Sri Lankan shares edge up; turnover rises to 12-wk high

Reuters: Sri Lankan shares ended slightly stronger on Tuesday after posting their lowest close in more than two weeks in the previous session, although concerns about rising interest rates continued to hurt investor sentiment.

Turnover rose to a 12-week high at 2.41 billion rupees ($15.93 million), around four times this year's daily average of 670.8 million rupees, boosted by a stake sale in Kotmale Holdings Plc.

The Colombo stock index ended up 0.2 percent at 6,134.28, after closing at its lowest since Feb. 9 on Monday.

"Crossings pushed the turnover," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

"Investors are still worried about economic conditions and rising interest rates."

Kotmale shares closed unchanged, while conglomerate John Keells Holdings Plc jumped 1.64 percent and Ceylon Cold Stores Plc rose 4.28 percent.

Foreign investors, who have been net buyers of 487.7 million rupees worth of equities so far this year, net sold 93.02 million rupees of shares on Tuesday.

Yields on treasury bills have risen to a more than four-year high since October, while the central bank has kept key policy rates on hold. 

($1 = 151.2800 Sri Lankan rupees) 

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

Sri Lankan shares hit 2-1/2-week closing low; block deals boost turnover

Reuters: Sri Lankan shares fell on Monday to hit their lowest close in more than two weeks as investors were worried over rising interest rates, but foreign buying and block deals in Expolanka Holdings boosted the turnover.

Foreign investors net bought 716.2 million rupees worth of equities on Monday, reversing the year-to-date net foreign outflow to an inflow of 580.7 million rupees worth of equities so far this year.

The Colombo stock index ended down 0.24 percent at 6,122.04, its lowest close since Feb. 9.

"Selling pressure on John Keells brought the market down," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

"Investor sentiment is negative due to the rising interest rates and most of the investors are on a wait-and-see approach," he added.

Shares in conglomerate John Keells Holdings Plc slid 1.20 percent, while Hatton National Bank Plc slipped 2.04 percent.

Expolanka Holdings Plc, which accounted almost half the day's turnover, climbed 1.72 percent on foreign buying.

Turnover stood at 1.35 billion rupees ($8.90 million), well more than this year's daily average of 625.2 million rupees.

Yields on treasury bills have risen to a more-than-four-year high since October, while the central bank has kept key policy rates on hold.

($1 = 151.7500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sherry Jacob-Phillips)

Commercial Bank first private bank to cross Rs. 1 trillion in assets in 2016

The Commercial Bank of Ceylon PLC continuing its good performance has reported profit before income tax (PBT) of Rs. 20.051 billion for 2016, marking the end of a spectacular year in which it made history as the first private bank in Sri Lanka to surpass a trillion rupees in assets.

In a media release, the bank said Profit before Value Added Tax (VAT) grew by 18.58 per cent to Rs. 23.755 billion. It said, that an increase in the financial VAT rate from 11 per cent to 15 per cent for four of the 12 months reviewed had resulted in the bank’s VAT expense for the full year increasing by 28.17 per cent to Rs. 3.703 billion, from Rs. 2.889 billion paid for 2015.

The 16.96 per cent growth achieved in PBT was bettered by the growth in profit after tax, which improved by 21.92 per cent to Rs. 14.513 billion during the year ending December 31, 2016, the media release added.

The bank paid Rs. 9.385 billion in taxes in respect of the year reviewed, an increase of 15.78 per cent even after discounting the Rs. 2.570 billion paid in 2015 as Super Gains Tax.

Commenting on these results, Commercial Bank Chairman Dharma Dheerasinghe, was quoted as saying: “The bank can take pride in the performance milestones reached in 2016, which reflect its ability to maintain its growth trajectory even in a rapidly changing environment. Doubling key components of our balance sheet in five years is no mean feat, and 2016 contributed significantly to this achievement.”

Managing Director/CEO Jegan Durairatnam observed that “Improvement in asset quality and a stable rating are testimony to balanced growth, while improving Return on Equity (ROE) attest to the direction of growth in our 48th year. The improvement in asset quality was key to improving profitability and reflects strong credit processes and an improved risk culture, particularly in our front lines which are responsible for accepting risk.”

Gross income of the bank improved by Rs. 15.275 billion or 19.62 per cent to Rs. 93.143 billion helped by a strong contribution from core banking activities with increased business volumes, which boosted interest income to Rs. 80.738 billion, a growth of 22.27 per cent, and Fee income increasing by 29.76 per cent to Rs. 8.143 billion principally through the growth of trade financing and card related business in the year reviewed.

Net loans and advances increased at a higher 21.24 per cent to Rs. 616.018 billion due to a reduction in impairment provisions required consequent to rigorous recovery efforts that resulted in a drop in non-performing loans (NPLs) in absolute terms, the bank said.

Deposits grew by 18.50 per cent to Rs. 739.563 billion as at December 31 2016.

www.sundayobserver.lk

Unit Trust firms consider winding up, consolidation amidst regressive taxation

By Duruthu Edirimuni Chandrasekera

Removing tax incentives to the unit trust industry will see many asset management firms dealing mostly in unit trusts winding up or selling their firms to bigger counterparts, a top official said.

“There’s an acute disparity between the taxation say of a fixed deposit and a unit trust. This will force asset management firms to wind their unit trust businesses. We are certainly thinking about it,” Dilshan Wirasekara, CEO First Capital Holdings PLC which has an asset management business told the Business Times.

Since the inception of unit trusts in Sri Lanka, the Government has been granting some tax concessions to promote the industry. Through the 2012 Budget proposals the profits and income from redemption of units were exempted from income tax in the hands of the investors. This assisted the industry to collect funds from corporate investors who could enjoy a tax benefit of 18 per cent when investing in unit trust funds.

In the recent budget proposals, such benefits to corporate investors have been removed. This may initially result in an outflow of funds from the industry and exert pressure on the unit trust management companies, P. Asokan, Consultant SEC told the Business Times.

Removing the tax break would not be a problem as long as there is a level playing field between the tax impact to an investor investing through a unit trust fund or investing directly in a financial instrument such as treasury bills, bonds, debentures, commercial paper or bank fixed deposits is what the industry is calling for.

The basis for any investment should be the tradeoff between the risk you take and the return you get for taking the risk; and not the tax rate, said Vindya Jayasekera, Vice President NDB Wealth Management Ltd. “The budget 2017 proposes a withholding tax of 5 per cent for individuals investing in bank deposits while unit trusts would be subject to a 14 per cent withholding tax. Similar tax differentials proposed at various levels creates an unequal playing field and ultimately could lead to the deterioration of an industry that is established globally to improve investment opportunities to retail investors and enhance financial market efficiency,” she explained.

Unit Trusts provide investors opportunities to invest in markets like treasury bills, bonds, commercial paper etc. which most may not have access to. In spite of the benefits available to retail investors, the industry remains small and under-penetrated with assets of Rs. 100 billion (versus bank assets over Rs. 8 trillion), Ms. Jayasekera added. One reason for this, she says is that it may be because the tax rate for individual investors in unit trusts (10 per cent) was higher than the tax rate applicable to bank deposits (2.5 per cent) creating an unequal playing field between bank deposits and unit trusts for individual investors.

Mr. Wirasekara added that his firm will be focusing more on the wealth management business of their asset management firm. “We’ll be focusing on wealth management and products such as retirement planning.”

While the SEC has made representations pertaining to this, the word on the street is that these same budget proposals will remain.

However, creating a level playing field in taxation between unit trusts and bank deposits will certainly improve investor participation and in turn broadbase the asset ownership and increase efficiency of capital market, is what all industry participants say.

On the other hand the absence of this tax will persuade the unit trust management companies to focus on increasing their retail investor base and promote equity funds as these funds will continue to remain tax exempted in the hands of the investors, Mr. Asokan added.

www.sundayobserver.lk

Pan Asia Bank posts record pre-tax profit of Rs.1.8 bln

Pan Asia Bank has closed its 2016 year recording a profit before tax of Rs 1.8 billion, up by 17 per cent over the previous year.

In a media release the bank said its post-tax profit was Rs.1.25 billion, surpassing its previous earnings record.

“This commendable performance is a result of the combination of factors from the timely re-pricing of assets and liabilities, re-calibration of assets in to more remunerative areas, better recoveries and asset quality, the relatively strong growth in loans and receivables and better management of costs in all areas of the banking business during the year,” the bank said.

Commenting on the performance, the bank’s Acting CEO, Lalith Jayakody attributed the performance to the proactive measures taken to successfully acclimatize the bank to the rising interest rate scenario from the beginning of 2016.

“Although the economic conditions were less supportive towards the banking and the financial services sector due to rising interest rates and the tightened credit conditions, we could still achieve these record numbers because we remained nimble to adjust ourselves fast to the new economic order. Our continuous efforts on upgrading the skills of our staff, improving the efficiency of our systems and processes by keeping a closer tab on our costs and investing in growth areas did yield us these record earnings,” he said.

The Return on Equity (RoE) which measures the return generated towards the shareholders, a widely used performance matrix in the banking industry stood at 19.97 per cent, above the industry average of 17.30 per cent. Pan Asia Bank remains among the few banks which have a RoE with a 20 per cent level, the release added.

Total operating expenses rose by 18.24 per cent predominantly due to increase in staff related expenses and other overhead expenses due to impact of tax hikes and inflationary pressures.

www.sundayobserver.lk

Senthilverl sells 11% of Bogawantalawa to Metropolitan

Dr. T. Senthilverl, a major investor in companies quoted on the Colombo Stock Exchange, had last week sold a 9.3 million share block (1l.1%) in Bogawantalawa Tea Estates PLC to Metropolitan Resource Holdings PLC, the controlling shareholder of Bogawantalawa at Rs. 10 a share, the Secretaries to Bogawantalawa disclosed in a Stock Exchange filing.

