Sri Lanka could sell second sovereign bond in 2017 for 'liability management'

ECONOMYNEXT - Sri Lanka could go to the markets in 2017 with a second sovereign bond for better management of debt, Central Bank Governor Indrajit Coomaraswamy said.

Sri Lanka sold a 1.5 billion US dollar bond this month, at 6.2 percent where the premium to the US Treasury yield compressed by about 384 basis points.

Under current law the parliament sets a limit for foreign borrowings.

Coomaraswamy said Sri Lanka could go to the markets again this year, but current law has to be changed to allow the government to borrow for liability management.

At the moment, parliament authorises the Treasury to borrow for the budget through the so-called Appropriations Act for payments to be made during the year.

Sri Lanka has some bunched up liabilities on sovereign bonds from 2019.

Sri Lankan poultry firm March quarter net down 49-pct

ECONOMYNEXT - Ceylon Grain Elevators, a Sri Lankan poultry and feed milling group, said March 2017 quarter net profit fell 49% to Rs168 million from a year ago mainly owning to higher raw material prices and import restrictions.

Earnings per share fell to Rs2.80 from Rs5.54 over the period with sales up 5% to Rs3.8 billion, according to interim accounts filed with the Colombo stock exchange.

“Although there was a revenue growth reported during the quarter under review, it is pertinent to note that group results were adversely affected by price hikes of key raw material,” Primus Cheng Chih Kwong, Executive Director and Chief Executive Officer said in a note accompanying the accounts.

“Decreased yield in the local maize cultivation and import constraints imposed by the government brought about an increasingly tight market that caused the price of local maize to be pushed up by over 20%, when compared to the same quarter of the previous year.”

The production shortfall and import restrictions caused a situation where feed millers were not able to get their maize requirements, despite them being ready to purchase the entire local maize production at a reasonable price acceptable both to the government and the farmers, Primus said.

“This scenario in fact compelled feed millers to pay artificially higher prices for maize thus pushing their cost of production higher, since their ability to exercise management skills to purchase imported maize at times when international prices are lower, was curtailed consequent to import restrictions,” he said.

In the backdrop of local maize production being way below the demand from feed millers, he called for the government to consider issuing import permits directly to feed millers without bringing in intermediaries.

This should enable feed millers to procure maize at competitive prices through international procurement planning, he said.

“This will no doubt lower their cost of production and will make it possible for them to provide cheaper feed to the local farmers, ultimately resulting in there being protein rich chicken meat available to local consumers at a more affordable price.”

Amana Bank Q1 profit tops Rs 66 mn

Amana Bank recorded a successful first quarter in which the bank achieved a profit before tax of Rs. 92.5 million, reflecting a remarkable YoY growth of 83 percent from the corresponding period in 2016.

The bank’s profit after tax for the same period grew by 74 percent to reach Rs 66.6 million.

CEO Mohamed Azmeer said, “I am happy to note that in line with its five-year strategic plan, the bank has been successful in maintaining its upward momentum. This reflects the growing acceptance of our people friendly banking model. I am confident the numbers we have achieved will add impetus to our forthcoming rights issue, which in turn, will support the future expansion of business.”

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The bank recently announced a rights issue to support its growth and comply with the regulatory capital requirements.

Nations Trust Bank 1Q profits up by 22% to Rs. 725m

Nations Trust Bank (NTB) has closed the first quarter ending 31March 2017 with a post-tax profit of Rs. 725 m, up by 22% over the corresponding period in the previous year with pre-tax profits increasing by an impressive 33%.

Profitability growth was underpinned by a 9% growth in loans and advances during the period under review despite the narrowing of net interest margins.

Net interest income increased by 18% as the volume growth outperformed the impact arising from the narrowing of NIMs.

The NIM compression is reflective of the rising cost of funds and a conscious rebalancing of the loan portfolio towards Corporate and SME from consumer lending.

Non fund based income including fees, commission and operating income increased by 39% for the period under review with trade and other related fees contributing to a larger portion of the increase. Initiatives put in place to harness fee generating business across various customer and market segments is progressing rapidly as reflected by the increases shown in fee based income.

