Sri Lankan stocks slip, banking shares lead; policy clarity awaited

Reuters: Sri Lankan shares ended slightly weaker on Tuesday, led by banks, with foreign investors turning net seller of stocks while many investors waited for more clarity on policy direction, brokers said.

The main stock index ended 0.04 percent, or 3.13 points, weaker at 7,085.93, further slipping from its highest close since Sept. 25 hit on Friday.

"Still investors are not fully into the market and they are on a wait and see mode due to lack of clarity on policy," said Dimantha Mathew, a research manager at First Capital Equities (Pvt) Ltd.

Prime Minister Ranil Wickremesinghe is to make a statement next month to outline the policies of the new government.

Foreign investors were net sellers of 104.97 million rupees ($745,790) worth of shares extending the year to date net forging outflow to 3.08 billion rupees.

Turnover was 664.2 million rupees, compared with this year's daily average of 1.12 billion.

Shares in Ceylinco Insurance Plc fell 3.81 percent while Lanka ORIX Leasing Co Plc slipped 2.00 percent. 

($1 = 140.7500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Anand Basu)

World Bank spells challenges for Sri Lanka

Ceylon Finance Today: Managing currency pressure and raising revenue to reduce the 2015 fiscal deficit were Sri Lanka's major economic challenges, the World Bank said in its latest report.

"Structural challenges include increasing fiscal revenue and narrowing a persistent current account deficit linked to structural competitiveness issues in the export sector", the twice-a-year South Asia Economic Focus report stated.

The report also stated that, with the country approaching upper middle income status, borrowing terms are becoming more commercial, which could affect affordability.

"Finally, with limited national savings compared to national investment, Sri Lanka needs to attract FDI. Going forward, to sustain its high growth path it needs to increase growth in the manufacturing and export sectors."

Growth is expected to reach 5.3 percent year-on-year in 2015 with significant contributions from the service sectors and accelerated private consumption, thanks to increased public sector wages partially compensated by reduced public investment.

Currency depreciation will exert upward pressure on prices in the second half of 2015, but relatively low international commodity prices and lowered taxes on key commodities are expected to keep annual average inflation around 1 percent in 2015.

Despite savings in the oil bill, private credit driven import expenditure is expected to widen the current account .deficit to 3.2 per cent of GDP in 2015, financed mainly by borrowing. Increased wages, social welfare and interest payments will expand the fiscal deficit to 5.8 per cent of GDP, while public debt to-GDP is expected to rise in the next two years.

Unless permanent revenue measures are implemented, fiscal consolidation will be challenging in 2016 and beyond.

The pace of growth and poverty reduction depends on the success of reforms that increase fiscal revenue, promote export-led growth, rebalance the role of the public sector, enhance economic inclusion by widening primary deficit and slowdown in growth led to a slight increase in public debt to 71.8 per cent of GDP, while contingent liabilities were estimated at 5.4 per cent of GDP by end 2014.

The low tax revenue placed at 10.2 per cent of GDP in 2014 remains a key macro-economic concern.

The external current account deficit narrowed to 2.6 per cent of GDP in 2014 thanks to strong tourism and remittance flows, financed mainly by FDI and other private sector loan flows along with inflows to the government.

For the first half of 2015, the trade deficit widened by 15.6 per cent on a year-on-year basis due to rising imports of vehicles and consumer goods, reversing the favourable impact of a reduced petroleum bill. Rapid growth in private credit in a historically low interest environment was a key driver of the surge in imports.

Gross official reserves declined to USD 6.5 billion by end August 2015 from USD 7.5 billion at end 2014 due to capital outflows, debt repayments, the widening trade deficit and central bank intervention in the forex market.

The Central Bank allowed more flexibility in the exchange rate in early September, leading to strong depreciation.

The year-to-date targeting poor areas and disadvantaged groups, and promote sustainable sources of growth.

Key risks are a growth slowdown, which would lead to a fast rising public debt burden. 

While the direct impact of a slowdown in China is limited, continued economic woes in the Middle East, the EU and Russia could adversely affect exports and remittance inflows.

Tightening global financial conditions could increase capital outflows and currency pressure, and make borrowing more expensive.
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Lanka Century Investments consolidates operations with IFS Applications

IFS, the global enterprise applications company, announces that LCI has decided to implement IFS Applications™throughout the group, which includes porcelain and textile manufacturing subsidiaries.

The IFS solution to be deployed at LCI's Headquarters will support mission-critical processes such as financial consolidation to empower senior management with the tools for strategic decision-making and improved visibility throughout the company.

