Inflation in April 2014

Inflation, as measured by the change in the Colombo Consumers’ Price Index (CCPI) (2006/07=100), which is computed by the Department of Census and Statistics, decelerated further to 5.6 per cent in April 2014, on an annual average basis, from 5.7 per cent in March 2014. This is the eleventh consecutive month, in which inflation has fallen continuously from high of 8.8 per cent in May 2013.


Inflation on a year-on-year (YoY) basis increased to 4.9 per cent in April 2014 from 4.2 per cent in the previous month, mainly on account of the base effect and increased prices of several food items.

The prices of items in the Non-food category, which recorded an insignificant increase in April 2014 compared to the previous month, caused inflation to be maintained at the mid-single digit level during the month. The prices in the sub categories of Housing, Water, Electricity, Gas and Other Fuels; Furnishing, Household Equipment and Routine Household Maintenance; Transport; Communication; Recreation and Culture; and Education remained unchanged during the month. However, the prices in the Miscellaneous Goods and Services (0.2 per cent); Clothing and Footwear (0.1 per cent); and Health (0.1 per cent) increased marginally.

The prices of items in the Food and Non-alcoholic beverages category, which increased by 0.7 per cent in April 2014 compared to the previous month, was the main contributor towards the 0.3 per cent monthly increase in the CCPI. Within the food category, price increases were recorded in many varieties of rice and vegetables, some varieties of dried fish, potatoes, red onion, green chilies and sugar. However, prices of most varieties of fresh fish, some varieties of fruits and big onion decreased during the month.

Annual average Core inflation which decelerated steadily from June 2013 reached 3.3 per cent in April 2014 compared to 3.5 per cent in the previous month, displaying well-contained demand conditions. YoY core inflation remained at the same level of 3.4 per cent recorded in March 2014.

http://www.cbsl.gov.lk/pics_n_docs/02_prs/_docs/press/press_20140430ea.pdf

Financial Sector Consolidation Update – April 2014

Central Bank of Sri Lanka - Press Release

Satisfactory progress was made in the consolidation process during the month of April 2014. All banks and finance and leasing companies (NBFIs) submitted their broad plans on consolidation and greater participation in economic activities. The Central Bank reviewed the broad plans submitted by the banks and NBFIs and another round of one-on-one meetings are to be held with the respective banks and NBFIs to discuss these plans further. Banks and large NBFIs have shown interest in merging/acquiring many smaller NBFIs and have initiated Board level discussions with the shortlisted merger/acquisition counterparts. To facilitate these discussions, due diligence and valuation reports of the respective NBFIs available with the Central Bank have been released to the interested parties, upon completing the necessary legal documentation. Several strategic investors who have shown interest in infusing fresh capital to banks and NBFIs have also initiated their preliminary assessments of the respective banks and NBFIs.

The DFCC Bank and the National Development Bank PLC continued the preliminary work relating to the merger. The Merchant Bank of Sri Lanka PLC, MBSL Savings Bank Limited and MCSL Financial Services Limited have also initiated Communications Department action on the merger of the three entities with the view of forming a single licensed finance company. In addition, approval has been granted by the Central Bank for several NBFIs operating within financial groups to proceed in the process of being merged.

In the meantime, the process of preparing the Information Memoranda (IM), Due Diligence Reports (DDs) and valuation of NBFIs is expected to be completed by the appointed audit firms during the first week of May. These reports based on financial data will form the basis for negotiations between the interested parties and target NBFIs. At the same time, the Inland Revenue (Amendment) Act No 8 of 2014 and Value Added Tax (Amendment) Act No 7 of 2014 have been enacted by the Parliament giving effect to the budget proposal on financial sector consolidation. The Central Bank is in the process of finalizing the Guidelines on taxation as required by these Acts. These Guidelines will provide clarity on the proposed tax incentives for the financial sector consolidation process and further motivate the stakeholders of the consolidation process. The Central Bank has also initiated action to review the existing regulatory framework of banks and NBFIs to ensure that it is strengthened to address the challenges that will arise along with the consolidation of the financial sector.

The Central Bank continued to exchange views with all stakeholders of the consolidation process while providing clarifications to queries raised by different parties. The Governor and other senior officials of the Central Bank also participated in several forums on financial sector consolidation organized by external parties during the month. 

http://www.cbsl.gov.lk/pics_n_docs/latest_news/press_20140430eb.pdf

Sri Lankan shares hit 3-month high; turnover spikes

(Reuters) - Sri Lankan shares rose to their three-month peaks on Wednesday in high turnover as investors bought large caps such as Ceylon Tobacco Company Plc in small quantities.

A lower interest rate regime helped the market, with turnover hitting a three-week high, though foreign investors sold the island nation's risky assets.

The country's main stock index rose 0.6 percent, or 37.42 points, to 6,223.67, its highest since Jan. 31.

The market gained 4.28 percent in April as some retail investors started buying risky assets in the face of low interest rates.

"The market looks positive, interest rates are also coming down," said a stockbroker.

Lower interest rates have helped the market gain in the past few weeks and we have seen activity across the board, stockbrokers said.

Last week the central bank kept policy rates steady at multi-year lows.

The day's turnover was 1.23 billion rupees ($9.42 million), its highest since April 9 and more than this year's daily average of 956.5 million rupees.

Shares of Union Bank of Colombo rose 0.47 percent to 21.50 rupees, while Ceylon Tobacco Company advanced 3.18 percent to 1,099.20 rupees. Aitken Spence rose 0.71 percent to 98.70 rupees.

Offshore investors were net sellers of 55 million rupees worth of stocks on Wednesday, extending the net foreign selling so far this year to 7.19 billion rupees. 

($1 = 130.6100 Sri Lanka Rupees) 

(Reporting by Ranga Sirilal; Editing by Subhranshu Sahu)

Sri Lanka shares end up 0.6-pct

Apr 30, 2014 (LBO) - Sri Lanka's shares end 0.60 percent higher Wednesday with tobacco and beverages stocks gaining amid strong foreign participation, brokers said.

The Colombo benchmark All Share Price Index closed 37.42 points higher at 6,223.67 up 0.60 percent. The S&P SL20 closed 12.87 points higher at 3,418.19, up 0.38 percent.

Turnover was 1.23 billion rupees, up from 570.90 million rupees a day earlier with 123 stocks close positive against 82 negative.

John Keells Holdings closed flat at 238.00 rupees with two off market transactions of 114.49 million rupees contributing 9 percent of the turnover.

JKH’s W0022 warrants closed 80 cents lower at 66.70 rupees and its W0023 warrants closed 20 cents lower at 72.40 rupees.

Aitken Spence closed 70 cents higher at 98.70 rupees with market transactions of 176.35 million rupees contributing 14 percent of the turnover.

George Steuart Finance closed 10.60 rupees higher at 64.50 rupees and Laxapana Batteries closed 60 cents higher at 4.30 rupees, attracting most number of trades.

Foreign investors bought 323.09 million rupees worth shares while selling 378.09 million rupees worth shares.

Ceylon Tobacco Company closed 33.90 rupees higher at 1,099.20 rupees and Lion Brewery Ceylon closed 28.80 rupees higher at 434.00 rupees, contributing most to the index gain.

Ceylinco Insurance closed 89.30 rupees higher at 1,360.00 rupees and NDB Capital Holdings closed 35.00 rupees higher at 500.00 rupees.

The Kingsbury closed 10 cents higher at 14.00 rupees and Aitken Spence Hotel Holdings closed 1.00 rupee higher at 74.00 rupees.

