Hayleys Fabric PLC’s acquisition of South Asia Textiles Limited may have a short-term impact on combined company profits due to margin declines and an increase in finance cost arising from borrowings issued to fund their April acquisition.
South Asia Textiles was purchased by Hayleys Fabric PLC for Rs.3.95 billion from its owners Ambeon Holdings PLC and a minority stakeholder. With a capacity of 57 metric tonnes per day, the acquisition became Hayleys Fabric, the largest fabric company in Sri Lanka. According to First Capital Research (FCR), the merged firm will see double-digit revenue growth due to increased capacity.
Hayleys Fabric announced strong results for the fiscal year ending March 31, 2021, with revenues of Rs.14.8 billion and profitability of Rs.736.2 million. However, margins fell during the quarters concluded in December 2020 and March 2021. According to FCR, Hayleys Fabric’s top line would rise by a healthy 23% in the fiscal year ending March 2022.