Thursday 19 May 2016

Sri Lanka's Haycarb net down 15-pct in March

ECONOMYNEXT - Sri Lanka-based Haycarb Plc, an activated carbon maker that also has operations in East Asia said profits fell 9.4 percent to Rs253 million in the March 2016 quarter from a year earlier amid competition and raw material disruptions.

The group reported earnings of Rs8.52 per share for the quarter. In the year to March 2016, the group reported earnings of Rs22.93 per share on total profits of Rs681 million, which were down 2 percent.

In the March quarter, revenue fell 15 percent to Rs3.3 billion, cost of sales dropped 7.7 percent to Rs2.5 billion and gross profit decreased 32 percent to Rs818 million.

Administration expenses also fell to Rs403 million from Rs559 million, and finance expenses were down from Rs127 million to Rs9 million.

Haycarb Managing Director Rajitha Kariyawasan said the firm battled a slowdown in gold mining; low-cost competition from India, Indonesia and the Philippines; and a shortfall in charcoal in Thailand during the year.

Marketing teams in the U.S., Europe, Australia, Thailand and Indonesia were restructured.

Commercialization of some value-added carbon products had brought better margins. Energy and cost savings measures were also implemented.

Sri Lanka HNB Assurance 'A(lka)' rating confirmed by Fitch

ECONOMYNEXT - Fitch Ratings said it was confirming an 'A(lka)' rating for HNB Assurance (HNBA) and HNB General Insurance (HNBGI) with a stable outlook.

Fitch said HNBA's consolidated capital strength as satisfactory. In 2015, its life solvency ratio was 2.2x (2014:2.3x), while its non-life ratio weakened to 1.5x (2014:3.1x) due to lower profitability resulting from high competition.

The regulatory minimum ratio was 1.0x for both life and non-life.

In 2015 HNBA's pre-tax return on assets reduced to 1.5% (2014: 4.9%), as the non-life combined ratio deteriorated to 123% from 110% in 2014. The increase in the ratio was mainly due to the motor insurance claims.

In November 2015, HNBA provided HNB GI with LKR150mn of capital to support its solvency until HNB GI arrests its weak profitability.

The full statement is reproduced below:

Fitch Affirms HNB Assurance and HNB General Insurance Ratings

Fitch Ratings-Colombo/Hong Kong-19 May 2016: Fitch Ratings Lanka has affirmed HNB Assurance PLC's (HNBA) National Insurer Financial Strength Rating and National Long-Term Rating at 'A(lka)'. Fitch has also affirmed its subsidiary HNB General Insurance Limited's (HNB GI) National Insurer Financial Strength Rating and National Long-Term Rating at 'A(lka)'. The Outlook on the ratings is Stable.

KEY RATING DRIVERS

The ratings reflect the Sri Lanka-based insurance group's satisfactory capitalisation in terms of risk-based capital, prudent investment policy and modest market share. The ratings also reflect synergies gained from using its parent's, Hatton National Bank PLC (HNB, AA-(lka)/Stable), wider branch network, HNBA's importance to the bank in providing bancassurance products and HNB's 60% stake in the insurance group.

Fitch considers HNB GI a core subsidiary of HNBA, due to the significant contribution non-life insurance makes to the top line (49% of gross written premiums) and significant operational synergies.

Fitch views HNBA's consolidated capital strength as satisfactory. In 2015, its life solvency ratio was 2.2x (2014:2.3x), while its non-life ratio weakened to 1.5x (2014:3.1x) due to lower profitability resulting from high competition. The regulatory minimum ratio was 1.0x for both life and non-life. In 2015 HNBA's pre-tax return on assets reduced to 1.5% (2014: 4.9%), as the non-life combined ratio deteriorated to 123% from 110% in 2014. The increase in the ratio was mainly due to the motor insurance claims.

In November 2015, HNBA provided HNB GI with LKR150mn of capital to support its solvency until HNB GI arrests its weak profitability.

HNBA and HNB GI have been recording above-sector growth in the last couple of years. Fitch generally views growth at rates greater than the market or peers cautiously from a ratings perspective, especially during periods of competitive pricing pressures.

From 2016, insurers will be required to report RBC positions. HNBA's life and non-life RBC ratios were 282% and 177% respectively at end-2015. HNBA expects its life and non-life business segments to maintain RBC ratios of at least 170%. This compares with a regulatory minimum of 120%.

Although Fitch does not expect the Sri Lankan insurance sector's credit profile to deteriorate materially, Fitch is of the view that operating conditions could become more challenging. Fitch downgraded the Sri Lankan sovereign to 'B+' from 'BB-' and assigned a Negative Outlook on 29 February 2016. The operating environment remains a key rating driver for the Sri Lankan insurance sector, given its potential volatility.

RATING SENSITIVITIES

An increase in market share in both the life and non-life insurance segments, while maintaining profitability and capitalisation at current levels, will lead to a rating upgrade for HNBA and HNB GI.

