Sri Lankan stocks slip to 2-week closing low on foreign selling

Reuters: Sri Lankan shares slipped for a third straight session on Wednesday and posted their lowest close in two weeks, weighed down by foreign selling amid concerns about political stability, stock brokers said.

The Colombo stock index ended 0.12 percent weaker at 6,551.78, its lowest close since Feb. 14. The index rose 0.18 percent last week.

"Still political cloud remains and the market is waiting for a clear direction," said Hussain Gani, deputy CEO at Softlogic Stockbrokers.

Foreign investors sold a net 127.3 million rupees worth of shares, but they have been net buyers of 6.1 billion rupees worth of equities so far this year.

Shares hit a more than three-week high last week after two key parties in the ruling coalition decided to remain in the ruling coalition, allaying fears of a government collapse. President Maithripala Sirisena reshuffled his cabinet on Sunday, appointing his prime minister as the law and order minister, after the governing coalition suffered a series of defeats in local elections earlier this month. However, the changes failed to boost the market with analysts said the cabinet reshuffle was not enough to address the election defeats.

Turnover stood at 1.05 billion rupees ($6.77 million) on Wednesday, more than this year's daily average of 972.9 million rupees.

Shares of Melstacrop Ltd fell 3 percent, Dialog Axiata Plc ended 1.5 percent weaker, Lanka ORIX Leasing Co Plc lost 2.9 percent, and Sri Lanka Telecom Plc fell 1.4 percent.

Sri Lanka's stock, bond and foreign exchange markets will be closed on Thursday for a Buddhist religious holiday. Trading will resume on Friday.

($1 = 155.0000 Sri Lankan rupees)

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

Vallibel Finance to issue ordinary shares by rights issue

Vallibel Finance PLC will issue 17,312,750 ordinary shares by way of a rights issue, which shall rank equal and pari passu with the existing ordinary shares five new ordinary shares for every 12 ordinary shares held as at the relevant date at a consideration of Rs 60 per share.

The current stated capital of the company is Rs.287,153,000, represented by 41,550,600 ordinary shares. The proceeds will be utilized to strengthen the tier I capital base of the company in keeping with the company’s expansion and maintaining the capital adequacy requirements as stipulated by the Central Bank of Sri Lanka. The Rights Issue is subject to the exchange approving in principle, the issue and listing of shares and the company obtaining the shareholders’ approval at a general meeting.

www.dailynews.lk

Fitch affirms Richard Pieris & Company at ‘A(lka)’- outlook stable

Fitch Ratings has affirmed Sri Lanka-based conglomerate Richard Pieris & Company PLC’s (RICH) National Long-Term rating at ‘A(lka)’ with a stable outlook. Fitch has also affirmed the National rating on RICH’s outstanding senior unsecured debentures at ‘A (lka)’.

The affirmation of RICH’s ratings reflects our view that the improvement in the group’s adjusted net leverage was offset by the underperformance in its tyre business and some segments in the plastics sector over the last 18 months, and the risks around their recovery prospects over the medium term, limiting any positive rating action. RICH’s rating also reflects the group’s diversified cash flows, market leadership in several of its segments, and the company’s well-established operating history. Fitch Ratings also expects the company to increase capex in the next two years in a bid to expand production capacity in the retail, rubber and palm oil segments.

“We expect store expansion and a shift in consumer preference towards hypermarkets and supermarkets to lead to double-digit revenue growth for the company’s retail segment in the medium term.
www.dailynews.lk

Sri Lanka's Janashakthi Insurance net down 27-pct in Dec, Rs11bn buyback

ECONOMYNEXT - Profits at Sri Lanka's Janashakthi Insurance, from life and general businesses, fell 27 percent to 623 million rupees in December 2017 quarter from a year earlier, amid higher benefits and claims, interim accounts showed.

The group reported earnings of 1.15 rupee a share for the quarter. For the year the December it reported earnings of 2.08 rupees per share, on total profits of 1.1 billion rupees, down from 1.64 billion rupees.

The firm has struck a deal to sell its general insurance unit to Allianz of Germany. The firm said it will buy back 3 shares out of every 5 held t 36.70 rupees to distribute 11.9 billion rupees to shareholders. The was selling at 31.00 rupees, down 20 cents in intra-day trading Monday.

In the quarter, gross written premium grew 6.5 percent to 4.0 billion rupees, and re-insurance rose 14 percent to 604 million rupees. Net premium grew 5 percent to 3.4 billion rupees.

Investment income grew 1.7 percent to 570 million rupees. Other income fell 24 percent to 239 million rupees.

Benefits and claims grew 4.1 percent to 1.8 billion rupees. With acquisition costs and 162 million charge to the life fund (292 million rupee gain last year), total benefits, claims and acquisition costs rose to 2.5 billion rupees from 1.9 billion rupees dragging down profits.

Sri Lanka's DSI to boost solid tyre sales, footware facing competition: Fitch

ECONOMYNEXT - Sri Lanka DSI Samson group, a rubber products group is planning to boost solid tyre sale as it faces domestic competition from small scale footware producers, Fitch Ratings confirming 'BBB+(lka)' rating said.

The outlook on the rating is stable.

Fitch said there is a recovery in domestic sales in the nine months to December, after revenues weakened in the year to March.

"The recovery was underpinned by the growth in domestic sales of school shoes and solid rubber tyre exports, which has helped to offset the decline in rubber slipper sales and pneumatic tyres sold to original equipment manufacturers (OEMs)," Fitch said.

"DSG's rating also factors in our expectation that the company's plans to grow its value-added footwear and solid tyre businesses over the medium term to diversify its product offering will help to counterbalance competitive pressures to an extent."

DSG's domestic tyre and tube volumes had fallen 7 percent in FY17 (13 percent growth in FY16) due to a slowdown in the demand for bicycle tyres and a reduction of the maximum loan-to-value (LTV) ratio on three-wheeler leases.

"We expect domestic sales of pneumatic tyres to the OEM three-wheeler market to remain under pressure over the medium term due to the tightening of three-wheeler financing regulations in 2017," Fitch said.

"However, DSG's exposure to the replacement market (65% of domestic pneumatic tyre volumes in FY17) mitigates this risk."

Sri Lanka has high import taxes on shoes and tyres which helps domestic producers to easily exploit consumers with high prices.

DSI is facing competition from a number of small producer as well as imports, Fitch said. But it had a strong brand and wide distribution network.

The full statement is reproduced below:

Fitch Affirms DSI Samson Group at 'BBB+(lka)'; Outlook Stable

Fitch Ratings-Colombo-27 February 2018: Fitch Ratings has affirmed Sri Lanka-based DSI Samson Group (Private) Limited's (DSG) National Long-Term Rating at 'BBB+(lka)'. The Outlook is Stable.

The rating affirmation reflects the moderate recovery in DSG's revenue and EBITDA in the nine months to 31 December 2017 following a weakening in the financial year ended 31 March 2017 (FY17).

The recovery was underpinned by the growth in domestic sales of school shoes and solid rubber tyre exports, which has helped to offset the decline in rubber slipper sales and pneumatic tyres sold to original equipment manufacturers (OEMs).

DSG's rating also factors in our expectation that the company's plans to grow its value-added footwear and solid tyre businesses over the medium term to diversify its product offering will help to counterbalance competitive pressures to an extent.

Fitch has tightened DSG's rating sensitivity on leverage (defined as lease-adjusted debt net of cash/operating EBITDAR) to 4.5x from 5.0x to capture the increased business risk from fiercer competition and slower domestic sales volumes in several of its key segments. We expect DSG's rating headroom to be limited over the medium term, with net leverage hovering only just below the 4.5x threshold at which Fitch would consider negative rating action.

DSG's 'BBB+(lka)' rating continues to reflect its leading positions in domestically sold pneumatic tyres to the replacement market and footwear, which are supported by its well-known brand and widespread distribution network. DSG's market share also benefits, to an extent, from high tariffs on imports of tyres and footwear.

KEY RATING DRIVERS

Pressure on Domestic Tyre Volumes: We expect domestic sales of pneumatic tyres to the OEM three-wheeler market to remain under pressure over the medium term due to the tightening of three-wheeler financing regulations in 2017. However, DSG's exposure to the replacement market (65% of domestic pneumatic tyre volumes in FY17) mitigates this risk.

DSG's domestic tyre and tube volumes declined by 7% in FY17 (13% growth in FY16) due to a slowdown in the demand for bicycle tyres and a reduction of the maximum loan-to-value (LTV) ratio on three-wheeler leases. In 2017, the regulator lowered the upper band of LTV ratios associated with three-wheeler leases to 25% from 70% to curb vehicle imports, which led to a 13% drop in DSG's three-wheeler segment volume.

Leverage to Remain High: We expect DSG's net leverage to hover just below 4.5x over the medium term, which is high for its rating, due to competitive pressure in some of its operating segments, while the company's bid to diversify its cash flows via exports and value-added footwear may take time to yield results.

DSG's leverage also weakened on high borrowings for capex and working capital investments in FY17. However, we expect capex to moderate from FY18 due to adequate production capacity and a recovery in EBITDA as a result of greater contribution from high-margin solid tyre exports and higher-value-added footwear.

EBITDA Margin Pressures: We expect DSG's EBITDA margin to remain at around 9% over the next two to three years due to escalating production costs caused by rising commodity prices and domestic currency depreciation. EBITDA margins have declined from 10.2% in FY16 and 13.3% in FY15 on rising input costs and competition. Fitch expects the price of natural and synthetic rubber, which is DSG's key production input, to increase in line with rising crude oil prices.

Growing price competition, particularly in the lower end of the rubber slipper segment, also means that the company is limited in its ability to fully pass on cost increases to its customers.

Leading Market Position: DSG is the market leader in the bicycle, motorcycle and three-wheeler tyre industry in Sri Lanka. The company also holds the leading market position in the footwear segment despite growing competition in the lower end of the market. Nevertheless, we expect the rising competition in the rubber slipper segment from small-scale domestic producers and certain importers who appear to be able to circumvent the current tariff structure to be a key long-term risk.

