SL’s regional competition offers more for less, says Eden boss

A major player in the tourism industry has said that significant foreign investment has been made in the country’s tourism industry with local hotels and companies now facing intensified competition with regional challengers offering "more for less."

Mr. Kapila Jayawardene, Chairman of Eden Hotels Lanka PLC, an LOLC company, has said that foreign investment has flown into the hospitality sector here in the context of projected significant growth in the mid to long term.

"Sri Lanka is also facing competition from the region which offers more at a lesser price which causes immense challenges to the local industry," he said in the Eden annual report.

This has resulted in the local industry facing the challenging of reduced margins as well as price pressure coming from markets which were attractive in the past but are currently not performing as a result of the global economic crisis, he noted.

The result was Eden incurring a substantial group loss of Rs. 273.2 million in the year ended March 31, 2015, down from a profit of Rs. 58.9 million the previous year. At company level, there was a loss of Rs. 212.3 million against a profit of Rs. 14.8 million a year earlier.

Jayawardene attributed the lower performance mainly to falling occupancy, reduced room rates and increased operational expenses. Average occupancy for the year in review was down to 58% from 62% the previous year, he said.

However, during the winter season, there was a significant increase in the numbers they hosted and resulting revenue. The average occupancy in the final quarter starting in January was 76% which resulted in revenue of Rs. 252 million in that quarter.

He was optimistic that despite reduced performance against the previous year, the company which had a strong asset base of Rs.4.8 billion as at March 31, 2015 was well positioned for the future.

They had completed a major refurbishment covering the rooms and had also acquired Dickwella Resorts (Pvt) Ltd in the previous financial year in order to strengthen their overall value proposition.

"With the development of the tourism industry in future years, the company is expected to reap the benefits of these investments which will have a positive impact on the company’s profitability and overall value proposition," he said.

He further noted that they had the advantage of LOLC Group resources to strengthen occupancy, increase margins and manage costs.

Dickwella Resorts has ocean frontage on three sides of the property providing sea views for all of its 76 rooms. The sea-water swimming pool and diving centreare also popular, the Director’s report said.

The report said that the directors had reviewed an investment opportunity in Maldives and identified it as one with potential for high returns.

Palm Garden Hotels PLC (46.21%), Confifi Management Services (Pvt) Ltd (10.7%) and the ETF (9.98%) are the top shareholders of Eden. The ETF too owns 3%. Palm Garden and Confifi Management are LOLC companies.

Eden has stated capital of Rs. 525 million, reserves of Rs.1.6 billion and retained earning of Rs.180.8 million in its books. Total assets ran at Rs. 5.03 billion and liabilities at Rs.2.7 bullion.

The Directors of Eden are Mr. W.D.K. Jayawardene, Mrs. K.U. Amarasinghe, Prof. M.T.A Furkhan, S. Furkhan, D.S.K. Amarasekera and Dr. J.M. Swaminadan. 

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Kelani fears dumping of Chinese tyres here

Global supplies exceed demand, China looks for alternative markets in face of prohibitive U.S. duty

The Chairman of Kelani Tyres had warned that the global outlook for tyres originating from manufactures like Sri Lanka looks bleak due to supply being substantially over demand.

"This situation has been further aggravated with the US Government imposing prohibitive duties on Chinese tyre imports which has forced Chinese manufactures to start dumping in alternate markets in Africa, the Middle East and Asia including Sri Lanka," Mr. Chanaka de Silva, Chairman of Kelani Tyres has said in the Company’s annual report.

"Although we did not experience the negative effects of this in Sri Lanka up to now, it is possible that this situation would have serious repercussions on volumes and margins in our business beginning in the next financial year (2015/2016)."

While production in the year ended March 31, 2015 by the Joint Venture (JV) company, CEAT Kelani Holdings (Pvt) Ltd (CKH) which handles the manufacturing business for Kelani Tyres was down slightly to 15,440 mt from 15,469 mt the previous year, the JV’s average profit after tax was slightly over Rs.1.5 billion against Rs. 1.3 billion a year earlier.