Net trading losses for the year amounted to Rs.56 m which is reflective of the swap cost arising from an increased funding forex SWAP book and unfavourable movements in forward premiums. However, the bank benefited from the relatively lower funding costs of the forex swaps compared to high cost rupee deposits.

Impairment charges recorded an 11% decrease which reflects the emphasis placed on credit quality and the collection effort that has been put in. Overall asset quality was maintained across the portfolios with the Group NPL ratio improving from 2.41% in December 2016 to 2.30% by quarter end 2017.

Expenses recorded a growth of 15% with personnel and other operating expenses contributing towards the increase. Growth in expenses are somewhat impacted by the higher taxes applicable for the current period on account of the increase in the VAT rate and the impact of regulatory allowances. The bank continued to focus on widening the roll-out of lean initiatives, workflow methods and automation across the enterprise in its pursuit towards rationalizing expenditure on key controllable cost lines.

SME and Corporate loan portfolios recorded good growth during the quarter, thereby cementing a strong base for further growth in the ensuing months. CASA growth was significant for the quarter recording a 10% growth and contributing to 25% of the total deposit growth. The launch of the new max-bonus product boosted growth in SA and has been well received by the market.

Commenting on the results and achievements, CEO/Executive Director Renuka Fernandostated: “I am extremely pleased with the performance of the first quarter; well-balanced across the business pillars with support functions collaborating and equally contributing towards the growth and achievements in the businesses. The foundation has now been put in place to have a successful financial year.”

Nations Trust Bank PLC is amongst the top 25 business establishments in Sri Lanka, ranked by Business Today Magazine and is the benchmark for customer convenience, ably providing a host of financial products and services to a wide range of customers.

Nations Trust Bank operates 93 branches across the country, boasting an ATM network covering 137 locations plus more than 3,500 ATMs on the Lanka Pay Network and is the issuer and sole acquirer for American Express cards in Sri Lanka.

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Piramal Glass concludes successful year

Piramal Glass Ceylon Plc (PGC) has completed yet another exciting and successful year with its highest ever turnover of Rs. 6,783 million and PAT of Rs. 485 million amidst a year which saw a two-month closure for furnace relining and upgrade.

With this achievement, the Board of Directors has proposed a dividend of 26%, thereby maintaining its consistent policy of a dividend payout ratio of 50%.

Total revenue achieved for the year was Rs. 6,783 million against Rs. 6,755 million during the previous year. Domestic revenue remained almost at the same level as the previous year with Rs. 5,574 million in F17 as against Rs. 5,437 during the previous year.

The Gross Profit for the year fell from Rs. 1,497 million to Rs. 1,371 million due to high trading volume, with the GP margin dropping from 22% to 20%. This was the result of the high trading volumes present to facilitate customers during the period of the furnace shutdown. A total of over Rs. 2,104 million in trading was done during the year, which yielded very slim margins. These imports were done from various sources, including Piramal Glass India, based on the segment, price and quality requirements.

The same impact was depicted in PBT & PAT figures. During the year under review the company achieved Profit before Tax of Rs. 603 million as against Rs. 805 million in the previous year and Profit after Tax of Rs. 485 million as against the Rs. 654 million of the previous year.

The export market sale in F2017 was Rs. 1,209 million as against Rs. 1,318 in F 2016. The decline was due to capacity constraints resulting from two months of furnace closure. The export market was managed by servicing the high-end niche segment. Also amidst these constrains several new bottles were launched and commercialised in the US and Australian markets.

The decline in profit for the year was not only due to the shutdown of the furnace for two months but due to fluctuating energy prices (LPG gas), including high furnace oil prices. Furthermore, a rupee depreciation of over 4% was experienced during the year which had a major impact due to the high imports throughout the year under review.

The Piramal Glass plant which commenced operations in December 2007 in Horana was stopped in July 2016 after continuous operation for almost nine years. A glass furnace has to be overhauled every 8-10 years.

Similarly, PGC also planned and overhauled its plant and took this opportunity to enhance its furnace capacity to a maximum of 300 MT per day from its existing capacity of 250 MT. Simultaneously, downstream equipment such as production lines, quality inspection machines, packing machines and other utility equipment were also upgraded and the capacity was enhanced to facilitate the increased furnace capacity. This was carried out with an investment of Rs. 3,000 million.

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