Sri Lanka's Lion Brewery December profits up 29-pct

ECONOMYNEXT - Sri Lanka's Lion Brewery said profits grew 29 percent to 412.5 million rupees in the December 2017 quarter from a year earlier with sales recovering after floods shut its brewery for six months in 2016.

The company reported earnings of 5.16 rupees a share in the quarter. In the nine months to December earnings were 10.24 rupees a share on total profits of 819.2 million rupees, compared to a loss of 634 million rupees a year earlier due to floods inundating its brewery.

Revenue in the quarter grew 50 percent to 8 billion rupees, cost of sales increased 36 percent to 6 billion rupees, expanding gross profits 121 percent to 1.9 billion rupees, interim accounts filed with the stock exchange showed.

Earnings growth was helped by a one-off stocks and assets write down due to flood related damages amounting to 1.1 billion rupees a year earlier.

Distribution costs rose 34 percent to 796 million rupees and administrative expenses grew 8 percent to 264 million rupees.

Net finance costs fell 15 percent in the quarter to 345 million rupees.

Lion Brewery reported flood related losses of 1 billion rupees in the year ending March 2017. The company receivedinsurance claims totalling 2 billion rupees, half of it to cover business interruption.

To help the company recover, the government granted the brewer tax concessions to import beer for the local market at the same rate that applied to locally manufactured beer. However a Buddhist monk filed a law suit against the concessions. The case is being heard in the Court of Appeals.

The company, a unit of Ceylon Beverage Holdings, brews the popular Lion Beer, a hit even among tourists. Carlsberg Brewery Malaysia holds a 25 stake in the company which also sells beer under that brand in the domestic market and the Maldives.

The company exports to 15 countries accounting for less than two percent of total revenue even prior to the floods.

The 75 million lire per annum brewery was shut down for nearly six months after floods in May 2016.

Sri Lanka's Sampath Bank net up 52-pct in Dec

ECONOMYNEXT - Profits at Sri Lanka's Sampath Bank rose 52 percent to 3.89 billion rupees helped by a 23 percent growth in net interest income and a lower tax bill, interim account showed.

The group reported earnings of 19.95 rupees for the quarter. In the year to December the group reported earnings of 49.28 rupees on total profits of 12.6 billion rupees which were up 33 percent from a year earler.

In the December quarter net interest income rose 29.5 percent to 23.1 billion rupees, interest expenses rose at a faster 33.4 percent to 14.6 billion rupees and the bank grew net interest income 23.4 percent to 8.5 billion rupees.

Fee and commission income rose 32.1 percent to 2.3 billion rupees

Specific loans loss provisions rose 29 percent to 242 million rupees and general provision fell 64 percent to 128 million rupees.

Pre-tax profits rose 32 percent to 5.1 billion rupees, but income tax fell absolutely 17 percent to 1.2 billion rupees, from 1.3 billion rupees a year earlier.

Sri Lanka’s Cargills Ceylon December profit up 30-pct

ECONOMYNEXT - Sri Lanka's supermarket chain Cargills Ceylon said profits grew 29.8 percent to 826.9 million rupees in the December 2017 quarter from a year ago helped by capital gains, despite shrinking retail margins.

"It has been a challenging consumption environment on account of the inclement weather affecting buying power in key agriculture regions of the country," the company said.

The company reported earnings of 3.69 rupees a share in the quarter. In the nine months to December, earnings amounted to 13.90 rupees a share on total profits of 3.1 billion rupees, up 60.8 percent from a year earlier, interim accounts filed with the stock exchange showed.

Revenue grew 5.26 percent to 23.2 billion rupees in the quarter, cost of sales rose 5.7 percent to 20.5 billion rupees, expanding gross profits by 2 percent to 2.7 billion rupees.

Administrative expenses rose 6.8 percent to 1 billion rupees, distribution costs increased 10.5 percent to 645 million rupees, and net finance costs fell 14 percent to 267.9 million rupees.

During the nine months to December the share of associate profit was recorded at 199 million rupees due to a 481 million rupee gain by Cargills Bank, an associate firm, from disposing its subsidiary Colombo Trust Finance to listed telco Dialog, the company said.

Cargills Ceylon said its subsidiary Dawson Office Complex disposed freehold property in Colombo valued at 4.2 billion rupees, recognizing a profit of 1 billion rupees.