De Silva said that the JV was able to maintain its top market position in truck/bus, three-wheeler, tractor tyres and passenger car/van tyres and the second position in motorcycle tyres. CEAT is by far the highest selling tyre in the local market and continues to be placed as the ‘best value’ quality tyre locally.

The year under review had seen 20 new sizes introduced to the market with a state-of-the-art passenger car radial tyre manufacturing facility declared open in June last year.

"We have been able to capture 30% in the domestic radial car tyre segment," de Silva said. "The production of radial tyres would increase to 37,000 monthly with the new facility and we are looking at further expansion and growth in sales in the local market with the introduction of 32 new sizes expected to be introduced to our range in the coming financial year."

He said that the board of the JV continues to take a positive outlook of the industry and they are taking several decisions which would have a positive impact on Kelani Tyres as and when economic opportunities and trends emerge.

The JV had increased its capacity for the manufacturing of motorcycle tyres this year and had commissioned its new state-of-the- art facility in Kelaniya. The initial capacity will be 162,000 tyres a year in 17 sizes, some with all new tread patterns suitable for local conditions.

"This is expected to enhance the CEAT product portfolio in two-wheel segment," de Silva said.

They were investing Rs.365 million on a new compounding/mixing line with most of the items needed for this already ordered. The line will be functional by the end of the next financial year. A further Rs. 165 million is being invested to expand two-wheeler tyre production with the resulting increased production expected before the close of the current financial year.

De Silva thanked the Ministry of Finance for its continued support towards bringing them closer to achieving their objective of import substitution of the country’s total tyre requirement with a quality product on par with international standards and brand names.

He said that based on the performance of the company in the year under review and a subsequent dividend received by JV, the directors have declared an interim dividend of Rs. 1.50 per share amounting to a payout of Rs. 120.6 million for 2015/16.

The Kelani Tyre Group’s share of the results of the joint venture for the year under review was Rs. 750.2 million, up from Rs. 693.3 million a year earlier. Group earnings per share at Rs.8.92 was up to from Rs.8.19 a year earlier while the company’s earning per share was up to Rs.2.07 from Rs.1.65 per year earlier.

Kelani Tyres has a stated capital of Rs. 402 million, and group retained earnings of Rs. 2.23 billion in its books. At company level, retained earnings stood at Rs. 141.2 million. Total group assets stood at Rs.3.2 billion and total liabilities Rs. 188.15 million.

Silverstock Ltd with 41.69% followed by Ceybank Unit Trust (9.69%) Mr. M. Ganaraja (7.88%) and Messrs M.M. and H.M. Udeshi (5.4%) are the principal shareholders of Kelani Tyres. The EPF (2.008%) and the Bank of Ceylon (1.55%) are also among the main shareholders.

The Directors of the Company are Messrs Chanaka de Silva (Chairman), Rohan T. Fernando (MD), Lasantha P. Fernando (Executive Director) T. Bevan Perera (Executive Director) D.S.K. Amarasekera and Ms. S.S. Jayatilaka.

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Ceylon Investment continue stock picking to good advantage

Rs. 986 million profit earned under "exuberant market conditions"

Ceylon Investment PLC, owning a quoted share portfolio worth Rs. 4.6 billion and is a subsidiary of Ceylon Guardian Investment Trust PLC, the country’s biggest quoted portfolio holder, has posted a profit of Rs. 996.9 million in the year ended March 31, 2015, up from Rs. 889.5 million a year earlier according to Company’s Annual Report.

The Company’s Chairman, Mr. I, Paulraj, said that the year under review had been a memorable one with the Colombo Stock Exchange recording a strong positive growth of 14.28% after two years of subdued activity.

