Seylan Bank records profit growth of 43% to post PAT of Rs 1.740 mn during 1H 2015

Seylan Bank posted a record half-yearly performance with Profit before Income Tax reaching Rs. 2,579 Million for the 6 months ended June 30, 2015. Profits after Tax reached Rs. 1,740 Million a 43% increase compared to the Rs. 1,212 Million reported in the corresponding 6 month period in 2014.

The quarterly (Q-2 2015) Profit after Tax figure of Rs. 1,089 Million was an improvement of 56% compared with Rs. 698 Million reported in corresponding 3 months of last year.

Net Interest income increased from Rs. 5.16 Billion to Rs. 5.83 Billion a 13% increase for the 6 months ended 30th June 2015. Net fee and commission income increased by 13% from Rs. 1,055 Million to Rs. 1,191 Million with the bank showing a continuation of the solid growth trend recorded in the past few years.

During 1H 2015, the Net Advance portfolio grew from Rs. 155 Billion to Rs. 162.7 Billion, while the Deposit base grew from Rs. 185.9 Billion to Rs. 190.5Billion. The Bank's low cost deposit base (CASA) stood at 38% as at end June 2015.

The Bank was also able to improve its asset quality through effective recovery and rehabilitating efforts. This enabled the Bank to reduce its Gross NPA (net of IIS) from 7.69% in December 2014 to 6.53% as at end June 2015. The Bank has consistently been able to improve its asset quality since 2009 through focused, sustained and effective recovery efforts.

The Bank, based on its 4 - year Strategic Plan (2012 - 2016) has focused significantly on areas which include Advance/Deposit growth, Branch Expansion, Customer Service improvement, Staff Development, NPA reduction, Cost Control, New Product Development, IT Infrastructure, Shareholder value, etc. The Strategic Plan also earmarks the opening of 100 libraries in under privileged schools. 70 such school libraries have been opened by the Bank, since 2013.

The Branch relocation and refurbishment project too continued in full steam during 1H 2015, with a view to enhance the customers' service experience. As of end June 2015, over 75% of the branch network has been refurbished. As at 30th June 2015, the Bank network comprised of 159 Branches, 181 ATMs and 93 Student Savings Centres.

The Bank's total Capital Adequacy ratio stands at 13.74% at the end of Q-2 2015, well above the regulatory requirements. In July 2015, Fitch affirmed the Bank rating at 'A -lka' with a stable outlook.

As a result of the impressive performance, Earnings per share were at Rs. 5.04 for Q-2 2015, while Return (profit before tax) on Assets and Return on Equity stood at to 2.03% and 14.52% respectively. The Bank's Net Asset Value per share as at 30th June 2015 was Rs. 71.48 (Group Rs. 74.88).

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Sri Lanka records a deflation of 0.2-pct in July after two decades

(LBO) – Sri Lanka has experienced a deflation of 0.2 percent for July 2015, for the first time after March 1995.

The main contributor for this decline was the major decrease in non food prices, statistics department said.

“This was mainly due to the decrease of electricity and water bills, LP gas, kerosene, petrol and diesel.”

Year on year inflation of food group has decreased from 4.0 percent in June 2015 to 2.5 percent in July 2015 while non‐food group increased by ‐3.2 percent to ‐2.5 percent during this period.

The overall rate of inflation measured by Colombo Consumer Price Index on year on year basis is ‐0.2 percent in July 2015 and inflation calculated for June 2015 was 0.1 percent.

The CCPI for all items for the month of July was 182.8.

An increase of 1.2 index point or a percentage of 0.68 has been recorded in July compared to June 2015.

The moving average inflation rate for the month is 1.3 percent and the corresponding rate for June 2015 was 1.7 percent.

Sri Lanka’s Dankotuwa Porcelain to raise Rs722mn through rights issue

July 30, 2015 (LBO) – Sri Lanka’s tableware exporter Dankotuwa Porcelain is to raise 722 million rupees by way of a rights issue, the company said in a stock exchange filing.

Subject to the necessary approvals, the company is to issue 90.31 million ordinary shares at 8.00 rupees each in the ratio of 5 for every 4 shares.

The proceeds will be utilized for plant modernization and to settle short term loans which would improve the gearing ratio, the company said.

The stock closed at 14.50 rupees on Wednesday.

Sri Lanka’s Fitch affirms Lion Brewery at ‘AA-(lka)’ with stable outlook

(LBO) – Sri Lanka’s Fitch Ratings has affirmed Lion Brewery (Ceylon) national long-term rating at ‘AA-(lka)’ with a stable outlook.

The agency also affirmed Lion’s senior unsecured rating and the rating on its debentures at ‘AA-(lka)’.

The full text of the announcement is reproduced below.

Fitch Affirms Lion Brewery at ‘AA-(lka)'; Outlook Stable

Fitch Ratings-Colombo-30 July 2015: Fitch Ratings has affirmed Lion Brewery (Ceylon) PLC’s (Lion) National Long-Term Rating at ‘AA-(lka)’. The Outlook is Stable. The agency also affirmed Lion’s senior unsecured rating and the rating on its debentures at ‘AA-(lka)’.

The National Long-Term rating takes into account Lion’s strong business profile as the leading beer producer in Sri Lanka. The rating also factors in the growing demand for beer driven by increasing urbanisation and preference for lower alcohol content beverages. The company faces risks from regulation and financial risk following a debt-funded expansion and acquisition of the second-largest brewer Millers Brewery Limited (MBL).

KEY RATING DRIVERS
Market Leadership: Lion is the largest producer of beer in Sri Lanka, where beer is the second most-consumed alcoholic beverage after arrack. Its flagship brand, Lion, accounts for close to 80% of its revenue, with its domestically produced and imported brands making up the rest. Lion’s leading position helps the company secure new brands and access a wide distribution network.

Debt-Funded Investments: Lion’s leverage increased to 2.9x during the financial year ended 31 March 2015 (FY15) from 2.2x at end-FY14 after the MBL acquisition was completed in October 2014, and following capacity expansion over the last two years. However, Fitch believes the financial risk is partially offset by improvement in its competitive position stemming from the investments. The acquisition of MBL will bring brands such as Three Coins, Sando, and Grande Blonde under Lion’s portfolio.

The added capacity will also support Lion’s business profile. Lion, which is currently operating at around half its capacity, will be able to meet additional demand over the medium term without extensive production-related capex. In the medium term, the company will undertake less capex, which will free up cash flow to pay down debt.

Highly Regulated Sector: The government regulates the alcoholic beverages sector heavily, including a complete ban on advertising and licensing of participants. There is a high risk of regulatory change, with the most recent being a rise in excise duties to make up for the elimination of offsets under the new value-added tax, which increased Lion’s effective tax burden to 50% of gross revenue in FY15 (FY14: 44%). Fitch expects the importance of the sector in terms of its contribution to government revenue to reduce the likelihood of excessive regulation and taxation.

Growing Demand for Beer: Beer production is increasing to meet demand as lifestyle changes stimulate a preference for beer. Fitch expects demand for locally manufactured hard liquor to decline in the longer term, driven by lower alcohol consumption, and the greater affordability of lower-alcohol content beverages.

KEY ASSUMPTIONS
Fitch’s key assumptions within the rating case for Lion include:
– Low double-digit revenue growth in the medium term
– Profitability, as measured by EBITDA margin, of around 24%
– Maintenance of current dividend policy
– Capex of LKR1.5bn-1.7bn to upgrade warehousing and raw material procurement in FY16
– No material capex from FY17

RATING SENSITIVITIES
Negative: Future developments that may, individually or collectively, lead to a negative rating action include:
– Adjusted net leverage (adjusted net debt to operating EBITDAR) of over 2.0x on a sustained basis (end-March 2015: 2.9x)

No positive rating action is expected over the next 24 months as leverage is likely to remain high. However, future developments that may individually or collectively lead to a positive rating action include adjusted net leverage of below 1.5x on a sustained basis

JKH reports robust 1Q results

Premier blue chip John Keells Holdings (JKH) yesterday reported robust results for the first quarter of new 2015/16 financial year, with transportation, consumer foods and retail and financial services sectors driving enhanced value.

