Sri Lanka to give more freedom for plantations to diversify: Paskaralingam

ECONOMYNEXT - Sri Lanka plans to give more freedom for plantations to diversify and use their land and other resources for more productive uses, a top official said, relaxing some of the state controls that have prevented the country's progress.

"Today we had a discussion on diversification in regional plantations companies," R Paskaralingam, advisor to Prime Minister Ranil Wickrmesinghe told a business forum at Sri Lanka's Finance Ministry in Colombo on October 01.

"Four committees will identify tea and rubber land that are not productive. We are going to release these plantations for other crops."

He said a committee report is expected to be submitted to the Prime Minister within three months.

Finance Minister Ravi Karunanayake noted that plantations firm were under some financial difficulty due to depressed commodity prices and they should be allowed to diversity.

Sri Lanka's large tea and rubber farms were formed mostly by foreign investors during British rule, expropriated by the state, run down and given back to private citizens with the land still in long term state control.

Paskaralingam was responding to a question from W Bogstra, from Malwatte Valley Plantations, a privatized and listed 'regional plantations company' who had been struggling to gain approvals to convert an old tea factory to a tourist hotel for more than 18 months.

Long years in state control has prevented the land from being used productively and in Sri Lanka state control and interventionism is so strong that even freehold owners of rice and coconut farms cannot put their ancestral land to better use due to a control mindset among rulers.

Malwatte Valley Plantations had also moved to fruit and spice cultivation.

Lack of economic freedoms is a key reason for Sri Lanka lagging behind the rest of the world. Plantations firms in Malaysia (some of which raised capital in Colombo stock market during British rule) and vastly improved cultivation practices and worker productivity.

Meanwhile many plantations were also uprooting some export crops and growing 'import substitution' oil palm.

Oil palm prices are artificially kept up by import taxes, supposedly to 'protect' coconut farmers at the expense of the welfare of the general population and the poor which analysts say is a classic perverse unintended consequence of state interventionism.

Sri Lankan rulers and interventionist put a great stress on 'saving foreign exchange' a problem that began after a money printing central bank replaced a low inflation 'hard currency' style currency board in 1951. 

Excise duty increased:Liquor and tobacco prices up

In a pre-budget announcement, the government yesterday increased excise duty on alcohol and tobacco.

In terms of the revision, the price of a bottle of Arrack will go up by Rs 60, country made foreign liquor by Rs. 125, beer by Rs 25 and 50, respectively depending on the strength and Gold Leaf cigarettes by Rs. 3 per stick.

The excise duty on Molasses and Coconut arrack has been increased by Rs 1,10.00 from Rs 1,485 to 1,595 per Proof Liter, the Finance Ministry said.

On country made foreign liquor, excise duty has been increased by Rs 160.00 from Rs 1,700 to Rs 1,860 per proof liter.

The excise duty on soft beer (Alcohol strength is less than 5%) increased by Rs 40 per liter from Rs 150 to Rs 190. Other beer, which contains the alcohol strength of more than 5%, will be increased by Rs 60 from Rs 185 to Rs 245, the Ministry said.

Accordingly, the price of 625 ml bottle of less than 5% alcohol beer will be increased by Rs 25 and the beer which has the alcohol strength of more than 5% will go up by Rs 50.

The excise duty on 1,000 cigarettes of JPGP variety (Gold Leaf) has been increased from Rs 21,610 to Rs 23,750 by Rs 2,140. This will translate into a Rs. 3 increase in the price of a stick.

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King coconut water with lemon juice and green tea from HVA

Roasted murunga leaf infused tea bags also on offer

HVA Foods PLC plans to introduce several new products including a newly developed king coconut water fortified with lemon juice and green tea into the isotonic beverage sector presently dominated by artificial beverages, the Company’s Chairman, Mr. Rohan Fernado has said in the company’s annual report.

Another innovation that is roasted moringa (murunga) leaves with a pleasant taste in easy to brew tea bags has been introduced this year and the company hopes to popularize it globally.

"A few other innovative products are also being tested for introduction in 2015," Fernando said. "It is also our intention to go after two of the biggest markets in the world, China and India, to have a strong foothold."

HVA has posted a total comprehensive loss of Rs. 1.86 million attributable to owners of the company during the year ended March 31, 2015, down from a profit of Rs. 24.66 million a year earlier. Retained loss of Rs.8.6 million is carried in the balance sheet.

Fernando said that the year under review had been one of the most difficult periods for the entire tea industry with Sri Lanka’s traditional importing countries continuing to experience economic hardships arising from war, civil commotion and trade sanctions imposed by the US and the Western allies.