Seylan Bank achieves milestone - Profit After tax exceeds Rs. 4 billion in 2016

Results at a glance

* Total assets up by 20% to Rs. 356Bn

* Net Loan book grows by 22% to Rs. 236Bn

* Customer deposits grows by 22% to Rs. 273Bn

* Profit after tax improves by 4.7% to Rs. 4,010Mn

In the backdrop of challenging external environment, Seylan Bank reported a resilient performance. The Bank recorded a Profit after tax of Rs. 4,010 Million for the year ended 31st December 2016, which is the highest profit reported since its inception.

Net interest income recorded a moderate growth of 12.03% as a result of the strong balance sheet growth. Net interest Margin contracted from 4.42% in 2015 to 4.19% in 2016 due to Cost of deposits increased at a faster rate.

Net fee and commission income witnessed a 15.04% growth from Rs. 2,697 Million to Rs. 3,103 Million during 2016, mainly attributed to core banking related business.

Other operating income comprising of net gains from trading, gains on financial instruments, gains on foreign exchange and other income decreased by 13.05% from Rs. 1,624 Million reported in 2015 to Rs.1,412 Million during 2016 mainly as a result of mark- to-market losses on Government Securities, due to the upward movement in interest rates.

Total Expenses recorded an increase of 12.76% from Rs. 8,625 million to Rs. 9,725 million. Expenses growth was witnessed by a higher proportion of investments being made towards branch upgrading and refurbishments, continuous development in human resources and technology which resulted in the underlying expenses increasing rapidly over the previous period. Bank continues to focus on Cost Management through strategic cost management initiatives and through the implementation of lean concepts.

The Bank reported a significant net credit growth of 22.22%, with net advances growing from Rs. 193,104 Million to Rs. 236,020 Million during 2016. The Gross NPA ratio has also improved to 4.47% in 2016 compared to 4.68% in 2015.

CASA growth slowed down with a notable shift from low cost to fixed deposits seen across the industry mainly due to increasing interest rates. As a result Bank’s CASA ratio (current & savings accounts) stood at 32.5% and total Time Deposits increased from 63.71% by end of year 2015 to 67.5% as at 31st December 2016 of the total deposit base. The overall deposit base recorded a growth of 21.79% from Rs. 224,525 Million by end of 2015 to Rs. 273,456 Million by 31st December 2016.

Consequently, the Bank’s Earnings per Share (EPS) grew from Rs 11.11 to Rs. 11.63. The Bank recorded a Return (profit before tax) on Asset (ROA) of 1.76% and Return on Equity (ROE) of 15.18%. The Bank’s Net Asset Value per share as at 31st December 2016 was Rs. 80.51 (Group Rs 84.13).

By end 2016 the Bank network comprised of 166 Banking Centres, 100 Student Savings Centres and 202 ATMs. Bank will continue to grow the Branch network to reach a larger spectrum of customers and widen the Bank’s geographical presence mainly to strengthen their on-going support for the growth and development of Small and Medium Scale (SMEs) Enterprises in the country. Further the Bank also re-located and refurbished 14 branches during the period to provide enhanced services to its customers.

The Bank remains well capitalised with a strong core capital adequacy ratio of 10.74% and total capital adequacy ratio of 13.18% as at 31st December 2016. In October 2016, Fitch reviewed the Bank’s rating and reaffirmed the Bank’s rating at ‘A-lka’ with a ‘stable’ outlook in January 2017.

Having successfully completed its 2012-2016 strategic plan and achieving significant strides in terms of SME coverage, retail growth, branch expansion and process improvement the Bank embarked upon developing its new 2017-2020 strategic plan in consultation with the Boston Consulting Group. The new plan will focus on an ambitious growth strategy built on the pillars of excellent customer service, product innovation and value addition aided by digital transformation.

As a responsible corporate citizen, the Bank continued focusing on education which has been the choice and centre of attention of its CSR activities. During the year 40 school libraries were opened taking the overall number of libraries opened under the project to 120 under "Seylan Pehesara" Project.

Media Contact

Tilan Wijeyesekera DGM (Marketing) Seylan Bank – 077 2268 600

Adahas PR : Kumar de Silva 0777 379 973.Tharindra Abeysekera 0777 560 611

www.island.lk

AIA Delivers Another Excellent Set of Results

VONB up 28per cent on constant exchangerates

Operating profit up 15 per cent — Final dividend up 25 per cent

The Board of Directors of AIA Group Limited ("AIA"; or the "Company"; stock code: 1299) is pleased to announce that AIA has delivered excellent results for the year ended 30 November 2016. Highlights are shown on a constant exchange rate basis:

Excellent growth in value of new business (VONB)

* 28 per cent growth in VONB to US$2,750 million

* 31 per cent increase in annualised new premiums (ANP) to US$5,123 million

* VONB margin of 52.8 per cent

Strong operating profit generation

* IFRS operating profit after tax (OPAT) up 15 per cent to US$3,981 million

* IFRS operating earnings per share up 15 per cent to 33.25 US cents

* Embedded value (EV) operating profit up 19 per cent to US$5,887 million

* Operating return on EV (ROEV) increased to 15.4 per cent

Robust cash flow and resilient capital position

* Underlying free surplus generation of US$4,024 million, up 11 per cent

* Free surplus of US$9.8 billion

* EV Equity of US$43.7 billion; EV of US$42.1 billion, up 12 per cent

* Net remittances of US$2.0 billion

* Solvency ratio for our principal operating company, AIA Co., of 404 per cent on the HKICO basis

Significant increase in recommended final dividend

* 25per cent increase in final dividend to 63.75 Hong Kong cents per share

* Total dividend of 85.65 Hong Kong cents per share, an increase of 23 per cent

Mark Tucker, AIA’s Group Chief Executive and President, said:

"AIA has delivered an excellent set of results in 2016. We have achieved record new business profits, significant earnings growth, strong free surplus generation and a step up in shareholder dividends. Today’s headline figures, with VONB up by 28 per cent, and our consistent track record of year-on-year profitable growth are the direct result of the strong fundamental growth drivers in the Asia-Pacific region, our highly-diversified and resilient business model and our commitment to building a high-quality, sustainable business for the long term.

"The Board has recommended a further step up of 25 per cent in the 2016 final dividend from our higher base in 2015 to 63.75 Hong Kong cents per share. This dividend uplift reflects our excellent financial performance and our confidence in the future outlook for the Group.

"AIA has been in Asia for close to a century. The powerful structural economic, social and demographic changes taking place across the region present an unparalleled opportunity for the Asian life insurance industry and one which AIA, with our distribution reach, trusted brand, financial strength and people capabilities, is in an advantaged position to capture.

"We have made an excellent start to 2017 with strong value of new business growth in the first two months of our financial year. We have clear strategic priorities in place and are committed to building on our strong competitive advantages by helping our customers meet their long-term financial needs through our products and services. This provides us with a strong foundation to deliver profitable growth and long-term value for our shareholders, as we help our customers live longer, healthier, better lives and plan for a brighter future."

www.island.lk

Hotel Nippon opens to public after Rs400mn refurbishment

(LBO) – Sri Lanka’s Hotel Nippon has reopened for tourists looking for a more sophisticated level of accommodation with a 400 million rupee renovation and refurbishment.

“The hotel aims to cater to a completely new demographic and is equipped and designed to receive guests with various needs,” the hotel said releasing a statement.

“It aims at medical tourists, budget travelers looking for a more sophisticated level of accommodation, the business tourist who wants to be close to the Central Business district.”

The building was first built as Manning Mansions, apartments for the British during their rule, and was later converted to Hotel Polski briefly and then Hotel Nippon.

It is currently owned by 4 brothers: V.K. Chandrasena, V.K. Vasan, Dr. V.K. Valsan and the late V.K. Prasannan, all sons of the late Vethody Kumaran.

They have maintained some key elements of the building’s history, like the 130-year-old Burma teak staircases that runs through two areas of the building, and the 130-year-old antique Seth Thomas grandfather clock.

The iron beams that run through the skeletal structure of the building are all still in place since the time Nippon was first built as Manning Mansions, and have embossed seals on them that state their factory of origin.
They are from England during the mid 19th century.(LBO) – Sri Lanka’s Hotel Nippon has reopened for tourists looking for a more sophisticated level of accommodation with a 400 million rupee renovation and refurbishment.

“The hotel aims to cater to a completely new demographic and is equipped and designed to receive guests with various needs,” the hotel said releasing a statement.

“It aims at medical tourists, budget travelers looking for a more sophisticated level of accommodation, the business tourist who wants to be close to the Central Business district.”

The building was first built as Manning Mansions, apartments for the British during their rule, and was later converted to Hotel Polski briefly and then Hotel Nippon.

It is currently owned by 4 brothers: V.K. Chandrasena, V.K. Vasan, Dr. V.K. Valsan and the late V.K. Prasannan, all sons of the late Vethody Kumaran.

They have maintained some key elements of the building’s history, like the 130-year-old Burma teak staircases that runs through two areas of the building, and the 130-year-old antique Seth Thomas grandfather clock.

The iron beams that run through the skeletal structure of the building are all still in place since the time Nippon was first built as Manning Mansions, and have embossed seals on them that state their factory of origin.
They are from England during the mid 19th century.

Singer Sri Lanka to subdivide ordinary shares by April

(LBO) – Singer Sri Lanka has decided to subdivide its ordinary shares in the proportion of three shares for every one existing share held as at the end of trading on 31st March 2017.

The company said in a stock exchange filing that the number of existing issued ordinary shares will then be increased from 125,209,610 to 375,628,830 without affecting an increase in the stated capital of 626 million rupees.

The increase of shares by way of a sub-division is however subject to the approval of controller of exchange and shareholder approval at a general meeting scheduled to be held on 31st March 2017.

On 7th March 2011, the company initially resolved to increase the number of ordinary shares amounting to 62,604,805 by subdividing them in the proportion of 2 for 1 without affecting an increase in the stated capital.

After the initial subdivision, the number of ordinary shares representing stated capital increased to 125,209,610.

