Milk powder price controls drive down LMF profits

No dividend recommended as earnings plunge

Lanka Milk Foods PLC (LMF) has seen a sharp downturn in profitability both at group and company levels in the year ended March 31, 2014 with the group attributable profit slumping 83.71% to Rs.61.1 million from Rs.374.9 million the previous year while the company saw its profit plunge 81% to Rs.44 million from the previous year’s Rs.231.2 million.

LMF Chairman Harry Jayawardena has said in the company’s annual report that although overall country economic indicators have improved during the year, "the milk powder sector continued to face challenging conditions."

Lakspray generates 44.27% of the group’s turnover followed by Ambewela (17.33%), yoghurt (12.99%) and fresh milk (6.95%),

Jayawardena expressed the hope that the government and the Consumer Affairs Authority will take a well informed decision to allow price increases in line with rising global prices of powdered milk in order to ensure a level playing field in the industry.

Jayawardena’s daughter, Ms. D.S.C. Jayawardena also said as much in the annual report stating:

"The profitability of the powdered milk arm suffered during the year due to the refusal by the Consumer Affairs Authority to allow companies engaged in the marketing and distribution of powdered milk to hike their prices in keeping with the global price rise in the rates of powdered milk."

"This ongoing and unfavourable status quo for the last two years is eroding the profitability of the powdered milk business in the country and gives rise to an urgent need for the renewed appraisal of price structures," she said.

Although LMF had made several representations to the concerned authorities to consider the plight of powdered milk companies, no positive response has been forthcoming so far.

LMF which owns 12% of the Distilleries Company of Sri Lanka, one of the country’s strongest listed corporates, has recommended no dividend for the year under review.

Mr. Harry Jayawardena said that LMF has sustained market leadership in several segments of the dairy industry through accelerated innovation and meaningful engagement with consumers.

"We are confident that our strong management systems and newly improved operational processes will combine to deliver much strong profitability in the upcoming financial year," he said.

The company which is into milk production running a herd of over 2,000 cattle in its dairy farms had injected Rs.875 million into its subsidiary, Lanka Dairies (Pvt) Limited to expand production capacity from 2,650 litres per hour to 8,500 litres per hour. New state of the art machinery enabled them to supply milk in the latest screw cap in one-litre slim packs in keeping with international standards.

Ms. Jayawardena said that the demand for fresh milk had reached a peak during the year enabling LMF to function at optimum capacity with the demand for fresh milk outstripping supply at the end of the period under review.

Ambewela Yoghurt had delivered a strong performance during the year with the Ambewela products boosting turnover Rs.847 million from Rs.683 million the previous year. Lanka Dairies earned revenue of Rs.1.2 billion during the year, up from Rs.1.08 billion the previous year.

"Ambewela products and Lanka Dairies were the two best performing companies in the Lanka Milk Foods Group in the period under review. Meanwhile, Lanka Milk Foods (CWE) PLC earned revenue of Rs.2,446 million during 2013/14 and posted a gross profit of Rs.171 million during the same period," she said.

She further reported that the upsurge in demand for fresh milk has accelerated their expansion plans in order to expand capacity further to meet the higher demand.

LMF has a stated capital of Rs.999.95 million, a capital reserve of Rs.105.1 million, an available for sale reserve of Rs.7.47 billion and revenue reserves of Rs.1.4 billion in its books.

Total assets ran at Rs.11.6 billion and total liabilities at Rs.1.6 billion.

Millford Exports (Ceylon) Limited with 33.57%, Mills Enterprises Limited with 15.3% and Melstacorp (Pvt) Limited with 14.87% are the biggest shareholders of the company.

Net assets per share had grown to Rs.247.08 from Rs.212.93 the precious year while the share closed for the year at Rs.107.10, down from Rs.108.30 the previous year.

The directors of the company are: Messrs. D.H.S. Jayawardena (Chairman), R.K. Obeyesekere, Zaki Alif, Mr. C.R. Jansz, Ms. D.S.C. Jayawardena, D.S.K. Amarasekera and Dr. A. Shakthevale.
www.island.lk

Sri Lanka central bank cuts interest rates on pawn loans

Sri Lanka's central bank requested banks on Friday to cut interest rates on loans in which banks accept gold as collateral, or pawning, to 12 percent if they want to be eligible for a government credit guarantee scheme. Banks had been charging 15 percent interest on such loans.

The central bank in May announced a credit guarantee scheme for loans backed by gold as collateral, in a bid to boost credit growth which fell to a four-year low in March. Pawning is a widely used method of borrowing in Sri Lanka.

