Sri Lanka’s NDB records PAT of Rs 3.3Bn in Q3

LBO - Sri Lanka’s National Development Bank PLC (NDB) reported a 64 percent growth in its Profit After Tax over the comparative period to record 3,310 million rupees for the nine months ended September 30, 2017.

The Bank’s Profit Before Tax (PBT) of 5,679 million rupees was an increase of 61 percent over the comparative period. Continuous and consistent improvement in core banking operations of the bank over the reported three quarters and dividend income from group companies contributed towards this remarkable performance.

The PBT and PAT of the bank, excluding the group dividends grew impressively by 51 percent and 50 percent respectively, which is a clear reflection of the strong performance of the core banking operations.

Net interest income (NII) recorded a 23 percent growth over the corresponding period to 7,656 million rupees. Accelerated NII growth over the quarters was due to steady growth in loans and advances coupled with improved Net Interest Margins of 2.90 percent for the nine months of 2017 as compared to 2.62 percent for the comparative period.

Net Fee and Commission Income of Rs 1,812 mn for the period was a growth of 10% over the comparative period and was in line with the increase in business volumes. Net fee and Commission Income have progressively improved over the three quarters affirming that fee income remains a strategic priority in improving the profitability of the Bank. Net gains from trading had a 16% growth to Rs. 793 mn which was also in line with business volumes generated during the period.

Total Operating Income which is a combination of NII and non-interest income had a 29% growth to Rs 12.02 billion. The total impairment charges for loans and other losses for the nine months was Rs. 872 million, a reduction of 11% over the corresponding period last year. Sound credit review, effective monitoring and recovery processes adopted by the bank have resulted in reduced impairment charges for the period.

Total operating expenses was Rs 5,472 million, an increase of 13% over the comparative period. If not for the one-off cost involved in the pre-payment of a foreign currency loan, the increase was only 8% over the comparative period and reflects the efficient and effective cost management initiatives adopted by the bank, despite branch expansion and launch of new products during the period.

The cost to income ratio (CIR) of 45.8% was well within the bank’s targets of maintaining its CIR below 50%. The profit attributable to shareholders was Rs 2,520 million and was 28% over the comparative period.

The moderate performance in the capital markets activities experienced during the nine months period, continue to pose a challenge to the investment banking and stockbroking businesses within the NDB group, resulting in lower contribution from the group.

(PRESS RELEASE)

High cotton prices, taxes trim Sept quarter profits at Sri Lanka’s Teejay

ECONOMYNEXT - Sri Lankan export fabric maker Teejay Lanka Plc reported net profit fell 37% to Rs370 million in the quarter ending 30 September 2017 from a year ago owing to softer demand, higher cotton prices and the ending of its tax holiday.

Sales rose 16% to Rs6 billion, according to interim accounts filed with the stock exchange.

Earnings per share in the September 2017 quarter were 53 cents. The share was trading at Rs37.50 Wednesday.

EPS for the six months to 30 September 2017 were 84 cents with net profit down 40% to Rs590 million and sales up 15% to Rs11.5 billion.

The Net Profit declined due to the challenges in the markets which saw softer demand, coupled with continuing high raw material price escalations and the ending of the tax holiday, and the Group recorded Rs370 Mn for the quarter, against last year’s Rs590 Mn for

Teejay Group chairman Bill Lam said the group was increasing capacity in India with the order book growing especially after Sri Lanka got back the GSP Plus trade concession allowing duty free imports to the European Union.

“The net profit declined due to the challenges in the markets which saw softer demand, coupled with continuing high raw material price escalations and the ending of the tax holiday,” he said.

The higher cotton yarn prices persisted, thereby depressing margins compared to the prior year, he said.

“The commissioning of extra capacity in India is gradually enabling greater volumes of business and certain economies of scale, and further aided by GSP. Thus, the Group increased its profitability quarter-on-quarter by 68%.”

Teejay Lanka also has been impacted with the ending of its tax holiday from September 2016 onwards and both Teejay India and Teejay Prints are now subjected to tax, Lam said.
Taxes within the group increased from Rs27 million to Rs79 million, a 189% increase.

Lam said Teejay Group is “gearing up for its peak quarters, with the GSP benefit already bringing in surges in EU business and expected to strengthen the customer portfolio, and the US base making strong demands for higher volumes.”