Limited Structural Subordination Risk: DSG is a holding company that depends on dividends paid by its subsidiaries to service its own obligations. Therefore, a substantial increase in leverage at its operating subsidiaries could increase the structural subordination of DSG's creditors. However, this risk is mitigated by DSG's strong control over operating subsidiaries that accounted for around 80% of consolidated EBITDA in FY17, which increases cash fungibility within the group.

Furthermore, the company indicates that there are no restrictions that would prevent its major operating subsidiaries from paying dividends to DSG and readily available cash at the holding company was more than sufficient to repay holding company borrowings as of FY17.

DERIVATION SUMMARY

DSG's sales are less vulnerable to economic downturns than those of its closest rated peers, Singer (Sri Lanka) PLC (A-(lka)/Stable) and Abans PLC (BBB+(lka)/Stable). However, DSG's slowing domestic footwear and tyre sales due to local market competition and the government's policy decisions are long-term risks, while Singer and Abans enjoy robust market positions in the sale of consumer durables domestically. Therefore, we believe Singer and Abans have stronger business risk profiles than DSG.

We rate Singer one-notch higher than DSG to reflect this strength, while Abans is rated at the same level as DSG because of its higher leverage.

KEY ASSUMPTIONS

Fitch's Key Assumptions Within Our Rating Case for the Issuer

- Revenue to decline by 1.9% in FY18 and to recover modestly to grow at a low-single-digit rate, on average, over the next three years.

- EBITDA margins to moderate at 9.0% on average in the next two years.

- Capex to average at LKR1 billion per year for the next two years.

- Dividend payout to shareholders to remain at around 50% of holding company's dividend income.

RATING SENSITIVITIES

Developments that May, Individually or Collectively, Lead to Positive Rating Action

- Sustained improvement in DSG's adjusted net debt/EBITDAR to less than 3.0x (FY17: 4.4x) and gross adjusted debt/EBITDAR to less than 3.5x (FY17: 4.8x)

- The company's ability to execute its medium-term expansion plans and increase the contribution of its cash flows from exports

Developments that May, Individually or Collectively, Lead to Negative Rating Action

- Sustained weakening of net adjusted debt/EBITDAR to more than 4.5x and gross adjusted debt/EBITDAR to more than 5.0x

- A sustained weakening of fund flow from operations fixed-charge cover to less than 1.3x (FY17: 1.9x)

- A significant increase in the structural subordination of DSG's holding company creditors
LIQUIDITY

Tight Liquidity: DSG had LKR1.0 billion of unrestricted cash and LKR5.5 billion in unutilised credit facilities as at end-FY17, to meet LKR3.6 billion of contractual maturities falling due through FY18, with a further LKR5.1 billion of working capital facilities coming up for roll-over during the same period. This places the company in a tight liquidity position, but we expect this to be manageable given the company's track record of accessing domestic banks.

Sri Lanka sells Rs30bn in 12-month bills, yield up

ECONOMYNEXT - Sri Lanka's central bank sold 30-billion rupees of 12-month bills at the weekly auction Tuesday with the average yield rising 14 basis points to 9.59 percent, data from the state debt office showed.

The central bank offered 8.0 billion rupees of 3-month bills, 9.0 billion rupees of 6-month bills and 13.0 billion rupees of 12-month bills.

The central bank accepted the entire offered quantity from 12-month bills.

Market analysts say it is not the best practice to accept higher than offered volumes, though it is now known to the market that the debt office will change maturities, though not by how much. Market already knows that up to 10 percnet more than the total could be accepted.

The taking up of the entire volume in 12-month was unexpected though there is now genuine demand for bills at these ratesm dealers said. Such uncertainty has a premium, analysts say.

There are market participants who are looking for different maturities. However there was a gap between the 6 and 12 month bills.

In the secondary market 12-month bills were quoted at 9.60/60 percent immediately after the auction.

Dealers said there is buying interest from investors who bid for 3 and 6 month bills and could not find any.

Bond yields moved about 10 basis points after the auction and were quoted wide after the auction, dealers said.

There was buying interest from foreign investors, in the morning, dealers said. In the spot market the rupee marginally strenthened to 154.88/90 percent.

Sri Lankan stocks close almost unchanged amid selling by foreigners

Reuters: Sri Lankan shares closed almost unchanged on Tuesday amid selling by foreign investors and some concerns about political stability, dealers said.

Shares hit a more than three-week high last week after two key parties in the ruling coalition decided to remain in the ruling coalition, allaying fears of a government collapse.

President Maithripala Sirisena reshuffled his cabinet on Sunday, appointing his prime minister as the law and order minister, after the governing coalition suffered a series of defeats in local elections earlier this month.

“A foreign fund is exiting. While some foreigners who do not want to take the risk is exiting, other foreigners who are willing to take the risk are coming in, that’s why the market is holding on,” said Dimantha Mathew, head of research, First Capital Holdings.

The Colombo stock index ended 0.01 percent weaker at 6,559.42, its lowest close since Feb. 15. The index rose 0.18 percent last week.

Turnover stood at 2.2 billion rupees ($14.21 million) on Tuesday, more than two times of this year’s daily average of 970.9 million rupees.

Foreign investors sold a net 171.2 million rupees worth of shares, but they have been net buyers of 6.2 billion rupees worth of equities so far this year.

Shares of AIA Insurance Lanka Plc ended 8.6 percent weaker, while Nestle Lanka Plc ended down 1.83 percent. 

($1 = 154.8000 Sri Lankan rupees) 

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

Sri Lankan stocks slip to over 1-week closing low on foreign selling

Reuters: Sri Lankan shares slipped on Monday to a more than one-week closing low, as selling by foreign investors and some concerns about political stability weighed on sentiment, dealers said.

Shares hit a more than three-week high last week after two key parties decided to remain in the ruling coalition, allaying fears of a government collapse.

President Maithripala Sirisena reshuffled his cabinet on Sunday, appointing his prime minister as the law and order minister, after the governing coalition suffered a series of defeats in local elections earlier this month.

“Some block deals boosted the turnover. However, the market is still mixed on political stability. Some investors say the changes are good, while some feel they have failed to ensure stability,” said Jaliya Wijeratne, CEO at First Capital Equities.

The Colombo stock index ended 0.23 percent weaker at 6,560.32, its lowest close since Feb. 15. The index rose 0.18 percent last week.

Turnover stood at 3.3 billion rupees ($21.32 million), the highest since Nov. 8, and more than three times of this year’s daily average of 935.9 million rupees.

Foreign investors sold a net 51.1 million rupees worth of shares, but they have been net buyers of 6.4 billion rupees worth of equities so far this year.

Shares of AIA Insurance Lanka Plc ended 18.9 percent weaker, while Lanka Hospitals Corp Plc fell 5.1 percent. 

($1 = 154.8000 Sri Lankan rupees) 

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

Sri Lanka Nestlé unit December quarter net up 37-pct

ECONOMYNEXT – Nestlé Lanka said net profits rose 37% to Rs1.18 billion in the December 2017 quarter from a year ago although annual profit fell as a severe drought and floods dampened consumer demand amid higher costs.

The Sri Lankan unit of Swiss food and beverage multinational said December 2017 quarter sales rose 16% to Rs9.98 billion. Quarterly earnings per share were Rs21.94. The stock was last traded Thursday at Rs1,850.

In the year to 31 December 2017, EPS was Rs67.64 with net profit down 17% to Rs3.6 billion while sales rose 3% to Rs37.6 billion from the previous year.

Severe drought, floods, sluggish market conditions and increased taxes impacted the annual results, Nestlé Lanka said in a statement.

“The FMCG market has been adversely impacted this year due to sluggish consumer demand and rising cost pressures,” said Shivani Hegde, Nestlé Lanka Managing Director.

Growth was further eroded by an increase in Value Added Tax, which coupled with unprecedented increase in coconut prices, had a negative impact on profit, the statement said.

“Enhanced cost saving measures and a focus on driving efficiencies across the value chain helped in partly mitigating these impacts.”

Nestlé Lanka said it has ongoing product renovations to reduce sugar, salt and fat, and increase micronutrients like iron, vitamin A and calcium in its products.

Sri Lanka’s DIMO buys control of seed, fertiliser firms

ECONOMYNEXT – Sri Lanka’s Diesel & Motor Engineering said it has acquired control of two companies which import and distribute agricultural inputs like chemicals, fertilisers and seeds.

A stock exchange filing said it invested Rs345.5 million to take 51% stakes in the privately-owned Plantchem (Private) Limited and Plant Seeds Private Limited.

The two firms are engaged in the import, processing and distribution of agri inputs like crop protection products, specialised fertilisers and seeds, it said.

DIMO, best known for importing luxury Mercedes-Benz cars and also selling Tata vehicles, has diversified in to other activities including agricultural machinery and crops and fertiliser.

Sri Lanka’s Com Bank December net up 12-pct to Rs4.8bn

ECONOMYNEXT – Sri Lanka’s Commercial Bank said net profit rose 12% to Rs4.8 billion in the December 2017 quarter from a year ago.

Interest income rose 21% to Rs27.6 billion while interest expenses rose 19% to Rs16.7 billion with net interest income up 26% to Rs10.9 billion, according to interim results filed with the stock exchange.

Quarterly diluted earnings per share were Rs5.05, up from Rs4.70 a year ago. Commercial Bank shares closed at Rs139 Friday.

Commercial Bank announced a scrip dividend after close of trading of one share for 77.78 voting shares and one for 58.9 non-voting shares.

In the year to 31 December 2017, diluted EPS was Rs17.27 with net profit up 14% to Rs16.6 billion.

December quarter net fee and commission income rose 13% to Rs2.6 billion while trading losses fell 67% to Rs117 million

The quarterly accounts showed impairment charges for bad loans of Rs607 million against a reversal of Rs237 million the previous year

Commercial Bank said in a statement that the 28% growth in annual interest income to Rs103 billion, up Rs22.3 billion, was “primarily due to a significant growth in the bank’s loan book over the 12 months.”

Commercial Bank chairman Dharma Dheerasinghe said the bank paid out about 41% of its profits as taxes in addition to over Rs2 billion it had collected from customers on behalf of the government in 2017.

