Sunshine Holdings to manufacture meds locally

Sunshine Holdings PLC, buoyed by support to local manufacture of drugs under the National Medicinal Drug Regulatory Authority, is to commence manufacturing drugs locally in the next few years, officials said. “We are eyeing to set up a manufacturing plant in a Board of Investment zone at about US$ 10 million,” an official told the Business Times.

He said that they believe it’s important to adopt adequate measures to ensure quality of imports as well as locally manufactured products. Analysts say that some moderation is expected in the industry growth given the expected expansion in the State Pharmaceuticals manufacturing Corporation (SPC) where an investment of Rs. 1.6 billion has been phased out up to 2015 in order to enhance production capacity. SPC is the only state sector entity engaged in manufacturing of high quality pharmaceuticals in Sri Lanka and making them available at affordable prices.

Sunshine’s retail arm Healthguard Pharmacies offers a range of pharmaceuticals, wellness and beauty products in 17 outlets across the Colombo with this chain recording a net profit of Rs. 23 million and a revenue growth of 15 per cent YoY in FY15 mainly driven by the growth in beauty product sales by 10 per cent in the last financial year. The official said that the company expects an aggressive expansion in this segment to a total of 50 outlets by 2017.

Sunshine Holdings currently has the second largest market share in the pharmaceutical industry with a market share of 14 per cent in FY2015 and is the market leader in the Diagnostic sector.
www.sundaytimes.lk

Lack of clear political direction stalls new foreign cash flow to CSE

By Duruthu Edirimuni Chandrasekera

Lack of clarity and direction in Sri Lanka’s political front has deterred fresh foreign funds from coming into the Colombo Stock Exchange (CSE), stock analysts say. ”Earlier (pre-January 9) despite peace being there, the international community wasn’t ‘totally’ inclusive and there were only certain sections of the international community (i.e. China, India) that were assumed to be largely included,” an analyst told the Business Times.

According to him, those (countries) that weren’t given much prominence earlier are now eyeing the CSE. “The window of opportunity that was half shut then is now fully open, but they are adopting a wait – and – see attitude resulting from the political situation.”

A CEO of a large broking firm said that when they had a roadshow recently in Singapore, France and the US, a collection of fund managers, bankers and high networth clients were extremely interested in investing in the CSE.”About 30 of them came to the country and made preliminary inquiries.”

Another analyst said that what some potential clients ask is whether Sri Lanka has ‘adequate laws’ to counter securities fraud and what kind of transparency there is. This is a frequent question by clients in the US. And we can’t explain (most times) all that’s going on here.”

Investor confidence can be described as the foundation on which the capital market is built, and sound governance will be able to contribute towards attracting both local and foreign investors and stimulate economic growth, the Securities and Exchange (SC) says in its annual report. “As the capital market regulator, the SEC strives to promote good corporate governance practices through a framework of rules and regulations which ensure accountability, fairness, and transparency,” SEC Chairman Thilak Karunaratne has said in his statement.
www.sundaytimes.lk

4 brokers install mandatory phone recording system

Four stockbrokers have installed a telephone system that records all transactions which the Securities and Exchange Commission (SEC) has made mandatory, SEC officials said. Enterprise Ceylon Capital, Richard Peiris Securities, Capital Alliance Securities and First Guardian Equities have implemented it so far, they said.

“Six more companies are in the process of implementing it,” an official told the Business Times. This system was incorporated into the stockbroker rules in August 2012 by the Colombo Stock Exchange (CSE) which stipulates that broking houses should use a telephone recording system to record clients’ order instructions and maintain these records for at least six years.

The CSE rules say that stockbrokers have the option to obtain written instructions from clients and maintain these records for at least six years, but now the SEC wants to make this rule mandatory as the regulator has received many complaints pertaining to client broker transactions which dispute certain instruction from clients and irregular transactions.

The official added that preventing, detecting and deterring market abuse is one of their key priorities. “We have seen that market abuse is one of the most difficult offences to investigate and prosecute. Good-quality recordings of voice conversations and of electronic taping will help firms and us detect and deter inappropriate behaviour,” he added.
www.sundaytimes.lk

Policy stability key to attract investors: British Envoy

By Chandeepa Wettasinghe

The results of the upcoming election would not pose a threat to the natural growth of the Sri Lankan economy; however, the intentions of the current regime appear to be more investor- friendly, according to the British High Commissioner James Dauris.

