Value of Nation Lanka Finance appreciated with listing of subsidiary

Charith Amarasekara

'The recently oversubscribed public offer of Millennium Housing Developers Ltd. (MHDL) has led its parent company Nation Lanka Finance PLC (NLF) to increase the net value of NLF by Rs.400 million and to experience a capital appreciation despite diluting its stake in MHDL to 68% from previous 77%. Market analysts identify the public offer as a prudent decision taken to increase the financial flexibility on both the holding company and its subsidiary - NLF and MHDL in terms of meeting future development goals and to support the current operations, a press release says.

'A part of the funds raised through the public offer will help MHDL to cater to the growing demand for quality houses in valued residential areas offered at attractive prices. NLF Chief Executive Officer Charith Amarasekara, elaborating on the objectives of the issue and its success said: "There are plans to launch five key housing projects in the Greater Colombo area, each consisting 150 housing units. In addition to this, MHDL expects to expand the ongoing three projects in the Urban Range into seven projects. MHDL is also looking at increasing its Urban Range – Gated housing projects into two large scale housing projects and seven urban range 40 – 50 housing unit projects. Most of these projects will be completed before 2017, the release adds.

"MHDL is a key subsidiary of ours where we held controlling stake. But with the successful completion of IPO, our shareholding was reduced to 68%, a strategic move, allowing the public to invest. MHDL incorporated in 1998 has a vibrant history. The company was the pioneers in mega township projects in Sri Lanka including the Millennium City in Athurugiriya. In 2012 MHDL entered into urban and semi development projects, launched millennium urban range in Maharagama & Piliyandala, launched the project in Seeduwa, and launched the Millennium Terrace project. MHDL has recorded Rs.98 million in net profits during the last financial year and well on its way to secure Rs.120 million this financial year. MHDL will continue as a strong subsidiary of NLF continuing to support our future plans," he added.

http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=96952

Sri Lanka shares rise on foreign, retail buying

COLOMBO, Jan 31 (Reuters) - Sri Lankan shares gained on Friday, helped by foreign buying in blue chips and retail buying in mid caps on earning hopes after bellwether John Keells Holdings posted strong December-quarter earnings. 

The main stock index gained 0.33 percent, or 20.82 points, to 6,248.08, hovering near its seven-month high hit on Jan. 24. 

"Retail buying is coming slowly into the market and retailers are buying mid caps as the interest rates are coming down. 

Foreigners bought some blue chips," a stockbroker said on condition of anonymity. 

Shares in Asiri Hospital Holdings Plc rose 8.38 percent to 20.70 rupees, while Aitken Spence gained 3.30 percent to 103.40 rupees. 

Foreign investors were net buyers of 208.8 million rupees ($1.60 million) worth of shares on Friday extending the year to date net foreign inflow to 1.03 billion rupees. 

They bought 22.88 billion rupees of stocks last year. 

Stockbrokers said retail and institutional investors were active in the market after interest rates in treasury bills eased at a weekly auction on Wednesday to multi-year lows, making fixed-income assets unattractive. 

The index has been in an overbought region since Jan. 7, Thomson Reuters data shows. 

It has risen 5.67 percent so far this year, following a 4.8 percent gain in 2013, after having fallen in the previous two years. 

The day's turnover was 1.34 billion rupees, more than last year's daily average of about 828.4 million rupees. 

($1 = 130.6750 Sri Lanka rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)

Sri Lanka’s ‘The Finance’ to separate finance and real estate businesses

Sri Lanka’s ‘The Finance Company PLC’ says it has decided to separate the finance and real estate businesses, so there will be substantial growth in both sectors.

The company says the latest move comes as a part of its decisions to concentrate on key areas of the firm’s business.

Already the firm has a separate arm for its education business.

Earlier in the week, the company announced that discussions are underway to merge the firm with an another finance sector firm, but said no final decision has been taken yet on the proposed move.

The entity believes the latest move to separate its finance and real estate business will no doubt facilitate the policy expressed by the Central Bank and enable the firm to source investor/s to merge on an individual basis or as a group.
www.news360.lk

Sri Lanka stocks close up 0.3-pct

Jan 31, 2014 (LBO) – Sri Lanka stocks close higher Friday with healthcare and beverage firms gaining amid improved US growth numbers, brokers said.

The Colombo benchmark All Share Price Index closed 20.82 points higher at 6,248.08, up 0.33 percent. The S&P SL20 closed 1.62 points lower at 3,442.94, down 0.05 percent.

Turnover was 1.33 billion rupees, up from 808.33 million rupees a day earlier, with stocks of 79 firms closing in the red against 116 gainers.

Brown and Company closed 50 cents lower at 91.00 rupees with an off market transaction of 89.15 million rupees contributing to 6.7 percent of the turnover.

The aggregate value of all off market deals accounted for 17 percent of the daily market turnover.

Commercial Credit closed 1.50 rupees higher at 17.60 rupees and Trade Finance closed 1.40 rupees higher at 19.70 rupees, attracting most number of trades during the day.

Foreigners bought 429 million rupees worth shares while selling 220 million rupees of shares.

Asiri Hospital Holdings closed 1.60 rupees higher at 20.70 rupees and Nestle Lanka ended 31.60 rupees higher at 2,181.60 rupees, contributing most to the index gain.

Aitken Spence closed 3.30 rupees higher at 103.40 rupees and JKH closed flat at 240.00 rupees.

JKH’s W0022 warrants closed 1.20 rupees lower at 74.10 rupees and its W0023 warrants closed 1.80 rupees lower at 78.10 rupees.

Ceylon Tobacco Company closed 12.10 rupees lower at 1,287.90 rupees and Distilleries closed 1.00 rupee lower at 210.00 rupees.

Dialog closed 30 cents lower at 9.20 rupees and LOLC closed flat at 74.50 rupees.

Cargills Ceylon closed 3.80 rupees higher at 153.90 rupees and Carson Cumberbatch ended 20 cents lower at 345.00 rupees.

Bukit Darah ended 2.20 rupees lower at 612.60 rupees and Commercial Bank closed flat at 127.00 rupees.

The Finance Company ended flat at 13.40 rupees with the company looking forward to separate it’s financing and real estate business.

Lanka Walltiles closed 1.00 rupee lower at 68.00 rupees despite its interim accounts recording 203.05 million rupees of profit for the third quarter.

Earnings per share of the tiles manufacturer have increased from 4.75 rupees to 5.77 rupees along with a 21.6 percent growth in its 9 months profits over the previous year.

Lanka Tiles closed 80 cents higher at 82.80 rupees after its provisional accounts reporting 196.89 million rupees of profit for the third quarter, a 22.2 percent increase against the previous year.

Sri Lanka inflation at 4.4-pct in January 2014

Jan 31, 2014 (LBO) - Sri Lanka's consumer prices rose 4.4 percent in the 12-months to January 2014, down from 4.7 percent in December, the state statistics office said.

But the Colombo Consumer Price index rose 0.6 percent to 177.5 points in the month with transport and communications costs rising though the food index fell 0.9 percent.

Sri Lanka's inflation has been moderate with a stable exchange rate and weak bank loan growth after a credit bubble burst in 2011 and 2012 in a balance of payments crisis.

Analysts say inflation would have been lower if the Central Bank had allowed the rupee to appreciate in the wake of weak credit growth after the credit bubble burst.

