Hayleys MGT's 3 Q profits decline as demand softens

Hayleys MGT Knitting Mills, the Hayleys Group's cotton and synthetic manufacturing business has posted a turnover of US$ 46.5 million for the nine months ending December 31, 2008, a growth of four per cent over the corresponding period of the previous year.

Turnover in the third quarter however, reflected a decline of 10 per cent over the corresponding quarter of the previous year.

This growth was achieved in the face of postponements and reductions in orders from customers as a result of a downturn in retail business in international markets, Hayleys MGT Joint Managing Director Bandula Weerasinghe said.

This softening of demand, coupled with higher furnace oil costs in the first two months of the third quarter had impacted adversely on profit growth in the period under review, he said.

According to results released to the Colombo Stock Exchange this week, Hayleys MGT's profit after tax and Economic Service Charge (ESC) at $ 2.115 million reflected a decline of 48 per cent over the first nine months of 2007- 08, due to the erosion of margins and lesser demand. However, margins are expected to improve in the final quarter of the year due to a reduction in energy costs as a result of a revision in furnace oil prices, Weerasinghe said.

The abolition of the fuel surcharge in January 2009 and depreciation of the Sri Lankan Rupee would also help the company, he said, but cautioned that overall results for the full year would not match those of the previous year.

To offset the rising costs of energy, Hayleys MGT Knitting Mills is setting up a biomass steam generator which will be operational in the new financial year, Weerasinghe said.

This is believed to be the biggest firewood fuelled steam energy generator in the country. A major supplier to top international brands such as Marks & Spencer, Next, Nike, Reebok and Decathlon, Hayleys MGT is the first fabric manufacturer in Sri Lanka to be certified as compliant with the world's most stringent Social Accountability Standard, SA8000.

The standard represents a comprehensive and flexible system for the management of ethical workplace conditions throughout global supply chains and assures a humane workplace through respect for workers rights.

Hayleys MGT has a production capacity of four million metres of fabric per month at its state-of-the art plant at Narthupana estate in the Kalutara district.