CFT diversifies, posts record revenue growth

Ceylon & Foreign Trades PLC (CFT) founded in 1949 as an exporter of traditional Ceylonese commodities has increased revenue during the year ended March 31, 2014 by 109% posting the highest growth in the company’s 64-year long history.

The group has posted an after tax profit of Rs.60.1 million, up from Rs.12.7 million a year earlier while at company level a profit of Rs.8.4 million against the previous year’s profit of Rs.7.2 million has been recorded.

The company’s Chairman, Dr. S.A. Gulamhusein, has said in its annual report that diversification into import and marketing of cement had significantly contributed to growth. They are now importing cement both from Pakistan and India.

Their consumer division which had disappointing results the previous year due to a break in supplies had been able to resume its business while their land at Sedawatte had been filled during the year and prepared for operation for warehousing in container boxes branded as "Jack In The Box."

They had also resumed importing of bulk palm oil re-entering this business after many years.

"This is an extremely competitive business and we will have to proceed cautiously to grow it if we are to profit from the turnover it could generate," Gulamhusein said.

He reported that their associate company, On’ally Holdings PLC had done well over the year and CFT had earned substantial dividend income. Also, the On’ally share had appreciated with the unrealized market value of the original investment increasing six fold.

Gulamhusein said that the company is looking at further investment and diversification and will embark on new ventures once they are convinced of profitability and growth.

Mr. G.I. Shabbir with 31.5% of the company, Spice of Life (Pvt) Limited with 20.6% and Mr. S.A. Gulamhusein with 20.3% are the major shareholders of the company.

CFT has a stated capital of Rs.14.1 million, a revaluation reserve of Rs.544.3 million, a revenue reserve of Rs.1.2 million and retained profits of Rs.291.7 million in its books.

Total assets ran at Rs.1.16 billion and total liabilities at Rs.311.4 million.

Net assets per share for the group was down to Rs.6.02 from Rs.6.32 a year earlier while for the company it was up to Rs.4.31 from Rs.4.25. The share traded at a high of Rs.9 and a low of Rs.5 during the year against a trading range of Rs.9.20 to Rs.4 the previous year.

The directors of the company are: Messrs. S.A. Gulamhusein (Chairman),Dr. D.C. Gunasekera, Mr. T.A. Gulamhusein, Mr. I. Shabbir, Mr. A. Tyebkhan, Dr. A.A. Shabbir, Mr. L.W.W. Priyankara and Mr. I. Zahir.
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Merchant Bank of Sri Lanka PLC reports a Net Profit before Tax growth of 78% in Q3 of 2014

Chairman Shah and CEO Mutugala confident of further post merger growth

Merchant Bank of Sri Lanka (MBSL), the pioneer subsidiary of State Banking giant, the Bank of Ceylon, reported a positive NPBT growth of 78% with a NPAT growth of 67% for the period ending Q3 of 2014. The Group NPBT grew by 376%, while the NPAT reported a 130% growth for the same period. The company’s Asset Base had a growth by Rs 1,339 million compared to the first nine months of 2013.

Commenting on the achievement, the Bank’s Chairman, M. R. Shah said "With the clear Business Vision of the Board of Directors, and the dedication of the staff who were effectively driven by the CEO, who was appointed in latter part of 2013 have resulted in this remarkable achievement".

He further said that "these strengths will be utilized to develop the branches of MCSL Financial Services Ltd (MCSL) and MBSL Savings Bank which will be merged with Merchant Bank of Sri Lanka PLC in due course, which will eventually enhance the Stakeholders value, with a greater portion of it adding to the Shareholders".

Merchant Bank of Sri Lanka PLC posted a revenue growth of 8% for the period ending 30th Sep 2014, compared to the first nine months of 2013. The Net Interest Income which was at Rs 672 million in the first nine months of 2013 also reported a growth of 19% in the corresponding 9 month period ending 30th Sep 2014. It peaked at Rs 800 million mainly due to the branch expansion drive in the year 2012 and business growth in Personal loans, Term loans, Microfinance and Auto Loans.   

On the other hand Merchant Bank of Sri Lanka PLC has been able to reduce the interest Expense by 10% in the Third Quarter of 2014 as against its corresponding period the year before.

Accordingly the Interest Expense that was at Rs 1,026 million in the 3rd Quarter of 2013, dipped to Rs 929 million for the same period of 2014. Net Fee and Commission Income remained a negative growth for MBSL with a 6% decrease during the period under review.

