We’ve given some focus in our business pages today to the just-released Annual Report of Hayleys PLC and comments made therein by the Group’s long serving Chairman/CEO, Mr. N.G. `Tanky’ Wickremeratne. What is most pertinent about what he has said in relation to the beleaguered economy of this nation is the reference to the prevailing ``deadly combination’’ of inflation, interest rates and exchange rates – all of which have serious consequences for frontline industries adding value to local raw material as well as imported fabric, as in the case of the garments industry. These goods are sold in competitive export markets and, as Wickremeratne starkly pointed out, ``global markets will not allow manufacturers the privilege of recovering cost increases fuelled by local inflation beyond the level of inflation in competing countries.’’

Hayleys is a Group that Sri Lanka can be truly proud of. As its chairman has said, it can be regarded as a perfect barometer of the country’s economic performance. ``If we under-perform, it is most likely that important sectors and indeed the country as a whole is doing poorly.’’ That, unfortunately, is the case at present and it is important that the government’s economic managers get their act together to deal with a problem that has now assumed frightening proportions. In years gone by, Hayleys pioneered the production of activated carbon from coconut shell charcoal, expanding that business into a multi-national with production facilities not only in Sri Lanka but also in Thailand and Indonesia and marketing companies in Europe, Australia and North America. The group began making rubber gloves out of home grown rubber and is today one of the world’s biggest non-medical hand protection manufacturers. A new factory in Thailand in which Dipped Products, a Hayleys subsidiary, has invested is now producing medical examination gloves although that business is still not contributing to the group’s bottom line.

The group, founded in Galle in 1878, is in a plethora of businesses including agriculture and agri-business, transportation and infra-structure, consumer products and leisure. Gherkins, cultivated by rural out-growers, are processed by Hayleys and shipped in brine to markets in Japan and the Near East where diners at McDonald’s eat their hamburgers with a pickled relish grown by village farmers in Sri Lanka’s hinterland. At Oluganwila, near Welimada, flower seeds the group produces together with a Dutch partner add a riot of colour to European gardens in the spring. The humble coconut husk fibre, a primary product intimately connected with the genesis of Hayleys some 130-years ago, is used in a range of brushes and mats manufactured in factories here. Hayleys is into hydro-power generation in its tea plantations and also into wind power. It is encouraging the growing of glyricidia near its activated carbon factory in Madampe, and loppings are helping to produce electricity to power the kilns. Waste heat from charcoaling coconut shells also produces power. This is just a microcosm of the group’s story. Hayleys does much more including producing high class knit fabrics for the garments industry, used among others for their jerseys by some of Europe’s biggest and most popular football clubs.

Yet the ``deadly combination’’ – galloping inflation, the exchange rate and interests rates, with no end in sight, has forced its chairman to publicly lament that these factors has cost their group at least a billion rupees in profit. Those funds, Wickremeratne has said, were earnings that they would have re-invested and would reward those who buy their shares ``in preference to Treasury Bills.’’ That is a telling indictment, socking between the eyes of the responsible authorities, that high class business groups such as Hayleys, accounting for as much as 2.6% of the country’s export earnings, can give those who have invested in them only a small fraction of the possible return from Treasury Bills and other fixed income instruments. Somebody with a thousand Hayleys shares will earn a return of Rs. 3,000 as a dividend for the financial year that ended last March. If he sold those shares at the ruling market price last week for Rs. 125,000, he could have got a return of at least Rs. 25,000!

Hayleys, as its chairman has pointed out, is no empire owned by a single super capitalist with its largest shareholder, the D.S. Jayasundera Trust, owning less than 12% of the company. That Trust, among others, supports worthy causes like the Deaf and Blind and the Child Protection Society. The second biggest shareholder owning a little over 9% is an Employees Share Trust, set up some years ago in the face of what was perceived as a likely predatory Stock Exchange raid on the company. The dividends from the shares held by that Trust go to people working for the group – excluding its executive directors. Over the years, Hayleys have built an enviable technological capacity that enabled it to take its business overseas and establish manufacturing facilities in Thailand, Indonesia and China. The group has also set up logistics distribution bases in India and in the region, linked to the origins of supply and demand in the European Union and North America. At the risk of being accused of blowing his own trumpet, Wickremeratne has gone on record saying that ``our pedigree of integrity in business practices sometimes loses us business but we are standing tall and hopefully we are not alone in this stance.’’ No one would, or could, dispute that claim.