Colombo Stock Exchange Market Review – 10th Nov 2016

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Colombo Stock Exchange Trade Summary 10-Nov-2016

Colombo equities edged up on budget day in thin activity as investors remained on sidelines. All Share index touched 6,427 mark in opening hours but closed at 6,420.78, with a gain of 3.23 index points or 0.05% while 20-scrip S&P SL20 index advanced slightly by 5.20 index points or 0.14% to end at 3,593.65. 

Price gains in Vallibel One (closed at LKR 21.50, +2.9%), Access Engineering (closed at LKR 26.40, +2.3%) and Commercial Bank (closed at LKR 148.00, +0.4%) contributed positively to the index while losses in Commercial Leasing & Finance (closed at LKR 3.60, -5.3%) and Dialog Axiata (closed at LKR 11.30, -0.9%) impacted index gains.

Daily market turnover was LKR 294mn. John Keells Holdings emerged as the top contributor to turnover with LKR 61mn underpinned by a single crossing of 0.3mn shares at LKR 150.00. Watawala Plantations (LKR 47mn), Commercial Bank (LKR 46mn) and Millennium Housing Developers (LKR 34mn) were among top contributors.

Another crossing was recorded in Commercial Bank where 0.17mn shares changed hands at LKR 148.00. Accordingly, aggregate value of crossings accounted for 26% of the total turnover.

Gainers offset the losers 57 to 48, while 86 stocks remained unchanged. High investor activity was witnessed in Access Engineering, Teejay Lanka, Tal Lanka Hotels and Watawala Planatations.

Foreign investors were net buyers with a net foreign inflow of LKR 15mn. Foreign participation was 20%. Net foreign inflows were seen in Singer (LKR 13mn), Commercial Bank (LKR 7mn), Watawala Plantation (LKR 2mn) while net foreign outflow was mainly seen in Teejay Lanka (LKR 5mn).
Source: LSL

Sri Lankan shares end little changed ahead of national budget

Reuters: Sri Lankan shares closed nearly unchanged on Thursday in thin trade as investors turned cautious ahead of the national budget, which proposed revisions to corporate and withholding taxes to boost revenue and cut the country's fiscal deficit target.

The benchmark index of the Colombo Stock Exchange ended 0.05 percent higher, or up 3.23 points, at 6,420.78.

The index hit its lowest close since Nov. 1 on Wednesday.

Turnover stood at 294.3 million rupees ($2.00 million), well below this year's daily average of 711.3 million rupees.

Foreign investors bought stocks for a seventh straight session, picking up shares worth a net 14.8 million rupees. They have net sold 884.5 million rupees worth of shares so far this year.

Shares in Lion Brewery Plc rose 0.94 percent, while the biggest listed lender, Commercial Bank of Ceylon Plc , gained 0.41 percent. 

($1 = 147.4000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

JKH's delayed $ 850 mn luxury project to be completed by 2020

The envisioned Cinnamon Life

By Hiran H.Senewiratne

A major investment venture of Sri Lanka's premier blue chip, John Keells Holdings (JKH), the $ 850 million Cinnamon Life project will be delayed by one to one and half years due to an issue with its contractor, Korea based Hyundai Engineering and Construction Co. Ltd.

"We have already resolved the problem with the contractor and now all the construction work has started and the luxury mixed development project will be launched by end of 2019 or early 2020. The reason for the issue stemmed from the complexity of the project, JKH deputy chairman Ajith Gunawardena told The Island Financial Review on the sidelines of an event organized by John Keells Holdings Plc, titled John Keells X, to announce the winners of its first Open Innovation Challenge, aimed at encouraging 'innovation with imagination' among entrepreneurs. The event was held at the Cinnamon Grand on Wednesday.

Gunewardene said that "Cinnamon Life" was conceptualized as a flagship project for Sri Lanka as it staked its claim for fame in the international arena after decades of remaining on the sidelines due to work delays. All construction work is now back on track. Previously, the project was slated to be completed in 2017.

