Sri Lankan shares fall for 5th day on rising interest rates

Reuters: Sri Lankan shares fell for a fifth straight session on Friday and posted their lowest close in five weeks, as rising interest rates and lack of new catalysts dented investor sentiment.

The benchmark Colombo stock index ended 0.07 percent, or 4.61 points, weaker at 6,519.23, its lowest close since April 29. It declined 0.8 percent this week, its third straight weekly fall after gaining for six consecutive weeks.

Treasury bill yields rose between 4 and 35 basis points to near three-year highs in the two weekly auctions through Wednesday despite the central bank leaving key policy rates steady for a third straight month on May 20.

"Investors are waiting to see some positive news and earnings are also not healthy," a stockbroker said asking not to be named.

Stockbrokers said a rise in interest rates could be detrimental to risky assets if they jumped beyond 12 percent. The average prime lending rate (AWPR) edged up 15 basis points to 10.15 percent in the week ended May 27.

Analysts said market sentiment remained weak as investors were waiting for catalysts such as a big foreign direct investment or initial public offering or inflows from the International Monetary Fund (IMF).

Investors are also concerned about foreign investment outflows, they added, with overseas investors offloading a net 5.54 billion rupees ($37.74 million) worth of equities so far this year. Foreign investors bought shares worth a net 49.2 million rupees on Friday.

Turnover stood at 739.8 million rupees, just below this year's daily average of around 791 million rupees.

Shares of Sri Lanka Telecom Plc dropped 3.51 percent, while those of Ceylinco Insurance Plc fell 0.39 percent. 

($1 = 146.8000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez)

Sri Lanka’s Cargills net up 39-pct in March with improved margins

(LBO) – Profits at Sri Lanka’s Cargills group, with interests in retailing and fast moving consumer goods, rose 39 percent to 412 million rupees in the March quarter, the interim accounts showed.

The group reported earnings of 1.84 rupees per share for the quarter against 1.33 rupees recorded in the previous year.

Group sales rose 27 percent to 18.8 billion rupees and sales costs rose at a slower 24 percent to 16.6 billion rupees posting a gross margin of 2.2 billion rupees, up 60 percent.

Total operating expenses rose 8 percent to 1.6 billion rupees and net finance costs rose 30 percent to 159 million rupees.

In the twelve months to March, the group reported earnings of 7.25 rupees per share on total profits of 1.6 billion rupees.

In segmental analysis, retail sector operating profits rose 80 percent to 1.7 billion rupees in the year and fast moving consumer goods jumped 134 percent to 1.6 billion rupees.

69 million rupees loss of restaurant sector has turned to a 124 million rupees profit in the year against the previous year.

By the end of financial year there were 1,857 public shareholders holding 20.49 percent of company shares.

The liability of the group for super gain tax amounted to 57.8 million rupees.

Cargills Bank Limited has been accounted as an associate of the Company based on the nature of the controlling interest of the company in Bank.

The shareholding of the company in Cargills Bank was 18.22 percent as at 31 December 2015.

The company has invested 1.3 billion rupees to acquire 88 million additional shares of the bank that were allotted on 10 May 2016.

Sri Lanka’s LOLC March net up 46-pct amid growing incomes

(LBO) – Sri Lanka’s LOLC group, which has interests in financial services, insurance, plantations, trading and leisure, said net profit for the March quarter rose 46 percent to 2.3 billion rupees.

The group reported earnings per share of 4.83 rupees for the quarter up from 3.31 from a year earlier and the stock closed at 86.00 rupees at CSE on Thursday.

The group reported interest income of 11 billion rupees for the quarter, up 43 percent, and interest expenses rose at a faster 79 percent to 6.1 billion rupees, resulting in net interest income growing at a slower 15 percent to 4.9 billion rupees.

Interest income represents the income receivable for the period on all contracts, rentals on operating leases, income on factoring of client debtors, earned premium on insurance contracts and IT service fees.

Revenues up 89 percent to 5.6 billion rupees and cost of sales rose at a slower 54 percent to 2.8 billion rupees making gross profits to rise at a faster 145 percent to 2.8 billion rupees.

Revenue includes revenue from trading, manufacturing, plantation and other activities of the group.

Net impairment charges fell 53 percent to 801 million rupees while personnel costs rose 133 percent to 3.9 billion rupees.

Direct expenses excluding finance costs fell 17 percent to 1.0 billion rupees while other operating expenses fell 35 percent to 1.6 billion rupees.

In the twelve months to March, the group reported earnings of 17.93 rupees per share on total profits of 9.3 billion rupees.

In the segmental analysis, financial services sector profits rose to 9.6 billion rupees in the year, up from 7.0 billion rupees in the previous year.

Manufacturing and trading sector profits rose to 1.1 billion rupees from 577 million rupees last year.

Plantation and hydro power sector has recorded a loss of 669 million rupees while leisure and entertainment segment posted a loss of 617 million rupees.

As at the end of March 2016, financial assets were fair valued at 276 billion rupees and financial liabilities were fair valued at 278 billion rupees.

The public shareholding at the end of March was 15.50 percent comprising of 3,100 shareholders.

Sri Lanka central bank bond auctions to be more transparent

ECONOMYNEXT – Sri Lanka’s central bank intends to change its Treasury Bond auction practices, being more transparent and adopting international best practices, it announced in a statement which came amid rising concern over auction rigging and insider dealing.