"The countries affected are the largest buyers of Ceylon orthodox teas, namely, Russia, Ukraine, Iran, Syria, Libya and Iraq," he said. "Exports to these countries amount to more than 60% of the total exports out of Sri Lanka."

This has adversely affected the weekly prices at Colombo Tea Auction which is the most expensive auction centre in the world which has to make a course correction to stay active. This has to naturally filter down to small holders with a gradual reduction in revenue for green leaf.

Fernando was sharply critical of the guaranteed price of Rs. 80 per kilo of green leaf offered by government as an election promise. The new government installed in January, 2015 had to allocate nearly a billion rupees per month to "dole out this subsidiary."

"This has created a two tier operating system favouring only segment of the plantation industry. We sincerely hope the practice of handouts to a 150-year-old industry will be replaced by a system based on quality, coupled with productivity," Fernando said.

He declared that there was no need to panic over the current decline in tea prices as prices are directly linked to the global supply and demand position. Unfortunately, most people have not understood this economic phenomenon but blindly hold tea exporters responsible for the low price.

"Amidst this gloom and doom there are positive signs emerging. The prospects of a settlement to the long drawn political battle between the USA and Iran and the stabilizing of the Russian ruble will hopefully improve the demands for teas from these countries," he said.

Locally, the change of administration at the Ministry of Plantations and the Sri Lanka Tea Board has vastly improved the interaction between the officials and representatives of the trade. They have now understood the importance of promotion and marketing of indigenous tea brands in the global market place to entice consumers to buy Ceylon Tea.

"For five long years, when the tea prices enjoyed a premium at the Colombo Auction, the top bureaucrats were comfortable in assuming that prices would continue to maintain high levels and purposely delayed the global marketing campaign," Fernando said. "What we are seeing today are the ill effects of bad decisions taken in the past."

HVA has a stated capital of Rs. 333.9 million and total assets of Rs. 1.19 billion in its books. Total liabilities ran at Rs. 681.5 million.

HVA Lanka Exports (Pvt) Ltd through three accounts is the controlling shareholder of HVA Foods PLC with 61.10 %of its equity.

The Company’s share traded at a high of Rs. 13.30 and a low of Rs. 7.80 closing at Rs. 8 at the end of the year. This compared to a trading range of 14.40 to Rs.8.10 closing at Rs. 9.40 the previous year.

The Directors of the Company are Messrs A.R.H. Fernando (Chairman), W.I.H Fernando, Mrs. V.S. A Fernando, N.C. Vitarana and J.H.P Ratnayeke.

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Strong investor confidence for Pan Asia Bank debenture issue

Bank gears up for Rs.100Bn asset base

Pan Asia Banking Corporation PLC (Pan Asia Bank) last week saw its Rs.4 billion senior debenture issue being oversubscribed on the opening day itself, receiving applications for over Rs.5.5 billion.

The issue was rated BBB by Fitch Ratings Lanka.

This is the second such debenture the bank issued in a span of 12-months. Its Rs. 3 billion subordinated debenture issue in October 2014 was also oversubscribed on the opening day itself.

Pan Asia Bank’s Director and Chief Executive Officer, Dimantha N. Seneviratne speaking on the success of the debenture issue attributed the oversubscription to the continuous investor confidence in the bank and its improved performance.

In a brief interview, Seneviratne spoke of the bank’s plans to deploy these funds to finance the growth of the balance sheet and manage funding maturity profiles. He also spoke of Bank’s planned Corporate Campaign coinciding with Bank’s 20th Anniversary and other expansion initiatives in its goal to reach Rs 100 Bn Balance Sheet. The following are the excerpts of the interview;

Q1. How do you view the recent success of Pan Asia Bank’s debenture issue?

I believe it was a strong endorsement received from the wider investment community on the bank’s direction and the recent performance.

In recent times we have been growing at a rapid pace – our loan book growth has been above the industry average while our key performance indicators have strengthened – and the investors have recognised the potential of our performance.

Besides, the rates that we offered were very competitive and offered a choice between the fixed and floating rates and three and four year tenors. This enabled us to attract investors with different risk appetites.

On the other hand, our debenture was the first such corporate debt issuance in two months and I am sure, it offered a solid investment opportunity for the individual investors as well as large corporate institutions to lock-in their funds.

From the market’s point of view too, the oversubscription of our debenture was a significant feat and re-inforced the confidence of investors. The Bank’s management took a bold decision to go ahead with the debenture at a time when there was uncertainty about the movement in interest rates and we are confident that we made the right decision. We will lock in these funds soon to ensure any downside risks are mitigated.

