Hayleys Fabric September performance boosted by strong demand for textiles

Hayleys Fabric PLC reported higher revenues and profits in the company’s fiscal second quarter ended in September 2021 as the weft knit fabric maker presented its second interim report after it acquired the complementary fabric maker, South Asia Textiles Limited from Ambeon Holdings PLC in April 2021.  

The group revenues, which typically earned in US  dollars but converted into Sri Lankan rupees were reported at Rs.8.16 billion with earnings at 95 cents a share or Rs.393.8 million for the three months 
to September. 

But the comparable top and bottom line data aren’t available as the company started preparing consolidated financial statements since its April acquisition. 

However, at a standalone level, Hayleys Fabric reported revenues of Rs.5.74 billion and earnings of Rs.321.1 billion for the period under review, up 37 percent and 59 percent respectively over the same period last year.
In US dollar terms, revenues rose by 26 percent to US$ 28.29 million and the earnings climbed 47 percent to US$ 1.58 million over the comparable period last year. 

The company’s share closed at Rs.36.20, down Rs.2.00 or 5.24 percent on Friday. Investors were flocking at counters with strong exposure to export earnings, sending their share prices higher. 

The company on October 22 paid an interim dividend of 40 cents a share amounting to Rs.166.2 million. 
Despite some deceleration in growth in the recent quarters, the company continues to see strong demand for its fabric from mostly its US and other foreign clientele as US has virtually returned to its pre-pandemic conditions stoke higher demand for clothing for outdoors. 

This was visible from the strengthening demand and earnings from garments and textiles exports from Sri Lanka which recorded 23.5 percent and 46.8 percent growth respectively in the eight months to August from the same period last year. 

In August alone, earnings from textiles exports rose by 92.2 percent to US$ 43.3 million over the same month in 2020, the external sector statistics published by the Central Bank showed.

The company benefited from the pandemic-fuelled demand since last year for specialised fabric used in facemasks and other personal protective equipment which set off a strong spell of revenues and profits.  

To add capacity further, Hayleys Fabric in April this year acquired 100 percent stake in South Asia Textiles Limited for little under Rs.4.0 billion.  

The acquisition made Hayleys Fabric the largest fabric maker with a capacity of 57 metric tonnes a day, according to First Capital Research. 

The closest competitors, Ocean Lanka and Teejay Lanka PLC are assumed to have a capacity of 40 metric tonnes a day.  The company saw the rising commodities prices adding pressure on their gross margins as cost of sales rose at a faster pace than its revenues in the foregoing quarter. 

For instance, at the company level, its cost of sales rose by 39 percent in rupee terms and 28 percent US dollar terms, slightly higher than the revenue growth in the quarter. 

Meanwhile, for the six months ended in September,  Hayleys Fabric reported revenues of Rs.13.96 billion and earnings of Rs.693.79 million. 

At stand-alone level, the company reported revenues of Rs.9.89 billion, up 37 percent and earnings of Rs.503.66 million, up 64 percent from the same period in 2020. 

Hayleys PLC along with its subsidiaries own 63.05 percent in Hayleys Fabric while Employees’ Provident Fund has 2.67 percent stake in the company being its second largest shareholder.