Bukit Darah Leisure sector 1Q records 20.5% YoY increase

Portfolio and Asset Management sector of Bukit Darah is currently evaluating several investment opportunities in the venture capital space as well as revitalizing its marketing strategy with the objective of increasing the client base and deriving enhanced returns.

Meanwhile for the three months ended June 2017, the revenue contribution from Portfolio and Asset Management sector of Bukit Darah group marginally declined by 3% to Rs. 183.3 million(Mn) from Rs.188.4Mn observed in the previous corresponding period.

Pegasus Reef hotel operated with its full room capacity of 140 rooms during the three months under review whereas during the comparative three months period in 2016, room refurbishment was commenced.
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Amãna Bank Rights Issue infuses USD 22 mn FDI

Amãna Bank’s recently concluded 1 for 1 Rights Issue brought in Foreign Direct Investments valued at over USD 22 million to Sri Lanka.

Rights Issue which was oversubscribed increased the Bank’s capital by Rs. 4.75 billion of which Rs.3.37 billion was from overseas shareholders.

IB Growth Fund (Labuan) LLP an investment firm under the aegis of the Islamic Development Bank (IDB) was the main subscribers to the Rights Issue, infusing a fresh capital of Rs. 2.4 billion along with IDB. IDB is a ‘AAA’ multilateral development financial institution which has over 50 countries as its membership. IDB’s subsidiary the Islamic Corporation for the Development of the Private Sector (ICD) , which oversees investments made by its subsidiary IB Growth Fund (Labuan) LLP, completed a 3 month comprehensive due diligence of Amãna Bank prior to committing their investment at the 42nd Annual Meeting of IDB Governors held in Jeddah.

Sharing his views on the inflow of foreign funds, Amãna Bank’s Chairman Osman Kassim said “At a time when the country’s focus is to increase FDIs, we are truly honoured to have had the support and confidence of our overseas shareholders, which has resulted in majority of our Rights Issue funds coming in as FDIs.

I am indeed thankful for IDB’s continued patronage despite Sri Lanka not being an IDB member country. ”

The IDB Group along with the participation of other overseas and local strategic shareholders will play a key role in supporting Amãna Bank to capitalize on the growing market potential for its unique and people friendly banking model across the country.

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Nations Trust Bank 1H PBT up by 27%

Nations Trust Bank closed the first half ending June 30, 2017 with a pre- tax profit of Rs. 2,977 million (Mn) up by 27% over the corresponding period in the previous year.

Post tax profits increased at a lower rate of 12% as a result of the increase in the effective tax rate stemming from higher financial services VAT as well as the additional tax provision of Rs. 90 Mn for the inter company dividend transfer which impacted the Group bottom line growth. However the dividend income received from the subsidiaries resulted in a higher profit growth for the Bank and further strengthened the capital base of the Bank. Performance was driven by the momentum achieved in the Bank’s core activities which posted a revenue growth of 21% while the operating expenses increase was kept at 11%.

The resulting improvement to operating margins were somewhat subdued by higher impairment charges for the period under review. Net interest income increased by 19% as the volume growth outperformed the impact arising from the narrowing of NIMs.

Interest income increased by 45% whilst interest expense increased at a faster rate of 70% as deposit rates in the market continued to increase due to tight liquidity.

Net fees and commission based income recorded a growth of 32% primarily driven by cards and trade related products. Other operating income also recorded good growth due to non trade related FX income. Net trading losses for the year amounted to Rs. 267Mn which is reflective of the swap cost arising from an increase in the funding FX SWAP book and unfavorable movements in forward premiums.

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CB suspends Pan Asia Bank primary dealership for 6 months

LBO - Sri Lanka’s Central Bank has suspended business activities of the primary dealer of Pan Asia Banking Corporation (PABC) for a period of six months with effect from Tuesday.

Releasing a statement, the Central Bank said the regulatory action is based on the findings of an investigation carried out by them related to PABC’s transactions with Perpetual Treasuries in the government securities market.

“The Central Bank wishes to inform the general public that the above regulatory action does not in any way affect PABC’s ability to carry on banking activities set out in Schedule II of the Banking Act as a Licensed Commercial Bank.”