Vallibel One closed 90 cents higher at 19.10 rupees and Vallibel Finance closed 20 cents higher at 31.30 rupees.

DFCC Bank closed 1.90 rupees lower at 158.10 rupees and Commercial Leasing and Finance closed 10 cents lower at 3.90 rupees.

Nestle Lanka closed 12.10 rupees lower at 1,985.60 rupees.

Sri Lanka's Lighthouse hotel net up 46-pct in March

Apr 30, 2014 (LBO) - Sri Lanka's The Lighthouse Hotel Plc, said profits in the March 2014 quarter surged 46 percent to 83 million rupees from a year earlier, with revenues also up.

The firm reported earnings of 1.81 rupees per share for the quarter. In the year to March 2014 it reported earnings of 2.66 rupees on total profits of 122 million rupees, up 9 percent from a year earlier.

Lighthouse Hotel closed at 53.20 down 2.90 rupees Wednesday.

In the March quarter revenues rose 26 percent to 250.3 million rupees from a year earlier and cost of sales fell 1 percent to 39.7 million rupees, helping expand gross profits 32 pecent to 210 million rupees.

Administrative expenses were up 24 percent to 111.8 million rupees.

Shangri-La increases investment to US$ 450 m

To add 125 more rooms to total 625
Sara Pathirana (spsara85@gmail.com)

The Shangri-La hotel chain, which will be initiating Sri Lanka’s first seven star hotel, has revised its plan of construction and has decided to increase their investment to US $450 million, excluding the cost of the land and along with an increase of rooms from the initial 500 to 625. The hotel is to be built on 10 acres of land overlooking the Galle Face Green.

The land was initially bought in 2010 with a price tag of US $ 125 million and the approval for the construction was received in the same year. With the increase of rooms and a newer plan already paving the way for the new building, the deadline has also gone up, with hopes for the project to see completion in 2017, though the preliminary plan was to finish the project in 2015.

The proposal for the new project has already been approved and the tax concessions will remain the same. With the project seeing fruition, the Electricity Board (CEB) will also have to shift one of their high-tension cables which is getting in the way of the construction and therefore, there are discussions underway between the relevant authorities with regard to this.

Shangri-La Colombo will comprise of a sushi bar, steakhouse, seafood market and Irish pub, specialty restaurants with Indian, Islamic, Szechuan and Macanese cuisines, a Sky lounge, meeting facilities, a swimming pool, spa and tennis courts.

In addition to this, Shangri-La’s Hambantota Resort and Spa, which is also in the pipeline, is set to include an 18-hole golf course and is set to offer 315 rooms, including 24 suites. Hambantota Resort and Spa will also comprise of a Sanctuary.

Shangri-La Hotels and Resorts is a Hong Kong based company and five star properties are located across Asia, the Middle East, North America, Oceania and Europe. The first hotel of the group was the Shangri-La Hotel Singapore and this opened in 1971.

The chain is the largest Asian-based luxury hotel group in the region and is regarded as one of the world’s finest hotel management companies.

www.dailynews.lk

Overseas Realty profits up 45%

Ceylon FT: Overseas Realty (Ceylon) PLC, developers and managers of the iconic World Trade Centre Colombo and the under-construction Havelock City mixed development project, reported a group net profit of Rs 804.8 million for the quarter ended 31 March 2014, up 45% from a year ago," the company said in its interim financial statement.

Rental income grew 23% to Rs 423.8 million and apartment sales rose 130% to Rs 1.25 billion during the quarter, interim financial statements filed with the stock exchange showed.

Operating expenses were flat from a year ago to Rs 106.22 million and cost of apartment sales rose 125% to Rs 1.04 billion.

Fair value gain on investment property increased 8% to Rs 250.8 million and exchange loss fell 25% to Rs 780,000.

Finance costs fell 20% to Rs 22.2 million and finance income grew 25% to Rs 87.6 million.

Earnings per share with fair value gains amounted to 85 cents, up from 61 cents a year ago.

Havelock City Residential phase 2 is nearing completion, the company said.

"The company's Subsidiary Mireka Capital Land (Pvt) Ltd assessed for Value Added Tax (VAT) for periods between January 2006 and January 2009 amounting to Rs 190 million plus penalties. The company has appealed against same and filed a writ application in the Court of Appeal to prevent recovery action being taken by authorities.

Although there can be no assurance, the directors believe, based on the information currently available, that the ultimate resolution of such legal proceedings would be favourable to the company and therefore would not have an adverse effect on the results of operations or financial position. Accordingly, no provision for any liability has been made in these financial statements. The company's subsidiary Mireka Homes (Pvt) Ltd., has been assessed for ESC amounting to Rs 2.9 million plus penalties and the company has appealed against same," the company said in the notes to the interim financial statements.

Capital expenditure commitments: Mireka Capital Land (Pvt) Ltd., has commitments amounting to Rs 46 million as at the balance sheet date in respect of the Havelock City Club House Development; Havelock City (Pvt) Ltd., has commitments amounting to Rs 43 million in respect of the Havelock City Commercial Development; Mireka Homes (Pvt) Ltd., has commitments amounting to Rs 1,232 million in respect of the Havelock City Residential Development.

The company owns 185 condominium units that are held to earn rentals. These units constitute the investment property of the group.

The Employees' Provident Fund is the third largest stakeholder with a 5.03 stake as at end March 2014.

In 2013, its iconic property the twin towers of the World Trade Centre Colombo, maintained an average occupancy of 98% and achieved a 19% increase in rental rates.
www.ceylontoday.lk

Tea in ‘thumbs – up’ mood, first quarter earnings top Rs. 50.3 billion

By Steve A. Morrell

January to March results put tea circles in an ‘all smiles’ situation particularly because earnings exceeded those of last year over the same period by as much as Rs 8. 3 billion. Additionally, exports of 75.2 million kilos indicate increase in quantities exported, by 4.3 million kilos, a Forbes & Walker tea market report said.

However , the Asia Siyaka weekly tea market report had an equally interesting story that India too had increased crop exports although weather indicators were that tea growing areas in Assam had longer dry spells with warmer temperatures. Irrigation systems installed in those plantations had ensured crop potential was not affected. It also meant in those tea growing areas weather was not really of critical concern.

The report further said prices realized were not in keeping with increased costs.

CTC ( Cut Tear and Curl), was selling at $ 1 . 68, which was low. The Colombo market average was around $ 3 . 70. However, as the Indian Tea Association said Assam produced 620 million kilos of tea last year, but the price drop was attributed to poor quality. Indian tea traders reportedly were unable to raise prices.

The Asia Siyaka report further said The Tea Research Association of India, on its part, had conducted studies and confirmed a drop in rainfall and rise in temperatures.

Global warming, which was an expected phenomenon this year, further aggravated the ‘Indian problem’, particularly because Ceylon Tea and Kenya were in competition for top slots.

Ex estate catalog tea sold at increased demand and the all round performance was said to be quite promising.

However, low grown Ceylon Tea maintained their demand markets in Iran, Turkey, Dubai, Iraq, Kuwait and Saudi Arabia. Additionally, CIS countries continued their strong support for Ceylon Tea.

Value addition exports had increased to as much as 62 % in 2013. These exports had not diminished currently and were sustained. But bulk tea demand did not fare as well.

Tea exports to end March, included, Russia, CIS and additionally, Japan, Germany and Middle East countries, which continued to support Ceylon Tea.
www.island.lk

Sri Lanka bourse at 1-week high on Keells

(Reuters) - Sri Lankan shares ended firmer on Tuesday to hit one-week highs, led by diversified shares such as John Keells Holdings Plc, after the nation's parliament approved three big mixed-development projects last week.