But external inflation usually generated by reserve currency central banks like the Federal Reserve has also started to moderate and if Fed tightens or normalizes monetary policy, an appreciating dollar can help reduce prices.

Amaya Leisure profits down 4.86%

Ceylon FT: Amaya Leisure PLC reported a net profit of Rs 228.25 million for the nine months ended December 2013, down 4.86% from a year ago, interim financial results showed. Revenue grew 12.53% to Rs 807.16 million.

Administrative expenses grew 12.49% to Rs 261.45 million and finance expenses grew 47.8% to 13.63 million.

The company saw revenue grow 19% year-on-year to Rs 305 million during the December quarter and net profit grew 28% to Rs 107.2 million.

Hayleys PLC held a 40.32% stake in the firm as at the balance sheet date.

The company operates seven luxury resorts and spas.

www.ceylontoday.lk

Hunas falls profits down

Ceylon FT: Hunas Falls Hotels PLC reported a net profit of Rs 12.5 million for the nine-month period ending 31 December 2013, down 31% from a year ago, interim financial results showed.

Revenue increased 8% year-on-year to Rs 113.4 million.

Finance charges increased by 700% to Rs 16 million, administration expenses grew 15% to Rs 54.9 million and marketing expenses grew 24% to Rs 12.98 million.

Earnings per share fell to Rs 2.23 as at end December 2013, down from Rs 3.24 a year ago.

The shares hit a high of Rs 55 and a low of Rs 44.10 during the nine-month period.

The share currently trades at Rs 48.00. (JK)

www.ceylontoday.lk

US-registered firm to invest Rs. 1.68 b in Commercial Credit for 25% stake

Commercial Credit and Finance (COCR) yesterday announced that the Board of Directors has approved the investment of Rs. 1.68 billion in the company by way of a private placement of shares at Rs. 21 per ordinary voting share.

US Delaware incorporated Creation Investments Sri Lanka LLC will be the company to which shares are to be allotted. The move has been approved by the Central Bank and the Securities and Exchange Commission but subject to shareholder consent.

The purpose of the issue is to meet the future capital adequacy requirements and for its future investment activities.

The maximum number of shares to be issued is 80 million voting shares (25% stake eventually) via two tranches. The first will be 48 million shares for a consideration of Rs. 1.008 billion and the second tranche will amount to 32 million shares for a value of Rs. 672 million, before March 2015.

Major shareholder of Commercial Credit and Finance is BG Investments Ltd with a 78% stake whilst Mrs. Vagdevi Fernando holds 7%. Company has 238 million shares in issue at present. Share price closed at Rs. 16.10 whilst Net Asset Per Share is around Rs. 8.

www.ft.lk

Record tea crop of 340 Mn kg in 2013

Sri Lanka Tea Board has confirmed annual tea production in 2013, at a highest ever 340 Mnkg 3.6% more than the 2012 figure of 328 Mnkg. Previous record was 331 Mnkg achieved in 2010.

This years figure was released relatively late and would have included most estate returns. The crop figure is an exceptional achievement considering the adverse weather that restricted production from Western High Grown districts during May to July. In the Low Country too the weather did not follow the traditional pattern. The availability of fertilizer at subsidized rates went a long way to assist both small holders and regional plantation companies to over come mixed growing conditions. Additionally high tea prices for Low Country teas and the resulting rise in bought leaf prices encouraged small holders to optimize production. In fact unhealthy competition for leaf by factories and leaf collectors increased production of low quality leaf.

National Green Tea production reached an all time high of 3.69 Mnkg in 2013; up 22% on the 2012 figure of 3.03 Mnkg. CTC production was 22.4 Mnkg down on the 2012 record of 23.3 Mnkg.

Elevational Production
It was a record year for Low country with production reaching a highest ever 208 Mnkg well ahead of the 2012 adjusted figure of 202 Mnkg. Tea crop from this region which contributes 61% of the national harvest; has a finite capacity to grow from the current base of production.

High Grown did well to achieve 75.5 Mnkg, nominally ahead of previous years figure of 73.6 Mnkg, but well below the highs of 86.9 Mnkg achieved in 2002 or even the figure of 78 Mnkg produced in 2011. The elevational numbers for 2013 YoY 2012 were propped up by improved production from the Eastern slopes of the central hills; that had a extended dry spell mid 2012. Mid Growns were similarly boosted by better growing conditions in Eastern growing districts and rose 7% from 52 to 56 Mnkg.

Agro Climatic Districts
In the Low Country the sub district of Ratnapura made the biggest contribution of 56 Mnkg, nominally lower than the 2012 figure of 57 Mnkg. Galle followed with an improved performance from 44 to 48 Mnkg. Morawaka 27 Mnkg, Kalutara 24 Mnkg and Deniyaya 16 Mnkg were the other significant contributors.
- Asia Siyaka Commodities PLC.

www.island.lk

Copal Amba Country Head puts opportunities in Sri Lankan stock market in context

Moody’s new subsidiary Copal Amba Sri Lanka Country Head Chanakya Dissanayake at the Invest Sri Lanka Forum in Singapore put the opportunities in the Colombo stock market in context via a brief yet insightful presentation.

He said that valuations at the CSE were attractive from a regional perspective since the All Share Index (ASI) was trading at low valuation in comparison to peers such as India, Indonesia, Philippines and Thailand though Vietnam was much lower.

“Overall valuations at CSE are still subdued despite the stronger growth outlook,” Dissanayake added.

He also said new investors in Singapore and South East Asia via the CSE had diversification opportunity due to low correlation to global events. He said QE3 tapering led sell-off had had minimal impact on the CSE in comparison to BRIC and other emerging markets. The continuing net inflows to the CSE since 2012 were also emphasised.

The relatively stable exchange rate was highlighted as a strong positive to foreign investors of the Colombo Bourse. This is because Sri Lanka Rupee depreciation was the lowest among regional currencies in 2013, according to Dissanayake.

He added that Sri Lanka’s gross official reserves were on the rise whilst Foreign Direct Investments had almost tripled over the past three years. Low inflation and its support to lower interest rate regime and anticipated lower Government borrowing with reforms and profits improving in the public sector were some of the other key reasons highlighted by the Copal Amba Sri Lank Country Head to emphasise that Sri Lankan equities were poised for a re-rating.

Dissanayake recalled that in 2009 the primary focus of economic commentary on Sri Lanka was whether the country would be able to achieve sustainable economic growth. Concerns included achieving a high investment yet low inflation economy, achieving a sustainable Government debt trend driven by fiscal consolidation and higher FDI to fund the infrastructure spending.

“By end 2013, we have seen investment in major infrastructure to reduce capacity bottlenecks. as well as maintenance of a high investment to GDP ratio whilst restricting inflation to single digit rates over the past five years,” Dissanayake said.

“Furthermore, Sri Lanka has attracted FDI to embark on large-scale infrastructure projects whilst debt to GDP ratio has been reduced to 78% in 2013 from 86% in 2009,” he added.
Having emphasised the far-reaching positives, Dissanayake also highlighted a few risks facing Sri Lanka and equities. Reversal of global economic growth trajectory especially in key export markets and significant energy price shocks that could reverse the Government’s ability to maintain turnaround in CEB and CP through market price adjustments were two of those.

He also cited unfavourable weather patterns that could lead to food price inflation and increase the cost of power generation.