“Accordingly, PABC may continue to deal in government securities to the extent permitted under schedule II of the Banking Act.”

The Central Bank said action will also be taken to safeguard the interests of the customers and counterparties of PABC in the government securities market, in an orderly manner.

The Central Bank emphasized that this regulatory action restricts PABC’s access to the primary auctions for government securities but does not affect any of the other services of PABC.

Earlier last month, the monetary board of the Central Bank suspended Perpetual Treasuries from carrying on the business and activities of a primary dealer for a period of six months.

Sri Lanka distilleries net down amid tax hikes, consumer crunch

ECONOMYNEXT - Distilleries Corporation of Sri Lanka, the country's largest hard alcohol marker, saw profits plunge 63.9 percent to 579 million rupees in the June quarter as revenues stayed flat amid weak demand.

The firm reported earnings of 1.93 rupees per share for the quarter. Distilleries is part of Melstacorp, and is no longer traded following a share swap.

In the June quarter, gross revenues rose 0.2 percent to 21.34 billion rupees, and net revenues after sales taxes rose 8.4 percent to 6.69 billion rupees, but costs surged 8.4 percent to 5.2 billion rupees, shrinking gross profits 50 percent to 1.42 billion rupees.

Total revenues are down from the 22.6 billion rupees reported in the March quarter.

Industry analysts say the Distilleries was hit by higher import taxes on ethanol imposed after the last budget, while value-added taxes re-imposed in full also added to the total price.

Some competitors are, however, selling below the market leader's price, raising questions over excise tax administration, they say.

The high price of legal arrack as well as strong beer has raised questions whether moonshine is taking legal market share.

Beer sales are sharply down at the expense of hard liqour after the new administration raised beer taxes faster. In the past, taxes on beer were below the actual alcohol content, according to promoters of higher beer taxes.

Meanwhile, several publicly traded consumer firms have reported weaker sales, pointing to larger weakness in demand.

In 2015, Sri Lanka's Central Bank printed tens of billions of rupees to help finance an expanded budget deficit, and driving credit to unsustainable levels, in a so-called 'Keynesian stimulus' generating a balance of payments crisis and capital flight.

It is usual for demand to come down during the Keynesian hangover phase, analysts say, especially when the centarl bank collect forex reserves, amid slowing credit.

Sri Lanka's Commercial Bank net up 17-pct in June

ECONOMYNEXT - Sri Lanka's Commercial Bank of Ceylon said net profits rose 17.8 percent from a year earlier to 3.8 billion rupees in the June 2017 quarter, with incremental growth in fund- and fee-based income.

The group reported earnings of 4.15 rupees per quarter. In the six months to June, the group reported earnings of 8.26 rupees per share on total profits of 7.6 billion rupees, which rose 17 percent. In mid-day trading on Monday, the stock was up 50 cents to 138.00 rupees.

Interest income for the quarter rose 30 percent to 25.5 billion rupees, and interest expenses increased 41 percent to 16.2 billion rupees, and net interest income grew at a slower 15 percent to 9.3 billion rupees.

Loan losses rose 24 percent to 708 million rupees, with a general provision of 648 million rupees. Fee and commission income was up 33 percent to 2.0 billion rupees. Net gains and losses from trading was 482 million rupees against a 1.89 billion rupee loss in the last quarter.

Other income was down to 271 million rupees down from 2.33 billion rupees a year earlier.

In the six months to June, the group loan book grew 8.5 percent to 673 billion rupees. Deposits also grew 8.2 percent to 804 billion rupees.

The gross non-performing loan ratio fell to 2.1 percent from 2.18 percent.

Financial instruments available-for-sale was up 1.5 percent to 162 billion rupees, and the held-to-maturity portfolio grew 4.9 percent to 66.7 billion rupees.

Total assets rose 7.2 percent to 1,095 billion rupees. Equity was up 22 percent to 97.6 billion rupees. Core capital adequacy at bank level rose from 11.5 percent to 12.2 percent and total capital adequacy rose from 15.9 percent to 17.2 percent.

Sri Lanka hospital profits boosted by Dengue: Hemas

ECONOMYNEXT - Sri Lanka's Hemas Group said falling profits from price controls on pharmaceuticals and currency depreciation was contained by a dengue epidemic, which has boosted occupancy at its hospitals.

