Noteworthy asset quality deterioration in Sri Lankan finance companies

LBO – ICRA Lanka, a group company of Moody’s Investors Service is cognisant of the asset quality deterioration in licensed finance companies in Sri Lanka, during the financial year ended March 31, 2018.

“As per our analysis about 100bps increase (5.82% in March 2018 vis-s-vis 4.89% in March 2017) in gross NPA (non-performing loans) levels during the period is attributable to a number of factors,” ICRA Lanka said in a statement.

The statement outlines overall slow-down in economic growth, particularly affecting lower tiers of the economy and adverse weather conditions that prevailed from the last quarter of 2016 to latter part of the year 2017 as those factors.

Particularly high NPAs in SME related lending: In the last couple of years, NBFIs were extensively growing their SME related lending portfolios, due to relatively better yields in SME lending and due challenging market dynamics in the traditional vehicle leasing segment. SME related loans are granted in the form of factoring, post-dated cheque discounting and short-term loans. However, we observe increasing slippages in these product segments of the SME portfolios as the macro conditions were challenging.

ICRA Lanka also observes a significant moderation in portfolio growth, in NBFIs that are involved in SME lending, as the focus has shifted towards recovery efforts of the same facilities.

Further, according to new capital adequacy requirements (June 2018), risk weighting for unsecured lending has increased to 125 percent, which is expected to limit NBFIs’ exposure to the asset class, in view of maintaining healthy capitalization.

Asset quality in Micro-lending is also affected: As per ICRA Lanka’s observations, microlending (Grameen model group lending and other micro related lending) of the NBFI sector has grown by about 28% CAGR between the period FY2015 to FY2017. As per their estimates, aggregate microlending by licensed finance companies stood at about LKR 90-100Bn as in March 2017.

“Number of factors including the recent weather conditions affecting rural areas, as well as multiple lending is done by unregulated microfinance lenders has affected the credit quality dynamics of the segment, However, as per our observation, the NPAs of this segment (NBFI microlending) remains better than that of the SME segment of NBFIs,”







“Going forward, ICRA Lanka will continue to monitor the NPA movement of the rated NBFIs and specific rating actions will be announced accordingly.”

Anilana (ALHP) investor to make mandatory offer at 18% premium

LBO – The Securities and Exchange Commission of Sri Lanka (SEC) has approved investment into Anilana Hotels and Properties (ALHP) by Singapore based SOMAP International.

The investment by way of private placement will result in an infusion of Rs667mn (US$4.2mn) into the company at Rs1.3/share. After the private placement SOMAP will own 51% of CSE listed ALHP.

After execution of the private placement SOMAP will be required to make a mandatory offer to all other shareholders of ALHP at Rs1.3/share. This price is currently 18% above where the stock is currently trading at Rs.1.1.

It is yet to be disclosed if ALHP major shareholder Asanga Seneviratne and related parties intend to sell into the mandatory offer. The CSE disclosure today states that further announcement will follow on July 2nd, after allotment of the private placement shares is complete.

The company went public in a 2013 Colombo Stock Exchange IPO at an offering price of Rs12/share. Original investors are therefore sitting on losses close to 90%.

Vallibel Finance crosses Rs.1Bn mark for net profits

LBO – Vallibel Finance PLC crossed the one billion rupee net profit mark with the company announcing its income statement for the financial year ended on 31 March, 2018, recording growth across key indicators including income and profitability.

Gross income for the financial year grew 35 percent over the previous year to reach 6.9 billion rupees with the previous year’s income at 5.1 billion rupees.

Net interest income accounted for a 38 percent increase over the previous year’s figure, reaching 2.7 billion rupees from 1.9 billion rupees.

Operating profits for the year under review grew exponentially by 43 percent to 1.9 billion rupees from the previous 1.3 billion rupees.

Net profit amassed to one billion rupees, growing by 40.3 percent on the back of outstanding performance built on prudent financial stewardship. Net profits for the previous year stood at 726 million rupees thus leading the company pass the billion rupee milestone in profits.

Deposits grew by 24 percent to 22.2 billion rupees over the previous year’s 17.8 billion rupees.

“We have been able to record impeccable performance, both qualitative and quantitative during a very challenging and daunting period of time”, Jayantha Rangamuwa, managing director of Vallibel Finance said.

Meanwhile, assets climbed to.38.4 billion rupees from the previous 30.6 billion rupees, accounting to a growth of 25.2 percent.

Sri Lanka development bond issue oversubscribed, 4 year bids rejected

LBO – The issue of Sri Lanka development bonds amounting to 700 million US dollars have been oversubscribed with 937 million dollars of bids received from investors.

The central bank received 829.60 million bids for the 2 years 10 months bond and accepted 693.89 million dollars worth bids at a weighted average fixed rate of 5.25 percent.

The central bank accepted only 6.11 million from the 44.11 million worth bids received for the 3 years 10 months bond at a weighted average fixed rate of 5.52 percent.

The bank rejected 63.21 million dollars of bids received for the 4 years 10 months bond offered.

The central bank has the authority to accept any amount not exceeding the total amount offered at auction depending on the market conditions.

The offer or the Treasury bonds denominated in US dollars was opened from 19 to 25 June for bidding with the settlement on 02 July 2018.

Tokyo Cement (TKYO) reports a loss as Sri Lankan construction industry slows in Q1

LBO – The Central Bank of Sri Lanka recently released its first quarter GDP report. Growth was a tepid 3.2% for the quarter ended March 31, 2018.

Digging deeper, one saw a rebound in agriculture with a growth of 4.4%, and services meandering along with the same 4.4% year over year growth rate.

The weakness in the GDP report was industrial activities with a growth rate of just 1%.

Within industrial activities is construction, which showed a notable negative growth of 4.9%. The construction industry has contracted year over year for the first time in years.

Analysts cite the slowdown in construction as one possible reason for the weak results from listed Tokyo Cement (TKYO) in the March 2018 quarter. For the quarter TKYO reported a loss of Rs303mn versus a prior year profit of Rs910mn.

Although revenue was down just 2%, cost of goods was up 12% causing significant gross margin compression.

The stock last traded at Rs35, close to its net asset value of Rs38.

Sri Lanka sells US$700mn dollar in 3 and 4-year bonds

ECONOMYNEXT - Sri Lanka has sold 700 million US dollars dollar denominated bonds 693.89 million dollars in 2-year 10-month bonds, data from the state debt office showed.

Sri Lanka sold 693.89 million US dollars of 2-year, 10-month bonds at a weighted average fixed rate of 5.25 percent and 6.11 million US dollars of 3-year 10-month bonds at a rate of 5.52 percent.

The debt office called offers for 700 million dollars of bonds in three tenors. None of the 63.21 million dollars in bids were accepted for 4-year 10-month bonds.

There were 829.60 million dollars of bids for 2-year 10-month bonds and 44.11 million dollars for 3-year 10-months.

Sri Lanka sells 12-month bills, rejects bids for shorter tenors

ECONOMYNEXT - Sri Lanka's has rejected bids for 3 and 6 month bills and sold 10.1 billion rupees of Treasury bills at Wednesday's auction, data from the state debt office showed.

The 12-month yield went up marginally by 02 basis points to 9.39 percent.

Sri Lanka's central bank has a habit of rejecting bills and printing money to worsen currency pressure.

Analysts have also warned the central bank not to buy dollars from the Treasury and create new money, which is another trick used in the past to worsen currency pressure and stop a float from taking hold.

Sri Lankan shares extend fall to near 15-month closing low

Reuters: Sri Lankan shares declined for a fourth straight session on Thursday and posted their lowest close in nearly 15 months, as foreign investors continued to offload the island nation’s risky assets, while month-end settlements also weighed on the bourse.

The Colombo stock index ended 0.11 percent weaker at 6,181.48, its lowest close since April 4, 2017.

“Foreign selling has not stopped yet which is pushing the market down,” said Dimantha Mathew, head of research, First Capital Holdings.

“Today we saw some foreign buying and that absorbed the selling pressure to some extent. Margin calls are also there.”