"This is the first of its kind in the region, Cinnamon Life will shine bright like a beacon of prosperity and help support the country’s development, he said.

Gunewardena said that JKH has all the required funds to go ahead with the project and these issued from debenture issues and loans.

"This architectural icon has been envisioned as a 4.5 million sqft integrated resort consisting of an 800-room luxury Cinnamon hotel, avant garde experiential and entertainment haven, residential apartments, state-of-the-art office spaces, a wide variety of food and beverage offerings and ballroom, conferencing, theatre and banqueting spaces, sources said.

"This mixed development project is Sri Lanka’s largest private sector investment. Cinnamon Life, with its vibrant and inspired concept, is a project of significant national importance and will become the epicentre of modern South Asia, they added.

It is said that internationally renowned architect, artist and engineer, Cecil Balmond, the design visionary behind some of the most popular buildings in the world, including the ArcelorMittal Orbit in London and the CCTV in Beijing, will be bringing this inspired concept to life.

"This project will generate numerous benefits for the economy and the community. More importantly, Cinnamon Life will engender a sense of pride to be Sri Lankan as it will signal the march of the country towards a vibrant future, Gunewardena said.

The property arm of the JKH has successfully executed prominent landmarks, such as, Monarch and Emperor at Crescat City; Onthree20; and its latest project, 7th Sense – Gregory’s Road.www.island.lk

Will JKH raise Rs. 8 billion from warrant conversion next week?

Retailers key to any shortfall

There will be a cash infusion of eight billion rupees to the John Keells Holdings conglomerate if all outstanding 2016 warrants are converted to shares at the Rs. 149.29 conversion price by next Friday (Nov. 11) but a question mark hangs over whether this would happen given the prevailing JKH share price on the market.

JKH closed on Friday on the CSE at Rs. 151.30, down 60 cents from the previous close with nearly 390,000 shares traded between Rs. 151 and Rs. 151.80. Given the transaction cost on the Exchange of 1.12%, this would have translated to slightly over Rs. 1.69 per share sold at the closing price.

"After paying the transaction cost, a seller at that price would have got Rs. 149.61 per share – just 32 cents over the warrant conversion cost. If he had warrants, convertible on the basis of one share per warrant, selling off at prevailing prices and recovering the shares sold by converting the warrants wouldn’t be much of a profit," an analyst explained.

He believed that institutional and large shareholders of JKH including some warrant holders who bought warrants on the secondary market at one and two rupees will covert.

"But what retailers will do remains open," he said. "Much of it will depend on what the share price is till the end of the week."

What would JKH do if the warrant conversion falls short of the maximum possible?

Unlike in a rights issue, warrants do not allow additional shares to be sold to those who want them. So the company will have to make the best use of whatever it raises by way of the conversion.

The biggest warrant holders as at Sept. 30, 2016 was the Sohli Captain controlled Paints and General Industries with 15.2 million (30.2%) followed by his daughter, Leesha, with 3.9 million (7.8%).

"There would have been few if any changes from the published figures of the quarter ended Sept. 30, 2016 because the warrants stopped trading on Sept. 27," the analyst said.

They were issued free to subscribers of the last JKH rights issue at the end of 2013 and commanded a good price earlier. In the quarter ended Sept. 2015 there was a top price of Rs. 43.80 and a low of Rs. 30 closing at Rs. 36.70. But this year the price was sharply down with a high of Rs. 7.90 and a low of 50 cents closing on Sept. 30, 2016 at one rupee.

Broga Hill Investments, a foreign fund with 10.4% of JKH is its top shareholder followed by Sohli Captain (10.1%) and Paints and General Industries (8.3%).

JKH’s mega Waterfront Development project costing USD 850 million has been delayed following an issue with the Korean contractor. But that has been resolved and JKH Deputy Chairman Ajit Gunawardene went on record last week saying work has resumed and the project would be launched by end 2019 or early 2020.

