Hayleys Chief upbeat on future prospects amidst adjustments-required challenges

Diversified blue chip Hayleys remains optimistic of future prospects despite what its Chairman Mohan Pandithage described as “adjustments-required” temporary challenges.

With regard to new policy developments relating to exchange rate and fuel prices, the Hayleys Chief admitted they do cause some temporary adjustment costs, but in the long-term they will help improve macroeconomic stability. Pandithage also said disclosed that Hayleys is seeing strong demand in both domestic and global markets.

In February, the Hayleys Group for the nine months ended 31 December 2011 reported an after tax profit of Rs. 3.6 billion, a more than quadruple increase. Turnover rose by 20% to Rs. 46.4 billion. Profit attributable to equity holders of the parent company rose by 303% to Rs. 2.3 billion whilst Group pre-tax profit of Rs. 4.3 billion, up by 179% over the first nine months of last year.

Here are excerpts of a brief interview with Pandithage on the current state of the economy and challenges:

Q: How do you view prospects for the Sri Lankan economy?

A: The Sri Lankan economy remains strong and we remain very positive about prospects going forward. However, there have been a few challenges emerging in the Sri Lankan economy in recent weeks. The rise in fuel prices, the depreciation of the rupee and higher market interest rates have caused some concerns amongst the business community. However, when considered in a broader perspective, the Sri Lankan economy still finds itself enjoying a number of fundamental strengths. In 2011 GDP is estimated to have grown by 8.3%. Inflation in January 2012 was 3.8% and unemployment is at record low levels of around 4.2%. There have also been encouraging signs in terms of foreign investor appetite in recent weeks, both in terms of FDI and in terms of equity markets.

Q: What is the impact of the new policy developments relating to the exchange rate and fuel prices?

A: With regard to new policy developments – yes, they do cause some temporary adjustment costs, but in the long-term they will help improve macroeconomic stability. The market-driven exchange rate will support exports and realign import and export prices to help curtail the trade deficit and encourage export-led growth. We also cannot rely forever on fuel subsidies and the more competitive pricing of fuel will support the financials of the CPC and CEB and thereby reduce the fiscal burden. It is important that subsidies are well-targeted to reach the most needy segments of society as opposed to being an across-the-board handout.

Q: How is Hayleys performing in the current economic environment?

A: At Hayleys we continue to see strong demand in both domestic and global markets, with most business segments running at near full capacity. We continue to adopt a long-term view of things and remain very positive about Sri Lanka’s future economic prospects and we will continue to streamline our operations in order to get through any short-term adjustment costs that are faced.