Declining rubber prices hurt Kegalle bottom line

Kegalle Plantations PLC, a member of the Richard Pieris group and the country’s single largest rubber producer, had seen a dip in both turnover and profits in the year ended March 31, 2014 but has increased capital expenditure, the company’s annual report reveals.

Turnover was down 6.7% to Rs.2.4 billion while the profit after-tax was down 26.9% to Rs.346 million. Capital expenditure increased 16% to Rs.294.5 million.

The company’s Chairman, Dr. Sena Yaddehige, has told shareholders in the annual report that despite challenges, positive results have been achieved.

Kegalle with a 5,326 ha of rubber in its portfolio is the largest natural rubber producer in the country. Despite adverse weather, the company posted production of slightly over 4,000 mt of rubber almost par with production the previous year.

"This amounts to over 3% of the national rubber production in Sri Lanka. The average sale price of rubber declined this year to Rs.353.16 per kg compared with Rs.415.1 per kg in 2013," Yaddehige said.

High rubber prices in recent years enabled Kegalle to do very well but this has now reversed with Yaddehige saying that the company, which also manages over 1,370 ha of tea, had suffered from depressed rubber prices.

He said that they strictly adhered to the best agricultural practices with greater attention given to process and productivity improvements.

The year under review had seen the profits from rubber decreasing to Rs.322 million from Rs.607 million the previous year.

Revenue from tea was up to Rs.882 million from Rs.805 million the previous year while the revenue from rubber declined to Rs.1.39 billion from the previous year’s Rs.1.63 billion.

There had been a marginal decrease in revenue from coconut from Rs.55 million the previous year to Rs.45 million.

Yaddehige reported that the company had invested Rs.294 million capital expenditure replanting and maintaining 247 ha of rubber at a cost of Rs.226 million while 19 ha of tea was replanted and maintained at a cost of Rs.49 million.

Discussing the future, Yaddehige said that low cost borrowing opportunities that have now arisen have made them optimistic about the future. This would enable expansion of the plantation sector.

"The company is also looking forward to create and build important investment relationships with foreign partners in order to expand our plantations sector and we have even commenced discussions with the relevant regulatory bodies in these countries," he said.

While tea remained less volatile at present price levels, the forecast for rubber remained weak due to sluggish demand in the emerging countries and the availability of surplus stocks.

Given that the cost of tea production here is the highest in the world, he expected the current year to be a challenging one for the company.

Kegalle has a stated capital of Rs.250 million, a general reserve of Rs.225 million and retained earnings of Rs.2.9 billion. Total assets ran at Rs.6.9 billion and total liabilities at Rs.3.6 billion.

RPC Plantation Management Services with 76.62% is the major shareholder of the company followed by J.B. Cocoshell (2.45%). All other shareholders own less than one percent.

Net assets per share have grown marginally to Rs.33.70 from Rs.33.48 the previous year. The Kegalle share traded at a high of Rs.121.90 and a low of Rs.90 during the year under review compared to a high of Rs.119.50 and a low of Rs.86.20 a year earlier.

The directors of the company are: Dr. Sena Yaddehige (Chairman), Mr. J.H.P. Ratnayeke (Deputy Chairman), Mr. S.S. Poholiyadde (CEO), Prof. R.C.W.M.R.A. Nugawela and Dr. S.S.B.D.G. Jayawardena.
www.island.lk

SUBWAY® poised to enter the Sri Lankan Market

SUBWAY® restaurant chain, the largest submarine sandwich chain with a presence of over 42,000 restaurants in 107 countries, is poised to launch its debut restaurant in Sri Lanka at R A De Mel Mawatha, Colombo.

The leading Quick Service Restaurant (QSR) brand once it enters will be committed to a rapid growth in the island nation and plans to open restaurants across the country, giving legions of local entrepreneurs the opportunity to own and operate their own business.

Mr. Nathan Wills, Franchise-Owner and Chairman, Subway Development Pvt. Ltd. Sri Lanka said, "People here are appreciative of fresh, flavourful offerings and like experimenting with international tastes. Subway is just the right kind of opportunity to grow and expand in the restaurant business while serving people with high quality products at value-for-money prices."

All things related to Subway including The SUBWAY® mascot, SubMan will be present at the debut Restaurant, which is poised to open soon, where the chain is 100 percent committed to provide the best possible customer experience to the Sri Lankan market.