“The underlying economic fundamentals of Sri Lanka are very strong; years of consistently strong economic growth, the highest rated country in South Asia by the World Bank in terms of doing business, strong tourist trade, highly educated population. Lots of reasons why companies should think about investing in Sri Lanka,” Dauris told Mirror Business.

He said that many investors are waiting for the elections to be over in order to commit their funds, and are expecting policy consistency.

“You can’t discount the importance of the election. A company which is thinking about investing now would wait, to see the outcome of the election. What businesses are going to be looking for is stability. The colour of government matters less. It’s the stability of policy,” he said.

However, he noted that the current government’s stand on corruption is more business-friendly, as corruption imposes significant extra hidden costs to doing business.

“If you take the current government’s intention to hunt down on large scale corruption; that will be welcome by businesses. Any government committed to making Sri Lanka more law abiding, reinforcing the law, and reducing corruption; that sort of change is going to be welcome. But in that sense, the intentions of the current government are welcome” Dauris said.

He noted that the British High Commission in Colombo is attempting to construct productive dialogues with businesses in the UK by providing information on Sri Lanka—both directly, and through chambers of commerce.

“We don’t have as many of the businesses we would like expressing interest.

It’s in our responsibilities as the High Commission, our challenge is to encourage more businesses to think about and understand the opportunities here,” he said.

Dauris added that most companies are currently attracted to India, despite a weaker doing business environment. “There are some pretty significant hurdles to doing business in some sectors of India. While the end prize is potentially greater, smaller contractors in a smaller economy actually are—in the short term—a more worthwhile prospect,” he said. Dauris said that the limit of the £300 million concessionary loan fund of the UK Export Finance programme for Sri Lanka has nearly been reached, and the British High Commission would evaluate writing to the British government to expand the limit, if needed. Meanwhile, British High Commission Trade and Investment Head Gary Leslie said that a significant number of British companies are awaiting the upcoming election to be over in order to enter the country, and have already sorted out their finances.
www.dailymirror.lk

Sri Lanka caught in a debt trap: Report

Sri Lanka is one of 22 countries currently in government external debt crisis, a new analysis by the Jubilee Debt Campaign undertaken with the assistance of the European Union revealed last week. According to the July 2015 report titled ‘The new debt trap’ Sri Lanka has been included amongst countries such as Greece, Armenia, Belize, Costa Rica, Croatia, Cyprus, Dominican Republic, El Salvador, The Gambia, Grenada, Ireland, Jamaica, Lebanon, Macedonia, Marshall Islands, Montenegro, Portugal, Spain, St Vincent and the Grenadines, Tunisia, Ukraine, Sudan and Zimbabwe.

Jubilee’s analysis defines countries already in debt crisis as those with a significant net debt (more than 30% of GDP), and those having a high current government external debt payments (more than 15% of government revenue). The analysis shows that Sri Lanka’s Net debt of whole country is at -55 (minus equals debt and plus equals a surplus), Current government external debt payments, proportion of revenue (2013) stands at 15.8%, Government external debt as a proportion of GDP at 34% and Sri Lanka’s Current account balance, percentage of GDP (Average 2013-2015) is a deficit of 3.2.

“There are 22 countries which currently have high government debt payments leading to large amounts of money leaving their country each year, along with an overall net debt with the rest of the world. Regions particularly affected are Europe (Croatia, Greece, Ireland, Macedonia, Montenegro, Portugal, Spain and Ukraine) Central America and the Caribbean (Belize, Costa Rica, Dominican Republic, El Salvador, Jamaica, and St. Vincent and the Grenadines) and North Africa and the Middle East (Lebanon and Tunisia). The Gambia in West Africa is also spending 15% of government revenue on foreign debt payments, despite qualifying for debt relief under the Heavily Indebted Poor Countries initiative in 2007.

Sudan and Zimbabwe do not have high government debt payments because they are both in default on much of their debt. Their overall debt is unpayable. Both are currently trying to enter debt relief initiatives, but have not been accepted yet by Western creditor countries,” the analysis said.

Meanwhile, the report noted that fourteen other countries are also spiraling towards government debt crises. The countries at high risk of government external debt crisis listed by the report were Bhutan, Cape Verde, Dominica, Ethiopia, Ghana, Laos, Mauritania, Mongolia, Mozambique, Samoa, Sao Tome e Principe, Senegal, Tanzania and Uganda.

“International debt has been increasing since 2011, after falling from 2008-2011. The total net debts owed by debtor countries, both by their public and private sectors, which are not covered by corresponding assets owned by those countries, has risen from $11.3 trillion in 2011 to $13.8 trillion in 2014. We predict that in 2015 they will increase further to $14.7 trillion.

