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The Hayleys Group has given shareholders an indication that dividends for the financial year ending March 31, 2006 are likely to be on par with those of the previous year, despite performance in two business sectors that continue to be adversely affected by external factors.

The blue-chip conglomerate's nine-month results released to the Colombo Stock Exchange indicate that sectors such as Transportation, agri inputs, industry inputs and consumer products have continued to perform strongly in the third quarter, in contrast to the group's fibre and activated carbon operations.

Group turnover for the nine months ending December 31, 2005 was up 23 per cent to Rs. 17.2 billion, on the back of strong turnover growth in transportation (up 83 per cent), agri inputs (up 38 per cent), industry inputs (up 110 per cent), consumer products (up 29 per cent) and hand protection (up 23 per cent), the group said.

Income from associates grew 7 per cent to Rs. 193 million for the nine months reviewed, with associate companies Hayleys MGT Knitting Mills and DIMO reporting strong results and making substantial contributions to profit.

In a note to shareholders, Hayleys Chairman Rajan Yatawara said: "We expect the final quarter's result to reflect an improvement on the performance thus far achieved during the year, but whole year performance is likely to be lower than in the last year."

He explained that "the strength of the rupee vis-a-vis local inflation continues to be a major factor impeding achievement of the results targeted."

Continued raw material shortages as a result of a shortfall in national coconut production in the first nine months of the year have also affected the bottomline of the group's fibre products and activated carbon exports. As a result of these factors, pre tax profit for the period under review - Rs. 1.0 billion was down 21 per cent, while profit after tax and minority interest was down 33 per cent to Rs. 386 million.

Elaborating on the external factors that impacted on the group's bottomline, Yatawara said: "While the coconut crop improved during the quarter, desiccated coconut mills operated at sub-optimal capacity and there was little activity in copra. This restricted shell availability, and thus charcoal supplies. Husks were less affected, but rains affected the drying of fibre.

The ongoing establishment of off-shore production centres will help insulate us against such vagaries in the future."

In his comments on the group's performance, Yatawara has acknowledged that the group is acutely mindful that its likely annual result will fall short of what had been projected at the beginning of the year. Noting that "shareholders may be anxious that dividends for the year will be lower than in the previous year," he has however assured them that this should not be so. Dividend payment for 2004-05 was 35 per cent.

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