Q2. How do you plan to deploy these funds?

We have a pipe-line of lending proposals in the Retail, Corporate banking and, Small and Medium Enterprise (SME) segment and these funds would be deployed to continue our growth in assets.

This will lead to a well balanced growth in our balance sheet and maintain the quality of the asset portfolio.

As mentioned earlier, our loan book grew by over 34 percent in FY 2014 and 14 percent in the first half of 2015. So, these funds too, will be used to expand our lending portfolio while minimizing some of the maturity mismatches in our assets and liability portfolios.

The funds will also be utilized to stabilize our earnings stream and improve stock of liquid assets and government securities.

Q3. Just before the debenture was issued, Pan Asia Bank received some Dollar funding too. Can you shed some light in to this?

Yes, we did complete a US $ 20 million re-financing line this month with the Global Climate Partnership Fund (GCPF), one of the largest green financiers based in Europe.

This is for the lending that the Bank has been providing in the sustainable energy sector.

This clearly demonstrates that, not just the local investors but also the larger foreign financing houses too are seeing the potential of investing in Pan Asia Bank.

If you look at the institutions that back the GCPF are the World Bank’s private sector financing arm, The International Finance Corporation (IFC), the German Federal Government’s Development Bank, KfW Bankengruppe and the Ministry of Foreign Affairs of Denmark.

In fact, the GCPF has expressed its willingness to extend the partnership with us and to provide much bigger refinancing facilities for green projects.

Q4. Green lending in Sri Lanka is still in its infancy but this is a step in the right direction in our finance sector. What more could your bank do to take the lead in promoting green lending in Sri Lanka?

We are the pioneers in introducing green lending for the retail sector in Sri Lanka when we offered hybrid vehicle leasing and loans to finance solar panels at preferential interest rates in 2013. But now, as a matured and a bigger player, we have taken a broader perspective and are looking at funding much larger projects in the fields of renewable energy and energy efficiency.

Currently we are looking at funding for hydro power projects and are also evaluating other renewable energy power generation projects.

Apart from the commercial value of these products, I believe this lending carries a much larger national significance, for through this lending, we help to create clean energy, clean air and a sustainable environment. This is also in line with our goals in corporate social responsibility, to contribute to climate friendly economic development.

Further, we have ingrained the sustainability agenda in to our own business processes , loan evaluation and risk management process and have taken initiatives to reduce the Bank’s carbon foot print.

Q5. How did the bank perform in recent times; both financially and non-financially?

During the first half of FY 2015, most of our performance indicators improved. The bank’s after tax profits increased by 156 percent to Rs. 451 million. This is higher than the after tax profit the bank recorded for the entire financial year of 2014 (i.e. Rs.415.2 million).

Apart from this, our biggest achievement was the doubling of our Return on Equity from 9.81 percent to 18.38 percent in a span of just six months.

We achieved this amidst the pressure on the net interest margin due to falling interest rates.

We managed to increase our efficiency by containing our cost-to-income ratio and gradually bringing it down to just below 54 percent. We have seen further improvements in this aspect.

Meanwhile, we doubled the Return on Assets from 0.58 percent to 1.11 percent during the same period.

It is also significant to mention that during this period we made substantial investment in a new core-banking system and a treasury platform to improve process efficiency and enhance the quality of delivery to provide a better service to our customers.

During the 18-months up to June 30, 2015, our balance sheet grew by 32 percent to Rs. 85.1 billion.

With the recent funding arrangements and current growth momentum, we are confident of reaching Rs.100 billion Balance Sheet in near future.

In the meantime we continue to increase our footprint , last week we opened our 79thbranch in Nawala and branch expansion plans would continue.

Besides these financial achievements, we were also adjudged as the fastest growing commercial bank in Sri Lanka in 2014 by the United Kingdom’s Global Banking and Financial Review.

Further, our groundbreaking lending product, ‘Sammana’ – which was designed to provide access to finance to our pensioners and senior citizens – was awarded the most innovative product by a financial institution in Sri Lanka.

Q6. What are your plans for the future of Pan Asia Bank?

This year, Pan Asia Bank will be celebrating two decades of excellence in banking business in Sri Lanka. In order to coincide with the anniversary celebrations, we will be embarking on a brand building campaign and also reinforcing our customer centric approach.

Ability to understand customer requirements effectively and fulfilling them with an efficient and courteous service has always been our forte. Pan Asia Bank is also known for the innovative products that have been introduced to meet customer needs. Therefore in our branding efforts, we will be making use of those core strengths to differentiate Pan Asia Bank from the competition.