JKH Group profit before tax (PBT) at Rs. 3.19 billion in the first quarter of the financial year 2015/16 is an increase of 6% over the Rs. 3.02 billion recorded in the previous financial year which included a capital gain of Rs. 389 million.

“The increase in PBT for the quarter over the previous year is primarily on account of a 43% increase in operating profits, demonstrating a robust underlying business performance,” JKH Chairman Susantha Ratnayake said in his review to shareholders accompanying interim results.

The profit attributable to equity holders at Rs. 2.18 billion reflects an increase of 2% over the Rs. 2.14 billion in the corresponding period of the previous financial year.

The revenue at Rs. 21 billion for the period under review is a marginal increase over the Rs. 20.70 billion recorded in the previous financial year.

The company PBT for the first quarter of 2015/16 at Rs. 3.25 billion is an increase of 10% over the Rs. 2.96 billion recorded in the corresponding period of 2014/15.

Following is the brief outline of performance of sectors of JKH by Chairman Ratnayake.

Transportation: The Transportation industry group PBT of Rs. 590 million in the first quarter of 2015/16 is an increase of 19% over the first quarter of the previous financial year [2014/15 Q1: Rs. 498 million]. The increase in profitability is attributable to the performance of the Group’s Bunkering business which recorded an improvement in margins on the back of an improved local operating environment and the performance of South Asia Gateway Terminals (SAGT), where an encouraging growth in higher yielding domestic TEUs contributed positively towards its profitability. The performance of the Logistics business was in line with expectations as the combined impact of a growth in its active customer base and improved operational efficiencies resulted in an overall improvement in profitability of DHL Keells.

Leisure: The Leisure industry group PBT of Rs. 553 million in the first quarter of 2015/16 is a decrease of 16% over the first quarter of the previous financial year [2014/15 Q1: Rs. 659 million]. The decline in PBT is mainly on account of the City Hotel sector, where the Group’s 5 star city hotels recorded a decline in occupancies due to the partial closure of Cinnamon Lakeside. The current slowdown in business related travel into the City, combined with the increased supply of room inventory within Colombo, also negatively impacted occupancies. However, Cinnamon Red continued to perform above expectations with average occupancies exceeding 75% in the period under review. The Sri Lankan and Maldivian Resorts sectors recorded an increase in profitability due to successful yield management and efficiency improvements. The Sri Lankan Resorts also benefitted from the continuing growth in tourist arrivals to the country.

Property: The Property industry group PBT of Rs. 203 million in the first quarter of 2015/16 is a decrease of 7% over the first quarter of the previous financial year [2014/15 Q1: Rs.218 million]. The decline in PBT is mainly on account of the lower revenue recognition of the “OnThree20” residential development project which reached completion in the previous financial year. Over 90% of units have been handed over to the buyers with the balance handovers expected to be completed during the ensuing quarter. Construction of the ‘7th Sense’ residential development is nearing completion with all 66 units being reserved as of the end of the first quarter of 2015/16. Waterfront Properties Ltd. finalised a syndicated project development facility amounting to USD 395 million with the Standard Chartered Bank, thus concluding the required debt financing for the ‘Waterfront Project’.

Consumer Foods and Retail: The Consumer Foods and Retail industry group PBT of Rs. 880 million in the first quarter of 2015/16 is an increase of 86% over the first quarter of the previous financial year [2014/15 Q1: Rs. 472 million], with both sectors contributing to the improved performance. We are encouraged by the continued strong performance of the industry group amidst growth in consumer spending as well as the fruition of our strategies in the respective sectors. The Frozen Confectionery and Beverage businesses witnessed an increase in profitability driven by double digit volume growth. Keells Food Products recorded a significant increase in profitability on account of enhanced operational efficiencies and higher volumes across all channels. The Retail sector reported a strong performance aided by an increase in footfall which contributed towards a year-on-year growth in same store sales, whilst average basket values remained stable.

Financial Services: The Financial Services industry group PBT of Rs. 373 million in the first quarter of 2015/16 is an increase of 12% over the first quarter of the previous financial year [2014/15 Q1: Rs. 332 million]. Nations Trust Bank was the primary contributor to the improved performance. The overall insurance industry benefited from the increase in disposable incomes with both the Life and General Insurance businesses recording an encouraging growth in gross written premiums.

On 28 May, Union Assurance PLC announced that a maximum of 26,785,714 ordinary shares will be repurchased at a price of Rs. 167.80 per share in the proportion of 10 shares for every 32 shares held. The offer closed on 28 July and JKH has accepted the offer to repurchase its entitlement.

Information Technology: The Information Technology industry group PBT of Rs. 68 million in the first quarter of 2015/16 is an increase over the first quarter of the previous financial year [2014/15 Q1: Rs. 21 million]. The improved profitability is mainly attributed to the Group’s Business Process Outsourcing operations which benefitted from the growth witnessed across a few large clients and the successful implementation of a number of cost management initiatives. The Office Automation business recorded a growth in volumes across its three main product segments.

Other, Including Plantation Services: Other, including Plantation Services and the Corporate Centre recorded a PBT of Rs. 522 million in the first quarter of 2015/16, this being a decrease of 37% over the first quarter of the previous financial year [2014/15 Q1: Rs. 826 million]. The lower PBT is primarily due to the gain of Rs. 389 million arising from the disposal of the investment in Expolanka Holdings PLC included in the last financial year. Revenue and profitability in the Plantations Services sector were negatively impacted as tea prices continued to remain at low levels. Subsequent to receiving shareholder approval on 26 June, the company completed the subdivision of its ordinary shares, whereby seven shares were subdivided into eight shares.
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Sri Lankan shares end at more-than-5-month high

Sri Lankan shares ended at their highest in more than five months on Thursday, as investors picked up risky assets on expectations of strong corporate earnings and political stability after the Aug. 17 parliamentary polls.

The main stock index ended up 0.25 percent at 7,332.05, its highest since Feb. 13.

Turnover was at 1.78 billion rupees ($13.33 million), more than this year's daily average of 1.09 billion rupees.

"The market ended the holiday-shortened week on a positive note with local investors topping the turnover charts. Institutional and high net worth activity was seen," TKS Securities said in a note to investors.

Gains were led by large-caps. Ceylon Tobacco Company Plc rose 0.98 percent after it reported a 16.6 percent rise in net profit for April-June, while Ceylon Cold Stores Plc gained 14.10 percent and Nestle Lanka Plc rose 0.53 percent.

Foreign investors, who have bought a net 955.9 million rupees worth of shares so far this year, were net sellers of 444.8 million rupees on Thursday.

Analysts expect local companies to post strong results for the April-June quarter.

Expectations of political stability after the Aug. 17 parliament elections also helped sentiment, they said.

Markets will be closed on Friday for a special Buddhist religious holiday. 

($1 = 133.5000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

NTB Bank posts Rs 1.25b PAT in first half

The Nations Trust Bank (NTB) closed the first six months ending June 30, 2015 with a post-tax profit of Rs.1,257 mn a growth of 9% over the corresponding period.

The results for the quarter were significantly better with post tax profits recording a commendable growth of 26%. Operating margins improved during the first six months as core revenue recorded a faster rate of growth than operating expenses. However, the improved operating margins did not translate to a similar bottom line growth owning to higher impairment charges.