Although pharmaceutical sales increased, profits were hit, the group said.

"However, this decline in profitability was mitigated by the strong growth in hospitals," Chief Executive Steven Enderby told shareholders. "Hospitals operated at high capacity levels over the quarter in part due to the dengue epidemic."

Hemas said consolidated healthcare revenues grew 18.7 percent to 5.1 billion rupees, which grew operating profits 22.4 percent.

Meanwhile, Sri Lanka imposing price controls on pharmaceuticals has busted the currency from 131 rupees to 154 rupees from early 2015, printing money through a soft pegged Central Bank. Central Bank money printing also worsens the credit cycle, creating booms and busts. The latest balance of payments crisis came from money printed to finance a state salary hike and vote-buying subsidies.

But now, the economy is going through a correction, with more taxes being raised to finances state spending and income redistribution. State spending usually gives less 'bang-for-buck' as it has no incentive to choose the best return for other people's money.

Hemas said its Bangladesh operations was also in the midst of a restructuring, and the leisure sector suffered losses. Its logistics unit grew 80 percent with shipping, helped by agencies for Evergreen and Far Shipping.

In the June quarter, group profits were down a marginal 3 percent to 694 million rupees. The group reported earnings of 1.21 rupees for the quarter. In mid-day trading on Monday, the stock was up 4.0 rupees to 144.

Revenues grew 14.9 percent to 11.3 billion rupees, cost of sales grew at a faster 17 percent to 7.1 billion rupees and gross profits rose 11 percent to 4.1 billion rupees.

Sri Lanka's Bogawantalawa Tea June net profit up 56-pct

ECONOMYNEXT – Sri Lanka’s Bogawantalawa Tea Estates reported that net profit rose 56 percent to 79 million rupees in the June 2017 quarter from a year ago, with exports fetching high prices during the period.

Sales of the firm, part of Metropolitan Resources Holdings, rose 17 percent to 1.2 billion rupees, according to interim accounts filed with the stock exchange.

Earnings per share were 94 cents compared with 60 cents the previous year. The share last traded at 15.40 rupees on Monday.

June quarter profit came from tea, with its small rubber business showing losses.

Sri Lanka's Serendib Hotels losses more than double in June quarter

ECONOMYNEXT – Sri Lanka’s Serendib Hotels group losses more than doubled to Rs72 million in the June 2017 quarter from a year ago with occupancy levels lower amid stiff competition from other hotels and informal accommodation.

Sales of the firm, part of the Hemas Holdings group, fell three percent to Rs303 million, according to interim accounts filed with the stock exchange.

The loss per share was 65 cents compared with 30 cents the year before. The Serendib Hotels share last traded at Rs24.10 Monday.

Serendib Hotels Executive Director Malinga Arsakularatne said the group had an average occupancy of 60% during the quarter under review, down 7 percent from last year.

“However, the loss in room nights was compensated by a 10% increase in the average room rates in rupee terms,” he said.

Club Hotel Dolphin achieved an occupancy of 66% and Avani Bentota achieved 59%, while Sigiriya achieved only 49%.

Arsakularatne said losses were also because of increased food and beverage costs, largely due to an increase in the all-inclusive package mix particularly in Club Hotel Dolphin.

Bad debt and other one-off provisions, higher IT-related expenses and amortization due to new systems implementations, and business development expenses also contributed to losses.

“While the industry is set to grow in terms of supply as well as demand, we expect the rest of the financial year to continue to be challenging,” Arsakularatne said.

“There seems to be an increasing trend towards the emerging traveler seeking alternative types of accommodation such as boutique hotels and villas, backpacking lodges etc, at the expense of the traditional tourist seeking mainstream hotels and resorts.”

The Serendib Hotels group comprises of Serendib Hotels and its subsidiaries, Dolphin Hotels, Hotel Sigiriya and Serendib Leisure Management Ltd.

It also manages AVANI Bentota Resort & Spa, AVANI Kalutara Resort, Club Hotel Dolphin and Hotel Sigiriya with a total of 413 rooms.

Jada Resorts & Spa (Pvt) Ltd., the owning company of Avani Kalutara, is treated as an investment and its earnings were not included in the accounts.