But the government's refusal to allow casinos at these projects hurt the momentum, dealers said.

The country's main stock index rose 0.23 percent, or 14.31 points, to 6,186.25, its highest since April 22.

The Sri Lankan parliament on Friday approved two projects for luxury resorts, worth up to $1,250 million, by John Keells, that will include hotels and shopping malls, and by Australian gaming tycoon James Packer's Crown Ltd.

Shares in Keells rose 1.28 percent to 238 rupees. Vallibel One, which ended flat at 18.20 rupees, got parliamentary approval on Thursday to invest $300 million in an integrated luxury tourist resort in the island nation's proposed exclusive gaming zone.

The market has gained 3.65 percent so far this month as some retail investors started buying risky assets in the face of low interest rates.

Lower interest rates have helped the market gain in the past few weeks, stockbrokers said.

Central bank on Tuesday rejected all bids at the benchmark 91-day treasury bills, which is already at its lowest since January 2007, while yield in the 182-day and 364-day t-bills also fell to its lowest since 2007, data showed.

Last week the central bank kept policy rates steady at multi-year lows.

The day's turnover was 570.8 million rupees ($4.4 million), well below this year's daily average of 952.8 million rupees.

Offshore investors were net buyers of 48.3 million rupees worth of stocks on Tuesday. But they have been net sellers of 7.14 billion rupees so far this year. 

($1 = 130.6300 Sri Lanka Rupees) 

(Reporting by Ranga Sirilal; Editing by Anand Basu)

Sri Lanka Treasuries yields steady

Apr 29, 2014 (LBO) - Sri Lanka's Treasuries yields were steady at Wednesday's auction with 12-month yield unchanged at 7.02 percent, date from the state debt office showed.

There were no sales of 3-month bills. Last week 3-month bills were sold for a weighted average yield of 6.58 percent.

The 6-month yield was 6.78 percent, down one basis point.

The debt office sold 3.9 billion rupees of 6-month bills, 7.4 billion rupees of 12 month bills totaling 11.3 billion rupees after offering 15.0 billion rupees of maturing bills at the auction.

Related News:
http://www.cbsl.gov.lk/pics_n_docs/latest_news/press_20140429e.pdf

Sri Lanka stocks close up 0.2-pct

Apr 29, 2014 (LBO) - Sri Lanka's stocks close up 0.23 percent Tuesday with diversified John Keells Holdings gaining amid net foreign buying, brokers said.

The Colombo benchmark All Share Price Index closed 14.31 points higher at 6,186.25 up 0.23 percent. The S&P SL20 closed 10.98 points higher at 3,405.32, up 0.32 percent.

Turnover was 570.90 million rupees, up from 423.81 million rupees a day earlier with 113 stocks close positive against 72 negative.

Union Bank closed 1.00 rupee higher at 21.40 rupees and The Finance Company closed 1.20 rupees higher at 12.20 rupees, attracting most number of trades.

Foreign investors bought 153.46 million rupees worth shares while selling 105.18 million rupees worth shares.

John Keells Holdings closed 3.00 rupees higher at 238.00 rupees contributing most to the index gain.

JKH’s W0022 warrants closed 40 cents higher at 67.50 rupees and its W0023 warrants closed 60 cents higher at 72.60 rupees.

Commercial Leasing and Finance closed 20 cents higher at 4.00 rupees and LOLC closed 60 cents higher at 76.10 rupees.

Sri Lanka Telecom closed 70 cents higher at 48.90 rupees and Dialog Axiata closed flat at 9.30 rupees.

Richard Pieris and Company closed 30 cents higher at 6.90 rupees and Expolanka Holdings closed 50 cents higher at 10.00 rupees.

Ceylinco Insurance closed 119.30 rupees lower at 1,270.70 rupees and Asiri Hospital Holdings closed 50 cents lower at 21.50 rupees.

Vallibel One closed flat at 18.20 rupees.

New identity for DFCC, NDB to be annulled?

The DFCC and NDB Banks are to be annulled, reports say.

The nullifying is to be done related to the Central Bank's decision to merge the two entities to set up a new bank, using all resources of DFCC and NDB, reports add.

However, a final decision with regard to the name or the management structure of the new bank is yet to made.

The DFCC was founded under a special Act while the NDB was established under the Banking Act.

It is said that in order for the merger to take place, the Parliament Act on which the DFCC was established, should be amended in Parliament, reports say.

The biggest stakeholders of both entities are state corporations, Employees' Provident Fund (EPF) and the Employees' Trust Fund (ETF).

From the private sector based stakeholders, Harry Jayawardena's Distilleries Group take the lead in DFCC bank while at the NDB, it is Ashok Pathirage, MD / Chairman of the Softlogic Group.www.srilankamirror.lk

Sri Lanka 'BB-' rating confirmed, foreign debt, deficits high: Fitch

Apr 28, 2014 (LBO) - Fitch Ratings has confirmed a 'BB-' rating on Sri Lanka with a stable outlook on strong economic growth but said state debt was over twice that of similar rated countries and foreign debt three times as much.

Sri Lanka's rating is three levels below the lowest investment grade rating of 'BBB-'. The outlook was stable.

"Official data do not point to overheating of the economy, as inflation (4.2 percent in March) and credit growth (4.4 percent in February) are low," Fitch Ratings said.

"However, average inflation over the past five years has been high (6.2 percent) and volatile compared with peers (5.0 percent median for the 'BB' peer group) and the potential for a build-up of future imbalances exists."

Fitch said authorities had a pro-growth bias with monetary policy being eased despite high official growth.

The public finances are weak relative to peers despite fiscal consolidation.

Both the budget deficit (5.9 percent of GDP in 2013) and government debt burden (78.3 percent of GDP in 2013) are more than double the 'BB' category medians of 2.7 percent and 35.9 percent of GDP, respectively.

"The 2014 budget signals commitment to medium-term debt reduction to maintain a gradual fiscal consolidation path, although the process is slow and to a large extent built on revenue projections that may turn out too optimistic," Fitch said.

The current account deficit has fallen from 6.7 percent of GDP in 2012 to 3.9 percent in 2013.

A current account deficit is generally caused when inflows that generate a surplus in the capital accounts is spent by domestic players. In Sri Lanka the government is a net borrower abroad. Private foreign borrowings are also picking up.

Foreign investments when spent, also expands the current account through capital imports.

But the current account deficit can also surge beyond the capital account surplus when money is printed by a central bank to sterilize foreign exchange sales during a so-called a balance of payments crisis and forex reserves are run down as happened in 2011 and 2012.

Fitch said in 2014 the external current account deficit is expected to narrow to 3.2 percent of gross domestic product.

Only relatively small part of the current account deficit was financed by foreign direct investments Fitch said.

Hence, net external debt (45.1 percent of GDP in 2013) was almost triple the 'BB' peer category median of 15.9 percent of GDP.

Band debts were 5.6 percent of loans in 2013 which Fitch said was "relatively high" and was expected to rise to 6 percent in 2014.

"However, the banking sector is not very large relative to the economy, with the credit to GDP ratio at only around 40% at end-2013," Fitch said.

"Rapid credit growth in the past elevated Sri Lanka into the highest '3' category of Fitch's Macro-Prudential Indicator."

Sri Lankan shares edge up on diversified companies

(Reuters) - Sri Lankan shares ended a tad firmer in dull trade on Monday, led by diversified companies like Vallibel One, after the nation's parliament approved three mega mixed development projects last week.

But the government's refusal to allow casinos at these projects hurt the momentum, dealers said.

