Sri Lanka’s John Keells (JKL) gets new CEO

(LBO) – Hishantha G R De Mel has been appointed Acting Chief Executive of John Keells PLC, a subsidiary of John Keells Holdings, from 01 October 2015, the Colombo Stock Exchange said in a statement.

Former CEO Sudath Chaminda Munasinghe resigned with effect from October 1 2015.

De Mel joined the Company in 2002 as an Executive then was promoted to Assistant Manager in 2005 and later appointed as Head of Marketing, Assistant Vice President of John Keells Holding in 2013.

He holds a MBA from the University of Southern Queensland and is an Associate member of the Institute of Charted Mannagement Accountants.

John Keells PLC has businesses in tea and rubber commodity broking, warehousing and stockbroking.

Sri Lanka tile sales seen strong, industry risks losing protection

ECONOMYNEXT – Sri Lanka’s ceramic tile manufacturers, controlled by the Royal Ceramics Lanka group, will see strong sales growth supported by the construction boom but risk losing protection against imports, a stockbroker report said.

Several hotels and condominiums under construction at present would reach completion during FY 2018 by which demand for tiles and bathware would rise, Bartleet Religare Securities said.

Royal Ceramics Lanka’s recurring earnings per share grew 243 percent to 4.97 rupees in the first quarter of the 2016 financial year.

RCL controls Lanka Tile and Lanka Walltiles, the other two ceramic tile manufacturers in the island.

RCL’s earnings growth was backed by higher than forecast revenue from tiles and aluminium sectors, lower finance cost and increased profits from an associate finance firm, the research report said.

Royal Ceramics Lanka’s gross profit margins improved to 33 percent in the first quarter from 30.2 percent a year ago aided by energy cost reduction and higher sales volumes.

“We expect the pick up in demand for tiles and bathware to continue in the forecast period aided by both domestic and export sales,” Bartleet Religare Securities said.

“The risk of the industry’s protected status being removed, however looms.”

Sri Lanka’s new government is known to favour more liberalisation of the economy and wants to remove trade barriers.

The ceramic industry had successfully lobbied for higher tariffs on imported tiles to protect domestic firms under the ousted Rajapaksa regime.

Bartleet Religare Securities said demand from both households and commercial sector contributed to RCL’s earnings growth.

“RCL has also started exporting to new markets like the US and UK which would add to top line in future.”

The RCL group’s enhanced margins were aided by the reduction in gas prices, electricity tariffs and Euro depreciation, with 90 percent of bathware raw materials imported from Europe, as well as by a shift to larger high value tiles, the brokers said.

Sri Lanka Finance Minister warns of vehicle tax hike in November budget

ECONOMYNEXT - Sri Lanka's Finance Minister Ravi Karunanayake had warned that new vehicle taxes would apply from the day of the budget on November 22, seen as an indication that taxes would go up.

The warning to citizens of an impending tax rise is an improvement on the earlier practice of hatching taxes in secret and slamming them on the people through a mid-night gazette while the citizenry is sleeping, a practice established by post-independent rulers.

The Daily Mirror newspaper quoted Karunanayake as saying the administration came under fire for suddenly imposing taxes on cars in January 2015.

Import duties through secretly hatched mid-night gazette was done by rulers, especially in the 1970s to prevent citizens from gaining any benefit before taxes went up.

In the 1970s, the rulers also suddenly started imposing taxes outside the budget, denying even the stability of one year to taxes.

Analysts have pointed out that the tyranny of the midnight gazette violates a fundamental principle of parliamentary democracy.

The practice of taxing people without parliamentary debate by 'Royal Prerogative' ended in Britain in 1689 with a English Bill of Rights. But in Sri Lanka in the 21st century taxation is still imposed by a 'minister's prerogative', through a mid-night gazette.

In a 'shoot first, ask questions later' strategy parliament is informed of midnight gazette taxes after the fact.

The new administration has to take more taxes from private citizens to pay higher salaries to state workers.

At the moment large volumes of money is being printed to finance the budget deficit, which has brought the currency down and generated forex reserve losses and undermined the credibility of the soft-dollar peg triggering capital flight.

Instead of following prudent monetary policy in the face of an expanded higher borrowing to finance an expanded deficit in January, the central bank cut rates in April, pushing the country into a balance of payments crisis.

Rates are still low and authorities are now trying to control imports and credit through non-market administrative measures involving trade controls.

Analysts have called for a reform of the Central Bank or its abolition and a return to a currency board arrangement to prevent future balance of payments crises.

Sri Lanka controversial telecom levy withdrawn from house

ECONOMYNEXT - Sri Lanka's ruling administration withdrew a controversial telecom tax from parliament Tuesday, amid a legal challenge.

Leader of the House, Lakshman Kiriella said the bill was being withdrawn.