Managing Director Jegan Durairatnam said a further improvement in asset quality with both gross and net non-performing loans ratios decreasing, boosted profitability.

Total assets of the bank grew by Rs131 billion or 12.96 % at a monthly average of Rs 11 billion to Rs 1.143 trillion as at 31st December 2017, the statement said.

Net loans and receivables increased by Rs 121.428 billion or 19.71% in 2017 to stand at Rs 737.4 billion at the end of the year, with an average increase of more than Rs 10 billion per month.

“This was the third successive time that Commercial Bank increased its loan book by more than Rs 100 billion in a year.”

The bank’s deposits portfolio grew 14.95% or Rs 110.6 billion to Rs 850 billion as at 31st December 2017, the second successive year in which deposits grew by more than Rs 100 billion.

Commercial Bank said it improved net interest income by 18.89% to Rs 39.023 billion, more than double the rate of growth achieved in 2016, despite interest expenses growing by 33.59% to Rs 64.011 billion due to rising interest rates and a continuing shift of low cost funds to fixed deposits in 2017.

Total impairment charges for loans and other losses were increased by 25.13% to Rs 1.914 billion mainly due to the collective impairment provisions required on the growth of the loan book in 2017.

Ceylinco Life’s net profit surges 95% to Rs. 6 bn

Ceylinco Life has posted a net profit of Rs. 6 billion for the year ending December 2017 while reaffirming its market leadership in Sri Lanka’s life insurance industry for the 14th successive year, with premium income of Rs 15.7 billion.

The company posted a pre-tax profit of Rs 6.3 billion, up by 70 per cent while net profit growth was even higher, at 95 per cent.

Total income, comprising of premium income and investment and other income, grew to Rs. 25.6 billion, the company said in a media release.

Investment and other income improved by 17 per cent to Rs. 10.3 billion in the 12 months reviewed, reflecting the success of the investment strategies deployed by the company. Ceylinco Life’s investment portfolio grew by 10.8 per cent to Rs 89.5 billion as at 31st December 2017.

“These figures once again demonstrate the importance of concentrating on the core elements of the business: selling the most appropriate and effective life insurance products, and prudent management of investments in the interest of all stakeholders,” Ceylinco Life Managing Director/CEO R. Renganathan said.

Ceylinco Life Director/Deputy CEO Thushara Ranasinghe said: “Our policyholders know that profit is not the sole objective of the company. Ceylinco Life has the most generous policyholder rewards programme in the industry and our commitments to community welfare are substantial and long term. In that context, our financial performance assumes even greater significance, because it is not detrimental to any stakeholders.”

Ceylinco General 2017 premium income up at Rs. 18 bn

Sri Lanka’s insurance giant, Ceylinco General Insurance Ltd., announced excellent results for the financial year ending December 2017, reporting a 11.5 per cent growth in premium income to Rs. 18 billion. In a company media release, Ajith Gunawardena, CEO of Ceylinco General Insurance, announcing the results, said: “When considering the stiff competition that exists in the market, last year’s performance was outstanding. Despite the price undercutting practiced by some players, customers have understood the value of Ceylinco VIP On The Spot. We believe in providing a superior service to our customers and our differentiation is not on price but on our exemplary claim settlement and the value we add to our products and services.” Patrick Alwis, Managing Director of Ceylinco General Insurance Ltd, noted: “Ceylinco General Insurance paid claims amounting to Rs. 9 billion during 2017, settling all genuine claims within 24 hours. This includes the large number of flood and cyclone claims that were paid within a period of 14 days, enabling customers to return to normalcy in the fastest possible time. We are the only company to do so.” In a landmark move, in August 2017, Ceylinco General Insurance announced a Rs. 1 million cover that reimburses medical costs incurred in the treatment of heart disease, cancer, kidney failure, stroke and several other serious illnesses including heart attack and open heart surgery, major organ transplants, chronic lung and liver diseases, deafness, blindness, multiple sclerosis, paralysis etc. www.sundaytimes.lk

Digital, strong customer service boost HNB post-tax profit to Rs 16.7 bn

HNB, successfully weathering the challenges that arose in 2017 while leveraging upon new growth opportunities, posted a post-tax profit (PAT) of Rs 16.5 billion, up by 16.4 per cent from 2016.

Group PAT improved to Rs. 16.7 billion while the group’s asset base crossed the Rs. 1 trillion milestone, during the year.

In a media release, the bank said CASA growth of Rs. 23.4 billion during the year was a key achievement given the industry wide decline in CASA ratios as high interest rates attracted funds into fixed deposits. Nevertheless through concerted efforts HNB successfully maintained its CASA ratio while focusing on profitable business segments.

Net losses from trading doubled in 2017 to Rs 3.7 billion on account of higher swap costs. This loss was however offset by balance sheet translation gains, which together with foreign exchange income amounted to Rs. 3.2 billion and reflected under ‘other operating income.’

HNB’s profit before taxes and financial VAT was reported at Rs. 27.1 billion amounting to a growth of 10.5 per cent YoY while total tax charge for the bank and the group stood at Rs. 10.6 billion and Rs. 11.8 billion, respectively.

Commenting on HNB’s performance, MD/CEO Jonathan Alles said: “HNB’s performance in 2017 has been strong and resilient amidst relatively low economic growth and a tighter fiscal and monetary policy environment. Our proven business model and strategy centered on digital leadership, best in class processes, and an uncompromising stance on being the best service brand in the country has once again been validated in 2017.

www.sundaytimes.lk

Seylan Group post-tax profit of Rs. 5 bn, 24% rise from 2016

The Seylan Banking group has recorded a post-tax profit of Rs. 5 billion for fiscal 2017, the highest profit reported in its history, while the bank itself reported a post-tax profit of Rs. 4.4 billion.

Net interest income recorded a moderate growth of 15.03 per cent as a result of the strong balance sheet growth, the group said in a media release.

Net fee and commission income rose by 22.07 per cent to Rs. 3,788 million in 2017 mainly due to core banking related business.

“Other operating income comprising of net gains from trading, net gains on financial instruments, gains on foreign exchange and other income increased by 39.18 per cent to Rs.1,660 million during 2017 mainly due to capital gains on Government Securities,” it said. Net credit (advances) grew by 19 per cent to Rs. 280,862 million.

The bank also continued focusing on education which has been at the centre of attention of CSR activities. During the year, 33 school libraries were opened taking the overall number of libraries opened under the project to 153 under the “Seylan Pehesara” Project. Further the Seylan Bank initiated the Environmental and Social Management System (ESMS) as a means of prudently devising the loan book growth, mitigating credit, legal and reputational risks if any that are inherent with environmental and social impact that may arise from advances granted to Corporate and SME clients.

The branch network continued to be the key contributor to the bottom line.

In 2017, the bank network comprised 166 Banking Centres and 205 ATMs. The bank said it remains well capitalised with a strong common equity tier 1 ratio of 11.16 per cent, total tier 1 capital ratio of 11.16 per cent, and total capital adequacy ratio of 13.25 per cent under Basel III as at 31st December 2017.

www.sundaytimes.lk

SEC exercises vigilance on Janashakthi share trades

By Duruthu Edirimuni Chandrasekera

The Janashakthi Insurance PLC’s (Janashakthi) Rs. 16.4 billion sale earlier this month of its general insurance business to multinational insurer, Germany’s Allianz, has rung alarm bells at the stock market regulator after a spurt in the share price just before the sale, informed sources said.

The Securities and Exchange Commission (SEC) is investigating a sharp rise in the share price of Janashakthi Insurance which went up by 44 per cent from Rs. 16.10 on January 29 to Rs. 23.20 on February 1, a day before the February 2 deal, they told the Business Times.

According to the share trades, 853,000 shares were sold on January 29, 10.5 million shares on January 30 (at Rs. 20) and 7.8 million shares on February 1. On February 2, the day the deal was done, 16.4 million shares were transacted throughout the day, touching a high of Rs. 28.40 per share.

Analysts said that the regulator is looking at the over 10 million share sale by Bank of Ceylon (BoC). Informed sources said that selling this large Janashakthi stake three days before the company changed hands has led to an unusual share price increase.

The BoC at current market rates (at Rs. 20) made a profit by selling the stock which they bought years ago at Rs. 10, to high networth investor Indra Silva, but they could have made much more had they waited till the sale happened, analysts say.

The regulator is trying to find out how information on the sale was leaked (possibly to BoC) before this transaction with Allianz, the German-headquartered financial services giant happened, BoC officials confirmed to the Business Times. The SEC is now recording statements from certain BoC officials, they added. “The SEC wants to establish who had advised BoC on this sale and who had made the investment decision,” a banking source told the Business Times.

www.sundaytimes.lk

Sri Lankan stocks end steady near 3-month high

Reuters: Sri Lankan shares ended steady on Friday, near a more than three-month high hit early in the week, as investors picked up diversified shares.

Investor sentiment got a boost after two key parties decided to remain in the ruling coalition, allaying fears of a government collapse.

The Colombo stock index ended 0.06 percent firmer at 6,575.39, near its highest close since Nov. 6, 2017 hit on Wednesday. The index rose 0.18 percent during the week.

“We are seeing new buying coming into the market with the things settling down on the political front,” said Dimantha Mathew, head of research, First Capital Holdings.

“The profit-taking we saw yesterday did not continue and the buying was more than the selling which is a good sign.”

Turnover stood at 813.6 million rupees ($5.25 million), less than this year’s daily average of 867.9 million rupees.

Foreign investors sold a net 16.9 million rupees worth of shares, but they have been net buyers of 6.4 billion rupees worth of equities so far this year.

Shares in Melstacrop Plc rose 3.8 percent and conglomerate John Keells Holdings Plc ended 0.6 percent higher. Dialog Axiata Plc gained 0.7 percent. 

($1 = 155.1000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Vyas Mohan)

Sri Lankan stocks slip from over 3-month high on profit-taking

Reuters: Sri Lankan shares on Thursday snapped a five-session winning streak and eased from a more than three-month high on profit-booking, while foreign buying in Commercial Bank Plc boosted the daily traded turnover.