The country's main stock index edged up 0.07 percent, or 4.13 points, to 6,171.94.

The Sri Lankan parliament on Friday approved two projects for luxury resorts, worth up to $1250 million, by John Keells Holdings PLC, that will include hotels and shopping malls, and by Australian gaming tycoon James Packer's Crown Ltd.

Shares in Keells rose 0.04 percent to 235.00 rupees. Vallibel One, which rose 2.25 percent to 18.20 rupees, got parliamentary approval on Thursday to invest $300 million in an integrated luxury tourist resort in the island nation's proposed exclusive gaming zone.

The market has gained 3.41 percent so far this month as some retail investors started buying risky assets in the face of low interest rates.

Lower interest rates have helped the market gain in the past few weeks, stockbrokers said.

The benchmark 91-day treasury bill yield dropped to its lowest since January 2007 on Wednesday, data showed, a day after the central bank kept policy rates steady at multi-year lows.

The day's turnover was 423.8 million rupees ($3.24 million), well below this year's daily average of 957.9 million rupees.

Offshore investors were net buyers of 52.2 million rupees worth of stocks on Monday in dull foreign activity. But they have been net sellers of 7.19 billion rupees so far this year.

($1 = 130.6150 Sri Lanka Rupees)

(Reporting by Ranga Sirilal; Editing by Subhranshu Sahu)

Sri Lanka stocks end higher

Apr 28, 2014 (LBO) - Sri Lanka's stocks end 0.07 percent higher amid net foreign buying on the board, brokers said.

The Colombo benchmark All Share Price Index closed 4.13 points higher at 6,171.94 up 0.07 percent. The S&P SL20 closed 6.37 points higher at 3,394.34, up 0.19 percent.

Turnover was 423.81 million rupees, down from 906.28 million rupees last Friday with 83 stocks close positive against 84 negative.

George Steuart Finance closed 15.10 rupees lower at 65.00 rupees, trading heavily on the market.

Foreign investors bought 128.46 million rupees worth shares while selling 76.23 million rupees worth shares.

Asiri Hospital Holdings closed 50 cents higher at 22.00 rupees and C T Holdings closed 3.00 rupees higher at 140.00 rupees.

Asian Hotels and Properties closed 1.00 rupee higher at 64.50 rupees and Vallibel One closed 40 cents higher at 18.20 rupees.

DFCC Bank closed 1.60 rupees higher at 159.30 rupees and NDB Capital Holdings closed 75.80 rupees lower at 461.20 rupees.

Ceylon Tobacco Company closed 50 cents lower at 1,065.00 rupees and John Keells Holdings closed 10 cents higher at 235.00 rupees.

JKH’s W0022 warrants closed 80 cents lower at 67.10 rupees and its W0023 warrants closed 1.00 rupee lower at 72.00 rupees.

Bukit Darah closed flat at 580.00 rupees.

Vajira Kulatilaka New Chairman at CSE

Mr. Vajira Kulatilaka will take office as the Chairman of the Board of Directors of the Colombo Stock Exchange (CSE), with effect from 5th June 2014. Mr. Kulatilaka has served on the CSE Board of Directors since October 2009.

Mr. Kulatilaka, is designated as Director/Chief Executive Officer - NDB Capital Holdings PLC and overlooks the operations of the Investment Banking Cluster of the NDB Group, which comprises of NDB Investment Bank Limited, NDB Securities Pvt Limited, NDB Wealth Management Limited and NDB Capital Limited, Bangladesh. He carries over 29 years of experience in the Finance Sector and Capital Market of Sri Lanka. Prior to joining NDB Investment Bank Limited, he functioned as the Chief Executive Officer at CKN Fund Management (Pvt) Limited. Mr. Kulatilaka has been instrumental in managing some of the largest IPO’s in Sri Lanka.

He is a Chartered Financial Analyst and has obtained a B.Sc Degree in Civil Engineering with First Class Honours from the University of Moratuwa, and MEng in Industrial Engineering and Management from the Asian Institute of Technology. He also obtained qualifications as a Fellow Member of the Chartered Institute of Management Accountants UK.

Mr. Kulatilaka currently holds Directorships at NDB Capital Holdings PLC, NDB Investment Bank Limited, NDB Securities Pvt. Limited, NDB Wealth Management Limited and NDB Capital Limited – Bangladesh.

He succeeds Mr. Krishan Balendra, who will step down as the Chairman of the CSE on 5th June 2014, at the Annual General Meeting, on the conclusion of the customary three year term.
http://www.cse.lk/cmt/upload_cse_announcements/2391398663784_.pdf

Sri Lanka's Chevron Lubricants unit revenues down, profits flat

Apr 28, 2014 (LBO) - Sri Lanka's Chevron Lubricants Plc said revenues fell 5.6 percent to 2.98 billion rupees in the March 2014 quarter from a year earlier, but profits fell at a lower 0.8 percent to 1.24 billion rupees, helped by a price hike.

The firm reported earnings of 6.36 rupees for the quarter. The stock closed at 269.90 up 1.90 rupees Friday.

"The marginal reduction in earnings is due to a variety of macro and micro challenges," chief executive Kishu Gomes told shareholders.

"Lubricants consumption has remained sluggish in the local market while there has been an increase in export volumes."

While revenues fell 5.6 percent, costs fell at a faster 11.1 percent to 1.74 billion rupees allowing gross profits to go up 3.4 percent to 1.24 billion rupees.

Gomes said a price increase in January 2014 was expected to improve margins.

Interest income fell 31 percent to 44.9 million rupees as cash reserves halved to 1.2 billion rupees and inventories rose to 3.3 billion rupees from 1.9 billion rupees.

Gomes said inventories were built up to meet the demand during a plant relocation.

Packer says if no casino no investment

Ceylon FT: Australian billionaire and gaming tycoon James Packer according to news reports has informed the Sri Lankan government that he would abandon the planned US$ 400 million integrated resort project in Colombo if operation of casinos were not allowed and not mentioned in the gazettes.

James Packer last year signed an agreement with the Board of Investment to set up an integrated resort in Colombo, the planned project was estimated to be US$ 350 million and the Australian gaming tycoon was expected to partner with local gaming operator Ravi Wijerathne.

The project came under heavy criticism, the Ministry of Investment Promotion, which submitted gazette notification including casinos in the integrated resort later removed and replaced it claiming no casino would be included. However transfer of existing casinos were permitted and according to reports James Packer was expected to transfer his partner's casino to the new property. President Mahinda Rajapaksa and Minister of Economic Development... ...last week said that government was not approving any casinos but only permitting the construction of hotels, and the Cabinet had taken a policy decision not to include casinos or provide tax concessions to such activity.

The Parliament last week approved all three projects excluding casinos by, Australian gaming tycoon James Packer, local blue chip John Keells Holdings and local gaming mogul Dhammika Perera.
www.ceylontoday.lk

'Stock Market gives better return on people's investments than banks'

Nalaka Godahewa

By Lynn Ockersz

'Do not confine yourselves entirely to the banking system. The Stock Market has always given you a better return on your investments and it would be advisable for you to invest some of your hard-earned money in the Stock Market, with a full knowledge of the money-earning opportunities it opens out regularly, rather than invest all your moneys in the banking system, which today offers investors very low interest on their investments.'

Thus said Securities and Exchange Commission of Sri Lanka chairman Dr. Nalaka Godahewa, when asked by The Island Financial Review during an interview recently, what advice he has to offer retired personnel who are usually prone to deposit their lifetime savings in mainly the banking system and depend on the interest these investments bring for their daily sustenance.