Earlier in 2015, LCI subsidiaries Dankotuwa Porcelain and Royal Fernwood Porcelain commenced their implementation project. Also scheduled to start implementing IFS Applications is manufacturing subsidiary South Asia Textiles, Sri Lanka's premier fabric manufacturer.

When fully deployed, IFS Applications will be used by more than 200 staff across four sites as the central ERP backbone providing integrated business process support for production planning, manufacturing, supply chain management, financials, HR, and business analytics.

"We are ushering in a new era of manufacturing excellence at our facilities and IFS Applications is an essential part of this project," LCI Chief Operating Officer Sajeewa Ranasinghe said. "We look forward to a group-wide integration, which is a strategic priority for our enterprise. Furthermore, we are also looking forward to working closely with IFS to create an outstanding business solution and ensure a smooth and swift implementation." IFS Sri Lanka Head of strategic accounts and public sector Kavinda Mahawedage added, "We are confident that our technology will bring about significant changes in efficiency in the LCI group's operations and provide greater visibility to its complex manufacturing operations. IFS understands the business challenges of the LCI group very well and with our decades of implementation experience in the sector, we are well positioned to deliver yet another robust industry solution."

IFS clients in the porcelain and garment industries include global ceramics company NGK Ceramics, Churchill China, and Emjay International.

About Lanka Century Investments PLC
Lanka Century Investments PLC, is the holding entity of a group of companies with interests in manufacturing porcelain tableware, Fabrics and leather footwear.

South Asia Textiles is Sri Lanka's premier fabric manufacturer. The company specializes in fabric knitting, dyeing, finishing, printing, brushing, sueding and finishing.

Dankotuwa Porcelain is a world class manufacturer of Porcelain Tableware, Located in Sri Lanka for the past 25 years. It is an ISO 9001/2008 certified company and its products are exported world over with an emphasis to Europe and USA. The company also owns Royal Fernwood Porcelain Limited. About 60% of the company's production is exported. South Asia Textile Industries Lanka recently announced a highly-ambitious expansion programme; having already begun investing what will ultimately be over Rs 1 billion in total. The move includes introduction of the latest fifth generation hybrid/nano technology used in state-of-art textile machinery in all its divisions.

IFS™ is a globally recognized leader in developing and delivering enterprise software for enterprise resource planning (ERP), enterprise asset management (EAM) and enterprise service management (ESM). IFS brings customers in targeted sectors closer to their business, helps them be more agile and enables them to profit from change. IFS is a public company (XSTO:IFS) founded in 1983 and currently has over 2,700 employees. IFS supports more than 2,400 customers worldwide from its network of local offices and through a growing ecosystem of partners.
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Pussalla to invest Rs. 900 m on poultry feed mill

Vishmi Wijeratne (vishmiwijeratne.wishwonder@gmail.com)

Pussalla Meat Producers, a leading poultry producer in Sri Lanka,signed an agreement with Andritz feed milling and bio fuel company in Denmark to build a fully automated poultry feed milling facility.

The total investment of the project is Rs. 900 million and constructed at Udamapitigama, Dompe in the Gampaha district.

“The mill capacity is 20 tonnes per hour and capable of producing 12,000 metric tonnes of feed per month,” Pussalla Meat Producers, Managing Director, Philip J. Wewita said.

The mill possesses its own silos for required grain storage and plans to use 100% totally produced maize for its production.

With the completion of the feed mill, Pussalla becomes the only totally integrated poultry producer in Sri Lanka having grandparent farm, parent farms, Commercial broiler farms, processing plant, further processing plant, islandwide distributor network and meatshop chain.

Pussalla Meat Producer is a company which already achieved ISO 9001:2008, ISO 22000:2005, ISO 14001:2004, ISO 50001:2011. The company possesses the biggest grandparent farm in the country, exporting 50% of its Parent Stock production to South Asian countries.

Pussalla produces 25% of the country’s day old broiler chick requirement. With the completion of the feed mill direct employment of the company reach 1500 employees and the company will begin commercial production of poultry feed in the next two months.

This is the first feed mill in the country built according to the international standards by a Sri Lankan entrepreneur.
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Janashakthi to raise Rs. 3.3 b in rights issue

Janashakthi Insurance plans to raise Rs .3.3 billion by way of a rights issue. The company will issue 181.5 million ordinary shares at Rs 18.50 each in the ratio of one for every two shares.

The proceeds of the right issue will be utilized to support the future expansion plans of the insurance business of the company.
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