Celebrated for their inherent values of freshness, choice and customization, all SUBWAY® sandwiches will be served on a variety of gourmet breads that are baked fresh each day. SUBWAY® lovers can create their own sandwiches by choosing from a variety of lean meats, fresh vegetables, cheeses and low-fat condiments while relishing the experience of the delicious meal being made right in front of them.

Talking about the menu that will be on offer, Mr. Savanth Sebastian, Co-Franchise-Owner, said, "The menu will be an eclectic mix of international and local flavours of popular Subway sandwiches and salads. We intend to adapt our international best-selling sandwiches to local tastes by producing local fresh produce and sauces."

A foot long delicious Subway Sandwich.

Nathan Wills, Franchise-Owner and Chairman, Subway Development Pvt. Ltd. Sri Lanka addressing the gathering.
www.island.lk

Bank of Ceylon – Sri Lanka’s No. 1 Bank

Ranked once again above all Sri Lankan Banks; Among the Top 1,000 Global Banks

Sri Lanka’s leading Bank with 75 years of strength, trust and stability, the Bank of Ceylon is proud to receive global recognition once again as one of the top 1,000 banks in the world, from the world’s premier banking and finance Magazine, "The Banker". The Top 1,000 banks were selected in recognition of their achievements as global leaders in the industry. The rankings are one of the industry’s most widely used indexes of global banking, and are internationally recognized as the definitive guide to the soundness, strength and profitability of banks. The Banker Magazine, first published in January 1926 in UK and currently circulated over 180 countries, is the key source of data and analysis for the industry in international finance affairs.

BOC possesses the strength and the diversity of resources to offer a complete range of financial solutions to its customers. Our multi-faceted offering is one of our greatest strengths. From the children’s savings account to corporate credit, from the state sector to private companies, we serve at every level. The bank has the strength and the diversity of resources to offer its customers a range of financial solutions; such as Corporate Banking, Personal Banking, Islamic Banking, Investment Banking, Off-shore Banking, Development Banking, International and Treasury operations and Trade Financing services, through its widely spread network of 618 branches covering all parts of the country. The clear-cut market leader in banking, BOC now boasts over 1000 customer touch points and over 10 million account holders and offers the full range of banking services through its overseas branches in Chennai, Male, Seychelles and Banking operations in London.

The Bank also laid claim to a unique position as the only Sri Lankan brand recognized as one of Asia’s Best Brands in 2013 by the Chief Marketing Officer’s Council (CMO Council) based in Mumbai, India. Brand Finance Lanka ranked Bank of Ceylon as the No.1 Brand in Sri Lanka for the last six consecutive years. The Bank of Ceylon recorded yet another hat-trick in 2013 at the National Business Excellence awards ceremony organized by the National Chamber of Commerce. Focusing on the Banks achievements, Fitch Rating Lanka ranked the Bank of Ceylon at AA+(lka) which is the highest rating awarded to a local commercial bank.

On the 1st of August 2014, Bank of Ceylon will celebrate its 75th Anniversary –a unique milestone in a journey of dedicated service and of continuous growth in strength, geographic reach, expertise and capability. Leading the banking and financial sector in Sri Lanka since 1939, BOC has constantly succeeded in contributing to the growth of our nation and continues to assist the development of the country and guiding entrepreneurs to reach greater heights which makes Bank of Ceylon ,truly, the "bankers to the nation". We thank our loyal customers for the trust and confidence placed in us.
www.island.lk

Palm oil keeps Watawala buoyant, tea and rubber loses

Watawala Plantations PLC, a diversified plantations company with 12,441 ha cultivated with palm oil, tea and rubber in 19 estates has turned in what its Chairman, Mr. Sunil Wijesinha called "a commendable performance" in the year ended March 31, 2014 with a profit of Rs.434 million maintaining its position as the regional plantation company (RPC) with the highest profit in the plantation sector.

However, this was below the Rs.681.9 million earned the previous year.

Wijesinha said in the company’s annual report that Watawala had recorded the highest tea production among the RPCs. The company which is also a significant oil palm producer operating one of the two oil palm mills in the country had done well with this crop during the year contributing 23% of the company’s revenue and the major share of its profits.

