AIA Sri Lanka announces 2015 Third Quarter Results

AIA Insurance Lanka PLC ('AIA Sri Lanka' or the 'Company') recently announced the financial results of the Company and its subsidiaries for the nine months ended 30 September 2015.

The main highlights are:

Delivering continued premium growth
• Consolidated revenue was up 3 per cent to Rs 11,015 million, mainly driven by the increase of net earned premiums in both life and general insurance businesses, partially offset by reduced investment income due to movement in market value of equity instruments.

• Composite gross written premium (GWP) income grew by 19 per cent to......Rs 8,979 million driven by continued growth momentum in conventional life business.

• GWP of conventional life business grew 23 per cent to Rs 5,271 million accounting for 87 per cent of the overall Life GWP.

• GWP of life business grew by 14 per cent to Rs 6,093 million

• GWP of general insurance increased by 30 per cent to Rs 2,886 million

• Consolidated profit after tax amounted to Rs 95 million AIA Sri Lanka reported a consolidated profit after tax of Rs 95 million for the nine months ended 30 September 2015, compared with Rs 199 million in the corresponding period in 2014. The lower profit was mainly attributable to the increase in claims in the general insurance business. The surplus of the life insurance business is reported annually at the year end and is therefore not included in the third quarter profit.

Shah Rouf, Chief Executive Officer of AIA Sri Lanka, said: "AIA Sri Lanka delivered a strong GWP growth of 23 per cent in conventional Life business in the first three quarters of 2015, compared with the corresponding period in 2014. On 23 October 2015, we announced completion of the divestment of our general insurance business which enables us to entirely focus our resources in growing and developing our core business of life insurance in Sri Lanka."

William Lisle, Chairman of AIA Sri Lanka, said:
"AIA Group is fully supportive of AIA Sri Lanka to continue to meet the growing protection and long-term savings needs in the country, in accordance with the vision of AIA Group to become the pre-eminent life insurance provider in the Asia-Pacific region."

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SLIC to exit ‘Apollo’

By Ishara Gamage

Ceylon Finance Today: State-owned Sri Lanka Insurance Corporation Ltd (SLIC) soon will divest its controlling stake of Lanka Hospitals Corporation PLC, government sources on Friday (06) confirmed to Ceylon FT.

Both SLIC's Life and General funds have a controlling stake of 54.4% of Lanka Hospitals Corporation (formerly Apollo Hospitals) shares.

Sources said that SLIC has so far received several unsolicited bids from leading local private hospital groups and foreign investors.

"Bids were from Rs 63 and upwards per share," they said. The company's shares closed, up 1.67% to Rs 54.90 a share on Friday. It's however understood that the Government/SLIC will divest its stake to the highest bidder after calling for tenders.

Among those who had evinced interest in the hospital were Hemas, Nawaloka and Asiri, it's learnt.

The government is also planning to appoint new members to the SLIC's Director Board. According to unconfirmed reports, SLIC's controversial Managing Director T.M.R.Bangsa Jayaha will be replaced by 'Maganeguma', Chairman Keith Bernard.

Speaking to Ceylon FT, SLIC Chairman Hemaka Amarasuriya said that he was unaware about such decisions taken by top government hierarchies. Nonetheless, he said that he too was expecting a board reshuffle.

"There may be some changes," he added.

Unveiling the government's economic policy framework......in Parliament on Thursday (5), Premier Ranil Wickremesinghe said that the government will take steps to sell the shares of State Ventures such as hotels and Lanka Hospitals, as they do not match the core competencies of State owner enterprises.

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Piramal Glass Ceylon Plc achieves a successful half year Results Revenue at Rs. 3,040 million and PAT at Rs. 287 million

Piramal Glass Ceylon PLC has successfully closed the 1st half of F2016 with revenue growth of 19% to Rs. 3040 Million, & PAT growth of 67% to Rs. 287 Million against the previous year similar period.