The Company recorded a Profit Before Tax (PBT) of Rs 206.2 million, which is a growth of 78% compared to the corresponding period of 2013, and NPAT was also recorded at Rs 142.4 million. This reflects a growth of 67% compared with the 9 months of 2013. The comprehensive income recorded as Rs 203 million, a growth of 114% as against the Rs 95 million in the previous year.

Chief Executive Officer of Merchant Bank of Sri Lanka PLC, T. Mutugala said that "We are now fully focused on our merger plans with MCSL and MBSL Savings Bank. Our aim is to continue the same growth momentum even after the merger is completed. We are confident of developing the MCSLFS and MBSL Savings Bank branches too and getting their contribution to the final results of MBSL. He is also very confident that with the current guidance of the Board of Directors and with the commitment of his staff, the goals could be reached within the set timelines".
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Unrecorded transactions & discrepancies drives Sierra into the red

Part written off, no fraud alleged

Sierra Cables PLC has posted a loss of Rs.306.5 million after tax in the year ended March 31, 2014, up from a loss of Rs.24.6 million a year earlier on account of certain unrecorded transactions and discrepancies in its accounts that have not been described as a fraud in the company’s annual report.

"Operational performance this year was undermined pursuant to the identification of certain unrecorded transactions as well as discrepancies between the physical stock of inventory and recorded balances, in relation to both prior and current year," the company’s Chairman Mr. Priyantha Perera has told shareholders in the annual report.

"These unrecorded transactions and discrepancies were quantified following a report from the auditors. The current year’s financial statements now incorporate the unrecorded revenue, expenses and assets, while a part of the value of inventories and finished goods were written-off."

He said that these adjustments triggered a considerable negative impact on the operating results of the year under review and disclosures regarding these matters had been made to the Colombo Stock Exchange.

Sierra had meanwhile initiated action to rectify and prevent such occurrences in the future, Perera said.

One of Sierra’s Associate companies, T&G Lanka (Pvt) Limited reported a profit of Rs.0.36 million in the year under review against a loss of Rs.5 million the previous year while Tea Leaf Resorts Holdings (Pvt) Limited reported a loss of Rs.0.7 million against a loss of Rs.0.05 million in 2013. Perera said that this company was presently awaiting approval to commence operations.

Of the two subsidiary companies, Sierra Industries (Pvt) Limited engaged in manufacturing PVC pipes, had commenced commercial operations in 2012.

However its operational results have been affected by a delay in receiving anticipated commercial orders for water supply schemes from within the group, lower than forecast margins and delay in obtaining SLS Standard for fittings.

"Several measures were implemented to arrest losses, including strengthening the sales team and the debt collection process," Perera said.

He also reported that Sierra Power (Pvt) Limited focused on mini hydro projects has commenced civil construction work.

"Whilst our inherent strengths and resilience enabled us to surmount challenges, the disquieting occurrence this year has strengthened our resolve to fortify our internal control systems, an aspect we have undertaken without delay," Perera said.

"Measures have been introduced to tighten and improve internal processes as well as our computerized systems so as to augment our risk management framework."

He also announced Sierra had a major order worth over Rs.1 billion which will contribute significantly to their growth plans.

"The ensuing year will probably pose its own share of challenges. Nonetheless, the improved prognosis for infrastructure development and national development offers considerable business opportunities for our diverse business segments," he said.

The company’s Auditors, KPMG, has issued a qualified opinion on the group results saying that certain transactions relating to the operations of the company had neither been recorded in the general ledger nor in the financial statements of the company up to March 31, 2014.

"The company has neither followed the established accounting procedures nor used the accounting system of the company for recording and accounting for these transactions as it had followed for recording and accounting for other transactions of the company up to 31st March 2014," the Auditors have said.

Sierra Holdings (Pvt) Limited with 58.11% is the controlling shareholder of the company followed by Browns Investments (5.99%) and Mr. D.S. Panditha (3.17%). The EPF too owns 1.51%.

Sierra has a stated capital of Rs.894.6 million, retained earnings of Rs.40.5 million, a fair value reserve of Rs.87.8 million and revaluation reserve of Rs.332.9 million in its books.

Total assets ran at Rs.3.02 billion and total liabilities at Rs.1.65 billion.

