New beer tax policy brings cheer to Sri Lanka's Lion Brewery

ECONOMYNEXT - Sri Lanka's Lion Brewery has praised the government’s new tax policy based on alcohol content, saying beer sales had recovered sharply as it was less expensive for consumers, along with government revenue.

The company reported group net profits of Rs1.3 billion in the March 2018 quarter compared with a loss of Rs813 million a year earlier, according to interim results filed with the stock exchange.

March 2018 quarter earnings per share were Rs15.88 compared with a loss of Rs10.17 the year before when it was recovering from the effects of floods which shut the brewery for six months.

Lion Brewery’s EPS for the full year to March 2018 were Rs26.12 compared with a loss of Rs18.09 the previous year.

Sales shot up 80% to Rs10.4 billion in the March 2018 quarter from a year ago. With cost of sales growing much slower, gross profit shot up over 200% to Rs2.6 billion. Sales in the year to 31 March 2018 rose 44% to Rs30.5 billion.

Lion Brewery said this year’s results are not comparable with those of the previous year, since the company’s operations were compromised by the flood for most of that period.

Flood related insurance receipts of Rs1.957 billion were accounted for in the results this financial year with the company now having received in full its insurance claim

“With a reasonable alcohol tax policy now in place, consumers, government and industry will all emerge winners,” a note accompanying the accounts said, referring to the November 2017 change in tax policy.

“Consumers, since they are no longer pushed by policy makers to drink hard alcohol, government, since its revenues will increase and industry, since it performance will improve.”

In November 2015, excise duties on beer were increased by as much as 70% with taxes on local spirits also increased but by a much lower 25%.

“There was no rationale for discriminating against the beer industry in this manner other than to provide the spirits industry a distinct competitive advantage,” Lion Brewery said.

“Consumption shifted immediately from beer to spirits, i.e. from mild to hard alcohol,” it said.

“Within months, spirits was accounting for over 65% of the country’s legal alcohol consumption. With illicit liquor factored in, hard alcohol accounted for an astonishing 85% of total consumption.”

It was the under privileged consumer that paid the price; since hard alcohols – both legal & illegal - were more affordable, they consumed more of it, the brewer said.

“Government revenues from the beer industry dropped dramatically. During the period November 2015 to October 2017, the company suffered an earnings loss of Rs 7.6 billion on account of the lop-sided excise tax policy.”

The figures exclude the losses that arose as a result of the floods and resultant shut down during May to December 2016.

“However, in November 2017, a more pragmatic excise duty policy was introduced and now, alcobevs are taxed on the basis of their alcohol content,” Lion Brewery said.

“This is in keeping with global practice and is the most appropriate policy to adopt with respect to alcohol since it encourages the consumption of beverages with a lower alcohol content.”

Lion Brewery revenue to government from the beer industry has also seen a sharp improvement.

Since November 2017 excise duty collections from Lion Brewery alone has increased by Rs 795 million a month with a further increase of Rs 208 million per month derived from VAT.

Sri Lanka ETI to make interim payment to depositors: Central Bank

ECONOMYNEXT - Sri Lanka's troubled ETI Finance Limited has been ordered to make an interim repayments of 10 percent of deposits amounting 3.35 billion rupees and interest of 1.4 billion from cash received from an asset sale, the Central Bank said.

A buyer of ETI Finance assets had transferred 32 million US dollars out of 75 million dollar which has a rupee value of 5,017.6 million US dollars, the central bank said.

The payments will start from June 05, 2018.

ETI had been instructed to repay a further 10 percent of deposits when the balance 43 million had been received, the central bank said.

The details of the payment plan commencing on 05.06.2018 will be informed to depositors by ETIFL shortly.

The CBSL is requested "all depositors to be patient until the finalization of the action plan with regard to ETIFL and to cooperate with the Central Bank appointed management panel of ETIFL to implement the payment plan."

Higher borrowing costs erode Sri Lanka’s Hayleys profits

ECONOMYNEXT – Net profit at Sri Lanka’s Hayleys group fell sharply in the March 2018 quarter and full year despite a big increase in sales after it bought consumer products retailer Singer, with borrowing costs doubling and tax expenses rising.