Overall, net debts owed by debtor countries will therefore have increased by 30% – $3.4 trillion – in four years,” the Executive summary of the report said adding that this increase in debts between countries is being driven by the largest economies whilst an underlying cause of the most recent global financial crisis, which began in 2008, was the rise in inequality and the concentration of wealth.

“This made more people and countries more dependent on debt, and increased the amount of money going into speculation on risky financial assets. Increasing inequality reduces economic growth as higher income groups spend a smaller proportion of their income on goods and services than middle- and low-earners. To tackle this problem, countries relied on either increasing debts, or for the countries which are the source of the loans, promoting exports through lending. This allowed growth to continue even though little income was going to poorer groups in society,” the report further added.

www.nation.lk

Central Industries post best ever result in 2014/15

Central Industries PLC, the Central Finance subsidiary manufacturing and distributing PVC pipes and fittings as well as electrical switches, sockets and accessories, has posted its best ever result in the year ended March 31, 2015 with a group profit after tax of Rs. 130.3 mn., up from Rs. 75.6 mn. a year earlier. At company level the after tax profit grew to Rs. 129.1 mn. from Rs. 74 mn.

The company has profited by the rapid growth of the construction industry during the year with the National Water Supply and Drainage Board, the largest buyer of the company’s products, increasing expenditure by 25%.

Central Industries chairman, G S N Peiris, has told shareholders in the annual report that the world market prices of PVC resin, the main raw material used by Central Industries, had dipped rapidly during the last quarter of the year.

They had seized this opportunity by stocking up on this material utilizing short term borrowing facilities available to them on favourable terms as well as storage capacity at their new production facility at Elhena, Yakkala.

Given the performance, the directors have recommended a first and final dividend of Rs. 4.50 per share out of the year’s profits, up from Rs. 3 per share paid the previous year.

Peiris reported that they had made several supplies of polyethylene pipes to the National Water Supply and Drainage Board (NWSDB) which has over the past several years been increasingly utilizing these pipes for selected applications. The company has in turn developed capability to meet this requirement.

While they have improved revenue significantly from supplies to the NWSDB during the year under review, there are long delays in obtaining payments for these supplies as the release of funds by the Treasury for several of these large projects have been delayed, he said.

"Several private sector contractors who have undertaken government projects on turnkey basis too have reported experiencing delays in obtaining payment for work done. These contractors who have purchased pipes and fittings from the company have requested further time for settlement and the company has in several instances permitted delayed settlement," Peiris said.

He said that all necessary precautions are taken in such instances to ensure that such forbearance does not increase the risk of default.

Central Industries has a stated capital of Rs. 121.3 mn., a revaluation reserve of Rs. 183.3 mn., a capital redemption reserve, of Rs. 35.8 mn., a general reserve of Rs. 65 mn. and retained earnings of Rs. 707.6 mn. in its books. Total assets ran at Rs. 1.53 bn. and total liabilities at Rs. 418.9 mn.

Central Finance with 44.1% is the largest shareholder of Central Industries with associate companies, CF Insurance Brokers (5.7%) and some of its directors also within the top twenty shareholders enabling the controlling interest.

The Central Industries share traded at a high of Rs. 99 and a low of Rs. 56.50 during the year under review closing the year at Rs. 84.90. Net assets per share as at balance sheet date were Rs. 112.61.

The directors of the company are Messrs G S N Peiris (Chairman) A N P Wickremasuriya (CEO), E H Wijanaike, R E Rambukwelle, A K Gunaratne, C S W de Costa, N J Abeysekere, L R de Lanerolle and Mrs. I S Jayasinghe.
www.island,lk

Expo sees profits dip, divests non-core businesses

Upbeat on outlook, maximizes resource deployment in growth areas

Expo Lanka Holdings PLC., now controlled by a Japanese conglomerate, has seen both turnover and earnings dip in the year ended March 31st 2015, but remains upbeat about its future prospects.

The company recently released its most comprehensive annual report since founding in 1978 and listing in 2011. In 2014, SG Holdings of Japan bought a 30% stake of Expolanka Holdings to aiming at the controlling 51% in the mandatory offer that followed.

Several members of the founding Kassim family sold down to give control to the Japanese investor whose representatives now have the majority board seats including the chairmanship.

However, the Kassims still retains a major interest in Expo with four of its members each owning between 8.22 to 8.35 % of the company and its CEO, Mr. Hanif Yusoof owning 7.52%.