Loans and advances recorded a steady growth of 5% for the first 6 months amidst high market liquidity and intense price competition.

Net interest income recorded a growth of 8% over the previous period with NIMs narrowing marginally.

The drop in interest expenses of 20% outweighed the drop in interest income of 6% thereby improving NII.

The challenges present in the current low interest rate operating environment was somewhat mitigated by timely re-pricing of assets and liabilities. Portfolios such as Corporate and Leasing in particular, felt the pinch of declining yields and narrowing NIMs.

The Bank continued its push for growth in low cost deposits which recorded a 6% growth with CASA improving to 31% of deposits.
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Bounties for whistleblowers under new SEC Act - Chairman

Shirajiv Sirimane

The Securities and Exchange Commission (SEC) is drafting a new Act to minimize manipulative actions in the corporate world, Securities and Exchange Commission Chairman,Tilak Karunaratne said.

Speaking at the Board Leadership Director Certification Programme conducted by the Sri Lanka Institute of Directors (SLID) last Tuesday he said this will help the SEC to take preemptive action.

“Complete security for employees and audit firms where their jobs and mandate are concerned and legal provisions protecting them being prosecuted for such affirmative action will be incorporated in the new Act.

“Where the whistleblowing employees are concerned if the allegations are true, will be rewarded with bounties,”he said.

Good governance is an expression in vogue today among emerging nations especially in Asia such as India, Indonesia, Sri Lanka and even China.”

“However implementation of the principals of good governance in a country will be a futile effort unless and until the principals of this ideology cascades to all units of the economy. In such a context one could not undermine the importance of Corporate Governance in organizations.”

“The Government or the regulator cannot foster Corporate Governance in isolation. It should be a joint initiative by all relevant stakeholders and I am pleased to note that several organizations have come forward to further this cause by offering various formal educational programmes.”

“It is disheartening to note how certain listed entities have not fully understood the importance of good governance. Negligence on their part not only exposes these companies towards greater risk but the effect also trickles down to the capital market.” The infamous NSB TFC share deal where a stock broker, perhaps acting in concert with sections of the top management of both NSB and TFC (the findings of the SEC investigation on the matter is still pending with the Attorney General for his opinion) sold 7.8 mn TFC shares at highly inflated price of Rs 50.00 to NSB.”

“The share price of TFC was around Rs 30.00 at that time. After the deal went through the then Chairman of TFC told the media that the deal was completely value driven and an investment for the future of both corporate entities breaking all codes of good governance. On July 27, 2015, the share price of TFC was Rs 14.00 and according to the latest Annual Report the Net Assets value per Share was Rs (51.44). The SEC was able to reverse this deal which saved NSB Rs 390 m then.”

“Such phenomenon is not limited to Sri Lanka. At times even world famous companies in developed economies could fall short of good corporate governance,” he said.

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Public, private listings key to GDP growth: CSE CEO

The capital markets are expected to play a key role in the next chapter of Sri Lanka’s growth story, the CEO of the Colombo Stock Exchange (CSE) Rajeeva Bandaranaike has said.

Speaking during an interview he gave to the global publishing, research and consultancy firm Oxford Business Group (OBG), Bandaranaike said that raising funds by getting both State-owned enterprises and larger capitalised private sector companies to list would be “essential” in meeting the Government’s targets for GDP growth.

The CSE is targeting $ 50 b market capitalisation as part of an ambitious development strategy. “We estimate that 25-30% of future funding requirements will come from the capital market through both debt and equity,” Bandaranaike told OBG. “We see particular potential – both for debt and equity listings – in insurance, ports, industry, infrastructure and banking.”

Bandaranaike said companies had much to gain from listing. “Over time, this will increase the accountability and transparency of these institutions, as well as make them more productive and efficient,” he commented. He also stated that should the Government decide to list public sector enterprises, using employer share option schemes, this would not amount to privatisation.

The full interview with Rajeeva Bandaranaike will appear in The Report: Sri Lanka 2016, OBG’s first report on the country’s economy. The landmark publication will contain a detailed, sector-by-sector guide for investors, alongside contributions from leading representatives.

In the interview, Bandaranaike highlighted the key part that the reworking of the Securities and Exchange Commission Act will play in setting the scene for new product lines to be introduced on the CSE. The overhaul is expected to be finalised in 2016.

“This will fill the gaps that currently exist in the market, addressing the need for new products as well as establishing a framework for the demutualisation of the CSE and the addressing systemic risk in the market,” he told OBG.

Oxford Business Group (OBG) is a global publishing, research and consultancy firm, which publishes economic intelligence on the markets of the Asia, Middle East, Africa and Latin America and the Caribbean. Through its range of print and online products, OBG offers comprehensive and accurate analysis of macroeconomic and sectoral developments, including banking, capital markets, insurance, energy, transport, industry and telecoms.

The critically-acclaimed economic and business reports have become the leading source of business intelligence on developing countries in the regions they cover. OBG’s online economic briefings provide up-to-date in-depth analysis on the issues that matter for tens of thousands of subscribers worldwide. OBG’s consultancy arm offers tailor-made market intelligence and advice to firms currently operating in these markets and those looking to enter them.
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Japan’s Mitsui Sumitomo enters with 6% stake in Ceylinco Insurance for Rs. 1.9 b

* First-ever investment by a Japanese insurance company in Sri Lanka

Mitsui Sumitomo Insurance Co Ltd., the largest insurance company in Japan, yesterday bought 1.2 million shares amounting to 6% of CIESOT, the employee share ownership trust ofCeylinco Insurance PLC.

The shares were sold at Rs. 1,602 per share and the total transaction amounted to Rs. 1.92 billion (JPY 1.7 billion).

Ceylinco Insurance said that they were quite pleased with Mitsui Sumitomo Insurance Ltd. 
(MSI) entering the local market through Ceylinco Insurance. MSI is considered as the largest insurance company in Asia and holds an A+ rating.

Further, the Ceylinco Insurance maintained a strong business relationship with MSI forover 20 years fostering mutual trust and that Ceylinco Insurance will be able to offer an exemplary service with very competitive pricing particularly to the Japanese investors and projects here in Sri Lanka as well as others. Ceylinco Insurance is confident that this synergy will add further value and bring in more expertise to its activities and operations.

This is the first-ever investment by a Japanese insurance company in Sri Lanka and MSIisin the process of enhancing its business network in the South Asian region.

MSI said that they will promote Ceylinco Insurance to increase penetration in Sri Lanka and that they will be able to work more closely with the Japanese corporates operating in Sri Lanka.

Ceylinco Insurance also added that Sri Lanka is attracting much attention from Japanese investors after the visit of Japanese Prime Minister ShinzoAbe, last September.
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Sri Lankan shares close at 5-mth high; turnover hits 2-1/2 mth peak

Sri Lankan shares gained more than 0.7 percent in high turnover on Wednesday, closing at their five-month peak, as expectations of strong corporate earnings and political stability after the Aug. 17 parliamentary polls lifted investor sentiment.

Turnover rose to 3.65 billion rupees ($27.32 million), its highest since May 14 and well above this year's daily average of 1.09 billion rupees, on block deals.

The main stock index ended firmer 0.73 percent, or 52.90 points, at 7,313.97, its highest since Feb. 26.

"Trading was dominated by heavyweights, while block deals pushed the turnover higher," said Dimantha Mathew, a research manager at First Capital Equities (Pvt) Ltd.

"Market is very positive, specially on the earnings. We expect the market to continue the uptrend."

Gains were led by large caps. Ceylon Tobacco Company Plc rose 2.85 percent after it reported a 16.6 percent rise in net profit for the April-June quarter, while conglomerate John Keells Holdings Plc gained 1.69 percent.

Dealers said block deals in Ceylinco Insurance Company Plc , which ended 0.17 percent weaker, boosted turnover and foreign trade.