Sri Lanka’s Chemanex to shed staff, stop exports, paints business

ECONOMYNEXT – Chemanex said it intends to stop its exports and retail paints business to focus on chemical trading as part of a restructuring to improve profitability and would shed staff through a voluntary retirement scheme (VRS).

Chemanex said in a stock exchange its export business had been deemed to be non-viable and the board of directors had decided to wind up Cal Exports Lanka (Private) Ltd. and its fully owned subsidiary Chemanex Exports (Pvt) Ltd.

“The Board has also decided to cease operations in the retail paints business in a managed manner since it does not have the required scale to move forward as an independent business operation,” the statement said.

Chemanex said it will focus on its chemical trading business in Sri Lanka.

Since the staffing requiremens would be much less because of the planned revamp, it will implement a VRS for its staff.

Chemanex will also get the support services from its holding company, CIC Holdings, for the chemical trading business which will further reduce the cost of trading operations, the company said.

Sri Lanka's Bairaha Farms Plc net down over poultry slump

ECONOMYNEXT - Sri Lanka's Bairaha Farms Plc, which has breeder farms and also sell meat and value added products has reported profits of 74 million rupees in the September 2017 quarter, down 71 percent from a year earlier, while revenues also edged lower.

The group reported earnings of 4.68 rupees per share for the quarter. In the six months to September Bairaha reported earnings of 11.94 rupees per share, on total profits of 190 million rupees, which were down from 378 million a year earlier.

Total revenues fell 8.5 percent to 1,068 million rupees in the September quarter but cost of sales rose 5.8 percent to 825 million rupees, shrinking gross profits 37 percent to 243 million rupees.

A company official said chicken demand has slumped in recent months, spreading from the live bird market to day-old-chicks.

The poultry industry goes through a downward cycle, especially after Sri Lanka's central bank prints money, creating currency collapse, which then pushes up inflation reducing disposable incomes, economic analysts say.

Demand eventually picks up as salaries adjust upwards, and workers regain lost income from currency depreciation.

Most of Sri Lanka's branded dressed chicken prices are held at 420 rupees a kilo and have not moved down. A faster adjustment of prices could boost demand, analysts say.

The industry at one time had price controls but they have now been lifted.

Sri Lanka’s UML sets up unit for heavy machinery imports

ECONOMYNEXT – Sri Lanka’s United Motors Lanka (UML) said it has invested Rs75 million to set up a new subsidiary to import and distribute heavy equipment and machinery.

A stock exchange filing said UML invested in 7.5 million ordinary shares at Rs10 each of UML Heavy Equipment Ltd.

The new firm was set up recently for the import and distribution of heavy equipment and machinery for all construction, agriculture, waste handling, demolishing and earth preparation applications, it said.

Sri Lankan stx hold steady; budget, cbank rate decision in focus

Reuters: Sri Lankan shares closed steady on Thursday ahead of a long weekend, with investors awaiting the national budget presentation and the central bank’s policy rate decision.

The Colombo stock index closed 0.04 percent weaker at 6,621.47. The index rose 0.1 percent for the week. Both currency and stock markets will be closed for a Buddhist holiday on Friday.

“There was heavy interest in Sampath Bank and investors are just holding until the next week’s budget,” said Prashan Fernando, CEO at Acuity Stockbrokers.

Finance Minister Mangala Samaraweera will present the 2018 budget on Nov. 9.

Sentiment has been mixed on September-quarter corporate earnings as lower consumer spending due to tight monetary and fiscal policies is expected to have hurt the quarterly performance.

Market heavyweight John Keells Holdings posted a 1 percent fall in its September-quarter net profit.

Sampath Bank climbed 1.6 percent, while Keells gained 0.3 percent.

Fernando said the market was hoping for policies that might result in improved consumer spending in the budget.

Sri Lanka’s central bank is expected to keep its key interest rates steady on Tuesday to support the sluggish economy despite a pick-up in inflation amid strong credit growth, a Reuters poll showed.

Foreign investors bought shares net worth 148.6 million rupees ($967,763), extending the year-to-date net inflows to 20.4 billion rupees in equities.

The session’s turnover was 992.1 million rupees, higher than this year’s average daily turnover of 942.8 million rupees. 

($1 = 153.5500 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Amrutha Gayathri)