Another advantage of choosing this approach is that our staff and processes are already strongly aligned to deliver a superior service to our customers.

Last year, we developed a three-year strategic plan and the results that we have delivered so far in 2015, are in line with such plan.

We will also engage in some CSR initiatives to celebrate our 20th anniversary along with staff engagement activities. The key strength of the success of Pan Asia Bank has always been the commitment and dedication of our staff. Hence, I am confident that Pan Asia Bank is now poised for the next wave of growth to become a formidable player in the banking and financial sector in Sri Lanka.

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New projects in the budget should provide cost/benefit analyses

By R.M.B Senanayake

According to the recent World Bank Review "The global economy is expected to grow 2.8 percent in 2015, slightly less than forecast in January, before strengthening moderately to 3.2 percent in 2016– 17. Developing country growth, buffeted by falling commodity prices, the stronger dollar, and tightening financial conditions has been revised downward to 4.4 percent in 2015 but is expected to pick up momentum and reach 5.3 percent in 2016–17".

How will we fare? We had high growth rates of 7.5% in 2014. But it was driven by extra government expenditure and is not sustainable. (The entirety of public capital expenditure is treated as investment and added to investment although economics strictly requires that capital expenditure must produce an economic return to be so treated).   This year growth is expected to come down to 6.5%. No matter since we cannot depend on higher growth rates unless such growth is linked to a sustainable factor. Government expenditure is not such a factor.

 Growth in 2014 driven by government expenditure

Development economists suggest export growth to be the driver of economic growth and the East Asian NICs did just that. Our growth in 2014 was largely from the government expenditure. But we cannot go on increasing government expenditure through money creation instead of taxation. Taxation of course has a reducing effect on national income which has to be offset.

Money creation has now become a standard practice with our governments - a convenient way to avoid taxing the people, although it eventually increases prices and worsens the current account of the balance of payments.

 But we are running increasing budget deficits fortunately funded by foreign capital inflows. But presently such net foreign capital inflows seem to be drying up.

The new government seems to have allowed the market to determine the rate of exchange. But the problem in that is that it encourages speculators who take a pessimistic view and the rupee might fluctuate too much.

But can we depend on foreign borrowings to fund growth forever?

When will foreigners stop lending to us?  Two things matter in the short term for the flow of foreign funds. They are the exchange rate and the rate of interest. The exchange rate was held more or less fixed for the last two years by the previous government which is good for foreign capital inflows.  But it caused a loss of foreign exchange reserves. It is not feasible for a country with large current account deficits to have a fixed rate of exchange unless other corrective action for the current account deficit in the balance of payments is taken by way of say, direct controls on imports. Despite the worsening current account deficit the new government rashly reduced taxes and relaxed controls. But it has now realized its mistake and is allowing the rupee to depreciate. When the rupee depreciates imports are discouraged and exports promoted. Unfortunately since our exports are largely primary products we are unable to increased the supply in the short term. We are now exporting textile and garments but our benefit is limited to the value addition. Yet we must encourage more exports of industrial products and a floating exchange rate which depreciates is better than a fixed exchange rate for this purpose.  The exporters must have confidence in the exchange rate policy of the government. It is now allowed to depreciate. But at what level will it settle at?

Money supply expansion

Our problem is the continuous expansion in money supply much more than is required to cope with the practical increase in output or GDP. Monetary expansion causes domestic inflation and or increases the current account of the balance of payments. When the public expect a sustained increase in money creation, then the forward rate of exchange will depreciate more than the amount of the interest rate - the differential between the present and the future. There is a regular and continued expansion in our money supply of about 15% although our growth rate is about half that. The other half over and above what is required to keep the growth, enters into the rate of inflation. The public believe that there will be continuous undue monetary   expansion and they therefore expect the spot rupee to depreciate continuously. If the government wants to hold the rupee without allowing it to depreciate, it must stop money creation or money printing. This means the government must raise more taxes to fund its expenditure or it must reduce public expenditure to match the taxation.

The plethora of state corporations still continues to make losses which are in the first instance funded by credit expansion by the banks and later by the Treasury. We are a nation prone to living on credit and to funding losses in state corporations. Current transfers to meet the losses in the state corporations still continue to increase. Current transfers to public corporations increased by 40.3% to Rs 19.4 billion last year. The increase, says the Central Bank, was due to increased losses in the state-owned railways and the department of posts. There is no case to subsidize these services and the situation calls for an increase in the fees and the rates, a matter the minister of finance should consider. If not the railways and the posts departments should be privatized. The managements of these two institutions should be told to run the enterprises at break even level and if they cannot do so they must be privatized.