"Tea recorded a loss of LKR 276 million after tax and other comprehensive income, significantly impacting the overall profitability of the company despite our leading position as the highest tea producer among the regional plantation companies," Wijesinha said.

"This reflects underlying structural issues that need industry wide consensus and action to resolve."

He said that torrential rains in the first half of the financial year had resulted in two factories being flooded with the consequential loss of harvest and production.

Rubber too had performed disappointingly, similarly affected by adverse weather conditions resulting in the reduction of the number of tapping days which contributed to a decrease in production and a net loss of Rs.28 million in the rubber segment.

However, Wijesinha saw promise in diversifying into timber and exports showing potential for the future.

Watawala’s board had unanimously consented to mutually terminate the agreement for management services and payment of management fees between itself and its major shareholder, Estate Management Services (Pvt) Limited.

This agreement which was valid for a period of five years from July 1, 2013, resulting in a big slice of the company’s earnings being paid as management fees to its main shareholder, has been discontinued with the Watawala board agreeing to take over expenses related with the provisions of management services.

Watawala is a subsidiary of Estate Management Services (Pvt) Limited, a joint venture between Sunshine Holdings, Tata Global Beverages and Pyramid Wilmar Plantations (Pvt) Limited which is a partner of Wilmar International.

Tata Global Beverages is the world’s second largest tea company with a brand presence in over 40 countries and interests in tea and coffee.

Wilmar International is Asia’s largest agribusiness group with headquarters in Singapore.

"The joint ventures with two giants in our major areas of interest provide Watawala Plantations with unparalleled access to markets, technology and knowledge providing a strong launching pad for our future growth as we week to take a differentiated path raising the bar on our own performance," the report said.

Of the company’s total land extent, 4,451 ha (36%) is planted in tea, 701 ha (6%) in rubber and 2,921 ha (23%) in oil palm. The remaining extent of 4,367 comprises timber and fuel wood plantations, extents in conservation forestry, spices, vegetable cultivation, jungle and patana, buildings, roads etc.

54,505 people live on Watawala estates which provide livelihoods for over 11,000.

Watawala has also invested in dairy farming and timber planting as well as energy management with none of their factories burning fossil fuel. They have invested in a turbine burning the waste of oil palm milling to generate 500 KWH of electricity and also briquettes from waste of tea factories, the company’s Managing Director, Mr. Vish Govindasamy said in the report.

Watawala has a stated capital of Rs.460 million, retained earnings and other reserves of Rs.3.76 billion and total assets of Rs.7.06 billion. Total liabilities for the group ran at Rs.2.84 billion and for the company Rs.2.83 billion.

The major shareholders of the company are Estate Management Services (75.65%), Ceybank Unit Trust (4.43%) and Aureos South Asia Fund (1.90%).

The directors of the company are: Messrs. Sunil Wijesinha (Chairman), G. Sathasivam (Alternate S.G. Sathasivam), V. Govindasamy (MD), D.V. Seevaratnam (CEO), H.R. Bhat, K. Venkataramanan, A.N. Fernando, M.S. Mawzoon, L. Ramanayake, C.P. Thomas and B.A. Hulangamuwa.
www.island.lk

LAL to assemble Light trucks for India

Shirajiv Sirimane shirajivs@gmail.com

Lanka Ashok Leyland (LAL) is looking at assembling light commercial vehicles in Sri Lanka from end of September. LAL CEO Umesh Gautham said this will be mainly to be exported to the Indian market.

Speaking to ‘Daily News Business’ he said there is a demand from India to manufacture ‘small trucks’ (DOST) and they have also received orders from India. “We had sent three samples to India and they had approved one and sent to us and this will be the model we will be developing in Sri Lanka.”

“We will be importing some of the material for this operation and will be offering sub contracts to Sri Lankan entrepreuners to manufacture most on the other material. These include rubber bushes, fuel tanks, seats, batteries and some other plastic items.

He said they will be doing the manufacturing process in their factory in Homagama. He said they have also come to an agreement with the government to obtain tax concessions for some of the machines they will be importing.

Lanka Ashok Leyland was incorporated in 1982 as a Public Limited Liability Company and began operations in 1983 as a Joint venture between Lanka Leyland Ltd (a wholly owned company of Government of Sri Lanka) and Ashok Leyland Ltd India, to carry out the business of importation of Ashok Leyland commercial vehicles in knocked down condition or fully built and carry out assembly operations, repair and service, body building on chassis and other developments to progressively develop ancillary industries locally. 