Hopes of political stability after two key parties decided to remain in the ruling coalition, allayed fears of a government collapse and that helped heavy buying to boost the day’s turnover.

The Colombo stock index ended 0.41 percent weaker at 6,571.73, slipping from its highest close since Nov. 6, 2017 hit on Wednesday.

Turnover stood at 1.54 billion rupees ($9.93 million), well above the year’s daily average of 869.6 million rupees.

Foreign investors bought a net 660.5 million rupees worth of shares, extending net foreign buying to 6.4 billion rupees worth of equities so far this year.

“There was a bit of selling today. Basically, what ever stocks moved up over the last few days were sold ... may be due to profit-taking by a fund,” said Dimantha Mathew, head of research, First Capital Holdings.

“A large block of Commercial Bank shares was bought by foreigners, boosting the turnover.”

Shares in Ceylon Tobacco Company Plc fell 2.9 percent while conglomerate John Keells Holdings Plc lost 0.5 percent and Dialog Axiata Plc ended 0.7 percent down.

Shares in biggest listed lender Commercial Bank of Ceylon Plc, which accounted for 52.6 percent of day’s turnover, ended 0.7 percent up.

The index dropped 0.13 percent last week, ending a three-week winning streak.

($1 = 155.1500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Vyas Mohan)

Sri Lankan stocks hit over 3-month high; bluechips lead

Reuters: Sri Lankan shares ended higher for a fifth straight session on Wednesday led by bluechips on hopes of political stability after two key parties decided to remain in the ruling coalition, allaying fears of a government collapse.

The Colombo stock index ended 0.32 percent firmer at 6,598.73, its highest close since Nov. 6, 2017.

“Interestingly, we saw some buying interest in blue chips and especially foreign interest is picking up,” said Dimantha Mathew, head of research, First Capital Holdings.

“Now that things are settling down, buying interest in bluechips is improving with continued retail buying.”

The two key coalition parties that were routed in a local election last week, sparking concerns of political instability, on Wednesday told the parliament that their government will continue.

Turnover stood at 829.4 million rupees ($5.35 million), marginally below the year’s daily average of 849.4 million rupees.

Foreign investors bought a net 171.6 million rupees worth of shares on Wednesday, extending net foreign buying to 5.8 billion rupees worth of equities so far this year.

Shares in Dialog Axiata Plc ended 0.7 percent higher, while conglomerate John Keells Holdings Plc gained 0.5 percent. The biggest-listed lender, Commercial Bank of Ceylon Plc, closed 1.5 percent firmer.

The index dropped 0.13 percent last week, ending a three-week winning streak. 

($1 = 155.1500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Vyas Mohan)

Sri Lankan stocks end at over 3-month high on hopes of political stability

Reuters: Sri Lankan shares ended higher for a third straight day on Tuesday on hopes of political stability after the prime minister decided to stay in office and reshuffle his cabinet in the wake of a stinging loss in local elections for both parties in the ruling coalition.

The coalition parties held a cabinet meeting on Tuesday and said the island nation’s government plans to continue their tenure.

Prime Minister Ranil Wickremesinghe’s centre-right United National Party (UNP) and President Maithripala Sirisena’s centre-left Sri Lanka Freedom Party (SLFP) were routed by a party backed by former President Mahinda Rajapaksa in local polls on Feb. 10, plunging the government into a crisis.

The Colombo stock index ended 0.19 percent firmer at 6,577.84, hitting their highest close in more than three months.

“With signs of stability coming in, investors are re-entering the market. Foreign investors are also returning slowly,” said Dimantha Mathew, head of research, First Capital Holdings.

Turnover stood at 860.2 million rupees ($5.54 million), in line with the daily average of 850 million rupees.

Foreign investors bought a net 72.3 million rupees worth of shares on Tuesday, extending the net foreign buying to 5.6 billion rupees worth of equities so far this year.

Shares in Ceylon Cold Stores Plc ended 5 percent higher, while conglomerate John Keells Holdings Plc closed up 1.2 percent, Vallibel One Plc ended up 7.9 percent and the biggest-listed lender Commercial Bank of Ceylon Plc ended 0.7 percent firmer.

The index dropped 0.13 percent last week, after marking three straight weekly declines.

($1 = 155.3500 Sri Lankan rupees) 

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

Sri Lankan stocks steady in dull trade; political woes weigh

Reuters: Sri Lankan shares ended steady on Monday in thin trade amid political uncertainty after both parties in the ruling coalition suffered defeats in a local election earlier this month.

Turnover stood at 288.4 million rupees ($1.9 million), well below the daily average of 849.7 million rupees.

The Colombo stock index ended 0.03 percent firmer at 6,565.63, its highest close since Feb. 9.

Shares in Melstacorp Ltd rose 7 percent, while Trade Finance Plc gained 16.8 percent.

The index fell 0.13 percent last week, after gaining for three straight weeks.

“Very slow day as investors are waiting for political direction after the election debacle,” said Dimantha Mathew, head of research at First Capital Holdings.

Prime Minister Ranil Wickremesinghe’s centre-right United National Party (UNP) and President Maithripala Sirisena’s centre-left Sri Lanka Freedom Party (SLFP) were routed by a party backed by former President Mahinda Rajapaksa in local polls on Feb. 10, plunging the government into crisis.

Since the results, both parties have locked horns on how best to continue in the government. Sirisena’s party wants to form its own government, his party ministers have said, while Wickremesinghe’s party has said it is in the process of forming its own government.

Wickremesinghe, addressing the media on Friday said that the government will continue with a reshuffle of the cabinet.

Foreign investors bought a net 20.7 million rupees worth of shares on Monday, extending the net foreign buying to 5.5 billion rupees worth of equities so far this year. 

($1 = 155.3000 Sri Lankan rupees) 

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

Janashakthi posts Rs.13, 759 mn income for 9 months ending Dec 31

Janashakthi PLC group posted a total income of Rs.13, 759 million for the nine months ended December 31, 2017 which is an increase when compared to Rs. 12,922 million in the corresponding period of the previous year.

Chief Executive Officer Ramesh Schaffter said this represents an increase of 6.4% year on year. Group loss after tax was Rs. 515 million against the Rs. 334 million profit recorded for the corresponding period of the previous year.

The asset base of the group stood at Rs. 57 billion, Janashakthi PLC reported a total income of Rs. 162 million for the 06 months ended December 31, 2017, compared to 146 million in the previous year.

The company’s main subsidiary, Janashakthi Insurance PLC reported a consolidated profit after tax of Rs. 507 million for the nine months ended September 30, 2017 when compared to Rs. 789 million for the nine months ended September 30, 2016.

Profitability was adversely affected by high claims in both the fire and engineering and the medical segment during the period under review. At 30 September 2017, the Janashakthi Insurance PLC had an asset base of Rs. 35.7 billion with a market capitalization of Rs. 8.1 billion.

The prudent management of investments by Janashakthi Insurance PLC helped increase the investment income by Rs. 441 million which is a remarkable increase of 32% over the previous year.

This was the mainstay for the increase in Other Revenue which reached Rs. 2,241 million, an increase of Rs. 515 million over the same period last year. The company recorded a total income of Rs. 2.58 billion for the 09 months ended 31 December 2017 when compared to Rs. 2.41 billion in the corresponding period of the previous year. This represents an increase of 7% year on year. 

www.dailynews.lk

Ceylinco General Insurance records premium income of Rs. 18 bn

Ceylinco General Insurance Ltd., announced excellent results for the financial year ended December 31, 2017, recording yet another exceptional year.

Ajith Gunawardena, Chief Executive Officer of Ceylinco General Insurance, said: “During 2017, the company recorded a premium income of Rs 18 billion (Rs 17,977 million), with an impressive growth of 11.5%, which signifies an increase of Rs. 1.9 billion over the previous year. When considering the stiff competition that exists in the market, last year’s performance was outstanding. Despite the price undercutting practiced by some players, customers have understood the value of Ceylinco VIP on the Spot.”

“We believe in providing a superior service to our customers and our differentiation is not on price but on our exemplary claim settlement and the value we add to our products and services. We have worked hard together and surpassed expectations and our own benchmarks. We remain committed in exercising disciplined control and maintaining far-sighted leadership.”

Elaborating further on the remarkable figures, Patrick Alwis, Managing Director of Ceylinco General Insurance Ltd, said, “Ceylinco General Insurance paid claims amounting to Rs 9 billion (Rs. 8,967 million) during 2017, settling all genuine claims within 24 hours. This includes the large number of flood and cyclone claims that were paid within a period of 14 days, enabling customers to return to normalcy in the fastest possible time. We are the only company to do so.”
www.dailynews.lk

Softlogic Holdings to raise over Rs.7 billion

Softlogic Holdings PLC is to raise over Rs.7 billion for the purpose of restructuring the balance sheet and improving key capital ratios by way of a private placement, rights issue and internal restructuring. said its Chairman, Ashok Pathirage.

“Going forward this exercise would no doubt reduce finance cost and significantly impact our credit rating,” he added.

Commenting on their interim results for period ending December 31, 2017 he said that for a consumer-retail-focused conglomerate such as Softlogic, a challenging operating climate was witnessed during the period. “This was especially evident in the retail sector, which was further compounded by the high interest rate regime, the rising inflation levels, the inclement weather and the VAT increase.”

Despite these systemic challenges, Group revenue grew 10.3% to Rs.49.4 billion during the first nine months of this financial year while the quarterly revenue grew 17.7% to Rs. 18.3 billion. (bn)

Cumulative Group top-line witnessed a contribution of 31.8% from the retail sector followed by ICT (26.3%), healthcare services (18.2%), financial services (16.3%) and leisure (3.5%). gross profit increased 22.5% to Rs. 17.6 bn during the 1-3Q-FY18 reflecting strong GP margin improvement from 32.1% in 1- 3QFY17 to 35.7% in 1-3QFY18.

The quarter too registered GP margin improvements from 33.3% in 3QFY17 to 35.3% in 3QFY18 pushing the quarterly gross profit to Rs. 6.5 bn (up 24.9%).