Net assets per share were down to Rs.2.52 from Rs.3.08. The Sierra share traded at a low of Rs.1.60 and a high of Rs.2.70 during the year under review against a trading range of Rs.2 to Rs.3.70 the previous year.

The directors of the company are: Messrs. W.A.P. Perera (Chairman), D.S. Panditha (MD/CEO), G.S.M. Irugalbandara, D. Lokuge, J.P. Ratnayeke, E.A.D.T.B. Perera, Dr. D.G.K.E. Weerapperuma, Prof. A.K.W. Jayawardane, B.W.N. Rupasinghe and P.R. Saldin.
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Cargills plan to delist Kotmale & run merged dairy operation

Cargills (Ceylon) PLC (CCP) has sent out an offer document to voluntarily acquire all the remaining ordinary shares of Kotmale Holdings PLC (KHP) not already owned by Cargills or any other person acting in concert with Cargills offering a price of Rs.62.50 per share which is a premium over the Rs.55 per share paid to acquire the major stake of the company.

The Kotmale shares are owned by Cargills Quality Foods Limited (CQF) and Cargills Quality Dairies (Pvt) Limited (CQD). Cargills is now paying the Rs.62.50 price of the volunatary offer to buy Kotmale on the secondary market increasing its shareholding of that campany to over 95%.

"The ultimate intention of CCP is to delist KHP from the official list of the CSE and subsequently merge the operations of KHP with CQD. The objective of this restructure is to create a unified entity focusing on carrying out the dairy operations of the group.

"The business operations will be continued under KHP until the entities are amalgamated. Subsequently to amalgamation, the business operations of KHP will be continued under the merged entity with the absorption of the assets and liabilities.

"The surviving amalgamated company will absorb all employees of KHP and its subsidiaries at the date of amalgamation and will continue to be employed by the entity," the offer document said.
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Milk powder price controls drive down LMF profits

No dividend recommended as earnings plunge

Lanka Milk Foods PLC (LMF) has seen a sharp downturn in profitability both at group and company levels in the year ended March 31, 2014 with the group attributable profit slumping 83.71% to Rs.61.1 million from Rs.374.9 million the previous year while the company saw its profit plunge 81% to Rs.44 million from the previous year’s Rs.231.2 million.

LMF Chairman Harry Jayawardena has said in the company’s annual report that although overall country economic indicators have improved during the year, "the milk powder sector continued to face challenging conditions."

Lakspray generates 44.27% of the group’s turnover followed by Ambewela (17.33%), yoghurt (12.99%) and fresh milk (6.95%),

Jayawardena expressed the hope that the government and the Consumer Affairs Authority will take a well informed decision to allow price increases in line with rising global prices of powdered milk in order to ensure a level playing field in the industry.

Jayawardena’s daughter, Ms. D.S.C. Jayawardena also said as much in the annual report stating:

"The profitability of the powdered milk arm suffered during the year due to the refusal by the Consumer Affairs Authority to allow companies engaged in the marketing and distribution of powdered milk to hike their prices in keeping with the global price rise in the rates of powdered milk."

"This ongoing and unfavourable status quo for the last two years is eroding the profitability of the powdered milk business in the country and gives rise to an urgent need for the renewed appraisal of price structures," she said.

Although LMF had made several representations to the concerned authorities to consider the plight of powdered milk companies, no positive response has been forthcoming so far.

LMF which owns 12% of the Distilleries Company of Sri Lanka, one of the country’s strongest listed corporates, has recommended no dividend for the year under review.

Mr. Harry Jayawardena said that LMF has sustained market leadership in several segments of the dairy industry through accelerated innovation and meaningful engagement with consumers.

"We are confident that our strong management systems and newly improved operational processes will combine to deliver much strong profitability in the upcoming financial year," he said.

The company which is into milk production running a herd of over 2,000 cattle in its dairy farms had injected Rs.875 million into its subsidiary, Lanka Dairies (Pvt) Limited to expand production capacity from 2,650 litres per hour to 8,500 litres per hour. New state of the art machinery enabled them to supply milk in the latest screw cap in one-litre slim packs in keeping with international standards.

Ms. Jayawardena said that the demand for fresh milk had reached a peak during the year enabling LMF to function at optimum capacity with the demand for fresh milk outstripping supply at the end of the period under review.