Sri Lanka's HNB's profits flat in June quarter

ECONOMYNEXT - Profits at Sri Lanka's Hatton National Bank group, which has an insurance unit edged up 2 percent to 3.4 billion rupees in the June 2017 quarter, amid higher loan loss provisions.

The group reported earnings of 8.05 rupees per share for the quarter. In the six month so June the group reported earnings of 17.09 rupees per share.

Interest income rose 33 percent to 28.5 billion rupees, and interest expenses rose at a faster48 percent and the bank grew net interest income 17 percent to 11.2 billion rupees.

Net fee income rose 26 percent to 2.3 billion rupees. Trading losses narrowed 45 percent to 1.4 billion rupees with forex swap costs falling, the bank said.

Insurance premium income rose 18 percent to 1.49 billion rupees.

Specific loan losses rose to 529 million rupees from a reversal of 65 million rupees last year. General provisions were increased to 545 million rupees from 123 million and other impairments rose to 417 million rupees from 3.6 million.

At bank level, loans grew 7 percent to 627 billion rupees and deposits grew 8 percent to 672 billion rupees.

Financial investments - available for sale fell 4 percent to 85.9 billion rupees.

Group gross assets grew 7 percent to 967 billion rupees in the six months to June.

Sri Lanka's HNB non-voting stock undersubscribed

ECONOMYNEXT - A cash call by Sri Lanka's Hatton National Bank which has left 4.4 million shares undersubscribed, is being offered to potential investors 'acceptable to the Board."

HNB offered 56 million voting shares at 220 rupees to rise 12.3 billion rupees and 14.09 million non-voting shares at 190 rupees to raise 1.8 billion rupees and boost its capital.

Voting stock, drew applications for 58.4 million shares but non-voting drew only 9.2 million orders, with another 300,000 requested through a 'letter of intimation' the bank said in a stock exchange filing.

The bank had allotted the stock. It says parties acceptable to the board may apply for additional shares through letters of intimation until August 24.

Sri Lanka's Bank of Ceylon profits dip with loss provisions

ECONOMYNEXT - Profits at Sri Lanka's state-run Bank of Ceylon group fell 9.6 percent to 4.44 billion rupees in the June 2017 quarter amid higher loan loss provisions, as interest rates rose following a period of strong loan growth.

Group interest income rose 29 percent to 43.3 billion rupees and interest expenses rose at a faster 34 percent to 27.7 billion rupees and the bank grew its net interest income 21 percent to 15.6 billion rupees.

Net fee income fell 9.9 percent to 1.46 billion rupees. Gains from trading was positive at 1.1 billion rupees but was 19 percent from a year earlier. Other operating income was up 59 percent to 1.74 billion rupees.

Loans grew by a strong 11.2 percent to 1,143 billion rupees in the June 2017 quarter. Customer deposits grew at a lower 10.4 percent to 1,406 billion rupees.

Loan loss provisions rose sharply to 4.4 billion rupees from a reversal of 180 million rupees a year earlier, with specific provision rising to 1.88 billion rupees from a reversal of 434 million rupees.
The bank made 2.56 billion rupees of general provisions to cushion against any losses.

The gross non-performing loan ratio rose to 3.32 percent from 2.88 percent.

The banks had 245 billion rupees in its investments held to maturity portfolio which usually refer to Treasury bonds.

Gross assets grew 8.1 percent to 1,854 billion rupees and net assets grew 9.4 percent to 113 billion rupees. Core capital adequacy fell to 8.29 percent from 8.72 percent and total capital adequacy fell to 11.79 percent from 12.34 percent.

Sri Lanka's Lion Brewery avoids loss with insurance

ECONOMYNEXT - Sri Lanka's Lion Brewery Plc, reported a 315 million rupee profit in the June 2017 quarter helped by 600 million rupee insurance receipt while revenues fell and gross profits shrank after tax hikes.

The firm reported earnings of 3.95 rupees per share.

Revenues fell 3 percent to 5.4 billion rupees in the June quarter, and cost of sales went up 1 percent to4.49 billion rupees, shrinking gross profits 20 percent to 939 million rupees.