It is not clear whether the bill would be re-presented after changes.

Activists went to court saying the tax had payment dates and also penalties set in the past, making it a retrospective tax.

The new administration brought a series of laws which harmed the expectations of citizens to just rule in general and consequently the investment environment for business as well.

Sri Lanka Treasuries yields flat

ECONOMYNEXT - Sri Lanka's 3 and 6-month Treasuries yields were held unchanged at 6.78 percent and 7.07 percent at Wednesday's auction, data from the state debt office showed.

The debt office, a unit of the Central Bank, said it sold 6.47 billion rupees of 3-month bills after offering 15 billion rupees of bill and 1.67 billion rupees of 6-month bills, having offered almost 14 billion rupees of bills.

It also sold 1.6 billion rupees of 12-month bills at a yield of 7.18 percent, having rejected offers at the last auction.

Sri Lanka Fitch rates People's Leasing's bonds 'AA-(lka)'

ECONOMYNEXT – Sri Lanka Fitch Ratings has assigned People's Leasing & Finance PLC's proposed senior unsecured debentures of up to six billion rupees a final National Long-Term Rating of 'AA-(lka)'.

The assignment of the final rating follows the receipt of documents conforming to information already received, and the final rating is the same as the expected rating assigned on 15 July 2015, a statement said.

The issue will have tenors of four and five years with fixed-rate coupon payments. PLC plans to use the proceeds for working capital purposes, to diversify its funding mix, and to reduce maturity mismatches.

The proposed debenture is rated in line with PLC's National Long-Term Rating of 'AA-(lka)', given that the issue is expected to rank equally with the claims of company's other senior unsecured creditors.

PLC's Issuer Default Ratings (IDRs) and National Long-Term Rating reflect Fitch's view that PLC's parent, the state-owned and systemically important People's Bank (AA+(lka)/Stable), has a high propensity but limited ability to provide extraordinary support to PLC if required.

Fitch said this is because PLC is strategically important to People's Bank.

People's Bank owns 75 percent of PLC and has board representation; the two entities share a common brand; and PLC is associated with People's Bank's franchise.

The rating on the debentures will move in tandem with PLC's National Long-Term Ratings.

PLC's ratings may be downgraded if People's Bank is no longer a majority shareholder in PLC, or if People's Bank's ability to provide support weakens, or if PLC's strategic importance to its parent diminishes over time.

Fitch does not expect PLC's ratings to be upgraded, unless People's Bank's ratings are upgraded.

Sri Lankan stocks end steady; policy clarity awaited

Sri Lankan shares ended little changed on Wednesday as gains in diversified shares helped offset losses in banking stocks, with many investors waiting for more clarity on policy direction, brokers said.

The main stock index ended 0.01 percent, or 0.48 points, weaker at 7,085.45, falling for the third straight session.

"The market is holding on as investors are awaiting to see the policy direction," 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 buyers of 47.03 million rupees ($334,495) worth of shares on Wednesday, but foreign investors were net sellers of 3.03 billion rupees worth of shares so far this year.

Turnover was 636.1 million rupees, compared with this year's daily average of 1.12 billion.

Losses in Commercial Bank of Ceylon Plc, Commercial Leasing & Finance Plc and Ceylon Tobacco Co Plc offset gains in conglomerate John Keells Holdings Plc and Ceylon Cold Stores Plc. 

($1 = 140.6000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Anand Basu)

New DFCC Bank aims big with overseas assignments

The DFCC Bank hopes to entrench its footprint firmly in the country and also focus on financing international projects with its amalgamation with the DFCC Vardhana Bank (DVB) last Friday.

DFCC Bank Chief Executive Officer Arjun Fernando said the bank will also be focusing on international markets as well.

“DFCC was chosen by two financial institutions overseas to provide consultancy and management services and this has already established the banks’ credentials overseas, so we will definitely be looking at pursuing assignments aggressively. Another component of this is that we aim to partner our customers in venturing overseas and this will be another initiative that I believe will set the stage for bigger things in the future,”Fernando said.

Excerpts of the interview the Daily News Business had with DFCC Bank Chief Executive Officer Arjun Fernando yesterday.

Q: What made DFCC and DVB tie up ?

A:The intention has always been to amalgamate the banks, but there were legal constraints. In January this year, these constraints were removed and since then, DFCC and DVB have been working to formalise the operational merger through a legal merger, where the amalgamated entity transforms into a full-service bank, however, not losing sight of DFCC’s development mandate founded 60 years ago.

The combined size and reach of the amalgamated entity and the synergies it will provide positions DFCC to be able to deliver sustainable solutions for all stakeholders by creating a powerful platform for growth.