Foreign investors, who have bought a net 1.4 billion rupees worth of shares so far this year, were net buyers of 1.95 billion rupees on Wednesday.

Analysts expect local companies to post strong results for the April-June quarter.

Expectations of political stability after the Aug. 17 parliament elections also helped sentiment, they said. 

($1 = 133.6000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Piramal Glass Ceylon continues upward momentum in F16 - Q1 Revenue Rs. 1,543 Million & PAT Rs. 147 Million

Grain Elevators could grow revenue by 10.4 pct: SC Securities

(LBO) – Ceylon Grain Elevators PLC (GRAN.N), Sri Lanka’s largest operator in the poultry industry, could grow revenue by 10.4 percent and net profit by 12.2 percent annually in the next four years, according to a research report by SC Securities.

This would give the share a 12-month price target of 70 rupees. The company was trading at 65 rupees, up 4.5 percent, on Wednesday.

According to SC Securities, rising consumer demand due to revised public sector salaries and higher per capita income should drive the top line. The surge in tourist arrivals may also contribute to stronger consumer demand for its products.

“We expect the price ceiling imposed on a Kg of chicken to be lifted in the forth coming period, with this the large scale broiler farms would ramp up the production triggering more demand for feed and DOC,” they said.

Ceylon Grain Elevators and its subsidiaries manufacture feeds under the Prima and Farmer’s Choice brands. They operate poultry breeder farms and engage in processing, packaging and retailing of poultry and other meat products.

One of its subsidiaries is Three Acre Farms PLC (TAFL.N).

Among the downside factors, the stockbroking firm noted that a depreciation of the rupee increases costs as more than 50 percent of raw materials are imported.

The re-banning of food maize importation could also drive maize prices up, while outbreaks of disease could affect its stock of day old chicks.

SC Securities currently has a ‘buy’ recommendation for the stock.

Sri Lanka's DFCC Bank 'B' rating to stay after merger: S&P

ECONOMYNEXT - A 'B' rating on Sri Lanka's DFCC Bank will stay after its merger with subsidiary DFCC Vardhana Bank, Standard and Poor's, a rating agency said.

"Our analysis of DFCC is already based on the consolidated profile of the two entities including their franchise, funding, asset quality, earnings, and capitalization," S&P said in a statement.

"Our ratings on DFCC reflect the bank's satisfactory business position, better capitalization and earnings than domestic peers', limited deposit base and branch network, and exposure to sensitive loan segments."

DFCC owns 99.71 percent of the subsidiary.

S&P said the merger will bring limited cost benefits because the two entities already have operational synergies. Group assets were 211 billion rupees at March 31, 2015.

Sri Lanka cigarette sales up 10-pct amid consumption boom

ECONOMYNEXT - Sales in Sri Lanka have picked up 10 percent in the June 2015 quarter from a year earlier amid higher consumption, the island's cigarette monopoly Ceylon Tobacco Company said as profits rose 20 percent.

Net profits rose 20 percent to 3.0 billion rupees in the quarter, giving earnings of 15.63 rupees per share. In the 6-months to June CTC reported earnings of 29.41 rupees per share on total profits of 5.5 billion rupees, up 21.4 percent from a year earlier.

The stock closed at 915.50 up 15.50 rupees on Tuesday.

CTC, a unit of British American Tobacco, said gross revenues rose 19.8 percent in the June 2014 quarter from a year earlier to 26.952 billion rupees due to a combined 10 percent rise in volumes and a price increase coming with a tax hike in October 2014.

CTC told shareholders than volume increase came from "a higher level of consumer confidence and an increase in disposable income."

In the March 2015 quarter also CTC reported an 11 percent volume gain.

Sri Lanka's credit growth picked up in the last quarter of 2014 and in January the state gave a steep credit funded salary increase to state workers and other subsidies, driving the recurrent expenditure and the budget deficit up.

Excise taxes rose 21 percent to 20.4 billion rupees in the quarter, with value added tax consolidated into excise this year, under the steady destruction of the value added tax system seen in the country over several years.

CTC said it is now carrying 80 percent pictorial warnings on their packs after a new law was passed by the new administration.

CTC went to court against the then health minister Maithripala Sirisena repeating tactics deployed BAT and other tobacco giants in other countries to prevent greater awareness that smoking causes cancer, erectile dysfunction and heart attacks.

However the former health minister made it part of his campaign for election as President and promptly requested parliament to pass a law to impose 80 percent pictorial health warnings on pack.

Cigarette and military hardware have the rare distinction of being two products that kill when used as directed by the manufacturer. Most other consumer goods cause death when mis-used, over-used.

Sri Lanka’s Asian Hotels & Properties June quarter profit down 10-pct

ECONOMYNEXT – Sri Lanka’s Asian Hotels & Properties said group net profit fell 10 percent to 302 million rupees in the June 2015 quarter from a year ago as competition from new hotels hit business at its city hotels.

The firm, part of John Keells Holdings, said in a stock exchange filing that sales in the June quarter fell six percent to 1.67 billion rupees.

Earnings per share for the quarter were 68 cents compared with 76 cents the year before.

The company operates two five star city hotels - Cinnamon Lakeside Colombo and Cinnamon Grand Colombo - under the brand ‘Cinnamon Hotels and Resorts’ while its property development division runs the Crescat Boulevard shipping mall.

The June 2015 quarter downturn came from its hotels business where sales and profits fell.

Asian Hotels & Properties has said it had a 46 percent market share among Colombo’s five-star city hotels in 2014 although business fell owing to intensifying competition that restricted growth in average room rates.

Google to cover Lanka with 3G floating balloons

Hiran H.Senewiratne (hsenewiratne@gmail.com)

The Information and Communication Technology Agency of Sri Lanka (ICTA) has partnered with Google to cover the entire country with 3G internet under the 'Google Loon project'.

The agreement was signed with Google and ICTA at the Prime Minister's official residence yesterday.

"The next government's five year economic development plan will enable Sri Lanka to become a knowledge based, highly competitive market in the region, which will be able to compete with Singapore and Malaysia, Deputy Policy Planning and Economic Affairs Minister Dr Harsha de Silva said.

"To achieve economic target, the government intends to make new technology more affordable and accessible to the people and iron out the gap between rural and urban and have and have-nots in the country," Dr de Silva said at the signing ceremony at Temple Trees yesterday.

He said that when they come to power after the election they will canvass a lot of investments for established colleges of technology improve the knowledge of youth to be more knowledgeable to face the future competitive world.

Dr de Silva also said setting up colleges of technology will help the younger generation to become future innovators, business leaders' and entrepreneurs Sri Lanka is the first country in the world to have Internet access covering the whole country with the government support, Google Vice President and Project Leader on GoogleX Project Loon Mike Cassidy said.

"Project Loon is the latest moonshot from Google[x]: balloon-powered Internet access," which is an important day for Sri Lanka to become the first country to launch covering the whole country, "he said

It is a network of balloons travelling on the edge of space, designed to connect people in rural and remote areas, help fill in coverage gaps and bring people back online after disasters, Cassidy said.

He said it is expected to place 13 balloons above Sri Lanka over the next few months and internet service providers will have to connect this network through these 'floating towers' which will ultimately reduce their transmission costs.

ICTA Managing Director and CEO Muhunthan Canagey said that with this new project the whole country will become universally connected through the Wi-Fi system. Under this system they will be linking to 3500 government buildings to enhance relationship with the government and people, he said.

"Matara covered or Jaffna covered is now history. In a few months we will be able to say Sri Lanka covered," addressing the signing ceremony Foreign Minister Mangala Samaraweera said.