The Ceylon Investment’s portfolio has outperformed the market during the year posting 23% growth against the index appreciation of 14.28% with the discretionary portfolio outperforming the market by 7.68% in a three-year horizon and 5.86% on a five-year horizon.

"The Company recorded a profit after tax of Rs.986.8 million given exuberant market conditions," Paulraj said. "Our portfolio value increased to Rs. 13.35 billion from Rs. 11.86 billion, recording an appreciation of 12.52% without adjusting for the distribution of dividend an inclusive of the strategic portfolio."

He said that the company’s portfolio is built for long term sustainability and continuity. Rather than getting into risky but lucrative short-term positions, they believed in holding consistently good companies for continued value creation.

Paulraj admitted that this may mean that their cash resources can sometimes remain uninvested until good equity opportunities are found.

He said that Ceylon Investment remains confident on the long term potential of Sri Lankan equities and the sustainability of the economic development plans set in place. They believe that the long term development potential of the country will flow through to its equity markets if the country continues to adopt good policy frameworks providing a strong foundation for economic activity and good governance.

"Needless to say, serious investor confidence will improve when policy makers as well as corporates take action to demonstrate vibrancy with stability," he said.

However, Pauraj said that the depth of capital markets remain a challenge as investors need a variety of companies to invest in, particularly state-owned enterprises and other top private sector corporates so that the market is more representative of the economy.

Guardian Fund Management Ltd, managers of the Ceylon Investment portfolio, explained that their buy and sell decisions are influenced by whether share prices are above or below intrinsic value. The portfolio was divided into long term core holdings and a short term trading portfolio.

During the year, divestment of holdings generated sales proceeds of Rs.1.25 billion and they had made purchases worth Rs.1.67 billion which made Ceylon Investment a net buyer in the market.

The divestment of the long term segment of the portfolio had focused mainly on Commercial Bank of Ceylon, their largest holding in the banking sector. The stake was cut back "with the superlative share price performance" and the banking portfolio rebalanced by buying intp HNB which they identified as an undervalued stock both in fundamental and relative terms.

"HNB is one of the largest commercial banks in Sri Lanka with an asset base of Rs. 624 billion and is poised for better performance in its strongest segments," the managers said. "However, Commercial Bank yet continues to be one of our largest holdings as we believe that it could deliver consistent steady growth in the long term as the most efficient and highest return-generating private sector bank."

JKH, the largest market-cap company quoted on the CSE was traditionally given high weightage in the Ceylon Investment portfolio. They have now moderated exposure to this stock taking advantage of the spike in share prices during mid year and await the outcome of its new mega real estate development project They saw a stable performance in JKH’s diverse sectors going forward.

They had sold out their total holdings in Hemas Holdings during the period under review. This stock was one of the best performing on CSE and had reached valuation targets sooner than expected.

The managers said that they will continue to hold their stake in Sampath Bank where they see further value-creation opportunities and an upside to their banking model.

The Ceylon Investment portfolio had continued to lean heavily on the banking and finance sector with substantial holdings in HNB, Commercial Bank, Sampath and Central Finance. The managers said that they were very bullish on the banking and finance sector which they believe will yield good medium to long term results capturing the first economic tide of the country.

They were underweight in beverage, food and tobacco and diversified sectors due to their portfolio stance on the multi-national companies and large conglomerates represented in the sector as being perceived as over-valued and continue to be so on forward valuation.

Ceylon Investment has booked Rs. 538.29 million net realized gains from disposals from their long term portfolio during the year under review. The company had used cash of Rs. 58 million for its operations and its earnings per share had increased to Rs.10.02 from Rs. 9.03 a year earlier-an increase of 11%.

The company had paid an interim dividend of Rs.2.50 per share similar to the previous year and a scrip dividend of Rs.1 for the year under review maintaining consistent dividend policy matching shareholder expectations.