By then the top team of JKH would have retired with Gunawardene and Finance Director Ronnie Peiris due to leave in Dec. 2017 with Chairman/CEO Susantha Ratnayake leaving a year later.

www.island.lk

Amãna Bank records ‘commendable Q3’

Amãna Bank improved its profit momentum in Q3 by accumulating a Profit Before Tax (PBT) of LKR 62.9 million. As a result of this addition, the Bank’s nine month PBT reached LKR 140.9 million, to achieve a 16.2% year on year growth. The Bank’s Profit After Tax (PAT), which surpassed the LKR 100 million mark at the end of nine months to read at LKR 101.4 million, also established a similar growth trajectory. Having achieved a PAT of LKR 56.1 million in the first half of the year, the Bank went on to record a PAT of LKR 45.3 million in Q3 alone.

With a strategic focus on retail and SME financing, the Bank’s top line continued its steady performance by recording a year on year growth of 39.2% in Financing Income to reach LKR 2.9 billion in the first nine months whilst Net Financing Income during the same period grew by 29.5% to LKR 1.4 billion. Net Financing Income for Q3 grew by an impressive 40.6% to LKR 533.4 million from LKR 379.4 million achieved in Q3 2015. The Bank also gained from Net Fee and Commission Income amounting to LKR 144.2 million for the nine months reflecting a growth of 20.7% compared to the corresponding period in 2015. Demonstrating a year on year growth of 19.9%, the Bank recorded a Net Operating Income of LKR 1.7 billion for the nine months ending 30 September 2016. The Bank went on to record LKR 266.7 million as Operating Profit Before Value Added Tax on Financial Services and Nation Building Tax, which was a growth of 18.4% on a year on year basis.

The Bank’s Total Assets grew year to date by 10.8% to close at LKR 53.0 billion while Customer Deposits and Customer Advances grew by 17.5% and 14.1% to read at LKR 45.3 billion and LKR 37.7 billion respectively. The Bank had been successful in maintaining an industry low Gross Non Performing Advances Ratio of 0.93%.

Commenting on the Bank’s financial performance Chief Executive Officer Mohamed Azmeer said "Having being affirmed a National Long Term Rating of BB with a stable outlook by Fitch Ratings Lanka, I am pleased on how the third quarter turned out for the Bank despite challenging market and economic conditions. Our growth for the quarter was once again fuelled by core banking activities, especially from the SME banking sector, a key strategic focus area of the Bank. I am thankful to the Bank’s customer base for continuing to place their trust and confidence in our unique banking model as well as to our team for their hard work and commitment. I am confident that this positive trend in performance will continue, as we also plan to expand our reach with the addition of new branches in Colombo during the last quarter of 2016."

Amãna Bank is the first Licensed Commercial Bank in Sri Lanka to operate in complete harmony with the non-interest based Islamic banking model and is listed on the Diri Savi Board of the Colombo Stock Exchange. The Bank was recognized as the Best ‘Up-and-Comer’ Islamic Bank of the World by ‘Global Finance Magazine’ at the 18th Annual World’s Best Banks Award Ceremony held in Washington DC, USA. The Bank was also bestowed the coveted title ‘Islamic Finance Entity of the Year 2016’ at the inaugural Islamic Finance Forum of South Asia Awards Ceremony. Powered by the stability and support of its strategic shareholders including, Bank Islam Malaysia Berhad, AB Bank in Bangladesh and The Islamic Development Bank based in Saudi Arabia, Amãna Bank is making strong inroads within the Sri Lankan banking industry and is focused on capitalizing the growing market potential for its unique banking model across the country.

www.island.lk

Sri Lanka seeks to boost capital markets

Government commitments to step up privatisation, repair its balance sheet and encourage more listings should help broaden the base of Sri Lanka’s capital markets and draw stronger flows of foreign direct investment (FDI) into the economy.

In April the Sri Lankan government brokered a $1.5bn loan agreement with the IMF, part of a three-year Extended Fund Facility programme aimed at halving the country’s fiscal deficit, which rose 12% in 2015 to reach 7.5% of GDP.

