Renuka continues growth momentum

In its interim financial statement released for the fourth quarter of the financial year 2014/15 Renuka Foods PLC recorded a revenue of Rs.1,703 million, a 17% increase compared to the revenue during the same period last year. For the year the turnover recorded was Rs.6.4 billion compared to Rs.5.5 billion in the previous year.

The profit for the period ended 31st March 2015 was Rs.462.9 million, of which profit attributable to the equity holders was Rs.229.6 million, reflecting a 150% increase compared to the same period during the previous financial year.

The total comprehensive income of the group for the period ended 31st March 2015 was Rs. 914.8 million, while the comprehensive income attributable to the equity holders was Rs.482.6 million.

In the operations review, which accompanied the interim financials, the organization stated that its vision is to be a leading food and beverage company, making every day delicious, by offering consumers in Sri Lanka and in over 34 international markets with its own brands. The business consists of the sectors of Agribusiness – Coconut, Organic Foods and Tea; and FMCG – Dairy, Fish, Fruit Beverages, Snacks and Soya.

In the Agribusiness Sector during the year the Group completed production capacity enhancements, increased warehousing capacity and expanded the product portfolio. The FMCG sector reported a gross profit of Rs.748 million against a turnover of Rs.3,629 million for the period ended 31st March 2015. The period under review has been one of consolidation.

“The dairy company, Richlife Dairies was completely integrated into Shaw Wallace Ceylon in terms of sales and distribution, sales administration and procurement resulting in significant cost savings being achieved in the quarter for the sector. This has enabled us to also further enhance the marketing and sales capabilities by increasing numeric distribution.

The significant investments into this sector over the last three years are now complete and we believe we have built the platform for one of the country’s leading food and beverage based FMCG companies powered by innovation and technology”, Executive Chairman Dr. Ranjit Rajiyah said.
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Mixed reactions to new market rules

By Arthur Wamanan

Analysts are to adopt a ‘wait and watch’ approach pertaining to two impending regulations to be laid out by the Colombo Stock Exchange (CSE) and the Securities and Exchange Commission (SEC) whilst new Automated Trading Rules, introduced last week was considered still early for feedback. Both institutions had recently come out with new instructions and regulations pertaining to the improvement of the stock market and also to strengthen the stock brokering firms.

The SEC had stated that it is looking at formulating a regulatory framework that would allow short selling in equity markets while also instructing brokering firms to install telephone recording equipment. In addition, the CSE recently amended the Rule 8.1 of the Automated Trading Rules (ATS) relating to the methodology of computing the Closing Price of Securities traded on the ATS (except debt securities). The Amendment came into effect from June 17.

On the CSE Amendment, analysts stated that it would ensure less market volatility as the closing price will be determined based on a minimum volume of 100 shares. In addition, according to the amendment, the ASPI heavyweights can’t be bought and sold as easily to affect ASPI or individual stock performance. However, they stated that they would have to wait and watch on the extent to which it would have an impact.

Meanwhile, they stated that adopting short selling methodology was not a feasible move at this juncture. Accordingly, a short selling involves the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is generally motivated by the belief that a security’s price will decline, enabling it to be bought back at a lower price to make a profit when the market is falling.

Analysts, however, stated that the move was not feasible this juncture owing to the nature of the market.

Speaking to The Nation Gain, Chief Strategist, Capital Alliance Partners Limited, Purasisi Jinadasa said that the move was highly impractical in the near future due to the illiquid nature of the market. “We should have a high market capitalization. Even the company which has the highest daily turnover cannot adopt this at the current juncture,” he said.

Head of Research at NDB Stock Brokers, Waruna Singappuli, while stating that short selling would make the market efficient, added that it could also result in the market becoming volatile. He added that since the risk of loss on a short sale is theoretically infinite, the methodology should only be used by mature markets who could afford to take up such risks.

