Turnover up, higher input costs erode Hayleys 05-06 profits

Hayleys has declared a final dividend of 17.5 per cent for the concluded financial year, bringing total dividends for the year to 35 per cent, on par with 2004-05, despite recording a disappointing year.

In financial results released to the Colombo Stock Exchange, the Group reported that notwithstanding a turnover of Rs. 24 billion for 2005-06, a healthy growth of 23.5 per cent over the previous year, pre and post tax profit had declined as a result of adverse factors of which the Group had reported throughout the year.

The impact of these factors on key business sectors such as Purification Products and Fibre and to some extent on Hand Protection, resulted in Group profit before tax declining by 21 per cent to Rs. 1,484.5 million in the year reviewed, while profit after tax and minority interest, at Rs. 586.3 million was down 24 per cent.

A significant aspect of the Group's turnover growth was that around 50 per cent of turnover or Rs. 12 billion was derived in foreign exchange from export businesses, an indication of Hayleys' exposure to exchange rate movements, or lack of them.

Additionally, the Fibre and Purification Products sectors incurred losses attributable to the high costs and non-availability of raw materials, and yielded a contribution which was not able to recoup fixed cost.

Compounding these factors, Group companies had to contend with delays in the refund of VAT and other taxes, and subsidies on fertiliser totalling around Rs. 500 million at any given time.

Chief among the positive contributors to Hayleys' profits in the year under review were the Transportation, Agri Inputs, Textiles, Consumer Products and Industry Inputs sectors, which produced solid performances. There were solid performances from Hand Protection and Plantations also, albeit lower than in the last year.

The transportation sector's turnover grew a noteworthy 62 per cent to Rs. 2,892 million, and contributed Rs. 691.8 million in pre-tax profit, following a profit growth of 59 per cent over the previous year. Turnover in the Agri Inputs sector grew 34 per cent to Rs. 3,152 million, with pre-tax profit recording an increase of 53 per cent to Rs. 181.3 million.