A key plank of the deal is that the government will work to privatise a number of state-owned enterprises (SOEs), which account for more than 80% of public debt. This in turn should boost their market capitalisation, providing a fillip to the country’s capital market as it seeks to regain emerging market status.

Plans for privatisation

Among the SOEs slated for privatisation are state holdings in the tourism and travel segments – including the Hilton Hotel and the Grand Hyatt in Colombo – as well as enterprises in the financial and utilities sectors seen as having strong investor appeal.

The state-owned national carrier, SriLankan Airlines, whose accumulated losses reached $3bn in March, is being downsized to improve its appeal for a potential sale. Though the exact nature and size of the deal sought is unclear, there have been reports of a 40% offering – the same amount previously owned by Dubai-based Emirates, which ran the airline from 1998 to 2008. The government said it is seeking a “strategic investor” to “reorient” the carrier and its low-cost subsidiary, Mihin Lanka.

“We are getting restructuring advisory services and will then issue a request for proposals – and when expressions of interest come, we will pursue negotiations with those particular parties,” Eran Wickramaratne, deputy minister of state enterprises and entrepreneurship, told local press in June.

Having announced plans to privatise the carrier as early as May, the government launched a six-month restructuring plan in June, then advertised for bids in July, later extending the deadline for submissions into August. As part of the overhaul, routes to Frankfurt and Paris are to be cut starting this autumn, though flights to London and New York will continue.

Similar rationalisation is afoot at public providers of utilities such as the Ceylon Electricity Board, National Water Supply and Drainage Board, and Ceylon Petroleum Corporation. Long in the red due to public subsidies, these have hinted at near-term rate hikes that could bring the books closer into balance, an important pre-requisite for selling a stake to the private sector.

Also on the docket for sale is a further holding in Lanka Hospitals, which is majority state-owned through Sri Lanka Insurance Corporation, with an 8% stake also owned by private shareholders on the Colombo Stock Exchange (CSE).

A range of foreign conglomerates have shown interest in acquiring majority ownership, including Kazanah Nasional, Malaysia’s sovereign wealth fund and the controlling shareholder of International Healthcare Holdings.

Path to liberalisation

Such privatisations should lead to increased investor Interest and liquidity in the capital markets and significantly more FDI, according to Rohan Goonewardene, CEO of First Guardian Equities, a Colombo-based stock brokerage, told OBG. “Achieving this milestone would send out a strong signal to investors about the maturity, sophistication and transparency of the domestic market place,” he said.

“Investors will be more apt to park their funds in the country.”

Expected increases in foreign portfolio investment, driven by opportunities in infrastructure and banking, could also help transform the bourse and lift its capitalisation, according to Rajeeva Bandaranaike, CEO of the CSE.

“The liberalisation of SOEs and non-core assets represents an important step on the path towards Sri Lanka achieving emerging market status,” he told OBG.

With higher trading volumes, Sri Lanka could eventually return to emerging market status on the Morgan Stanley Capital International (MSCI) indicator, a significant step forward for the country’s economy.

MSCI downgraded the country from emerging market to “standalone” market in 2001 after a cease-fire was agreed in the country’s civil war, later upgrading the bourse to frontier market in 2007, on the back of three consecutive years of over 30% growth in its All Share Price Index. Moving forward, the CSE has set a goal of reaching $50bn in market capitalisation, significantly higher than the $20.9bn seen at the start of 2015, though it has not yet suggested a date for meeting this target.

Rising inflows

In a positive sign for such objectives, the IMF deal prompted a rise in capital inflows in the months after it was signed, with the rupee, the CSE and bond markets all seeing modest jumps in the weeks leading up to the signing on April 29.

Stronger overseas interest in government paper, in particular, reflects increased confidence in the economy, markets and fiscal stability.

The improving macro environment and certainty about government policy and plans is starting to attract a stronger flow of capital, though it will still take time, according to Sujendra Mather, managing director of York Street Partners, a Colombo-based investment banking firm.