Ambewela Yoghurt had delivered a strong performance during the year with the Ambewela products boosting turnover Rs.847 million from Rs.683 million the previous year. Lanka Dairies earned revenue of Rs.1.2 billion during the year, up from Rs.1.08 billion the previous year.

"Ambewela products and Lanka Dairies were the two best performing companies in the Lanka Milk Foods Group in the period under review. Meanwhile, Lanka Milk Foods (CWE) PLC earned revenue of Rs.2,446 million during 2013/14 and posted a gross profit of Rs.171 million during the same period," she said.

She further reported that the upsurge in demand for fresh milk has accelerated their expansion plans in order to expand capacity further to meet the higher demand.

LMF has a stated capital of Rs.999.95 million, a capital reserve of Rs.105.1 million, an available for sale reserve of Rs.7.47 billion and revenue reserves of Rs.1.4 billion in its books.

Total assets ran at Rs.11.6 billion and total liabilities at Rs.1.6 billion.

Millford Exports (Ceylon) Limited with 33.57%, Mills Enterprises Limited with 15.3% and Melstacorp (Pvt) Limited with 14.87% are the biggest shareholders of the company.

Net assets per share had grown to Rs.247.08 from Rs.212.93 the precious year while the share closed for the year at Rs.107.10, down from Rs.108.30 the previous year.

The directors of the company are: Messrs. D.H.S. Jayawardena (Chairman), R.K. Obeyesekere, Zaki Alif, Mr. C.R. Jansz, Ms. D.S.C. Jayawardena, D.S.K. Amarasekera and Dr. A. Shakthevale.
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Sri Lanka central bank cuts interest rates on pawn loans

Sri Lanka's central bank requested banks on Friday to cut interest rates on loans in which banks accept gold as collateral, or pawning, to 12 percent if they want to be eligible for a government credit guarantee scheme. Banks had been charging 15 percent interest on such loans.

The central bank in May announced a credit guarantee scheme for loans backed by gold as collateral, in a bid to boost credit growth which fell to a four-year low in March. Pawning is a widely used method of borrowing in Sri Lanka.

"The central bank has requested all banks who are participating in the credit guarantee scheme to reduce the applicable interest rate for such pawning advances to 12 percent from the current rate of 15 percent, with immediate effect," the central bank said in a statement. It said 12 banks had joined the scheme and those banks grant loans worth up to 80 percent of the value of the gold used as collateral.

The scheme, and other central bank measures to try and boost lending, have yet to lift credit growth in the private sector.

Banks lost huge amounts of money last year as the gold price plummeted because that encouraged banks to make smaller loans and as defaults left them with lower-value collateral.

Loans provided by pawning at Sri Lankan banks fell 13.7 percent last year to 292.9 billion rupees ($2.25 billion), according to central bank data. (Reuters)
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‘SL’s bullish stock market, reflective of investor confidence’

‘Sri Lanka’s bullish stock market is reflecting the overall high confidence and the positive sentiments among investors, Securities and Exchange Commission chairman Dr. Nalaka Godahewa said Thursday at the launching of the ‘Capital Market Conference 2014’ at Cinnamon Lakeside.

The conference was organised by the Securities and Exchange Commission and the Colombo Stock Exchange.

He added: ‘The capital market conference 2014, is quite timely, coinciding with a bullish market, reflecting the overall high confidence and the positive sentiments amongst the investors.

‘As we all know, the stock markets are considered the barometers of economic development. Usually when an economy performs well, the stock market flourishes. When an economy struggles, the stock market becomes bearish. So our key policy makers who are present with us today, should be happy to see the exceptional performance of the Colombo Stock Market, which is symbolic of the post conflict economic progress of the country.

‘Since mid 2009, over the last 5 years, the all share price index of Colombo Stock market has grown more than 300 percent from 1,800 to 7,400 levels. The market capitalization has appreciated by over 350 percent during the same period.

‘The average daily turnover of the CSE which was Rs.464 million in 2009 has increased to Rs.1.2 billion by 2014. The Net Asset Value of Unit Trusts have gone up from Rs.6.7 billion to Rs.75.7 billion. Market capitalization to GDP ratio, has reached 35%.

‘During the last few years, we have taken a number of strategic initiatives, to develop our capital market inline with the Governments vision of making Sri Lanka a commercial hub for the region. We have already completed most of these tasks and the results you see today, are reflective of our efforts. But naturally our goals are long term and the journey will continue. You will hear more about our plans during this capital market conference 2014.