The year under review saw group turnover dip a marginal 1.3% to Rs. 52.65 bn. from Rs. 53.32 bn. a year earlier. But the profit before tax was down 32.2% to Rs. 1.31 bn. and the profit after tax down 33.3% to Rs. 1.05 bn. Total assets, however, grew 0.6% to nearly Rs. 22 bn.

Expo’s business is mainly focused on freight and logistics accounting for 77% of its turnover while travel and leisure (5%), international trading and manufacturing (16%) and investment and services (1%)are also part of the portfolio.

The company’s chairman, Mr. Nobuaki Kondo, described the year under review as a focal year and one of "strategic fusion where we have focused our attention to critical growth factors sharpening our operational acumen through optimization initiatives."

He reported that the group continued to consolidate its various sectors moving with sustained momentum to reach key targets and had during the year continued to create a base for sustained growth identifying and enhancing the key growth sectors.

They had divested none-core operations where returns from divestment were ahead of the expected potential returns from re-investment into these sectors.

Kondo said that it is exactly one year since SG Holdings of Japan made an investment partnership with the Expolanka Group on the strength of their shared vision for the two corporates.

"I have had the pleasure of being at the helm of your group over the past financial year and attest to the joint efforts of SG Holdings and Expolanka Holdings to create synergies across both the entities, creating value across global boundaries," he said.

"With the fusion of these two corporates, the synergies that are yet to be explored are immense."

Kondo envisions strong growth for Expolanka in the medium term as the benefits of the strategic fusion begin to unfold. He expressed the belief that "we will witness the creation of a conglomerate that will be a powerhouse in the Asian subcontinent."

Group CEO Hanif Yusoof said that Expolanka had continued to execute business reconfigurations in the year under review further de-investing in non-key sectors aimed at better optimization of the group’s resources towards key growth sectors.

"The intention of the re-engineering efforts was to divest businesses that were falling below performance benchmarks and projected growth patterns," he said.

"Returns, scalability and scope remain the critical criteria in the divestment analysis."

He explained that their drive towards a value-drive base business model was a response to evolving business challenges. Most predominant of these has been a consistent erosion of margins despite sustained volume growth.

"Despite intense pressure on margins, your group sustained profitability posting a pre-tax profit of Rs. 1.3 bn. and an after tax profit of Rs. 1 bn.," he said. The group’s balance sheet as at March 31, 2015 remained healthy with a comfortable assets:liabilities balance while sustaining sound ratios across the board."

Yusoof said that freight and logistics remained the major core-contributor to the group’s consolidated performance during the reporting period as in the previous financial year.

The year under review saw the Expo Global Distribution Centre, a value-added bonded warehousing facility under the Free-port regulations at the Katunayake Export Processing Zone. This was a joint venture between Expolanka and Brandix Lanka providing a range of value added logistics services at point of origin to freight customers through the effective management of their supply chain - a first of its kind in Sri Lanka.

Yusoof also said that the travel and leisure sector undertook "bold and ambitious steps towards entering the next generation of travel business by dissecting the traditional travel market into specialist niches," enabling the sector to offer unique services to specific target audiences, specially high yield targets.

Some of the businesses divested included the tea plantation operations and the herbal pharmaceuticals sub-sector represented by the brand Baraka.

Expolanka has a stated capital of Rs. 4.1 bn., reserves of Rs. 10.7 mn. and retained earnings of Rs. 6.52 bn. in its books as at March 31, 2015. Total assets ran at nearly Rs. 22 bn. and total liabilities ran at Rs. 10.37 bn.

SG Holdings Global of Japan with 51.43% is the controlling shareholder followed by Mr. Osman Kassim (8.35%), Shafik Kassim (8.35%), Sattar Kassim (8.28%), Farook Kassim (8.22%) and Hanif Yusoof (7.22%).

Foreign and local institutions are also on the top 20 shareholders list but individually holding less than 2.2% of the company each.

The Expo share traded at a high of Rs. 10.80 during the year under review and a low of Rs. 8.50 closing at Rs. 8.50. This compared with a trading range of Rs. 9.90 to Rs. 6.50 closing at Rs. 8.70 the previous year.

The Directors of the company are Messrs. Nobuaki Kondo (Chairman), Hanif Yusoof (CEO), Osman Kassim, Harsha Amarasekera, Sanjay Kulatunga, Naosuke Kawasaki, Yoshifumi Matsubana, Motonori Matsuzono and Toji Shiho.
www.island.lk