It is also noteworthy that we achieve this milestone at the same time DFCC celebrates its diamond Jubilee. We turned 60 on October 4, and as we look back, we are very proud of what we have accomplished over the years. As you know, we were the first to finance new economic sectors in the country, and today these sectors have become mainstream businesses that support the national economy in many ways.

Over the years we have evolved, diversified and grown to meet changing needs and aspirations, and even today we continue to evolve while holding firm to our development banking roots. We have found a worthy partner in DFCC Vardhana Bank, well known for being the fastest growing commercial bank in the country. We will continue to grow and evolve, focusing on sustainable value creation for all stakeholders.

Q: How does the tie up help customers of both banks?

A: Our customers will definitely benefit, as we will be able to provide them with a wider range of products and services and enhance our island wide footprint. Both banks have an extremely customer focused mentality, and provide solutions and services which consistently exceed expectations. Clients of both banks can now look forward to receiving this service from one, integrated bank, all over the island.

We plan to introduce innovative solutions, delivering significant value, in the future.

Q: How does this help the SME sector?

A: SME’s are the backbone of a diverse and sustainable economy and we have always placed a lot of emphasis on SME development.

We have the distinction of being the first bank in Sri Lanka to set up a separate department for financing the small and medium business sector as early as 1978. When this department was set up the goal was to jumpstart and develop the country’s small and medium industrial base as well as the agricultural base but since then we’ve come a long way.

Our experience in this sector has taught us that mere financing isn’t the way to creating long term development so we adopt a more holistic approach. This means that apart from financing we also go the distance to provide the necessary knowledge for entrepreneurs to take their business to the next level, we conduct skills development programmes and we have dedicated officers and managers that provide continuous monitoring and guidance to ensure stable and continuous growth.

Our formula of providing comprehensive services for SME development has been proven to be a winner. We have provided capital growth to a number of clients especially during their early and risky start up stages and as a result they have been able to successfully grow their businesses within Sri Lankan borders and also expand business overseas.

We will continue to support SMEs, and they will have access to a wider range of products and services as well as customer service points. As in the past, we will continue to work with multilateral agencies and provide training and knowledge sharing sessions for this sector.

Q: Is there any retrenchment of employees with the tie up?

A: There will be no reduction of staff. We value all our people, and with the growth opportunities that will come from becoming a bigger bank, the opportunities for advancement are open to all enterprising and dynamic individuals.

We have teams of experts at both DFCC and DVB who have pioneered innovative products and services, which are at the forefront of the banking industry. We will foster and encourage these people to continue these initiatives for the benefit of our customers and other stakeholders.

Q: What is the total asset base with this tie up?

A: The combined entity will have an asset base of Rs 210 billion (as at March 2015). Further we will have approximately 1,500 employees with expertise in various disciplines and an islandwide footprint, operating through 137 branches.

Q: Future expansion plan after the amalgamation?

A: Well, our customers can look forward to enhanced service standards, and we hope to introduce new and innovative products in the not too distant future. We will continue to support individuals, businesses and the community, as we have done for 60 years, and now as a commercial bank, we will expand the services in order to cater to our customers’ needs.

We will also be focusing on international markets. DFCC was chosen by two financial institutions overseas to provide consultancy and management services and this has already established the banks credentials overseas, so we will definitely be looking at pursuing assignments aggressively. Another component of this is that we aim to partner our customers in venturing overseas and this will be another initiative that I believe will set the stage for bigger things in the future.

Finally, we will continue to draw synergies from our complementary areas of business through our subsidiaries, associate company and joint venture.

These services include investment banking, unit trusts, stockbroking, venture capital, industrial estate management, consulting and IT services.

- Pravin Mendis
www.dailynews.lk

De Mel new John Keells CEO

John Keells CEO Sudath Chaminda Munasinghe has resigned with effect from October 1 2015.

Hishantha Gerard Rodney De Mel has been appointed Acting CEO John Keells from October1. De Mel has no relevant interest in the shares of the above company as at October 1. 2015.
www.dailynews.lk

MTD Walkers PLC rebrands as Walkers CML

By Waruni Paranagamage

MTD Walkers PLC, one of pioneer integrated infrastructure and engineering solutions providers in Sri Lanka, yesterday re-branded as Walkers CML by consolidating two of its strong brands.

The new brand, Walkers CML, will bring all MTD Walkers PLC subsidiaries under one uniform identity and one umbrella.

MTD Walkers PLC Executive Deputy Chairman Jehan Amaratunga addressing the gathering said that the new brand identity would open more opportunities to the Group, while enhancing the corporate identity of MTD Walkers PLC and its subsidiaries.

He noted the brand would represent the group companies in the diverse Sri Lankan business arena, while characterising and defining its service quality and excellence to all their stakeholders.