Commenting on their partnership with the Transport Minister, he said they are now keen to build more luxury buses to feed to the public transport sector. “Sri Lankan is now seeing a massive development and there is also a lot tourist arrivals and the transport sector too is undergoing a mass transformation with more luxury buses being tasked to their government fleet.”

LAL has also introduced a special easy payment scheme the both the private and government sector when purchasing their buses for transport.
www.dailynews.lk

Capital Alliance profits up by 17%

Capital Alliance Ltd (CALT), a primary dealer in government securities recorded an impressive profit after tax of Rs. 331.9 million for the financial year of 2013/2014. This year's financial performance showed a 17 percent increase in profitability from the previous financial year which helped CALT maintain its position as a dynamic leader in the trading sphere.

CALT's ability to refocus business and management strategies and maximize on opportunities in an extremely active trading climate resulted in the company achieving higher capital gains and momentous growth. The company's total assets were valued at Rs. 5.13 billion, an eight percent rise from the previous financial year. Earnings per share were recorded at Rs. 22.12 and increased by 17 percent. Total shareholder's funds were recorded at Rs 1 billion with an increase of 27 percent over the previous financial year.

Due to a turbulent financial year and the challenges of QE tapering, markets were in shock and only recently recovered. Despite a tough economic climate and various ongoing challenges, CALT delivered a consistent financial performance that exceeded expectations.

Gehan Hemachandra, Chief Executive Officer, CALT completed his first tenure as CEO of the company this year. Some of the key changes he implemented included revising the company's strategic focus and developing CALT's dynamic marketing and dealing teams. Commenting on the measures taken to strengthen CALT's operational prowess, he said,"People are at the core of CALT's business operations and the company invested in recruiting high performing professionals to head our marketing and treasury divisions. We developed a new marketing team from scratch and recruited senior management to ensure the growth and development of the division. Thereafter, both our marketing and dealing teams performed exceptionally and their efforts contributed significantly to our high financial performance this year."

Under new rules created by the Colombo Stock Exchange (CSE) the company became the first-ever primary dealer to obtain a debt-broker license from CSE, the new license has enabled CALT to significantly diversify income revenues. CALT was initially focusing on the government securities market and is now applying the same model in the corporate debt space. Corporate debt trading is a market that is still in its infant stages and although it will face many challenges, it also has great potential for growth. Due to a burst of activity in corporate debt, aided by interest rate fluctuations, CALT is now developing corporate debt trading into a vibrant secondary market.

Capital Alliance Ltd (CALT) commenced operations in 2000 and began dealing in fixed income securities and corporate finance advisory services. The company has become a dominant force in trading and developing financial services and has acquired an impressive client portfolio. In 2003, CALT was issued with a primary dealer license from the Central Bank of Sri Lanka (CBSL). Thereafter in 2013, the company was appointed as Sri Lanka's first registered debt dealer in the primary dealer category.

Capital Alliance Ltd is part of the CAL Group which also includes Capital Alliance Partners (CALP), the company's corporate finance arm which specializes in investment banking, fund management and securities broking.
www.dailynews.lk

Ceylon Guardian posts Rs.2.12 b PAT in 2013/14

Ceylon Guardian Investment Trust PLC, the investment group of Carson Cumberbatch, recorded a profit after tax of Rs. 2.12 billion for the FY 2013/14, an encouraging performance amidst somewhat subdued market conditions the previous year. Ceylon Guardian’s above average performance was attributed to booking of profits on selected overvalued stocks, capturing market anomaly and booking substantial capital gains despite subdued market conditions.

Ceylon Guardian’s portfolio as at end March is reported to be Rs.24.2 bn. The portfolio is managed by an in house professional team attached to Guardian Fund Management Limited, a fund management company licensed by the Securities and Exchange Commission of Sri Lanka.

Although Ceylon Guardian’s total portfolio including strategic investments decreased to Rs. 24.20 bn, from Rs. 26.03 bn a year earlier, the actively managed component of the Guardian portfolio amounting to Rs.12.12.bn has grown 4.4% in comparison with the ASPI growth of4% and S&P SL20 depreciation of 0.4%. On medium term performance, five year compound annual portfolio growth rate of the actively managed portfolio was 35.8% on market value basis, vis à-vis an All Share Index growth of 29.5%.

