Hayleys MGT Knitting Mills profits dip 9% in 9 months

Hayleys MGT Knitting Mills profit after tax in the nine months to December 2011 fell 9% to Rs. 514 million as revenue declined 18% to Rs. 4.26 billion.

This follows a loss of Rs. 598 million (a 363% plunge) in the nine months to December 2010 when the company had a discrepancy when it carried out a stock verification followed by a forensic audit and management notified the stock exchange of a loss in the third quarter of financial year 2011.

Cost of sales fell 11% to Rs. 4.015 million and gross profit declined 66% to Rs. 249 million. Distribution costs rose 6% to Rs. 57 million and administration expenses fell 50% to Rs. 587 million. Financing cost fell 4% to Rs. 105 million and profit before tax dropped 16% to Rs. 501 million. Referring to a discrepancy that arose between the physical balance of inventory and of that reflected in the financial records, writing down a part of inventory to its net realisable value and a correction to receivables which was overstated, Hayleys MGT Chairman Mohan Pandithage said: “The discrepancies appear to have occurred and accumulated over a period of time.”

Outlining prospects for his company in the 2010/11 annual report, he said that nevertheless, the timely intervention and quick response by the present management to these discrepancies have enabled the management to arrest these negatives and necessary measures have now been taken to ensure the sustainability and growth of the company and its operations. “It is our pleasure to report that our order book is healthy, amidst these interim negatives. This is testimony to the level of confidence that our customers have in the company, and we acknowledge and appreciate this. The management team has since been strengthened and revamped through the recruitment of personnel for key positions. The company has further upgraded its machinery and fine-tuned its processes and is working closely with the Hayleys Group Information Technology Division in order to strengthen and re-engineer management information systems, controls and processes.”