Sri Lanka shares post near four-month closing high; telcos lead

Reuters: Sri Lankan shares rose for a second straight session on Friday to hit their highest close in about four months, led by telecom stocks amid foreign investors' buying.

However, the gains were capped as investors were worried that the island government's move to increase the value added tax (VAT) and impose new taxes effective from Monday would hit the bottom lines of companies.

The benchmark stock index rose 0.21 percent to 6,592.45, its highest closing level since Jan. 11. For the week, it gained 1.2 percent, its fifth straight weekly rise.

"It looks like the market is continuing to move up at a slow pace with some foreign selling pressure on big-cap shares," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

"High interest rates and earnings yet to be released will have an impact on the market."

Foreign investors, who have sold equities worth 2.88 billion rupees ($19.84 million) so far this year, were net buyers for the second straight session on Friday. They bought a net 71.7 million rupees worth of shares.

Turnover stood at 701.2 million rupees, less than this year's daily average of around 777 million rupees.

Leading fixed line phone operator Sri Lanka Telecom Plc jumped 6.03 percent, while conglomerate John Keells Holdings Plc rose 0.58 percent. 

($1 = 145.1500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lanka railways' losses fall

ECONOMYNEXT – Operational loses at Sri Lanka’s state-run railway fell 30 percent to Rs7.7 billion in 2015 from the year before, but fares remained unchanged even though urgent modernisation was needed to improve service.

The number of passengers carried grew because of the resumption of services in the former war zone and worsening traffic on roads, but freight carriage fell, Sri Lanka Railways (SLR) said in its annual report for 2015.

“Introducing market-oriented fare schemes, while permitting concessionaries to the lowest fare segment, would help improve the financial position of SLR,” it said.

Sri Lanka Railways' total revenue increased 7.2 percent to Rs6.3 billion, reflecting an increase in passenger transportation.

“Recurrent expenditure declined substantially by 17.1 percent to Rs14.0 billion, leading to a decrease in operational losses to Rs7.7 billion in 2015, when compared to the loss of Rs11.0 billion recorded in 2014,” the Central Bank said.

“However, rail tariffs were kept unchanged in spite of continuous operational losses made by SLR.”

Despite some improvements, the quality of train services remains “sub-standard”, the report noted.

Key concerns included the shortage of trains and compartments during peak hours; lower demand for train services during off-peak hours; the lack of value-added services, including luxury and intercity train services; the inability to operate on time on a sustainable basis; and inadequate emphasis on goods transportation.

“The availability of a reliable and comfortable train service could attract the general public towards mass transit,” the Central Bank said.

It suggested partnerships with the private sector to upgrade and expand the railway network to increase capital infusion, including electrification of the railway, and introducing faster and comfortable intercity services.

Modernising signalling and telecommunication systems to ensure a timely service delivery and promoting rail ervices as a cost-effective alternative for goods transportation are essential in improving the quality of railway services, it said.

Sri Lanka's CPC loses Rs18 billion in 2015 on price cuts and currency collapse

ECONOMYNEXT - Sri Lanka's Ceylon Petroleum Corporation has lost Rs18 billion in 2015, plunging it into the red, following politically directed price cuts in 2015 and a currency collapse, despite sharply lower oil prices.

"In spite of falling international oil prices, CPC’s financial position weakened during the year," the Central Bank said in its 2015 annual report.

A series of price cuts in the beginning of the year and a fall in the rupee, which pushed up the cost of dollar borrowings and payments to suppliers, drove the state-run distributor back into the red.

Exporting Naptha, which is usually sold to the Ceylon Electricity Board, also lost the firm Rs6.2 billion.

Sri Lanka's Finance Minister Ravi Karunanayake ordered several price cuts to fuel in 2015. Kerosene was cut for the second time during a revised budget. Kerosene, which is similar to jet fuel, is the most expensive to import and is now used by big businesses as it is underpriced.

The Central Bank said taxes were not cut to match the price cuts. By not cutting taxes on state enterprises for deceptive 'reliefs' given through budgets, the deficit can be falsified.

SOEs are then bailed out later, also outside the budget, again understating the deficit.