The long term track record of Ceylon Guardian is driven by its investment philosophy of selective bottom up investing, where the focus is on stock selection and acquisition at advantageous prices to enhance returns.

The intrinsic value per share of the company is Rs. 228.70 on a market price based net asset valuation of the portfolio, since the balance sheet is now stated at market value taking into account IFRS methodology. Based on the market price at end March of Rs. 177.90, it trades at a discount of 22% from the intrinsic value.
www.dailynews.lk

Orient Finance reaches Rs 2 billion mark in deposits

‘Orient Finance PLC surpassed the Rs. 2 billion threshold in their deposits during the 1st week of July. Having reached Rs. 1 billion in deposits a mere 06 months ago, doubling the deposit base to trigger 1 billion within a remarkably short span is indeed commendable.

‘Established as a specialised leasing company in 2003 with Leasing, Hire Purchase and Debt Factoring as its core businesses, the company broadened its product range to include Fixed Deposits and Gold Loans, subsequent to being licensed by the Central Bank as a Finance Company under the Finance Business Act No 42 of 2011, in June 2012. Thus, the full product suite of the company now consists of Leasing and Hire Purchase, Debt Factoring, Gold Loans, and acceptance of Fixed Deposits.  The company is also listed on the Diri Savi Board of the Colombo Stock Exchange, with a BBB- (stable outlook) investor grade rating from Lanka Rating Agency, a press release said.

It adds: ‘Functioning in the capacity of Assistant General Manager – Fund Mobilisation, Ms. Geethika Wickramasinghe who has been in charge of the Unit since its inception attributes this success to the commitment of the Deposit Mobilising unit, aptly supported by Regional Managers as well as Branch Managers and the stability that the company has established over a decade of service. Further, she believes that this achievement is a reflection of the confidence the depositors have placed in the stability of the Company.

‘OFP operates 23 fully fledged branches & customer convenience centres located in Ampara, Anuradhapura, Avissawella, Colombo, Galle, Gampaha, Kalutara, Kandy, Kegalle, Kochchikade, Kurunegala, Matara, Welisara, Jaffna, Killinochchi, Vavuniya, Batticaloa, Horana, Ratnapura, Negombo, Nugegoda, Chilaw and Avissawella.
www.island.lk

Stable Outlooks for nine Sri Lankan banks

Fitch Ratings has affirmed ratings on nine Sri Lankan banks, all with Stable Outlooks.

The Long-Term Issuer Default Ratings (IDRs) on National Savings Bank and Bank of Ceylon (BOC) have been affirmed at ‘BB-’ and their National Long-Term Ratings have been affirmed at ‘AAA (lka)’ and ‘AA+(lka)’, respectively. Fitch has also affirmed the National Long-Term Rating of People’s Bank at ‘AA+(lka)’.

At the same time, Fitch has affirmed the Long-Term IDRS of DFCC Bank and National Development Bank PLC (NDB) at ‘B+’ and their National Long-Term Ratings at ‘AA-(lka)’.

The National Long-Term Ratings of Commercial Bank of Ceylon PLC (Commercial Bank) have been affirmed at ‘AA(lka)’. The National Long-Term Ratings of Hatton National Bank PLC (HNB), Sampath Bank PLC and DFCC Vardhana Bank Ltd. have been affirmed at ‘AA-(lka)’.

The operating environment, which remains potentially volatile, is a key rating driver for the Sri Lankan banking sector. This is a challenge for banks, notwithstanding the current high real GDP growth, which Fitch expects to continue.

While private-sector credit demand is currently muted, the potential for high growth exists given the low overall levels of credit to GDP.

The Support Ratings (SRs) and Support Rating Floors (SRFs) of state-owned National Savings Bank, BOC, and People’s Bank reflect their high importance to the government and high systemic importance. The SRs and SRFs of privately-owned DFCC and NDB reflect their lower systemic importance.

The Sri Lanka rupee-denominated subordinated debt of BOC, DFCC, DFCC Vardhana Bank, NDB, Commercial Bank, HNB, and Sampath Bank are rated one notch below their National Long-Term Ratings to reflect the subordination to senior unsecured creditors
www.island.lk