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by Saruchi Dissanayake

The Hayleys Group is one of Sri Lanka's largest diversified conglomerates with holdings in the coir, rubber, environment, agriculture, inland marketing, plantation, transportation, textiles and tourism industries. Hayleys was founded in 1878, and converted to a public company, Hayleys Ltd., in 1954. The Hayleys Group accounts for seven billion rupees or 1.7% of the Sri Lanka's exports which totalled Rs 430.3 billion last year.

According to Hayleys, the company also accounts for 1.3% of Sri Lanka's Gross Domestic Product, 2.3% of domestic value addition and 7% of market capitalisation on the Colombo Stock Exchange. Out of over eighty group companies in the Hayley's group, nine are listed on the Colombo Stock Exchange while the company has subsidiaries in Australia, Bangladesh, England, Holland, Japan, Thailand and the United States. At the helm of Hayleys since 1993, as Chairman and Chief executive, is Sunil Mendis - who has a long association of thirty years with the company having joined Hayleys in 1962.

The coir holdings of Hayleys were the best performers in the group in the last financial year - contributing the highest percentage to the Group's results. Hayleys is the largest exporter of coir (in forms such as rubberised, needled, stitched pads, curled fibre and twine) and value added coir products (Eg: floor coverings and brushware). Haycarb is the largest producer of coconut shell activated carbon in the world - activated carbon is used for instance, in liquid, gas and air purification and recovery of precious metals.

The Group's environment sector is also among leading producers globally of coir fibre pith briquettes. The Hayleys Group's tourism holdings include the hotel management company, Jetwing Hotels and Seashells Hotels, Royal Oceanic, Hunas Falls, Tropical Villas and the Lighthouse Hotel. Hayleys' Maritime Holdings Group handles a range of transportation services including ticketing, travel, shipping, freight forwarding, warehousing and container yard operations.

In the Textiles industry, Hayleys - ADC Textiles and Hayleys MGT Knitting Mills produce knitted and dyed fabric for retailers such as "Marks & Spencer" and "Next". Dipped Products Ltd., and its subsidiaries consist of the rubber holdings of Hayleys, and are among the leading producers of non-medical rubber gloves globally. Hayleys also ventured into the insurance industry with Hayleys AIG Insurance Company Limited - a joint venture with American International Group. In the plantations sector, Hayleys owns and manages Kelani valley Plantations (Tea and Rubber) and Talawakelle Plantations (Black tea). Among Hayley's Agriculture holdings are Sunfrost - the largest exporter of Gherkins, HJS Condiments which exports bottled and pouched vegetable products, and the Quality Seed Company which produces hybrid flower seeds for export.

In the last financial year, Hayleys launched a restructuring of its inland marketing division in which 15 companies were brought under an umbrella of three companies. Under the program, three market-focused groupings were identified - Agro, Consumer and Industrial Solutions and three new companies were established - Hayleys Agro Products, Hayleys Consumer Products and Hayleys Industrial Solutions. Hayleys notes that the restructuring has already begun to reap benefits, with the three companies having increased their contribution by 20% in the first quarter on the back of reduced operating costs and better performance. The inland marketing sector consists of a range of products including healthcare, industrial, agricultural and household chemicals, printing and photographic items, automobiles, electronics and light engineering. Hayleys is the local representative for brands such as Mercedes Benz, Tata, Michelin, Usha, Proton, Bayer, Fuji, Daewoo and Philips.

Hayleys is one of the premier blue chips trading on the Colombo bourse and is an often-recommended buy. Significantly, Sri Lankan Raj Rajaratnam - the top US fund manager bought a 7% stake of Hayleys for Rs 420 million in August to increase his shareholdings to over 8%. Hayleys obtained a Credit rating of SLAA+ from Fitch ratings last year. SLAA+ denotes a very low expectation of credit risk and indicates very strong capacity for timely payment of financial commitments. Asia Capital Securities is cautious about the present conditions in the market due to growing political uncertainty over the tense cohabitation arrangement between President Chandrika Bandaranaike Kumaratunga and the United National Front Government. However First Capital recommends Hayleys as a "definite buy" or the long term, pointing out that the highly diversified company has much to gain, and will prosper if the current peace process bears fruit. First Capital noted that there were no major concerns about Hayleys Stock, pointing out that in a year during which almost all sectors suffered declines, Hayleys still managed to stay profitable in 2001/02. They predict that the company will record a growth of around 10% over last year during the financial year to March 2003.

Sonali Ratnayaka of Lanka Securities said Hayleys is a good buy, pointing to the company's strengths such as vast diversification, being a multinational with a focus on exports and its recent performance - especially in the last quarter. According to Ratnayaka, of some concern is the decline in exports in the first quarter, but she was optimistic that exports would pick up during the next few months, adding that wider consequences would not be evident the company is diversified. She too predicted that Hayleys would stand to gain from a permanent settlement to the North East conflict.

In the last financial year ending March 31, 2002, Hayleys recorded after tax profits of Rs 775 million - a fall of 23% compared with Rs One billion in the corresponding period in 2001/02. Turnover amounted to Rs 16.5 billion - down marginally from the Rs 16.9 billion recorded the previous year. Export earnings in 2001/02 were down 12.8% largely due to the global downturn while imports were down 18.4% during the year on the back of declines in the local economy. Profit Before tax totalled Rs 1,029 million - a 20% decline over the previous year's Rs 1,283 million. Group turnover amounted to Rs 10,896 million in 2001/02, marginally higher than the Rs 10,834 million recorded in the previous financial year.

During the financial year ended March 31, 2002, Hayleys invested Rs 746 million on capital assets and long term investments. That brought the total investment in the group over five years to Rs 3,226 million.

During the last financial year - Hayleys made a rights issue of one share for every nine held, thereby increasing the issued and paid up share capital from Rs 360 million to Rs 400 million. A total dividend of 35% was paid to shareholders in 2001/02. In the first quarter of 2002/3 - ending June 30, Hayleys recorded an 8% increase in net profit to Rs 123 million. The performance came despite unfavourable economic conditions, both internal and external. Nationally, exports were down 17% in the six-month to June 30, but Hayleys exports in the first quarter climbed 2.5% and stood at Rs. 1.72 Billion. The higher export volumes came with improved productivity and diversification which helped counter several negative factors such as the slower depreciation of the rupee and the increased competition from regional exporters. Provisional results showed that 1st quarter domestic turnover was Rs. 2.5 billion - an increase of 25.6% over the corresponding period last year.

Total group turnover was Rs. 5.1 billion compared with Rs. 4.6 billion. Consolidated gross profit had risen 5% to Rs. 830 million and profit from operations stood at Rs. 338 million. Pre-tax profit, however, was down 6% at Rs. 258.8 million, while after-tax profit was 5% lower at Rs. 199.5 million. The declines were a result of a 47% increase in financing costs and lower negative growth in the share of associate companies' profits. Profit attributable to shareholder after minority interest was 123.6 million compared with Rs. 115 million in the corresponding period in 2001. Rs. 1.26 billion of profits was carried forward to the second quarter.

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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