In 2011, the company also amended its Articles of Association in order to permit the share split and increase of shares through an ordinary resolution.

“Sub-divide (split) all or any of its shares issued at the time with the objective of increasing the number of shares in issue leaving un-affected the relative voting and distribution rights of the holder of those shares.” new Articles of Association showed.

Sri Lanka Mackwoods mulls investments in mature hydro power projects

ECONOMYNEXT – Sri Lankan energy firm Mackwoods Energy said it is considering investments in more mature hydro power projects, which already have approval given continuing delays in getting approvals for its own projects.

The firm is also exploring projects in other renewable energy segments such as solar, wind, bio-mass and bio-gas, and waste to energy projects in line with the company’s objectives of diversifying into the renewable energy sector, a stock exchange filing said.

“In view of the persistent delay in implementation of mini hydro power projects, including transmission lines and grid availability issues, the company is exploring investments in more mature hydro power projects that already have approval,” the statement said.

Sri Lanka 02-year Treasury Bonds yield 12.89-pct at auction - central bank

ECONOMYNEXT – Sri Lanka’s central bank said it sold 02-year Treasury Bond to yield 12.10% at an auction Thursday.

The public debt department of the central bank got bids worth Rs21.4 billion for the 02-year bonds maturing on 15 January 2019 and accepted bids worth Rs9 billion, a statement said.

It sold 04 year and 10 months to yield 12.89 percent at the auction, 07 year and 05 months –bonds to yield 12.89 percent and 09 year and 05 months bonds to yield 12.91 percent.

Sri Lanka’s DFCC Bank December net up 74-pct

ECONOMYNEXT – Sri Lanka’s DFCC Bank said December 2016 quarter group net profit rose 74 percent to Rs759 million from a year ago, owing to sharp gains in net interest and fee income at bank level although trading gains were lower.

Group interest income rose 3.3 percent to Rs7.2 billion, while interest expenses rose 9.6 percent to Rs4.5 billion, with net interest income falling 5.8 percent to Rs2.68 billion. The group’s net fee and commissions income fell and net gain from trading was sharply lower.

But at bank level, during the December quarter, net interest income increased 48 percent to Rs2,670 million from a year ago, while net fee and commissions income grew by 25 percent to Rs359 million. Net gain from trading fell to Rs25 million in the December quarter of 2016 from Rs92 million the year before.

“Total operating income grew 32 percent during the quarter under review,” the statement said. “A decline of 50 percent in impairment charges quarter to quarter helped further improve the net operating income.”

Quarterly earnings per share were Rs2.86. DFCC Bank shares were last traded at Rs123.70 each.

EPS for the year ended 31 December 2016 were Rs12.88 with annual group net profit at Rs3.4 billion.

“Major contributions for the group performance apart from DFCC Bank came from Acuity Partners (Pvt) Limited, Lindel and NAMAL,” a statement said.

The total assets of the DFCC Bank group grew by 18 percent and stood at Rs291,266 million as at 31 December 2016.

The statement said, after the amalgamation with DFCC Vardhana Bank, DFCC changed its financial year end from 31 March to 31 December, with the results for 2016 relating to the 01.01.2016 to 31.12.2016 period.

As the bank’s performance of the previous period comprised only a nine-month period, the results cannot be directly compared with that of the current year.

Sri Lanka's Commercial Bank net up 25-pct in Dec quarter

ECONOMYNEXT - Profits at Sri Lanka's Commercial Bank of Ceylon rose 25 percent from a year earlier to Rs4.3 billion in the December 2016 quarter, helped by a provision reversal amid an Rs870 million unrealised bond loss, interim accounts showed.

The group reported earnings of Rs4.83 per share for the quarter. For the year to December, Commercial Bank reported earnings of Rs16.24.

Interest income rose 29 percent to Rs22.7 billion, but interest expenses rose at a faster 48 percent to Rs14.0 billion, allowing the bank slowing net interest income at 8.1 percent to Rs8.6 billion.

The bank has a government bond portfolio of Rs204.2 billion, mostly acquired in 2015. Over Rs63 billion of bonds had been transferred from its available-for-sale portfolio to a held-to-maturity portfolio up from Rs37 billion in September.

The bank showed an Rs865 million unrealised loss on bonds for the quarter. The full-year number came down to Rs3.2 billion from Rs6.69 billion.

In the year to December, the group grew its loan book 21 percent to Rs620 billion.

Profits were boosted by an Rs885 million reversal in general loan loss reversal, which resulted in a net Rs237 million reversal compared to a Rs987 million provision last year.

Total assets grew 15 percent to Rs1,020 billion, which were financed with deposits that grew 19 percent to Rs743 billion.

Net assets grew 12 percent to Rs79.8 billion.

Sri Lanka’s NDB December profit down on higher impairment charges, taxes

ECONOMYNEXT – Sri Lanka’s National Development Bank (NDB) said December 2016 quarter group net profit fell 42% to Rs726 million from a year ago with tax costs and provisioning for bad loans sharply higher.

Interest income grew 41% to Rs8.2 billion in the quarter while interest expenses grew 59% to Rs3.7 billion with net interest income up 11% to Rs2.3 billion, according to interim accounts filed with the stock exchange.

Individual impairment charges more than doubled to Rs397 million in the quarter.

Net fee and commission income was lower in the quarter and while net gains from trading grew, gains from investments were sharply lower with other operating income also lower.

Diluted earnings per share for the December quarter were Rs4.40. NDB’s share was last traded at Rs148.90.

EPS for the year ended 31 December 2016 were Rs16.29 with annual group net profit down 24% to Rs2.69 billion although net interest income went up 13% to Rs8.86 billion.

The accounts showed primary dealer Perpetual Treasuries had increased its stake in NDB to 4.45% and was now the seventh largest shareholder.

The top shareholders were Bank of Ceylon, Employees Provident Fund, Rusi Captain, Sri Lanka Insurance Corporation and Sena Yaddehige.

A statement said that while National Development Bank’s core banking operations improved during the year, performance was affected by “one-off specific provisions made for few customers and the higher effective tax rate in 2016 compared to 2015.”

This was partly due to the increase in the financial services VAT rate from 11% to 15%.

NDB group profit was impacted by “lesser than anticipated capital market activities during the year,” it said.

The bank’s sustained a net interest margin (NIM) of 2.64%, which it said was “satisfying, given the tapering interest margins that were experienced across the industry over the year.

“Strategic and focused expansion of the assets and liabilities growth compared to that of lending growth, whilst being conscious of product pricing led to these sustained NII.”

The bank’s total assets base increased by 8% to Rs335 billion in 2016 from Rs 309 billion the year before.

“Asset quality remains high as reflected by a gross non-performing loan ratio (NPL) of 2.63% (2015:2.43%) well within the bank’s consistently low NPL range and also well below the industry average,” the statement said. Net NPL ratio stood at 1.16% as at 31st December 2016.

Customer deposits grew by 10%, crossing the Rs200 billion mark for the first time and reached Rs 204 billion.

NDB said that increasing its CASA (current accounts and savings accounts) ratio - the ratio of deposits in current and saving accounts to total deposits - from its current range of 22% is “a key strategic priority”.

It said this is a “challenge to the industry at large in an increasing interest rate environment, as depositors’ preference largely skews towards time deposits.

“This skewness is further augmented by the considerable interest rate gap that prevails between the savings and time deposits in the Sri Lankan banking and non-banking sphere, which will also pressurize the industry NIMs.”

Sri Lanka to raise at least US$450mn from 3-year loan

ECONOMYNEXT - Sri Lanka will raise at least 450 million dollars from a syndicated loan for which the government has selected 6 banks, a media report said.

Bloomberg Newswires said Bank of Baroda, Deutsche Bank, Indian Bank, Qatar National Bank, SBI, SMBC will arrange the loan.

Last year Sri Lanka raised 700 million dollars from a syndicated loan. Sri Lanka has a 'B+' speculative rating. Fitch has just upgrade the outlook to 'stable' from 'negative'.

Sri Lanka wanted to raise about a billion US dollars from the syndicated loan.

Nestlé Sri Lanka unit December net up 34-pct

ECONOMYNEXT – Nestlé Lanka, the Sri Lankan unit of the food multinational, said December 2016 quarter net profit rose 34 percent to Rs860 million from a year ago.

Sales rose 2 percent to Rs 8.6 billion over the period, according to interim results filed with the stock exchange, but was down from 8.8 billion rupees reported in the September quarter.

“Tax increases resulted in some erosion in the Q4 2016 revenue,” a company statement said.

“The impact of cost increases and taxes was partially mitigated through focus on driving efficiencies across the value chain.”

Earnings per share for the quarter were Rs16.01. Nestlé Lanka shares were last traded at 1,998 rupees.

Sri Lanka Treasuries yields up, lower volumes sold

ECONOMYNEXT - Sri Lanka's 3-month Treasuries yield edged up 10 basis points to 9.32 percent at Wednesday's auction though the only 7.86 billion rupees out of 25.5 billion rupees of securities offered were sold.

The 6-month yield rose 07 basis points to 10.19 percent and the 12-month yield rose 03 basis points o10.58 percent.

The debt office, which is a unit of the Central Bank sold 1.35 billion rupees of 3-month bills, 6.2 billion rupees of 6-month bills and 295 million rupees of 12-month bills.

The 12-month bill yield is far below the 12-month term deposits offered by commercial banks.

Sri Lanka last week rejected an entire bond auction.

Drought hits Sri Lanka mini-hydropower firms

ECONOMYNEXT – Electricity generation by Sri Lanka’s mini-hydropower companies has been sharply reduced by severe drought that also raises the prospect of looming power cuts, according to a new report.

The island’s hydropower capacity, most of which is from large government hydropower reservoirs, is about 40% of total generation but has been halved owing to lack of rain.

“Mini-hydropower plants are not delivering the expected output,” said the ‘Initial Drought Rapid Assessment 2016/2017’ presented on the drought impact Monday organised by the Asia Pacific Alliance for Disaster Management Sri Lanka (A-PAD Sri Lanka).