Distribution and administrative expenses increased 10.8% and 14.4% to Rs. 2.5 bn and Rs.9.8 bn respectively during the period resulting in the total operational expenses, which now includes Movenpick Hotel Colombo, to increase to Rs. 12.3 bn (up 13.6%) while maintaining the operating cost margins at 24% levels during 1-3QFY18.

Quarterly operational cost increase remained moderate at 8.8% to Rs. 4.3 bn Other operating income for the period was to Rs. 1.9 billion (Rs. 741.5 mn in 1-3QFY17).

Cumulative operating profit improved 67.2% to Rs. 7.2 bn while the quarter registered 124.3% increase to Rs. 3.1 bn

Finance Income which primarily consists Softlogic Life Insurance PLC’s investment portfolio’s performance, increased 52.6% to Rs. 879.5 million during the nine-month period while the quarter registered 87.9% growth to Rs. 308.2 million.

“We are awaiting the launch of Asiri Hospital Kandy, which would be the first state-of-theart 190-bed hospital to cater to the Central, North and Eastern provinces. This facility will include state-of-the-art technology specializing in cardiac, some of which will certainly be a first for the region.

“Odel will take 100,000 sq.ft of mall space in Shangri La which is expected to open in June 2019 and plans are progressing well to unveil one of the city’s authentic malls The Odel Mall in 2020.”
www.dailynews.lk

Fitch rates ComBank’s Basel III sub debt ‘AA-(lka)(EXP)’

Fitch Ratings has assigned Commercial Bank of Ceylon PLC’s (CB, AA(lka)/Stable) proposed Basel III-compliant subordinated unsecured debentures of up to Rs.10 billion an expected National Long-Term Rating of ‘AA-(lka)(EXP)’.

The debentures will have maturities of five and 10 years and carry fixed coupons. The debentures will qualify as Basel III-compliant regulatory Tier-two capital for the bank and include a non-viability clause whereby they would convert to ordinary shares if so determined by the Monetary Board of Sri Lanka.

The debentures will be listed on the Colombo Stock Exchange.

The bank plans to use the proceeds to strengthen its Tier-two capital base and support its loan book expansion.

The final rating is subject to the receipt of final documentation conforming to information already received.

Fitch rates the proposed Basel III Tier-two notes one notch below the bank’s National Long-Term Rating of ‘AA(lka)’.

This reflects the notes’ higher loss-severity risks compared with senior unsecured instruments due to the notes’ subordinated status.

CB’s National Long-Term Rating is used as the anchor rating because the rating reflects the bank’s standalone financial strength.

Fitch believes the bank’s standalone credit profile best indicates the risk of becoming non-viable.

Fitch has not differentiated the notching on the proposed notes from the notching on CB’s legacy Tier-two notes as it is assumed that the authorities would step in late, moving the point of non-viability close to liquidation.

Fitch has not applied additional notching to the notes for non-performance risk according to our criteria, as the notes have no going-concern loss-absorption features. CB’s ratings reflect its modest risk appetite, strong funding profile, solid franchise and stable performance.

www.dailymirror.lk

Insurance Industry records 15.5-pct growth in 3Q of 2017

LBO - Sri Lanka’s insurance industry was able to report a growth of 15.53 percent (3Q, 2016: 16.97 percent ) in terms of overall Gross Written Premium (GWP), at the end of third quarter of 2017, recording an increase of 15,862 million rupees when compared to the same period in 2016.

The GWP for Long Term Insurance and General Insurance Businesses for the nine months ended September 30, 2017 was 118,016 million rupees compared with the same period in 2016 amounting to 102,155 million rupees.

The GWP of Long Term Insurance Business amounted to 51,893 million rupees (3Q, 2016: Rs. 46,540 million) while the GWP of General Insurance Business amounted to 66,123 million rupees (3Q, 2016: Rs. 55,615million). Thus, Long Term Insurance Business and General Insurance Business witnessed a GWP growth of 11.50% and 18.89% respectively, when compared to the corresponding period of 2016.

The value of total assets of insurance companies has increased to Rs 548,361million as at September 30, 2017, when compared to Rs 497,868 million recorded as at September 30, 2016, reflecting a growth of 10.14% (3Q, 2016: 13.41%). The assets of Long Term Insurance Business amounted to Rs. 387,461 million (3Q, 2016: Rs 342,072 million) indicating a growth rate of 13.27% year-on-year. The assets of General Insurance Business amounted to Rs160,900 million (3Q, 2016: Rs 155,796 million) depicting a growth rate of 3.28%.

The investment in Government Securities for the period of nine months amounted to Rs 181,791 million representing 46.92% (3Q, 2016: Rs162,084;47.38%) of the total assets of Long Term Insurance Business, while such investment of the total assets of General Insurance Business amounted to Rs. 29,598 million representing 18.40% (3Q, 2016: Rs. 33,503;21.50%). Accordingly, the total investment of both Long Term Insurance Business and General Insurance Business in Government Securities amounted to Rs 211,389 million (3Q, 2016: Rs. 195,587million). Thus, the investment in Government Securities of Long Term Insurance Business has increased by 12.16% and the investment in Government Securities of General Insurance Business has declined by 11.66%.

The profit (before tax) of insurance companies in both Long Term Insurance Business and General Insurance Business for the nine months ended September 30, 2017amounted to Rs. 10,854 million (Q3, 2016: Rs. 14,721 million) showing a decline in profit by 26.27%.

The profit (before tax) of Long Term Insurance Business amounted to Rs. 5,110 million (3Q, 2016: Rs. 5,159 million) while the profit (before tax) of General Insurance Business amounted to Rs. 5,743 million (3Q, 2016: Rs. 9,562 million).

Thus, profit (before tax) of General Insurance Business showed a significant decrease of Rs. 3,819 million (39.94%) when compared to the period ended September 30, 2016.

This is mainly due to receipt of significant dividend income of an insurer during the year 2016. However, there was no significant declaration of dividend income for the period ended September 30, 2017. Apart from the General Insurance Business, no material deviation noted in respect of the profit (before tax) of Long Term Insurance Business for the period ended September 30, 2017.

Out of 27 Insurance Companies (Insurers) in operation as at September 30, 2017, 12 are engaged in Long Term (Life) Insurance Business,13 companies are carrying out only General Insurance Business and two are composite companies (dealing in both Long Term and General Insurance Businesses).

Sixty insurance brokering companies, registered with the Board as at September 30 2017, mainly concentrate in General Insurance Business. Total Assets of insurance brokering companies as at September 30, 2017 have increased to Rs. 4,148million when compared to Rs. 3,961millionrecorded as at September 30, 2016, reflecting a growth of 4.70% year-on-year.

Sampath sweetens forthcoming rights issue with one for 19.7 scrip issue Second cash call within three months

Sampath Bank PLC Friday sweetened its forthcoming rights issue of approx. 50.13 million new voting shares in the proportion of three new shares for every 13 already held shares at a price of Rs. 250 per share by announcing a scrip issue of approx. 13.55 million new shares in the proportion of one share for every 19.728 (approx) already held shares.

Following the scrip issue announcement on the CSE, the Sampath share closed at Rs. 327.40 on Friday, Rs. 9.40 up on the market, with 82,425 shares trading between a low of Rs. 319 and a high of Rs. 330.

This is the second capital call on Sampath shareholders since November last year and the bank has sent out notices summoning an Extraordinary General Meeting (EGM) on Mar. 7 to obtain shareholder approval for the rights issue.

The previous one for six rights issue was priced at Rs. 245 per share, at a sharp discount to then prevailing market price. Many investors who applied for additional shares were allotted up to 9,000 shares each enabling a windfall profit.

The availability of a fairly large number of additional shares was attributed by analysts to some large foreign shareholders not taking up their full entitlement and also not applying for additional shares to maintain their percentages.

At least one large shareholder who applied for a large number of additionals was disappointed by the 9,000-share limit on allotment of additional shares.

The bank has not indicated in its circular on what basis additional shares will be allotted to applicants but has made no underwriting arrangements with the directors saying "that the interest shown for the company’s share does not warrant an underwriting for the issue."

The company has also declared that it had "not sought any written commitment from any shareholder for subscription in full for their entitlement for the proposed rights issue and for their commitment to further subscribe to any unsubscribed shares."

"The company is confident that that the shareholders will subscribe in full for their entitlement for the proposed rights issue and there will be ample subscribers for the additional shares," the circular said.

It said the forthcoming rights issue is priced at a discount of Rs. 67.01 to the group’s net asset value per share. The Sampath share traded in Jan. at a high of Rs. 330 and a low of Rs. 313.60 closing at Rs. 318.20 with over 3.1 million shares transacted in 1,461 trades.

www.island.lk

Depositors’ woes continue at failed finance companies

By Quintus Perera

With regard to the failed finance companies (FCs), the Central Bank (CB) appears to have proved that throughout it has neglected its responsibility of ‘monitoring and supervising’ the finance companies as the very purpose of having a separate unit to monitor and supervise is to prevent these finance companies from failing.

Instead of fulfilling their responsibility, the CB is now reduced to issuing media statements and circulars which are sometimes inconsistent and contrary to one another leading to losing confidence on this premier financial regulator by Sri Lankans as well as foreigners, aggrieved depositors say.

To prevent FCs failing and safeguard them, a special unit – Department of Supervision of Non-Bank Financial Institutions of the CB but their non-action is reflected in several FCs failing and no resolution of issues in sight.

The latest circular – Circular No.1 of 2018 – issued by the Resolutions and Enforcement Department of the CB to the CEOs of all member institutions of Sri Lanka Deposit Insurance and Liquidity Support Scheme states that the definition of depositors has been widened to include the value of shares of shareholders who were initially deposit holders.

Members of the scheme are required to include all the details for the purpose of calculation of premium and send those data effective from January 1, 2018.

Depositors fear that some of these failed companies would be liquidated and all the depositors to be paid at the rate of Rs. 600,000 irrespective of deposits above this limit. It is apparent that the liquidation is prevented since these failed FCs have gone for litigation against the violation of the rights of the depositors.