Foreign investors net sold equities worth 196.1 million rupees ($1.24 million), extending the year-to-date foreign outflows to 1.2 billion rupees this year.

Turnover was 1.3 billion rupees, more than this year’s daily average of 934.9 million rupees.

Shares of Cargills (Ceylon) Plc fell 4.4 percent, conglomerate John Keells Holdings Plc ended 0.7 percent weaker, Bukit Darah Plc declined 3.7 percent and Commercial Bank of Ceylon Plc, the country’s biggest listed lender, slipped 0.7 percent.

Finance Minister Mangala Samaraweera said last week the economy was likely to grow about 4.5 percent this year, below a central bank estimate of 5 percent.

The International Monetary Fund (IMF) said on June 20 Sri Lanka’s economy remained vulnerable to adverse shocks because of sizable public debt and large refinancing needs.

Ratings agency Moody’s said on Wednesday a strengthening U.S. dollar since mid-April has increased the credit risk of several emerging markets, including Sri Lanka, due to currency depreciation.

Moody’s said a strong dollar would also lead to a drop in foreign exchange reserves of countries such as Argentina, Ghana, Mongolia, Pakistan, Sri Lanka, Turkey, and Zambia.

Sri Lankan markets were closed on Wednesday for a public holiday. 

($1 = 158.1000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Subhranshu Sahu)

Sri Lankan shares hit near 15-mth closing low on margin calls, foreign selling

Reuters: Sri Lankan shares fell for a third straight session on Tuesday and posted their lowest close in nearly 15 months as margin calls triggered selling and as foreign investors continued to offload the island nation’s risky assets.

The Colombo stock index ended 0.52 percent weaker at 6,188.05, its lowest close since 4 April 2017.

“Margin calls are coming up and selling is accelerating. Foreign selling is also dragging the market,” said Dimantha Mathew, head of research, First Capital Holdings.

Foreign investors net sold equities worth 26.4 million rupees, extending the year-to-date foreign outflows to 978.7 million rupees this year.

Turnover was 541.2 million rupees ($3.42 million), well below this year’s daily average of 931.9 million rupees.

Shares of Sri Lanka Telecom Plc lost 5.8 percent, while conglomerate John Keells Holdings Plc ended 1.3 percent weaker, Hatton National Bank Plc closed 2.2 percent down and Ceylon Tobacco Company Plc ended 0.8 percent lower.

Finance Minister Mangala Samaraweera said last week the economy was likely to grow about 4.5 percent this year, below a central bank estimate of 5 percent.

The International Monetary Fund (IMF) on Wednesday said Sri Lanka’s economy remained vulnerable to adverse shocks because of sizable public debt and large refinancing needs.

Stock, bond and foreign exchange markets are closed on Wednesday for a public holiday. 

($1 = 158.2500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Vyas Mohan)

Sri Lankan stocks end weaker near 14-month low in dull trade

Reuters: Sri Lankan shares ended weaker on Monday, staying close to a 14-month low hit last week as investors sold diversified shares in dull trade with turnover at a nine-week low.

The Colombo stock index ended 0.13 percent weaker at 6,220.13, near its lowest close since April 2017, which was on Wednesday.

The bourse fell 1.63 percent last week recording its fifth straight week of losses.

“Low key market with marginal dip,” said Hussain Gani, deputy chief executive at Softlogic Stockbrokers.

“Its mainly local investor participation, we’ve not seen major foreign activity. Investors are waiting for opportunities and they will get in when there is an opportunity.”

Turnover was 176.1 million rupees ($1.11 million), its lowest since April 16 and well below this year’s daily average of 935.3 million rupees.

Foreign investors sold equities of a net worth of 18 million rupees, extending the year-to-date net foreign outflows to 952.3 million rupees of shares this year.

Shares of Hatton National Bank Plc lost 1.2 percent, while Distillers Company of Sri Lanka Plc ended 0.96 percent weaker, Carsons Cumberbatch Plc closed 1.9 percent down and Lanka IOC Plc ended 1.2 percent weaker.

Finance Minister Mangala Samaraweera said last week the economy was likely to grow about 4.5 percent this year, below a central bank estimate of 5 percent.

The International Monetary Fund (IMF) on Wednesday said Sri Lanka’s economy remained vulnerable to adverse shocks because of sizable public debt and large refinancing needs. 

($1 = 158.8000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal)

Sri Lankan stocks end steady, marking fifth straight losing week

Reuters: Sri Lankan shares ended steady on Friday, staying close to the 14-month low hit this week and marking their fifth straight week of losses.

The Colombo stock index ended 0.01 percent weaker at 6,228.15, hovering near its lowest close since April 2017 hit on Wednesday. The bourse fell 1.63 percent this week.

“Though the market is attractive investors are still awaiting direction. We will see sideways movement for the next couple of days as the sell-off has stopped,” said Atchuthan Srirangan, assistant manager - research, First Capital Holdings Plc.

Turnover was 277.4 million rupees ($1.8 million), well below this year’s daily average of 942 million rupees.

Foreign investors sold equities net worth 72.7 million rupees, extending the year-to-date net foreign outflows to 934.3 million rupees of shares so far this year.

Shares of Dialog Axiata Plc ended 0.2 percent weaker, while Melstacorp Ltd fell 0.9 percent.

Finance Minister Mangala Samaraweera on Tuesday said the country’s economy is likely to grow around 4.5 percent this year, below the central bank estimate of 5 percent in a sign political uncertainty is curbing a more robust recovery after a weak 2017.

The International Monetary Fund (IMF) on Wednesday said Sri Lanka’s economy remains vulnerable to adverse shocks because of sizable public debt and large refinancing needs. 

($1 = 158.7000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Amrutha Gayathri)

Sri Lankan stocks climb from 14-mth low, snap 10-session losing run

Reuters: Sri Lankan shares ended slightly firmer on Thursday, snapping a 10-session losing streak, as local investors bought battered beverage and telecom shares.

The Colombo stock index gained 0.18 percent to close at 6,229.06, edging higher from its lowest close since April 5, 2017 hit on Wednesday.

“Market is up on local buying, mostly its bargain-hunting by local investors as the market has dropped too low in very little time,” said Hussain Gani, deputy CEO at Softlogic Stockbrokers.

Turnover stood at 416.2 million rupees ($2.6 million), well below this year’s daily average of 948 million rupees.

Foreign investors sold equities net worth 34 million rupees, extending the year-to-date net foreign outflows to 861.6 million rupees of shares so far this year.

Shares of Ceylon Tobacco Co Plc rose 1.8 percent, while Sri Lanka Telecom Plc ended 3.8 percent higher. Distillers Co of Sri Lankan Plc gained 1.5 percent and Melstacorp Ltd ended 1.9 percent firmer.

Finance Minister Mangala Samaraweera on Tuesday said the country’s economy is likely to grow around 4.5 percent this year, below the central bank estimate of 5 percent in a sign political uncertainty is curbing a more robust recovery after a weak 2017.

The International Monetary Fund (IMF) on Wednesday said Sri Lanka’s economy remains vulnerable to adverse shocks because of sizable public debt and large refinancing needs. 

($1 = 159.2500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Amrutha Gayathri)

Sri Lanka Treasuries yields fall amid currency pressure

ECONOMYNEXT - Sri Lanka Treasuries yields eased at Wednesday's primary market auction with the benchmark 12-month yield falling 7 basis points to 9.37 percent, data from the state debt office showed.

Low benchmark yields encourage more speculation against the rupee, analysts say, intensifying problems.

The 3-month yield eased 2 basis points from a week earlier to 8.32 percent, and the 6-month yield also eased 2 basis points to 8.85 percent.

The state debt office offered and accepted Treasury bills worth 14 billion rupees.

Total bids amounted to 52.5 billion rupees.

Foreign investors exit Sri Lanka government bonds in 2018

LBO – Foreign investors have been dumping Sri Lanka government bonds in 2018, after being big net buyers in 2017.

Year to date, foreign investors have been net sellers of Rs22.5bn (US$140mn) of Sri Lanka government bonds. This is a reversal from 2017, where foreign investors were net buyers of Rs64.2bn (US$400mn) worth of government bonds.