Hayleys group net profit fell 37% to Rs827 million in the March 2018 quarter from a year ago while sales rose 74% to almost Rs51 billion, interim accounts filed with the stock exchange showed.

Earnings per share for the quarter were Rs11.03, down from Rs17.59 the previous year. Hayleys share last traded at Rs215.

EPS for the year to 31 March 2018 fell to Rs13.65 from Rs37.12 the year before with net profit down 63% to Rs1 billion while annual sales rose 47% to Rs163 billion.

A company statement said the group posted strong operating profits which expanded by 18% to Rs11.4 billion during the year.

“However, increased borrowings, combined with the prevalence of higher interest rate conditions throughout the financial year resulted in net finance costs increasing to Rs5.93 billion, leading to a reduction in profit before tax (PBT) to Rs5.76 billion.”

Hayleys chairman and chief executive Mohan Pandithage said the group had borrowed heavily to support an aggressive growth strategy and would strive to reduce indebtedness and revive profit growth.

“The past year bore witness to several bold new investments across Hayleys that are designed to place the group on a stable but aggressive growth trajectory over the medium-long term,” he said.

“Nevertheless, we remain cognizant of the higher finance costs arising from increased investments over the past year.

“Moving forward the group will move to rapidly reduce gearing and re-align capital structures with a view to bolstering the bottom line.”

Hayleys group marks its 140th year of operations as the first listed Sri Lankan entity to surpass the US$1 billion turnover milestone, Pandithage said.

“This is truly a remarkable milestone that serves to highlight the scale of our operations and the vital contributions that Hayleys continues to make as an engine of growth and innovation in the Sri Lankan economy.”

Pandithage made special note of the “highly encouraging performance of the Hayleys group over the final quarter of FY18, during which time, turnover expanded by a significant 74% YoY up to Rs50.9 billion while operating profits surged 33% YoY to Rs4.7 billion,” the statement said.

The accounts showed tax costs rose 76% to Rs1 billion in the March 2018 quarter from the year before and 26% to Rs2.5 billion in the year.

The company statement said the group results were supported by addition of six months of operations from its recently acquired subsidiary, Singer (Sri Lanka) PLC.

“Leading segmental performance during the year was the group’s transportation and logistics business which posted substantially improved revenue and operating profits of Rs 35.7 billion, and Rs 2.95 billion respectively,” it said.

“Increased raw material costs hampered profitability within the group’s purification products and hand protection segments both of which posted improved turnover but weaker operating profits.

“Purification segment recorded a turnover of Rs15.5billion with an operating profit of Rs1.1 billion while hand protection segment revenue was Rs15.9billion while operating profits reduced to Rs464 million,” the statement said.

“Boosted by the introduction of new revenue from Singer, the group’s consumer products segment also posted impressive growth in turnover, closing the year with revenue of Rs35.9 billion while operating profits increased to Rs 2 billion during the period in review,” the company said.

“The group’s Agriculture and Plantations segments, though affected by weather conditions in the earlier part of the financial year, contributed substantially towards group revenue and profitability.”

Teejay Lanka doubles capacity of India plant with $15 m expansion

Teejay Lanka, one of the region’s largest textile manufacturers, has announced a doubling of capacity of its Indian mill, following the completion of an expansion project involving an investment of $ 15 million (more than Rs. 2.3 billion at current rates).

Located within the 1,000-acre Brandix India Apparel City (BIAC) in Vizag, Andrapradesh, Teejay India is now capable of manufacturing up to 42 million metres of Weft knitted fabric annually using state-of-the-art machines for knitting, dyeing, finishing and inspection, the company said. The expansion entailed the installation of state-of-the-art machinery for knitting, dyeing, finishing and inspections as well as fully-automated Packing Machines, a Lab Dip Dispenser for Colour Service and a chemical dispensing system. These can produce 12,500tons of fabric a year.

The expansion has also generated additional employment opportunities for up to 276 people, the company disclosed.

Commenting on Teejay India’s expansion, the company’s Deputy CEO Pubudu De Silva said: “We now have a remarkable new facility in India which is one of the best in BIAC and sends a clear message that Teejay is a global company which believes in high standards of production, and is ready to take on more orders. The decision to expand despite tough market conditions is likely to be one of the best the Company has made, as it equips Teejay to tap into the broader Asian and expanding EU business.