The managers also noted that the net asset value of the Ceylon Investment share amounted to Rs. 133 per share based on fair value of the portfolio. However, a share had been trading at a discount of CSE over the past few years with a market price of Rs. 91 as at March 31, 2015.

Ceylon Investment has a stated capital of Rs. 673.53 million, capital reserves of Rs.187.14 million and revenue reserves of Rs.12.24 billion. Total assets stand at Rs.13.38 billion and total liabilities at Rs.274.8 million.

Ceylon Guardian Investment Trust with 64.36% is the controlling shareholder of Ceylon Investment with all other individual shareholders holding less than 1.5%.

The Directors of the Company are Messrs: I. Paulraj (Chairman), D.C.R Gunawardene, A.P. Weeratunga, Mrs. Rose Cooray, V.M. Fernando, K. Selvanathan and T.C.N Chia. www.island.lk

Assets soar as Vallibel Finance records strong growth

Asset base up by 34% to 16.8 billion

Vallibel Finance affirmed its continuing ascendency, announcing yet another impressive performance in 2014-15. Pre-tax profits soared by 28% to exceed Rs.623 million over the previous year’s Rs.489 million. The company’s consistent rise in the financial sphere was further secured with net profits reaching Rs. 374 million, recording an increase of 23% from the previous year’s figure of Rs. Rs. 303 million. The company capped an outstanding year with all key indicators showing an impressive performance.

Increasingly popular as the name-bearer of the iconic Vallibel Group, public confidence in the company continues to grow as numbers for fixed deposits showing a sharp rise, year after year. The Fixed Deposits portfolio grew by 31% to cross the Rs. 12 billion threshold from the previous year’s Rs. 9 billion.

Recording the highest gains was the company’s asset base which recorded a 34% rise to reach Rs. 16.8 billion. The previous figure stood at Rs.12.5 billion.

Vallibel Finance was ranked amongst the top 50 most respected entities in the country by LMD in its 2014 survey and its significant rise in brand equity was recognized in LMD’s top 100 Most Valuable Brand Survey 2014 where Vallibel Finance’s rank rose to 67th, standing alongside some of the greats of the banking and finance sectors.

Mr. Rangamuwa, Managing Director avers that in a volatile industry subject to many unforeseen influences continuous good performance comes on the back of fundamental values. "As we keep reiterating, macro-economic landscape will always witness challenging times but the company’s proven formula of building values ensures a resilient performance, year after year.

The year under review saw more branches joining its expanding network which serves as a catalyst of development for people from diverse backgrounds. The lending portfolio increased by 26%. Total lendings stood at Rs.12.5 billion rising from a previous Rs.9 billion.

Vallibel Finance deals chiefly in Hire Purchase, Leasing, Pawning (Gold Loan), Fixed Deposits, Group Personal Loans, Mortgage Loans, Education Loans and Microfinance products deployed via a cutting-edge technological framework.

The increasing stature of Vallibel Finance, on the back of its impressive performances, is further augmented by the highly diversified Vallibel conglomerate led by corporate leader Mr. Dhammika Perera. Vallibel Finance’s standing in the business landscape is also affirmed by the upgrading of its rating to BBB- by Lanka Rating Agency. 

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Nestlé Lanka delivers another strong quarter

Nestlé Lanka strengthens its nutrition health and wellness leadership through strategic partnerships and the launch of micronutrient fortified products

*Revenue of LKR 9.0 billion, with a growth of 11.2% (year-on-year) for Q2 2015

*Net Profit of LKR 1.3 billion for Q2 2015

*Launches Ready-to-drink Nespray Nutri-Up, fortified with Vitamins A and D

*Partners with Sri Lanka Medical Association to strengthen nutrition health and wellness initiatives

*Continues school level sports activities through energy brand Milo

Nestlé Lanka PLC delivered revenue of LKR 9.0 billion with year-on-year growth of 11.2% in the second quarter of the year. The company announced a net profit of LKR 1.3 billion for the quarter.

