HAYCARB PLC Financial Summary
HAYC.N0000 · HAYCARB PLC · Materials · 2026-08-12
Haycarb PLC Financial Summary and Investment Analysis
Executive Overview
Haycarb PLC, a subsidiary of Hayleys PLC, is a global leader in the manufacture and marketing of coconut shell-based activated carbon. With a portfolio of over 1,500 products, the company serves customers across more than 50 countries, catering to water and air purification, gold recovery, food and beverage, and emerging energy storage applications. The company operates seven manufacturing plants across Sri Lanka, Thailand, and Indonesia, and is currently developing a new greenfield facility in the Philippines.
Despite a volatile operating environment marked by geopolitical tensions, high freight costs, and raw material supply constraints, the company achieved its highest-ever annual turnover in the natural year ending Q1 2026, surpassing the USD 200 million milestone. This growth was strongly supported by demand for value-added products, particularly in gold recovery and energy storage carbons. The company remains highly focused on sustainable production, aggressively expanding its renewable energy mix and proprietary "Haritha Angara" green charcoaling operations.
Key periods covered: Q2 2024 to Q2 2026 (Natural calendar quarters).
Financial Performance
Revenue and Profitability Trends
The company has demonstrated robust top-line growth driven by volume expansion, strategic price revisions, and a favorable product mix. However, gross profit margins faced downward pressure due to significant escalations in the cost of coconut shell charcoal and elevated logistics expenses.
| Period (Natural) | Revenue (LKR Mn) | Gross Profit (LKR Mn) | Net Profit (LKR Mn) | GP Margin (%) | NP Margin (%) |
|---|---|---|---|---|---|
| Q2 2026 (3M) | 19,796 | 3,913 | 1,239 | 19.8% | 6.3% |
| Q1 2026 (3M) | 19,680 | 3,501 | 1,360 | 17.8% | 6.9% |
| Q4 2025 (3M) | 18,934 | 3,908 | 1,299 | 20.6% | 6.9% |
| Q3 2025 (3M) | 14,788 | 3,303 | 1,005 | 22.3% | 6.8% |
| Q2 2025 (3M) | 13,682 | 2,668 | 677 | 19.5% | 4.9% |
| Q1 2025 (3M) | 11,767 | 3,217 | 1,521 | 27.3% | 12.9% |
| Q4 2024 (3M) | 10,868 | 3,283 | 1,109 | 30.2% | 10.2% |
| Q3 2024 (3M) | 10,507 | 2,812 | 784 | 26.8% | 7.5% |
| Q2 2024 (3M) | 10,059 | 2,751 | 857 | 27.3% | 8.5% |
*Note: 3M periods are derived from the respective cumulative and quarter-end reports.*
Analysis: Revenue grew significantly by 44.7% YoY in Q2 2026 compared to Q2 2025, driven by strong traction in energy storage carbons and high global gold prices boosting gold recovery carbons. Despite top-line success, GP margins have structurally compressed from the mid-to-high 20% range in 2024 to the high 10% range in 2026. This margin erosion is primarily attributed to intense competition and climate-related shortages in coconut shell availability. However, net profit for Q2 2026 showed an 83% YoY increase, indicating strong operational cost control, improved scale efficiencies, and strategic pass-through of cost increases to customers.
Balance Sheet Analysis
The balance sheet expanded substantially, primarily funded by an increase in borrowings to support deliberate working capital build-ups and strategic capacity expansions.
| As at Period End | Total Assets (LKR Mn) | Total Liabilities (LKR Mn) | Total Equity (LKR Mn) |
|---|---|---|---|
| Q2 2026 | 68,808 | 33,858 | 34,950 |
| Q1 2026 | 63,868 | 30,522 | 33,346 |
| Q4 2025 | 61,320 | 28,273 | 33,047 |
| Q3 2025 | 55,758 | 23,782 | 31,975 |
| Q2 2025 | 50,126 | 19,208 | 30,918 |
| Q1 2025 | 45,897 | 16,221 | 29,677 |
Analysis:
- Assets: Total assets grew by 39% in the natural year ending Q1 2026, propelled by a massive inventory build-up (from LKR 15.1 Bn in Q1 2025 to LKR 23.2 Bn in Q1 2026, rising further to LKR 25.2 Bn by Q2 2026). This was a strategic move to secure raw material supplies amidst prevailing market shortages and price volatility.
