Sri Lankan shares edge up as banks gain

Reuters: Sri Lankan shares ended marginally higher on Thursday as banking shares rose, but profit-booking in several recent outperformers capped gains.

The Colombo stock index ended 0.05 percent firmer at 6,714.95, further moving away from its lowest close since May 15 hit on Tuesday.

The index rose 0.83 percent last week and has climbed 11 percent since March 31 through Friday.

Turnover stood at 394 million rupees ($2.58 million), well below this year's daily average of 909.4 million rupees.

Foreign investors net sold shares worth 4.53 million rupees worth of shares, but they have been net buyers of 19.39 billion rupees wroth of equities so far this year.

Shares in Nanda Investment Plc rose 8.17 percent, while Lion Brewery Plc rose 5.99 percent and DFCC bank Plc ended 3.75 percent up.

($1 = 152.7800 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Vyas Mohan)

Sri Lanka's HNB Assurance records a ‘robust’ Q1

HNB Assurance PLC (HNBA) and its fully owned subsidiary HNB General Insurance Limited (HNBGI) posted a Profit After Tax (PAT) of LKR 74 MN for the first quarter of 2017, reflecting a 121% growth compared to LKR 33 MN recorded during the corresponding period last year.

The Group achieved a growth of 18% during Q1 of 2017, posting a Gross Written Premium (GWP) of LKR 1.9 BN against the GWP of LKR 1.6 BN recorded during the same of 2016. The Life Insurance Company posted a GWP of LKR 988 MN and the General Insurance Company posted a GWP of LKR 929 MN during the period under review. The Group was able to deliver a steady performance as a result of the strategic initiatives implemented in new business acquisition as well as streamlining its core business operations.

The key contributors to the reported growth were identified as the growth in both Individual and Corporate Policies of the Life Insurance Company as well as the contribution of the Motor segment of the General Insurance Company. On a comparable basis with the results of the corresponding period of 2016, the post-tax profit of the Life Insurance business showcased a growth of 66%. The businesses were successful in capturing new market segments and seizing profitable growth opportunities, despite the challenging market and economic conditions. The recorded growth was in line with the Group’s expectations on the phase of maximizing its profits as well as in delivering value to its stakeholders.

Sharing thoughts on the financial performance of the Group, Chairperson of HNBA and HNBGI Ms. Rose Cooray stated, "We are indeed pleased on the results the Group was able to yield at the end of the first quarter of this year, amidst the stiff competition and other macroeconomic factors. The Group surpassed the LKR 15 BN milestone of Total Assets during the first quarter of 2017 and Investments in Financial Instruments reached a value of LKR 12 BN. During the same period the Life Insurance Fund grew by 7% while the General Insurance Fund grew by 5% reaching values of LKR 9 BN and LKR 2 BN respectively. These results reflect the favorable direction the company is headed and the Board, the management and staff of both HNBA and HNBGI are committed to improve the financial performance of the Group as well as to strengthen the competitive positioning of both HNBA and HNBGI". - HNBA

‘Allianz Lanka registers impressive Q1 2017’

Allianz Lanka continued to maintain its growth momentum across its life and general insurance businesses through Q1 2017.

The Non-Life company, Allianz Insurance Lanka Ltd., recorded 33% YoY growth in Gross Written Premium (GWP) at Rs.1.493 billion during the period under review, with a Profit After Tax (PAT) of Rs. 13 million despite expenditure on expansion.

The Life company, Allianz Life Insurance Lanka Ltd., registered a 7% YoY growth in GWP, ending the quarter at Rs.277 million with an impressive growth of 23% in annualized new business fueled by Universal Life Products which contributed Rs. 174 million. The PAT stood at Rs.24 million which marked a continuation of making profits since last quarter 2016.

Commenting on the company’s performance during the quarter, Surekha Alles, Chief Executive Officer - Allianz Lanka, said, "I’m excited to report that we have recorded a positive start to FY 2017 with both the life and non-life businesses registering steady growth. Our efforts to expand our retail network around the country were instrumental in helping Allianz Insurance Lanka Limited register impressive growth in GWP. This together with the uniqueness of our products has helped us gain the confidence of customers and grow the business. The parent company Allianz SE’s capital infusion of Rs.405 million too contributed to the non-life business’ growth numbers. Allianz Life Insurance Lanka Limited was able to consolidate its market position with a focus on recruitment and new business creation under its new leadership in sales. Energized by these results, we look forward to continuing to grow our business through FY 2017."