'From being around 20 percent at one time, bank interest is down to 10 percent or thereabouts. This is slightly above the inflation level and would hardly prove adequate in meeting current living costs. On the other hand, wise investments in the Stock Market would bring substantial returns which would enable a retiree to live comfortably, the SEC Head explained.

'However, it is important that a prospective investor in shares refrains from making rushed decisions. First, he or she must study market opportunities carefully. Moneys must be invested judiciously after some time spent studying the market openings that would yield the best returns. I would also urge potential investors to invest some of their savings, and not all of it, at first, in the Stock Market and assess the progress before making huge investments, the SEC chief added.

http://www.island.lk

Arpico Finance partners with Adl Capital to offer Islamic financing

Arpico Finance Company PLC, (AFC), one of Sri Lanka’s oldest finance company is the newest entrant into the growing domestic market of Islamic Financing with the launch of a dedicated Islamic Financing Unit – Al Jabal. 

The unit will operate under the overall ambit of AFC and will offer a range of Shariah compliant products and services to its entire clientele. The unit was officially launched on 8 April and operates from a dedicated premises located at Orchard Building Complex, Colombo 6. The company hopes to introduce Islamic finance products and services for other branches shortly.

AFC has been in the continuous search for new markets and geographical expansion, incorporating all major cities and townships into its network and thereby attracting a larger and vibrant customer base. The company’s entry into the domain of Islamic banking offers much promise for the growth of the company and beneficial for all stakeholders.

The setting up of AFC’s Al Jabal was facilitated within record time, which is a reflection of the dynamism displayed by Arpico, supported by the expert guidance and supervision of Adl Capital Ltd., a company that specialises in the field of Islamic Finance Advisory, having been actively involved in structuring turnkey Islamic financing solutions to the local IBF industry. These include establishing fully fledged Islamic banking units and product structuring for licensed banks/registered finance companies/leasing companies.

Adl Capital’s business advisory functions also includes structuring Shariah-compliant products for the capital and equity markets and offers Shariah-based financial advisory services to private businesses.
www.ft.lk

EPF ups Royal Ceramics stake to 10%

The Employees Provident Fund (EPF) has increased its stake in Royal Ceramics Plc to 10% by last week.

As at 31 December 2013, EPF held a 9.80% stake in Royal Ceramics Plc, up from 9.55% as at end September 2013.

Vallibel One Plc is the controlling shareholder of Royal Ceramics with a 51% stake.

In recent weeks EPF also announced its stakes in Central Finance and Piramal Glass reached 10% as part of disclosure to the CSE.
www.ft.lk

Vignarajah writes to SEC on related party transactions and public float

Investor and minority interest activist K.C. Viganarajah has written to the Securities and Exchange Commission on a host of issues concerning new rules on related party transactions and public float. Following are excerpts of the letter which he released to the media as well:

I am pleased to refer to our above meeting, at your invitation, at which we had a pleasant and constructive exchange of views on wide ranging matters arising from, inter alia:
a) The articles on ‘The Hurried Release of New Rules and Directives on Related Party Transactions and Public Float’ referred to herein below, and
b) The contribution I made exactly three months ago at the CSE Investor Forum held on 25 January 2014, at Taj Samudra.

The concerns and issues raised have not been adequately addressed though some progress in attitudes seems to have taken place. The loopholes and escape routes remain and are being brazenly exploited.

There is no inquiry process with the aggrieved shareholders who took up issues being present when the wrongdoers and errant Controlling Interest and Related Parties (CI&RP) are investigated.

Discretion and secrecy facilitates corruption with “files being closed”; no reports of the offences, findings, fines or deterrent punishment etc!

“The CSE has to be commended for organising an Investor Forum on ‘Potential Value of the Market’. They state that “it is an ideal opportunity to clarify matters relating to the capital market ….”

However, the agenda limits the Q&A session to only 15 minutes! We cannot expect a healthy dialogue or satisfactory answers to many vexed concerns expressed on the recent hurriedly announced rules and directives by the SEC. They were highlighted by all the major business media. There has been no credible response as yet.

In a spirit of maximum cooperation, to make this forum a success, in boosting investor confidence, I have noted a few points for the panel to clarify at the forum and give this note to the keynote speaker and the organisers.

* A 7,500 to 8,000 + ASPI and a 4,500 S&P 20,is possible (only if immediate positive action is taken).

This is a market of great opportunities and potential; it will reach the above targets. 

However, if SEC/CSE, Secretary to the Treasury, Governor of Central Bank, Auditors and CA Sri Lanka appease and mollycoddle the crooks, the market will crash, after a phony push up.

Meaningful and determined action on a continuing basis, as requested repeatedly by genuine Investor Minority Shareholder (IMS) must be taken now.

* From the articles written, and many numerous statements made by me and fellow genuine IMS, you will notice that we have much greater credibility of honest endeavour, when compared to those market manipulators, insider traders and corrupt Controlling Interests (CI) & Related Party (RP) who profess to push up the market. It is an incontrovertible fact which you can verify from patterns of trade and even publish them.

* The SEC/CSE must perform their duties perfectly, reining in and punishing the wrongdoers.

* Companies must exhibit fairness to current shareholders declaring by dividend payouts of at least 50% of NPAT. They should carry forward, the balance as retained earnings/reserves (which again are the property of all shareholders) , and may be given as scrip dividends, without affecting cash flow, but increase liquidity, shareholder choice, in a better, freer market.

* Myself and the genuine IMS applauded the youngest Chairman of CSE Krishan Balendra, when at the beginning of his term, he emphasised that independent directors should stay and fight the wrongdoers, rather than quit. He also supported preferential tax rates for PLCs with good public floats (“40% was good enough”, moderating IMS request of 45% public float to qualify).

* We believe that the new CEO will also understand that a vibrant, well-regulated “market” is where inter-alia, high liquidity, transparency, accountability prevails. We welcome him to act vigorously on the lines suggested in letters written by me and some of my colleagues from IMS to the chairmen, members of SEC/CSE and given very wide publicity by the eminent editors of all the business media together with their brief comments and emphasis.

* We have always been non-political. The concerted action of all men and women of goodwill is essential to save our country from going into a deep morass from which it will take many years and much effort to pull it out.

* The IMS has urged the CI&RP at AGMs & EGMs: “Do not steal from the small partners (IMS) to unfairly, unjustly, unlawfully, enrich yourselves directly or indirectly through subsidiary/associates companies and R.Ps to pass on such stolen ill-gotten riches to your ill-fated future generations!”

* We have advocated minimum dividend payouts of at least 50% of Net Profit after Tax (NPAT) as cash dividends and balance to retained earnings/reserves. Periodically capitalise and issue script dividends; also split the shares or issue bonus shares to create liquidity, equity, fairness, transparency and good return on investments. These are essential to make the stock market boom.

* Genuine Foreign Investors (FIs) will also storm into the CSE, if the above is implemented.

* The SEC Chairman has stated that a very modest 10% of directors of PLCs are corrupt. 

Will he also say they are under investigation and name them as we normally do in other areas of criminal and civil legal activities? Our guess is about 50% including those puppet directors who only stand or sit and stare (they also serve their masters!!). We must bring to the notice of IMS and investing public, re suspected wrongdoers, and the progress of investigations. It is a huge national task. Let the good honest elements of the SEC, CSE perform and act fast to save the good the good name of the institution.

Conflicts of Interest (CoI) have seriously eroded confidence in the market.