Revenue from retail, which includes the Cargills Food City supermarket chain, grew 7 percent during the nine month period to 54.7 billion rupees, but profits were flat from a year ago at 2.3 billion rupees.

Cargills Food City opened its 338th outlet in this period.

Fast moving consumer goods revenue grew 8 percent to 16.6 billion rupees and profits rose 6 percent to 1.8 billion rupees.

Revenue from restaurants, which includes a KFC franchise, grew 12 percent to 2.8 billion rupees and profits surged 75 percent to 349.8 million rupees.

Sri Lanka's Odel December profits up 11-pct

ECONOMYNEXT - Sri Lanka's department store Odel, a unit of the Softlogic group, said profits rose 11 percent to 66.3 million rupees in the December 2017 quarter from a year earlier on lower tax payments despite thinning margins.

The company had earnings of 24 cents a share in the quarter, interim accounts showed.

In the nine months to December 2017, earning amounted to 0.43 cents a share on total profits of 116.3 million rupees, down 32 percent from a year earlier on higher interest costs and administrative expenses.

Odel last traded at 22.90 rupees Friday.

Revenue in the quarter rose 6 percent to 2 billion rupees, cost of sales grew 1 percent to a billion rupees, expanding gross profits by 11 percent to a billion rupees.

Distribution costs rose 11 percent to 124 million rupees and administrative costs also rose 11 percent to 678.9 million rupees. Net finance costs rose 58 percent to 115 million rupees.

Taxes paid in the quarter fell 58 percent to 23 million rupees.

Odel said it invested 10 million rupees to form a new company to carry out a Board of Investment approved project.

The company said it has entered into an agreement with Access Engineering for 570 million rupees to construct the diaphragm wall and piling work of the proposed Odel department store.

Odel has also entered into an agreement with China Construction Third Engineering Bureau for 7 billion rupees to develop its Ward Place property.

Sri Lanka’s Laugfs Gas back in the red in December quarter

ECONOMYNEXT – Sri Lanka’s Laugfs Gas group slipped back in to the red in the December 2017 quarter with losses rising 184% to Rs527 million from a year ago.

The company made a Rs1.36 loss per share, according to interim results filed with the stock exchange. The stock was last traded at Rs26.20 Friday.

December quarter sales rose 38% to Rs6.6 billion but cost of sales rose faster, at 52% to Rs5.6 billion, squeezing margins and reducing gross profits by eight percent to a billion rupees.

In the nine months to 31 December 2017, the loss per share was Rs2.43 with losses of Rs942 million although sales rose 40% to Rs18 billion.

Laugfs Gas had returned to profit in the September 2017 quarter with net earnings of Rs40 million, down 85% from a year ago, after three successive quarters of losses.

The firm has attributed the downturn to local price controls as LPG and steel prices rose internationally, rupee depreciation and rising interest costs and said it continued to lobby for a pricing formula.

Sri Lanka's The Finance Losses up 24-pct, balance sheet gap Rs16bn

ECONOMYNEXT - Losses at Sri Lanka's troubled The Finance Company expanded 24 percent to 598.2 million rupees in the December 2017 quarter, and a hole in the balance sheet expanded by 1.6 billion rupees to 16 billion in the past 9 months.

Losses in the quarter were 3.73 rupees a share. In the nine months to end December 2017, losses were 10.50 rupees a share, on a total loss of 1.7 billion rupees, up 41 percent from a year earlier.

The Finance shares gained 10 cents on Friday closing at 5 rupees on Friday.

Interest income in the quarter grew 6 percent to 866.9 million rupees, interest expenses increases 20 percent to 1.1 billion rupees, ballooning net interest losses by 122 percent to 248.8 million rupees.

The company has 30 billion rupees of deposits and 5.0 billion borrowings but only 22.4 billion rupees of assets of which over 4 billion rupees are not interest bearing.

Fees and commission income grew 29 percent 19.3 million rupees and other income fell 49 percent to 12.1 million rupees.

Bad loan provisioning increased 34 percent to 117.7 million rupees.

Operating expenses including personnel increased 16 percent to 263.9 million rupees.

The Finance Company's book value, or shareholder funds, was a negative 16 billion rupees as at end December 2017, up 12 percent from March.

The Finance Company's loan book expanded 28 percent in this period to 4.9 billion rupees, its hire purchase portfolio shrank 10 percent to 4.6 billion rupees, leasing fell 28 percent to 729 million rupees.