We have to run an efficient state machinery if we want economic growth without inflation. We cannot go on funding the public sector expenditure through money creation. Economists generally don’t want the government to reduce its capital expenditure because such expenditure is assumed to increase the growth rate. Yes the practice of adding all government expenditure to investment will prima facie increase capital expenditure. But it is extremely doubtful that even government capital expenditure is productive. In 2014 such capital expenditure and net lending increased to Rs 473 billion from 464 billion the previous year. It is better to reduce government capital expenditure (except for replacement of capital goods) although economists have opposed such reductions of government investment. At least the government should devote such capital expenditure to private public partnerships instead. There are inherent reasons why public expenditure in our country fails to achieve its objectives. There is of course the interference of the elected politicians in such spending plans. The MPs are elected to be legislators and not to be members of the executive.

We have not got used to the practice of feasibility studies and study of economic rates of return for capital expenditure unless they are required by international institutions for projects funded by them. But cost/benefit analysis should be the routine required practice for the inclusion of projects in the annual budget. The public officials do such studies only to conform to the requirements of the World Bank or some international financial institution. But it should be standard normal practice and the Treasury should not permit any new project to be included in the annual budget unless and until the cost/benefit analysis is included. 

But public expenditure is incurred without proper feasibility studies (unless the World Bank or some International institution is also a partner in the project). We have still to practice cost benefit analyses in public expenditure. No public expenditure project should be included in the annual budget unless it has been cleared by the Ministry or Department of National Planning as providing a sufficient return on the investment to cover at least the cost of capital. Capital is a scarce resource and has alternative demands and any project should be selected after a comparison of its economic rate of return.

All public officials are not economists. But there is a cadre of economists now unlike in the past and they should be called upon to do an analysis of the cost and benefits of all projects to be included in the annual budget. In no way should such a study be dispensed with on the ground of urgency. The public doesn’t realize the damage done to their interests by the imprudent and excessive public expenditure. The government too must realize that the present policy of money creation can’t go on without adverse consequences on the economy. The next budget due in November provides an opportunity for the new government to retrace the steps and advance towards a more prudent policy.

If the new government is unwilling to raise taxes, both direct and indirect, its better to cut down on recurrent government expenditure. The scope to do so is limited as almost 70% of the budget is already earmarked expenditure. Then the only option is to reduce capital investment. There will be the fear that the growth rate will then sag. True, but it is better than creating more inflation and with it increasing the current account deficit in the balance of payments.

Another option which we have been using is to keep the import expenditure unchanged and fund it by running down our Foreign Reserves. But we need to preserve a minimum Foreign Exchange Reserve   An excess of domestic spending over domestic production is financed in a direct way by the creation of new credit in the banking system which leads to the loss of Foreign Reserves. We therefore need to curb credit expansion to prevent the erosion of reserves even if it leads to a lower growth rate for the alternative in the form of a loss of Foreign Reserves is worse.

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Super Gains Tax impinges on CSE says Acuity

Shares slumped to an 11-week low on Wednesday on the back of concerns about the Super Gains Tax which was presented in Parliament through the new Finance Bill, Acuity Stockbrokers said in a market report.

"By Friday however, strong buying interest by high net worth investors (HNIs) and institutions helped the benchmark ASPI gain ground to close the week a marginal 0.07% lower W-o-W," it said.

"In contrast, volumes recorded a sharp increase during the week, surpassing LKR 1bn on four days, consequently bringing the daily average turnover value to LKR 1.43bn (27.71% higher than the Y-T-D average)."

The bulk of last week’s turnover value was generated through off-board block trades (63.0%) with large deals in particularly the Diversified, Banking & Finance and Manufacturing counters, the report said. Retail activity however is yet to pick up pace, dwindling further this week as investors await cues from the upcoming Budget in November.

Foreigners meanwhile, exited shares last week following three consecutive weeks of steady net inflows. Net outflows of LKR 0.63bn at the beginning of the week offset inflows over the remainder of the week resulting in a net outflow position of LKR 0.43bn.

The current market sentiment is likely to continue into the week ahead, Acuity concluded.

John Keells Stock Brokers said that the ASPI ended flat for the week amid healthy turnover levels. Trading in the diversified, banking, finance & insurance sectors accounted for a majority of turnover.

Active foreign participation amounted to 59% of the week’s turnover resulting in a net outflow of Rs. 425mn.

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Access upbeat despite dip in profit, venturing overseas

Access Engineering PLC, the premier civil engineering firm listed on the Colombo Stock Exchange which has successfully completed over 100 major projects since 2001 when it was founded, has seen top line growth in the year ended March 31, 2015 but seen attributable profit both at group and company level down 17.2% and 30.5 % respectively.