Yields on local currency denominated debt have remained double digit as the currency (LKR) has started to depreciate, hitting record lows in recent days.

Governor Indrajit Coomaraswamy and the Monetary Board of Sri Lanka have maintained relatively tight monetary policy which has likely prevented a more rapid devaluation of the currency. The Central Bank also spent US$220mn defending the LKR in the month of May.

Foreign selling in government bonds, stocks, and devaluation of the LKR comes amid the backdrop of the largest YTD exodus from Asian emerging market stocks since 2008.

NDB Bank to raise Rs6.2bn in discounted rights issue

LBO – Colombo Stock Exchange (CSE) listed National Development Bank (NDB) announced a one for three rights issue to raise approximately Rs6.2bn.

The purpose of the rights issue as stated in the CSE announcement is to: “further strengthen the equity base of the bank and thereby improve capital adequacy, and to part finance the loan portfolio of the bank.”

The price of the issue is Rs105/share, which is a 44% discount to the Rs189 net asset value, and a 20% discount to the Rs132 market price of the shares.

Analysts say there may be a chance for subscribers to recieve over allotments as the rights of shares owned by controversial Perpetual Group companies may not be able to be exercised.

NDB Bank is Chaired by well known senior banker Ananda Atukorala. Its CEO is recently appointed Dimantha Seneviratne who came over from the CEO position of PABC Bank after the controversial exit of senior banker Rajendra Theagarajah from NDB.

Colombo Stock Exchange decides to delist Kalpitiya Beach Resort

LBO – Board of Directors of the Colombo Stock Exchange has decided to delist the securities of Kalpitiya Beach Resort subject to the approval of the Securities and Exchange Commission.

In an announcement, Colombo Stock Exchange said the decision to delist the company is based on the following reasons.

1. The shareholders of the Company have been issued with shares of Hikkaduwa Beach Resort pursuant to the Amalgamation
2. The company does not exist at present subsequent to the amalgamation since the Registrar of Companies has removed all particulars relating to the company from the Register
3. Trading of the securities of the Company has been suspended

The announcement further said that any person aggrieved by the aforesaid decision of them may appeal to the Securities and Exchange Commission within 14 days.

Fitch revises Siyapatha’s outlook to stable; affirms ‘A-(lka)’

Fitch Ratings Lanka has revised the outlook on Siyapatha Finance PLC (Siyapatha) to sable from negative and affirmed its National Long-Term Rating at ‘A-(lka)’.

The agency has also affirmed the National Long-Term Rating on Siyapatha’s senior unsecured debentures at ‘A-(lka)’ and subordinated debentures at ‘BBB+(lka)’. The rating action follows the revision of the Outlook on its parent Sampath Bank PLC’s ‘A+(lka)’ rating to stable from negative on June 13 2018.

Siyapatha’s rating reflects Fitch’s expectation that support for Siyapatha would be forthcoming from Sampath, which owns 100% of Siyapatha and is involved in the strategic direction of the subsidiary through board representation.

Siyapatha is rated two notches below its parent because of its limited role to the group’s core business and it is branded independently from its parent. Sampath’s leasing book accounted for just 7% of group loans at end-March 2018, of which half came from Siyapatha. Siyapatha is a small contributor to group profit, accounting for 5% of group 2017 pre-tax profit.

Siyapatha’s senior unsecured debentures are rated at the same level as Siyapatha’s National Long-Term Rating, as they constitute direct, unconditional, unsecured and unsubordinated obligations of the company.

www.dailynews.lk

Mercantile Investments posts Rs 514 mn PAT

Mercantile Investments and Finance PLC displayed a strong financial performance posting impressive profits for the financial year ended March 31, 2018.

Based on the recently published annual report of the Company, pre-tax profits and post-tax profits stood note-worthily up at Rs. 879 million and Rs. 514 million respectively, reflecting 180.2% and 154.4% astounding growth rates compared to the last year’s moderate performance. Amid the industry slowdown, MI sustained steady core business revenue growth of 24%, enjoying improved core margins on the diverse lending product mix offered whilst efficiently managing the funding cost.

In keeping to the corporate sustainable growth strategy, total assets advanced to the Rs 40 billion mark, up by 7.6%. The vibrant credit products offered to the market enabled the Company to grow the loan book by 11.5% and to supersede the challenging business conditions and the constraints witnessed in the vehicle sales industry. The growth was driven by both the term based lending and the traditional lease financing which recorded 28% and 8% growths respectively for the financial year. With a 51% portfolio increase, micro finance lending played a key role in boosting yields and was a catalyst in self-empowering women to play a wider role in the economy.

Stemming from the previous year, few large accounts though adequately collateral backed continued to impact the asset quality, with the Non-Performing Lending Ratio (NPL) moving up to 7.58%. However, through close recovery monitoring, debt restructuring and recovery actions, impairment charges was curtailed and brought down by 32% compared to previous period.

Growing capital strength and the personalized service extended, paved the way for the company to broad-base the depositor base, which resulted in the total deposit base growing steady by 18% and reaching the Rs. 20 billion milestone for the first time. Having expanded the shareholder capital base to Rs. 8.7 billion by the close of the financial year, the Company maintained a solid 43.26% Capital Funds to Total Deposits Liability Ratio. MI’s financial strength was further fortified by the strong Tier 1 and Total Risk Weighted Capital Adequacy prudential ratios which stood significantly above the minimum regulatory limits and the industry average, at 16.24% and 17.36% respectively. This continued to be a hallmark in MI’s financial success story that spans over fifty years, driven by the unwavering commitment to business excellence and the sustainable growth focus. Mercantile Investments and Finance PLC is a Licensed Finance Company under the Finance Business Act No. 42 of 2011, listed on the DiriSavi Board of the Colombo Stock Exchange.
www.dailynews.lk

Fitch Affirms Sierra Cables at ‘BB+(lka)’; Outlook Stable

Fitch Ratings has affirmed Sri Lanka-based cable manufacturer Sierra Cables PLC’s National Long-Term Rating at ‘BB+(lka)’ with a Stable Outlook.

The affirmation reflects our view that the rise in Sierra’s leverage is temporary and that the company will be able to deleverage in the next 12 months based on a sustained recovery in demand and profitability seen since the fourth quarter of the fiscal year ending March 2018 (FY18). Revenue increased by 30% in 4QFY18, compared with a 4% decline in 9MFY18, and EBITDA margin climbed to 12.2% from 5.9%.

Weaker profitability during most of FY18 was the main contributor to the company’s high leverage, as Sierra was unable to pass on higher raw material prices and local-currency depreciation to customers. However, it has priced-in some of the cost of inflation with support from stronger demand since the start of 2018.

We expect net leverage - defined as lease adjusted debt net of cash/operating EBITDAR, excluding cash flow from overseas operations - to fall below 3.5x by FY19, the level above which the rating could be downgraded (FY18: 4.4x).

However, an inability to make meaningful progress towards deleveraging in the next 12 months could result in negative rating action.

Sierra’s rating also reflects its modest market share in the domestic copper and aluminium cable market, which is counterbalanced by its exposure to cyclical end-markets, such as infrastructure and construction. It also factors in risks associated with investments in international markets, where the company has yet to establish itself.
www.dailynews.lk

CDB Profit after tax up 39% to 1.4 Bn

The Citizens Development Business Finance PLC (CDB), recorded yet another 2017/18 milestone with its after tax profit blazing ahead to a 39% increase to Rs 1.4 Bn, from last two year’s back-to-back record of topping the Rs 1 billion mark.

CDB’s aggressive bottom line growth in 2017/18 was driven by a 37% surge in its top line, an upward trajectory to Rs 11.8 billion, from Rs 8.6 Bn in 2016/17. These revenue gains resulted in a 20% increase in net interest income, to Rs 3.5 billion, from Rs 2.9 billion in the previous year.

