Sri Lanka’s Haycarb profit margins squeezed by high charcoal prices

May 19, 2015 (LBO) – Sri Lankan coconut shell-based activated carbon manufacture Haycarb’s March 2015 quarter profit after tax rose 18.33 percent to 279 million rupees from 236 million rupees last year, the interim accounts filed with the stock exchange revealed.

“The increase in price of the primary raw material, coconut shell based charcoal impacted the profitability of the Sri Lanka and overseas operations, as the prevailing market conditions prevented the company from passing the increase in raw material and other input costs to end customers adequately,” Rajitha Kariyawasan, Managing Director of Haycarb PLC said.

“The markets continued to be affected by the depressed gold mining industry and low-cost competition from countries such as Philippines, Indonesia and India,”

“The depreciation of currencies in key markets in which we operate, notably in the second half of the year, contributed to the erosion of margins.”

Kariyawasan added that in this background, several initiatives contributed to the recovery of profitability, especially in the last quarter of the year.

Haycarb’s March 2015 quarter cost of sales rose 39.9 percent to 2.7 billion rupees from a year ago.

The firm, a subsidiary of the Hayleys conglomerate, said basic earnings per share for the quarter increases to 9.41 rupees from 7.95 rupees the previous year.

In the financial year ending March 31, 2011, Haycarb’s group net profit was down 12 percent to 694.9 million rupees while revenue rose 15 percent to 11.9 billion rupees from the previous year.

Basic annual EPS fell to 23.39 rupees from 26.51 rupees the year before.

Haycarb, which owns activated carbon manufacturing plants in Sri Lanka, Indonesia and Thailand, said that it focused on expanding its supply chain network for coconut charcoal in Sri Lanka and Indonesia, consequently reducing dependency on India, during the year while expanding the overall production.

“Haycarb Group crossed the significant milestone of 40,000 MT of installed manufacturing capacity per year with the commissioning of the new plant in Indonesia and a major thrust on lean initiatives targeting productivity improvements,” the statement said.

“The lean projects launched by technical and manufacturing teams to achieve cost savings, notably through energy saving initiatives helped the company to retain its competitiveness,”

“The increase in market share of value added carbons, and the growth in its non-traditional markets and purification systems were positive factors that helped to achieve the overall results.”

Kariyawasan said that performances by the operations in Thailand and in Indonesia contributed significantly to overall Group performance.