Banking/Finance and Conglomerates: Growth sectors
Focusing on growth sectors for foreign investors, which he described as “sectors in structurally sweet spots for medium term growth,” Dissanayake picked Banking and Finance and Conglomerates as attractive ones.

On Banking and Finance, he said short to medium term growth catalysts were falling into place. His optimism stems from the fact that there was upside potential on Net Interest Margins as interest rates decline, pickup in demand for credit and long term bond portfolios mark-to-market valuation upside due to declining rates. Furthermore, Dissanayake said policy-driven consolidation in the Banking and Finance sector was a long term catalyst since the move should help reduce inefficiencies in the sector, improve sector stability and improve cost to income ratios, providing sustainable support to Return on Equity.

He said that the Banking and Finance sector saw Non Performing Loans rise in 2013 but the risks were mitigated by high Capital Adequacy Ratios, provisions and the waning impact of the gold price decrease. It was noted that the impact of the 2013 NPL rise was already factored into current valuations in Banking and Finance sector equities and mid-teen ROEs versus below 2 times Price to Book value make the sector attractive for investors.

He said banks were trading at low valuations despite stronger growth outlook. His analysis covered Commercial Bank, HNB, DFCC Bank, Sampath Bank, NDB, NTB and Seylan Bank.

With regard to conglomerates, Dissanayake said these companies enjoy multiple growth drivers with transport, logistics and port services being high growth trajectory, leisure brimming with exponential growth owing ambitious targets as well as potential for post-conflict growth in tourism. The Copal Amba Country Head highlighted the attractiveness of JKH (as good as buying the index and emerging as a prime property player in Colombo with integrated resort projects), Aitken Spence (a play on tourism and logistics), CT Holdings (provides exposure to spending growth in the middle class consumers via retail, real estate and food processing), Hayleys (Sri Lanka’s top exporter, earnings growth aligned to recovery in export destinations), Hemas Holdings (a play on healthcare, FMCG, hydro and thermal power and leisure) and Expolanka Holdings (provides exposure to the high growth freight and logistics sector) in the diversified sector.
www.ft.lk

Sri Lanka shares fall on large caps, foreign selling after Fed decision

COLOMBO, Jan 30 (Reuters) - Sri Lankan shares fell on Thursday, led by blue chips and large caps and due to foreign selling, following the regional trend a day after the U.S. Federal Reserve further trimmed its monetary stimulus. 

The Fed announced a further $10 billion reduction in its monthly bond buying as it stuck to plans to wind down its extraordinary stimulus despite the recent turmoil across many emerging markets. 

The main stock index lost 0.4 percent, or 24.88 points, to 6,227.26. The fall was led by a 1.93 percent loss in market heavyweight Ceylon Tobacco Company Plc and a 3.16 percent fall in Cargills (Ceylon) Plc. 

Shares in John Keells Holdings lost 0.29 percent to end at 240 rupees, a day after it posted a 17 percent year-on-year gain in its December-quarter net profit. 

Foreign investors were net sellers of 216.5 million rupees ($1.66 million) worth of shares on Thursday, but bourse has witnessed net inflow of 823.5 million rupees so far this year. 

They bought 22.88 billion rupees of stocks last year. 

Stockbrokers said local retail and institutional investors were active in markets after interest rates in treasury bills eased at a weekly auction on Wednesday to multi-year lows, making fixed-income assets unattractive. 

The index has been in an overbought region since Jan. 7, Thomson Reuters data shows. 

It has risen 5.32 percent so far this year, following a 4.8 percent gain in 2013, after having fallen in the previous two years. 

The day's turnover was 808 million rupees, less than last year's daily average of about 828.4 million rupees. 

($1 = 130.7300 Sri Lanka rupees)

(Reporting by Shihar Aneez; Editing by Anupama Dwivedi)

Sri Lanka stocks close down 0.4-pct

Jan 30, 2014 (LBO) – Sri Lanka stocks close 0.40 percent lower Thursday with tobacco and hotel stocks losing ground amid strong foreign selling and Fed’s stimulus cut, brokers said.

The Colombo benchmark All Share Price Index closed 24.88 points lower at 6,227.26, down 0.40 percent. The S&P SL20 closed 12.13 points lower at 3,444.56, down 0.35 percent.

Turnover was 808.33 million rupees, down from 809.31 million rupees a day earlier, with stocks of 122 firms closing in the red against 69 gainers.

Aitken Spence closed 90 cents lower at 100.10 rupees with four off market transactions of 165 million rupees contributing to 20 percent of the turnover.

The aggregate value of all off market deals accounted for 30 percent of the daily market turnover.

Union Bank closed 20 cents lower at 19.70 rupees and Nation Lanka Finance closed 50 cents higher at 9.50 rupees, attracting most number of trades during the day.

Foreigners bought 88 million rupees worth shares while selling 304 million rupees of shares.

Ceylon Tobacco Company closed 25.60 rupees lower at 1,300.00 rupees and Asian Hotels and Properties closed 2.90 rupees lower at 63.10 rupees, contributing most to the index drop.

Cargills Ceylon closed 4.90 rupees lower at 150.10 rupees and Aitken Spence Hotel Holdings closed 2.40 rupees lower at 69.50 rupees.

Carson Cumberbatch ended 60 cents lower at 345.20 rupees and JKH closed 70 cents lower at 240.00 rupees.

JKH’s W0022 warrants closed 2.40 rupees lower at 75.30 rupees and its W0023 warrants closed 1.10 rupees lower at 79.90 rupees.

Asiri Hospital Holdings closed 80 cents higher at 19.10 rupees and Ceylinco Insurance ended 31.30 rupees higher at 1,371.30 rupees.

Nestle Lanka ended 11.00 rupees higher at 2,150.00 rupees and Bukit Darah ended 2.80 rupees higher at 614.80 rupees.

Nations Trust Bank closed 1.90 rupees higher at 66.90 rupees and Commercial Bank closed 60 cents lower at 127.00 rupees.

Distilleries closed 90 cents higher at 211.00 rupees and troubled Touchwood Investments ended flat at 3.10 rupees.

Vallibel Power closed 20 cents higher at 5.90 rupees with its interim accounts showing 134.48 million rupees of profit for the third quarter, a 15 percent growth over the previous year.

Earnings per share of the company have increased to 0.18 rupees from 0.16 rupees along with 127 percent growth in its 9 months profits over the same period the previous year.

JKH posts strong 3Q

Group revenue up 11% to Rs. 24 b; pre-tax profit up 19% to Rs. 4.27 b

• Bottom line up 17% to Rs. 3.4 b; Rights proceeds boost interest income
• Core sectors except transportation improve performance
• First nine months Group revenue up 4% to Rs. 62 b; PBT up 2% to Rs. 9.1b; Bottom line up 1% to Rs. 7 b

Premier blue chip John Keells Holdings PLC (JKH) yesterday reported strong results for third quarter as all core sectors except transportation improved their performance and high interest income helping the bottom line.
The Group revenues at Rs. 23.89 billion and Rs. 64.98 billion in the third quarter and the nine months ended 31 December 2013 were 11% and 4% above the Rs. 21.51 billion and Rs. 62.20 billion recorded in the corresponding periods in the previous year.

Results from operating activities grew by 30% to Rs. 2.64 billion in the 3Q and by 7% to Rs. 5.89 billion in the nine months.