The formal opening of the expanded Teejay India manufacturing plant took place recently with the participation of senior management of Teejay operations in Sri Lanka and India, major shareholders Brandix and Pacific Textiles of Hong Kong and representatives of key customers.

Sri Lanka’s only multinational textile manufacturer, Teejay supplies fabric to some of the best international brands across the world. Teejay Lanka PLC is a public quoted company with 39 per cent public ownership. The company is backed by Sri Lanka’s largest apparel exporter, Brandix Lanka which has a 33% stake and Pacific Textiles of Hong Kong which owns 28 per cent of the company.

Teejay has been listed on the Colombo Stock Exchange (CSE) since 2011 and was included in the S&P Top 20 Index in Sri Lanka last year. The Company has also been named among the Forbes “200 Best under a Billion in Asia and been recognised as the ‘International Textile Firm of the Year’ and the ‘International Dyer and Finisher’ by World Textile Institute, London.

Teejay India was incorporated in 2009 as Ocean India Ltd. and became part of the Teejay Group in 2015, as a fully-owned subsidiary of Teejay Lanka. It was renamed as Teejay India Ltd. in 2016 with the rebranding of Teejay.

www.ft.lk

Aitken Spence ups FY18 pre-tax profit by 22% to record Rs. 6.4 b

Aitken Spence Plc recorded a steady financial performance for the 12 months ending 31 March 2018 with a 22% year-on-year growth in profit-before-tax from Rs. 5.2 billion to Rs. 6.4 billion, its highest ever.

The leading conglomerate recorded an increase in its annual revenue by 14.9% from Rs. 45.9 billion to Rs. 52.7 billion. The company also reported the highest ever profit-after-tax of Rs. 5.1 billion, which was an increase of 27.3% from the previous year.

The diversified group concluded the reporting period with a strong fourth quarter performance during which both revenue and profit-before-tax figures showed strong growth trajectories.

Aitken Spence Plc’s profit-before-tax increased by 31.4% from Rs. 2.4 billion to Rs. 3.1 billion in the fourth quarter, over the previous year, while revenue increased by 7.9% from Rs. 15.4 billion to Rs. 16.6 billion. The profit-after-tax increased by 47.1% from Rs. 1.8 billion to Rs. 2.7 billion in the fourth quarter.

The holding company’s revenue growth reflected across all key operational sectors including tourism, maritime and logistics, strategic investments and services.

The tourism sector recorded a growth of 18.2% in revenue to Rs. 28.5 billion, while the maritime and logistics, strategic investments, and services sectors reported revenues of Rs. 10.7 billion, Rs. 19.3 billion and Rs. 1.9 billion respectively, indicating a growth of 7.7%, 6.3% and 16.8% respectively over the year.

Aitken Spence Plc reported a profit attributable to shareholders of Rs. 3.6 billion, a rise of 23.2% while earnings per share also rose by 23.2% from Rs. 7.12 to Rs. 8.77. The earnings per share surged by 47.1% from Rs. 3.03 to Rs. 4.46 for the fourth quarter, year-on-year.

Sri Lankan hotels ended the year with a satisfactory performance. All properties under the Group’s flagship Heritance brand achieved revenue targets, with Kandalama, Tea Factory and Ayurveda Maha Gedara reporting good results despite being affected by a slow start to the year. Despite severe competition facing beach properties, Heritance Ahungalla recorded a satisfactory performance, while the newest addition to the portfolio – Heritance Negombo - shows great promise for the future. Meanwhile, Turyaa Kalutara made steady progress towards a turnaround, as did Hotel RIU, where the Group has a 60% shareholding.

The global and local market conditions have remained less than favourable, with slow market growth impacting many of the operational sectors Aitken Spence Plc is engaged in.

“Despite challenges posed by a turbulent operating environment, our prudent and astute strategies continued to hold Aitken Spence in good stead, enabling the Group to achieve a remarkable performance, recording its highest ever profit before tax of Rs. 6.4 billion during the year. In the year under review, we switched gears and accelerated the pace to reach the next phase of our growth agenda,” stated Aitken Spence Deputy Chairman and Managing Director J.M.S. Brito.