This is on the back of a remarkable lending portfolio growth of 38%. Demonstrating the quality of portfolio management, credit growth has been achieved while simultaneously controlling the non-performing credit risk. The Company closed the year by containing the Gross NPL ratio (Net of IIS) to 3.07%, from 3.08% in the previous financial year, and the Net NPL ratio (Net of IIS and provisions) slashed to 0.89%, from 1.05%.

The Company sustained a 30% growth in net operating income, which reached Rs 4.8 billion, from Rs 3.7 billion, with the operating profit margin continuing to improve from 16.27% to 16.63%.

The profit before tax also moved up by 37% to Rs 1.7 Bn.

Despite the rising cost structures experienced during 2017, CDB has successfully reduced its cost to income ratio from 58.28% one year ago, to 54.52%.

CDB closed the year by recording a stronger financial base, with total assets beefed up by 40% to Rs 75.5 Bn on the back of robust loan portfolio growth to Rs 59.4 Bn, from Rs 43.2 Bn, up 38%. Total equity increased by 15%, to Rs 7.2 Bn and the Company also grew its deposit base to Rs 44.7 Bn, which is a growth of 37% year-on-year. Return on average assets improved to 2.17% from 1.93%.

The earnings per share has moved up to Rs 25.80 from Rs 18.53, whilst the Return on Equity (after tax) has increased to 20.92% from 17.83% and Net Asset Value per share has augmented to Rs 131.71, from Rs 114.93.

The CDB’s 90.38% owned specialized leasing subsidiary UCL has performed well during the year under review, growing its balance sheet to Rs. 1.7 Bn from Rs. 693 Mn.
www.dailynews.lk

Sri Lankan stocks drop for 10th session

Reuters: Sri Lankan shares fell for a 10th consecutive session on Wednesday to their lowest close in more than 14 months, led by losses in lenders such as Commercial Bank of Ceylon Plc.

The Colombo stock index ended 0.76 percent weaker at 6,217.91, its lowest close since April 5, 2017.

“There were a few margin calls as the prices are coming down,” said Prashan Fernando, CEO at Acuity Stockbrokers.

Turnover stood at 341.5 million rupees ($2.1 million), well below this year’s daily average of 952.8 million rupees.

Foreign investors sold equities net worth 31.4 million rupees, extending the year-to-date net foreign outflows to 796.2 million rupees of shares so far this year.

Shares of Hatton National Bank Plc fell 2.1 percent, while Sampath Bank Plc ended 2.1 percent lower and National Development Bank Plc closed 6.2 percent down. The biggest listed lender Commercial Bank of Ceylon ended 1.1 percent weaker.

Finance Minister Mangala Samaraweera on Tuesday said the country’s economy is likely to grow around 4.5 percent this year, below the central bank estimate of 5 percent in a sign political uncertainty is curbing a more robust recovery after a weak 2017.

($1 = 159.9000 Sri Lankan rupees) 

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

Sri Lankan stocks extend losses to 9th session as weak rupee weighs

Reuters: Sri Lankan shares fell for a ninth consecutive session on Tuesday to their lowest close in more than a year, led by losses in heavyweight John Keells Holdings Plc.

The Colombo stock index ended 0.71 percent weaker at 6,265.73, its lowest close since April 6, 2017.

Depreciation of the rupee, which hit a record low last week, is one of the main concerns of equity investors, said Hussain Gani, deputy CEO at Softlogic Stockbrokers.

Turnover stood at 638.6 million rupees ($4 million), less than this year’s daily average of 958.3 million rupees.

Foreign investors bought equities net worth 76.2 million rupees, but they have been net sellers of 796.2 million rupees of shares so far this year.

Shares of John Keells Holdings Plc fell 3.2 percent, while Ceylon Tobacco Co Plc ended 1.3 percent lower and Hatton National Bank Plc closed 2 percent down. The biggest listed lender Commercial Bank of Ceylon Plc ended 1.3 percent weaker.

Sri Lanka’s economy grew 3.2 percent year-on-year in the first quarter, slowing from 3.5 percent in the fourth quarter of 2017, the state-run Department of Census and Statistics said after the market closed.

A weaker rupee, political uncertainty and the recent fuel price hike has weighed on sentiment over the past few weeks, with local investors remaining on the sidelines as they gauge the impact of floods last month, brokers said. 

($1 = 159.8000 Sri Lankan rupees) 

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

Sri Lankan stocks extend losses, hit 14-month low

Reuters: Sri Lankan shares fell for an eighth consecutive session on Monday to their lowest close in more than a year, as foreign investors sold shares, with block deals boosting the day’s turnover.

The Colombo stock index ended 0.33 percent weaker at 6,310.51, its lowest close since April 11, 2017. The index dropped 0.4 percent last week, marking its fourth straight weekly fall.

Foreign investors sold equities net worth 98.8 million rupees ($618,000), extending the year-to-date net foreign outflows to 872.4 million rupees of shares.

Turnover stood at 1.3 billion rupees, more than this year’s daily average of 961.3 million rupees.

Shares of biggest listed lender Commercial Bank of Ceylon Plc fell 0.9 percent, while Hatton National Bank Plc ended 0.5 percent lower and conglomerate John Keells Holdings Plc ended 0.6 percent weaker.

Most investors have adopted a wait-and-watch approach, hoping for some positive news on the economic front, analysts said.

Sri Lanka’s economy grew 3.2 percent year-on-year in the first quarter, slowing from 3.5 percent in the fourth quarter of 2017, the state-run Department of Census and Statistics said after the market closed.

A weaker rupee, political uncertainty and the recent fuel price hike has weighed on sentiment over the past few weeks, with local investors remaining on the sidelines as they gauge the impact of floods last month, brokers said.

($1 = 159.8000 Sri Lankan rupees) 

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

United Motors invests Rs 100 mn on JCB facility in Peliyagoda

United Motors Lanka (UML) has invested Rs 100 million in the first phase of the state of the art machinery and service facility in a 1.5 acre land in Peliyagoda.

This is to promote the world famous brand JCB. At the launch UML Group CEO and Executive Director, Chanaka Yatawara said that construction is an exciting and growing industry in Sri Lanka and UML wanted to explore the opportunities and invested there by collaborating with the JCB, heavy equipment brand.

Yatawara said that almost 9 per cent of the GDP had come from the construction sector last year and Rs 200 billion has been added to the GDP by the construction sector in 2017. Some 700,000 persons were employed directly and otherwise in construction related employment which is about 8 percent of the working population in the country, he said.

Yatawara noted that over 1,200 machines used for constriction are imported every year and the market has grown 30 percent from 2016 to 2017. There could be a large market for material handling application and there is a big opportunity to be a player in the excavator space,” he pointed out.

Sale of JCB product range, mechanical repairs, painting, welding, servicing and maintenance will be done at the new facility in Peliyagoda. UML will also use ‘JCB Livelink’, a technology developed by JCB to monitor the performance of all its machinery. The technology will identify and alert JCB users of issues or a decrease in efficiency of the machine and will provide details for servicing and product support.

A highly skilled team of UML technicians to facilitate the JCB Livelink technology has been deployed by UML, he added.
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Ambeon Group launched to take on techno-centric business world of tomorrow

In a strategic move to reposition the entity to represent the Group’s business vision and take on the dynamic, technocentric business world of tomorrow, Taprobane Group announced the transformation of the Group including the name change to Ambeon.

As such, Taprobane Holdings PLC will be repositioned as Ambeon Capital PLC, while Lanka Century Investments PLC will be Ambeon Holdings PLC, with immediate effect.

The transformation of Ambeon Group, which includes restructuring of its diversified businesses to bring about collective focus, optimize investments and increase shareholder value, is now said to be well-poised to take the leap and transform the latent opportunities into lucrative ventures that deliver sustained value.

With over 3500 employees, Ambeon Group is reputed for its market dominance in the areas of financial services, manufacturing, real estate, technology and strategic investments.

Post-restructuring of the Group, Ambeon Capital PLC will be the holding company while all businesses have been repositioned and realigned legally under Ambeon Holdings PLC, transforming the Group to become a medium-sized, diversified conglomerate geared to take on the business opportunities available in global markets.

