Hayleys Fabric profits plunged 95% in the December 2025 quarter, reflecting weaker revenue and rising administrative costs. The sharp earnings decline underscores mounting pressure on Sri Lanka’s export-focused textile sector.
Hayleys Fabric profits tumble as revenue slips and costs climb
Hayleys Fabric Plc reported a dramatic contraction in quarterly earnings, with net profit falling to 11.1 million rupees for the December 2025 quarter, according to its interim financial statements. The figure represents a 95 percent decline from the 235 million rupees recorded in the corresponding quarter a year earlier, signaling significant margin compression within the company’s operations.
The steep fall in Hayleys Fabric profits was driven by a combination of reduced revenue growth and elevated operating expenses. Quarterly revenue declined 6 percent year-on-year to 8.4 billion rupees, reflecting softer demand conditions in export markets and pricing pressures within the apparel supply chain. Although cost of sales eased by 4 percent to 7.35 billion rupees, the decline was insufficient to offset the revenue contraction, narrowing gross margins.
Administrative expenses emerged as a major drag on profitability. The company reported a 28 percent increase in administrative costs, which rose to 975 million rupees from 760 million rupees in the same quarter last year. The disproportionate rise in overheads relative to revenue indicates heightened cost pressures, potentially linked to wage adjustments, compliance requirements, or currency-related expenses.
Earnings per share mirrored the downturn in bottom-line performance. EPS dropped sharply to 0.03 rupees in the December quarter, compared with 0.57 rupees a year earlier. The erosion in shareholder returns reflects both the weaker net income and the challenges facing Sri Lanka’s textile exporters amid volatile global demand.
The quarterly results form part of a broader downward trend in the company’s financial performance over the current fiscal year. For the nine months ending December 2025, Hayleys Fabric posted a 68 percent decline in profit to 543 million rupees. Revenue during the same period fell 18 percent year-on-year to 28.5 billion rupees, underscoring sustained pressure across multiple reporting periods.
As a manufacturer of fabric for export-oriented apparel production, Hayleys Fabric operates within a highly competitive global environment. Demand fluctuations in key Western markets, shifts in sourcing strategies by international brands, and rising input costs can significantly affect margins. The latest results suggest that external headwinds, combined with internal cost escalation, have materially weakened financial performance.
Despite a modest reduction in cost of sales, the company’s gross profit appears to have been squeezed by the mismatch between declining revenue and rising fixed or semi-fixed overheads. When administrative costs increase at a faster rate than revenue contracts, operating leverage turns negative, amplifying the impact on net income.
Investors responded cautiously to the earnings release. Shares of Hayleys Fabric closed 2.8 percent lower at 38.70 rupees on Wednesday, reflecting concerns about near-term profitability and margin recovery prospects. The stock movement indicates market sensitivity to sustained earnings volatility within Sri Lanka’s manufacturing and export segments.
The textile and apparel value chain remains a cornerstone of Sri Lanka’s export economy, contributing significantly to foreign exchange earnings and employment. However, the sector has faced persistent challenges including subdued consumer demand in developed markets, higher logistics costs, and increased competition from lower-cost manufacturing hubs.
For Hayleys Fabric, restoring profitability will likely depend on stabilizing revenue streams, optimizing production efficiencies, and containing administrative expenditure growth. Margin management and cost discipline are expected to be critical priorities in the coming quarters, particularly if global demand conditions remain uncertain.
Currency dynamics may also play a role in shaping future results. While a weaker local currency can enhance export competitiveness, it can simultaneously inflate imported input costs and administrative overheads denominated in foreign currency. Effective financial management and hedging strategies therefore become central to mitigating earnings volatility.
The sharp decline in Hayleys Fabric profits highlights the vulnerability of export-oriented manufacturers to external demand shocks and cost inflation. As the company navigates this challenging environment, stakeholders will be monitoring operational adjustments, expense rationalization efforts, and any signs of demand recovery in key markets.
While quarterly fluctuations are not uncommon in cyclical industries, the magnitude of the 95 percent drop underscores the need for strategic recalibration. Sustained improvement in revenue momentum and tighter cost controls will be essential if the company is to regain earnings stability and rebuild investor confidence in the months ahead.