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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Sri Lanka's Hayleys Exports to develop property

Sri Lanka's Hayleys Exports to develop property

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Redbulls

Redbulls
Director - Equity Analytics
Director - Equity Analytics
May 30, 2012 (LBO) - Sri Lanka's Hayleys Exports Plc, an exporter of coir fibre products said it is moving out of low value activities, revamping production facilities and developing prime land near north of the capital.

The firm lost 8.0 million rupees in the year to March down from 49.4 million rupees a year earlier, partly helped by capital gains from sale of stock of a related company.

Chairman Mohan Pandithage said without the capital gain the firm lost 39.6 million rupees in the year to March 2012, without the capital gains.

But Hayleys Exports was taking corrective action.

The firm said it was moving out of baling mattress fibre, which millers were doing more cheaply, but would continue to trade in the product.

It had shifted its production facility from Ekala, a north of Sri Lanka's capital Colombo to Kuliyapitiya in North Central Sri Lanka and to Kotugoda.

"This has allowed us the opportunity to develop this prime real estate," managing director G M P de Silva said.

"Due to the relocation of the plants the company had the opportunity of refurbishing and re-laying the equipment improving productivity and efficiency."

The depreciation of the rupee had given Hayleys Exports foreign exchange gains but it lost on a dollar denominated loan.

Raw material prices which had moved up, had fallen later in the year.

"The depreciation of the Sri Lanka Rupee in the beginning of 2012 and lower raw material prices will contribute to a significant improvement in the gross margins of the company," de Silva said.

"However, the depreciation of the Rupee had a negative impact in the short term as the company enjoys export packing credit in US dollars.

"We expect a gradual improvement on results through the significant devaluation of the Rupee, on the premise that exchange rate becomes stable in the medium term."

Depreciation helps a firm by imposing a real wage cut on workers. Raw materials, if they are traded also move up with depreciation, as the rupee value of both exports and imports move up due to depreciation.

Wages can also catch up eventually. But moving higher up the value chain allows a firm to use less labour as real wages rise.
http://lbo.lk/fullstory.php?nid=442991693

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