Hayleys reports strong March sales on exports but profits slump on finance cost
Hayleys PLC reported a strong topline and operating profits in the three months to March 2023 on the back of higher income from exports as the sharp fall in the rupee against the dollar gave a fillip to its foreign incomes which account for more than 50 percent of its revenues.
The most diversified listed entity reported revenues of Rs.117.5 billion in the January – March period, its fourth fiscal quarter, up 23 percent from a year ago.
But the revenue growth was seen moderating due to a combination of factors from a slowdown in key export markets in the West, easing global commodities prices, appreciation of the rupee against the dollar in the final quarter and the weaker demand conditions at home.
The group operating profit rose 47 percent to Rs.13.45 billion.
Hayleys share ended the week adding Rs.1.50 or 2.24 percent on Friday to Rs.68.50.
Fitch Ratings assigned a first time rating of ‘AAA’ to Hayleys with a Stable outlook last week reflecting its large operating scale at home and significant export business and a strong market share in most of its businesses.
“We believe this will lead to steady operating cash flows. We expect Hayleys to maintain a measured approach to debt-funded acquisitions amid a weak domestic operating environment and high borrowing costs. This should keep its credit metrics adequate for the rating,” the rating agency said.
The conglomerate has interest in 12 main sectors from defensive segments such as agriculture to hand protection to textiles and purification to cyclical but growth markets such as transportation, consumer durable retail and construction.
During the pandemic, Hayleys’ hand protection segment which manufactures both industrial and medical gloves saw a sharp rise but that moderated in the last two financial years.
The EBITDAR margin, which expanded to 15 percent in FY23, the highest in recent years, could also narrow by around 200bps in FY24 due to slower sales and price pressure, Fitch said.
While segments such as agriculture could remain resilient in the local market, the recovery in domestic focused consumer durables, construction and transport would take longer as Fitch expects a lag before the gains in economic conditions trickle down to consumer and private sector spending.
The group reported earnings of Rs.2.40 a share or Rs.1.79 billion for the March quarter due to substantially higher finance cost compared to earnings of Rs.11.68 a share or Rs.8.76 billion in the year earlier period.
For the full year ended in March 2023, the group reported earnings of Rs.21.80 a share or Rs.16.35 billion compared to Rs.24.34 a share or Rs.18.26 billion.
Dhammika Perera holds 51.1 percent stake in Hayleys PLC.