"The central bank has requested all banks who are participating in the credit guarantee scheme to reduce the applicable interest rate for such pawning advances to 12 percent from the current rate of 15 percent, with immediate effect," the central bank said in a statement. It said 12 banks had joined the scheme and those banks grant loans worth up to 80 percent of the value of the gold used as collateral.

The scheme, and other central bank measures to try and boost lending, have yet to lift credit growth in the private sector.

Banks lost huge amounts of money last year as the gold price plummeted because that encouraged banks to make smaller loans and as defaults left them with lower-value collateral.

Loans provided by pawning at Sri Lankan banks fell 13.7 percent last year to 292.9 billion rupees ($2.25 billion), according to central bank data. (Reuters)
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‘SL’s bullish stock market, reflective of investor confidence’

‘Sri Lanka’s bullish stock market is reflecting the overall high confidence and the positive sentiments among investors, Securities and Exchange Commission chairman Dr. Nalaka Godahewa said Thursday at the launching of the ‘Capital Market Conference 2014’ at Cinnamon Lakeside.

The conference was organised by the Securities and Exchange Commission and the Colombo Stock Exchange.

He added: ‘The capital market conference 2014, is quite timely, coinciding with a bullish market, reflecting the overall high confidence and the positive sentiments amongst the investors.

‘As we all know, the stock markets are considered the barometers of economic development. Usually when an economy performs well, the stock market flourishes. When an economy struggles, the stock market becomes bearish. So our key policy makers who are present with us today, should be happy to see the exceptional performance of the Colombo Stock Market, which is symbolic of the post conflict economic progress of the country.

‘Since mid 2009, over the last 5 years, the all share price index of Colombo Stock market has grown more than 300 percent from 1,800 to 7,400 levels. The market capitalization has appreciated by over 350 percent during the same period.

‘The average daily turnover of the CSE which was Rs.464 million in 2009 has increased to Rs.1.2 billion by 2014. The Net Asset Value of Unit Trusts have gone up from Rs.6.7 billion to Rs.75.7 billion. Market capitalization to GDP ratio, has reached 35%.

‘During the last few years, we have taken a number of strategic initiatives, to develop our capital market inline with the Governments vision of making Sri Lanka a commercial hub for the region. We have already completed most of these tasks and the results you see today, are reflective of our efforts. But naturally our goals are long term and the journey will continue. You will hear more about our plans during this capital market conference 2014.

‘Today’s event is attended by the leaders of our business community and a large cross section of local and foreign stakeholders. We have many invitees here representing various public and private sector institutes.

‘Some of our participants have come from very far. We have representatives here today, from a number of countries including- USA, UK, Germany, Hong Kong, Singapore, Japan, Switzerland, Netherlands, Thailand, Malaysia, India, Pakistan, Saudi Arabia, Bahrain and Dubai Whilst thanking each and everyone of you, for your keen interest, we trust that you will find the conference productive and useful.
www.island.lk

Nawaloka buys control of Millennium Housing for Rs. 459 m

Nation Lanka divests 68% stake with Rs. 306 m capital gain

Nawaloka Holdings Ltd. yesterday bought 68% controlling interest in Millennium Housing Developers Plc for Rs. 459 million with the seller Nation Lanka Finance booking hefty capital gain.

Nawaloka Construction Ltd. bought 53 million shares or 39.35% stake at Rs. 5 per share and related party Ceyoka Ltd. bought 38 million shares or 28.28% stake. The latter is an associate of Nawaloka Holdings Ltd. Buyer and seller and acquired company share one or more common directors.

The seller, Nation Lanka Finance Plc, said the divestiture was carried out with the approval of the Central Bank. It said following the sale, it expects to recognise Rs. 305.8 million as a direct gain in financial statements. This represents a Rs. 1.22 increase in the Net Asset Value per share of Nation Lanka Finance. With this capital gain, Nation Lanka Finance is poised to make significant profits for the current financial year ending on 31 March 2015 compared to a Rs. 23.6 million net profit posted in FY14.

The Net Asset Per Share of Millennium Housing Developers at Group level is Rs. 4.56 as at September 2014, down from Rs. 5.18 as at FY14. At Company level it was Rs. 3.64 down from Rs. 4.13.

In the quarter ended 30 September 2014, the highest price traded was Rs. 7.20 and the lowest was Rs. 5.50 with the closing value being Rs. 6.10.

Millennium Housing Chairman Harshith Dharmadasa is also a director at Nawaloka Holdings. He is also a director at Nation Lanka Finance whilst Nawaloka Constructions owns 7% stake in the company.

The group has assets worth Rs. 1.14 billion and liabilities of Rs. 530 million.