- Liabilities & Solvency: To fund this working capital requirement and capital expenditures, total debt increased dramatically. Short-term borrowings spiked from LKR 2.85 Bn in Q1 2025 to LKR 13.1 Bn in Q1 2026, and LKR 17.1 Bn by Q2 2026. The gearing ratio elevated from 23.4% to 37.5% over the natural year ending Q1 2026.
- Liquidity: The current ratio stands at a healthy 1.74x as of Q1 2026, although the quick asset ratio dropped to 0.80x, reflecting the heavy weighting of inventory in current assets.
Cash Flow Analysis
| Period (Cumulative) | Operating Cash Flow (LKR Mn) | Investing Cash Flow (LKR Mn) | Financing Cash Flow (LKR Mn) |
|---|---|---|---|
| 3M to Q2 2026 | 646 | (1,858) | (1,212) |
| 12M to Q1 2026 | (5,578) | (3,960) | (1,232) |
| 12M to Q1 2025 | 110 | (2,310) | (496) |
Analysis: Cash generated from operations before working capital changes was robust at LKR 8.9 Bn for the year ending Q1 2026. However, massive working capital absorption (LKR 8.1 Bn into inventories and LKR 7.8 Bn into receivables) resulted in a net operating cash outflow of LKR 5.58 Bn. Encouragingly, operating cash flows turned positive (LKR 646 Mn) in Q2 2026. Capex remains high, with LKR 4.15 Bn invested during the 12 months ending Q1 2026, primarily for the Philippine plant expansion and energy storage carbon capacity.
Key Financial Ratios and Growth Indicators
| Metric | Q1 2026 (Annualized/Year End) | Q1 2025 (Annualized/Year End) |
|---|---|---|
| Return on Equity (ROE) | 12.3% | 13.6% |
| Return on Assets (ROA) | 6.8% | 9.3% |
| Earnings Per Share (EPS) | LKR 12.18 | LKR 12.10 |
| Net Asset Value Per Share | LKR 98.83 | LKR 89.30 |
| Dividend Per Share | LKR 4.07 | LKR 3.80 |
| P/E Ratio | 8.99x | 6.78x |
| Asset Turnover | 1.05x | 0.94x |
| Inventory Days | 158 days | 178 days |
| Debtor Days | 58 days | 59 days |
Growth & Operational Indicators:
- Capacity: Global capacity expanded to 58,500 MT per annum, with a major 7,500 MT greenfield expansion underway in the Philippines.
- Innovation: 14 new products were launched in the year ending Q1 2026. R&D investments amounted to LKR 261 Mn.
- Market Share: Commands a 16% global market share in the activated carbon segment.
Economic and Market Context
The global activated carbon industry is projected to grow at a CAGR of 4% to 9%. The transition to a low-carbon economy, EV proliferation, and AI data center expansion are accelerating the demand for energy storage carbons. Stringent environmental regulations, notably the restrictions on PFAS ("forever chemicals") in the US and Europe, are driving demand for advanced water and air purification solutions.
On the downside, coconut yields in major sourcing countries (Sri Lanka, Indonesia, Thailand) are under threat from El Niño-induced rainfall variability and aging plantations. This physical climate risk directly elevates the cost of coconut shell charcoal, forcing the company to import fallback volumes at higher costs and aggressively drive backward integration. Geopolitical fragmentation and the Middle East conflict have also resulted in elevated freight and energy costs.
