High costs, rupee appreciation cause Hayleys Exports losses

Hayleys Exports PLC, made losses for the financial year of 2009/10 despite an overall increase in turnover, as raw material costs increased and the rupee appreciated. While demand is expected to improve as the global economy recovers, it hopes single digit inflation and expected decreases to energy costs would help improve its bottomline.

"The company recorded a loss even though there was an overall increase in turnover. Escalation of cost due to an increase in price of raw materials and the appreciation of the rupee are the main contributory factors for the drop in margins," Hayleys Exports PLC Chairman A M Pandithage told shareholders in the company’s annual report.

Its revenues increased by 3.4 percent to Rs. 492.9 million during the 2009/10 financial year from Rs. 476.5 million the previous year, but cost of sales increased by 4.1 percent to Rs. 470.1 million from Rs. 451.3 million bringing down gross profits to Rs. 22.7 million, a 9.5 percent decline from Rs. 25.1 million the previous year.

The company’s after tax losses expanded by 4.2 percent to Rs. 9.8 million to Rs. 9.4 million.

The company was not successful in passing high costs to its buyers because of stiff competition.

"Price increases were obtained from overseas customers even though the increases were not in line with the cost due to severe competition coming from coir producing countries such as Vietnam, India, Indonesia and Philippines," Pandithage said.

"Sales volumes recorded on major products handled by the company, namely mattress fibre and twisted fibre were similar to the previous year. There was a significant growth in coir twine.

"Turnover recorded in bio-engineering was on par with the previous year despite the fact that developed economies are still not ready to launch environmental conservation projects on a bigger scale."

Pandithage said the company would pursue an aggressive marketing and sales effort, and is hopeful Hayleys Exports would perform better this year with the export industry showing signs of improving. The company is expecting Chinese demand for its mattresses to surge.

"The single digit inflation rate as currently prevailing and the expected decrease in energy costs would help to improve the performance of the company. An overall growth is expected in sales volume which is expected to contribute towards better performance in the forthcoming year," Pandithage said.

The board of directors: A M Pandithage, F R Alles, L K B Godamunne, I Piyasena, H C S Mendis, Dr. Anura Ekanayake, S C Ganegoda, M M M De Silva and T G Thoradeniya.


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