The Group profit before tax (PBT) at Rs. 4.27 billion in the third quarter of the financial year 2013/14 was an increase of 19%. The Group PBT for the nine months ended 31 December 2013 of Rs. 9.11 billion was an increase of 2%.

Pre-tax profit figure was boosted by Rs. 1.26 billion net finance income up by 24% in the first quarter and Rs. 3.08 billion in nine months, up by 19%. This was largely on account of the increase in the cash balance arising from the proceeds of the rights issue which is earmarked for the ‘Waterfront’ Project.

The PBT for the nine months ended 31 December 2013, included a non-recurring charge of Rs. 139 million on account of the voluntary retirement scheme offered at Keells Food Products PLC, a non-cash charge of Rs. 144 million relating to the share based payments which came into effect in the current financial year and an impairment loss of Rs. 141 million arising from the demolition of buildings at Glennie Street and Justice Akbar Mawatha, totalling Rs. 424 million. The impact of these expenses on PBT for the quarter amounted to Rs. 211 million.

JKH’s bottom line – net profit attributable to equity holders of the parent was up 17% to Rs. 3.4 billion in 3Q and by 1% to Rs. 7.04 billion in the nine months.

JKH interim results were released after the market was closed but the stock was on the up anyway. JKH closed up 2% or Rs. 4.80 to Rs. 240.70 though on a surprisingly very thin volume of 28,493 shares.

Detailing sectoral performance JKH Chairman Susantha Ratnayake said the transportation industry group PBT of Rs. 538 million for the third quarter of 2013/14 was a decrease of 36% in comparison to the corresponding period in the previous financial year [2012/13 Q3: Rs. 844 million].

The decline in PBT is mainly attributable to the lower contribution from the ports and bunkering businesses. The ports business witnessed a drop in volumes as a result of the re-alignment of services experienced in the second quarter.

The Group’s bunkering business, although retaining market leadership in terms of share, recorded lower earnings compared to the same period last year as a result of the continued depression in the global bunker market coupled with the local and regional competition.

Leisure
The Leisure industry group PBT of Rs. 1.54 billion for the third quarter of 2013/14 was an increase of 15% compared to the corresponding period of the previous financial year [2012/13 Q3: Rs. 1.34 billion]. The increase in PBT was driven by the improved performance of Sri Lankan and Maldivian resorts compared to the previous year.

The performance of Sri Lankan resorts improved as a result of revised market positioning and implementation of effective yield management strategies which resulted in higher occupancies across the portfolio of hotels, whilst Maldivian resorts also benefitted from higher occupancies. The performance of city hotels and destination management continued to be in line with expectations.

Property

The property industry group PBT of Rs. 347 million for the third quarter of 2013/14 was a 93% increase over the PBT recorded in the corresponding period of the previous financial year [2012/13 Q3: Rs. 180 million]. The growth in PBT is on account of higher revenue recognition during the quarter in the ‘OnThree20’ development and the recognition of revenues from ‘7th Sense’ which had not commenced in the previous year. Construction of both developments are progressing as scheduled with approximately 90% of units of ‘OnThree20’ and 70% of ‘7th Sense’ sold to date.

Consumer foods and retail
The consumer food and retail industry group PBT of Rs. 228 million in the third quarter of 2013/14 was an increase of 23% over the PBT recorded in the corresponding period of the previous financial year [2012/13 Q3: Rs. 186 million]. Both the soft drinks and frozen confectionary segments recorded an increase in volumes.

Keells Food Products had a one off cost of Rs. 139 million during the quarter under review associated with the voluntary retirement scheme offered to its employees at the Ja-Ela plant in order to improve productivity and to make possible an internal restructuring of operations.

The retail business continued to witness same store sales growth on the back of increased footfall and basket values.

Financial services

The financial services industry group PBT of Rs. 1.01 billion in the third quarter of 2013/14 was an increase of 38% over the PBT recorded in the corresponding period of the previous financial year [2012/13 Q3: Rs. 734 million].

Both the insurance and banking businesses were the primary contributors to the improved performance. The implementation of the bank’s new positioning strategy was successfully concluded during the quarter under review.

As stipulated under the Insurance Industry Act No. 3 of 2011, the insurance business is in the process of making the necessary arrangements to segregate the life and general businesses by February 2015.

The stock brokering business gained market share despite the decrease in average daily turnovers as a consequence of the lower level of activity that prevailed on the Colombo Stock Exchange.

Information technology

The information technology industry group PBT of Rs. 87 million for the third quarter of 2013/14 was a decrease of 16% compared to the corresponding period of the previous financial year [2012/13 Q3: Rs. 103 million].

This decrease in PBT was largely on account of the software services business. The office automation business, which is the significant contributor towards the profits of the industry group, recorded a marginal decline in profits compared to the corresponding period in the previous year.

Other, including plantation services
Other, comprising of plantation services and the corporate centre recorded a PBT of Rs. 517 million in the third quarter of 2013/14 [2012/13 Q3:Rs. 194 million]. The increase in PBT was primarily attributable to an increase in net interest income at the company as a result of the increase in the cash balance arising from the proceeds of the rights issue which is earmarked for the ‘Waterfront’ Project.

The plantation sector also saw a significant improvement in its performance following improved quality of made tea, attractive prices and positive market conditions.

www.ft.lk

Sri Lanka shares up on Keells, local buying on low interest rates

COLOMBO, Jan 29 (Reuters) - Sri Lankan shares rose on Wednesday, led by conglomerate John Keells Holdings, and as local institutions bought stocks after interest rates dropped though foreign investors sold risky assets ahead of a U.S. Federal Reserve decision on trimming stimulus. 

The main stock index gained 0.54 percent, or 33.31 points, to 6,252.14, near its highest close since June 12 hit on Friday. Interest rates in treasury bills eased at a weekly auction on Wednesday to multi-year lows, making fixed-income assets unattractive for investors. 

"Now we see some local institutions buying shares when foreigners are selling. We didn't see that up to now. Gradually local (investor) confidence is building up," said a stockbroker on condition of anonymity. 

Shares in John Keells Holdings rose 2.03 percent. The company said after market close that its December-quarter net profit rose 17 percent year-on-year to 3.39 billion rupees. 

Sri Lanka's only specialised Islamic bank, Amana, which started trading for the first time on Wednesday, ended at 5.90 rupees, 15.7 percent lower than its IPO price of 7 rupees. 

Foreign investors were net sellers of 18.77 million rupees ($143,500) worth of shares, but have been net buyers of 1.04 billion rupees so far this year. 

They had bought 22.88 billion rupees of stocks last year. 

The index has gained 5.2 percent in the last 15 sessions, including last week's 2 percent gain, which analysts attributed to the central bank's rate cut on Jan. 2 and the recent fall in T-bill yields. 

The index has been in an overbought region since Jan. 7, Thomson Reuters data shows. 

It has risen 5.7 percent so far this year, following a 4.8 percent gain in 2013, after having fallen in the previous two years. 

The day's turnover was 808 million rupees, less than last year's daily average of about 828.4 million rupees. 

($1 = 130.8250 Sri Lanka rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anupama Dwivedi)

Sri Lanka's John Keells' Q3 net up 17 pct y/y

COLOMBO, Jan 29 (Reuters) - Group results for top Sri Lankan conglomerate John Keells Holdings PLC for the three months ended Dec. 31, released on Wednesday. 

