Sharply increased charcoal prices rocketing to Rs. 25,000 a ton from Rs. 11,000 the previous year had impacted on the profitability of Haycarb Limited, the Hayleys subsidiary that pioneered the manufacture of activated carbon in Sri Lanka from coconut shell charcoal, during the year ended March 31, 2003.

However, Haycarb remained profitable although post-tax earnings at group level declined to Rs. 139.8 million from the previous year’s Rs. 159.9 million while at company level, the bottom line read Rs. 144.5 million against Rs. 182.7 million a year earlier.

"As much as 30% of the charcoal we used in our Sri Lanka factories had to be imported," Haycarb Chairman Sunil Mendis said. "Our factory in Thailand whose capacity is only 35% of our factories here made the same profit that we earned in Sri Lanka."

He said that they were compelled to import charcoal from India, Vietnam, Thailand and Indonesia to make good the shortfall of local production.

"There was no price advantage in importing because of the cost of ocean freight," he explained, "but we had to import charcoal to keep our production schedules. Our competitors were able to procure their raw material at USD 80 – 100 per mt. Against that our average raw material cost here was equivalent to USD 200 rising to USD 250 per ton at the year-end."

Mendis said that their Thai associate, Carbokarn had done very well but in Sri Lanka they had to close a kiln at one of their factories.

"We couldn’t pass on cost increases resulting from sharply higher charcoal prices to our customers because our competitors in the Philippines – the world’s largest coconut producer – and Indonesia were getting their raw materials much cheaper than us," he explained.

Kinetics, the Haycarb subsidiary manufacturing floor coverings, had a bad year on account of marketing problems. Haycarb is trying to identify a strategic partner who can invest substantially in the company or alternatively help to effectively market its products.

The year under review saw Haycarb group turnover rise to Rs. 1.9 billion from Rs. 1.7 billion the previous year while at company level, turnover was Rs. 1 billion against Rs. 0.9 billion the previous year.

While Haycarb had succeeded in bringing down its group distribution cost to Rs. 27.3 million from Rs. 34.1 million a year earlier and company distribution cost to Rs. 4.7 million from Rs. 5.5 million the previous year, administrative expenses were up sharply to Rs. 406.1 million from Rs. 319 million (group) and to Rs. 178.8 million from Rs. 157.9 million (company).

The group operating profit for the year was Rs. 231.7 million, down from Rs. 277.8 million a year earlier. At company level, the operating profit declined to Rs. 157.2 million from the previous year’s Rs. 215.2 million.

Income tax expenses for both group and company were down significantly – to Rs. 60 million from Rs. 74.5 million (group) and to Rs. 12.8 million from Rs. 32.5 million (company) helping the bottom line.

The Haycarb directors who have adopted the audited accounts for the year under review have recommended a final dividend of 15%, part of it tax-free, which together with the 15% interim paid the previous year would give shareholders a 30% return for the year, maintaining the same dividend level as in the previous year.

Group earnings per share during the year under review were Rs. 4.70, down from Rs. 5.38 the previous year. At company level, Rs. 4.85 per share was earned against Rs. 6.15 the previous year.