Financial investments fell 2.2 percent to 6.2 billion rupees. Real estate investments fell 18 percent to 805.8 million rupees.

Ceylinco Crisis

The Finance's problems began with the collapse of Golden Key, over 10 years ago, when interest rates rose after a period of high inflation fired by deficit spending and loose monetary policy.

The Finance was incorporated in 1940 and later became part of the now defunct Ceylinco Group, controlled by Justin Kotelawala.

Ceylinco Group was founded in the late 1930s by Hugh Weerasekere and Cyril E. S. Perera, who relinquished control over to Kotelawala in the 60s.

The Ceylinco crisis began under Kotelawala’s son Lalith, when the Golden Key Credit Card Company, an unregulated credit card issuer, collapsed, unable to settle 26 billion rupees in unauthorised customer deposits.

The Finance faced a run on deposits, and worse, borrowers stopped servicing loans.

The central bank took control through a management agent, but the firm continues to bleed money.

For one, the company had invested heavily in property, which couldn’t be liquidated fast enough.

The Finance also had loans to Ceylinco group companies, which were not paid back.

In 2010, the Central Bank converted 10 percent of The Finance’s deposits worth 2 billion rupees into non-voting shares and raised another 1.6 billion rupees via a public offer.

The Employees Provident Fund managed by the Central Bank was forced to invest in 5.1 million shares. The Finance shares were trading on the stock exchange at 37 rupees at end-March 2011. Today, a share is worth 5 rupees, losing 86.5 percent in value since.

The company’s 19 billion rupee pre-crisis loan book deteriorated rapidly to 7 billion rupees in the three years to 2012. Its deposit base fell by a quarter to 21 billion rupees. The Finance reported a 9 percent negative interest margin that year.

In the two years to 2014, the loan book grew 14 percent to 8 billion rupees, but deposits rose to 24 billion rupees. Its annual report that year hailed high growth in deposits as a sign of growing public confidence, but this only pushed negative interest margins further into the red at 14 percent.

To help reduce negative interest expenses, in December 2014, the Central Bank granted a 6 billion rupee low-cost loan to The Finance, mostly invested in government securities.

That year, The Finance’s board finalised a five-year business plan (2014/15 to 2019/20) approved by the Central Bank detailing a strategy to revive the company with low-cost deposit mobilisation, converting non-yielding real estate into yielding assets or selling them to finance long -term business loans, and improving the collection of 3.8 billion rupees worth of Ceylinco Group loans.

The company also has some real estate. The firm had land and real estate assets worth 1.7 billion rupees at end-March 2017 in its books, down 73 percent from 6.5 billion rupees in 2011 after provisioning for losses.

Despite appreciating land prices, there is a growing gap in the balance sheet.

Sri Lankan stocks edge up on foreign buying

Reuters: Sri Lankan shares hit a one-week closing high on Friday as foreign investor purchases helped overcome negative market sentiment due to political uncertainty, dealers said.

The Colombo stock index ended 0.16 percent firmer at 6,563.69, its highest close since Feb. 9.

Financials led the gains, with Sampath Bank rising 3 percent and Aviva NDB Insurance Plc jumping 15.2 percent.

The index fell 0.13 percent on week, after gaining for three straight weeks.

The index rose on Thursday on hopes President Maithripala Sirisena’s expected announcement on the future of the coalition government would ease political uncertainty.

Sirisena, however, did not address the nation as expected.

“There was not much activity. The market was waiting for the president’s direction,” said Prashan Fernando, CEO at Acuity Stockbrokers.

Prime Minister Ranil Wickremesinghe, however, addressed the media saying that the government will continue, albeit with a reshuffle of the cabinet.

“The market might react on Monday to the Prime Minister’s speech,” said Fernando.

The ruling coalition government of Sirisena’s centre-left Sri Lanka Freedom Party and Prime Minister Wickremesinghe’s centre-right United National Party suffered defeats in a local election over the weekend.

Since the results, both parties have locked horns on how best to continue in the government. Sirisena’s party wants to form its own government, his party ministers have said.

Investors are waiting for some stability and to see where coalition partners are headed, analysts said.

Turnover stood at 735.5 million rupees ($4.74 million), below last year’s daily average of 868.4 million rupees.

Foreign investors bought a net 109.5 million rupees worth of shares on Friday, extending the net foreign buying to 5.5 billion rupees worth of equities so far this year. 

($1 = 155.1000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Biju Dwarakanath)