John Keells Holdings is a heavyweight on the Colombo Stock Exchange and is among the most liquid stocks on the bourse, making it a favourite of offshore investors. 

 Foreign investors hold 55.6 percent of the total issued shares in the company, which has a market cap of 238,3 billion Sri Lanka rupees ($1.82 billion) and accounts for 9.62 percent of the total market capitalisation of the Stock Exchange, latest bourse data showed. 

 ($1 = 130.8250 Sri Lanka rupees) 

 (Reporting by Shihar Aneez and Ranga Sirilal; Editing by Mark Potter)

Sri Lanka stocks close up 0.5-pct

Jan 29, 2014 (LBO) – Sri Lanka stocks close 0.54 percent higher Wednesday ending a two day negative rally with diversified stocks gaining, brokers said.

The Colombo benchmark All Share Price Index closed 33.31 points higher at 6,252.14, up 0.54 percent. The S&P SL20 closed 30.09 points higher at 3,465.96, up 0.88 percent.

Turnover was 809.31 million rupees, down from 1.45 billion rupees a day earlier, with stocks of 87 firms closing in the red against 104 gainers.

HNB non-voting closed 90 cents higher at 127.90 rupees with two off market transactions of 104.94 million rupees contributing to 13 percent of the turnover.

The aggregate value of all off market deals accounted for 25 percent of the daily market turnover.

Union Bank closed 1.10 rupees higher at 19.90 rupees, attracting most number of trades during the day.

Foreigners bought 142 million rupees worth shares while selling 160 million rupees of shares.

JKH closed 4.80 rupees higher at 240.70 rupees and Ceylon Tobacco Company closed 24.60 rupees higher at 1,325.60 rupees, contributing most to the index gain.

JKH’s W0022 warrants closed 2.20 rupees higher at 77.70 rupees and its W0023 warrants closed 1.00 rupee higher at 81.00 rupees.

Asiri Hospital Holdings closed 1.00 rupee higher at 18.30 rupees and Cargills Ceylon closed 4.50 rupees higher at 155.00 rupees.

Dialog ended 10 cents higher at 9.50 rupees and SLT closed 60 cents lower at 36.00 rupees.

Carson Cumberbatch ended 5.20 rupees lower at 345.80 rupees and Bukit Darah ended 2.80 rupees lower at 612.00 rupees.

Ceylinco Insurance ended 18.20 rupees higher at 1,340.00 rupees and Commercial Bank closed 50 cents higher at 127.60 rupees.

Distilleries closed 2.40 rupees higher at 210.10 rupees and Nestle Lanka ended 13.80 rupees higher at 2,139.00 rupees.

Touchwood Investments ended flat at 3.10 rupees.

Asia Capital announces Directors’ exit after 4 months

Asia Capital Plc yesterday announced that two Directors, F.X.R. Pereira and D. Muthukumarana, have ceased to be Directors of the Board as of 25 September 2013.

The announcement of the cessation however comes four months late.

Following the changes, the Board of Directors of Asia Capital Plc comprises of Paul Ratnayeke (Chairman), A.D. Ross, V. Siva Jr, R.J. Wickramasinghe, D.A.S. Abeysesinhe (alternate to V. Siva Jr), S.A. Abeyesinhe (alternate to Paul Ratnayeke), S.A. Abeyesinhe, Z. Merchant, T. Tanaka, D.P. Pieris.

www.ft.lk

Amana Bank debuts today as 290th on the Bourse

Following the successful first IPO in the banking sector for nearly two years, Amana Bank Ltd. will go up on the Colombo Bourse today.

Classified under the Banks, Finance and Insurance Sector with ABL-N-0000 as the security code, 1.25 billion shares of Amana Bank will be listed on the Diri Savi Board for trading. It will be the 290th listed company on CSE.

In late December, the company successfully raised Rs 1. 5 billion with 3,781 applications received.

The bank made available 214,300,000 new ordinary shares at Rs. 7 each (worth Rs. 1.5 b) with an option of issuing a further 71,500,000 new ordinary shares (worth Rs. 500 m). 

The total value of the IPO including the option was Rs. 2 billion. The Rs. 500 million option wasn't exercised.

www.ft.lk

Sri Lanka shares slip for second straight session on blue chips

COLOMBO, Jan 28 (Reuters) - Sri Lankan shares slipped on Tuesday for a second straight session, further retreating from a seven-month high, led by blue chips like John Keells Holdings despite foreigners buying risky assets ahead of a U.S. 

Fed meeting that is expected to reduce its monetary stimulus. 

 The main stock index fell 0.43 percent, or 26.98 points, to 6,218.83, further moving away from its close on Friday which was the highest since June 12. 

 "There is a risk of foreign investors pulling out from the shares," a stockbroker said on condition of anonymity. 

"We have quite significant foreign investments in some blue chips and large caps. So there is a worry of foreign outflow." 

 Foreign investors, however, were net buyers of 267.56 million rupees ($2.05 million) worth of shares, extending the year-to-date net foreign inflow to 1.06 billion rupees. 

They had bought 22.88 billion rupees of stocks last year. Shares in conglomerate John Keells Holdings Plc slipped 2.37 percent to 235.90 rupees. 

 The index has gained 5.2 percent in the last 12 sessions through Friday, including last week's 2 percent gain, which analysts attributed to the central bank's rate cut on Jan. 2 and the recent fall in T-bill yields. 

 The index has been in an overbought region since Jan. 7, Thomson Reuters data showed. 

It has risen 5.2 percent so far this year, following a 4.8 percent gain in 2013, after having fallen in the previous two years. 

 The day's turnover was 1.46 billion rupees ($11.17 million), more than last year's daily average of about 828.4 million rupees. 

($1 = 130.7250 Sri Lanka rupees) 

 (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anupama Dwivedi)
http://www.reuters.com/

Sri Lanka stocks close 0.4-pct lower

Jan 28, 2014 (LBO) – Sri Lanka stocks close 0.43 percent lower Tuesday with diversified stocks losing ground despite net foreign buying, brokers said.

The Colombo benchmark All Share Price Index closed 26.98points lower at 6,218.83, down 0.43 percent. The S&P SL20 closed 25.88 points lower at 3,435.87, down 0.75 percent.

Turnover was 1.45 billion rupees, up from 872.63 million rupees a day earlier, with stocks of 82 firms closing in the red against 93 gainers.

HNB closed 40 cents lower at 159.00 rupees with three off market transactions of 599.21 million rupees contributing to 41 percent of the turnover.

The Finance Company closed flat at 13.70 rupees, attracting most number of trades during the day.

Foreigners bought 545 million rupees worth shares while selling 278 million rupees of shares.

Ceylon Tobacco Company closed 39.20 rupees lower at 1,301.00 rupees and JKH closed 3.30 rupees lower at 235.90 rupees, contributing most to the index drop.

JKH’s W0022 warrants closed 2.20 rupees lower at 75.50 rupees and its W0023 warrants closed 30 cents lower at 80.00 rupees.

Ceylinco Insurance ended 128.00 rupees lower at 1,321.80 rupees and Dialog ended 10 cents lower at 9.40 rupees.

Carson Cumberbatch ended 4.00 rupees lower at 351.00 rupees and Bukit Darah ended 2.80 rupees higher at 614.80 rupees.

Finlays Colombo closed 36.90 rupees higher at 290.00 rupees and Distilleries closed 2.20 rupees higher at 207.70 rupees.