The project is handled by ICTA with the collaboration of former Facebook executive Chamath Palihapitiya who represents Lotus Flare.
www.dailynews.lk

JKL profit falls 20 pct in three months to June

Author CHAMATH ARIYADASA

(LBO) – Sri Lanka’s John Keells PLC (JKL.N), the tea and rubber broking unit of John Keells Holdings, announced a 20 percent drop in net profits in the first quarter, in provisional results released to the Colombo Stock Exchange.

The company said profit after tax fell to 54.2 million rupees from 67.7 million rupees in three months to June, on revenue which fell 18 percent to 188 million rupees.

The company noted that weak global tea and rubber prices could affect performance in the short term, in its annual report.

“The demand for tea could remain depressed in the short term due to issues across some of the key export destinations for Sri Lankan tea,” Chairman Susantha Ratnayake said.

The rubber industry too would be called upon “to demonstrate greater resilience in the near term,” he said.

The company earnings per share fell to 0.87 rupees in the quarter from 1.10 rupees in the same period last year. The share price closed at 93.50 rupees, up 0.54 percent, on Tuesday.

Sri Lanka’s tea exports, for the first five months from January to May 2015, declined 13 percent to 561 million US dollars compared with 644.4 million US dollars in the same period in 2014.

John Keells Stockbrokers also comes under the John Keells PLC wing.

Sri Lanka’s Cargills brands bolster June quarter profits

ECONOMYNEXT - Sri Lanka's Cargills (Ceylon) reported a net profit of 390.6 million rupees in the June 2015 quarter compared with a loss of 145 million rupees a year earlier with fast growth in branded products.

Earnings per share for the quarter were 1.74 rupees against a loss per share of 65 cents the previous year, a stock exchange filing said.

Group sales rose 9.0 percent to 17.1 billion rupees in the three months ended 30 June 2015 from a year ago.

Cargills Ceylon, part of the CT Holdings group, attributed revenue growth to the strong performance of its retail and Fast Moving Consumer Goods businesses.

“Improved consumer sentiment was evident from the beginning of the year,” the statement said.

“The FMCG sector has returned a stable performance with a 24.6 percent growth in turnover ending at 3.0 billion rupees.

“The double-digit growth reported by our agriculture and livestock processing businesses indicates category growth driven by our strong portfolio of national brands; ‘Kist’, ‘Goldi,’ ‘Sams’, ‘Magic’ and ‘Kotmale’.”

The group’s retail sector sales grew 5.7 percent to 13.4 billion rupees in the quarter.

But Cargills said the business “continued to be challenged by the ‘deemed’ Value-Added-Tax (VAT) imposed on VAT exempted products that are essential for daily nutrition and are sourced locally.

”Continuation of this arbitrary fiscal policy is contradictory to national efforts of encouraging local agriculture and production and has far reaching implications on smallholder farmers who have been empowered by the steady markets and guaranteed minimum prices benchmarked by the private supermarket industry.”

The statement said the group restructuring process with efforts to optimize resources and expertise while strengthening the balance sheet has “yielded the expected results leading to enhanced efficiency.”

Sri Lankan shares rise, hover near 2-month closing high

Sri Lankan shares rose on Tuesday, hovering near their two-month closing high hit on Friday, as expectations of strong corporate earnings and political stability after the parliamentary polls next month lifted investor sentiment.

The main stock index ended firmer 0.19 percent, or 13.84 points, at 7,261.07. On Friday, it had closed at its highest since May 25.

Gains were led by large caps such as John Keells Holdings Plc amid block deals. John Keells rose 0.67 percent, Ceylon Tobacco Company Plc 1.72 percent and Distilleries Company of Sri Lanka Plc gained 0.35 percent.

Turnover was 1.1 billion rupees ($8.23 million), just above this year's daily average of 1.07 billion rupees.

Foreign investors were net sellers of 212.8 million rupees worth of shares, extending the net foreign outflow so far this year to 549.3 million rupees.

Analysts expect local companies to post strong results for the April-June quarter. 

($1 = 133.6000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lanka Treasuries yields up across maturities

ECONOMYNEXT - Sri Lanka's Treasuries yields rose across maturities Wednesday with the 3-month yield up 03 basis points to 6.28 percent from a week earlier, data from the state debt office showed.

The 6-month yield rose 05 basis points to 6.43 percent and the 12-month yield rose 09 basis points to 6.48 percent.

The debt office sold 12.8 billion rupees of 03-month bills, 9.6 billion rupees of 6-month bills and 04 billion rupees of 12 month bills totalling 26.5 billion rupees.

Fitch places Ceylon Income Fund on negative rating

Fitch Ratings has placed the National Fund Credit Quality Rating assigned to the Ceylon Income Fund of ‘A(lka)’ on Rating Watch Negative.

There is uncertainty regarding the credit quality of a significant portion of the funds’ underlying assets,Fitch said.

This action comes after the Securities and Exchange Commission of Sri Lanka (SEC) did not renew the licence of Lanka Rating Agency (LRA), which rated 32% of Ceylon Income Fund’s assets as at end-May 2015.

The SEC on July 1,2015 issued a statement saying that LRA is not entitled to assess, evaluate or review the creditworthiness of listed securities or securities to be listed.

The fund’s Weighted Average Rating Factor was previously consistent with a National Fund Credit Quality Rating in the ‘A(lka)’ category.

The fund primarily invests in corporate debt instruments and is managed by Ceylon Asset Management.

The National Fund Volatility Rating is ‘V-NR’.

The Rating Watch Negative will be resolved if the assets that were previously rated by LRA reduce materially or if these assets are rated by another rating agency.

Fitch will review the Rating Watch in one month’s time.
www.dailynews.lk

Fitch rates PABC senior debt final ‘BBB(lka)’

Fitch Ratings has assigned Pan Asia Banking Corporation (PABC) issue of senior unsecured debentures of up to Rs 4.0b a final National Long-Term rating of ‘BBB(lka)’

The final rating is the same as the expected rating assigned on June 17, 2015, and follows the receipt of documents conforming to information already received.

The debentures will have maturities of three and four years with a combination of fixed-rate and floating-rate coupons. PABC expects to use the proceeds to reduce structural maturity mismatches, diversify the funding mix and secure medium-term funding.

The debentures are to be listed on the Colombo Stock Exchange.
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After Cairn exit global giant Total, Shell and ExxonMobil want to explore Lankan oil

Following the exit of Cairn India from offshore oil exploration in Sri Lanka’s Mannar basin, three major oil companies have expressed interest in continuing Cairn’s work.

Power and Energy Ministry Secretary B.M.S. Batagoda said bids had been received from three global oil companies - Total, Shell and ExxonMobil - for exploration in the Mannar Basin.

The bids had been received after an open tender was called when Cairns Lanka decided to end its operations in Sri Lanka.

Cairn Lanka, a subsidiary of Cairn India Ltd. (CIL), one of the leading independent exploration and production companies globally, announced in April that a nearly 50% drop in crude oil prices had forced Cairn India to exit its operations in Sri Lanka.

Following Cabinet approval, the Government has floated bids to select an investor to commercially develop the natural gas deposits found in the two wells of block SL 2007-01-001 in the Mannar Basin.

According to Dr. Batagoda, the two wells in the basin had yielded two trillion cubic meters of natural gas which would be sufficient to meet the demand of the country for ten years. Furthermore, the natural gas would be used to run the power plants at Kerawalapitya and Kelanitissa

The new tender will be awarded for 20 blocks in the Mannar basin while a separate tender will be called for work on the data obtained by Cairns during its exploration.

Meanwhile, the Cabinet has decided to give the tender for the exploration for oil and natural gas off the eastern coast of Sri Lanka to Total, a leading French company, the Sunday Times reported.

The company will gain exclusive rights for scanning, data collection and mapping in the seas off the eastern coast.