Mini-hydropower generation is only around 20MW when installed capacity is 400MW, the report said.

It warned that power cuts were looming owing to the ‘double monsoon failure’ that has depleted hydropower generation capacity.

The problem was worsened by the breakdown of part of the Norochcholai coal-fired power plants, which with a total installed capacity of 900MW had been supplying the base load when running at full capacity.

The government has assured the business community that it will not impose power cuts and would buy power from private firms and asked industries with their own generators to produce their own electricity supply.

Sri Lankan shares end firmer; earnings lift sentiment

Reuters: Sri Lankan shares ended slightly firmer on Thursday, further moving away from a more than one-week closing low hit earlier in the week, as better-than-expected corporate earnings boosted sentiment, although concerns over rising rates capped gains.

The Colombo stock index ended 0.14 percent firmer at 6,138.14. It fell 0.35 percent on week.

The bourse will remain closed on Friday for a Hindu religious holiday.

"December-quarter earnings helped boost sentiment. Some companies have reported better-than-expected earnings," said Prashan Fernando, CEO at Acuity Stockbrokers.

Commercial Bank of Ceylon Plc, which posted a 25.8 percent increase in profit for the quarter ended Dec. 31, rose 0.63 percent.

Shares in Lion Brewery Plc jumped 4.9 percent, while Carson Cumberbatch Plc climbed 4.8 percent and Hatton National Bank Plc rose 1.7 percent.

Turnover stood at 356.4 million rupees ($2.36 million), well below this year's daily average of 605.6 million rupees.

Foreign investors net bought 79.5 million rupees worth of equities on Thursday, but they have net sold 135.5 million rupees worth shares so far this year.

Yields on treasury bills have risen to more than four-year highs, while the central bank has kept key policy rates on hold. 

($1 = 151.2500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

Sri Lankan shares edge up as investors pick up bank stocks

Reuters: Sri Lankan shares rose slightly on Wednesday from a more than one-week closing low hit in the previous session as investors bought banking shares, but concerns over rising interest rates weighed on sentiment.

Yields on treasury bills rose 3-10 basis points at a weekly auction on Tuesday. They have risen 44-73 basis points since Oct. 7 to more than four-year highs, while the central bank has kept key policy rates on hold.

The Colombo stock index ended 0.04 percent firmer at 6,129.69, snapping a four-session losing streak and edging up from its lowest close since Feb. 9 hit on Tuesday.

"Some crossings in blue chips boosted the turnover. Other than that, there was nothing and the market was very dull as investors are still on the sidelines," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

"Selling pressure is there, but there are no buyers."

Shares in Lanka ORIX Leasing Company Plc rose 4.18 percent, while Nestle Lanka Plc, which posted a 42 percent rise in profit for the quarter ended Dec. 31, climbed 2.02 percent.

Turnover stood at 482.7 million rupees ($3.19 million), well below this year's daily average of 612.5 million rupees.

Foreign investors net bought 37.8 million rupees worth of equities on Wednesday, but they have net sold 215 million rupees worth shares so far this year.

($1 = 151.1000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

Sri Lankan shares hit more than 1-wk closing low as rising rates weigh

Reuters: Sri Lankan shares hit a more than one-week closing low on Tuesday, their fourth straight session of losses, as investors sold shares of blue chip companies such as John Keells Holdings Plc amid concerns over rising interest rates.

The Colombo stock index fell 0.2 percent to 6,127.49, slipping to its lowest close since Feb. 9.

"We have seen some interest on retail sector counters," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd. "Investors are mainly waiting for some positive news and now watching the direction of the fixed-income segment."

Yields on treasury bills rose 3 to 10 basis points at a weekly auction on Tuesday. They have risen 44 to 73 basis points since Oct. 7 to more than four-year highs, while the central bank has kept key policy rates on hold.

Conglomerate John Keells Holdings Plc dropped 0.6 percent, while Ceylon Tea Services Plc fell 11.1 percent.

Turnover stood at 300.4 million rupees ($1.99 million), less than half this year's daily average of 616.2 million rupees.

Foreign investors net bought 19.9 million rupees worth of equities on Tuesday, but have net sold 252.8 million rupees worth shares so far this year.

Investors are expected to wait for direction from the outcome of a sovereign bond issue, analysts said.

The Sri Lankan cabinet last week approved a $1.5 billion sovereign bond issue to repay loans and manage interest payments. 

($1 = 151.1500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

IFC invests Rs510mn in Sanasa Development Bank

(LBO) – Sri Lanka’s Sanasa Development Bank by way of a private placement has received 510.65 million rupees from International Finance Corporation (IFC) for the proposed fund raising of the Bank.

The bank said that the subscription agreement with IFC for the issue of 3,647,500 ordinary voting shares at 140 rupees per share amounting to a total investment of 510.65 million rupees was executed on February 17, 2017.

Sanasa Development Bank further said in a stock exchange filing that the investment by IFC does not require approval under the monetary board.

“It is within the permissible single shareholder limit stipulated for Licensed Specialized Banks,” Sanasa Development Bank said.

“The CBSL however via its letter dated October 20, 2016 has granted a “No Objection” for the investment by IFC.”

The issue of the said shares is subject to obtaining shareholder approval at a general meeting.

The directors of Sanasa Development Bank have resolved on December 15, 2016 to raise funds from several foreign institutional investors including IFC.

The bank proposed to issue 10,438,143 ordinary voting shares of the Bank at a price of 140 rupees per share resulting in 19.88 percent of the shares of the Bank.

The fund raisings via private placement and subordinated convertible loan facilities are expected to enhance Tier I and Tier II capital levels of the bank and further strengthen the bank’s capital adequacy ratios.

Colombo Stock Exchange Market Review – 20th Feb 2017

(Click here)

Colombo Stock Exchange Trade Summary 20-Feb-2017

Colombo bourse extended losing streak for the third consecutive day amid price decline in blue-chips. All Share index shed 20.36 index points or 0.33% to end at 6,139.51 while 20-scrip S&P SL index edged lower by 5.56 index points or 0.16% to end at 3,538.07.

Blue-chips namely, Ceylon Tobacco (LKR 815.00, -1.8%) and John Keells Holdings (LKR 145.20, -1.2%) spearheaded the index decline along with price drop in Richard Pieris (LKR 8.10, -8.0%) on its XD.

Daily market turnover reached 729mn supported by negotiated deals which accounted for 46% of the turnover. Dunamis Capital was the top contributor to the turnover with LKR 264mn underpinned by a single crossing of 12mn shares (9.8% issued shares of CSEC) at LKR 22.00. Cargills (LKR 130mn), Hatton National Bank (LKR 92mn) and Hemas Holdings (LKR 86mn) made notable contribution.

Three negotiated deals were recorded in Cargills (0.3mn shares at LKR 195.00) and Tokyo Cement non-voting (0.4mn shares at LKR 54.00).

Losers outweighed the gainers 81 to 46, while 74 Stocks remained unchanged. Pan Asia Bank rights (LKR 0.30, +25%) attracted high investor preference on its renunciation. Central Investments & Finance, Richard Pieris & Company and Pan Asia Bank were among heavily traded counters.

Foreign investors stood on sell side with net foreign outflow of LKR 35mn. Foreign participation was 34%. Net foreign outflows were seen in Cargills (LKR 98mn), Hatton National Bank (LKR 39mn), and Overseas Realty (LKR 1mn). Net foreign inflows were mainly seen in Hemas Holdings (LKR 54mn) and Lanka Tiles (LKR 29mn).
Source: LSL

Sri Lankan shares fall for 3rd session; blue-chips down

Reuters: Sri Lankan shares hit a one-week closing low on Monday, as investors sold shares of blue chip firms such as Ceylon Tobacco Company Plc and John Keells Holdings Plc amid concerns over rising market interest rates.

The Colombo stock index fell 0.33 percent to 6,139.51, slipping for a third straight session to its lowest close since Feb. 13.

"Blue-chips brought the market down. The profit-taking is still continuing and investors are more on a wait and see approach," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

"The buying interest is there, but at a lower level. So investors are waiting to buy at cheaper rates."

Shares of Ceylon Tobacco Company Plc fell 1.83 percent, while conglomerate John Keells Holdings Plc dropped 1.22 percent.

Turnover stood at 728.9 million rupees ($4.83 million), more than this year's daily average of 625.5 million rupees.

Foreign investors offloaded a net 34.88 million rupees worth of equities on Monday, extending the year-to-date net foreign outflow to 272.7 million rupees worth of shares.

The market will remain slow for the next few days and many investors will wait for directions from a sovereign bond issue, Mathew said.

The Sri Lankan cabinet last week approved a $1.5 billion sovereign bond issue to repay loans and manage interest payments.

Yields on treasury bills are hovering at a more than four-year high. 

($1 = 150.8300 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

US bond rate increase good for CSE; not so much for local bonds

Despite being one of the poorest performing markets in the region, Sri Lanka’s stock market which has been in the doldrums has attracted a lot of foreign buying interest since of late.

This heavy investor participation stems mainly from the rate increase in the US bond market. While the rates going up is seeing foreign funds shifting back to the US from frontier markets such as Sri Lanka, a small component of their corresponding funds which invest in stock markets are being ploughed into the Colombo Stock Exchange (CSE), analysts say.

There has been continuous foreign selling in local bonds and as at January 1, 2017 it was US$ 2 million. The new regime under Donald Trump is trying to strengthen the US Dollar and luring back funds to the US.

Atchuthan Srirangan, Senior Research Analyst First Capital Equities noted that on the back of all this, this month’s foreign inflow at CSE was Rs. 600 million as at February 8. Mr. Srirangan said that in the year to date the total foreign participation so far is more than 50 per cent of CSE’s turnover, while for the same period last year it’s 38 per cent.

But why put cash in the CSE?