* Stockbrokers (SBs) know everything about the trades. They give advice; they buy, sell, hold, give or deny credit, force-sell etc.etc and should come out clean. They should, inter alia:
a) Declare their (and of any related party) transactions and shareholdings. They must post the info on the CSE web site, immediately.
b) The Brokers and RP must immediately disclose all purchases and sales to CSE and website. Obvious, serious CoI, where brokers sell/buy for their own or RP shares accounts must be avoided, if the integrity of the market is to be assured.
c) The Stockbrokers must immediately disclose the completed transaction of directors or Key Management Personnel (KMP) of PLCs shareholdings to the CSE. This should be a primary responsibility of the broker, and should augment the responsibility of the directors to disclose immediately (in some cases has taken almost a year to do so!).

The earlier requirement of immediate disclosure must be followed, instead of within a curiously extended T+5 period within which repeat transactions can take place to manipulate and benefit.

* “The truly Independent Director (ID) must have a keen interest in ensuring a well performing enterprise. He must have a balanced view and preferably have a sufficient stake, or even a significant, stake to be effective to stall errant CI and RP. The Independent Directors should by definition, be not dependent on the CI&RP for their appointment, and of course must not be connected to, related or controlled by the CI or RP. The shareholdings of the Independent Directors must be included in the public float, whereas the shareholding of other directors, KMP and RP should be excluded from the public float.”

We trust that the SEC and CSE will act to vigorously prosecute errant CI&RPs in order to restore confidence of independent investors. I had written on ‘Justice for investors of CIFL & Touchwood’, and here again all leading newspapers published it with the eminent business editor’s comments, and slightly modified headlines.

I heartily applaud the depositors’ court action and the SEC’s supportive action (though delayed) against the directors of Touchwood citing, inter alia, ‘criminal breach of trust’.

The growing knowledge of the criminality of stock market manipulators and frauds, as well as the realism by the law courts in transcending legal technicalities and forms, to go on to award natural justice considering that substance and core issues as most important, are most heart-warming.

It is a serious malady in some companies where CI&RP unjustly enrich themselves when they shun good corporate governance, and create “shareholder fatigue”, to depress prices, deprive IMS of fair and equitable, pro rata share of current profits, benefits, and of growth via a Dividend payout of at least 50% of current profits, scrip dividends, bonus shares, share splits of retained earnings, revenue reserves, and capital reserves, to enhance liquidity, marketability while affording equitable shareholder choice.

I have many a time, given long lists of eminent corporate leaders, and companies which have followed these eminent corporate policies. They enriched the companies and stakeholders to even greater growth and prosperity.

Deshamanya Chari P. de Silva who was honoured at the 175th anniversary of the Ceylon Chamber of Commerce (CCC), was one among this list of fame who had put into practice these ideals. This brave warrior also won in law courts to establish that “capital expenditure should not be at the expense of fair cash dividends,” and that good dividends and rapid growth are quite compatible. How many who bask in the glory of the CCC, follow its hallowed Code of Ethics?

Over to, not only the members of CCC, but more importantly to top office bearers past and present!

Will the CCC consider strong disciplinary action to regain its past glory?

K.C. Vignarajah
Acting in the interests of the IMS, the investing public and national interest.

www.ft.lk

Packer's casino plans knocked back by Sri Lanka

Sri Lanka has refused to allow casinos at three super-luxury resorts planned in the capital after opponents said they would lead to prostitution, an official says.

It was not immediately known whether the casino ban would endanger the development of the three mega-resorts in Colombo, which have attracted investment worth $US1.3 billion ($A1.40 billion) from tycoons including James Packer, who runs casinos in Melbourne, Perth, Macau and London.

Developers, including Mr Packer, wanted casinos to be part of all three luxury resorts, but the government rejected the plans, Economic Development Minister Basil Rajapakse said.

"We will not allow casinos. That we say very clearly," Mr Rajapakse told Parliament. "They [the promoters] asked, we did not allow, nor will we allow [in the future]."

He did not give a reason for the move, but opposition figures have raised fears that the casinos could lead to prostitution.

Although prostitution is illegal in Sri Lanka, foreign and local prostitutes frequent small-scale gambling operations in the country.

Buddhist monk Athuraliya Rathane, a legislator, said his party opposed the new hotels because of worries gambling would spur prostitution and harm Buddhist culture.

"We voted against these concessions as a warning to the government to correct its course," the monk told reporters in Colombo.

The main opposition United National Party (UNP) staged a demonstration in Colombo on Thursday, accusing the government of encouraging prostitution through gambling.

There was no immediate reaction from developers to the casino ban.

Mr Packer's proposed 450-room Crown Sri Lanka resort - which promises on its website to offer "world-class gaming facilities" - is one of those affected by the casino ban.

Crown had earlier said it was in "detailed discussions" with the government and potential joint venture partners and the deal was subject to "relevant approvals".

The other two resorts are a $US650-million development from local conglomerate John Keells Holdings and a $US300-million project by local businessman Dhammika Perera.

The government gave approval for all three projects to go ahead, minus the casinos, and also granted 10-year tax breaks - despite opposition. The UNP and even some of President Mahinda Rajapakse's own coalition partners broke ranks and voted against the tax concessions, but the government has a comfortable majority in the 225-member legislature and passed the legislation.

The palm-fringed island nation legalised casinos in December 2010, but the legislation has never been implemented. Sri Lankan officials have said they hoped high-end casinos could boost tourist arrivals to 2.5 million annually by 2016 from 1.27 million tourists last year.

Tourism suffered when government forces were locked in a decades-long combat with separatist Tamil Tiger rebels till 2009, but with the end of fighting, the hospitality trade has grown steadily.

AFP
Read more: http://www.smh.com.au/business/packers-casino-plans-knocked-back-by-sri-lanka-20140427-37bow.html#ixzz305B0t6O7

Touchwood is “forever” but without an office, says Kiwlegedara

By Sunimalee Dias

Touchwood would re-commence operations in early June this year although the location of its new office remains a mystery as its chief Lanka Kiwlegedara admitted on Friday that the publicly announced address was indeed a bogus one.

Mr. Kiwlegedara admitted during an interview with the Business Times that they do not have an office from which the Touchwood company is operating from at present. In this respect, he pointed out that the Nawala address was not correct and it was “verbally” informed to the Colombo Stock Exchange (CSE)” but was not aware as to why this was not made public.

However, he claims that while they do not have an office they had recruited at least 15 on the staff of the new Touchwood company with an altogether new management. The board comprises Mr. Kiwlegedara, Anuradha Bandaranayaka, Upul Peiris and the Maloneys (since it was not possible to leave them out due to the ongoing Securities and Exchange Commission inquirySEC) against the two), he explained. Mr. Kiwlegedara said they were awaiting the court decision (on a winding up application) due next month prior to re-commencing operations of the new company. He noted that they would be bringing in a foreign investor from one of his own ventures but all information on the whereabouts or name of the individual or company or country in which this overseas interest was coming from remained anonymous.

Commenting on the concerns of clients attempting to get in touch with him, it was stated that he could not be answering each and every call of even these clients that invested small sums of money. But calling out to all investors in Touchwood, he said, “don’t be frightened because Touchwood is forever.” The chief at Touchwood said that he would incurring personal expenses to the running of the company and had sought foreign investment since local banks were averse to lending due to the negative media reports. Mr. Kiwlegedara pointed out that while it would incur a cost of at least Rs.5 million for a new office, he said they were working on the re-structuring plans for Touchwood. Asking not to be attacked in the media, he lamented that he had undertaken a company which the Maloneys had “nethi naasthi karala thiyana company ekak (wasted).”
www.sundaytimes.lk

Move to transform EPF, ETF into pension funds

By Bandula Sirimanna

Amidst reports of ‘losses’ in investments made in the stock market by the Employees’ Provident Fund (EPF), the Government is planning to transform the EPF and Employees’ Trust Fund (ETF) into pension funds, official sources said. The Finance Ministry is drafting legislation to amend the EPF and ETF Acts for this purpose. The sources said the proposed pension fund would allow a retiring member to take part of the money as a ‘lump-sum’ payment and retain the balance to receive a monthly pension or withdraw his or her entire contribution on retirement.

