Haycarb recovering from tough year-2005, posts modest profit

Haycarb Limited, the Hayleys Group's multinational activated carbon manufacturing company has emerged from the adverse conditions that retarded its performance last year to post a modest profit at the end of the first half of 2006.

In results released to the Colombo Stock Exchange this week, the company reported a profit after tax of Rs 34.9 million, in a welcome contrast to the Rs 118.5 million loss incurred in the corresponding six months of last year.

Turnover for the six months ending September 30, 2006 was up 31.2 percent to Rs 1,633 million.

Profit attributable to equity holders of the parent company was Rs 19.2 million against a loss of Rs 132.3 million at the end of the first half of 2005.

The world's biggest exporter of coconut shell based activated carbon, Haycarb was hit by raw material shortages due to a drop in domestic coconut production during much of last year and the high prices of charcoal, its main raw material. The post-tsunami strength of the rupee against the US dollar also negatively impacted on its bottom line.

To retain customers overseas and operate its plants at higher capacity, charcoal had to be imported, despite the fact that inward freight costs eroded the difference between prices of local and imported charcoal, a company statement added.

Commenting on the company's improved performance, Haycarb Managing Director, Ananda Hettiarachchy said, "Although there is a significant shift from the results of the previous year, the performance is still well below expectations." The main reason for this is that prices of charcoal in the local market remain high, almost double the price in countries like Indonesia and the Philippines, he explained. Charcoal costs around Rs 20,000 a tonne to the five local producers in Sri Lanka, with the advent of a new foreign competitor, who took the price up to Rs.28,000, in contrast to US $ 110 - 120 in other activated carbon producing countries, Hettiarachchy noted.

He said three tonnes of charcoal is required to produce a tonne of activated carbon, and the high price of raw material in Sri Lanka gives producers in other countries a significant advantage.