Prevailing high interest rates together with the company’s prudent investment strategy helped drive 70% and 17% growth in investment income in the non-life and life businesses, respectively. The non-life business’ investment portfolio grew by 23% YoY to Rs.2.301 billion while the life business’ investment portfolio grew by 34% YoY to Rs.2,105 million. - Allianz Lanka

Fitch downgrades Kotagala to 'CC(lka)' on worsening liquidity

Fitch Ratings Lanka has downgraded Sri Lanka-based Kotagala Plantations PLC's National Long-Term rating to 'CC(lka)' from 'B+(lka)'. The agency has also downgraded the National Long-Term rating on Kotagala's outstanding listed senior secured debentures of LKR1 billion to 'CC(lka)' from 'B+(lka)'.

The downgrade follows continued deterioration in the company's liquidity, as its operating EBITDA weakened further in the financial year ending-March 2016 (FY16) due to falling tea and rubber prices, high labour costs and poor labour productivity. Consequently, Kotagala's operating EBITDA of LKR30 million was insufficient to cover its borrowing costs of LKR503 million and the company had to utilise cash reserves to meet most of its financial obligations.

The company's EBITDA recovered to LKR247 million in 9MFY17, from LKR198 million in 9MFY16, driven by improving tea and rubber prices. However, we expect EBITDA to fall short of meeting the company's borrowing costs and operating lease rent in the next 12 months-18 months. Kotagala has around LKR546 million of bank loan maturities due in FY18. The company has benefitted from banks' willingness to restructure its borrowings in the past. However, principal repayments on its listed senior secured debenture will fall due in FY19, starting with LKR250 million principal due in May 2018.

Weak Liquidity; High Refinancing Risk: Kotagala faces substantial debt maturities from FY18 and we believe it will be challenging for the company to meet its obligations due to its low cash balance and negative free cash flow generation in the next two years. Further, the company does not have any committed credit lines at its disposal, limiting its financial flexibility and exposing it to significant refinancing risk. The company's efforts in FY16-FY17 to lower debt via asset disposals and extending the maturity of part of its existing debt has not led to a sustained improvement in liquidity.

Challenging Operating Conditions: The profitability of Kotagala's tea and rubber plantations has improved in the previous few months with rebounding global prices, but we do not believe the improvement is sufficient to offset the sector's structural decline stemming from continued supply-side pressure, such as lower productivity and high labour costs.

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Sri Lanka Watawala Plantations March quarter net profit up 168-pct

ECONOMYNEXT - Sri Lanka’s Watawala Plantations said net profit rose 168% to Rs212 million in the March 2017 quarter from a year ago with its tea business returning to profit and despite a sharp fall in palm oil earnings.

Sales of the group rose 5% to Rs1.8 billion over the period, according to interim accounts filed with the stock exchange.

Quarterly earnings per share were 89 cents compared with 32 cents a year ago. The stock last traded at Rs33.60.

The accounts showed Watawala Plantations’ tea business returned to profit in the March 2017 quarter while there was a sharp fall in palm oil profit.

“The palm oil segment profitability was below the expectations as the government reduced the duty on palm oil by Rs 40/- in 4QFY17,” said Watawala Plantations Managing Director Vish Govindasamy.

In the year to March 2017, EPS was Rs5.18 with net profit up 137% to Rs1.2 billion which Govindasamy said was Watawala’s highest ever profit “on the back of the increased performance in oil palm and tea segment.”

Palm oil continued to be the highest contributor to the company’s annual profitability, mainly because of the increased crop and higher Net Sale Average achieved during the year, he said.

Watawala Plantations achieved the highest profitability by any regional plantations company since privatization, he said.

Sri Lanka 03-month Treasury Bill yield steady at 9.62-pct

ECONOMYNEXT – The yield on 03-month Sri Lankan Treasury Bills stayed steady at 9.62 percent at Wednesday’s auction, the same as last week, the public debt department of the Central Bank said.

The 06-month t-bill yield fell to 10.40 percent from 10.42 percent last week and the 01-year bill yield remained at 10.73 percent the same as last week.

A statement said the public debt department got 77 billion rupees worth of bids and accepted bids worth 25 billion rupees.