“The proposals will be discussed with all stakeholders — companies, workers and unions — before any decisions are made and their views taken into consideration,” one official said. Free Trade Zones & General Services Employees’ Union (FTZ&GSEU) convener Anton Marcus said they would propose that the unclaimed EPF money running into billions of rupees be used to set up a private-sector pension fund.

Private sector employees should be given the option to join the pension scheme voluntarily, he said. Mr. Marcus said that the Central Bank should not manage the EPF but it could continue its role as the custodian of the fund. The Auditor General’s review of the EPF report for 2011 says the value of investments made in the stock market in 56 companies and totalling Rs. 54 billion made as of December 2011 had diminished by Rs 11.7 billion as of January 15, 2013, according to news reports this week.

This triggered concern from opposition parties and EPF contributors. Currently EPF contributions can be withdrawn on reaching 55 years while the ETF contribution could be withdrawn on leaving a company or the account transferred to a new company a member is joining. The Government has abandoned its previous attempt in May 2011 to set up a separate pension scheme for the private sector with part of the EPF funds after wide-ranging public protests.
Trade unions have also been demanding a private sector pension scheme in consultation with all stakeholders including employees and employers, the ministry official said.

The move to set up a private sector pension scheme comes as Sri Lanka is likely to face a major economic burden with an ageing workforce, he said adding that it was essential to bring improvements to the operating structure of both the EPF and ETF and find ways to bring into the structure the informal workforce not eligible for any kind of retirement funding.

In less than a decade, according to some estimates, the EPF may find it difficult to meet payments to retiring people, because outflows would rise faster than inflows and the Government is now looking at ways to get higher returns to the proposed pension funds, the official said. Taking past trends into account, he said it was estimated that Sri Lanka would have an elderly population of about 4 million, or one fifth of the population by 2021.

The official said the Finance Ministry was considering a modern fund management structure to secure higher returns for the fund once the amendments were approved by Parliament.
www.sundaytimes.lk

Consolidation impact on Banking sector - Jobs may shrink

Sri Lanka’s proposed consolidation of the financial sector is likely to result in a reduction in the number of employees in the banking sector with the consolidation process likely to cause distress to the existing banking sector employees, a recent report by a stock brokerage firm has highlighted. According to a Banking Sector Review of 2013 published by Asia Securities Research, the guidelines on staff retrenchments provided by the Central Bank of Sri Lanka in the process of the proposed consolidation poses a challenge given that the consent of the employees is required before proceeding with staff reductions.

“Under this backdrop the existing volume of banking sector jobs could shrink given that the process is an industry wide phenomenon and laid off staff could not be easily absorbed by other sectors of the economy. Hence, the consolidation process may cause distress to the existing banking sector employees,” the review by the investment firm released last week stated.

On the other hand, the report noted that since it is stipulated by the monetary authority that the terms of deposits are not liable to change in the case of a merger between a commercial bank and a non-banking financial institution this particular clause could constrain a merger between a bank and a Non Bank Financial Institution (NBFI) given that banking institutions will not be keen on paying higher interest rates offered by the NBFIs to depositors, hence, limiting the mergers within the sphere of operation of each firm.

However, pointing out the positive impact of consolidation, the report said the reduction in the number of banks through the consolidation process will reduce the volume of expenses spent by the banking sector specifically on advertising and inter firm competition in general.

“This, in turn, reduces the waste of loanable/investable funds and savings of depositors due to excessive competition among individual banks. Hence, the measure would reduce aggregate operating costs of the sector as a whole enabling the banks to lower their interest margin without deteriorating the Net Interest Income or other profitability ratios. The reduction in sales and promotion costs as a result of reduced degree of inter-firm competition would also proportionately increase the loanable funds of the financial system and hence may have a favorable impact on interest rates and economic growth,” the report elaborated.

It further added that a similar impact can be expected on the financial system in particular and on the economy in general by the possible reduction in overall operating costs including overhead costs accruing to premises, staff, equipment and other related cost categories of the banking sector following the consolidation process.

Following the consolidation process of the banking sector, the Central Bank expects that at least five Sri Lankan banks will have assets of Rs.1 trillion or more, with such banks also having a strong regional presence and the economy to have a large Development Bank that will provide a substantial impetus to development banking activities in the country.

http://www.nation.lk

Increased electricity prices depress Regnis sales

"We’re ready for growth when the market takes off’’: Hemaka

The Regnis annual report ran this photo to claim the company was as "solid as a rock".

 Regnis (Lanka) PLC, a member of the Singer group incorporated in 1987 to manufacture gas cookers, ceiling fans and refrigerators, has now completed 25 years of operation and become the number one white goods manufacturer in Sri Lanka.

The company’s Chairman, Mr. Hemaka Amarasuriya, has told shareholders in the recently released annual report that Regnis manufactures and assembles two of the best loved heritage brands in Sri Lanka marketplace – "Singer" and "Sisil" with Singer continuously reigning as number one in the A.C. Nielsen annual survey as the "Most Popular Brand" in the country.

Sisil had last year celebrated its 50th anniversary. The Singer and Sisil brands under, one umbrella, sells more refrigerators and sewing machines than any other single brand in the home market, Amarasuriya claimed.

"With electrification spreading rapidly across the nation, we anticipated growth in 2013. However a reason for markets not responding was the subsequent increase in tariffs for electricity," he noted.

"Customary sales spikes for holiday sales in April and December did not occur and slow holiday sales affected annual volumes."

He reported that refrigerator penetration levels in the country stood at around 60% and there was significant future market potential. Their plants were currently under deployed, he said.

The 7.2% GDP was not yet resonating in the market place and there was a possibility that drought conditions predicted locally may impact the country’s agriculture sector and spill over elsewhere.

"We can sum up the forecast by stating that our company is ready for growth when the market takes off, that is when consumer sentiment returns," Amarasuriya said.

He explained that to stay ahead in the market and ward off the present strong challenge offered by importers of Korean and Chinese brands, Regnis had to keep abreast of technology changes.

"With the introduction of the new series of Singer GEO Refrigerators, we have eliminated Hydrocarbon gases, replaced by energy efficient R600A gas and LED lighting. These models are substantially energy-efficient and built to last," he said.

Regnis had attempted to enter the lucrative air conditioner manufacture/assembly area but this has been aborted as a result of changes of tariffs and duties. With global warming and rising temperatures, it was inevitable that the AC market will grow exponentially in the second half of this decade, Amarasuriya said.

"Unfortunately there is a crusade today against ‘import substitution’ industries. We should have the foresight to change this nomenclature to ‘Value Added Industry,’ and recollect that the apparel industry which started as a so called ‘import substitution industry’ in the late fifties is today our leading exporter with over USD 4 billion in sales," he noted.

"With the development of the light metal and coil fabricating industry the government should encourage and support this product category (air conditioners) as a viable alternative (as they did successfully with washing machines some years back) to imports."

He reported that while revenue had remained flat in a year of sluggish market conditions, Regnis had grown its group net profit to Rs.107.8 million from Rs.87.3 million the previous year.

A rights issue of one new share for every six held in 2012 raised new capital, reduced finance cost and supported plant expansion. Tax benefits on expansion had also pushed down the company’s effective tax rate to 13.4% in 2013 from 19% in 2012 against a corporate tax rate of 28%.