The Employees Provident Fund, the government pension fund, is to actively participate at the primary auctions, the statement of the Monetary Board of the central bank said.

The central bank bond management team would hold pre-bid meetings with all the Primary Dealers to share information on market developments and have a clearly defined auction calendar, it said.

The full statement follows:

This refers to the recent articles and discussions relating to the Treasury bond auctions that took place during the latter part of March 2016, where allegations of lack of transparency were made with regard to the process that was followed. Attention of the public is drawn to the fact that the process followed was similar to what has been in practice since February 2015 when a complete market based mechanism was introduced in auctioning of Treasury bills and bonds.

The Monetary Board noted the large resource needs of the Government. Further, in the context of Monetary Policy actions, mainly the upward adjustment of the Statutory Reserve Requirement (SRR) at the beginning of the year and the subsequent upward adjustment of the policy interest rates, had resulted in an increase in yield for Treasury bills and Treasury bonds.

Given the existing and emerging financial needs of the Government, the Monetary Board has recommended;

1) The relevant management team:

a. to hold pre-bid meetings with all the Primary Dealers to share information on market developments and to have a clearly defined auction calendar,

b. to examine the international best practices with respect to volumes advertised and accepted at public auctions and propose to the Board as to how the Central Bank should adopt such practices, and

2) The Employees Provident Fund to actively participate at the Primary Auctions

LafargeHolcim to exit $150 mn a year cement business in Sri Lanka

ECONOMYNEXT - Switzerland-based LafargeHolcim, a materials group, is exiting Sri Lanka's cement business where it operated the island's only integrated factory and had annual business volumes of $150 million.

A spokesperson said the decision to sell Holcim Lanka was part of a larger global divestment strategy of the Swiss materials group.

Market sources say at least three Sri Lanka-based firms are vying to buy the firm including a diversified listed company and a politically prominent privately-held business group.

The group has been exiting a number of countries following its merger with Lafarge. In India, Lafarge units are on sale.

Holcim owns Sri Lanka's only integrated plant that made cement straight from domestic limestone, a grinding plant that used imported clinker, and a bagging plant that uses foreign-made cement.

The Swiss group first tookover a state-run cement factory in Puttalam in the West Coast of Sri Lanka from a Pakistani firm, which bought it during a privatization drive over two decades ago.

The group sold 1.7 million tonnes of cement in 2015 worth about Rs23.4 billion a year, according to published data.

Sri Lankan professional bodies tolerating unethical conduct: SEC chief

ECONOMYNEXT – Professional bodies and trade chambers in Sri Lanka were not taking action against unethical conduct of their members, undermining efforts to inculcate and enforce business ethics, the head of the capital markets regulator said.

Proper implementation of business ethics in organizations can ensure maximization of lawful profits and effectively protect the interests of all stakeholders, said Thilak Karunaratne, chairman of the Securities and Exchange Commission (SEC).

“This eventually can ensure a viable and competitive business environment,” he said in a speech at the Junior Chamber International Biz Meet 2016

“It is very important that organizations practice business ethics in order to ensure good governance in their organizations.”

Most of the trade chambers, professional bodies and similar organizations in Sri Lanka have codes of ethics or codes of conduct, Karunaratne said.

“Some are very well documented. They expect their members to be ethical,” he said. “But how many of these institutions have taken action against their members for not conforming to these? My own experience is very rarely, if at all.”

Karunaratne also spoke about the importance of ethics in capital markets, a source that fuels business activities.

He recalled how in 2012 he quit as chairman of the SEC when he “was confronted by the highest in the land” and “stood up for what was just as I was not ready to trade my values.”

In the stock market stakeholders are expected to inculcate professionalism and ethics in all their dealings in order to foster trust, he said.

“We experienced how the market had to pay dearly during 2010/ 2011 due to the actions of few individuals who resorted to unethical and downright scandalous methods of manipulating the market,” he said.

“It is with great concern and distress I reflect on how attempts were made by again a few investors, stockbrokers, investment advisors and even influential politicians to transform the market to a casino during the previous regime. Market manipulation was the talk of the day.

“In the process a large number of innocent and ignorant small time investors who followed with herd instinct these manipulators got ruined and we are still in the process of giving some redress to these investors. These unethical behaviour patterns were well grounded on unlimited greed and power politics.”

Expolanka March quarter net down 31-pct

ECONOMYNEXT - Expolanka Holdings PLC said March 2016 quarter net profit fell 31% to 150 million rupees from a year ago.

Sales were stagnant at 14 billion rupees, according to interim accounts filed with the stock exchange.

The accounts showed a sharp 214% increase in income tax costs to 207 million rupees during the March quarter.

Earnings per share were eight cents in the quarter. In the year ending 31 March 2016, EPS was 57 cents with annual net profit up 26% to 1.1 billion rupees while sales rose six percent to 56 billion rupees.

Expolanka Holdings chief executive Hanif Yusoof said the year’s results were mainly driven by the sustained performance of the Indian sub continent along with market growth in Indonesia, Vietnam, Hong Kong, USA and China.

“Both sea and airfreight businesses recorded healthy volume growth driven by positive sentiments in the US trade lane,” a statement said.

Yusoof said the group looked to yield the benefits of the restructuring process by focusing on the growth of core business.

“Our focus remained on improving operational efficiencies,” he said in a statement.

“In the next financial year, we hope to focus more on high growth markets and provide more solutions based services for freight and logistics whilst looking at process improvements and leveraging on technology enhancement that we’ve already put in place.”