Q2:- The Sales for the quarter under review showed a growth of 15% from Rs. 1,291 Million to Rs.1,491 Million. This was made possible due to the domestic market which continued with its positive momentum with a growth of 22% over Q2 of previous year. All sectors showed a marked improvement whilst the food & Beverage contributed significantly.

The export market achieved Rs. 252 Mn during the period under review as against Rs 276 Mn during the similar period of previous year. As a strategy the company is continuously churning the export market shift from mid mass to premium thereby utilising the capacities towards servicing the 100% requirements of the domestic market and remain active player in the export premium and value added segment.

Yet during the period the PGC exports have launched several new bottles in the USA market. Presently USA remain the 2rd largest exporting country in the company’s product portfolio.

The operating profit (PBIDT ) for the second quarter grew by 18% to Rs 329 Million.

The Profit after tax for the quarter ended 30th Sept,2015 stood at Rs 141 million as against Rs 84 Million in the corresponding period previous year.

H1:- At half year the company achieved a domestic sale of Rs.2,497 Mn as against Rs. 2,031 Mn of previous year with a growth of 23%

The export sales stood at Rs. 543 Mn as against Rs. 527Mn of previous year with a growth of 3%.

The operating profits (PBIDT) for the first half of the FY 2015-16 grew by 20% to Rs 672 million as against Rs 560 Million in the similar period of the previous year .

The Gross Profit as at date stood at 21% as against 19% of the previous year. The continuous efforts made by the operations team to improve and enhance productivity & efficiency amidst the strict quality parameters by countries such as USA, Australia contributed much towards these figures.

The company had to increase its level of trading activities to cater to the high domestic demand. At marginal margins the company opted to import some products with the sole objective of servicing its customer.

Further to above Piramal Glass Ceylon PLC was able to secure the gold ward for the Fifth consecutive year at the recently concluded 23rd National Chamber of Exporters awards. The award ceremony was organized by the National Chamber of Exporters of Sri Lanka which is the premium institute looking after the interests of export community in Sri Lanka. The Prestigious glittering award ceremony was held at the Colombo Hilton Hotel under the patronage of the Hon. Sujeewa Senasinge, Minister of State for International Trade and Hon. Dr. Harsha De Silva – Deputy Minister of Foreign Affairs along with the participation of a large gathering from business community.

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Finance companies suffer following the CB directive on vehicle leasing

By Bandula Sirimanna

Finance and Leasing companies have suffered a loss of 30 per cent in their vehicle leasing business in the past six weeks following the Central Bank (CB) directive to restrict the leasing facility to 70 per cent for vehicle purchases with effect from September 15, industry officials said.

The CB circular has driven away the prospective middle income buyers of vehicles and three wheeler buyers of low income groups, they pointed out.

Most of the finance and leasing companies recorded a loss of 60 per cent of their business and others suffered 30 per cent loss, Abans Finance Plc Managing Director Kithsiri Wanigasekera, former President of Finance Houses Association of Sri Lanka, disclosed.

He noted that limiting exposure of banks and financial institutions through the restriction leasing facility is a practice adopted the world-over to mitigate risk of default in loan repayment. Loans and advances include finance leases, hire purchases, loans and advances granted to purchase vehicles.A Finance Ministry official said restrictions on lending to import vehicles could not only control future credit growth of leasing and finance companies but also reduce loan defaults and limit a dollar outflow.

The cost of importing vehicles in the first seven months almost doubled to US $744.4 million this year, Central Bank data showed.

Mahinda Sarathchandra, President of the Vehicle Importers’ Association of Sri Lanka, told the Business Times that there was no significant impact on vehicle sales due to the change in leasing facility.A significant player in car financing in Sri Lanka are the leading car importers themselves through their own captive financing companies, he added.
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China biggest investor in Sri Lankan real estate

China, India and Hong Kong are the top three countries currently investing in the Sri Lankan real estate market, according to new research from online real estate platform, Lamudi Sri Lanka.In a media release, Lamudi Sri Lanka ranked the leading countries investing in Sri Lanka based on foreign direct investment (FDI), number of upcoming projects and buildings currently underway.