Depositors associations of these failed finance companies that are earmarked to be liquidated are objecting to the CB claim of paying only Rs. 600,000 to all the depositors as they indicate that all their members are equal and any decision to pay back the deposits has to be fair and reasonable and their full amounts to be paid according to the CB’s own media release on 16/10/2016.

A depositor pointed out that it is unfair to pay only Rs. 600,000 for a depositor who may have deposited Rs. 15 to 20 million.

Some depositors complain that non-settlement of these issues pertaining to failed FCs leads to further wastage of funds as large funds have to be utilised to maintain them. A depositor of Standard Credit Ltd said that they are forced to pay Rs. 3 to 5 million a month for the upkeep of nearly 30 employees of this defunct company.

This depositor has asked the CEO of Standard Credit to ‘take immediate action’ to correct this sorry state of affairs and ensure the safety of all documents at the company as they intend to request President Maithreepala Sirisena to appoint a Presidential Commission of Inquiry to investigate the massive frauds that has taken place in collapsed CB-registered finance companies in the past.

He also indicated that they believe that it was during the tenure of the present CFO of Standard Credit that the Treasury Bills to the value of Rs. 2.5 billion vanished from Standard Credit.

Though it is the responsibility of the CB to find investors to resurrect these failed FCs, in several cases the depositors themselves have attempted to bring in investors.

W. Gunawardene, President, Central Investment and Finance Ltd Depositors’ Association (CIFLDA) pointed out that it is very unfair by the CB that it has supported the failed FC – ETI (Swarnavahini) and promoted two investors, one local and the other foreign and also granted some concessions to ETI.

He said that depositors associations of some of these failed FCs tried to bring in investors to restore their failed companies, but it is apparent that with the CB imposing various terms and conditions on these prospective investors, progress is slow.

He said that they have been finding investors to resurrect their failed FCs, but due to the CB imposing several terms and conditions the investors’ response has slowed down. When the CB threatened CIFL by issuing notice of Cancellation of Business Finance Licence, these investors panicked.

He said that collectively they have been struggling to get relief for their members for the last 4 ½ years, but it appears that a favourable result is bleak.

www.sundaytimes.lk

SEC halts On’ally’s mandatory offer

By Duruthu Edirimuni Chandrasekera

The Securities and Exchange Commission (SEC) last week halted the mandatory offer by Renuka Capital PLC to purchase On’ally Holdings PLC.

In a letter dated February 8 to On’ally Holdings PLC, the SEC said that it has received a written complaint against Renuka Capital PLC “the offeror” in the said mandatory offer alleging acts of misrepresentation and miscommunication to the market and thereby violating the provisions of the SEC’s the Takeovers and Mergers Code 1995 as amended (TOM Code) and the SEC Rules.

“The complaint has also challenged the Independent Advisor’s Report obtained by your company. The allegations against ‘the offeror’ stated in the above said complaint has given rise to the need for the SEC to conduct investigations to check the veracity of the said allegations in terms of section 13 (0) of the SEC Act which in turn may require the SEC to issue certain directions to ‘the offeror’ and also to your company as ‘the offeree’ if deemed appropriate,” the letter said. The name of the complainant was not disclosed.

The SEC acting in terms of the SEC Act in order to protect the interests of investors, has instructed and directed Renuka Capital PLC to take steps forthwith to keep the ‘offer period’ open until further notice by the SEC and give notice of such fact to the market and also to the shareholders of On’ally Holdings PLC in respect of the extension of the said mandatory offer period.

“The reasons for the instructions to keep the ‘offer period’ open is to enable the SEC to issue directives to ‘the offeror’ and also to your company as ‘the offeree’ in respect of the above said mandatory offer,” the regulator has said.

On’ally Holdings PLC was instructed by the SEC to obtain a second Independent Advisor’s Report in respect of the mandatory offer by engaging another qualified advisor who is independent in terms of Rule 12 of the TOM Code and submit a draft of the report within one week of engaging the independent advisor for the approval of the SEC in terms of Rule 18 of the Code prior to dispatching same to the shareholders of On’ally Holdings PLC.

“Your company is further requested to keep the SEC informed as to the identity of the advisor prior to engaging such advisor. During the period the offer is kept open you are advised against taking any steps to dispose of any assets of the company without the approval of the shareholders or the SEC, other than to enter into any contract in the ordinary course of business in pursuance of a contract entered into earlier before this offer became imminent. You are also instructed to await further directions from the SEC,” the letter added.

www.sundaytimes.lk

TESS AGRO returns to profit owing to GSP+ return

The return of GSP+ concessions has propelled TESS AGRO to a winning position from losses earlier.

Dilshan Fernando, company Director/CEO, said in a media release that TESS AGRO recorded a sharp growth in its profits during the last quarter of 2017 ending December 31.

The operating profit grew by 297 per cent to Rs. 8.27 million from an operating loss of Rs. 4.18 million in the previous quarter.

This increase in profits and turnover for this quarter can be largely attributed to the company sourcing its product from Sri Lanka as a result of the GSP + concession that Sri Lanka obtained in June 2017 by the European Union, he said.

The company has announced to its shareholders the plan to go for a rights issue subject to regulatory approval. The main reason for the plan is to infuse working capital to strengthen its purchases from Sri Lanka as local exports has increased significantly in 2017 after the GSP + concession.

“During the EU ban the company continued to carry out its business with the help of its Belgium branch by importing from other neighbouring countries such as the Maldives and the Philippines hoping that when Sri Lanka is back in business we would still hold on to our market share,” he said.

In 2016 the company purchased almost 90 per cent of its requirement from these neighbouring countries which meant that only seven per cent was purchased from Sri Lanka. Since June 2017 after the GSP+ return, Sri Lankan exports have increased by 40 per cent while 60 per cent was purchased from neighbouring countries.

In January 2018 the company has purchased more than 80 per cent from Sri Lanka.

The company is expected to raise Rs. 59 million through this rights issue for which Rs. 32 million will be used for working capital needs to procure fish from Sri Lanka while the balance will be used to retire debt.

www.sundaytimes.lk

CBSL extends primary dealer suspension of Pan Asia Bank

The Monetary Board of the Central Bank of Sri Lanka has decided to extend the suspension from carrying on the business and activities of a primary dealer by Pan Asia Banking Corporation PLC (PABC) for a period of six months with effect from 10 a.m. of February 15,2018.

This is acting in terms of the regulations made under the Registered Stock and Securities Ordinance and the Local Treasury Bills Ordinance. This is to continue the investigations, being conducted by the Central Bank of Sri Lanka.

The Central Bank wishes to emphasize that this regulatory action restricts PABC’s access to the primary auctions for government securities. It does not affect any of the other activities, services of PABC.
www.dailynews.lk

HNB Assurance, HNB General Insurance post Rs 910 mn PAT

HNB Assurance PLC (HNBA) and its fully owned subsidiary HNB General Insurance Limited (HNBGI) has posted a Profit After Tax (PAT) of Rs 910 million for the year ended December 31, 2017.

This depicts a steady growth of 41% in comparison with the PAT of Rs 647 million recorded in 2016.The Group recorded a Gross Written Premium (GWP) of Rs 7.82 billion signifying a growth of 17% as contrasted with the GWP of Rs 6.65 billion recorded in the financial year 2016. The Parent Company, HNB Assurance PLC recorded a GWP of Rs 3.96 billion and the subsidiary, HNB General Insurance Limited recorded a GWP of Rs. 3.86 billion.

The Group was able to yield an Interest and Dividend Income of Rs. 1,693 million, showcasing a growth of 43% against an interest and dividend income of Rs. 1,180 million achieved during the previous year. Total assets of the Group reached a mark of Rs. 18.65 billion and Investments in Financial Instruments reached a value of Rs15.05 billion. During the course of 2017, the Life Insurance Fund reached a value of Rs. 10.9 billion and the General Insurance Fund reached a value of Rs 2.38 billion.

Expressing her views on the solid financial performance during the year under review, Chairperson of HNB Assurance Group, Rose Cooray said, “the Group delivered a superlative financial performance during the course of 2017, depicting a steady flow of revenue generation and accelerating progress towards achieving our corporate goals during 2017.

The Management guided by the Board has meticulously executed a well-crafted plan that focused on creating value to all stakeholders.”

“Not only have we been able to fulfil the aspirations of the shareholders, the Group paid out Rs 2.29 billion in claims and have focused on rewarding its employees, while contributing towards society through various corporate stewardship initiatives and we are confident that this growth we’ve embarked on will continue during 2018.”

Sharing his thoughts on the Group’s financial performance, Managing Director/CEO of HNBA and HNBGI Deepthi Lokuarachchi said, “the strategies deployed during the course of 2017 led the Group capture emerging and dynamic markets. The Group was able to maintain its solid industry position throughout the course of 2017, despite the volatile macro-economic conditions and heightened competition.”
www.dailynews.lk

CB keeps policy rates unchanged: Economy currently operating below potential

LBO - Sri Lanka will keep policy rates unchanged in February as the economy is stabilizing with improvements in trade figures, the islands central bank said.

“The decision of the Monetary Board is consistent with the objective of maintaining inflation at mid-single digit levels over the medium term and thereby facilitating a sustainable growth trajectory,’ it said in a statement.

The Monetary Board also noted that the economy is currently operating at a level below its potential.

“Nevertheless, as per the available indicators, the economy is likely to recover from the effects of adverse weather conditions in the past two years and benefit from the expected boost in external demand and foreign direct investment inflows,”

“Improvements in the trade front, including the execution of new trade agreements supported by increased private
investment driven by structural reforms, are also likely to provide the necessary impetus for the economy to achieve its potential in the medium term.”

The full statement follows:

Considering the recent developments in the domestic and international macroeconomic environment, the Monetary Board, at its meeting held on 14 February 2018, was of the view that the current monetary policy stance is appropriate and decided to maintain the policy interest rates of the Central Bank of Sri Lanka at their present levels.

The decision of the Monetary Board is consistent with the objective of maintaining inflation at mid-single digit levels over the medium term and thereby facilitating a sustainable growth trajectory. The rationale underpinning the monetary policy stance is set out below.

