MONETABRIEF - Publicly listed Hayleys Plc, was given a B+ rating, above Sri Lanka's CCC+ sovereign rating by S & P, saying it had export revenues and limited foreign currency debt.
We believe the company will maintain adequate liquidity during periods of sovereign stress," S & P said in a statement.
""Hayleys' export revenue and limited exposure to foreign-currency debt support the ratings above those on Sri Lanka (CCC+/Stable/C).
But the group relied on short term domestic debt which weakened its capital structure.
More than 60 percent of the company's debt was due within the 12 months from March 31, 2026, mostly taken for working capital.
Hayleys' reliance on short-term debt is sticky due to lower interest rates for such facilities, and the lack of a deep domestic market for much longer loan tenors.
The full statement is reproduced below:
Hayleys PLC Assigned 'B+' Foreign Currency Rating; Outlook Stable
• A small scale and volatile working capital constrain the cash flow predictability of Hayleys PLC. The company's liquidity buffer could remain narrow, given a reliance on short-term debt to fund working capital.
• Strong positions in the domestic consumer durable and logistics markets, and diverse revenue streams provide some earnings stability. We expect this to support the company's operating resilience over the next 12-24 months.
• We assigned our 'B+' long-term foreign currency issuer credit rating to Hayleys.
• The stable rating outlook reflects our expectation that the Sri Lanka-based conglomerate will expand its revenue base, generate healthy operating cash flow, and maintain business diversity and liquidity access over the next 12-24 months. We also expect continued balance sheet discipline such that its ratio of funds from operations (FFO) to debt remains above 12%.
SINGAPORE (S&P Global Ratings) Aug. 17, 2026--S&P Global Ratings today took the rating actions listed above.
We expect Hayleys' small scale to continue to result in higher earnings sensitivity than larger global peers. The company's limited revenue base leads to a higher percentage of fixed costs. This causes margin volatility, especially for imports, exacerbated by a less stable Sri Lankan rupee (LKR). The company also faces growth limitations in its retail and logistics businesses due to the small scale of these domestic industries.
Global conglomerate peers have revenue 2x-4x the size of Hayleys. These peers include Sweden-based Storskogen Group AB (BB/Stable/--), United Arab Emirates-based Ittihad International Investment LLC (BB-/Stable/--), and Brazil-based Cosan S.A. (B+/Negative/--).
Hayleys operates its white-goods business under the Singer brand and activated carbon business under Haycarb. The company's other businesses and products such as gloves, textile, and tea tend to be more commoditized.
In our view, this results in lower pricing power and margin control. While Hayleys is shifting to higher value-added products, the share of revenue from such products remains small.
Large swings in working capital result in volatile cash flow. Hayleys' consumer durable, textile, and agriculture businesses are working capital intensive. The company is exposed to fluctuations in the prices of natural rubber, coconut shells, and cotton. Since it also imports a large part of its raw materials, any sharp depreciation of the LKR increases its working capital requirements.
Hayleys reported negative operating cash flow in fiscal 2026 (year ending March 31) due to a large working capital outflow. The causes were higher raw material prices and inventories held in anticipation of higher Singer sales. As a result, the company's S&P Global Ratings-adjusted debt increased to LKR211 billion as of March 31, 2026, from LKR152 billion as of March 31, 2025. We expect working capital to rise further over the next 12-24 months to support business growth.
A reliance on short-term debt to finance operations weakens Hayleys' capital structure and strains liquidity. More than 60% of the company's debt is due within the 12 months from March 31, 2026. This primarily comprises working capital borrowings.
Hayleys' reliance on short-term debt is sticky due to lower interest rates for such facilities, and the lack of a deep domestic market for much longer loan tenors.
All else being equal, this increases Hayleys' exposure to refinancing risk. The company would have less time to manage any major business and financial market setbacks, in our view. We estimate it had a weighted average debt maturity of 1.7 years as of March 31, 2026.
Hayleys' export revenue and limited exposure to foreign-currency debt support the ratings above those on Sri Lanka (CCC+/Stable/C).
We believe the company will maintain adequate liquidity during periods of sovereign stress. It derives its export revenue primarily from its glove, purification, textile, and tea segments, which it will likely continue to expand over the coming years.
Hayleys' resilience relative to its sovereign surfaced during Sri Lanka's currency crisis and debt default in 2022-2023. S&P Global Ratings lowered the foreign currency sovereign rating to 'SD' and the rating on the sovereign's senior unsecured notes to 'D' in April 2022. Even then, Hayleys remained current on its obligations. The company's EBITDA also jumped 71% in that year, propped up by export revenue that benefited from LKR depreciation.