That’s due to most shares at the CSE trading at 4x their price to Earnings Ratio (PER) which has made these bargain counters for foreign investors. Foreign fund managers say that CSE is a good investment this year owing to superior earnings projections, low valuations and the potential for better earnings.

From January 1 to 8 February, foreigners bought Rs. 7.67 billion and sold Rs. 8.63 billion. While the net outflow is Rs. 1.026 billion, analysts note that some foreign selling was done to foreigners themselves.

Analysts say that a considerable foreign play was done by Norway’s $830 billion sovereign wealth fund, locally managed by Lynear Wealth Management. The fund has been increasing its focus on emerging countries but only has about 4 per cent of its assets managed externally. Negotiated deals were recorded in many counters early this month – mostly blue chips and mid-caps bought by foreign funds — Hatton National Bank (0.7 million shares at Rs. 227) and Commercial Bank (0.2 million shares at RS. 145). The aggregate value of crossings accounted for 45 per cent of the turnover. Subsequent to its scrip dividend announcement, Sampath Bank attracted high investor preference where stock price increased to Rs. 267 up by 0.8 per cent.

On February 2, foreign investors stood on the ‘buy’ side with a net foreign inflow of Rs. 90 million. Net foreign inflows were seen in Commercial Bank at Rs. 29 million, Sampath at Rs. 29 million, Melstacorp at Rs. 17 million while net foreign outflows was mainly seen in Seylan Bank (Rs. 5 million). Foreign participation was 66 per cent.

Hemas Holdings saw 2.8 million shares crossed at Rs. 104 on February 2. Its main buyer in 3Q17 was Morgan Stanley and Co: International PLC. But Franklin Templeton Investment Funds had reduced its position in Hemas during the same period.

Overseas Realty Rights Issue saw a 24 per cent acquisition by Jilansu Tao Shing Pee Education Foundation on February 3. Foreign investors were net buyers with a new foreign inflow of Rs. 27 million on this day and net foreign inflows were mainly seen in Sampath Bank Rs. 35 million, Melstacorp Rs. 13 million and Tokyo Cement non-voting Rs. 12 million. That following Monday foreign investor activity accounted for 47 per cent of the turnover.

The day after foreign investors stood on the ‘buy’ side with a net foreign inflow of Rs. 111 million. Net foreign inflows were seen in John Keells Holdings (JKH) Rs. 51 million, Hemas Holdings Rs. 30 million, and Nestle Rs. 28 million while net foreign outflow was mainly seen in National Development Bank Rs. 4 million. Foreign participation was 52 per cent that day. On February 8 foreign investors were net buyers with a net foreign inflow of Rs. 152 million. Net foreign inflows were seen in JKH (Rs. 103 million), Sampath Bank (Rs. 49 million) and Melstacorp (Rs. 10 million). Net foreign outflow was mainly seen in Hatton National Bank (Rs. 17 million). Foreign participation was 33 per cent.

On February 13, foreign investors were net buyers with a net foreign inflow of Rs. 333.33 million foreign participation was 61 per cent. Let’s hope this trend co continues.

Price controls hit Sri Lanka IOC unit as crude, taxes rise

ECONOMYNEXT - Sri Lanka's Indian Oil Corporation said December quarter profits fell to 80 percent to 257.5 million rupees in the December 2017 quarter from a year earlier, as taxes rose amid price control, interim accounts show.

Profits plunged 82 percent from 1,461 in the September quarter.

The firm reported earnings of 0.48 cents per share for the quarter.

Crude prices which fell to unusual lows of around 38 dollars a barrel in the first quarter of 2016 had risen to around 50 dollars by the fourth quarter with a steep increase taking place in the last quarter, data shows.

Revenues rose to 20.5 billion rupees in the December quarter from 18.1 billion rupees a year earlier, while cost of sales rose to 19.2 billion rupees, from 16.44 billion rupees.

Gross profit fell to 1.2 billion rupees from 1.7 billion rupees.

By end September the firm had 12 billion rupees of inventory, which had reduced to 8.0 billion rupees by December.

The firm said in August customs duty was increased by 6.0 rupees a litre in June 201 and excise import duty by 10 rupees in August.

Sri Lanka was supposed to have a price formula in place by December 2016 to prevent the economy and the rupee and the economy from being hit by credit taken to cover losses, but it did not happen.

Piramal Glass Sri Lanka unit December net up 22-pct

ECONOMYNEXT – Piramal Glass Ceylon said net profit rose 21.7 percent to Rs202 million from a year ago in the December 2016 quarter, the first quarter in operation after a two-month shutdown to upgrade its furnace.

The Sri Lankan container glassmaker's December quarter sales grew 11 percen to almost Rs2 billion over the period, with growth mainly from the domestic market.

Earnings per share for the quarter were 21 cents, according to interim accounts filed with the stock exchange. The share was last traded at Rs5.50.

EPS for the nine months ending 31 December 2016 were 29 cents, with net profit down 39 percent to Rs276 million from the previous year.

A statement said sales grew 6 percent to Rs5.1 billion over the period, with 7 percent growth in domestic sales and a 3 percent increase in export sales.

“During the year, the company’s export portfolio has showed a marked increase in its sales to USA,” it said.

Piramal Glass Ceylon said nine month profits were lower because of higher borrowing costs, the plant closure, and reliance on lower-margin trading and rising gas prices.

“The long-term loan interest cost has yet again started rising from this quarter onwards due to the long-term loan of Rs3 billion obtained for the relining,” it said.

“The plant was inoperative for two months due to relining and hence a major portion of domestic sales were done through trading. Although margins are low, we were compelled to resort to trading to ensure continuity of supply to our customers,” the company said. “The continuous upward trend of LPG prices has a major impact on the cost of production.”

Sri Lanka’s Softlogic December net down 33-pct, sales sluggish, costs up

ECONOMYNEXT – Sri Lanka’s Softlogic Holdings group said December 2016 quarter net profit fell 33 percent to Rs151 million from a year ago, with finance costs almost doubling as interest rates rose along with higher marketing expenses for new operations.

Group sales were stagnant at Rs15.7 billion over the period, according to interim accounts filed with the stock exchange.

Finance costs almost doubled during the quarter as interest rates rose, while there was an increase in operating costs owing to the opening of te new Mövenpick City Hotel and marketing costs of new ventures.

The accounts showed that Softlogic group’s Information & Communication Technology business profit doubled during the December quarter and retail business profits improved. But the group’s healthcare services and financial services earnings were sharply lower, the automobile business loss was slightly lower, and leisure sector losses narrowed.

December quarter earnings per share were 20 cents. The share last traded at Rs12.40.

In the nine months to 31 December 2016, EPS was 45 cents with net profit down 18 percent to Rs347 million, while sales went up 10 percent to Rs45 billion.

Softlogic Chairman Ashok Pathirage said the group’s outlook has “tremendous potential for increasing its overall value substantially through its strategic investments in growing sectors of the economy.”

He said the opening of the Mövenpick City Hotel, a substantial investment of the group, received rave reviews from the industry and was the first new five-star luxury hotel to operate after almost three decades in Colombo.

“ODEL Mall will commence in the near future, so its unrivalled leadership in retailing would take the country to its next level of consumerism and lifestyle improvements,” Pathirage said.

He said the group faced economic challenges like rising interest and tax rates, and falling consumer confidence, which affected retail and services.

Pathirage said group December quarter sales were stagnant “primarily due to the group’s substantial downsizing of ‘Nokia’ operations.”

Sri Lanka's Melstacorp December net down 7-pct

ECONOMYNEXT - Melstacorp Limited, a diversified group that controls Sri Lanka's largest hard alcohol maker, said December 2016 quarter net profit fell 7 percent to Rs1.67 billion from a year ago.
Sales rose 17 percent to Rs27.5 billion over the period, according to the group’s first set of interim accounts, as the listed company filed with the Colombo Stock Exchange.

The accounts showed a sharp hike in finance and tax costs during the quarter, with earnings per share at Rs1.34. The share was trading at Rs65 at mid-day Friday. EPS for the nine months ended 31 December 2016 was Rs4.66, with net profit up 16 percent to Rs5.78 billion and sales up 29 percent to Rs81.9 billion.

The group’s liquor business continued to dominate sales and profits with its plantations and mobile phone units making losses and lower earnings from its financial services and diversified sectors.

Melstacorp is now the holding company of Distilleries Corporation of Sri Lanka, following a share swap in which former Distilleries stockholders were issued Melstacorp shares.

Sri Lanka’s Namunukula Plantations December net up 170-pct

ECONOMYNEXT – December 2016 quarter net profit of Sri Lanka’s Namunukula Plantations shot up 170% to Rs90 million from a year ago as palm oil prices remained high on production shortfalls.

Sales rose 41% to Rs629 million over the period, according to interim results filed with the stock exchange.

Quarterly earnings per share were Rs3.78. The share last traded at Rs86.90.

In the nine months to 31 December 2016, EPS was Rs13.85 with net profit up 231% to Rs329 million while sales rose 33% to Rs1.89 billion from the year before.

Namunukula Plantations, part of the Richard Pieris & Company group, has a diversified crop base and cultivates tea, rubber, oil palm, coconut and cinnamon.

Namunukula Plantations’ losses from the tea business narrowed to Rs73 million from Rs161 million while losses from rubber grew to Rs53 million from Rs34 million.

The firm’s oil palm profits rose 73% to Rs508 million while coconut generated a small profit and cinnamon cultivation a loss, according to the accounts.

Namunukula Plantations has a stake in the AEN Palm Oil Processing (Pvt.) Ltd. joint venture with Agalawatta Plantations and Elpitiya Plantations.

Sri Lanka Telecom's outlook changed to stable, sales slowdown seen

ECONOMYNEXT - Fitch Ratings said it has changed the outlook on Sri Lanka Telecom's (SLT) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to stable from negative and confirmed the IDRs at 'B+'.

The dominant fixed line operator’s sales growth are likely to slow down after tax hikes, the rating agency said in a statement.