Nestle Lanka ended flat at 2,125.20 rupees and Lion Brewery closed 4.90 rupees lower at 380.10 rupees.

Cargills Ceylon closed 1.60 rupees lower at 150.50 rupees and Commercial Bank closed 90 cents lower at 127.10 rupees.

Lanka Orix Leasing Company ended 1.40 rupees lower at 73.60 rupees.

L B Finance closed 1.00 rupee lower at 101.00 rupees with its interim accounts showing 317.95 million rupees of net profit for the December 2013 quarter, a 17.3 percent decline the same period in the previous year.

Earnings per share dropped to 4.05 rupees from 5.83 rupees, according to accounts filed with the stock exchange.

Textured Jersey closed 40 cents higher at 16.60 rupees with its accounts reporting 301.39 million rupees of net profit for the December quarter, a 17.4 percent decline the same period in the previous year.

“The firm recorded a net profit of 804.96 million rupees for the nine months, up 16.0 percent over the previous year supported by strong growth in turnover.” the textile company said in a stock exchange filing.

Chairman's Review Textured Jersey Lanka PLC

Textured Jersey Lanka PLC (TJL) recorded net profit of Rs. 805mn for the nine month period ended 31st December 2013, up 16.0% year on year supported by strong growth in turnover. Net profit for the quarter ended 31st December 2013 (3Q FY2013/14) was Rs. 301mn, representing a decline of 17.4% year on year, compared to the above average corresponding quarter last year. 3Q results in the previous year were significantly above average due to benefits from lower yarn prices, depreciation of the  Sri Lankan rupee and a reversal in stock provisions.

During the quarter under review, TJL continued to record higher sales volumes as compared to the previous year. This resulted in sales for 3Q FY2013/14 reaching Rs. 3.4bn, 16.7% higher than that of last year, placing the FY2013/14 nine month period cumulative sales figure at Rs. 9.5bn, up 19.7% year on year.

TJL’s gross profit for the nine month period ended 31st December 2013 was at Rs. 1.1bn, a healthy 15.0% increase over the corresponding period last year. The reported gross margin for 3Q FY2013/14 slid to 10.6% due to an increase in outsourced business. While outsourced business generates incremental value, it impacts the overall profit margin due to a lower level of in-house value addition. The gross margin excluding outsourced business is 11.9%, which is on par with the FY2012/13 average gross margin of 11.6%. It must be noted that due to one off gains from lower yarn prices, depreciation in the Sri Lankan rupee and reversal in stock provisions, gross margin in 3Q last year experienced a temporary spike to 15.7%.

Continuous enforcement of strict cost controls enabled TJL to maintain its 3Q FY2013/14 distribution and administrative expenses at Rs. 19mn and Rs. 82mn, respectively, the same level as the corresponding quarter last year. The cumulative operating profit for the nine months ended 31st December 2013 was Rs. 766mn, an increase of 14.7% year over year.

Owing to a near debt-free balance sheet and a healthy cash position throughout the period, TJL was able to record Rs. 22mn in net finance income for 3Q FY2013/14, representing a substantial 95.1% growth year on year. As at 31st December 2013, the company had no borrowings and a strong cash position of Rs. 2.3bn.

TJL recorded a net profit of Rs. 301mn for 3Q FY2013/14, down 17.4% year over year. Net profit for the nine month period ended 31st December 2013 remained strong at Rs. 805mn, up 16.0% compared to the corresponding period last year. TJL’s order book for the fourth quarter remains healthy and the management is confident of surpassing last year’s bottom line milestone of Rs. 1.0bn, despite the above average performance last year.

TJL management has kicked off a few key strategic initiatives in order to enter the next phase of growth. The capacity expansion and modernization project is currently underway and is expected to be completed in March 2014. The initiative is aimed at increasing capacity by 10-12%, which will enable TJL to reduce its outsourced orders and improve margins, as well as take on new customer orders which are currently refused due to capacity constraints. In addition, the construction of TJL’s multi-fuel boiler plant is progressing with amendments to timelines compared to the original plan. The plant is expected to reduce TJL’s energy cost substantially when commissioned and reduce dependency on the national grid.

TJL entered into a Technical Service and Management Agreement with Ocean India Private Ltd, a knit fabric manufacturer located in India. This arrangement is expected to provide TJL with knowledge and experience in regional markets. Given the above factors, TJL management remains confident of maintaining growth and delivering value to shareholders on a continuous basis.

SLT denies and then confirms negotiations to acquire Hutch

Ceylon FT: State-owned Sri Lanka Telecom (SLT), the country's largest telecommunication provider, has submitted two contradictory disclosures to the Colombo Stock Exchange on the ongoing Hutch deal.

SLT in its stock market filing yesterday (27) said that its fully owned subsidiary Mobitel, was negotiating with Hutchison Asia Telecom about a possible acquisition of its... Sri Lanka operation, Hutchison Telecommunication Lanka.

It said that the discussions were in the preliminary stages, and the final decision would depend on completion of confirmatory due diligence and both parties agreeing on terms and conditions of the transaction and thereafter, obtaining necessary regulatory approvals.

SLT assured to keep shareholders and the public informed after a definite decision on the transaction.

Last Friday (24) the company informed the Colombo Stock Exchange that Sri Lanka Telecom has 'not negotiated to purchase Hutch'.

http://ceylontoday.lk/22-54185-news-detail-slt-denies-and-then-confirms-negotiations-to-acquire-hutch.html

Mobitel to buy Hutch

Mobitel (Pvt) Ltd, national mobile telecommunications service provider and a fully owned subsidiary of Sri Lanka Telecom, has launched negotiations to purchase Hutch Sri Lanka, informed sources said.

The purchase is considered advisable in view of the fact that both Mobitel and Hutch are in the same principal line of business, being mobile phone service providers of repute. 

Besides, Hutch enjoys an extensive subscriber base of around one million, the sources added.

http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=96706

Vallibel Finance in Rs 250M debt issue

Ceylon FT: Vallibel Finance PLC is planning to raise Rs 250 million via a debenture issue next month, hoping to double the take upon over subscription.

In a statement to the market, the Colombo Stock Exchange... ... said the Dhammika Perera controlled Vallibel Finance would issue 2.5 million unsecured, subordinated, redeemable debentures at Rs 100 each, with an option to double the issue.

The debenture issue opens on 11 February 2014.

According to latest available data, the company reported a net profit of Rs 135.8 million during the six months ended June 2013, up 5.6% from a year ago.

http://ceylontoday.lk/22-54188-news-detail-vallibel-finance-in-rs-250m-debt-issue.html

Keells Food in the red

Ceylon FT: Keells Food Products PLC saw net profits fall 192% during the nine months ended December 2013, from Rs 64.14 million a year earlier, to a loss of Rs 58.7 million, interim financial results showed.

Revenue grew 3% to Rs 1.73 billion during the period.

A voluntary retirement scheme saw an additional expense of Rs 139 million being reported during the period from a year ago.

Net finance income dipped 11% to Rs 23.6 million.

http://ceylontoday.lk/22-54192-news-detail-keells-food-in-the-red.html

Sathosa Motors profits up 86%

Ceylon FT: Sathosa Motors PLC reported an 86% growth in net profits to Rs 244.1 million during the nine months ended December 2013, interim financial results showed.