Policies adopted by the Central Bank and the government have helped stabilise the economy. By end 2017, both the growth of broad money supply and the growth of credit extended to the private sector by commercial banks moderated to desired levels.

In the external sector, export earnings reached an all-time high of around US dollars 11.4 billion in 2017, largely supported by the sustained increase in export earnings stemming from the restoration of the GSP+ facility by the European Union, favourable prices for key commodities in the international market and the flexible exchange rate policy maintained by the Central Bank.

However, drought related imports and increased gold imports caused an expansion in the trade deficit. Positive momentum in services exports, including the tourism sector, also continued while there was a moderation in workers’ remittances. Direct investment inflows are also estimated to have increased considerably in 2017, partly due to the receipt of divestment proceeds from the lease of the Hambantota port.

Reflecting these developments, gross official reserves stood at US dollars 7.7 billion at end January 2018, while the rupee depreciated by 0.9 per cent against the US dollar so far during 2018.

Meanwhile, with the considerable slowdown in food inflation, headline inflation as measured by the year-on-year change in Colombo Consumer Price Index (CCPI, 2013=100) declined sharply in January 2018. It is expected thatthe National Consumer Price Index (CCPI, 2013=100) will also register a substantial decline in January 2018, and both headline and core inflation will stabilise in the desired mid-single digit levels during the remainder of 2018.

The Monetary Board also noted that the economy is currently operating at a level below its potential. Nevertheless, as per the available indicators, the economy is likely to recover from the effects of adverse weather conditions in the past two years and benefit from the expected boost in external demand and foreign direct investment inflows.

Improvements in the trade front, including the execution of new trade agreements supported by increased private
investment driven by structural reforms, are also likely to provide the necessary impetus for
the economy to achieve its potential in the medium term.

On the fiscal front, available indicators suggest that the government has been able to record a marginal surplus in the primary fiscal balance in 2017 after several decades. However, the overall fiscal performance is expected to have deviated from the envisaged path, mainly due to increased expenditure on flood and drought related relief measures and some slippages in revenue collection.

With regard to the global economy, the International Monetary Fund revised its global growth projections upwards in its update to the World Economic Outlook issued in January 2018. While it is anticipated that this improved global growth momentum will have an overall positive effect on the Sri Lankan economy, tighter global financial conditionsremain a concern.

Considering these developments, the Monetary Board decided to maintain the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 7.25 per cent and 8.75 per cent, respectively.

Piramal Glass Sri Lanka unit December profit down 52-pct

ECONOMYNEXT – Piramal Glass Ceylon PLC said net profit fell 52% to Rs97 million in the December 2017 quarter from a year ago as demand in the food, beverage and liquor markets was yet to recover from a slowdown.

Total sales growth of the firm, a unit of India’s Piramal Glass, was virtually flat at Rs1.98 billion over the same period, according to interim results filed with the stock exchange.

Quarterly earnings per share were 10 cents. Piramal Glass Ceylon’s share last traded at Rs6 Wednesday.

EPS in the nine months to 31 December 2017 was 26 cents with net profit down nine percent to Rs251 million while sales remained flat at Rs5 billion.

Domestic sales for the December 2017 quarter fell 20% to Rs. 1,256 million from the previous year, a company statement said.

“The dip felt in the overall domestic market since beginning of the year did not recover during the quarter under review,” it said.

“Due to the increase in levies and taxes, the final products are becoming more expensive. This results in a decline in consumer demand which ultimately reflects in the reduction of sales in the food, beverage and liquor segment.

“Added to this , the impact of extreme weather conditions impacted the sales in Virgin Coconut Oil and the agro chemical segment.”

Piramal Glass Ceylon’s management has tried its best to channel the extra capacity towards the export market to bridge the gap due to the loss of domestic volumes, with exports shooting up 75% to Rs. 729 million.

“Sales to USA, Canada, Australia and neighbouring markets showed an exceptional increase which partly helped to shorten the gap,” the statement said.

“PGC is focussing to develop these potential markets to contract the incremental capacity added in the year 2016/17.”

The company said margins improved as it had reduced imports of bottles from India which it resorted to when the furnace was shut down for a capacity expansion, but higher finance costs on borrowings had restrained profit growth.

Sri Lanka Melstacorp profits fall 12-pct in Dec

ECONOMYNEXT - Profits at Sri Lanka's diversified Melstacorp fell 12.3 percent from a year ago to 1.5 billion rupees in the December 2017 quarter, on falling liquor margins and losses in telecommunications despite gains in plantations and financial services.

The company reported earnings of 1.25 percent a share. In the nine months to December earnings amounted to 3.77 rupees a share on total profits of 4.4 billion rupees, down 24 percent from a year earlier.

Revenue including sales taxes fell 1.35 percent in the quarter to 27.1 billion rupees. Net of sales taxes, revenue was 11.1 billion rupees, up 7.6 percent from a year ago.

Cost of sales grew 19 percent to 7.3 billion rupees contracting gross profits 8.9 percent to 3.8 billion rupees.

Administrative expenses grew 14.27 percent to 1.5 billion rupees and net finance cost increased 15.8 percent to 252.5 million rupees.

Distribution expenses fell 2.4 percent to 399.3 million rupees in the quarter.

Revenue from beverages which includes listed Distilleries Company of Sri Lanka fell 4 percent to 71.2 billion rupees in the nine months to December on higher sales taxes. Profits fell 44 percent to 4.9 billion rupees.

Rubber and tea plantations revenue grew 39 percent to 2.5 billion rupees. Profits amounted to 355.9 million rupees, compared to a loss of 118.8 million rupees a year earlier.

Telecommunications which includes Lanka Bell, revenue fell 4 percent to 2.2 billion rupees and losses expanded 24 percent to 1.2 billion rupees.

Revenue from financial services, which includes Continental Insurance and Melsta Regal Finance, grew 40 percent to 2.8 billion rupees and profits increased 50 percent to 316 million rupees.

A segment classified as diversified reported revenues of 1.7 billion rupees, up 21 percent from a year earlier with profits surging 250 percent to 983.8 million rupees.

This segment includes logistics, BPO, IT, hydropower, media, textiles and hotels.

Sri Lanka's Kelsey Developments losses expand 53-pct

ECONOMYNEXT - Losses at Sri Lanka Kelsey Developments, a property developer, expanded 53 percent to 70.9 million rupees in the December 2017 quarter on sliding housing sales and mounting debts, interim accounts showed.

The company reported a loss of 4.07 rupees a share in the quarter. In the nine months to December 2017 losses amounted to 6.87 rupees a share on total losses of 119.7 million rupees, increasing 324 percent from a year earlier.

Revenue fell 99 percent to 1 million rupees, cost of sales fell at the same rate to 0.3 million rupees, contracting gross losses by 97 percent to 0.7 million rupees.

Administration costs fell 34 percent to 27.5 million rupees. Selling and distribution expenses fell 94 percent to 1.4 million rupees.

Net finance costs amounted to 44 million rupees, compared to a 0.2 million income a year earlier.
Long term loans increased 20.7 percent to 473 million rupees as at end December 2017. Short term debt grew 175 percent to 392.4 million rupees.

In September 2017, the company acquired Pre-Fab Engineering Projects for 90 million rupees.

The company has four subsidiaries in construction, real estate, gated housing and condominiums. Kelsey Developments has built over a thousand residential units since incorporation in 1984, the company says.

Sri Lanka's Ceylon Beverage Holdings margins up, net down

ECONOMYNEXT - Profits at Ceylon Beverage Holdings fell 41 percent from a year earlier to 186.9 million rupees in the December 2018 quarter, with last year's profits boosted by insurance receipts, but margins on beer widened sharply with sales picking up.

The company reported earnings of 8.90 rupees a share in the quarter. In the nine months to December earnings per share was 15.10 rupees on a total profit of 708 million rupees, compared to a loss of 668.7 million rupees a year earlier.

Revenue in the quarter grew 44 percent to 8.6 billion rupees which includes the year end festive season and a part of the tourism peak.

Cost of sales grew 30 percent to 6.4 billion rupees, with gross profits soaring 109 percent to 2.1 billion rupees.

Distribution costs rose 26 percent to 827 million rupees amid larger volume sales.

Net finance costs fell 14 percent to 383 million rupees.

Last year the firm received over 2.0 billion rupees of insurance and wrote off items worth 1.1 billion rupees due to flood damage.

This year's revenues are profits are from beer sales.

The company holds 52.25 percent stakes in both Lion Brewery and Millers Brewery, and dealerships for Diageo (Johnny Walker, Smirnoff and Guinness) and Moet Hennessey (Glenmorangie and Dom Perignon). It also manages 34 pubs under the Machang, 8.8%, Chillax and O! brands.

The company suffered a loss of 1.5 billion rupee for the year ending March 2017 after floods inundated the Lion Brewery.

That year the government increased excises taxes on beer by 70 percent and later introduced VAT. But taxes were lowered this year.

Sri Lanka's Lion Brewery December profits up 29-pct

ECONOMYNEXT - Sri Lanka's Lion Brewery said profits grew 29 percent to 412.5 million rupees in the December 2017 quarter from a year earlier with sales recovering after floods shut its brewery for six months in 2016.

The company reported earnings of 5.16 rupees a share in the quarter. In the nine months to December earnings were 10.24 rupees a share on total profits of 819.2 million rupees, compared to a loss of 634 million rupees a year earlier due to floods inundating its brewery.

Revenue in the quarter grew 50 percent to 8 billion rupees, cost of sales increased 36 percent to 6 billion rupees, expanding gross profits 121 percent to 1.9 billion rupees, interim accounts filed with the stock exchange showed.

Earnings growth was helped by a one-off stocks and assets write down due to flood related damages amounting to 1.1 billion rupees a year earlier.

Distribution costs rose 34 percent to 796 million rupees and administrative expenses grew 8 percent to 264 million rupees.

Net finance costs fell 15 percent in the quarter to 345 million rupees.

Lion Brewery reported flood related losses of 1 billion rupees in the year ending March 2017. The company receivedinsurance claims totalling 2 billion rupees, half of it to cover business interruption.