The rating actions follow the outlook revision on Sri Lanka's sovereign ratings to stable from negative on 9 February 2017.

The agency also affirmed SLT's National Long-Term Rating at 'AAA(lka)' with a stable outlook.

The full statement follows:

Fitch Ratings-Singapore/Colombo-14 February 2017: Fitch Ratings has revised the Outlook on Sri Lanka Telecom PLC's (SLT) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to Stable from Negative and affirmed the IDRs at 'B+'.

The rating actions follow the Outlook revision on Sri Lanka's Long-Term Foreign- and Local-Currency IDRs to Stable from Negative on 9 February 2017. The agency also affirmed SLT's National Long-Term Rating at 'AAA(lka)' with a Stable Outlook.

KEY RATING DRIVERS

Ratings Constrained by Sovereign: SLT's IDRs are constrained by the sovereign's IDRs of 'B+', as the government directly and indirectly holds a majority stake in SLT and exercises significant influence on its operating and financial profile. Therefore the Outlook has been revised to Stable, following the revision of the sovereign Outlook to Stable. SLT's second-biggest shareholder, Malaysia's Usaha Tegas - which owns 44.9% of SLT - does not have any special provisions in its shareholder agreement that dilute the government's significant influence over SLT.

Negative FCF, Large Capex: We expect SLT to have negative FCF in 2017-2018 (2016 estimated FCF deficit: LKR7bn-8bn), as cash flow from operations will be insufficient to fund its large capex plan. We expect SLT to invest about LKR20bn-22bn, or 28%-30% of revenue, in capex each year to expand its optical fibre and 3G/4G mobile networks.

Taxes Hinder Growth: We expect SLT's revenue growth to slow to 2%-3% in 2017 (2016 estimated: 9%), as consumers will likely curb usage due to the reintroduction of value-added tax and nation-building tax on telecom services from November 2016. The effective tax rate for voice and SMS services increased to about 50%, from 28%. The effective tax on data services increased to 32% from 12%, and will further increase to 50% when the telecommunications levy increase becomes effective from April 2017. Revenue growth from increased use of data services is likely to be more than offset by declines in revenue from fixed-voice, code division multiple access and international operations.

We forecast SLT's EBITDA margin to narrow by about 50bp over 2017-2018, from an estimated 29% in 2016, as improving profitability of fixed-broadband and mobile internet usage will only partly offset margin erosion from a change in revenue mix and the tax hikes.

Solid Market Position: SLT's ratings are underpinned by its market-leading position in the fixed-line services and second-largest position in the mobile market, along with its ownership of the country's extensive optical fibre network. The company benefits from a diverse service offering, which includes fixed-voice, broadband, mobile, pay-tv, enterprise, international terminations and international data services. We believe SLT's market position will strengthen from its planned mobile and fibre infrastructure expansion.

Market Consolidation, M&A Risk: We believe some industry consolidation is likely with ongoing intense competition - especially in the mobile segment where there are five operators, of which the smaller operators are unprofitable, and all of them face still-high investment requirements. SLT's National Long-Term Rating could come under pressure if it were to do a debt-funded acquisition of a smaller operator; any rating action will be based on the acquisition price, funding structure and the financial and operating profile of the combined entity. The international ratings, which are constrained by the sovereign ratings, have sufficient headroom to absorb a debt-funded acquisition.

DERIVATION SUMMARY

SLT's Foreign-Currency and Local-Currency IDRs are constrained by Sri Lanka's IDRs of 'B+', given the government's ownership and significant influence on its operating and financial profile. SLT's National Long-Term Rating is based on a relative comparison of domestic peers. SLT has a lower exposure to the crowded mobile market and more diverse service platforms than Sri Lanka's mobile market-leader, Dialog Axiata PLC (AAA(lka)/Stable). Distilleries Company of Sri Lanka PLC (DIST, AAA(lka)/Rating Watch Negative) faces high regulatory risk, with frequent excise tax hikes. However, it benefits from a higher EBITDAR margin and stronger FCF generation than SLT. SLT's estimated 2016 FFO-adjusted net leverage of 1.5x is broadly similar to that of Dialog Axiata and DIST.

KEY ASSUMPTIONS

Fitch's key assumptions within our rating case for the issuer include:

- Slower revenue growth of 2%-3% in 2017 (2016: 9%) on higher taxes.

- Growth to recover from 2018 to a mid-single-digit percentage, driven by fixed-broadband and mobile data services.

- Operating EBITDAR margin to fall by about 50bp in 2017-2018, due to a change in revenue mix and higher taxes.

- Capex/revenue to remain high around 28%-30%, as SLT expands it fibre and 3G/4G networks.

- Dividend payout to remain similar to 2016, at LKR1.6bn.

- Negative FCF during 2017-2018, resulting in gradual increase in FFO-adjusted net leverage.

RATING SENSITIVITIES

Developments that may, individually or collectively, lead to positive rating action include:

-A change in Sri Lanka's IDRs will result in a corresponding action on SLT's IDRs.

-A weakening of links between SLT and the sovereign could result in SLT's Local-Currency IDR being upgraded above Sri Lanka's Local-Currency IDR. However, SLT's Foreign-Currency IDR will remain constrained by the Country Ceiling of 'B+'.

Developments that may, individually or collectively, lead to negative rating action include:

- A downgrade in Sri Lanka's IDRs will result in a corresponding action on SLT's IDRs.

- A debt-funded acquisition of a smaller operator could threaten SLT's National Long-Term Rating, depending on the acquisition price and the financial profile of the combined entity.

LIQUIDITY

Solid Access to Capital: Cash of LKR5.8bn and committed undrawn bank lines of LKR7.9bn were insufficient to fund its short-term debt of LKR12.7bn and annual FCF deficit of LKR3bn-5bn. However, SLT is in the process of raising LKR6bn to refinance its short-term debt and has demonstrated a solid record of accessing capital from local banks and capital markets.

Fitch upgrades Sri Lanka Insurance Corp's outlook to stable

ECONOMYNEXT – Fitch Ratings said it has revised the outlook on Sri Lanka Insurance Corporation's (SLIC) Insurer Financial Strength (IFS) rating to stable from negative, and confirmed the IFS rating at 'B+'.

The rating action follows the revision of the outlook on Sri Lanka's Long-Term Local-Currency Issuer Default Rating (IDR) to stable from negative and the confirmation of the rating at 'B+' on 9 Feburary 2017, a statement said.

SLIC's IFS rating is constrained by Sri Lanka's Long-Term Local-Currency IDR and the Negative Outlook reflects the Negative Outlook on Sri Lanka's IDR, it said.

The rating review does not include SLIC's 'AA(lka)' National Long-Term Rating and 'AA(lka)' National IFS rating.

Fitch said SLIC's ratings reflect its established franchise and market position in Sri Lanka, 99.9%-state ownership and importance to the government as the largest state-owned insurer.

“Offsetting these strengths are significant investments in non-core subsidiaries and a high equity exposure, which weighs on its risk-based capital,” it said.

If the sovereign ratings are upgraded in the future, and the constraints on SLIC's IFS rating are relieved, Fitch said it would take similar rating action on SLIC's IFS rating.

Conversely, a downgrade of Sri Lanka's ratings will lead to downgrade of SLIC's IFS rating.

Fitch said the IFS rating may also be downgraded if there is:

- Significant weakening in SLIC's market position.

- Deterioration in the non-life combined ratio to above 100% on a sustained basis.

- Weakening in SLIC's importance to the government, increased pressure from the state for higher dividend

payouts or a significant increase in non-core investments.

Sri Lanka beers sales plunge 40-pct, arrack up after tax hike: brewery

ECONOMYNEXT - Sri Lanka's beer sales volumes have plunged 40 percent and arrack sales have risen 14 percent after a steep hike in beer taxes, while toddy industry which pays little taxes are also making gains, the brewer has warned.

Lion Beer, which produces Lion and Carlsberg brands said beer taxes were raised 70 percent and taxes on arrack, a hard alcohol was raised 25 percent, leading to a shift in demand.

The firm said beer which has an alcohol content of around 5 percent or higher is taxed at 315 rupees a litre while toddy which also has a similar alcohol content is only taxed at 50 rupees a litre.

"As a result, consumers are shifting in large numbers to toddy," Lion Beer said.

"In revenue terms too, the Government is losing out since available data clearly indicates that this industry is a habitual tax evader."

"If the intention of the steep tax increase on beer was to reduce consumption of legally made alcobevs, it has not worked since arrack volumes have grown to compensate."

Lion Beer claimed that toddy is made from mixing chemicals under unhygienic conditions.

"In reality, what is currently sold as toddy is not fit for human consumption. Yet, its sale is encouraged by the application of a preferential tax."

A 10 and 15 rupee tax was also levied on cans from November.

"Again the objective is not clear. Why only beer cans?," the firm asked.

"If the intention was to protect the environment, why not on similar packaging of other products including beverages?

"Irrational policy measures of this nature scare away all investors – not just brewers – and at a time when the Country is seeking to expand its manufacturing base, this is counter-productive."

The taxes however are expected to help boost sales of 'quarter' bottle arrack, and bring back to the alcohol market, working class consumers who had started to consume 'strong' beer, analysts familiar with the market say.

However Lion Beer said the government had helped the firm import beer paying the same domestic manufacturing taxes, after its factory was damaged by floods.

The move had helped keep the product flowing, though imports cost more and margins were lower.

The firm was also in talks to get a 2.0 billion rupees insurance claim, of which a billion had already been received.

The factory was re-started from November but was fully operational only in late December, the firm said.
Lion Brewery said revenues fell 35 percent to 5.3 billion rupees in the December quarter from a year earlier and profits fell 29 percent to 327 million rupees. It reported earnings of 4.0 rupees per share for the quarter.

In the nine months to December the firm lost 613 million rupees, compared to profits of 1.7 billion rupees a year earlier.