CEO Asoka Pieris reported that their new generation of refrigerators introduced in the final quarter of 2012 used R600A. This gas does not result in global warming, has no impact on ozone depletion and is a gas used in developed nations and is also recommended for use in the future.

He reported that refrigerators and washing machine volumes had decreased 10% in the year under review with the production of high quality plastic chairs also down 12.5% due to lower demand in the market.

The group had discontinued assembly of refrigerators and air conditioners which came in semi knocked down form due to changes in tariff and tax structures and as a result volumes in these products had decreased.

Regnis has a stated capital of Rs.211.2 million, reserves of Rs.290.3 million and retained earnings of Rs.334.8 million at group level and Rs.272.4 million at company level in its books.

Total assets of the group stood at Rs.1.5 billion and total liabilities Rs.659.5 million while for the company total assets stood at Rs.1.4 billion and total liabilities Rs.616.8 million.

The net profit for the year was the highest in the decade and the company’s net assets per share had grown to Rs.74.22 from Rs.67.24 a year earlier.

The dividend per share for the year under review at Rs.2 per share was down from Rs.2.50 per share paid the previous year.

Singer (Sri Lanka) BV with 58.29% is the controlling shareholder followed by Almar Trading Company (2.31%) and Amana Bank (1.98%).

The directors of the company are: Messrs. Hemaka Amarasuriya (Chairman), Asoka Pieris (MD/CEO), S. Kelegama, G.J. Walker, V.G.K. Vidyaratne and P.L.D.C. Perera.

www.island.lk

Overseas Realty finally reaping

"harvest of our sacrifices’’ says Tao

Special dividend of one rupee a share on top or ordinary dividend

The World Trade Centre in Colombo has maintained an average occupancy of 98% throughout 2013 and achieved a 19% increase in average rental rates, its owning company, Overseas Realty (Ceylon) PLC has said in its annual report for the year ended December 31, 2013.

The report also said that the pre-tax profit, excluding fair value gains of Rs.1.7 billion, was the highest in the group’s history. Also, borrowings were down by Rs.279 million and the debt equity ratio was reduced to 8% from 11% the previous year.

The company’s Chairman, Mr. S.P. Tao, has told shareholders that he believed that Overseas Realty is "finally able to begin to reap the harvest of our considerable sacrifices.’’

He declared that the World Centre building was ``standing tall and proud with almost full occupancy by sterling tenants and most importantly, was free from any debt.’’

Tao also announced that the company’s Board of Directors have proposed a special dividend (Re.1/= per share) "to reward shareholders for their patience and confidence during the past several years."

In addition to the special dividend, a final dividend of Rs.0.45 per share has also been recommended by the directors and adopted by shareholders at an AGM last Thursday.

Tao also reported that they expected completion of the Phase 2 residential development at Havelock City by the middle of this year. This comprises two towers with 219 luxury apartments.

Marketing of Phase 3 of the Havelock City residential development has been launched along with the opening of the Club House in the complex last November.

"The future of the Sri Lankan economy is positive with the prevailing harmony and peace in the country. The property sector is a direct beneficiary of long term economic growth, stability and increased business confidence," Tao said.

"The standard of living in Sri Lanka is expected to improve with economic progression. Hence, as property developers and property managers the future of your company is positive."

Overseas Realty has a stated capital of Rs.10.19 billion, a revaluation reserve of Rs.238.9 million and group retained earnings of Rs.13.75 billion in its books. The company’s retained earnings are Rs.13.23 billion.

Total assets of the group run at Rs.30.9 million and the company at Rs.25 billion while total liabilities of the group are Rs.5.57 billion and of the company Rs.1.36 billion.

The Shing Kwan Investment Company with 53.75%, Unity Builders with 26.1% and the EPF with 5.03% are the major shareholders of the company.

Shing Kwan Investments (Singapore) Limited (2.56%) and Chipperfield Investments (0.91%) are subsidiaries of the parent company.

Among the public sector shareholders of overseas Realty are the People’s Bank, NSB, Bank of Ceylon and the Sri Lanka Insurance Corporation which are among the 20 top shareholders although their stakes in percentage terms is small. The public holds 16.64% of the issued shares.

Earnings per share during the year under review stood at

Rs.2.89 while net assets per share were up to Rs.28.66 from Rs.26.05 the previous year. The overseas Realty share traded at a high of Rs.21.30 and a low of Rs.13.90 against a trading range of Rs.15.60 to Rs.9.50 a year earlier.

The directors of the company are: Messrs. S.P. Tao (Chairman), H.Z. Cassim (Deputy Chairman), T.K. Bandaranayake, A.M. De S. Jayaratne, L.R. de Lanerolle, Rohini Nanayakkara, Mildred Tao Ong, Melville Pin, En Ping Ong and R. Jayamaha.

www.island.lk

Nestle Lanka’s state-of-the-art manufacturing facility in Kurunegala

90% of products marketed in SL made at Kurunegala factory

Nestle Lanka PLC has contributed almost Rs.5 billion to the rural economy last year via procurement of fresh milk and coconuts, Mr. Ganesan Ampalavanar, Managing Director of the company has told shareholders in the company’s annual report.

``We procured 62 million kilograms of local fresh milk from 18,000 Sri Lankan farmers for our dairy based products, marking our highest ever milk collection in Sri Lanka. We also procured 56 million coconuts for our Maggi Coconut Milk Powder," he said.

Nestle has posted net revenue of Rs.30.9 billion during the year, up from Rs.28.6 billion the previous year, and a profit after-tax of Rs.3.3 billion against the previous year’s Rs.2.93 billion with profit before-tax amounting to 13% of net revenue, up from 12% the previous year.

The company which earned Rs.61.51 per share had paid shareholders Rs.60 per share, up from Rs.54 the previous year, posting a dividend payout ratio of 98%.

The Nestle share which traded last year at a high of Rs.2,550 and a low of Rs.1,500 against a trading range of Rs.1,700 to Rs.870 the previous year last traded in 2013 at Rs.2,100.70, up from Rs.1,593.50 a year earlier.

The company’s Chairman, Mr. Etienne Benet, told shareholders in his annual review that Nestle had succeeded in delivering an organic growth of 8.2% together with improvements on its net profit and earnings per share.

"This performance reflects a focus both on our shorter-term performance – seeking to grow faster than the market – and on the longer term – making the right decisions to ensure sustainable profitable growth in the future," he said.

Benet noted that these results had been obtained in the backdrop of a general slowdown in the growth of food and beverage industry last year.

"Operating in a difficult environment required us to work smarter to maintain our edge in the market and deliver greater value for consumers and for you, our shareholders," Ampalavanar said.

"Our investments in 2013 – investments in capabilities and our brands – now provide the opportunity for us to

exploit that investment: to do more with what we have by further leveraging our assets, our scale and our capabilities and work smarter."

He said that investments this year will also extend to their state-of-the-art manufacturing facility in Kurunegala to build capacity and to continue upgrading with the latest technology.

Nestle manufactures 90% of its products sold in Sri Lanka locally at its multi-product factory in Kurunegala.

Nestle SA with 90.82% of the company is its dominant shareholder with only one other shareholder, Coupland Cardiff Funds PLC, owning over one percent. Coupland owns 1.59% of Nestle Lanka.

The directors of the company are: Messrs. Etienne Benet (Chairman), Ganesan Ampalavanar (MD), S. S. Islam, S. Duggal, Mahen Dayananda and R. Seevaratnam.

www.island.lk