Turnover grew 24% to Rs 2.19 billion and other operating income grew 209% to Rs 102.34 million.

Administrative expenses grew 123% to Rs 218.3 million and selling and distribution expenses grew 390% to 58.27 million.

Access Engineering PLC has an 84.4% stake in the company as at the balance sheet date. 

The company is agents for Japan's Isuzu and Germany's Opel and operates workshops for a range of vehicles under these brands from cars to heavy construction vehicles.
http://ceylontoday.lk/22-54190-news-detail-sathosa-motors-profits-up-86.html

LB Finance profits down 30%

Ceylon FT: LB Finance saw net profits fall 30% year-on-year to Rs 796.9 million during the nine months ending December 2013, interim financial results showed.

Net interest income grew 26% year-on-year to Rs 4.12 billion; interest income grew 25% to Rs 9.51 billion and interest expenses grew 25% to 5.38 billion.

Auction losses saw net operating income decline by 11% to Rs 3.17 billion.

Personnel expenses grew 28% to Rs 979.5 million, depreciation charges grew 6% to Rs 244.69 million and other operating expenses grew 10% to Rs 751.6 million.

Loans and receivables stood at Rs 17.5 billion as at end December 2013, against Rs 16.45 billion as at end March 2013. Lease rentals and stock out on hire stood at Rs 29.99 billion, from Rs 28.2 billion in March.

Customer deposits stood at Rs 45.2 billion as at end December 2013, up from Rs 38.7 billion as at end March 2013.

http://ceylontoday.lk/22-54186-news-detail-lb-finance-profits-down-30.html

Sri Lankan index slips from over 7-month high on profit-taking, outflows

COLOMBO, Jan 27 (Reuters) - Sri Lankan shares slipped on Monday, retreating from seven-month highs hit in the previous session on foreign outflows and profit-taking after gaining for three straight sessions on low interest rates and expected foreign inflow. 

The fall, however, was much less than its Asian peers, which plunged on concerns over U.S. Federal Reserve further tapering its stimulus this week and fears of a slowdown in China. 

The main stock index fell 0.16 percent, or 9.82 points, to 6,245.81, from its highest close since June 12 hit on Friday. 

Foreign investors were net sellers of 33 million rupees worth of shares. But they have been net buyers of 793.5 million rupees so far this year. 

They had bought 22.88 billion rupees of stocks last year. Conglomerate John Keells Holdings Plc slipped 3.16 percent to 239.20 rupees. 

The index has gained 5.2 percent in the last 12 sessions through Friday including last week's 2 percent gain, which analysts attributed to the central bank's rate cut on Jan. 2 and the recent fall in t-bill yields. 

The index has been in an overbought region since Jan. 7, Thomson Reuters data showed. 

It has risen 5.6 percent so far this year following a 4.8 percent gain in 2013, after having fallen in the previous two years. 

The day's turnover was 872.6 million Sri Lanka rupees ($6.68 million), inline with last year's daily average of about 828.4 million rupees. 

($1 = 130.6500 Sri Lanka rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)

http://uk.reuters.com/

Sri Lanka stocks close lower

Jan 27, 2014 (LBO) – Sri Lanka stocks close 0.16 percent lower Monday with diversified stocks losing ground, brokers said.

The Colombo benchmark All Share Price Index closed 9.82 points lower at 6,245.81, down 0.16 percent. The S&P SL20 closed 17.89 points lower at 3,460.20, down 0.51 percent.

Turnover was 872.63 million rupees, down from 1.45 billion rupees last Friday, with stocks of 137 firms closing in the red against 48 gainers.

JKH topped the turnover contribution list with one off market transaction of 164.50 million rupees contributing to 19 percent of the turnover.

Touchwood Investments closed 30 cents higher at 3.20 rupees, attracting most number of trades during the day.

Foreigners bought 249 million rupees worth shares while selling 282 million rupees of shares.

JKH closed 7.80 rupees lower at 239.20 rupees and Finlays Colombo closed 46.90 rupees lower at 253.10 rupees, contributing most to the index drop.

JKH’s W0022 warrants closed 2.30 rupees lower at 77.70 rupees and its W0023 warrants closed 4.70 rupees lower at 80.30 rupees.

Nestle Lanka ended 25.30 rupees lower at 2,125.20 rupees and C T Holdings closed 6.00 rupees lower at 144.00 rupees.

Ceylon Tobacco Company closed 88.90 rupees higher at 1,340.20 rupees and Ceylon Cold Stores ended 10.50 rupees higher at 165.50 rupees.

Lion Brewery closed 5.00 rupees higher at 385.00 rupees and Distilleries closed 50 cents higher at 205.50 rupees.

Carson Cumberbatch ended flat at 355.00 rupees and Bukit Darah also ended flat at 612.00 rupees.

Cargills Ceylon closed 1.30 rupees lower at 152.10 rupees and Commercial Bank closed 1.90 rupees lower at 128.00 rupees.

Ceylinco Insurance ended 49.80 rupees higher at 1,449.80 rupees and Lanka Orix Leasing Company ended 1.70 rupees higher at 75.00 rupees.

Cargills Bank limited to 3-branch chain

The Central Bank license given to Cargills (Ceylon) PLC to operate a commercial bank called Cargills Bank Ltd. has limited the bank chain to three branches, reports say.

Accordingly, the headquarters of Cargills Bank will be set up in the ceramic building in Kollupitiya while the other two branches will be located in Independence Avenue, Colombo 07 and in Batticaloa.

The license lacked the signature of the President Mahinda Rajapaksa for some time. According to the Banking Act, the President's signed approval in his capacity as Finance Minister is required to commence a new Banking venture.

Earlier, a spokesman of Cargills Bank had revealed that the bank would expand throughout the island choosing 10 strategically located branches.

He added that all facilities required were completed and employees required were recruited.

Former CEO of Sampath Bank - Harris Premaratne is to be the CEO of Cargills Bank, which was to kick start operations with a Rs. 4 billion investment.

Ranjit Page will be the Chairman of the Bank.

https://www.srilankamirror.com

Watawala Plantations brews Rs. 4.5 b in revenues; net income of Rs. 311 m in 9 months

Watawala Plantations PLC (CSE: WATA) has reported revenue of Rs. 4.5 billion for the nine months ended 31 December 2013 (9MFY14), up 8.8% YoY. Net profit declined to Rs. 311 million for 9MFY14, from Rs. 589 million recorded in 9MFY13.

The overall decline in YoY PAT is mainly attributed to the 20.0% YoY wage hike which came into effect from April 2013, which inflated the cost of production across all crops.

In 3QFY14, Revenue grew by 13.2% over the same quarter last year to Rs. 1.7 billion. PAT declined 24.8% YoY to stand at Rs. 212 million. The strong bottom line contribution in 3QFY14 was very encouraging as 68% of the total profit was generated in the quarter under review.

Segmental review
WATA’s Managing Director Vish Govindasamy said: “Segment performance overall met our expectations, especially in the 3QFY14. Yield improvements in palm oil have been excellent, while the turnaround in the tea segment has been very encouraging. In a challenging year, we continuously keep re-inventing ourselves with productivity improvements.”

The palm oil segment registered a revenue growth of 5.4% YoY to reach Rs. 1.1 billion in 9MFY14 which accounted for 24.8% of the company’s revenue during the period. The revenue growth was mainly driven by an impressive increase in production of crude palm oil (CPO), resulting from the adoption of good agricultural practices over the last few years, in line with the company’s agriculture policy.