Future Potential and Outlook
- Energy Storage Carbons: The company is positioning itself to capture the premium transition-driven market. It successfully launched a commercial carbon range for Silicon-Carbon (SiC) composites used in Li-ion battery anodes and supercapacitors. It invested LKR 1.4 Bn to double its energy storage carbon manufacturing capacity in Sri Lanka.
- Geographic Expansion: The ongoing construction of the Philippine manufacturing plant (set for phased operations in 2027/28) will strategically diversify supply chain risk and capture 7,500 MT of new capacity.
- PFAS Remediation: The commercialization of activated carbons explicitly designed for PFAS removal positions the company well against tightening EPA and European environmental standards.
Risks and Challenges
- Raw Material Availability & Cost: Highly dependent on coconut shells. Climate stress and intense competition have spiked input prices.
- *Mitigation:* Establishing the "Haritha Angara" green charcoaling hubs (expanding in Indonesia and Sri Lanka) to secure 25% of Indonesian raw materials internally, maintaining an 85%+ local sourcing mix in Sri Lanka, and developing alternative raw materials like palm shell and candlenut.
- Liquidity and Debt Load: Heavy reliance on short-term borrowings to fund inventory.
- *Mitigation:* Positive operating cash flow generation observed in Q2 2026; forward bookings and agile pricing to absorb working capital pressure.
- Energy Dependency: Manufacturing is highly energy-intensive.
- *Mitigation:* Transitioning heavily to renewables; currently fulfilling 77% of energy requirements through renewable sources (biomass, solar, waste-heat recovery).
Shareholder and Corporate Information
- Major Shareholder: Hayleys PLC holds 67.73% of the outstanding shares.
- Public Holding: The float-adjusted market capitalization sits at approximately LKR 14.7 Bn (30.91% public holding) as of Q2 2026.
- Stock Performance: The stock price demonstrated strong momentum, climbing from LKR 82.10 (Q1 2025) to LKR 109.50 (Q1 2026), and eventually reaching LKR 161.25 by the end of Q2 2026.
- Dividends: The company maintains a consistent dividend payout, returning LKR 1.21 Bn to shareholders in the year ending Q1 2026, representing a 33% payout ratio.
Investment Decision Indicators
Strengths:
- Global market leadership (16% share) with a highly diversified geographic sales footprint (Asia 53%, North America 14%, Europe 7%).
- Successful pivot towards high-margin, high-growth sectors (Li-ion batteries, supercapacitors, PFAS removal).
- Strong proprietary R&D capabilities, allowing rapid product commercialization.
- Impressive ESG integration, utilizing 77% renewable energy and driving a sustainable circular economy (reusing waste coconut shells).
Weaknesses:
- Severe margin compression due to raw material price inflation, dropping gross margins below 20%.
- Significant short-term debt buildup resulting in negative operating cash flows for the full year ending Q1 2026 (though reversing in Q2 2026).
- High inventory carrying requirements, reducing quick liquidity.
Opportunities:
- The global push for EVs and grid-level energy storage guarantees exponential demand for advanced energy carbons.
- The new Philippine plant will lower regional sourcing risks and provide scalable capacity.
- Tightening global water standards creates a long-term demand floor for purification carbons.
Threats:
- Climate change permanently altering coconut yields, leading to systemic raw material shortages.
- Geopolitical tensions keeping freight and logistics costs structurally high.
- Alternative battery chemistries or filtration technologies bypassing the need for activated carbon.
Overall Assessment: The data presents a compelling narrative of a company successfully transitioning from traditional filtration products to advanced, high-tech energy storage materials. While the massive inventory build-up and resulting debt spike negatively impacted free cash flows over the last 12 months, this appears to be a calculated, strategic buffer against raw material scarcity rather than a structural failure. The sharp 45% revenue growth and 83% net profit growth in the latest quarter (Q2 2026), alongside the return to positive operating cash flow, suggests that pricing power is intact and the aggressive capacity investments are yielding tangible returns. The stock's current P/E ratio and strong dividend yield, combined with secular tailwinds in its target markets, offer clear metrics for investors evaluating entry or holding positions.