However, the company remains upbeat about the future and has maintained a dividend level of one rupee per share during the year under review, the same as the previous year, although earnings per share for the group was down to Rs. 2.35 from Rs. 2.83 a year earlier and for the company for Rs. 1.75 from Rs. 2.52.

"Looking ahead, Access Engineering will continue to consolidate its core business via our value engineering approach," the Company’s Chairman, Mr. Sumal Perera, has said in the annual report. "We will continue our exploration of opportunities overseas. We are also looking at building a land bank, with the objective of exploring opportunities in the property development market of Sri Lanka."

The company presently employs over 1,800 workers, comprising more than 150 engineering and technical professionals, skilled personnel, tradesmen, skilled and unskilled workers.

The group comprises several fully-owned subsidiaries as well as an associate company where it holds a 30% stake in a joint venture with China’s Zhenhua Heavy Industries Company Limited (ZPMC), the world’s largest container-handling equipment manufacturer.

Fully-owned subsidiary, Access Realties (Pvt) Ltd owns Access Towers on Union Place, while Access Realties 2 (Pvt) Ltd is developing the proposed Access Towers 2 currently under construction.

Its 84% owned subsidiary, Sathosa Motors PLC holds a franchise for Isuzu commercial vehicles. The latest addition to the group is 80% owned Access Projects (Pvt) Ltd, a leader in the leisure-related building construction and interior solutions.

Perera said while GDP last year was up 7.37 % on the back of strong growths in the construction sector, the devaluation of the rupee against the USD posed a challenge to the business sector. Also, volatility and uncertainty beset the latter part of the year due to the presidential elections and the subsequent change of government.

In a joint statement, a company’s Managing Director, Christopher Joshua and Rohana Fernando, its Chief Operating Officer, said that investment in the country’s developing infrastructure continues apace with many of the major projects receiving Chinese funding. Many other multilateral and bilateral funding agencies lent muscle to the country’s infrastructure development projects.

They said that the construction 9of roads and rehabilitation of existing roads continued to be one of the development priorities last year in line within the National Road Master Plan (2007-2017).

The company’s primary focus for the year under review was consolidating its core business with expansion only undertaken where there were synergies with their core values. They continue to invest in capacity building having invested Rs. 714 million in enhancing and infusing plant, equipment and machinery with new technological capabilities. This expenditure was on top of Rs. 3.2 billion invested in this regard over the previous three financial years, they said.

Exploring business opportunities overseas remain within their immediate focus with a project started in Papua New Guinea in the previous financial year and completed during the year under review making a positive contribution to the bottom line. They have opened a branch office in Djibouti in February to help push further a field.

The joint review said that the top line of Rs. 11.2 billion was supported by highway construction (40%), building construction (34%), sale of construction related material (11%) and water and drainage construction (10%).

"We experience a reduction in other income mainly due to the depreciation of the exchange rate of the euro against the SLR where we had income in euro on the Labugama-Kalatuwawa Water Supply Project," they said. "Our net profit ratio margin, at 16%, was well above the world industry average. Access Engineering is debt-free and its liquidity is at a position of great strength."

At group level, Access Realties contributed approximately Rs. 314 million to the bottom line, a year-on-year growth of over 130% mainly on the account of a revaluation gain of Rs.174 million. Sathosa Motors contributed approximately Rs. 270 million while the recently acquired Access Projects contributed Rs. 145 million.

The company continues to enjoy a preferential 12% tax rate applicable to the construction industry.

Access has a stated capital of Rs. 9 billion and retained earnings of Rs. 7.17 billion in its books. Total assets ran at Rs. 22.33 billion and total liabilities at Rs. 5.63 billion.

Mr. Sumal Perera owns 25% of the company and is its top shareholder followed by fellow directors, R.J.S. Gomez (12%) and J.C. Joshua (10%). The directors, their spouses and children control the company with over 50% of its equity. The EPF owns 1.54 %.

The company’s share traded at a high of Rs. 43.50 and a low of Rs. 18.50 during the year under review closing at Rs. 19.20. This compared to a trading range of Rs. 23.50 to Rs. 19.10 closing at Rs. 22.50 the previous year.

The Directors of the Company are Messrs S.J.S Perera (Chairman), R.J.S. Gomez, J.C. Joshua, S.H.S. Mendis, D.A.R. Fernando, S. D. Munasinghe, Prof. Malik Ranasinghe, N.D. Gunaratne, S.D. Perera and D.S. Weerakkody.