“The aim of this initiative was to reinforce Walkers CML as the preferred partner in infrastructure development and engineering industries. This will allow an individual to identify the diverse variety of projects carried out by the Group and have confidence that the project will be implemented in a quick, efficient and a safe manner according to the world class standards expected of the brand,” Amaratunga added.

Since 1854, the brand Walkers has extended its expertise in sectors such as civil, marine, mechanical, electrical engineering work, pile construction, power generation, manufacture of tea machinery for the plantation industry and real estate. The event was in line with MTD Walkers PLC’s 162nd anniversary celebration.

Over the years the Group has grown organically and through acquisitions and has consolidated two of its strongest brands to re-brand itself as Walkers CML, bringing all its subsidiaries under a single identity. Through this initiative, the Group hopes to present its organisation as one that boasts unmatched strength and endless potential in engineering synergy.

Amaratunga emphasised that as the seventh oldest company in Sri Lanka, Walkers Group would support the Government in all of its construction needs in order to serve the people.

“We believe in sustainable development and support the people to uplift the environment. We work with the Government and give support to achieve the 2020 goals,” he said.

With infrastructure development and growth poised to become a national priority, people will become increasingly aware of the company’s direct impact on the county’s economic growth and thereby their lives, he emphasised. Along with its vision to be a vital part of the development in the country, Walkers CML will remain dedicated to achieve great prestige amongst the many corporate giants in the industry and hopes to further strengthen its presence in every sector while embracing a truly sustainable value creation process.

The company is a public quoted company and aims to grow rapidly in the future, therefore this move will allow Walkers CML to cement its place at the forefront of the Sri Lankan infrastructure development industry and reinforce itself as the only company able to provide the full spectrum of services, the company said in a statement.
www.ft.lk

Motor traders call for policy consistency from Govt.

By Charumini de Silva
Ahead of Budget 2016, the Ceylon Motor Traders Association (CMTA) yesterday called for policy consistency to continue healthy growth in the industry and raised concerns over recent policy changes made by the Government.

Noting that the ad-hoc policy changes were disturbing the free-trade flow of the industry, the association said it hoped to see long-term policy measures in the upcoming Budget.

“A stable policy framework will greatly enhance the development of the industry and we hope that these are temporary measures to curtail the current situations in the economy especially with regard to vehicle imports,” CMTA President Gihan Pilapitiya told the Daily FT.

He commended the recent policy decision announced by the Finance Ministry on the loan-to-value (LTV) ratio being revised upward to allow more than 90% from leasing facilities.

Previously, the Central Bank directed finance companies not to provide any vehicle loan amounting to more than 70% of LTV ratio of the price of a vehicle, particularly affecting the lower end of the market.

However, he pointed that 100% margin on import Letters of Credit (LCs) for vehicle imports will affect the industry significantly.

Elaborating on the expectations on the upcoming 2016 Budget, Pilapitiya said that they were looking forward to concrete positive policy directives on vehicle imports.

Leasing Association of Sri Lanka (LASL) President Nishaman Karunapala also praised the recent directive of the Government on LTV.

Non-bank finance companies are the key financiers of vehicles with leasing and hire purchase the driving force behind many financial institutions.

“The industry does not require a high upfront payment on vehicle imports and there were many concerns from the industry, therefore we did not want to curtail the growth of the internal vehicle market,” Treasury Secretary Dr. R.H.S. Samaratunga told the Daily FT.

He also noted that before imposing the new directive of 90% LTV the Ministry had a series of discussions with vehicle importers. 
www.ft.lk

NCE commends CB proposal to merge EPF, ETF pension funds

The National Chamber of Exporters of Sri Lanka (NCE) yesterday commended the proposal of the Central Bank to merge the EPF and ETF pension funds. 

According to media reports, it is proposed to merge the EPF and ETF pension funds, which collectively accounts for more than Rs. 1 trillion, with a view to simplify the operations of the two fundsand provide more benefits to employees in the private sector, the NCE said in a statement.

Through this move it is envisaged that employees who run small business entities will be able to benefitby obtainingassistance from the huge combined fund.Further it is envisaged that the operations related to the combined fund will be assigned to professional fund managers who will ensure the prudent management of the fund related to its investment, to enable private sector employee to reap optimum returns, since questions have been raised regarding the management of the two separate funds in the past, resulting in the eroding of their values.

“The chamber is of the view that the proposal when implemented will not only benefit private sector employees, but will also enable export enterprises to reduce their staff costs and other administrative costs as well as the time expended to prepare documents and returns to two separate institutions by not having to assign separate staff for the purpose.As a result productivity of the enterprises and their competitiveness in the international market place will improve,” it said.

The chamber pointed out that it proposedthis move when submitting its Budget proposals for 2014. Further, it was also suggested that a similar approach be adopted in regard to NBT and VAT.

The chamber hopes that the proposal will see the light of day in regard to its implementation, it added in a statement yesterday.
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