Dr. Batagoda said that this would be the first time that gas and oil exploration will take place in the eastern seas. 
www.ft.lk/

Sri Lanka sells US$165 million in floating rate bonds

ECONOMYNEXT - Sri Lanka has sold 165.25 million dollars of floating rate bonds which includes 110 million US dollars of 1 year and 3 month bonds at 342.99 basis points above the 6-month London Interbank Offered Rate.

The debt office also sold 55.25 million US dollars of 2 year bonds which will pay 365.36 basis points above the 6-month Libor.

The securities styled Sri Lanka Development Bonds are aimed at the domestic markets but non-residents could also buy them. The debt office said it received bids of 113.25 million dollars for 15 month bonds and 59.25 million in bids for 2 year bonds.

About 170 million dollars of floating rate bonds are coming up for rollover this month.

Sri Lanka sells Rs60bn in 4 and 6-year rupee bonds

ECONOMYNEXT - Sri Lanka has sold 27.6 billion rupees of 4-year bonds and 23.0 billion rupees of 6-year bonds and rejected bids for 10-year bond which were also offered, the state debt office said.

The 4-year bonds maturing on 01.07.2019 were sold at a weighted average yield of 8.19 percent.

Similar 4-year bonds were last auctioned on May 12 at 8.15 percent. The bonds were quoted at 8.15/20 percent in the secondary market after the auction, dealers said.

The 6-year bonds maturing on 01.08.2021 were sold at an average yield of 8.87 percent.

They were quoted around 8.83/78 percent in the market.

A close maturity of 15.10.2021 bonds were last auctioned at 9.08 percent on July 15.

Sri Lankan shares slip on profit-taking, month-end settlements

Sri Lankan shares fell on Monday from the previous session's two-months high, snapping a three-session gaining streak due to profit-taking and month-end settlements.

The main stock index ended lower 0.3 percent, or 21.82 points, at 7,247.23, slipping from its highest since May 25 hit on Friday.

Hopes of improved corporate earnings and political stability after the parliamentary polls next month have boosted investor sentiment.

"The market has run out of steam, with a bit of profit-taking and month-end settlements, but there was not much of selling pressure," said Dimantha Mathew, a research manager at First Capital Equities (Pvt) Ltd.

Turnover was 1.09 billion rupees ($8.15 million), just above this year's daily average of 1.06 billion rupees.

Foreign investors were net buyers of 64.9 million rupees on Monday, extending the net foreign inflows during the past three sessions to 1.07 billion rupees.

Analysts also expect Sri Lankan companies to post strong results for the April-June quarter.

Ceylon Cold Stores Plc fell 2.74 percent, while Aitken Spence Plc fell 2.10 percent. 

($1 = 133.7000 Sri Lankan rupees) 

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

Harsha regrets delay but vows swifter action against stock market Mafia

By Madushka Balasuriya

Economic Affairs Deputy Minister Dr. Harsha de Silva, once a vocal critic against the stock market mafia, on Friday expressed disappointment over the progress in punitive action but vowed justice would be meted out more swiftly under a permanent government post elections.

“Numerous allegations have been made of stockbrokers complicit with investors manipulating the market – pumpingshares, dumping them on various State institutions and so on. I am disappointed that we have still not made sufficient progress in making sure that we have done the expected job in dealing with those people who acted in ways that contravened the Securities and Exchange Commission’s Act,” said De Silva.

He was speaking as Chief Guest at the Certificate and Diploma Awards Ceremony 2015, organised by the Capital Market Education and Training (CMET) and the Securities and Exchange Commission of Sri Lanka on Friday.

“What happened to those who breached that Act? Where are the files, cases filed against these people?” asked the Deputy Minister, referring to the one of the more pronounced failures of the new regime in bring white collar criminals to justice, adding that it had allowed some to say that “none of these allegations were ever true”.

De Silva called on the SEC, the Colombo Stock Exchange and Attorney General’s Department to see how they could “speed up” this process, so as to “rebuild the confidence in the market”.

He assured that come 17 August, the UNF coalition would bring to book those who had so far evaded justice.

“If people think they don’t have a fair chance of making money in the capital market, then people will not invest in it. The allegation is that it is cornered by a few. Maybe a couple of hundred people, essentially, are the main players in this market,” warned De Silva, regarding the implications of a lack of faith in the market.
www.ft.lk

Former SEC chief Godahewa emerges as a UPFA supporter

Nalaka Godahewa, Sri Lanka’s former high profile Securities and Exchange Commission (SEC) chairman, who once said he was not a political appointee, emerged this week – after a near 6-month absence from the public spotlight – as a supporter of the opposition United People’s Freedom Alliance (UPFA).

He was shown on a local television station on Tuesday night addressing a UPFA political meeting and criticising the controversial Central Bank Treasury bond issue. Some of the decisions taken by the former SEC chief, who was also a former Chairman of Sri Lanka Tourism, and the SEC board during the earlier administration – including the provision of funds to Namal Rajapaksa’s Tharunyata Hetak programme are presently under investigation by the Financial Crimes Investigation Department (FCID).

Earlier this year just before Dr. Godahewa resigned he told a newspaper that he was a non-political appointee. “There is no reason for the capital market regulator to hand over his resignation after an election. We do not engage in politics,” he was quoted as saying in the report.
www.sundaytimes.lk

Access interested in more property business

Access Engineering (AEL) which bought Horizon Holdings Ventures (Pvt) Ltd and acquired 50 per cent in Horizon Holdings (Pvt) Ltd is eyeing more such investments, officials said.

“We are interested in the housing development sector and are interested in more such opportunities,” an AEL official said.
Horizon Holdings Ventures (Pvt.) Ltd (incorporated in June 2015) and Horizon Holdings (Pvt.) Ltd. (incorporated in March 2014) are in the business of developing their property located in Malabe, in 12.5 acres.

AEL has also focused on geographical diversification by creating its presence aboard, where AEL has taken the first step in the Pacific region.

The company undertook work for one of its Chinese partners at the biggest port in Papua New Guinea, Port Lae. AEL further plans to extend its international operations, however paying particular attention to the risks involved as the company hopes to partner with its principals. Currently the company is on the lookout for opportunities in East Africa and the Middle East with current strategic partners. (DEC)
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Softlogic Capital bounces strongly in 2014/15

Softlogic Capital PLC., incorporated as Capital Reach Holdings Ltd. by former Central Bank Governor Ajith Nivad Cabraal in April 2005 and subsequently acquired by the Softlogic Group which changed its name, has returned a superior performance in the year ended March 31, 2015 boosting revenue 20% to Rs 9.95 bn. and profit after tax 153% to Rs. 782 mn. from the previous year’s Rs. 309 mn.

But the highly capitalized company which concluded a 13 for 10 rights issue at Rs. 3.60 a share increasing its stated capital to Rs. 2.88 billion during the year under review has been unable to pay a dividend to its shareholders.

The company which controls the financial services business of the Softlogic Group is however upbeat about its future prospects given its estimation of the high potential of financial services in Sri Lanka’s economy.

Softlogic acquired Capital Reach in August 2010 and the shares of the company were listed on the Dirisavi board of the Colombo Stock Exchange in September 2011. This company is now the financial services sector holding company of the Softlogic group.

According to the Company’s recently released annual report Softlogic Capital’s portfolio of financial services comprised Softlogic Finance PLC., a licensed finance company, Asian Alliance Insurance PLC., an insurer licensed for life insurance by the Insurance Board of Sri Lanka and Asian Alliance General Insurance Ltd., licensed for general insurance by the Insurance Board as well as Softlogic Stockbrokers (Pvt) Ltd., a stock broking company licensed and operating on the CSE.

Softlogic Capital PLC is licensed by the Securities and Securities and Exchange Commission (SEC) as a market intermediary under the ‘investment manager’ category.

