Sri Lanka’s John Keells (JKL) gets new CEO

(LBO) – Hishantha G R De Mel has been appointed Acting Chief Executive of John Keells PLC, a subsidiary of John Keells Holdings, from 01 October 2015, the Colombo Stock Exchange said in a statement.

Former CEO Sudath Chaminda Munasinghe resigned with effect from October 1 2015.

De Mel joined the Company in 2002 as an Executive then was promoted to Assistant Manager in 2005 and later appointed as Head of Marketing, Assistant Vice President of John Keells Holding in 2013.

He holds a MBA from the University of Southern Queensland and is an Associate member of the Institute of Charted Mannagement Accountants.

John Keells PLC has businesses in tea and rubber commodity broking, warehousing and stockbroking.

Sri Lanka tile sales seen strong, industry risks losing protection

ECONOMYNEXT – Sri Lanka’s ceramic tile manufacturers, controlled by the Royal Ceramics Lanka group, will see strong sales growth supported by the construction boom but risk losing protection against imports, a stockbroker report said.

Several hotels and condominiums under construction at present would reach completion during FY 2018 by which demand for tiles and bathware would rise, Bartleet Religare Securities said.

Royal Ceramics Lanka’s recurring earnings per share grew 243 percent to 4.97 rupees in the first quarter of the 2016 financial year.

RCL controls Lanka Tile and Lanka Walltiles, the other two ceramic tile manufacturers in the island.

RCL’s earnings growth was backed by higher than forecast revenue from tiles and aluminium sectors, lower finance cost and increased profits from an associate finance firm, the research report said.

Royal Ceramics Lanka’s gross profit margins improved to 33 percent in the first quarter from 30.2 percent a year ago aided by energy cost reduction and higher sales volumes.

“We expect the pick up in demand for tiles and bathware to continue in the forecast period aided by both domestic and export sales,” Bartleet Religare Securities said.

“The risk of the industry’s protected status being removed, however looms.”

Sri Lanka’s new government is known to favour more liberalisation of the economy and wants to remove trade barriers.

The ceramic industry had successfully lobbied for higher tariffs on imported tiles to protect domestic firms under the ousted Rajapaksa regime.

Bartleet Religare Securities said demand from both households and commercial sector contributed to RCL’s earnings growth.

“RCL has also started exporting to new markets like the US and UK which would add to top line in future.”

The RCL group’s enhanced margins were aided by the reduction in gas prices, electricity tariffs and Euro depreciation, with 90 percent of bathware raw materials imported from Europe, as well as by a shift to larger high value tiles, the brokers said.

Sri Lanka Finance Minister warns of vehicle tax hike in November budget

ECONOMYNEXT - Sri Lanka's Finance Minister Ravi Karunanayake had warned that new vehicle taxes would apply from the day of the budget on November 22, seen as an indication that taxes would go up.

The warning to citizens of an impending tax rise is an improvement on the earlier practice of hatching taxes in secret and slamming them on the people through a mid-night gazette while the citizenry is sleeping, a practice established by post-independent rulers.

The Daily Mirror newspaper quoted Karunanayake as saying the administration came under fire for suddenly imposing taxes on cars in January 2015.

Import duties through secretly hatched mid-night gazette was done by rulers, especially in the 1970s to prevent citizens from gaining any benefit before taxes went up.

In the 1970s, the rulers also suddenly started imposing taxes outside the budget, denying even the stability of one year to taxes.

Analysts have pointed out that the tyranny of the midnight gazette violates a fundamental principle of parliamentary democracy.

The practice of taxing people without parliamentary debate by 'Royal Prerogative' ended in Britain in 1689 with a English Bill of Rights. But in Sri Lanka in the 21st century taxation is still imposed by a 'minister's prerogative', through a mid-night gazette.

In a 'shoot first, ask questions later' strategy parliament is informed of midnight gazette taxes after the fact.

The new administration has to take more taxes from private citizens to pay higher salaries to state workers.

At the moment large volumes of money is being printed to finance the budget deficit, which has brought the currency down and generated forex reserve losses and undermined the credibility of the soft-dollar peg triggering capital flight.