Any upside to our foreign currency issuer credit rating on Hayleys remains capped at two notches above the 'B-' transfer and convertibility assessment on Sri Lanka. The cap reflects the fact that Hayleys derives half of its revenue in the local currency, and the risk that Sri Lanka could enact stricter capital or foreign currency controls on exporters.
Hayleys' dominant market position in Sri Lanka tempers its credit weaknesses. The company is the largest conglomerate in Sri Lanka, with top positions in the retail, textile, and logistics segments. Its established market presence creates barriers to entry. Hayleys maintained a healthy compounded annual revenue growth rate of 20% through the country's economic adversities in the past five years,
Hayleys' retail business under its 86%-owned subsidiary Singer (Sri Lanka) PLC accounts for 20% of the group's earnings. We estimate Singer has a 37% share of Sri Lanka's consumer durables market through an extensive retail and dealer network, strong brand equity, and multi-brands. In our view, Singer's one-stop-shop concept and credit programs translate into a sticky domestic customer base.
Hayleys' presence in multiple geographies and business lines adds a layer of earnings stability. The company derives half of its revenue outside Sri Lanka, namely from the U.S. (10%), Europe (10%), and Asia (25%). Primary exports include gloves, activated carbon, and tea. It also supplies fabric to domestic garment manufacturers serving global apparel chains. This geographic diversification helps mitigate idiosyncratic economic volatility in each market.
Hayleys also has diverse earnings from several industries.
These include retail (Singer), consumer staples and nondurables (gloves, purification, textile, and tea), and logistics.
Although these segments have their respective cyclical demand and raw material cost pressures, each has mostly independent dynamics and demand drivers. This cushions overall earnings volatility from weakness in any segment.
Healthy earnings growth will likely contain leverage. We forecast annual EBITDA growth of 10%-12% for the next two to three years on a pickup in Sri Lankan economic activity and exports due to easing tariff uncertainties.
As a result, Hayleys could have a stable debt-to-EBITDA ratio of 3.0x-3.5x through fiscal 2028, despite higher debt to fund growing working capital needs.
This ratio is within the ballpark of Hayleys' leverage tolerance. The company aims to keep its debt-to-EBITDA ratio below 3.0x, based on its own calculations. We estimate this translates to about 3.5x on an S&P Global Ratings-adjusted basis.
We expect Hayleys' ratio of FFO to debt to remain above 15%, comfortably above our downside threshold of 12%. The ratio could trend closer to 12% should EBITDA margins fall below 10%. Failure to pass on increases in raw material prices could result in such a scenario.
We deconsolidate Singer Finance (Lanka) PLC in our assessment of Hayleys' financial risk. This is because we view Singer Finance as a well-capitalized nonbanking financial institution, with adequate credit fundamentals to be a self-sustaining business. We do not anticipate any large capital infusions from Hayleys into Singer Finance.
Although Singer Finance adds some diversity to Hayleys' portfolio, we expect earnings contributions from the subsidiary to remain modest at about 5% of group EBITDA. As such, we consider Singer Finance to be neutral to Hayleys' overall credit profile.
The stable rating outlook reflects our expectation that Hayleys will maintain business diversity, generate healthy operating cash flow, and keep its EBITDA margins at more than 10%. This is such that the company's ratio of FFO to debt could remain above 15% over the next 12-24 months. The stable outlook also reflects our expectation that the company will maintain liquidity access to roll over its short-term working capital facilities.
We could lower the foreign currency rating if:
• We revise downward our transfer and convertibility assessment on Sri Lanka, currently at 'B-';
• A material change in Hayleys' mix of imports and exports results in lower net foreign currency cash inflows, or there is an increase in foreign currency obligations; or
•Our assessment of the company's stand-alone credit profile (SACP) weakens from the current 'b+'.
We could revise downward the SACP if Hayleys has significantly weaker earnings and elevated working capital requirements. In such a scenario, we expect the company's ratio of FFO to debt to decline below 12% or its liquidity access to weaken further.
We could raise the foreign currency rating if we revise upward the SACP and raise our transfer and convertibility assessment on Sri Lanka.
We could revise upward the SACP if:
• Sustained earnings growth and deleveraging result in Hayleys' ratio of FFO to debt improving above 20%, or
• A lower reliance on short-term borrowings results in a material and sustainable improvement in the weighted average debt maturity and liquidity position.