“Today’s announcement about the launch of Ambeon and the transformation of the Group is yet another milestone in our journey to build on our foundation of re-engineering success,” Ambeon Capital PLC Chairman Sanjeev Gardiner said.

“Ambeon Group is now ready and well-poised to compete amongst the elite conglomerates in the country. As a dynamic and diversified group of companies, Ambeon will continue to seek for lucrative business opportunities and transform entities to be the best within their respective industries in Sri Lanka and the world. This is just the beginning. True to our commitment, we will continue our journey to enhance the overall wealth and value creation of our shareholders and all other stakeholders beyond ambition,” Gardiner added.

Under the new Group structure, the subsidiaries of Ambeon Holdings PLC will include Taprobane Capital Plus (Pvt.) Ltd (a leading financial services provider with a wealth of experience in capital markets in Sri Lanka), South Asia Textiles Industries Lanka (Pvt.) Ltd (a leading manufacturer of exceptional quality weft knitted fabric specializing in knitting, dyeing, finishing, printing, brushing, sueding and anti-pin micro/polar fleece fabric for leading global brands such as Victoria Secret, Next, Marks & Spencer, Tesco, Calvin Klein, Decathlon and Adidas), Dankotuwa Porcelain PLC and Royal Fernwood Porcelain Ltd (manufacturers of porcelain tableware and gift items for global giants such as Oneida, Macy’s, Country Road, Lenox, John Lewis, Crate & Barrel, Megros, Jasanmal, Ralph Lauren, the Walt Disney Company and Dilmah), Ceylon Leather Products PLC (manufacturer of leather footwear and accessories, popularly known as DI), Millennium Information Technologies (Pvt.) Ltd (Sri Lanka’s leading information systems solutions providers delivering IT solutions for many industries, including banks and finance, telecommunications, apparel and leading conglomerates) and Colombo City Holdings PLC (real estate).

Commenting on the transformation, Ambeon Capital PLC and Ambeon Holdings Group Managing Director/Chief Executive Officer Murali Prakash PLC stated, “It is with a sense of pride that I announce the birth of Ambeon – a well-diversified group of companies, empowered and backed by the market dominance, infinite potential and financial strengths of Taprobane Holdings PLC and Lanka Century Investments PLC.

The Group has been restructured and realigned to be astute, driven, nimble and visionary – one with an expanded range of products, strong globalized local brands, premier technology and innovation platforms along with the required resources will pave the way for Ambeon to extend its footprint across new businesses, markets and regions.”

“Ambeon Group is built on a robust set of values which include identifying the latent opportunities and moving first with the utmost discipline, empowering our people and channelling teamwork across all disciplines, building a culture of actioning results across all our businesses and seeing beyond the horizon in search of the next frontier. Integrity, governance, risk and compliance are further built into our DNA.

This ensures that the Group maintains transparency across all processes, invariably benefitting our customers and creating sustainable long-term value for our shareholders and all other stakeholders. We are now future-ready to re-engineer success across all our businesses,” Prakash concluded.

Ambeon Group is powered and guided by the renowned corporate giants – the Galle Face Hotel group, Hirdaramani group and Navitas Holdings.

The Ambeon Capital PLC board of directors comprises of eminent personalities – Sanjeev Gardiner (Chairman/Non-Independent Non-Executive Director), Ajith Devasurendra (Deputy Chairman/Non-Independent, Non-Executive Director), Murali Prakash (Group Managing Director/Chief Executive Officer), Priyantha Fernando (Independent Non-Executive Director), Harsha Amarasekera P.C. (Non-Independent Non-Executive Director), Ranil Pathirana (Non-Independent Non-Executive Director), Sarinda Unamboowe (Independent Non-Executive Director), Deshamanya Deva Rodrigo (Independent Non-Executive Director), while the board of directors of Ambeon Holdings PLC include – A.G. Weerasinghe (Chairman/Non-Independent Non-Executive Director), Murali Prakash (Group Managing Director/Chief Executive Officer), Ruwan Sugathadasa (Non-Independent Non-Executive Director), Mangala Boyagoda (Independent Non-Executive Director) and Priyantha Maddumage (Non-Executive Director).
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Sri Lanka's Finance companies to face tougher capital requirements from July

• BASEL-like model to increase minimum capital every year up to 2021 
• Tier I and tier II ratios to increase to 8.5% and 12.5% from current 5%t and 10%
• Fitch says higher capital requirements will improve sector resilience 
• But says will add to capitalization pressures for small-scale finance firms

Accordingly, the tier I and tier II ratios of licensed finance companies will increase to 8.5 percent and 12.5 percent from the current 5 percent and 10 percent respectively, effective from next month.If there was any leniency enjoyed by the Sri Lanka’s finance companies on their capital and disclosure requirements thus far, such will end soon as the sector is set to come under a BASEL-like regulatory framework.

The new capital regulations on licensed finance companies, which will take the form of BASEL rules on banks, will require the finance companies to gradually increase their capital ratios from 2018 through 2021, said Fitch Ratings on a special note on the sector ahead of the new rules coming into effect from July 1. Further, the finance companies with assets over Rs.100 billion – termed as systematically-important licensed finance companies – will be required to build an additional capital surcharge of 150 basis points starting from July 1, 2019 to July 1, 2021. This effectively takes the total capital ratio up to 14 percent by 2021 for such larger finance companies. However, the most immediate hurdle for all finance companies will be to up their tier I ratio to 6.0 percent by next month. “New capital-adequacy regulations for Sri Lankan finance companies are likely to improve the resilience of the sector to economic shocks, but will add to capitalization pressures— particularly for the country’s numerous small-scale finance companies,” Fitch Rating said. Fitch noted the finance companies that they rate already stay on top of the capital thresholds coming into effect next month even after taking into account the potential risk-weighted asset changes based on the current asset mix. While most of them already comply with the 2021 thresholds with some requiring external capital to stay in line, the rating agency said the small finance companies are struggling to raise capital to comply with an earlier requirement, which asked them to hold a minimum core capital of Rs. 2.5 billion by January 1, 2021. “The new minimum capital ratios are likely to add to those difficulties”, Fitch said. Sri Lanka’s licensed finance company sector has long been subjected to less stringent checks and balances compared to the banks on their capital adequacy, measurement of risks and disclosure requirements. The lax regulatory framework on the sector resulted in many finance companies filing for bankruptcy due to mismanagement of funds with the taxpayers having to rescue the hapless depositors.Meanwhile, capital ratios of the finance companies will come under downward pressure due to substantial increase in risk weighted assets/loans in the sector stemming from additional risk weighting made on ‘operational risks’ and the changes in the computation of risks weighted assets for credit risk.Therefore Fitch said those finance companies exposed to uncollateralized lending such as micro-financing, “may see the sharpest increases in RWAs, as this lending will be risk-weighted at 125 percent instead of 100 percent as previously”. However, the sector does not consider the ‘market risk’ in their trading book when computing the risk weighted assets in a finance company’s balance sheet because the regulator still views such a risk is low in the sector. The staggered capital ratio increments for the licensed finance sector in Sri Lanka is coming into effect precisely one year after the country’s banking sector was made subjected to BASEL III regulations on capital requirements.www.dailymirror.lk

Sri Lanka to remove VAT from hospital bills

ECONOMYNEXT - Sri Lanka will remove value added tax from hospital bills from next week, Finance Minister Mangala Samaraweera said in the wake of calls by President Maithripala Sirisena also to lift the tax.

Sri Lanka slammed a 25 value added tax on hospital bills while threatening price controls on private hospital bills and also depreciating the rupee in a bid to boost exports by improving 'competitiveness' which involves the destruction of real wages of workers.

Every person who goes to a private hospital, will save resources from the state hospital system.

Sri Lanka provides education and healthcare free, and also uses both services as an excuse to justify the existence of the state and the taxation system.

Though President Sirisena had admitted placed stumbling blocks proposed reforms of the United National Party that will free the common man from vested domestic business oligarchs who are exploiting them though import duties, some analysts say he was right to oppose the VAT on healthcare.

