit before tax of Rs. 176 million and Dipped Products Group (dipped latex gloves) with a turnover of Rs. 939 million and profit before tax of Rs. 101 million merit special recognition. The Maritime Holdings Group (shipping, freight forwarding and warehousing), the Group’s business in brushes and cleaning devices (Ravi Industries/Rileys) and the Dimo Group (automobiles) also were substantial contributors.
Hayleys Group directly employs 20,142 persons spread in several locations throughout the country, with 16,516 being employed outside Colombo. “We remain committed to the development of our human resources. An important part of our philosophy is the provision of opportunities to enable employees achieve their potential”, says Chairman Mendis. Thus training, of varied types is provided for employees at all levels.
The Group is quite conscious of the need for environmental protection. Since its business activities can have direct and indirect effects on the environment, it is the Group’s policy to keep adverse effects on the environment to a minimum and to promote co.operation and compliance with the relevant authorities and regulations.
The Group also seeks to conserve scarce and non renewable sources such as energy, in all its operations. While many of the Group’s products and technologies are used to improve the environment, continuous research is being done on new applications which will benefit customers and create growth opportunities for the Group’s businesses.
Commenting on strategy and future prospects, Mr. Mendis says that the Group continues to shift its offices from Colombo to the relevant production locations where feasible, and to decentralise service functions so that the companies concerned are more autonomous, self sufficient and ultimately more productive.
"The Group’s export businesses are generally expected to register satisfactory performances in the current year. Budgets for the Group’s non export businesses are cautious, considering the difficult business conditions being encountered but project satisfactory performances for the current year in most areas”, he adds.
As regards new investment, the Group invested Rs. 481 million last year in capital assets, reaching the Rs. 1,880 million mark in the sum invested in the five years to end March 1996, to augment Group capacity for the future. In the hotel sector, the Group is cautious in its investments. While construction work of the Lighthouse Hotel in Galle is underway, the Group also bought into the existing Royal Oceanic Hotel in Negombo.
A 30,000 sq. ft. building to expand office space at the head office premises in Deans Road has also commenced. Land has been purchased in north Colombo for the establishment of a containeryard and container freight station. This is intended to provide much scope for the development of the transportation business.
Hayleys now have a controlling stake in the Kelani Valley Plantations Ltd., and also has first claim on the controlling stake in Talawakelle Plantations Ltd., a Regional Plantation company under its management.
With over 60 companies sited in 240 production and service centres throughout the island, Hayleys has created employment opportunities, both directly and indirectly, for more than 38,000 citizens. “Our contribution to the nation’s wealth involves providing 1.79% of the country’s gross export earnings, value addition to indigenous raw materials in export manufacturing contributing 2% of the country’s value addition, adding Rs. 931 million to Government coffers through taxes and other levies and accounting for over 6.5% of total market capitalisation of the Colombo Stock Exchange”, the Annual Report stated.
Despite crippling new stamp duties on debt securities, introduced in the recent budget, Commercial Leasing Company Ltd, went ahead with medium term note issue last week.
"The cost of stamp duty was spread over three years, so its impact was less than it would have been on a short term note," an official said.
The leasing company raised Rs.100 million for three years at 17.75 per cent a year by selling a promissory note to the Employees Trust Fund.
Commercial Leasing had been engaged in covering its short term funding to medium and long term over the past twelve months. Leasing companies and merchant banks were exposed to severe interest-rate risks, especially in 1995 as short term rates shot up driving up their cost of borrowing.
Their income however were from fixed, medium term leases. In an effort to match the maturities of leases with matching term borrowing, Commercial leasing had converted Rs. 250 mn. short term bank borrowings to medium term borrowings.
"The note issue was a culmination of our efforts to stabilize funding sources through medium term debt instruments", Commercial Leasing General Manager N. K. Hulangamuwa said.
The note was guaranteed by the Union Bank and the Development Finance Corporation of Ceylon.
ETF Chairman Denzil Gunaratne said the ETF was keen to inject long term funds to the private sector, provided the risk profile of the borrower was satisfactory. In this case the guarantee of the Union Bank and DFCC had enhanced the credit-worthiness of the investment.
Candra Senanayake Holdings (CSH) in further consolidation of it corporate policy of internationalisation, recently added a major Indonesian manufacturing facility producing activated carbon to their Group, the acquisition according to a press release was effected through the CSH subsidiary Prime Carbon (Lanka) Limited.
Prime Carbons (PCL) is a market leader in activated carbon and has been exporting to 19 countries such as USA, Europe, the Far East and South Africa, since 1989. Fortune 500 Companies of the calibre of Anglo American Corporation, Coca-Cola Corporation, Barrick Goldstrike and Newmont are just a few of the reputed end-users of PCL products, who have continuously endorsed the flawless quality of the PCL Products.
This addition to PCL will not only promise in higher levels of profitability of PCL but also will add a new dimension to Sri Lanka's market development efforts for activated carbon products.
PCL will introduce state of the art technology and related inputs aimed at product diversification and productivity improvements backed by superior quality control systems. The plant in Indonesia will be modernised and upgraded to match the plant in Sri Lanka and will be controlled with on line computer connections between the two countries.
The new venture will maximise utilisation of the abundant levels of raw material supply in Indonesia and intensify its thrust into world-wide market eventually bringing increased foreign exchange earnings into Sri Lanka.
Two years after the WTO came into effect, the time is ripe for an analysis on the implementation of Uruguay Round legal instruments, Trade Minister Kingsley Wickremaratne told the World Trade Organization Summit in Singapore.
"It is opportune that members of the multilateral trading system undertake a thorough stocktaking as to how far we have gone and what remains to be done in the future," he said.
He said developing countries had made substantial commitments on the liberalization of their economies as well as making a number of concessions during negotiations.
"The developing countries undertook these commitments in the belief that the new rule-based trading system would guard against protectionist tendencies in developed countries," Minister Wickremaratne said.
But developing countries were still facing numerous tariff and non-tariff barriers in products which they exported like textiles and clothing, leather and agricultural products.
"While the Uruguay Round has addressed the issue of non- tariff barriers and improved the rules governing trade policy issues, there are several provisions in the rules which would hinder access to markets by developing countries" he said.
'Market access remained the central issue for concern for developing countries such as Sri Lanka, with export products being subjected to tariff peaks or tariff escalation.
"We are justified in asking whether we have benefited from the Round in terms of market access, especially in comparison to the net obligations and responsibilities we have assumed," Minister Wickremaratne said.
Despite a fall in tourist arrivals, national carrier AirLanka had boosted revenue, but high interest costs had undermined profits.
Group turnover was up by more than one billion rupees to Rs. 15,072 mn. but after-tax profits were down to Rs. 166 mn. from Rs. 561 mn. a year before.
More than 80 per cent of the profits (Rs. 136.9 mn.) had come from other group operations which included AirLanka Catering Services, on a turnover of Rs. 367.7 mn.
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