For the first half of the year 2015, the Company announced revenue of LKR 18.3 billion with a year-on-year growth of 9.2% and net profit of LKR 2.5 billion.

"Our strong results are a reflection of the passion and capabilities of our people, coupled with the trust our brands enjoy amongst consumers. We are increasing our investments behind both, our people and our brands. We continue with our commitment to provide nutrition, health and wellness to the people of Sri Lanka through innovative products and guidance on lifestyle choices," said Shivani Hegde, Managing Director of Nestlé Lanka PLC.

The company recently launched Ready-to-Drink Nespray Nutri-Up, a quality product made using Sri Lankan fresh milk, and fortified with Vitamins A and D. Nespray Nutri-Up offers the wholesome goodness of milk while addressing the Vitamin A deficiency in Sri Lanka.

Building further upon its commitment to helping families enhance their nutrition, health and wellness in their daily lives, the company embarked on a strategic partnership with the Sri Lanka Medical Association, with the aim of generating public awareness of the importance of good nutrition and an active lifestyle. Nestlé Lanka also engaged in promoting physical activity amongst school children through its popular energy brand Milo, a name synonymous with school sports, touching over 200,000 kids through various sporting events in H1 2015. Additionally as part of the Nestlé Healthy Kids initiative, it rolled out the ‘IAAF Kids’ Athletics’ programme, encouraging over 30,000 children to become more physically active. www.island.lk

Commercial Bank rated Most Respected Bank in Sri Lanka for 11th consecutive year

Ranked No 1 overall for Honesty for 3rd year running

The Commercial Bank of Ceylon has been rated the most respected bank in Sri Lanka for the 11th consecutive year and the second ‘Most Respected’ corporate entity in the country overall for the fifth successive year in the 2015 LMD rankings of the Most Respected Entities in Sri Lanka.

The Bank has also been ranked No 1 in Sri Lanka for ‘Honesty’ for the third consecutive year, No 1 in Financial Performance and in the top five in several other areas of evaluation.

The only bank among the top five Most Respected entities in Sri Lanka in 2015, Commercial Bank has been ranked second overall in Management Profile, third overall in Quality Consciousness, fourth overall in Innovation, Corporate Culture and Vision and fifth among all entities in Dynamism and CSR.

The Bank has been the Most Respected bank in this prestigious ranking since its inception in 2005.

The latest edition LMD ranking of Sri Lanka’s most respected companies includes the largest and most diversified conglomerates in the country and some of the world’s best-known multi nationals.

"We are pleased to note that the Bank has increased the number of aspects in which it is ranked among the top five corporate entities in Sri Lanka in 2015," Commercial Bank Managing Director/CEO Mr Jegan Durairatnam said. "Of these, our consistent ranking of No 1 for Honesty, and leading the entire list for Financial Performance are the most significant, but we are also delighted to be ranked among the best in Sri Lanka in the other areas."

The LMD rankings are based on the opinions of the general public. Respondents include senior executives from the state and private sectors and their views are obtained under 10 areas of evaluation: Financial Performance, Quality Consciousness, Management Profile, Honesty, Innovation, Dynamism, Corporate Culture, CSR, Vision and Nation-mindedness. In nine of these 10 areas, the Bank was placed within the top five in the 2015 survey.

Commercial Bank operates a network of 243 branches and 615 ATMs in Sri Lanka and is the country’s largest private bank. The only Sri Lankan bank to be ranked among the Top 1000 banks of the world for five consecutive years and ranked the most valuable private sector brand in the country in 2014, the Bank was adjudged the Best Bank in Sri Lanka by FinanceAsia and Euromoney in 2015. Commercial Bank has also won multiple awards as Sri Lanka’s best bank from other international publications over several years. The Bank was adjudged one of Sri Lanka’s 10 best corporate citizens by the Ceylon Chamber of Commerce in 2013 and 2014. 

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