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Sri Lanka slaps 100-pct margin on car LCs: Finance Minister

(LBO) – Sri Lanka will impose a 100 percent margin deposit on car import LCs with effect from today, Finance Minister Ravi Karunanayake told at a media briefing held in Colombo.

According to data Sri Lanka’s expenses on vehicle imports has doubled to 744 million US dollars for year 2015 compared to 374 million dollars in the same period last year.

The margin will be effective from today October 02, 2015 Karunanayake said.

The same step was last taken in 2013.

Sri Lanka has imported about 491,000 vehicles for the eight months ended August this year.

“We have more vehicles in Sri Lanka than we require at the moment. Even though we understand the need to have a vehicle,” Karunanayake said.

“We are taking these measures to control it,”

The loan to value ratio (LTV) for vehicles, however, will be increased back from 70 percent to 90 percent due to the imposition of the 100 percent margin deposit on LCs.

“When we increase the LC margin, we can relax the loan value,” Karunanayake said.

“We received a lot of requests from banks and finance companies to relax the loan value as it was hitting the second hand car market.”

Sri Lanka tourist arrivals up 36-pct in September

ECONOMYNEXT - Tourist arrivals in to Sri Lanka continue to grow strongly with the numbers rising 35.9 percent in September 2015 from a year ago, said Rohantha Athukorala, chairman of the Sri Lanka Tourism Promotion Bureau.

Tourist arrivals for the nine months to September were up 18.8 percent from a year ago, he told a news conference.

“We have crossed the 1.3 million mark in tourist arrivals,” Athukorala said.

Data from the tourism office showed India regained the top position among source markets from China in September 2015 with the number of visitors rising 41.5 percent to 27,233 while Chinese visitors rose 54 percent to 20,502.

But China remained the fastest growing source market and arrivals were up 73.6 percent up to September this year from a year ago.

Arrivals from India during the first nine months were up 29.4 percent to 220,907.

The number of visitors from the traditional European markets continued to grow with arrivals from the United Kingdom up 24.2 percent to 11,160 in September 2015 and up 14 percent to 122,291 for the year so far.

Arrivals from Germany grew 18.5 percent to 8,292 in September 2015 and were up 12.8 percent to 84,761 for the year.

But visitors from Russia continued to fall, down 7.6 to 2,788 in September 2015 and down 10.7 percent to 42,552 in the first nine months of this year compared with 2014.

Capital Alliance celebrates 15 years of success

Capital Alliance, Sri Lanka's leading full service investment bank recently celebrated 15 years of success at the helm of the financial services sector. Over the years, CAL has grown from strength to strength, emerging as the country's leading investment bank and a pioneer in innovation in the finance industry CAL's diverse portfolio of service offerings has grown exponentially and the company has consistently been able to deliver world-class solutions and develop products that effectively meet the growing needs of its clients.

The company's ethos of being 'the preferred partner in financial markets' is built on the deep relationshipsit enjoys with its clients, regulators and stakeholders alike. Driven by thesepartnerships, which have been built over 15 years, CAL has helped blue-chip conglomerates, family owned businesses and individual investorsto grow their businesses, earn superior returns and meet their complex financial objectives.

CAL does not believe in providing 'cookie cutter' solutions, instead the company carefully evaluates and considers the diverse needs of each client, and thereafter crafts the most suitable solution to effectively meet their specific needs.

Having commenced operations as a secondary dealer in government securities, CAL became a primary dealer in 2003, thereafter branching out into Investment Banking, Stockbroking and most recently into Investment Management. CAL's Investment Management unit has in a short period of time, become the largest unit trust manager in the country and currently manages a portfolio, which is valued at overRs. 30bn in assets. 

Its unique equity product, the Quantitative Equity Fund continues to prosper and comfortably outperforms the market.

The company's Investment Banking arm has advised on several landmark fundraising and M&A transactions, emerging as the undisputed market leader in IPOs, listed debentures and M&A advisory services. Some of CAL's milestone accomplishments in this field include the issue-manager role it played in Sri Lanka's largest post-war IPO for People's Leasing Company PLC,which raised Rs. 7bn and the issue manager role it played in the first single-digit interest rate debenture issue for DFCC Bank which raise a total of Rs.5bn. The company also advised Hemas Holdings PLC, in 2014 on the sale of its controlling stake in Hemas Power PLC.

CAL is also the leading non-bank primary dealer in government securities, making markets across all maturities. In 2014, this market leadership was extended to corporate debt as well with a dominant share exceeding 50%. CAL's Independent Research armhasfocused heavily on researching current trends and market conditions in order to ensure that the company makes significant returns on its investments and transactions. In 2014, the company's Research team won the gold prize for 'The Best Equity Research Report' and the team's excellence in research continues to help its clients stay well aware of the latest trends and developments in local and global markets.