“Investment inflows are increasing to Sri Lanka, and while we see more investment opportunities in small and medium-sized space, the Sri Lankan economy and thus many Sri Lankan companies are still relatively small to attract large-scale investments,” he told OBG. “This will gradually change as the economy grows and key sectors start to grow aggressively.”

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Sri Lanka’s Expolanka Sept net down 39-pct

ECONOMYNEXT – Sri Lanka’s Expolanka Holdings PLC said September 2016 quarter group net profit fell 39 percent to Rs243 million from a year ago largely owing to a write-down in its investment portfolio because of the stock market slump.

Sales of the group rose 17 percent to Rs16.2 billion over the period, according to interim results filed with the stock exchange.

Earnings per share for the quarter were 12 cents.

For the six months ending 30 September 2016, EPS was 22 cents, with net profit down 31 percent to Rs425 million although sales went up 12 percent to Rs31 billion.

The accounts showed profits from Expolanka’s core logistics business were up only 3 percent to Rs842 million, with sales up 10 percent to Rs26 billion.

The group’s leisure profits fell 8 percent to Rs94 million, although sales shot up 59 percent to almost Rs3 billion.

Expolanka Holdings chief executive Hanif Yusoof said profits fell “primarily due to a decline in other income resulting from a write down in passive investments held at the group level, alongside a more significant drop in exchange gains in comparison to the previous year.”

The write down in passive investments affected the profitability of the group’s venture business sector.

“The depressed stock market along with low liquidity in some of the stocks has resulted in a drop in share prices, affecting our investment value,” Yusoof said. “We are currently exploring possibilities for an exit from this passive investment with an appropriate value realisation to shareholders.”

Yusoof said the core sector logistics recorded an “encouraging” growth of 15 percent in revenue in the second quarter.

“Both air and ocean freight recorded double-digit volume growth for the year,” he said. “As anticipated, margins took a dip in the US trade lane and corrected to a more sustainable level when compared to the high level in the previous year.”

The group’s core markets in India, Bangladesh and Sri Lanka performed well, fueled by healthy volume growth in the US trade lane and a recovery in business from the Europe trade lane.

Yusoof said Expolanka was planning to sell its Indian outbound travel business.

“The Indian outbound had a challenging period on margins with higher cost increases than anticipated,” he said. “The Group has already entered into a memorandum of understanding to explore an exit from this business given the outlook. However, as part of our strategy, we will continue to focus on increasing our value propositions within the leisure.

Nestlé opens Rs500mn milk plant in Sri Lanka

ECONOMYNEXT – Nestlé Lanka said it has opened a milk plant in Sri Lanka’s Kurunegala area with an investment of Rs500 million that will expand its capacity to make popular dairy-based beverages.

The UHT or ultra-heat treatment plant will manufacture Ready-To-Drink (RTD) products like Milo, Nespray Nutri-Up, NescaféIce and Nestomalt, a statement said.

“The new UHT milk plant will positively impact the farmers we work with daily, strengthening our efforts to develop the local dairy industry,” said Shivani Hegde, managing director of Nestlé Lanka.

Nestlé, which has been operating in Sri Lanka for 110 years, focuses on manufacturing products locally, largely using local ingredients, and contributed Rs3.6 billion in 2015 to its dairy farmers as payment for fresh milk.

Central Bank Governor Indrajit Coomaraswamy, who declared open the plant, said the local manufacture of milk products reduces imports.

“External debt is a real challenge the country faces today. Nestlé, however, has greatly benefited the country by helping Sri Lanka earn and save its foreign exchange reserves through the local manufacture of Nestlé’s strong brands,” he said.

Nestlé is also a fine example of a company that has fully integrated itself into the domestic economy through its many initiatives to empower the lives of 20,000 local dairy farmers, he added.

“Their new investment will further increase import substitution and exports in the country,” said Upul Jayasuriya, chairman of the Board of Investment of Sri Lanka.

Sri Lanka Hayleys Sept net profit down 9-pct

ECONOMYNEXT – Sri Lanka’s Hayleys group said September 2016 quarter net profit fell 9 percent to Rs575 million from a year ago, with losses in its plantations business widening.