Data from the Central Bank of Sri Lanka indicates that a growing percentage of foreign direct investments have been flowing in from nations such as China, India, Singapore, Netherlands, the UK and the USA. As of 2014, over 42 percent of investments were focused on infrastructure, of which nearly 50 percent were driven into housing, property development, shopping and office complexes.

China
Data from the Central Bank of Sri Lanka confirms China is the biggest contributor to Sri Lanka’s FDI with over US$400 million in investment in 2014. Over the past five years, a high number of Sri Lanka’s infrastructure and real estate projects have been developed by China. Transportation developments financed by Chinese investments include the expressways from Colombo to Katunayake, and other major cities like Galle and Matara. 

In addition to luxury residential projects such as Avic Astoria, the long-awaited Colombo Port City, an impressive mixed development project, has been given the go-ahead by the new government. The project is slated to cost almost $1.4 billion, Lamudi said.

IndiaA growing number of private firms have shown interest in investing in Sri Lanka. From the ITC Colombo One in Galle Face and the Tata Housing project, to the Sandal Lands residential project, India is contributing a large amount to Sri Lanka’s total FDI. Indian development firms have also planned to construct 65,000 houses in Sri Lanka to assist in the resettlement of the families affected during the civil conflict.

Hong KongThe nation’s leading brand, Shangri-La, has invested in Sri Lanka in two areas: Colombo and Hambantota. The project in Colombo is a luxury mixed-use development, consisting of commercial spaces, a mall and residential units, while the project in Hambantota is focused on tourism; the construction of a luxurious hotel will accommodate the growing number of tourists every month.

Countries including Pakistan and the USA have been increasingly investing in major projects in the commercial, residential and tourism industry. Projects include the Destiny and the Hyatt Regency Hotel, the release said.
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100 % leasing facility for motor vehicles available till Dec 1

Did the Central Bank bungle or was it a bona fide error? Confusion reigned earlier this week over a direction given by the Central Bank (CB) on maximum loan facility available for leasing vehicles.

A CB issued a directive on September 14 titled “Finance Leasing Act Direction No 01 of 2015” to specialised leasing companies said from September 15th, leasing companies can grant loans or advances not exceeding 70 per cent of the value of such vehicle known in technical terms as “loan to value ratio (LTV)”.

Since then finance and leasing companies have been providing leases based on this circular (at up to 70 per cent).However on October 29, the CB issued another directive this time under the Finance Business Act (Finance Business Act Direction No 2 of 2015) saying that the circular issued dated September 14 on the LTV “shall come into force with effect from December 1, 2015”.

Confused finance companies and motor car dealers seeking clarification from the CB on a ‘somewhat’ contradictory circular, were then told by the CB that between October 29 and December 1, the earlier rates which according to the trade was unlimited credit (100 per cent or over) would be in force for the lease purchase of a vehicle.

It was pointed out by the trade that though Finance Minister Ravi Karunanayake, in a media release on October 29, has announced that the leasing facility has been increased to 90 per cent with immediate effect, that was never made formal through a CB directive. “This means, despite Government concerns of unlimited growth in motor vehicle imports (and draining of foreign exchange), a new one month window has been opened for more vehicles to be imported,” a trader said, adding however that there were other restrictions on opening LCs and a complex valuation method.

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SL listed hotels’ profits low despite rise in tourists

By Duruthu Edirimuni Chandrasekera

Public quoted hotels of some major conglomerates witnessed low profits in the past quarter, despite tourist arrivals to Sri Lanka being up by 9 per cent last month, analysts say.For the quarter ended 30 September 2015, John Keells Holdings (JKH) leisure sector saw a 23 per cent drop over the same period in the last financial year to Rs. 885 million. “…. the decline is mainly on account of the partial closure of Cinnamon Lakeside,” JKH Chairman Susantha Ratnayake said in his statement.

