Hayleys optimistic of improved results year end despite tough 3Q

Enjoys healthy top line growth though profits slip in both 3Q and first nine months Enjoys healthy top line growth though profits slip in both 3Q and first nine months

Export-rich diversified blue chip Hayleys Plc yesterday expressed optimism that its 2010/11 financial year end results would improve despite a tough third quarter.

For the quarter ended 31 December, 2010, net profit attributable to equity holders amounted to Rs. 90 million, down by 68% from Rs. 279 million in the corresponding period of last year.

Hayleys Chairman Mohan Pandithage said that given some recent investments and consolidation of core activities, the “Group is expected to post improved results in the 4th quarter.”

First nine months net profit attributable was down by 30% to Rs. 580.4 million as against Rs. 831.5 million in the corresponding period of 2009/10 financial year. Group after tax profit was Rs. 843.7 million, down from Rs. 1.3 billion whilst pre-tax profit was down by 13% to Rs. 1.5 billion.

Though bottom line dipped, Hayleys Group top line saw 33% growth to Rs. 13.7 billion in the third quarter and by 42% to Rs. 38.5 billion in the first nine months.

Pandithage said this increase is due to the improvement in turnover in all sectors, other than Agri Products of the Group. Inclusion of Talawakelle Tea Estates Plc, Hotel Services ( Ceylon) Plc, Hunas Falls Hotels Plc, Alumex Group and Hayleys MGT Knitting Mills Plc, as subsidiaries of Hayleys Plc also contributed to the increased turnover.

The Agriculture cluster performed exceptionally well with the Agri Input sector contributing Rs. 584 mn to operating profits, an increase of 88% over the previous year. With improved commodity prices and the inclusion of Talawakelle Tea Estates Plc as a subsidiary, the Plantations sector performed well contributing Rs.323 mn rebounding from their previous year’s losses.

Chairman said the additional provisioning required for inventories and receivables at Hayleys MGT Knitting Mills Plc (a 60% owned subsidiary) as per the two announcements made by this company to the Colombo Stock Exchange and the increase in raw material costs incurred by the companies within the Global Markets and Manufacturing sector of the Group compounded the adverse variance in profit over the previous year.

“The situation at Hayleys MGT Knitting Mills Plc was largely due to challenging operational circumstances which the board believes has since been corrected,” Pandithage said.

A strong performance from the Transportation sector contributed Rs. 393 mn to operating profits, a 114% increase over the previous year.

He also said the quarter was a challenging one for the Global Markets & Manufacturing sector of the Group, with substantial increases in costs of most raw materials such as fibre, latex, coconut shells and cotton yarn used by these businesses, eroding profit margins. Purification and Hand Protection sectors have continued to make substantial contribution, to the Group’s operating profits for the reporting period, Rs.502 mn and Rs. 433 mn respectively, albeit less than the corresponding period of the preceding year.

Power & Energy sector’s hydro power projects have yielded better results. The newly formed Aviation & Leisure sector, which includes the previous Resorts sector, too performed well in the period under review. “These activities are poised to yield satisfactory results in the medium term,” Pandithage said.

Hayleys Plc acquired a 95% equity in Alutec Anodising & Machine Tools (Private) Limited (Alumex Group) and subsequently divested 35%.

The Chairman also said the Group, continuing to invest in its key sectors, took total control in Mabroc Teas (Pvt) Ltd by acquiring the balance 60% of its equity, in December 2010. Mabroc Teas is engaged in export of branded teas. “This will bring added synergies to the Group’s plantation sector,” he added.

Dr. Harsha Cabraal joins Hayleys Board

TOP professional Dr. Harsha Cabraal has been appointed to the Board of Hayleys Plc as an Independent Non Executive Director.

The appointment to Hayleys Board is in addition to several Board positions he holds, including Director and Chairman of the Remuneration Committee of DIMO, Director and Chairman of the Nomination Committee of Union Bank Colombo and Director Tokyo Cement Company (Lanka) Plc.

He also serves on the Boards of Richard Peiris and Company Distributors Ltd., Lanka Orix Finance Co Ltd., Fuji Cement (Lanka) Ltd. and Tokyo Super Cement Co Ltd.

Dr. Cabraal, a President’s Counsel with 24 years experience in corporate law specialising in company, law, intellectual property law, commercial law, international trade law and commercial arbitration, holds a Ph.D in corporate law from the University of Canberra, Australia. He has to his credit several books authored by him on company law and intellectual property law.

He is a senior lecturer and examiner at the University of Wales, University of Colombo, Sri Lanka Law College, IALS and ICLP as well as the Course Director for the LLM Programme for the University of Wales-IALS.

He is a member of the Board of Studies of the Council of Legal Education of Sri Lanka, Academic Board of Studies of the Institute of Chartered Accountants of Sri Lanka and the Corporate Governance Committee of ICASL.

As a member he has made several contributions to the Law Commission of Sri Lanka and to the Company Law Advisory Commission where he was a key figure in drafting the new Companies Act. He is also a member of the Ministerial Committee appointed to reform the law on commercial arbitration.