Softlogic’s investment strategy has focused on the most promising sectors likely to benefit from the country’s growth, and the financial services sector is one area that we see has huge potential based on the increasing per capita values, Mr. Ashok Pathirage, chairman of the company has said in Softlogic Capital’s annual report.

He noted that insurance expansion and penetration in the country is relatively low standing at 1.05% in 2014 with 0.45% penetration for life and 0.06% for general insurance. This compared with insurance penetration in the whole of Asia at 5.18% with 3.56 for life and 1.62% for general insurance.

"At Asian Alliance Insurance we are capitalizing on these prospects and are happy to report that life premiums for the company grew by 21% for 2014 and continued with the same momentum into the first quarter of 2015," Pathirage said.

"Asian Alliance Insurance PLC., is ranked fifth in the industry and has so far concentrated its business almost entirely on protection products. We see huge potential for life business and are planning on diversifying our product range."

He said that they had adopted a clear technology backec strategy in general insurance and is aiming at "providing unparalleled and unrivalled customer convenience." Their focus will be directed to the motor and health classes of insurance and will synergize with the Softlogic retail channel for distribution and Asiri Hospitals for healthcare.

"Our MOU with Apollo Hospitals, India that establishes the ‘Asian Health Alliance’ will ensure that our customers have the best choice of health care options whether local or overseas," Pathirage said.

Discussing Softlogic Finance, he said that they had coped with continued volatility related to impairment from leasing and hire purchase products and had made a timely change to focus on SME loan products where there is immense potential to grow based on speed of execution and delivery.

The company’s deposit base had increased by 30% to exceed Rs. 12 bn. which was the highest recorded increase in the Non-Banking Finance Institution (NBFI) sector, he said.

Pathirage also said they had transformed Softlogic Stockbrokers into "a winning proposition" on the back of favourable market conditions and the company had "stormed into third place" in the industry recording a turnover of Rs. 63.3 bn. and commanding a market share of 8.9%.

"With excellent client coverage and extensive research capabilities, the company has a strong focus on the foreign sector and sees enormous business potential tied to a strong based economy," Pathirage said.

He concluded by confidently stating that the group’s Financial Services Sector "is fully primed and in a great position to benefit from Sri Lanka’s growth.We have invested heavily in upgrading our teams, acquiring the infrastructure and building our brands which we also see as doing our part in developing our country’s future."

The company’s Managing Director, Mr. Ifthikar Ahamed, said that Asian Alliance insurance had delivered an extraordinary year recording gross written premiums of Rs. 4.9 bn., up 16% from a year earlier, while the bottom line saw an impressive profit of Rs. 705 mn. up 22% from the previous year’s profit of Rs. 576 mn.

Softlogic Finance had "stormed its way through impairment turbulence" and delivered a profit of Rs. 216 mn., up 31% from the previous year, he said. The total assets of the company was up 10% to Rs. 20 bn. from Rs. 18 bn. the previous year.

Ahamed reported that Softlogic Strockbrokers that was totally revamped had risen dramatically in their league recording a turnover of Rs. 225 mn for the year and a profit of Rs. 63 mn. against a turnover of Rs. 42 mn. and a loss of Rs. 13 mn. the previous year.

Their stock broking team has a keen focus on foreign business and one of the best research teams delivering outstanding works importantly institutional and high-net-worth clients, he said.

Softlogic Capital has a stated capital of Rs. 2.88 bn. and a reserve of Rs. 73.66 mn. It’s available for sale reserve is Rs. 31.5 mn. and retained earnings Rs. 509.9 mn. Total Assets ran at Rs. 32.85 bn. and total liabilities at Rs. 26.73 bn.

Earnings per share had grown to Rs. 0.72 from Rs. 0.20 the previous year for the group and Rs. 0.32 for the company from a loss of Rs. 0.36 per share the previous year.

Softlogic Holdings is the controlling shareholder of the company owning 73.11% though two accounts followed by ARC Capital (10.22%), Melstacorp (5.81%) Rosewood (Pvt.) Ltd., (5.41%) and WDNH Perera ( 1.49%).

The Softlogic share traded at a high of Rs. 8.80 and a low of Rs. 3.60 during the year under review against a trading range of Rs. 7.20 to Rs. 3.10 the previous year.

The director of the company are Messrs. A K Pathirage (Chairman), T M I Ahamed (Managing Director), R J Perera, WL P Wijewardena, Mr. A M Pasqual, Ms E Wickramaarachchi and Mr. H Premaratne.

www.island.lk

Amalgamation of DFCC and DFCC Vardhana from Oct. 1

The amalgamation between the DFCC Bank PLC and DFCC Vardhana Bank PLC (DVB) is expected to take effect from Oct. 1, 2015, or such other date as may be specified in the certificate of amalgamation issued in that regard by the Registrar General of Companies, the DFCC and DFCC Vardhana said in separate Stock Exchange filings on Friday.

The shareholders of DVB (other than DFCC) shall be paid a consideration of Rs. 52 for every DVB share they hold in lieu of their holding in DVB as at the date of the amalgamation.

The 281,823,005 shares of DVB held by DFCC would be cancelled in terms of the relevant provisions of the Companies Act upon the amalgamation without any payment or other consideration.

Ernst & Young Transaction Advisory Services (Private) Ltd. has issued an Independent Advisors’ Report on July 3 in respect of the payment to minority shareholders.

DVB which had a commercial banking licence handled the commercial banking business of the DFCC group.

The two banks had made disclosures in this regard on May 15 this year and their two boards have approved the amalgamation proposal subject to obtaining necessary shareholder and regulatory approvals.

The DFCC Bank will hold an EGM on Aug. 28 at King’s Court of the Cinnamon Lakeside Hotel to seek the necessary shareholder approval while DFCC Vardhana will hold an EGM the same day at the head office of the DFCC Bank for the same purpose.

The filing by both entities said that the DFCC Bank PLC will be the surviving entity upon completion of the amalgamation.

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Debt-wracked Madulsima plans cash infusion of Rs. 1.4 bn.

Five for one rights issue will settle related shareholders with shares

Madulsima Plantations PLC, controlled/influenced by Harry Jayewardena related companies, has announced the issue of 145 million new ordinary shares by way of a five for one rights issue priced at Rs. 9.50 per share.

The company has said in a circular to shareholders that if the rights issue is fully subscribed, the company’s stated capital would increase from Rs. 290 mn. to approximately Rs. 1.67 bn., increasing by approximately Rs. 1.38 bn.

The company intends utilizing approximately Rs. 1.38 bn. of the funds raised by the rights issue to fully settle loans due to two related companies, Melstacorp. Ltd. and Stassen Exports Pvt. Ltd. which are two related companies, and part settle an HNB overdraft.

The circular has said that the loans due to Melstacorp and Stassen Exports are loans due on demand. Furthermore, these lenders are the majority shareholders of Madulsima who are willing to convert their loans into equity. The remaining borrowings due on a secured

HNB permanent overdraft is not yet due for settlement but Madulsima expects to settle Rs. 55 mn. of an outstanding of Rs. 294 mn.

Considering that the two related companies have expressed their willingness to subscribe fully to their rights entitlement and to apply for additional shares to the extent required to convert the outstanding loans into equity, the directors are assured that the total fund requirement will be met, the circular indicated.

Madulsima carries substantial debt and in the company’s last annual report for 2014 its auditors, without qualifying their opinion on the accounts, drew attention to the fact that the company continues to incur losses financed by related companies. In the last year under review the company incurred a net loss of Rs. 277.7 mn., up from Rs. 219.6 mn. a year earlier. As at that date, the company’s current liabilities exceeded its current assets by Rs. 1.79 bn. and there are uncertainties of its status as a going concern.