In the Sri Lankan segment, many coastal properties of large hoteliers continued to witness pressure on ‘Average Annual Returns (ARRs)’ which came from the higher industry inventory.One of the main reasons for this drop in profits for large hotels is the changes in trends in hotel bookings and a shift towards the informal hotel sector, analysts say. Purasisi Jinadasa, Chief Strategist Capital Alliance says that many tourists prefer to stay in unclassified hotels. “Short term rentals, bed and breakfast lodging are becoming popular,” he said.

Meanwhile, there has been a gradual shift in the source markets for the country’s tourism sector, with arrivals from traditional markets of Western Europe declining as a percentage of total arrivals whilst East Asia and East Europe have increased its market share, led by China. Analysts say that these tourists command needs and wants different to their Western counterparts. Also online hotel booking has changed the game for many small hotels. Data showed that the growth of Internet booking services has made it easier for small scale lodging providers to sell rooms to a larger market. Popular hotel reservation engine – bookings.com, lists over 3,500 properties offering accommodation in Sri Lanka compared to around 300 graded establishments in the country.

A top hotelier said that with such a facility, travellers can select from a great catalog of hotels and finally choose what they actually want. “This beats having to go to your vacation destination on a limb and then to scour the place for a hotel you like and also within your budget,” he opined. Small hotels also offer budget deals and nowadays many tourists want to experience the destination. “So many won’t stay for long or care about a hotel. It’s just a clean bed, bath and wi-fi that they want,” the hotelier added.

A sector analyst noted that while occupancies in Cinnamon Grand and Cinnamon Lakeside are falling (the closure of the latter for refurbishment is also a factor) the group’s 3-star Cinnamon Red hotel’s occupancy is high. “This is because the Cinnamon Red prices correspond to the quality it offers,” he said, pointing out that most city hotels are overpriced. Hayleys, in its 2014/2015 Annual Report has said that the hotel sector is challenged due to increase of graded room supply as several new domestic and international players expanding capacity.

“The increased supply of graded hotel rooms has led to severe price competition and margin erosion, particularly given the prevalent shift in spending patterns of tourists,” it says.
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“Progressive” tax on vehicles and luxury goods in 2016 Budget

By Bandula Sirimanna

Sri Lanka plans to unveil a “progressive” tax on vehicles, luxury and semi luxury goods, and imported food items in a bid to increase revenue and bridge the 2016 budget deficit.

The new tax rate on these luxury goods and vehicles is yet to be finalised, official sources said adding that it is likely to be around 5 per cent.

The 2016 Budget to be presented on November 20 is aimed at increasing tax to GDP ratio to a 14 to 15 per cent from 10.5 per cent at present.

VAT on vehicles at the import and selling point which was removed from the 2015 budget presented by the Rajapaksa regime and a new tax levied at the point of sale, will be re-introduced, a senior Treasury official said.

He said that the government is also considering the possibility of abolishing VAT on goods and services and bring it under the new “progressive tax” which will be levied on invoices.Motor traders said that the new policy will further increase the prices of vehicles and affect sales making it difficult for small motor dealers to survive.

Motor traders will recover the new tax money from buyers and the end result would be a vehicle price hike, Director of Lekhraj Automobiles (PVT) Ltd, Mahen L. Ganwani told the Business Times.He disclosed that small and medium scale importers of vehicles are under severe pressure with the new requirement of an annual licence fee of Rs.1.5 million introduced in the 2015 budget for brand new and used vehicle importers.

“This licence fee is unbearable for small and medium importers who cannot even pay heavy import duties at present.” he added.

VAT may be replaced by old BTT

The Ministry of Finance is considering replacing the Value Added Tax (VAT) with the old Business Turnover Tax (BTT) or Turnover Tax which was discontinued before 2000, sources said. 

“There’s a discussion going on currently on whether to replace VAT with BTT,” a Ministry source told the Business Times. The source said that the Ministry is concerned on issues pertaining to low revenue as many businesses evade VAT payments. “The revenue has dropped drastically over the years owing to VAT,” he said, adding that it was introduced to mitigate the cascading effect on domestic consumption goods and services.(Duruthu)

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