‘Today’s event is attended by the leaders of our business community and a large cross section of local and foreign stakeholders. We have many invitees here representing various public and private sector institutes.

‘Some of our participants have come from very far. We have representatives here today, from a number of countries including- USA, UK, Germany, Hong Kong, Singapore, Japan, Switzerland, Netherlands, Thailand, Malaysia, India, Pakistan, Saudi Arabia, Bahrain and Dubai Whilst thanking each and everyone of you, for your keen interest, we trust that you will find the conference productive and useful.
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Nawaloka buys control of Millennium Housing for Rs. 459 m

Nation Lanka divests 68% stake with Rs. 306 m capital gain

Nawaloka Holdings Ltd. yesterday bought 68% controlling interest in Millennium Housing Developers Plc for Rs. 459 million with the seller Nation Lanka Finance booking hefty capital gain.

Nawaloka Construction Ltd. bought 53 million shares or 39.35% stake at Rs. 5 per share and related party Ceyoka Ltd. bought 38 million shares or 28.28% stake. The latter is an associate of Nawaloka Holdings Ltd. Buyer and seller and acquired company share one or more common directors.

The seller, Nation Lanka Finance Plc, said the divestiture was carried out with the approval of the Central Bank. It said following the sale, it expects to recognise Rs. 305.8 million as a direct gain in financial statements. This represents a Rs. 1.22 increase in the Net Asset Value per share of Nation Lanka Finance. With this capital gain, Nation Lanka Finance is poised to make significant profits for the current financial year ending on 31 March 2015 compared to a Rs. 23.6 million net profit posted in FY14.

The Net Asset Per Share of Millennium Housing Developers at Group level is Rs. 4.56 as at September 2014, down from Rs. 5.18 as at FY14. At Company level it was Rs. 3.64 down from Rs. 4.13.

In the quarter ended 30 September 2014, the highest price traded was Rs. 7.20 and the lowest was Rs. 5.50 with the closing value being Rs. 6.10.

Millennium Housing Chairman Harshith Dharmadasa is also a director at Nawaloka Holdings. He is also a director at Nation Lanka Finance whilst Nawaloka Constructions owns 7% stake in the company.

The group has assets worth Rs. 1.14 billion and liabilities of Rs. 530 million.

In the six months ended on 30 September 2014, the company posted revenue of Rs. 127 million, down from Rs. 314 million a year earlier. Operating loss was Rs. 18 million, as against a profit of Rs. 62 million in the first half of FY14. The group’s net loss was Rs. 9 million, as opposed to Rs. 67 million profit a year earlier.

With the acquisition, Nawaloka Construction will make a mandatory offer to buy remaining shareholding as per the SEC’s Takeovers and Mergers Code. Other major shareholders of Millennium Housing include Anilana Hotels and Properties (8.85%), Arrow International Ltd. (4.45%) and Ceybank Unit Trust (1.52%).
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Sri Lankan stocks down to 1-week low on banks, profit-taking

(Reuters) - Sri Lankan stocks fell to more than one-week low on Friday, led by a decline in banking shares amid foreign outflows and selling pressure on large-caps, which gained in the recent rally.

The main stock index ended lower 0.88 percent, or 65.08 points, at 7,321.00, its lowest since Oct. 1. It hit a near 3-1/2 year closing high on Friday.

Foreign selling was 506 million rupees on Friday, but foreign investors have been net buyers of 9.17 billion rupees so far this year, exchange data showed.

"The lack of foreign buying is the main reason for the market decline. There was sharp selling pressure on big cap shares as well," said Dimantha Mathew, manager, research at First Capital Equities (Pvt) Ltd.

"Downward pressure may continue for a bit more days. The correction is good for the market. We feel the market went up unnecessarily."

Analysts said investors are awaiting the September-quarter earnings and the 2015 budget scheduled on Oct. 24 for further direction.

DFCC Bank Plc, which led the overall loss, fell 2.63 percent, while Commercial Bank of Ceylon Plc lost 1 percent.

The day's turnover was 2.81 billion rupees ($21.6 million), well above this year's daily average of 1.36 billion rupees. 

($1 = 130.4000 Sri Lankan rupee) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Prateek Chatterjee)