In 2014, a loss of Rs. 9.58 per share, up from a loss of Rs. 7.57 per share a year earlier, had been incurred. The directors have said that once debts are settled, Madulsima which has paid no dividends to shareholders but paid management fees to its controlling shareholder for 11 years, will benefit from reduced finance costs of approximately Rs. 165 mn. a year amounting to a saving of approximately Rs. 30 per kilo of made tea.

In the current financial year the saving would be approximately Rs. 80 mn.

These savings of interest cost together with the improvements in productivity, agricultural practices and factory development has led the directors to believe that once the lion’s share of outstanding debt is reduced, the financial performance of the company would improve together with its ability to continue as a going concern.

The Madulsima share closed at Rs. 13.20 last February, Rs. 11.40 in March, Rs. 11.80 in April and Rs. 10.80 in May.

The company has summoned an Extraordinary General Meeting on August 3 to seek shareholder approval for special resolutions enabling the floating of the rights issue.

The Madulsima directors are Messrs. D.H. S. Jayawardena, N.M.A. Gaffar, Lalith Obeyesekere, A Shakthevale and D.S.K. Amarasekera.

www.island.lk

Sri Lanka's UNP wants all SOEs under one holding company

ECONOMYNEXT - Sri Lanka's United National Party said it will place all state owned enterprises under a holding company, whose trustees will be appointed with the agreement of political parties and civil society.

"The government owns the biggest commercial enterprises in the country and this ownership is maintained on behalf of the people," the UNP said in its manifesto for the August 17 general elections.

"Unfortunately, for the past 50 years these enterprises have not been managed properly and therefore suffered huge losses.

"As a solution all state enterprises will be placed under holding company."

Both Malaysia and Singapore have holding companies to own and manage enterprises and also sovereign wealth funds.

The document said trustees to the asset holding company would be appointed after consultations with political parties and civil society organization.

State enterprises where the elected ruling class and bureaucrats plays around and do business with taxes extracted from the people. They make large losses frequently indicating that the gamble with people money is lost.

Some SOEs which benefit from the coercive power of the state also have monopoly powers restricting the rights of citizens to engage in similar activities like the Imperial Mercantilist Dutch East India Company and the British East India Company did.

SOEs also have looser financial regulations or 'financial independence' than government departments, allowing the elected ruling class to mis-use them more easily.

As a result the existence of state enterprises have become one of the key causes of corruption in the country.

The UNP which led the way in privatization sharply reducing opportunities for rulers and bureaucrats to steal and mis-use people's money in the 1980s now have 'policy fright' according to some critics.

The UNP said it will also create a pubic wealth trust to manage two retirement funds of private sector workers if it comes to power after August elections.

Both agencies will come under the scrutiny of parliament.

Sri Lanka’s EPF should be managed by public trust, Not allowing Central Bank to manipulate: Eran

(LBO) – Sri Lanka’s Employee Provident Fund should come under a public trust and not allowed to be manipulated by the Central bank, a former deputy minister said.

“This is one of the biggest frauds happening in the country and I have been saying this in parliament for the last five years,” Eran Wickramaratne, a former deputy Minister said.

The Employee Provident Fund of private sector workers is managed by the central bank which also manages government debt.

EPF funds are regularly invested in government debt.

“When the government wants to borrow money it is from these funds that they take it and they want low interest loans while the workers want a high yields for their funds,” Wickramaratne said.

“So who are the winners – is it not the government?”

“Now you see that there is a conflict of interest and a very unfair situation for the workers because after saving for 20-25 years when they are retiring they are saddled with low interest earning savings.” Wickramaratne added.

The UNP’s manifesto released targeting the general election of the August 17th said, if elected they will set up a public trust to manage the provident fund of private sector workers better.

“We are proposing the setting up of a public trust to manage these funds and then the government won’t be able to manipulate it,”

“Then the returns that the workers will be receiving will be protected,”

“The responsibility of the persons in charge of the trust would be to protect the rights of the employees and get the highest possible interest.”

Sri Lanka’s Carsons profits up, Beverage sector revenues affected: Annual Report

(LBO) – Sri Lanka’s Carson Cumberbatch PLC, with investments ranging from oil palms and beer to financial services said revenue were up by 22.8 percent to 785 million rupees in 2014/2015, even though beverage segment of the company was affected due to excise duty.

“Some of the tax proposals presented at the National budget early this year are considered to be, not business friendly,” Tilak de Zoysa Chairman of the Carson Cumberbatch said.

“However, we are confident that the Government will review some of these proposals based on the representations made by the Chambers of Commerce on behalf of the private sector.”

The company recorded a net profit of 645.7 million rupees, up by 71.8 percent compared to the financial year 13/14 where the company reported 375.9 million rupees of profit.

The group revenues rose to 19.7 billion rupees from 12.7 billion rupees in the same period 2011, the group said in a stock exchange filing on Thursday.

Pre-tax profits dived to 8,582 million rupees in the 2015, from 11,223 rupees reported a year earlier.

Net profits slipped to 5,981 million rupees this year from 7966 million rupees reported in 2014.

The Group profit attributable to equity holders of the parent for the year was 3,085 million rupees in 2014/2015 when compared to 3,799 million rupees in 2014.

Carson’s stock closed up 400 rupees on Thursday (23), July 2015.

Oil palms sector net profit was down 40.7 percent to 3.1 billion rupees during the twelve months under consideration, as against a profit of 5.3 billion recorded during the previous financial year.

The Oils & Fats segment reported a revenue of 29.2 billion rupees for the twelve months ended 31st March 2015, which is an increase of 12.7 percent against the figure reported in financial year 13/14.

Carsons says despite revenue growth, sector EBITDA for the year under review, at 211.6 million, declined by 69.2 percent year – on-year, largely due to the challenging business environment that prevailed in India as well as in the key markets in which the Malaysian entity operates in.

Profitability for the year was further impaired by net finance cost of 501.1 million rupees, leading to a loss before tax of 769.4 million rupees.

On account of claims made on capital expenditure incurred, the sector reported a deferred tax gain of 156.2 million against the gain of 55.6 million rupees registered in financial year 13/14.

The annual report says the sector reported an overall net loss of 619.1 million rupees for the year concluded, against a loss of 128.2 million rupees in financial year 13/14.

Carson’s beverage sector reported a 1.2 billion rupee profit for the year up four percent from 1.1 billion profit of the preceding year.

Carsons says the group’s margin had a negative impact on the back to back increases in excise duty of the government in the beverage sector.

In total the sector suffered a total cost of 640 million rupees due to the VAT exemption on the beer industry announced by the Government.

Carson’s asset management segment reported a profit after tax of 1.9 billion rupees on a revenue of 2.1 billion rupees for the year ended 31st March 2015 portraying year-on-year increases of 18.7 percent and 10.3 percent respectively.

Further to increased revenue, the sector profitability for the period also benefited from a 194.9 million rupees unrealized gain from the net change in fair value of short term financial assets, which is an absolute increase of 189.0 million rupees when compared against the gain registered during the previous financial year.

The leisure sector witnessed 11.1 percent year-on-year increase in revenue, to record a figure of 510.5 million rupees for financial year 14/15.

Carson say the overall room revenue however, was comparatively lower during the year, due to competitive room rates across the industry and a meagre growth in occupancy.

The leisure sector concluded the reviewing financial year with a net profit of 83.7 million rupees, which is a commendable increase of 33.9 percent compared to the previous year.

Real estate overall sector profitability for the year was at 365.1 million rupees which is an increase of 84.1 percent compared to the previous year.

However Carson’s Investment Holding and Management Service reported a loss of 119 million rupees in the twelve months ended 31st March 2015, compared to the 238 million rupees loss that was made in the last year.