“The year also saw the power generation segment begin work on a landmark waste-to-energy project that would help solve both the waste disposal and energy supply challenges in the country at present. The project would see the construction of a 10 MW waste-to-energy plant in Muthurajawela which upon completion would be equipped to convert municipal solid waste to electricity, which I expect would greatly relieve the Colombo City of its waste disposal burden,” added Brito.

“Moving forward, I am convinced that the Group has the resilience and the capability to accelerate its growth trajectory even amidst headwinds by drawing on our innate domain expertise and business acumen. In doing so we will look for long-term growth opportunities by focusing on sectors and markets where we see ourselves having a distinctive role, now and in the future. We will continue the strategy of expanding in domestic and offshore markets through enabling partnerships and improving competitiveness by making consistent investments in technology, people and processes,” he added further.

Listed in the Colombo Stock Exchange since 1983 and marking its 150th year milestone in September 2018, Aitken Spence is a blue-chip conglomerate with a strong regional presence in the Hotels, Travels, Maritime Services, Logistic Solutions, Plantations, Power Generation, Financial Outsourcing, Insurance, IT, Printing and Apparel sectors.

www.ft.lk

Brown’s goes for Rs. 7.1 b Rights Issue

Brown and Company Plc has announced a Rights Issue to raise Rs. 7.1 billion to settle debt.

The rights will be on the basis of two new shares for every one held at Rs. 50 each.

The current stated capital of Brown’s is Rs. 2 billion represented by 70.875 million shares and the Rights will involve the issuance of 141.75 million shares. Browns shares yesterday traded between a low of Rs. 68 and a high of Rs. 70 before closing at Rs. 69.90, up by Rs. 1.80. Brown’s net assets per share as at 31 December 2017 was Rs. 253.87 at the Group level as against Rs. 219.55 a year earlier. At the Group level, short-term loans and borrowings amounted to Rs. 2.6 billion and long-term loans and borrowings were worth Rs. 4.7 billion.

Top six shareholders of Browns are Engineering Services Ltd. (23.4%), Masons Mixture Ltd.

(19.4%), ETF (9.76%), Browns Holdings (7%), Shanker Somasunderam (5.9%) and LOLC (4.8%). Browns has 2,357 shareholders whilst the public float is 45.32%.

www.ft.lk

Sri Lankan shares close slightly higher; foreigners buy

Reuters: Sri Lankan shares closed slightly stronger on Tuesday, driven by telecom stocks and as foreign investors continued to buy the island nation’s equities.

However, investors were cautious as they waited for some cues about the real impacts of floods, brokers said.

Heavy monsoon rains have killed eight people, prompting authorities to warn against landslides and floods in low-lying areas after spill gates had to be opened across the Indian Ocean island.

The Colombo stock index ended 0.1 percent firmer at 6,472.25, edging up from its lowest close since May 15 hit on Monday.

Foreign investors, who have been net sellers of shares worth 573.5 million rupees ($3.63 million) so far this year, net bought equities worth 73.3 million rupees on Tuesday. They net purchased shares worth 152 million rupees on Monday.

“Some block deals pushed the turnover today. Other than that the market was very dull as investors were on the sidelines to asses the real impact of the floods,” said Dimantha Mathew, head of research, First Capital Holdings.

Shares of Dialog Axiata Plc rose 2.8 percent, Distilleries Company of Sri Lanka Plc ended 0.9 percent higher and Sri Lanka Telecom Plc closed 1.6 percent firmer.

Turnover was 777.4 million rupees, less than this year’s daily average of 991.1 million rupees.

Stock brokers said investors also waited for more clarity on the political and economic front amid recent fuel price hike, while the depreciation in rupee also weighed on sentiment.

The rupee hit a fresh low of 158.50 per dollar on Wednesday on importer demand for the U.S. currency.

Analysts said concerns over political instability following President Maithripala Sirisena’s decision to suspend the parliament last month after 16 legislators from his ruling coalition defected, dented market sentiment.

On May 8, Sirisena urged his own coalition government and the opposition to end a power struggle to achieve ambitious goals including anti-corruption measures. 

($1 = 157.8500 Sri Lankan rupees) 

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