Sri Lanka’s Haycarb December net profit up 23-pct

ECONOMYNEXT – Sri Lankan coconut shell-based activated carbon manufacturer Haycarb said December 2016 quarter net profit rose 23.3% to Rs210 million from a year ago despite difficulties in securing raw material owing to bad weather.

Group sales rose 21% to Rs3.5 billion over the same period, according to interim accounts filed with the stock exchange.

Earnings per share for the December quarter were Rs7.08. The share was last traded at Rs150.

EPS for the nine months ending December 2016 were Rs17.08 with net profit up 19% to Rs507 million and sales up 12% to Rs9.4 billion.

Haycarb Managing Director Rajitha Kariyawasan said that the company continued to face challenges in some locations due to the shortage of charcoal that was driven by adverse weather conditions that prevailed in 2016.

“However, the company’s initiatives to strengthen raw material supply chain networks in other key locations contributed to sustaining charcoal supplies to support the group’s growing demand,” a statement said.

“The company continues to invest in acquisition of new customer accounts and product segments backed by continued focus on product development and commercialization of value added products that shows positive results,” Kariyawasan said.

“We also continued to expand sales volumes globally in our key markets. The challenges of cost increases were partially offset through lean and productivity improvement measures that resulted in increased efficiencies in processes and supply chain.”

Haycarb’s Environmental Engineering arm, Puritas (Pvt.) Ltd., continued to make steady progress increasing its regional presence and is expected to continue its growth momentum, Kariyawasan said.

Sri Lankan brush maker to list on stock exchange

ECONOMYNEXT – B P P L Holdings Ltd., a Sri Lankan brush manufacturer and supplier of other cleaning products, has got approval from the Colombo Stock Exchange to list on the Diri Savi second board.

The firm, also known as Beira Group, will issue 30.68 million ordinary shares at Rs12 each, with the offer opening on 7 March 2017, a statement said.

The prospectus will be available on 22 February. The share issue is managed by CT CLSA Capital (Pvt) Ltd.

According to the Beira Group website, the company claims to be Sri Lanka’s largest brush manufacturer and exporter of sanitary maintenance tools, with over 30 years of experience.

Its products like brushes, brooms, banisters, dusters and scrubs are made for household, professional, commercial and industrial cleaning applications.

Sri Lanka’s Serendib Leisure Hotels December net down 12-pct

ECONOMYNEXT – Sri Lanka’s Serendib Leisure Hotels group said December 2016 quarter net profit fell 12 percent to Rs33 million from a year ago and that the last quarter would be highly competitive, with more room inventory and weaker currencies of key markets.

Sales of the firm, part of the Hemas group, fell 2 percent to Rs436 million, according to interim accounts filed with the stock exchange.

Earnings per share for the December quarter were 29 cents.

EPS for the nine months ending 31 December 2016 were 22 cents, down from 47 cents the year before when net profit had halved to Rs24 million, with sales up 3 percent to Rs1.2 billion.

“With an increased room inventory, particularly in the regions that we operate, we anticipate a highly competitive final quarter for the current financial year,” a statement said.

“Our revenue will be under further pressure with a weak outlook on the euro and the Sterling Pound, the currencies of our key markets. With a focused effort on sales and marketing, we expect to close the year with good results for the final quarter.”

The Serendib Leisure Hotels group comprises Serendib Hotels and its subsidiaries Dolphin Hotels, Hotel Sigiriya and Serendib Leisure Management Ltd.

The Serendib group had an overall occupancy of 73 percent for the nine month period, and a drop of 3 percent over last year, the statement said.

“The increase in overheads and reduction in exchange gains compared to last year resulted in a reduction in operating profit by 40 percent to Rs88 million,” it said. “Notably, the repayment of debt has reduced our finance costs by 46 percent to Rs11 million by the end of Q3.”

Serendib Leisure Hotels said that, with the partial closure of the Bandaranaike International Airport from 6th January to 6th April 2017 for repairs, a drop of 12-13 percent in flight capacity is anticipated.

“However, we do not expect occupancy levels at our hotels to be significantly affected,” it said.

The group under the Serendib Leisure umbrella currently manages AVANI Bentota Resort & Spa, AVANI Kalutara Resort, Club Hotel Dolphin and Hotel Sigiriya, with a consolidated inventory of 413 keys, a statement said.

Jada Resorts & Spa (Pvt) Ltd., the owning company of AVANI Kalutara is treated as an investment, and its operating results are not reflected in the results of Serendib Hotels.

Sri Lanka’s Bogala Graphite December net doubles to Rs24mn

ECONOMYNEXT – Sri Lanka's Bogala Graphite said net profit for the December 2016 quarter rose 95 percent to Rs24.2 million from a year ago.

Sales of Bogala Graphite Lanka, controlled by Germany's Graphit Kropfmuhl Gmbh, rose 12.3 percent to Rs174 million over the period, according to interim accounts filed with the stock exchange.

Earnings per share for the quarter were 26 cents. The share was last traded at Rs13.20.

EPS for the year ended 31 December 2016 were 78 cents, with net profit at Rs74 million and sales at Rs583 million, up 21 percent from the year before.

Sri Lanka’s Aitken Spence December quarter net up 36-pct

ECONOMYNEXT – Sri Lanka's Aitken Spence said group net profit for the December 2016 quarter rose 36.4 percent to Rs870 million from a year ago.

Sales of the conglomerate rose 102 percent to Rs13.1 billion over the period, according to interim accounts filed with the stock exchange.

Earnings per share for the quarter were Rs2.14. The share was last traded at Rs60.

EPS for the nine months to 31 December 2016 were Rs4.09, with net profit up 17 percent to Rs1.66 billion and sales up 69 percent to Rs30.5 billion.

Tourism business profits fell sharply, while there was strong growth in maritime and logistics sector earnings, the accounts showed. Finance costs were much higher.

“The Maritime and Logistics, Services and Strategic Investments sectors all showed positive growth figures, contributing to the bottomline gain during the reporting period,” a company statement said.

“Growth in the Strategic Investments sector was driven by the power generation, plantations and printing segments, while the elevator agency segment helped the Services sector performance. The Maritime & Logistics sector benefited from growth in port management services, the education segment and the addition of a new freight forwarding representation,” the statement said.

“Unfavourable market conditions in foreign markets, particularly the Maldives and India, and the high cost of finance have negatively contributed towards a challenging period for the tourism sector, despite topline growth.”

Aitken Spence group said the addition of RIU Sri Lanka in Ahungalla, Al Falaj Hotel (Oman), TuryaaChennai and the new wing of Turyaa Kalutara contributed to the rise in revenue.

“We have seen growth in revenue, and more significantly contributions from some of our new investments to the group's topline, which is a healthy indicator of the performance of those investments,” Deputy Chairman and Managing Director of Aitken Spence J M S Brito said.

“Most of the group’s key sectors have experienced positive growth in the third quarter. We are also confident that the tourism sector will rebound across the various geographical markets and that the new investments we made will continue to pay off in the coming years,” he said.

Sri Lanka's Sunshine Holdings hit by pharma price controls

ECONOMYNEXT - Sri Lanka's Sunshine Holdings Plc said profits in its healthcare business fell 66 percent to Rs91 million in the nine months ended December 2016 due to price controls imposed by the state.

Revenues grew 10.5 percent, with 4.1 percent coming from retail sales, the group said. Margins fell 4.3 percent to 3.3 percent mainly due to price controls, which led to a write down of Rs123 million in stock.

The firm said it was the second-largest player in the pharma sector in the country with a 12 percent market share.

Revenues in pharmaceuticals had grown 6 percent from a year earlier, while surgical grew 19 percent, retail 34 percent, diagnostics 6 percent and wellness 16 percent.

The firm also has interests in agriculture and fast moving consumer goods.

Group revenues grew 3.2 percent to Rs4.42 billion in the December quarter, with profit after tax growing 3.2 percent to Rs402 million, helped by agriculture, especially palm oil.

Its branded tea sales were also growing.

Sri Lanka’s Aitken Spence Hotel Holdings December net up 7.8-pct

ECONOMYNEXT – Sri Lanka’s Aitken Spence Hotel Holdings said December 2016 quarter net profit rose 7.8 percent to Rs405 million from year ago.

Sales during the December quarter rose 32 percent to Rs4.4 billion over the period, according to interim resulrs filed with the stock exchange.

Earnings per share for the quarter were Rs1.19. Aitken Spence Hotel Holdings' share was traded at Rs40.10 during mid-day Tuesday.

Aitken Spence Hotel Holdings’ EPS for the nine months ended 31st December 2016 was 14 cents, with net profit down 93 percent to Rs57 million, while sales rose 17 percent to Rs10.4 billion.

The accounts showed that the group’s Sri Lankan hotels made a pre-tax loss of Rs18 million compared with Rs536 million pre-tax profit the year before.

The group’s South Asian and Middle East sector pre-tax profit halved to Rs452 million from Rs921 million the year before

Six months of the period under review related to the off season of the tourism industry both in Sri Lanka and overseas, where the group operates, a note to the accounts said.

Sri Lanka's Dialog Axiata December net doubles to Rs1.25bn

ECONOMYNEXT - Sri Lankan celco Dialog Axiata said December 2016 quarter net profit rose 102% to Rs1.25 billion from a year ago but was much lower than the previous quarter after a tax hike slowed sales and earnings growth.

Group sales in the quarter grew 13.7% to Rs22.8 billion, according to interim accounts filed with the stock exchange.

Dialog Axiata's net profit in the September 2016 quarter was Rs2.8 billion.

Earnings per share for the quarter were 15 cents. The share was last traded at Rs10.60.

EPS for the financial year ending 31 December 2016 were Rs1.11 with net profit up 74% to Rs9 billion and sales up 17% to Rs87 billion.

The accounts showed continued losses in the Dialog Axiata group’s television and broadband businesses.

A statement accompanying the accounts said Dialog Television (DTV) continued its “positive growth momentum, recording a revenue growth of 5% YoY and QoQ to reach Rs6.1 billion for FY 2016 and Rs1.5Bn for Q4 2016.