Instead of following prudent monetary policy in the face of an expanded higher borrowing to finance an expanded deficit in January, the central bank cut rates in April, pushing the country into a balance of payments crisis.

Rates are still low and authorities are now trying to control imports and credit through non-market administrative measures involving trade controls.

Analysts have called for a reform of the Central Bank or its abolition and a return to a currency board arrangement to prevent future balance of payments crises.

Sri Lanka controversial telecom levy withdrawn from house

ECONOMYNEXT - Sri Lanka's ruling administration withdrew a controversial telecom tax from parliament Tuesday, amid a legal challenge.

Leader of the House, Lakshman Kiriella said the bill was being withdrawn.

It is not clear whether the bill would be re-presented after changes.

Activists went to court saying the tax had payment dates and also penalties set in the past, making it a retrospective tax.

The new administration brought a series of laws which harmed the expectations of citizens to just rule in general and consequently the investment environment for business as well.

Sri Lanka Treasuries yields flat

ECONOMYNEXT - Sri Lanka's 3 and 6-month Treasuries yields were held unchanged at 6.78 percent and 7.07 percent at Wednesday's auction, data from the state debt office showed.

The debt office, a unit of the Central Bank, said it sold 6.47 billion rupees of 3-month bills after offering 15 billion rupees of bill and 1.67 billion rupees of 6-month bills, having offered almost 14 billion rupees of bills.

It also sold 1.6 billion rupees of 12-month bills at a yield of 7.18 percent, having rejected offers at the last auction.

Sri Lanka Fitch rates People's Leasing's bonds 'AA-(lka)'

ECONOMYNEXT – Sri Lanka Fitch Ratings has assigned People's Leasing & Finance PLC's proposed senior unsecured debentures of up to six billion rupees a final National Long-Term Rating of 'AA-(lka)'.

The assignment of the final rating follows the receipt of documents conforming to information already received, and the final rating is the same as the expected rating assigned on 15 July 2015, a statement said.

The issue will have tenors of four and five years with fixed-rate coupon payments. PLC plans to use the proceeds for working capital purposes, to diversify its funding mix, and to reduce maturity mismatches.

The proposed debenture is rated in line with PLC's National Long-Term Rating of 'AA-(lka)', given that the issue is expected to rank equally with the claims of company's other senior unsecured creditors.

PLC's Issuer Default Ratings (IDRs) and National Long-Term Rating reflect Fitch's view that PLC's parent, the state-owned and systemically important People's Bank (AA+(lka)/Stable), has a high propensity but limited ability to provide extraordinary support to PLC if required.

Fitch said this is because PLC is strategically important to People's Bank.

People's Bank owns 75 percent of PLC and has board representation; the two entities share a common brand; and PLC is associated with People's Bank's franchise.

The rating on the debentures will move in tandem with PLC's National Long-Term Ratings.

PLC's ratings may be downgraded if People's Bank is no longer a majority shareholder in PLC, or if People's Bank's ability to provide support weakens, or if PLC's strategic importance to its parent diminishes over time.

Fitch does not expect PLC's ratings to be upgraded, unless People's Bank's ratings are upgraded.

Sri Lankan stocks end steady; policy clarity awaited

Sri Lankan shares ended little changed on Wednesday as gains in diversified shares helped offset losses in banking stocks, with many investors waiting for more clarity on policy direction, brokers said.

The main stock index ended 0.01 percent, or 0.48 points, weaker at 7,085.45, falling for the third straight session.

"The market is holding on as investors are awaiting to see the policy direction," said Dimantha Mathew, a research manager at First Capital Equities (Pvt) Ltd.

Prime Minister Ranil Wickremesinghe is to make a statement next month to outline the policies of the new government.

Foreign investors were net buyers of 47.03 million rupees ($334,495) worth of shares on Wednesday, but foreign investors were net sellers of 3.03 billion rupees worth of shares so far this year.

Turnover was 636.1 million rupees, compared with this year's daily average of 1.12 billion.

Losses in Commercial Bank of Ceylon Plc, Commercial Leasing & Finance Plc and Ceylon Tobacco Co Plc offset gains in conglomerate John Keells Holdings Plc and Ceylon Cold Stores Plc. 

($1 = 140.6000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Anand Basu)