Instead of healthcare some analysts say VAT should be built into areas like energy, where people can contribute small amounts tax over time to pay for hospital upkeep. Hospital bills on the other hand are large and sudden.

A VAT on energy will also help the exports become competitive without destructive measures like currency depreciation.

EPF proven a winner with its large divestiture of John Keells (JKH) shares to Malaysians in 2012

LBO - The EPF as of late has not been proven to be the most savvy investor, but with one of its biggest moves in the stock market 6 years ago, the provident fund clearly made the right choice.

Early in 2012, Sri Lanka’s largest provident fund sold an 8.4% stake in John Keells Holdings (JKH) to the Malaysian sovereign fund Khazanah for Rs13.7bn. This was a blockbuster deal at the time, and many analysts were critical that the shares were sold at too low a price.

Over the past 6 years, JKH has had complicated adjustments to its share count due to rights issues, warrant issues, and sub division of shares. When all these events are taken into account, EPF could likely buy the shares it sold back at a similar price 6 years later. During that 6 years, it is likely that the EPF has earned close to a 100% return with its investments in fixed income.

Stock brokers in Colombo are constantly lobbying the state institutions (of which EPF is the largest) to invest more money into the stock market. However, these arguments made by brokers who will benefit financially from the EPF investments into the stock market, have for the most part fallen on deaf ears. For those Sri Lankan’s who hold their savings in the EPF, this has been a blessing as investments into the stock market would have likely drastically underperformed fixed income over the corresponding period. The Central bank has not provided analysis of how its investments in the stock market have performed relative to fixed income over long time periods. Thus, EPF holders are left in the dark when trying to evaluate the management of their funds.

This begs the question…. Why is the EPF investing in the stock market at all?

MTD Walkers (KAPI) reports a massive loss of Rs2.8bn

LBO - The woes of Colombo Stock Exchange listed stocks continue with the financial results of construction company MTD Walkers (KAPI). For the year ended March 31st 2018, KAPI has reported a staggering loss of Rs2.87bn, Analysts say this is one of the largest losses of any listed company in recent memory.

Many construction companies in Sri Lanka had benefited from contracts with the last government. However, with the new regime in power since January 8th 2015, several companies have reported rocky results.

The company is sitting on a large balance sheet of Rs46bn, and a significant debt load of Rs30bn. Payables are also a significant Rs8bn. With such large losses being reported, it is uncertain how the company can continue to operate with such a large debt load.

KAPI is 90% owned by Malaysian investors who have pumped billions into the company over the last several years, only to produce a retained net loss of Rs1.4bn.

The stock last traded at Rs13.4, less than half of its Rs33 net asset value.

Melstacorp, Softlogic, Vallibel, Ceylinco in S&P Sri Lanka 20 Index

ECONOMYNEXT – The Colombo Stock Exchange (CSE) has included four new firms, Melstacorp, Softlogic Holdings, Vallibel One and Ceylinco Insurance in the S&P Sri Lanka 20 index, which tracks the top 20 largest and most liquid stocks, in its latest revision.

They replace Ceylon Cold Stores, Ceylon Tobacco Company, Nestle Lanka and Seylan Bank in the semiannual rebalancing of the index, made by S&P Dow Jones Indices, the CSE said in a statement.

The S&P SL 20 index includes the 20 largest companies by total market capitalization listed on the CSE that meet minimum size, liquidity and financial viability thresholds.

The constituents are weighted by float-adjusted market capitalization, subject to a single stock cap of 15%, which is employed to reduce single stock concentration.

The CSE said the S&P SL 20 index has been designed in accordance with international practices and standards.

Effective from 18 June2018 the stocks in the S&P Sri Lanka 20 in alphabetical order are as follows.

COMPANY TICKER
Access Engineering PLC                                            AEL.N0000
Aitken Spence PLC                                                   SPEN.N0000
Ceylinco Insurance PLC                                            CINS.N0000
Chevron Lubricants Lanka PLC                                  LLUB.N0000
Commercial Bank of Ceylon PLC                               COMB.N0000
Commercial Bank of Ceylon PLC Non-Voting              OMB.X0000
DFCC Bank PLC                                                        DFCC.N0000
Dialog Axiata PLC                                                    DIAL.N0000
Hatton National Bank PLC                                        HNB.N0000
Hatton National Bank PLC Non-Voting                       HNB.X0000
Hemas Holdings PLC                                                HHL.N0000
John Keells Holdings PLC                                        JKH.N0000
Lanka Orix Leasing Company PLC                            LOLC.N0000
Melstacorp PLC                                                      MELS.N0000
National Development Bank PLC                             NDB.N0000
People's Leasing & Finance PLC                              PLC.N0000
Richard Pieris & Company PLC                                RICH.N0000
Sampath Bank PLC                                                 SAMP.N0000
Softlogic Holdings PLC                                           SHL.N0000
Teejay Lanka PLC                                                 TJL.N0000
Tokyo Cement Company (Lanka) PLC                     TKYO.N0000
Tokyo Cement Company (Lanka) PLC Non-Voting    TKYO.X0000
Vallibel One PLC                                                   VONE.N0000

Sri Lankan stocks end lower for 7th straight session

Reuters: Sri Lankan shares closed lower for a seventh straight session on Thursday, with turnover slumping to a more than three-week low, as investors sold diversified shares.

The Colombo stock index ended 0.17 percent weaker at 6,337.88, its lowest close since Dec. 22. The index dropped 0.4 percent during the week, marking its fourth straight weekly fall.

Shares in Dialog Axiata Plc closed 0.7 percent weaker, while conglomerate John Keells Holdings Plc ended 0.1 percent lower and Lanka IOC Plc closed 3.5 percent weaker.

“The sentiment is still lousy. We don’t see much activity from retail investors and government funds,” said Prashan Fernando, CEO at Acuity Stockbrokers.

Foreign investors net sold 32.5 million rupees ($203,762) worth of equities on Thursday, extending the year-to-date net foreign outflow to 773.6 million rupees worth of shares.

Turnover stood at 273.3 million rupees, the lowest since May 23 and less than a third of this year’s daily average of 958.2 million rupees.

Most investors have adopted a wait-and-watch approach, hoping for some positive news on the economic front, analysts said.

A weaker rupee, political uncertainty and the recent fuel price hike has weighed on sentiment over the past few weeks, with local investors remaining on the sidelines as they gauge the impact of floods last month, brokers said.

The Sri Lankan stock market will be closed for a public holiday on Friday. 

($1 = 159.5000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

Sri Lankan stocks near 6-month closing low on foreign selling

Reuters: Sri Lankan shares ended lower for a sixth straight session on Wednesday to hit their lowest closing in nearly six months, as foreign investors sold banking shares such as Commercial Bank of Ceylon Plc.

The Colombo stock index ended 0.17 percent weaker at 6,337.88, its lowest close since Dec. 22. The index dropped 0.7 percent last week, marking its third straight weekly fall.

Foreign investors net sold 213.2 million rupees ($1.34 million) worth of equities on Wednesday, extending the year-to-date net foreign outflow to 741.1 million rupees worth of shares.

“The market is down with foreign selling,” said Atchuthan Srirangan, assistant manager - research, First Capital Holdings Plc.

“We saw some foreign selling in Commercial Bank, which brought the index down. The rupee depreciation also affected foreign investors.”

Shares in Distillers Company of Sri Lanka Plc closed 2.3 percent weaker, while Lanka ORIX leasing Company Plc ended down 3.3 percent, conglomerate John Keells Holdings Plc ended 0.2 percent lower and biggest listed lender Commercial Bank of Ceylon ended 0.2 percent down.

Most investors have adopted a wait-and-watch approach, hoping for some positive news on the economic front, analysts said.

Turnover stood at 459.8 million rupees, half of this year’s daily average of 964.6 million rupees.

A weaker rupee, political uncertainty and the recent fuel price hike weighed on sentiment in the past few weeks with local investors remaining on the sidelines as they gauged the impact of the floods last month, brokers said.

The Sri Lankan rupee slipped to a fresh all-time low of 159.80 per dollar on Monday, pulled down by a lack of support for the local currency from exporters.