In the six months ended on 30 September 2014, the company posted revenue of Rs. 127 million, down from Rs. 314 million a year earlier. Operating loss was Rs. 18 million, as against a profit of Rs. 62 million in the first half of FY14. The group’s net loss was Rs. 9 million, as opposed to Rs. 67 million profit a year earlier.

With the acquisition, Nawaloka Construction will make a mandatory offer to buy remaining shareholding as per the SEC’s Takeovers and Mergers Code. Other major shareholders of Millennium Housing include Anilana Hotels and Properties (8.85%), Arrow International Ltd. (4.45%) and Ceybank Unit Trust (1.52%).
www.ft.lk

Sri Lankan stocks down to 1-week low on banks, profit-taking

(Reuters) - Sri Lankan stocks fell to more than one-week low on Friday, led by a decline in banking shares amid foreign outflows and selling pressure on large-caps, which gained in the recent rally.

The main stock index ended lower 0.88 percent, or 65.08 points, at 7,321.00, its lowest since Oct. 1. It hit a near 3-1/2 year closing high on Friday.

Foreign selling was 506 million rupees on Friday, but foreign investors have been net buyers of 9.17 billion rupees so far this year, exchange data showed.

"The lack of foreign buying is the main reason for the market decline. There was sharp selling pressure on big cap shares as well," said Dimantha Mathew, manager, research at First Capital Equities (Pvt) Ltd.

"Downward pressure may continue for a bit more days. The correction is good for the market. We feel the market went up unnecessarily."

Analysts said investors are awaiting the September-quarter earnings and the 2015 budget scheduled on Oct. 24 for further direction.

DFCC Bank Plc, which led the overall loss, fell 2.63 percent, while Commercial Bank of Ceylon Plc lost 1 percent.

The day's turnover was 2.81 billion rupees ($21.6 million), well above this year's daily average of 1.36 billion rupees. 

($1 = 130.4000 Sri Lankan rupee) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Prateek Chatterjee)

Sri Lanka’s MTD Walkers to raise Rs2.4bn through a rights issue

Oct 10, 2014 (LBO) – Sri Lanka’s MTD Walkers Plc, a member of the MTD group is to raise 2.4 billion rupees by way of a rights issue, the company said in a stock exchange filing.

Subjected to the necessary approvals, the company is to issue 53.29 million shares at 45.00 rupees each in the ratio of 466 shares for every exiting 1,000 shares held.

Part of the proceeds will be utilized to acquire Wincon Development Ceylon (Pvt) ltd while the rest will be used to fulfill the working capital requirements of the company.

MTD Walkers, a construction and engineering giant in the island recently announced that it is acquiring 100 percent stake in Wincon Development for 2.17 billion rupees under a restructuring plan of the MTD group in Sri Lanka.

Sri Lanka stocks close down 0.9-pct

Oct 10, 2014 (LBO) - Sri Lanka's stocks closed 0.88 percent lower with tobacco and banking stocks losing ground amid strong foreign selling, brokers said.

The Colombo benchmark All Share Price Index closed 65.08 points lower at 7,321.00, down 0.88 percent. The S&P SL20 closed 41.33 points lower at 4,110.02, down 1.00 percent.

Turnover was 2.81 billion rupees, up from 1.46 billion rupees a day earlier with 53 stocks closed positive against 164 negative.

John Keells Holdings closed 1.10 rupees lower at 250.90 rupees with nine off-market transactions of 443.77 million rupees changing hands at 250.00 rupees per share contributing 16 percent of the turnover.

The aggregate value of all off-the-floor deals represented 20 percent of the daily turnover.

Chilaw Finance closed 50 cents higher at 26.00 rupees with market transactions of 495.47 million rupees contributing 18 percent of the turnover.

Millennium Housing Developers closed 60 cents lower at 5.00 rupees with market transactions of 495.47 million rupees contributing 16 percent of the turnover.

Access Engineering closed 1.10 rupees lower at 31.60 rupees and MTD Walkers closed 3.90 rupees lower at 53.30 rupees, attracting most number of trades during the day.

Foreign investors bought 274.28 million rupees worth shares while selling 780.29 million rupees worth shares.

Ceylon Tobacco Company closed 25.20 rupees lower at 1,124.90 rupees with the company increasing its cigarette prices from midnight today while contributing most to the index drop.

DFCC Bank closed 6.20 rupees lower at 229.80 rupees and Commercial Bank of Ceylon closed 1.70 rupees lower at 167.20 rupees.

Hatton National Bank closed 3.70 rupees lower at 195.00 rupees.