Despite margin pressure LB Finance maintains profits in 1Q

LB Finance PLC saw its margins coming under pressure as the funding cost escalated and the new loans and leases showed signs of slowing down during its most recent quarter but the company managed to maintain profitability, LB Finance interim financial accounts showed.

The interest income of the fourth largest finance company in the country grew by 28 percent year-on-year (YoY) to Rs.5.5 billion but the corresponding cost of the funds spiked 54 percent YoY to Rs.2.6 billion, resulting in a net interest income of Rs.2.6 billion, up by a modest 10 percent YoY for the April-June quarter (1Q18).

The pace at which the interest expense grew demonstrated the pressure exerted on the interest margins. Hence, the company managed to report a net profit of Rs.940 million or Rs.6.79 a share compared to Rs.911.7 million or Rs.6.58 a share during the same period last year – an increase of modest 3.0 percent YoY.

LB Finance, with an asset base of little under Rs.110 billion, loaned Rs.3.2 billion for the quarter, relatively slow, but better than some of the small commercial banks in the country. “LB Finance continues to display remarkable resilience and growth even amidst the prevailing challenges in the external environment,” LB Finance Managing Director Sumith Adhihetty said in a statement.

The company has a total loans and leases book of Rs.93 billion.

LB Finance is also one of the main microfinanciers in Sri Lanka but the sector is currently undergoing some challenges with rising delinquencies as some borrowers have taken loans from multiple companies and are now in a debt trap.

In a bid to avoid the issue being spiralled into a much larger socio-economic issue, the microfinance sector is expected to come under the Credit Information Bureau (CRIB) by the end of the year. 

While the specifics are not clear, the provisions made against the possible bad loans of the company tripled to Rs.68.6 million from Rs.22.5 million a year earlier.

Meanwhile, the company increased its customer deposits by Rs.4.8 billion, a commendable growth, given the competition from the banks and similar finance companies.

The company now has a total deposit portfolio of Rs.65.2 billion.

The investment vehicle of business magnate Dhammika Perera, Vallibel One PLC, together with Royal Ceramics Lanka PLC, held a 77.83 percent stake in LB Finance PLC.

SBI Ven Holdings Pte Ltd, an investment holding company that is part of Japan’s SBI Holdings, Inc., held 1.15 percent in the company being the fourth largest shareholder.

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Panasian Power plans two mini hydro plants in Nuwara Eliya

(LBO) – Panasian Power has announced the acquisition of Lower Kotmale-Oya Power Two (Pvt) Ltd to construct two mini hydro-power plants (MHP) in the Nuwara-Eliya district in early 2018.

The construction will have an estimated investment of 400 million rupees, and envisages combined output of 7.53 GWh per annum.

“This latest acquisition is in keeping with our long term goal of increasing our renewable energy footprint to meet the local demand for clean, low cost energy. Furthermore, our decade long experience in the mini hydropower sector makes us ideally suited to ensure that the project runs efficiently with the highest energy output,” said Pathmanatha Podiwala, General Manager of Panasian Power.

“Renewable energy projects like this will help propel Sri Lanka towards a sustainable energy future that will yield benefits throughout our economy and increase the quality of life.”

Due to the convenient accessibility, short length of structures and minimal environmental impact, construction of the project is not expected to exceed 12 months, Podiwala said.

The Lower KotmaleOya Power Two(Pvt) Ltd was formed as a special purpose vehicle company to develop two cascade projects, the Lower KotmaleOya II MHP and Medakumbura MHP, utilizing water resources from KotmaleOya in the Pudaluoya township, NuwaraEliya district.

Panasian Power, which was incorporated in 1982, owns and operates a Mini Hydropower Plantsand supplies electricity directly to the Ceylon Electricity Board in accordance with the Small Power Purchase Agreement (SPPA) entered into on 5th July 2004 and spans for 15 years with a further extension of 5 years.

Sri Lanka’s Odel expands retail space

ECONOMYNEXT – Sri Lankan retailer Odel Plc said it has added another 10,000 square feet to its main store at Colombo’s Alexandra Place and was offering new footwear and sportswear brands.

A statement said the extension increases the floor area of the Alexandra Place store to 52,000 square feet and was the second such investment by its owner Softlogic in the location in the past eight months.

The extension was designed and built by Blocher Partners, the Germany-headquartered architecture firm that designed the 645,000 square foot Odel Mall that will soon begin to take shape at the adjoining site.

In July 2017, Odel said it plans to do a mixed developed property project there with an investment of $105.7 million.

Along with the expansion, Odel said it has introduced Aldo, the global Canadian fashion footwear and accessories brand.

Sri Lanka's MTD Walkers to expand shipyards, eyes Maldives

ECONOMYNEXT - Sri Lanka's MTD Walkers, a publicly traded construction and engineering group, said it is eyeing a third shipyard in Galle, and opportunities in the Maldives as expected to win more business in the Indian Ocean.

The firm said it had invested 1.3 billion rupees building a shipyard in Mutwal, near Colombo Port, which can accommodate vessels of up to 1,250 tonnes. It will have a shiplift and transfer system, which is being built by a group company.

The yard has already built a barge to carry out sea-piling, and two tugboats for its own use are also being built.

"Further to this, the sector will evaluate emerging opportunities in the Galle Harbour and Maldives," the firm told shareholders. "The sector’s strategy is to establish shipyards across the island to cater to growing demand for quality ship repair and shipbuilding services in the Indian Ocean."

The Mutwal shipyard is expected to start commercial operations in the next financial year. Already, offshore ship repairs are being done, the firm said.

The Trincomallee yard in Cod Bay Fishery harbour will have a boatlift and cater to smaller fishing vessels.

MTD Walkers group is already engaged in civil engineering work in the Maldives.

Sri Lankan shares fall to lowest close in four months

Reuters: Sri Lankan shares fell to their lowest close in more than four months on Tuesday as persisting uncertainty over a proposed tax reform bill dragged down blue chips.

The Colombo stock index fell 0.39 percent, or 25.21 points, to 6,395.32, its lowest close since April 18.

The index shed 4.1 percent since July 27 through Tuesday and has fallen in 16 out of 18 sessions due to lacklustre corporate earnings in the June quarter and speculation that the new tax reform bill might impose a tax on stock trading.

"Market slipped a bit with lower-than-expected results and overall negative sentiment on tax worries," said Hussain Gani, deputy CEO at Softlogic Stockbrokers.

"Investors are awaiting clarity on the tax bill."

Junior Finance Minister Eran Wickramaratne said on Thursday concerns over tax on trading stocks would be addressed before the proposed bill is passed in the parliament. The bill is expected to be presented in the parliament on Friday.

However, foreign investors bought into the island nation's risky assets in the session.

Foreign investors bought shares worth a net 78.4 million rupees ($512,586) on Tuesday, extending the year-to-date net foreign inflow to 27.8 billion rupees worth of shares.

Turnover was 419.4 million rupees, less than half of this year's daily average of around 866.5 million rupees.

Shares of conglomerate John Keells Holdings Plc fell 0.7 percent, while Melstacorp Ltd lost 1.7 percent and Hemas Holdings Plc ended 1.4 percent weaker. 

($1 = 152.9500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)