Sales rose 27 percent to Rs28 billion, according to interim accounts filed with the stock exchange.

Earnings per share for the quarter were Rs7.67. For the six months ending 30 September 2016, EPS was Rs12.40, with net profit down 19 percent to Rs903 million although sales went up 18 percent to Rs52 billion.

The accounts showed lower profits in the group’s transportation and logistics, leisure, power and energy, and purification product sectors, while profits from its gloves, construction materials and agriculture businesses rose.

A company statement said crop losses due to adverse weather conditions and a Government ban on weedicides resulted in the group’s plantation segment’s revenue shrinking from Rs4.7 billion to Rs4.4 billion during the period.

“While systemic issues in the Sri Lankan plantation sector did have a negative effect on the bottom line, these effects were largely mitigated by strong performances across Hayleys Group – particularly with regard to the hand protection and construction material segments,” Hayleys PLC Chairman Mohan Pandithage said.

Sri Lanka Treasuries yields rise at auction

ECONOMYNEXT – Yields on Sri Lankan 06 month and 01-year Treasury Bills rose at Wednesday’s auction while the yield on the 03-month bill remained steady at 8.60 percent, the debt office said.

The one-year bill yield rose 04 basis points to 10.14 percent, according to data from the debt office, a unit of the Central Bank of Sri Lanka.

The 06-month bill yield rose 09 basis points to 9.56 percent.

The debt office got Rs53 billion worth bids and accepted bids of Rs10.4 billion.

AIA Sri Lanka revenue increases by 21%

AIA Insurance Lanka PLC (“AIA Sri Lanka” or the “Company”) announced the financial results of the Company and its subsidiary for the nine months ended 30 September 2016.

Consolidated revenue increased by 21 per cent up to LKR 10,794 million, from LKR 8,954 million reported over the same period in 2015. This growth was mainly driven by the increase in the gross written premium (GWP) of Conventional Life business.

Gross written premium of life insurance business increased by 22 per cent to LKR 7,425 million, from LKR 6,093 million reported over the same period last year. This is attributed to the favourable shift in premium mode mix and growth in business volumes.

Gross written premium of Conventional Life increased 27 per cent to LKR 6,720 million, from LKR 5,271 million reported over the same period in 2015.

Investment income rose by 24 per cent to LKR 3,513 million, benefitting from the interest rate hike and attractive yield locking.

Consolidated profit after tax of continuing business increased by 40 per cent to LKR 199 million, from LKR 142 million reported over the same period last year.

The surplus of the life insurance business is reported annually at the year end and is therefore not included in the profit reported during interim periods in the year.

Shah Rouf, Chief Executive Officer of AIA Sri Lanka, said: “I am delighted to report a 40% increase in consolidated profit after tax for the nine months ended 30 September 2016. Our team continues to dedicatedly implement our strategy of building Premier Agency and Bancassurance distribution to provide our customers with the best of products and services."

"I am confident that we will continue to have strong delivery as we consolidate our position as a leading player in Sri Lanka’s insurance market.”

William Lisle, Chairman of AIA Sri Lanka, said: “I am pleased to see the strong results achieved by AIA Sri Lanka. With focus on delivering profitable growth and sustainable progress through enhanced product portfolio and extended distribution reach, AIA Sri Lanka is well on course to becoming the pre-eminent life insurer in Sri Lanka.”

Through an extensive network of agents, partners and employees across Asia-Pacific, AIA serves the holders of more than 29 million individual policies and over 16 million participating members of group insurance schemes.
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Sunshine Holdings doubles 1h profits

Bolstered by impressive growth in its Agribusiness segment, Sunshine Holdings concluded the half year ended September 30, 2016 (1H17) on a strong positive note.

Consolidated revenue during the period in review rose by 13.6% YoY up to Rs. 9.6 billion, while profits after tax (PAT) increased by 42.2% YoY up to Rs. 935.4 million, leading to a 29% YoY increase Profits to Equity Holders of Rs. 433 million during, and earnings per share of Rs. 3.21 over 1H17.