($1 = 159.7000 Sri Lankan rupees) 

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

Chevron Lubricants Lanka (LLUB) in Decline as CEO Kishu Gomes Exits

LBO – On May 22, 2018 Kishu Gomes resigned as Managing Director/CEO and as a Director of Chevron Lubricants Lanka with ‘immediate effect’ as per stock exchange disclosure. He was immediately replaced by the company’s Chairman Rochna Kaul, who has served as General Manager Chevron Lubricants in Pakistan.

The abrupt resignation came after a 22 year career at the multinational firm. After the resignation Gomes was quoted in several newspapers stating that the resignation was in order to take a break from corporate life, and that he hopes to play a future role nurturing young talent in the country.

In the months prior to the surprise resignation, Chevron Lubricants has been on the decline with a 27% decline in profits and a 9% decline in revenue for the year ended December 2017.

The decline has continued in the March 2018 quarter with revenue down 4% and profits down 15% year over year. The struggling multinational which once had a market capitalisation over Rs50bn has now seen its market cap decrease to below Rs19bn.

The Colombo Stock Exchange listed company (LLUB) has historically been a favourite of foreign institutional investors. However, with its market capitalisation dipping close to US$100mn, the market cap of the company may be approaching levels where foreign funds will find the stock unattractive from a liquidity perspective.

Chemanex posts Rs. 230 mn profit

Leading importer and distributor of industrial chemicals and intermediaries Chemanex PLC recorded a Rs. 724 million group turnover during 2017/2018 financial year, reporting a Rs. 230 million profit for the same period.

Considering the challenges, Rs. 2.03 billion worth Company faced, in the recent past a decision was made in 2017/2018 to carry out a strategic restructuring with a far-sighted vision.

Chemanex took a number of salient measures including the discontinuation of non-competitive operations, placing strong emphasis on core competencies and inducinggrowth in the relevant areas.

The Company also carried out a voluntary retirement scheme reducing the number of employees significantly and will obtain support services from within the CIC Group.

Chemanex also took steps for the disposal of unutilised assets during the same year, garnering a significant amount of cash and short term investment for the Company. Careful analysis of variousoptions available is being carried out in order to utilize the funds effectively.

“The steps required for restructuring the organization were carried out during the Financial Year, and the Company will now focus on its core business of distributing chemicals to selected industries.

It will exploit synergies with the chemical business of CIC Holdings and obtain support services within CIC Group.

The Board is confident that these steps will result in the Company making a profit on operations in the near future,” Chairman, Chemanex PLC, P. R. Saldin said.

Chemanexa subsidiary of CIC Holding PLChas maintained a strong position as the industry leader in the sphere of trading chemicals and industrial intermediates backed by four decades of expertise.
www.dailynews.lk

Sri Lanka's Tess Agro struggles despite EU GSP+

ECONOMYNEXT - Sri Lanka's Tess Agro which exports fish to Europe is struggling to make use of the reinstatement of GSP Plus trading concessions with losses expanding 10.4 percent from a year earlier to 13.2 million rupees in the March 2018 quarter, interim accounts showed.

The company reported a 4 cents loss per share in the quarter. The share last traded at 70 cents on the Colombo Stock Exchange.

The loss per share was 10 cents for the year to end March 2018 with revenue declining 33 percent from a year earlier to 310.6 million rupees, interim accounts filed with stock exchange showed.

The company which exports fish to Europe has been making losses over the previous three years after the EU slapped a ban on fish exports from Sri Lanka for failing to prevent poaching.

Despite EU reinstating GSP Plus trade concessions in June 2017, pick up in export volumes was slow due to challenges in sourcing fish.

"As a result of the ban many fishermen had abandoned their livelihood," the company's chairman Faika Fernando told shareholders in the 2016/17 annual report.

Gross profit in the March quarter grew 7 percent from a year earlier to 6 million rupees with revenue declining 33 percent to 47 million rupees and cost of sales falling at a faster 37 percent to 41 million rupees.

Administrative expenses declined 5 percent to 9.3 million rupees, selling and distribution costs rose 140 percent 6.7 million rupees.

Net finance cost increased 20 percent to 3.1 million rupees.

Less than 1 percent of its revenue is made selling fish to the Sri Lankan market for which it operates a cannery.

Sri Lanka Treasuries yields flat; 3-month below overnight rate

ECONOMYNEXT - Sri Lanka's Treasuries yields were flat at Wednesday's auction with the 12-month yield falling 04 basis points to 9.44 percent, data from the state debt office said.

The 6-month yield was flat at 8.87 percent and the 3-month yield was flat at 8.34 percent.

The debt office offered 2.0 billion rupees of 3-month bills and accepted only 246 million rupees, keeping the 3 month rate below the overnight rate of 8.50 percent.

In 6-month bills 4.0 billion rupees was offered and 3.8 billion rupees was accepted, and in the 12-months, 6.0 billion was offered and 7.9 billion rupees was accepted.

At total of 12.0 billion rupees of bills were offered and a similar volume was sold.

Sri Lanka's ODEL raises Rs5.4bn loan for mall

ECONOMYNEXT - ODEL Plc, said had raised reached a deal with three banks to raise 5.4 billion rupees to build a mall in Sri Lanka's capital Colombo.

The building will be constructed by Odel Properties One (Pvt) Ltd, a fully owned subsdiary of ODEL the firm said in a stock exchange filing.

Hatton National Bank, Sampath Bank and the Bank of Ceylon has each committed 1.8 billion rupees for the syndicated loan.

The stock closed 24.10 rupees, unchanged.

Sri Lankan stocks hit near 6-month closing low

Reuters: Sri Lankan shares fell for a fifth straight session on Tuesday to hit their lowest closing level in nearly six months, as investors sold telecom and diversified shares.

The Colombo stock index ended 0.06 percent weaker at 6,348.53, its lowest close since Dec. 22. The index fell 0.7 percent last week, its third straight weekly fall.

Shares in Dialog Axiata Plc fell 1.4 percent, while Sri Lanka Telecom Plc closed 0.8 percent weaker and Asiri Hospital Plc ended 2 percent lower.

“The market is bottoming out and we have seen the index has been almost flat in the last two days. We expect it to bounce back once investors see any positive news,” said Hussain Gani, deputy CEO at Softlogic Securities.

Most investors have adopted a wait-and-watch approach, hoping for some positive news on the economic front, analysts said.

Turnover stood at 876.4 million rupees ($5.50 million), less than this year’s daily average of 969.4 million rupees.

Foreign investors net sold 33 million rupees worth of equities on Tuesday, extending the year-to-date net foreign outflow to 527.9 million rupees worth of shares.

A weaker rupee, political uncertainty and the recent fuel price hike weighed on sentiment in the past week with local investors remaining on the sidelines as they gauged the impact of the floods last month, brokers said.

The Sri Lankan rupee slipped to a fresh all-time low of 159.80 per dollar on Monday, pulled down by a lack of support for the local currency from exporters. 

($1 = 159.3000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

Sri Lankan stocks hover near 5-1/2-month closing low

Reuters: Sri Lankan shares edged lower on Monday, falling for a fourth straight session to end at their lowest close in more than five months, as investors continued to stay on the sidelines looking for fresh cues.

The Colombo stock index ended 0.04 percent weaker at 6,352.61, its lowest close since Dec 26. The bourse fell 0.7 percent last week recording a third straight weekly fall.

“The market was very slow with weak investor sentiment and things continue to remain low,” said Dimantha Mathew, head of research, First Capital Holdings.

“The investor perspective is things are uncertain and they are not willing to invest due to lack of any positive news on the economic front.”

Most investors have adopted a wait-and-watch approach, hoping for some positive news on the economic front, analysts said.

Turnover was 393.9 million rupees ($2.48 million), less than half of this year’s daily average of 970.2 million rupees.

Foreign investors bought net 59.6 million rupees worth of equities on Monday. The market, however, has witnessed a year-to-date net foreign outflow of 494.9 million rupees worth of shares.