Higher taxation with beer badly hit over the past two years with higher taxation on beer shifting demand to hard alcohol. A tax on cans was also introduced.

"As a result of these multiple taxes, the price of beer increased by as much as 75 percent over a 14-month period," the firm told shareholders.

"Thus, beer is now unaffordable. This has compelled consumers to shift to cheaper, value for money alternatives such hard alcohol, toddy & illicit alcohol."

Currency depreciation and inflation, following a bout of money printing in 2015, had hurt consumer disposable income, and most consumer firms are seeing tighter venues.

Lion received a 608 million rupee insurance claim for interrupted business when a flood hit its plant, which is now back in operation.

High finance costs cut Sri Lanka’s Cargills June quarter profit

ECONOMYNEXT – Sri Lanka’s Cargills (Ceylon) said net profit fell two percent to Rs751 million in the June 2017 quarter from a year ago with a sharp increase in finance costs owing to higher borrowing expenses.

Sales of the group, part of CT Holdings, rose nine percent to Rs22.9 billion over the period, according to interim results filed with the stock exchange.

Diluted earnings per share were Rs3.30. The Cargills (Ceylon) share last traded at Rs198.

A note accompanying the accounts said the performance of the group during the period “was satisfactory in light of the weak consumption environment, and external weather challenges including flooding and landslides, and a severe drought that continues to impact the Eastern, North Central and North Western Provinces.”

It said that group net finance costs increased 86.2% to Rs367 million in the June quarter from a year ago because of the increase in group debt and rise in market interest rates.

Share of associate profit rose to Rs14.1 million for the quarter, compared with a loss of Rs29 million the previous year on account of the performance of associate Cargills Bank.

Cargills (Ceylon) said its retail business sales grew 9.2% to Rs.18.2 billion while operating profit grew 7.6% to Rs.896 million.

“Cargills successfully kept prices of key essentials below market prices in spite of rising inflation during the quarter,” the company said.

“Cargills Food City added five new outlets during the quarter, taking the total number of outlets to 320 as at 30th June 2017. The pace of expansion is targeted to increase through the financial year.”

The group’s FMCG business sales grew 7.7% to Rs.3.8 billion during the June quarter from a year ago with operating profit up 10% to Rs.616 million.

“The FMCG business has enhanced market share amidst what have been tight market conditions,” the company said.

Sri Lanka's Laugfs gas in losses; hopes for market pricing

ECONOMYNEXT - Sri Lanka's Laugfs Gas, a publicly traded liquefied petroleum gas distributor said it lost 455 million rupees amid price controls and higher interest costs, but was hopeful of market pricing soon.

The reported losses of 1.18 rupees per share in interim accounts filed with the Colombo Stock Exchange.

Laugfs said revenues rose 32 percent to 5.1 billion rupees and expenses rose 48 percent to 4.3 billion rupees, and gross profits fell 18 percent to 782 million rupees.

In the March quarter gross profits were 683 million rupees.

In March 2017 the Saudi Aramco benchmark price for Butane rose to 600 dollars a tonne from 320 a year earlier and propane rose to 480 from 290 dollars a tonne, but market prices were not changed amid new price controls imposed by the current administration. There is a court-ordered formula to market-price LP gas.

But May, June and July benchmark contract prices plunged. By July, butane was at 365 dollar a tonne and propane at 345 a tonne. It is not clear whether the firm is buying forward.

Interest costs at Laugfs rose 116 percent from a year earlier to 534 million rupees. Long term loans rose from 8.9 billion rupees to 16.0 billion over the past 12 months.

"Whilst investments made in some areas such as Renewable Energy sector are already yielding profits, certain other long term investments will be of longer gestation periods," Laugfs Chairman W K H Wagapitiya told shareholders.

In August butane jumped to 460 dollars again and propane to 420. Liquefied petroleum gas is about 70 percent butane.

"…[T]he Company is in a continuous dialogue with the relevant regulatory authorities in order to ensure that LPG retail prices are in line with global LPG market prices, so that the Company’s main source of revenue is secured," Wagapitiya said.

"We are confident that we will receive a positive response in this regard very soon."

He said group was also seeking strategic partnerships to generate funds to create marketing channels and opportunities.

