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