CPO production grew 9.5% YoY to 6.52 m kgs for 9MFY14 from 5.96 m kgs recorded in the same period last year. The segment maintained its position as the highest contributor to company profitability, having made a net profit of Rs. 465 million for 9MFY14, compared Rs. 447 million recorded in 9MFY13.

The tea segment, the dominant revenue contributor which accounted for over 65% of the total revenue, increased 6.7% YoY to Rs. 2.9 billion in 9MFY14, on the back of improved tea prices, and increased production volumes in the 3QFY14. Tea NSA (Net Sale Average) for 9MFY14 improved to Rs. 418, compared to Rs. 403 recorded in the corresponding period in the last year. The negative impact due to reduction in production volumes, resulting from the continuous rains which prevailed in the upcountry area during the 1st few months of FY14 was partially offset by the increased volumes experienced in the 3QFY14, on the back of favourable weather conditions.

Tea production was recorded at 7.28 m kg in 9MFY14, which equalled the previous year’s production of 7.30 m kg. As anticipated, at end of 1HFY14, the cumulative net loss of Rs. 233 million recorded for 1HFY14 reduced to Rs. 197 million, as substantial crops were harvested during 3QFY14, while tea prices continued to be buoyant. 

Yet another factor that needs due consideration was the 20.0% YoY wage hike effective from April 2013 which resulted in an increase of average production cost by Rs. 41 per kg, and as a result, the total negative impact on cost of sales amounted to Rs. 289 million for the 9MFY14.

The rubber segment which accounted for 2.5% of the total revenue for 9MFY14, experienced a 23.1% YoY drop in revenue to Rs. 111 million, from Rs. 145 million recorded in 9MFY13 due to a decline in production by 15.3% YoY, compared to same period last year. The drop in production was accounted by lower number of tapping days due to bad weather that set in from May 2013 through till September 2013. The net loss for rubber amounted to Rs. 15 million in 9MFY14 versus the Rs. 2 million recorded in the same period last year.

Export segment

The export sector recorded a significant improvement in revenue driven by increased volumes due to several additional export orders received from Tata Global Beverages for their Tetley operation in Australia, Russia, Pakistan, and India. In 9MFY14, export revenue grew 75.5% YoY to Rs. 365 million from Rs. 208 million in 9MFY13.

Outlook
WATA has successfully endured a tough 9MFY14, on the back of wage hikes and tea crop losses, aggravated by extreme rainfall, thanks to its diverse range of agri crops which nulled the risk of a single commodity to the company.

FY14 being a ‘wage year’, the company had a 20.0% YoY increase in its staff related cost, but this was somewhat cushioned by strong tea prices, and a good harvest for our palm oil plantations.

Historically, 4Q is known to be the quality season, and provided there are no extraordinary weather conditions, we believe the company can recuperate most of its lost crop in the next few months up to the year-end FY14, to be at least on par with the volumes witnessed last year.

We are also confident that our palm oil plantations will continue to perform well and deliver expected crop, given the current weather conditions.

A member of the Sunshine Group, Watawala Plantations PLC is a diversified plantation company in Sri Lanka, managed by the Group’s subsidiary, Estate Management Services Ltd., a joint venture with the TATA Global Beverages Ltd. and Pyramid Wilmar Plantations (Part of Wilmar International). The company manages a total land extent of over 12,000 hectares in tea, rubber and palm oil with a workforce of over 12,000 people. The company has the largest palm oil plantation and the largest rubber factory in Sri Lanka to augment the production of more than 10m kgs of Ceylon Tea annually.

www.ft.lk

TFC to strike merger deal with a state bank

By Bandula Sirimanna

First finance company to respond to new Central Bank rules

Battling in a difficult financial and negative net-worth situation, the Finance Company Plc (TFC) is close to striking a merger deal with a state bank in accordance with new Central Bank (CB) rules aimed at consolidating the non-banking financial sector, official sources said.

TFC is the very first Non Banking Financial Institution (NBFI) to identify a partner to merge to reach the stipulated Rs. 8 billion in assets and capital of Rs. 1 billion.

The top management of the bank held a discussion with CB authorities on Friday, January 17th to explore the possibility of merging the company with the State Mortgage and Investment Bank (SMIB), the sources said.

The regulatory process will commence shortly after the handing over of the merger plan by TFC to the CB before the March 31st deadline.

However Kamal J. Yatawara, Director/CEO of the company and former President Finance Houses Association of Sri Lanka told the Business Times that three financial institutions have stepped into merger talks with the TFC and the final decision would be conveyed to Colombo Stock Exchange in accordance with listing regulations and before that he was unable to name the institution earmarked for the possible merger.

Provided the regulatory review concludes positively the newly-merged integrated company is expected to provide financial services including business loans, housing loans, leasing, hire purchase, trade finance, foreign currency exchange, foreign remittances, fixed deposits, savings and pawning for customers and new innovative financial products, he revealed.

He said the CB took timely action to consolidate the 58 non-bank financial institutions into 20 larger ones, as most of the NBFIs were struggling to survive as a result of losing confidence on finance companies, with the recent collapse of CIFL. On top of it banks were reluctant to lend to non-bank lenders such as TFC and the interest rate was also high, he said, adding that this made them difficult to survive.

TFC is the country’s oldest finance company and its CEO was hopeful that its “unparalleled” branch network strategically located countrywide and the merger of the company with a strategic partner will help (TFC) bounce back on a platform of efficiency and customer service.

The company is carrying accumulated losses of Rs.6 to 8 billion with total liabilities of Rs.6.6 billion over total assets. Mr. Yatawara said the company has been able to reduce 60 per cent of the accumulated losses amounting Rs. 12 .8 billion.

“The negative impact created by a share transaction of the company during the early part of the year under review hampered the planned growth in the deposits, loan disbursements and real estate sector,” he pointed out.

Commenting on the CB’s plan to merge NBFIs, economic expert and MP Dr. Harsha de Silva told a gathering of disgruntled CIFL depositors who were at a Sathyagraha campaign demanding the repayment of their deposits, that there was a move to merge TFC with a state bank.

Such mergers will only allow the owners and the directors of questionable companies to get away but there will not be any redress for poor depositors.

He said that he has brought to the notice of parliament that troubled finance companies are headed by people with strong links to the Government, raising more questions over the CB’s newly-unveiled plans.

He noted when shares of TFC were bought at Rs. 50 through the National Savings Bank inflating the market rate of Rs. 30. Today the share price has gone below Rs. 10.

Under this set up now the CB is matchmaking to link the loss making TFC with a state bank, he revealed.

The company has not met any regulatory requirements of the CB and losses have grown over the last few years even when it was under the CB restructuring process, even with hand picked directors, he said adding that all these details were disclosed in parliament by him.

People’s Leasing discussing mergers

The People’s Leasing Company (PLC) has begun discussions with some four finance companies to acquire them, PLC officials said.

“They have approached us and we’re talking to them,” a senior official told the Business Times.

The official added that they may also wrap up a deal involving a big finance company and another company where one will purchase a small finance company’s assets and the other will buy its infrastructure.
(Duruthu)

http://www.sundaytimes.lk/140126/business-times/tfc-to-strike-merger-deal-with-a-state-bank-80866.html