“Notwithstanding revenue growth, EBITDA (earnings before interest, taxes, depreciation, and amortization) contracted by 37% YoY to Rs383 million, due to direct cost expansion accruing from product enhancements featuring the expansion of channel genres.

“ . . . on a QoQ basis, EBITDA contracted 24%. The decline in EBITDA translated to an equivalent negative impact on NPAT leading to a net loss of Rs644 million for FY 2016 and a net loss of Rs298 million for Q4 2016,” the statement said.

Dialog Broadband Networks (DBN) sales grew 28% to Rs9.3 billion for FY 2016 and 7% to Rs2.6 billion in Q4 2016.

“Downstream of strong revenue performance, DBN EBITDA for FY 2016 was recorded at Rs4.0 billion and Rs1.2 billion in Q4 2016, representing an increase of 39% YoY and 25% QoQ respectively,” the statement said.

“DBN's net loss for FY 2016 increased to Rs385 million relative to the net loss of Rs133 million recorded in FY 2015 underpinned by the higher depreciation and finance cost.”

The statement said the 4th Quarter featured the re-introduction of Value Added Tax (VAT) effective 1st November 2016, which moderated revenue growth to 5% Quarter-on-Quarter to reach Rs22.8 billion.

"On a QoQ basis EBITDA declined 4% to post at Rs7.4 billion."

Dialog Axiata said group net profit declined 56% QoQ to be Rs1.3 billion for Q4 2016 due to lower EBITDA combined with increased depreciation and higher non-cash translational forex losses.

Sri Lanka Renuka Holdings December net profit up sharply to Rs135mn

ECONOMYNEXT - Sri Lanka’s Renuka Holdings said December 2016 quarter net profit shot up 659% to Rs135 million from a year ago.

Group sales rose 12.7% to Rs2.4 billion over the period, according to interim accounts filed with the stock exchange.

Earnings per share for the quarter were Rs1.33. the company shares were last traded at Rs21 in Thursday afternoon trade.

Renuka Holdings EPS for the nine months ending December 2016 were Rs7.15 with net profit up 242% to Rs728 million and sales up 6% to Rs6.3 billion.

The accounts showed the group’s agribusiness sales and profits were lower while fast moving consumer goods sales were higher but profits down.

In a note accompanying the accounts Executive Director Shamindra Rajiyah said the group’s Property Sector reported a net profit of Rs510 million for the period ended 31st December 2016 which includes the revaluation of investment property of Rs426 million.

Sri Lanka Taj Samudra Hotel December net profit down 63-pct

ECONOMYNEXT – December 2016 quarter net profit of Sri Lanka’s Taj Samudra Hotel, part of India’s Taj hotels group, fell 63% to Rs13 million from a year ago.

Sales of Taj Samudra, owned and operated by TAL Lanka Hotels, connected to India's Taj Hotels group, rose 5% to Rs778 million, according to interim accounts filed with the stock exchange.

December quarter earnings per share of Taj Samudra were nine cents. The share last traded at Rs24.90.

EPS was 75 cents for the nine months ending December 2016 with net profit at Rs105 million against a loss of Rs89 million the year before and sales up 8% to Rs2.1 billion.

Sri Lanka’s Odel December net profit down 61-pct

ECONOMYNEXT –Sri Lankan retailer Odel said December 2016 quarter net profit fell 61% to Rs60 million from a year ago.

December quarter sales rose 6% to Rs1.9 billion over the same period, according to interim accounts filed with the stock exchange.

The accounts showed much higher administrative expenses and finance costs.

Quarterly earnings per share of Odel, part of the Softlogic group, were 22 cents. The share was trading at Rs21.80 in mid-morning trade Thursday.

In the nine months ending December 2016, EPS was 62 cents with net profit down 31% to Rs170 million while sales rose 8.3% to Rs5.2 billion.

Sri Lanka's Multi Finance capitalized by Fairway Holdings

ECONOMYNEXT - Fairway Holdings (Pvt) Ltd, a property developer will inject 550 million rupees to capitalize Multi Finance Plc, a firm controlled by controversial Entrust group which has seen a run on deposits.

Fairway will buy 41.1 million shares at 13.40 rupees injecting 550.87 million rupees to the company under a deal backed by the Central Bank, which regulates registered finance companies, the firm said in a stock exchange filing.

Current majority shareholders Entrust Holdings Ltd and Entrust Ltd, which failed to capitalize the firm until now, has been prohibited by the regulator, from taking part in the current share placement following irregularities in the group.

A primary dealer in the Entrust group is under a criminal investigation.

Other minority shareholders would be allowed to buy 7.39 million shares offered as part of the recapitalization plan.

Following the capital injection a deposit and borrowing ceiling imposed on the firm by the central bank will be removed.

Sri Lanka’s Hemas Group Dec quarter profit flat

ECONOMYNEXT – Sri Lanka’s Hemas Holdings said December 2016 quarter group net profit was virtually flat at Rs864 million compared with a year ago with tax hikes hurting its healthcare business while logistics and maritime sector earnings surged.

December 2016 quarter sales grew 14.4% to Rs11.3 billion from a year ago, according to interim results filed with the stock exchange.

The group’s fast moving consumer goods and health care business profits were down slightly in the December quarter, profits from the leisure sector went up slightly while earnings from the logistics and maritime business rose 340% up to Rs101 million.

Diluted quarterly earnings per share were Rs1.51. The Hemas share was last traded at Rs104.50.

For the nine months ending December 2016, Hemas reported diluted EPS were Rs4.20 with group sales up 12.9 percent to Rs31.9 billion and net profit up 26.1% to Rs2.4 billion.

Hemas group chief executive Steven Enderby said the firm faced "increasingly challenging operating conditions across most sectors" in the December quarter.

"We anticipate a challenging last quarter for our businesses with the latest developments in the macroeconomic context," he added.

"Increasing VAT (value added tax) rates and the introduction of VAT at hospitals, new pharmaceutical pricing regulation, and increasing inflation have impacted Q3 profitability," he said.

"During the last quarter, healthcare sector experienced challenges arising from new pharmaceutical price regulation and the introduction of VAT on specified hospital services," he said.

But Hemas group pharmaceutical distribution operation recorded a “solid performance” over last year with an increased volume growth, Emderby said.

"Our hospitals also delivered good growth over last year with its latest investments in bed expansion in Hemas Hospital Wattala and a range of new surgical specialties and medical equipment."

Hemas group also saw higher sales and distribution costs in Bangladesh as it grow its operations there.

Hemas also had continued losses at its new hotel, Anantara Peace Haven Resort in Tangalle, its joint venture with Thailand’s Minor Group, although performance was helped by more tourist arrivals in the December quarter, the start of the peak season, Enderby said.

N*Able, the information technology arm of Hemas, performed behind last year, Enderby said.

The growth in Hemas group logistics and maritime business was driven by its new maritime agency for the Evergreen shipping line.

Sri Lanka's Sierra Cables December quarter net up 28-pct

ECONOMYNEXT - Sri Lanka's Sierra Cables, which has been expanding into Africa and the Pacific islands, said December 2016 quarter group net profit rose 28% to Rs81 million from a year ago.

Sales for the quarter rose 51% to Rs1.1 billion, according to interim accounts filed with the stock exchange.

Basic Earnings Per Share for the quarter were 15 cents up from 12 cents a year ago. The share was last traded Rs3.50

EPS in the nine months to December 2016 rose to 49 cents from 41 cents the year before with net profit up 21% to Rs265 million and sales rising 30% to Rs3 billion.

The Sierra group subsidiaries are Sierra Industries (Private) Limited, Sierra Power (Private) Limited, Sierra East Africa Ltd and Associate Companies T & G Lanka (Private) Limited and Tea Leaf Resorts (Private) Limited.

Sierra Cables has set up plant in Kenya to supply transmission and distribution cables to East African countries and plans to set up a joint venture power cable factory in Fiji, with three other partners, where the firm will own a 30 percent stake.

Sri Lanka’s J L Morisons to invest $13.5mn in pharma plant

ECONOMYNEXT – Sri Lanka’s J L Morisons Son & Jones (Ceylon) PLC said it plans to invest $13.5 million to build a new pharmaceutical manufacturing plant.

The company, a unit of the Hemas Holdings group, said in a stock exchange filing that commercial operations of the plant are expected to start in 2019.

“This research and manufacturing facility will be located within the Sri Lanka Institute of Nanotechnology park in Pitipana, Homagama,” it said. “The proposed plant will significantly enhance the manufacturing capacity of the company, while complying with global regulatory standards.”

Sri Lanka's Laugfs in the red as LPG costs soar amid price controls

ECONOMYNEXT - Sri Lanka's Laugfs said it lost Rs185 million in the December 2016 quarter against a profit of Rs293 million a year earlier, as liquefied gas prices soared and it was seeking a price hike from authorities.

The group, which also has interests in tourism, reported losses of 46 cents per share. In the nine months to December, it reported earnings of 28 cents per share on total profits of Rs120 million.

However, finance costs also rose to Rs403 million from Rs186 million.

"Significant increases in LPG prices in the world market have had a substantial negative impact on our bottomline compared to the corresponding period last year," Laugfs Chairman W K H Wagapitiya told shareholders.

"However, in order to effectively counteract the impacts of these global trends, we have already engaged with the relevant stakeholders for a realignment of prices. While some of our long-term investments have also had a significant negative impact on our financial results, we remain positive and confident of the long-term returns these will yield."

Sri Lanka had a price formula for LGP during the last administration, which protected distributors, the rupee and the credit system by matching domestic demand with imports.

However, the current administration had mandated a series of price reductions outside the formula.

Over the last quarter, both propane and butane prices, which make up LPG, have soared.

The price of $295 a metric tonne in September 2016 had soared to $510 by February 2017. Butane had shot up from $320 a tonne to $600 in the same period.

Crude prices have also recovered from unusually low prices in the first quarter of 2016.