To help the company recover, the government granted the brewer tax concessions to import beer for the local market at the same rate that applied to locally manufactured beer. However a Buddhist monk filed a law suit against the concessions. The case is being heard in the Court of Appeals.

The company, a unit of Ceylon Beverage Holdings, brews the popular Lion Beer, a hit even among tourists. Carlsberg Brewery Malaysia holds a 25 stake in the company which also sells beer under that brand in the domestic market and the Maldives.

The company exports to 15 countries accounting for less than two percent of total revenue even prior to the floods.

The 75 million lire per annum brewery was shut down for nearly six months after floods in May 2016.

Sri Lanka's Sampath Bank net up 52-pct in Dec

ECONOMYNEXT - Profits at Sri Lanka's Sampath Bank rose 52 percent to 3.89 billion rupees helped by a 23 percent growth in net interest income and a lower tax bill, interim account showed.

The group reported earnings of 19.95 rupees for the quarter. In the year to December the group reported earnings of 49.28 rupees on total profits of 12.6 billion rupees which were up 33 percent from a year earler.

In the December quarter net interest income rose 29.5 percent to 23.1 billion rupees, interest expenses rose at a faster 33.4 percent to 14.6 billion rupees and the bank grew net interest income 23.4 percent to 8.5 billion rupees.

Fee and commission income rose 32.1 percent to 2.3 billion rupees

Specific loans loss provisions rose 29 percent to 242 million rupees and general provision fell 64 percent to 128 million rupees.

Pre-tax profits rose 32 percent to 5.1 billion rupees, but income tax fell absolutely 17 percent to 1.2 billion rupees, from 1.3 billion rupees a year earlier.

Sri Lanka’s Cargills Ceylon December profit up 30-pct

ECONOMYNEXT - Sri Lanka's supermarket chain Cargills Ceylon said profits grew 29.8 percent to 826.9 million rupees in the December 2017 quarter from a year ago helped by capital gains, despite shrinking retail margins.

"It has been a challenging consumption environment on account of the inclement weather affecting buying power in key agriculture regions of the country," the company said.

The company reported earnings of 3.69 rupees a share in the quarter. In the nine months to December, earnings amounted to 13.90 rupees a share on total profits of 3.1 billion rupees, up 60.8 percent from a year earlier, interim accounts filed with the stock exchange showed.

Revenue grew 5.26 percent to 23.2 billion rupees in the quarter, cost of sales rose 5.7 percent to 20.5 billion rupees, expanding gross profits by 2 percent to 2.7 billion rupees.

Administrative expenses rose 6.8 percent to 1 billion rupees, distribution costs increased 10.5 percent to 645 million rupees, and net finance costs fell 14 percent to 267.9 million rupees.

During the nine months to December the share of associate profit was recorded at 199 million rupees due to a 481 million rupee gain by Cargills Bank, an associate firm, from disposing its subsidiary Colombo Trust Finance to listed telco Dialog, the company said.

Cargills Ceylon said its subsidiary Dawson Office Complex disposed freehold property in Colombo valued at 4.2 billion rupees, recognizing a profit of 1 billion rupees.

Revenue from retail, which includes the Cargills Food City supermarket chain, grew 7 percent during the nine month period to 54.7 billion rupees, but profits were flat from a year ago at 2.3 billion rupees.

Cargills Food City opened its 338th outlet in this period.

Fast moving consumer goods revenue grew 8 percent to 16.6 billion rupees and profits rose 6 percent to 1.8 billion rupees.

Revenue from restaurants, which includes a KFC franchise, grew 12 percent to 2.8 billion rupees and profits surged 75 percent to 349.8 million rupees.

Sri Lanka's Odel December profits up 11-pct

ECONOMYNEXT - Sri Lanka's department store Odel, a unit of the Softlogic group, said profits rose 11 percent to 66.3 million rupees in the December 2017 quarter from a year earlier on lower tax payments despite thinning margins.

The company had earnings of 24 cents a share in the quarter, interim accounts showed.

In the nine months to December 2017, earning amounted to 0.43 cents a share on total profits of 116.3 million rupees, down 32 percent from a year earlier on higher interest costs and administrative expenses.

Odel last traded at 22.90 rupees Friday.

Revenue in the quarter rose 6 percent to 2 billion rupees, cost of sales grew 1 percent to a billion rupees, expanding gross profits by 11 percent to a billion rupees.

Distribution costs rose 11 percent to 124 million rupees and administrative costs also rose 11 percent to 678.9 million rupees. Net finance costs rose 58 percent to 115 million rupees.

Taxes paid in the quarter fell 58 percent to 23 million rupees.

Odel said it invested 10 million rupees to form a new company to carry out a Board of Investment approved project.

The company said it has entered into an agreement with Access Engineering for 570 million rupees to construct the diaphragm wall and piling work of the proposed Odel department store.

Odel has also entered into an agreement with China Construction Third Engineering Bureau for 7 billion rupees to develop its Ward Place property.

Sri Lanka’s Laugfs Gas back in the red in December quarter

ECONOMYNEXT – Sri Lanka’s Laugfs Gas group slipped back in to the red in the December 2017 quarter with losses rising 184% to Rs527 million from a year ago.

The company made a Rs1.36 loss per share, according to interim results filed with the stock exchange. The stock was last traded at Rs26.20 Friday.

December quarter sales rose 38% to Rs6.6 billion but cost of sales rose faster, at 52% to Rs5.6 billion, squeezing margins and reducing gross profits by eight percent to a billion rupees.

In the nine months to 31 December 2017, the loss per share was Rs2.43 with losses of Rs942 million although sales rose 40% to Rs18 billion.

Laugfs Gas had returned to profit in the September 2017 quarter with net earnings of Rs40 million, down 85% from a year ago, after three successive quarters of losses.

The firm has attributed the downturn to local price controls as LPG and steel prices rose internationally, rupee depreciation and rising interest costs and said it continued to lobby for a pricing formula.

Sri Lanka's The Finance Losses up 24-pct, balance sheet gap Rs16bn

ECONOMYNEXT - Losses at Sri Lanka's troubled The Finance Company expanded 24 percent to 598.2 million rupees in the December 2017 quarter, and a hole in the balance sheet expanded by 1.6 billion rupees to 16 billion in the past 9 months.

Losses in the quarter were 3.73 rupees a share. In the nine months to end December 2017, losses were 10.50 rupees a share, on a total loss of 1.7 billion rupees, up 41 percent from a year earlier.

The Finance shares gained 10 cents on Friday closing at 5 rupees on Friday.

Interest income in the quarter grew 6 percent to 866.9 million rupees, interest expenses increases 20 percent to 1.1 billion rupees, ballooning net interest losses by 122 percent to 248.8 million rupees.

The company has 30 billion rupees of deposits and 5.0 billion borrowings but only 22.4 billion rupees of assets of which over 4 billion rupees are not interest bearing.

Fees and commission income grew 29 percent 19.3 million rupees and other income fell 49 percent to 12.1 million rupees.

Bad loan provisioning increased 34 percent to 117.7 million rupees.

Operating expenses including personnel increased 16 percent to 263.9 million rupees.

The Finance Company's book value, or shareholder funds, was a negative 16 billion rupees as at end December 2017, up 12 percent from March.

The Finance Company's loan book expanded 28 percent in this period to 4.9 billion rupees, its hire purchase portfolio shrank 10 percent to 4.6 billion rupees, leasing fell 28 percent to 729 million rupees.

Financial investments fell 2.2 percent to 6.2 billion rupees. Real estate investments fell 18 percent to 805.8 million rupees.

Ceylinco Crisis

The Finance's problems began with the collapse of Golden Key, over 10 years ago, when interest rates rose after a period of high inflation fired by deficit spending and loose monetary policy.

The Finance was incorporated in 1940 and later became part of the now defunct Ceylinco Group, controlled by Justin Kotelawala.

Ceylinco Group was founded in the late 1930s by Hugh Weerasekere and Cyril E. S. Perera, who relinquished control over to Kotelawala in the 60s.

The Ceylinco crisis began under Kotelawala’s son Lalith, when the Golden Key Credit Card Company, an unregulated credit card issuer, collapsed, unable to settle 26 billion rupees in unauthorised customer deposits.

The Finance faced a run on deposits, and worse, borrowers stopped servicing loans.

The central bank took control through a management agent, but the firm continues to bleed money.

For one, the company had invested heavily in property, which couldn’t be liquidated fast enough.

The Finance also had loans to Ceylinco group companies, which were not paid back.

In 2010, the Central Bank converted 10 percent of The Finance’s deposits worth 2 billion rupees into non-voting shares and raised another 1.6 billion rupees via a public offer.

The Employees Provident Fund managed by the Central Bank was forced to invest in 5.1 million shares. The Finance shares were trading on the stock exchange at 37 rupees at end-March 2011. Today, a share is worth 5 rupees, losing 86.5 percent in value since.

The company’s 19 billion rupee pre-crisis loan book deteriorated rapidly to 7 billion rupees in the three years to 2012. Its deposit base fell by a quarter to 21 billion rupees. The Finance reported a 9 percent negative interest margin that year.

In the two years to 2014, the loan book grew 14 percent to 8 billion rupees, but deposits rose to 24 billion rupees. Its annual report that year hailed high growth in deposits as a sign of growing public confidence, but this only pushed negative interest margins further into the red at 14 percent.

To help reduce negative interest expenses, in December 2014, the Central Bank granted a 6 billion rupee low-cost loan to The Finance, mostly invested in government securities.

That year, The Finance’s board finalised a five-year business plan (2014/15 to 2019/20) approved by the Central Bank detailing a strategy to revive the company with low-cost deposit mobilisation, converting non-yielding real estate into yielding assets or selling them to finance long -term business loans, and improving the collection of 3.8 billion rupees worth of Ceylinco Group loans.

The company also has some real estate. The firm had land and real estate assets worth 1.7 billion rupees at end-March 2017 in its books, down 73 percent from 6.5 billion rupees in 2011 after provisioning for losses.

Despite appreciating land prices, there is a growing gap in the balance sheet.