Commenting on CAL's 15 years of operations in Sri Lanka, Ajith Fernando, Managing Director of CAL said, "We are immensely proud to celebrate our 15th anniversary. Over the last 15 years, CAL has celebrated many important milestones and has continuously changed the game in all service areas, primarily due to our relentless commitment to serve our clients and meet their needs.

As a result of our efforts to deliver excellence to our clients, we have also been able to pioneer many innovative new products and set the industry standard in the areas of compliance and best practices. Our intention has always been to secure lasting relationships built on trust and superior advice.

It is the ability to attune and align ourselves to our clients' needs that has enabled CAL to become a dynamic force in Sri Lanka's investment and finance arena today. The success of the company must also be attributed to CAL's talented team of professionals who have truly helped deliver best-in-class solutions and haven taken the company to new heights."

Ajith Fernando, the Managing Director of CAL, is well renowned for his contributions to the corporate world and society at large. In 2013, he co-founded the 'Around the Pearl' initiative, which on an annual basis raises funds to support children suffering from cerebral palsy.

The CAL team is well known in the industry for their commitment, critical thinking capabilities and their ability to consistently deliver the very best returns for their clients. 

Key members of the CAL team include Gihan Hemachandra, Chief Executive Officer, CAL Treasurieswho heads CAL's Primary Dealership arm and Kishan Vairavanathan, Chief Executive Officer, CAL Partners who heads the company's Stockbroking, Investment Management and Investment Banking units. With a wealth of experience and the ability to use insights to gauge and meet client needs, the CAL team is well-poised to continue the company's momentum of growth.

Capital Alliance (CAL) is continuously striving to become the preferred partner in financial markets. Having commenced operations in October 2000, CAL has established itself as a leading player in the financial markets of Sri Lanka.

The company specializes in the origination, trading and investment of debt and equity securities and this mix of expertise and services allows CAL to offer integrated and customized solutions to its customers across the entire financial spectrum. The company strives to build lasting relationships with all of its clients, in order to acquire an in-depth understanding of their needs and goals. CAL has built a reputation for itself as a market leader, by consistently delivering excellence in execution, world-class research and product innovation.
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CSE joins United Nations SSE initiative

CSE chairman (front row second from right) joins other capital market leaders and senior UN officials for the NYSE Closing Bell on September 24, to mark the launch of the new United Nations Sustainable Development Goals.

The Colombo Stock Exchange (CSE) joined the United Nations Sustainable Stock Exchanges (SSE) initiative, a partnership among the UN, UN-supported organizations, stock exchanges, investors, companies, regulators and governments around the world. The chairman of Colombo Stock Exchange Vajira Kulatilaka made the public announcement of its entrance to SSE during a special Leadership Luncheon on September 24, at the New York Stock Exchange.

The SSE Initiative, launched by UN Secretary General Ban Ki-moon in 2009, aims to explore how exchanges can work together with investors,regulators and companies to promote sustainability initiatives. Over the years it has contributed to enhance corporate transparency on Environmental, Social, and corporate Governance (ESG) issues and encourage responsible long term approaches to investment.

The Chairman of CSE, Vajira Kulatilaka commented: "I believe that being part of the Sustainable Stock Exchange initiative demonstrates our commitment towards adopting sustainable business practices. We endeavor to engage with our stakeholders, and collectively work towards sustainable policy initiatives which will help us create better corporate citizens in the areas of environment, society and governance."

"CSE wishes to publicly demonstrate its commitment to sustainability,while promoting better business practices within the Sri Lankan Capital Market. Moreover, CSE encourages listed companies to measure and publicly report their ESG performance and impacts" Chief Executive Officer of the CSE Rajeeva Bandaranaike said.

Sutheash Balasubramaniam, Sri Lanka Representative/Director of the UN Global Compact Network Sri Lanka commented: "The Board Members of UN Global Compact Network Sri Lanka are encouraged by the Colombo Stock Exchange partnering UN Sustainable Stock Exchange with a focus to drive responsible investment and sustainable business. This partnership will enhance the global positioning of CSE while creating a platform for the Sri Lankan capital market to be abreast with international trends. UNGC Sri Lanka Network will support CSE in building a sustainable stock exchange of greater value."

Every two years the SSE initiative hosts its flagship event, the SSE Global Dialogue. It brings together leaders from stock exchanges, regulators, investors and companies to share best practices, and releases a SSE Report on Progress to coincide with the Global Dialogues.

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