Laugfs also distributes gas in Bangladesh.

Sri Lanka Treasuries yields reverse downward trend

ECONOMYNEXT - Sri Lankan Treasury Bills yields reversed a falling trend Wednesday with the one-year bill yield up 16 basis points to 9.54 percent at an auction from 9.38 percent last week, the central bank said.

Its Public Debt Department said in a statement the 06-month bill yield rose 15 basis points to 9.17 percent from 9.02 percent last week.

The 03-month bills were not offered at the auction which drew bids worth Rs40.5 billion of which bids worth Rs17.6 billion were accepted.

Sri Lanka Telecom June net down 4.3-pct

ECONOMYNEXT - Sri Lanka Telecom, the country's sole wireline operator, which has a mobile unit, said net profit fell 4.3% to Rs1,051 million in the June 2017 quarter from a year ago.

Sales of the group rose 2.4% to Rs18.7 billion over the period, according to interim results filed with the stock exchange.

Earnings per share for the quarter fell to 58 cents from 61 cents the year before. SLT shares were trading at Rs31 Wednesday morning.

In the six months to June EPS was Rs1.39, down from Rs1.56 the previous year with net profit of Rs2.5 billion and sales of Rs37.4 billion.

Pre-tax profits from both fixed line and mobile operations fell during the half-year, the accounts showed.

Accounts of SLT group, which comprises of the holding company and eight subsidiaries including Mobitel (Pvt) Ltd, the mobile arm, showed higher depreciation charges during the quarter and lower interest income and foreign exchange losses.

Sri Lanka's Ceylinco Insurance June quarter net profit up 75-pct

ECONOMYNEXT - Sri Lanka's Ceylinco Insurance Plc said net profits rose 75 percent in the June 2017 quarter to 894 million rupees from a year earlier.

Ceylinco Insurance reported earnings of 33.84 rupees per share for the quarter, according to interim results filed with the stock exchange. The share last traded at 1,400 rupees.

Net written premiums after re-insurance costs grew 5.0 percent to 6.9 billion rupees, the accounts showed. Non-life premiums grew 11.5 percent and life rose 3.2 percent.

Investment income increased 31 percent from a year earlier to three billion rupees in the quarter.

Claims rose 11 percent to 3.6 billion rupees. Income tax expenses more than doubled to 284 million rupees. Ceylinco Insurance is liable to income tax at the rate of 28%.

The company said in a statement its investment portfolio reached 92.4 billion rupees as at 30th June 2017, up 14 per cent since 31st December 2016.

“We believe this performance is a good illustration of the momentum that has kept the company ahead of the competition for the past 13 years,” Ceylinco Life Managing Director/CEO R. Renganathan said.

“General business sentiment remains somewhat subdued and the insurance market is fiercely competitive.”

Total assets grew to 144.5 billion rupees from 130.8 billion rupees in December 2016.

Sri Lankan shares fall to 4-mth closing low; blue chips drag

Reuters: Sri Lankan shares fell for a fourth consecutive session on Wednesday, posting their lowest close in four months, as local investor sentiment remained muted following a string of disappointing June-quarter corporate results.

However, the decline was limited as foreign investors bought into equities.

The Colombo stock index fell 0.36 percent, or 23.50 points, to 6,417.41, its lowest close since April 18.

It declined in 13 of the last 14 sessions, while yields on short-term government securities also fell over the past two weeks.

"The market came down on blue chips. The main reason for the market to come down is the poor quarterly earnings," said Atchuthan Srirangan, a senior research analyst at First Capital Holdings PLC.

Foreign investors bought shares worth a net 98.3 million rupees (about $641,854) on Wednesday, extending the year-to-date net inflow to 27.6 billion rupees.

Turnover was 780.3 million rupees, less than this year's daily average of around 875.3 million rupees.

Shares of market heavyweight John Keells Holdings fell 0.5 percent, Carson Cumberbatch Plc dropped 3.2 percent, Melstacorp Plc ended 0.8 percent weaker and Ceylon Cold Stores declined 0.8 percent.

Pan Asia Banking Corp (PABC), which had its primary dealer status suspended by the central bank on Tuesday for six months, fell 2.4 percent. 

($1 = 153.1500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)