Downgrade rating triggers include:

- a weakening RBC ratio for life and non-life to below 160% on a sustained basis

- reduced operational synergies with HNB

- a significant weakening of HNB's credit profile

- HNB GI may be downgraded if it is no longer viewed as a core entity of the group

Sri Lanka beer factory flooded

ECONOMYNEXT – Floods caused by heavy rain in Sri Lanka in the past several days have halted production at the Lion Brewery (Ceylon), the company said in a stock exchange filing.

Its factory at Biyagama has been affected by flood waters from the Kelani River and production has been halted.

“The management will assess the impact to the factory once the water recedes and will inform shareholders of the status accordingly,” the statement said.

The company is trying to bring operations back to normal as soon as possible, it said.

Sri Lankan shares fall to over one-week low amid foreign outflows

Reuters: Sri Lankan shares fell on Thursday to an over one-week low, led by heavyweights amid foreign selling along with sluggish business activity after floods and landslides dented general business sentiment.

Hopes faded on Thursday for the survival of about 150 people trapped under the mud and rubble of two landslides in Sri Lanka, as heavy rain hampered rescue operations and the death toll from the disaster rose to 43 as of 0630 GMT.

Investors also awaited some cues on the interest rates ahead of the central bank's May monetary policy decision, which is due on Friday.

The benchmark stock index fell 0.48 percent, or 32.02 points, to 6,648.13, its lowest close since May 10.

Turnover was 1.2 billion rupees ($8.19 million), well above this year's daily average of around 780 million rupees.

Foreign investors, whose selling accounted for 72 percent of the total turnover, net sold 578.4 million rupees worth shares, its worst outflow since March 17. They have net sold 4.25 billion rupees worth shares so far this year.

"There was lack of retail investor participation in the market," a stockbroker said asking not to be named.

Stockbrokers said manufacturing and banking sectors might get affected due to low employee turnout during the floods.

Concerns over a government move to increase the value added tax and impose new taxes, which could hit the bottom line of many companies, also hit the sentiment.

Yields on T-bills, which move in tandem with market interest rates, rose between 11 and 14 basis points at a weekly auction on Wednesday ahead of the central bank monetary policy rate announcement later on Friday.

Top conglomerate John Keells Holdings dropped 1.1 percent, while Ceylinco Insurance PLC ended down 2.85 percent, dragging the overall index.

($1 = 146.6000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Sherry Jacob-Phillips)

London Stock Exchange Group (LSE) opens in TRACE City

London Stock Exchange Group (LSE) will be setting up their biggest service centre in Sri Lanka at the TRACE Expert City in Tripoli Market, Maradana. Named as London Stock Exchange Business Services Ltd, the company will offer 400 direct employment opportunities to Sri Lanka s from the project.

Group Head of Shared Services Martin Ryan said they have been planning this centre for two years and it will provide all support services for their entire business spread all over the world.

He said that they will start the centre in July and will be fully operational by September.

Ryan said that they were also happy with the architecture of the TRACE Expert City which has a good mix of old and new culture.

Business Services Limited Country Head Rohan Paulas said the high quality of skilled staff, global doing business index ratings for Sri Lanka and most importantly the time zone of Sri Lanka were the key factors for this investment to come to Sri Lanka.

“In addition the Millennium IT connection with the London Stock Exchange too helped us to vote in favour of Sri Lanka for this project.”

He said that this is the biggest investment in recent times and would give positive message to the world and entice more FDI’s to Sri Lanka.

“Since this is a knowledge-based business we expect the brain to reserve,” he said.

Exchanges Technology Executive Director Duminda Liyanawela said that this kind business was the key to the economic progress of Singapore and this investment would bring same results to Sri Lanka.

“We have obtained a two acre land on a 10 year lease from the government and would make a significant foreign direct investment for this operation.”

The officials also met Prime Minister Ranil Wickremesinghe yesterday and said they were happy in the manner in which some of the issues were addressed.

“We will soon sign agreements with the Board of Investment and the Urban Development Authority.”

www.dailynews.lk

Hayleys Fabric records remarkable turnaround

Hayleys Fabric PLC, a subsidiary of Hayleys, has recorded a profit after tax of Rs.261 million (US$ 1.84 million) for the financial year ending March 31,2016, delivering a profit growth of 190%.

FY 2014/15 has marked the first year of recovery of the company recording a surplus after consecutive losses during the recent past.

The ROE improved, from 4% in the last FY to 11% in the year under review as well as a significant EPS growth of 168%. The top line had a negative growth of 8% due to rationalization of the product portfolio.

The changes made to the structure of the company including the top management, continued to show results through improved performance on quality and on-time delivery which in turn attracted new business.

The company’s own brand, “Inno” made a positive impact with customers being drawn to the novelty that was created by the fabric that was developed according to brand specific requirements. Cost reduction measures, productivity improvements, system and process improvements were some of the main contributory factors for the better performance. During the year, the company also made significant investments to up-grade production technology with the introduction of new machinery for the Knitting, Dyeing and Finishing areas, upgrading of printing technology and further enhancing the effluent treatment facility.
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