Healthcare continued to be the largest contributor to top and bottom line performance, accounting for 41.7% of group revenue and 42% of Profit After Tax and Minority Interest (PATMI). The Healthcare sector’s contribution was followed by strong performances across

Sunshine’s Agribusiness and FMCG segments which accounted for 34.2% and 19.6% respectively.

Net Asset Value per share during the same period increased to Rs. 44.9, as compared with Rs. 42.8 at the beginning of the year.

Notably, the performance of Sunshine Holdings over the quarter ended 30th September 2016 (2Q17) amounted to the Group’s highest ever 2Q performance. During this period, profits more than doubled, recording 53.5% YoY growth to reach Rs. 527 million.

Group Managing Director Vish Govindasamy said Sunshine Holdings was able to achieve its highest ever 2Q profits. “These results stand as further evidence of the growing success that our growth-oriented strategy has enabled and the Group remains poised for further expansion and innovation over the medium-long term,”he said.

Healthcare revenue during 1H17 rose by 17.9% YoY driven by growth in the Group’s retail business, however as a result of price controls of Pharmaceuticals, an increased cost of sales and exchange rate fluctuations were absorbed by the company, leading to a 90 basis point (bps) contraction in Earnings Before Income Tax margins (EBIT).

The FMCG sector reported revenues of Rs. 1.9billion in 1H17, up 20.3% YoY, on the back of both volume and price growth while the group’s domestic branded tea business within FMCG sold 1.89 million kilos of branded tea, up 15% YoY, driven by their largest brand ‘Watawala Tea’, and their converter brand ‘Ran Kahata’

PAT from the FMCG segment saw a contraction of 28.2% YoY, to stand at Rs. 164 million in 1H17, with a margin of 8.6%, compared to 14.4% in the same period last year.

High margins witnessed during same period last year were mainly a result of low tea prices which prevailed during the period. Business expansion investments pertaining to scaling up of the ‘Zesta Connoisseur’ brand across Shangri-La properties worldwide also had an impact on the operating margins.

The Agribusiness sector represented by Watawala Plantations (WATA) saw revenue growth of 1.7% YoY to Rs. 3.3 billion, despite a contraction of 6% YoY in Tea revenues, which was mitigated by the group’s flourishing Palm Oil sub sector which recorded a 42% YoY during the period in review.The Palm Oil sector, was able to record a PAT of Rs. 548 million, as compared with a previous Rs. 262 million.

"Packaging revenues increased by 13.4% YoY to Rs. 192 million, leading to a PAT of Rs. 7 million while the changing weather patterns resulted in 27.9% YoY reduction in revenue within the group’s Renewable Energy division. The group, which provides employment to around 12,000, generates over US$ 120 million in revenue," Group MD Vish Govindasamy said.
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Nestle Lanka posts Rs. 3.5 bn profit in first 9 months

Nestle Lanka has recorded a revenue of Rs. 27.8 billion for the first nine months of the year, posting a growth of 6.1% and net profit of Rs. 3.5 billion.

The Company faced stiff cost challenges and volatile market conditions, the impact of which was minimised through cost optimisation measures and consumer led initiatives providing more value.

Nestle Lanka Managing Director, Shivani Hegde said the steady performance is a result of the trust consumers place in their products.”We have once again reaffirmed our position as a leading and respected company, committed to enhancing the quality of life of the people of Sri Lanka, through our strong brands and rural development initiatives.”

Leveraging the Nestle group’s strong R&D capability and Nestle Lanka’s expertise in understanding local consumer preferences, the company launched Nescafe‚ 3 in 1 coffee mix, offering coffee lovers a product perfected to give the right taste and aroma.

The company continued to invest in Sri Lanka and recently invested around Rs. 500 mn in a new state-of-the-art milk processing and packing facility at its factory in Pannala, demonstrating its commitment towards enhancing local fresh milk usage.

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