CPC was able to repay loans in the first eight months of the year, but its liabilities ballooned Rs18.9 billion to Rs264.5 billion after the rupee collapsed in the latter part of the year.

CPC has been misused to borrow dollars or run arrears to foreign suppliers during balance of payments troubles in the past, which is triggered by Central Bank money printing.

"The introduction of an appropriate pricing formula for domestic petroleum products is essential to improve the financial viability of the CPC," the Central Bank said, echoing the calls of other economists and analysts.

Analysts say the loss from exporting Naptha, a heavy fuel, probably also shows that the product is overpriced to CPC, and a market base for Naptha may improve the 'merit order' of CEB power plants using Naptha.

Economists and analysts have called for a reform of the Central Bank, or its abolition in favour of a currency board to prevent is ability to print money, resist market rate interest rates and generate currency collapses.

Nestlé Sri Lanka unit March net up 10-pct

ECONOMYNEXT – The Sri Lankan unit of food multinational Nestlé said March 2016 quarter net profit rose 10.1 percent to almost 1.3 billion rupees from a year ago.

Sales rose 9.1 percent to 9.8 billion rupees, a stock exchange filing said.

Earnings per share for the quarter were 23.74 rupees compared with 21.56 rupees the year before.

A company statement said its ‘Out-of-Home’ food and beverage solutions arm, Nestlé Professional, launched a proprietary cool beverage dispenser made with advanced smart technology, NestléCoolpro.

The machine provides a beverage, Nestlé Sjora, with a flavour fusion combining mango, peach and milk.

Nestlé also has opened a new milk chilling centre in the North-Eastern town of Vaddakkachchi in line with its plans to develop its milk procurement network in the north.

Singer records excellent growth in Revenue and Net Income in Q1

The Singer Sri Lanka Group generated Group Revenue of Rs. 10.6 billion in the first quarter of 2016 representing a dynamic growth of 23%.This is in addition to strong growth achieved last year capping a record 57% increase over two years.

Group Net Profit for the 1st Quarter was a high of Rs. 809 million, an increase of 191% when compared with the previous year.

The company only Net Profit generated for the 1st Quarter was Rs. 215 million, an increase of 74%.

Successful initiatives undertaken by the Group and the stable business environment have contributed to the growth in both revenues and net income.

Pursuing new-growth initiatives including opening additional shops, adding new dealers and channels of distribution, improving and renovating shops, securing new brands and distributorships, introducing new products and improving processes have immensely contributed to the Group’s strong results.

Other significant initiatives comprise the launch of the new Singer Smart TV range under sub-brand Singer Vista, the opening of Digital Media Corners in retail shops, expansion of capacity at the refrigerator factory, introduction of new furniture brand for Dealers and the thrust into dealer markets for computers and furniture. Additionally, the Group continued its successful campaigns for refrigerators and air-conditioners.

Product lines in most sectors recorded noteworthy growth; refrigerators grew by 22%, sewing machines by 11%, smart mobile phones grew by 65%, deep freezers by 33%, computers by 18%, washing machines by 14%, air conditioners by 114%, air coolers by 108% and fans by 58%.

Noteworthy were contribution to revenue by the new Distributorships/Brands of DELL, SONY, SHARP and MITSUBISHI, obtained in 2014 and 2015. These recorded sales of Rs. 1.0 billion during the quarter, an increase of 52% in comparison to the previous year.

Singer Sri Lanka’s acquisition of majority stakes in Singer Industries (Ceylon) PLC and Regnis (Lanka) PLC from its parent company Singer (Sri Lanka) B.V. followed a one-time gain amounting to Rs. 443 million.

Q1 revenue at Singer Finance (Lanka) PLC, the company’s other public listed subsidiary, increased 8%, however, net profit decreased by 20%.

This is mainly due to average borrowing rates increasing faster than average lending rates immediately after a sharp increase in interest rates and also due to the initial operating costs of its credit card operations. It is expected to stabilize in the coming months.

The Company’s subsidiary Singer Digital Media Limited, which undertakes the sale of mobile phones to the trade channel posted Rs. 1.5 billion revenue to external parties.

Singer Group’s Q1 2016 marked by a strong performance in revenues and net income heralds an excellent start to the year. 

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