“This system allows one to make money when the market is going down. While it is a good thing on one hand, on the other hand, if we do not have a strong market, it would make it even more volatile,” Singappuli added. Deputy Director General, SEC, Dhammika Perera stated that the SEC was currently looking at the possibility of formulating the framework but added that that it would not be done overnight since they would have to consider practicality of the system and also draft regulations that would go along with it.

Further the SEC also stated that it had also instructed all stock brokering firms to install recording devices on their phones in order to record conversations with their clients pertaining to deals.

While analysts had given mixed responses to the call, Perera pointed out that even though it was not mandatory for firms to record their conversations with clients, it will eventually be made compulsory once the system and the finances are finalized. “We have to do this because, as a regulator, we need to have some sort of evidence in the event of problems,” he said.

Singappuli stated that such a move was impractical since there were too many stock brokering companies. “We have 29 stock brokering firms in a market that has only 200-300 companies. In addition, our market is also slow. Therefore, I do not think it is feasible for all the companies to go for this system at the moment,” he said.

Meanwhile, President, Colombo Stock Brokers Association (CSBA), Dihan Dedigama stated that the onus was on the firms to implement the system.
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John Keells aims to double its hotel room stock in 5 years

Investing over $1 mln annually in Cinnamon brand promotion

John Keells Holdings (JKH), one of three large hotel chains in the country, is pumping in over US$1million annually on promoting its premium Cinnamon brand and aiming to double its room stock in five years from a current 2,200 in Sri Lanka and the Maldives. The group, which has been working on a brand strategy for the past 3-5 years, says it is now ready to take the brand – includes opening resorts – to South East Asia.

“We are ready,” noted Ajit Gunewardene, Deputy Chairman – JKH, in an interview on Wednesday in Colombo at the group’s make-shift corporate headquarters at the former Duty Free Shopping complex adjoining the Cinnamon Lakeside hotel, adding “We are ready to strengthen the brand”.

He said the group has been looking at the region for investments. “We did a lot of infrastructure in the past few (five) years to be able to travel with the brand. Now we are ready. We made huge investments in an integrated software system, management systems – essentially a plug and play integrated system, customer relationship management and a brand strategy. All these manuals are in place. So taking the brand out (overseas) makes is easier now. It’s not anymore about just buying a hotel and operating. We need to be able to add value.”

The group has been helped by its own independent research study on the local traveller and his/her needs. “We resorted to the research route against the traditional marketing as the economy has evolved to a point where the gut (gut feeling type of marketing) is just not enough to cater to a discerning local clientele. To be truly professional we need to know their (clients’) likes and dislikes,” he said adding that the Sri Lankan clientele is quite significant and accounts for 20 per cent of JKH’s occupancy annuallyThe research, the first ever on the domestic traveller, showed that local visitors also – similar to the foreign traveller – are seeking an experience (in a holiday). “Unlike before they don’t want to just go on the holiday. The new age traveller wants an experience. It’s no more the room-pool-buffet type of local tourist that we are dealing with. They want something more,” said Dileep Mudadeniya, Head of Brand Marketing for Cinnamon Hotels & Resorts, who was associated with Mr. Gunewardene in the interview.

Mr. Gunewardene said the group is not resorting to the traditional manner of advertising Cinnamon hotels. “We are using our position in Sri Lanka as a destination to position our hotels as well. It’s almost a nation branding. We will complement what the authorities are doing. It’s Sri Lanka first and the then the Cinnamon brand.”

JKH will be adding 500 more rooms in the next five years in addition to the 800-room, 5 star Cinnamon hotel at “Cinnamon Life”, the integrated property at Glennie Street which comes on stream in 2018. That would have 4.5 million sq. feet of space inclusive of two apartment towers, one office tower, a 400,000 sq. feet mall and a 2000-vehicle park. The conference space can accommodate a total of 5000 delegates with the largest hall able to seat 1,700 delegates.

He said Cinnamon is also looking at the top-end segment of luxury hotels and considering creating properties in the 20-room range.

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