A weaker rupee, political uncertainty and the recent fuel price hike weighed on sentiment in the past week with local investors remaining on the sidelines as they gauged the impact of the floods last month, brokers said.

The Sri Lankan rupee slipped to a fresh all-time low of 159.10 per dollar on Monday, pulled down by a lack of support for the local currency from exporters.

Shares in Asiri Hospitals Plc ended 0.4 percent lower, while Melstacorp Ltd closed 0.6 percent weaker, Distillers Company of Sri Lanka Plc closed down 0.9 percent, the biggest-listed lender Commercial Bank of Ceylon Plc ended 0.3 percent lower and Sri Lanka Telecom Plc closed 1.6 percent weaker.

($1 = 159.0000 Sri Lankan rupees)

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

Sri Lanka tourist arrivals up 6.2-pct in May 2018

ECONOMYNEXT - Sri Lanka's tourism arrivals grew 6.2 percent to 129.466 in May 2018 from a year earlier with strong growth in visitors from India and Australia while Chinese visitors fell, data from the state tourism promotion office showed.

Indian visitors grew 23 percent to 34,167 but Maldives fell 19 percent to 4,343 in the fasting month of Ramadan.

Malaysian arrivals fell 23 percent to 1,604, and visitors from the Middle East also fell 22 percent to 1,954.

Chinese visitors fell 7.5 percent to 17,103. But up to May 2018, 149,197 visitors have arrived, up from 117,539 last year.

UK arrivals grew 9.6 percent to 9,337, while visitors from Germany grew 8.7 percent t 6,906.

Arrivals from Australia surged 28 percent to 4,873, after state-run SriLankan Airlines started direct flights. Up to May 42,808 Australians have come, up from 28,734 last year.

Japanese visitors also grew 48.5 percent to 4,229 and US visitors grew 24 percent to 4,123.

In the first five months of the year 1,017,819 tourists have come to Sri Lanka up 14.7 percent from last year.

In 2017, 2,116,407 visitors came with weak arrivals up to May due to a partial airport closure.

Tax hike to trim profits of Sri Lankan life insurers: Fitch

ECONOMYNEXT – Higher taxes are likely to reduce profits of Sri Lankan life insurance companies, Fitch Ratings said in a new report on the sector.

Fitch said it expects changes in the Inland Revenue Act, which came into effect on 1 April 2018, to lower the net profits of life insurers.

Under the new law, surplus distributions to shareholders from policyholder funds and investment income of shareholder funds (less allowable expenses) are taxed at 28%.

Earlier, most of the life insurers paid lower taxes under the ‘investment income minus management fees’ method, which resulted in a lower tax base.

“In addition, distributions to participating life policyholders, which were not taxed previously, are now taxed at 14% and will be increased to 28% from 2021,,” Fitch Ratings said.

However, the rating agency said Sri Lankan insurers are likely to cope with extreme weather events whose increasing frequency has raised risks and industry growth will continue given low insurance penetration.

“Fitch Ratings expects the exposure of Sri Lanka’s non-life insurers to extreme weather-related events to be manageable due to extensive use of reinsurance,” the report said.
“However, reinsurers are seen to be reducing ceding commissions to reflect the increasing risk of catastrophes.” 

Sri Lanka has seen a recurrence of extreme weather-related events – back-to-back floods in May 2018 and over the past two years, and a prolonged drought in several parts of the country.

Fitch Ratings said it believes these extreme weather events may raise long-term risks for insurers’ capital.

But Fitch expects the insurance sector to continue its growth momentum, driven primarily by the rising per capita income, growing awareness on insurance, and considerably lower insurance penetration supporting the growth potential.

Foreign investors sell down some Sri Lanka bonds

ECONOMYNEXT - Foreign investors had sold down about 2.8 billion rupees of bonds in the week to June 2018, amid political uncertainty, in a trend that began about four weeks ago, official data showed.

Foreign investor holdings grew up to April 25 and sales began as the rupee came under pressure and some political uncertainty with President Maithripala Sirisena attacking the main partner in the coalition.

In the week to May 02, foreign bond holdings fell by 5.0 billion rupees from a peak of 323 billion rupees to 318 billion rupees.

By May 23 it was down to 308 billion rupees but it eased on May 30 to 307.28 billion rupees. This week the stock was down to 304.45 billion rupees.

Sri Lanka's central improved monetary policy in the past two weeks, though it cut rates and injected cash in the first weeks of April.

In 2015 the credibility of the peg was lost with a rate cut which led to foreign investor sales, but liquidity injections began long before as credit picked up in the last quarter of 2014.

In the absence of printed money banks that buy bonds from exiting investors cannot also give credit.

Sri Lanka’s Hatton Plantations to build more tea factories

ECONOMYNEXT – Sri Lanka’s Hatton Plantations PLC plans to build more tea factories as it seeks to take advantage of its standalone position and focus on its core business after being separated from Watawala Plantations.

The company intends to maximise on the opportunity which affords it total focus on the production of high quality tea for domestic and international markets, chairman Sunil Wijesinha has said.

“Expecting a quantum leap in the production of high quality tea, fit for our international and domestic markets, we can now synergise our efforts to make our operating theme a reality,” he told shareholders in the company’s annual report.

Hatton Plantations was incorporated in September 2017 to carry out the existing upcountry tea business of Watawala Plantations.

Hatton Plantations is 75.65% owned by Estate Management Services (Private) Limited, a joint venture in which Sunshine Holdings PLC has 60% and Pyramid Wilmar Plantations (Private) Limited 40%.

Wijesinha said its joint venture partner’s input in the area of modern technology is invaluable for operations across the company.

“Building on this platform, we plan to establish state-of-the-art factories in all our estates,” he said.

Hatton Plantations currently is involved in cultivation and production of tea from 14 estates located in the Central Province of Sri Lanka with over 5,000 hectares of arable land at elevations reaching 4,800 feet above sea level.

Operating as a stand-alone company has certain benefits, the company said.

“Chief among them is that HPL can synergise all its efforts at producing premium quality tea, fit for international and domestic markets,” the report said.

“As its stand-alone position allows us to focus purely on production of tea, we currently produce over thirty-five different grades.”

Sri Lanka 01-year Treasury Bill yield falls to 9.49-pct

ECONOMYNEXT – Sri Lanka's 01-year Treasury Bill yield fell 13 basis points to 9.49% at an auction Wednesday, data from the state debt office showed.

The 06-month bill yield also fell, down 06 basis points to 8.87% from last week, the public debt department of the central bank said.

The yield on the 03-month bill remained steady at 8.34% with only 312 million rupees in bids being accepted although 2.5 billion rupees in bills were offered.

The debt office offered 5.0 billion rupees of 12-month bills and accepted 5.68 billion rupees of bids.

It offered 2.5 billion rupees of 06-month bills and accepted 04 billion in bids.

Colombo Stock Exchange (CSE) transfers companies to Watch List due to non-submission of reports

LBO - Colombo Stock Exchange has transferred nine companies to their Watch List with effect from today due to non-submission of interim financial statements for the period ended 31 March 2018.

Accordingly, Anilana hotels and properties, Adam capital, Tess agro, Ceylon & foreign trades, Janashakthi, Ceylon printers, Lucky Lanka milk processing, Office equipment and Paragon Ceylon have been transferred to Watch List.

Hotel developers (Lanka), has also been transferred to Colombo Stock Exchange’s Watch List due to non-submission of annual report 2017.

Sri Lankan shares at more than 5-mth closing low; blue-chips drag

Reuters: Sri Lankan shares fell for a third straight session on Friday and ended at a more than five-month low, dragged down by diversified shares such as John Keells Holdings Plc, brokers said.

The Colombo stock index ended 0.14 percent weaker at 6,354.92, its lowest close since Dec 26.

“It was a slow day and we saw some foreign buying, which is a good sign. But most of the investors are waiting for better bargains,” said Hussain Gani, deputy CEO at Softlogic Stockbrokers.

“Economic concerns and the rupee depreciation are the key concern for investors.”

Most of the investors have adopted a wait-and-watch approach, hoping for some positive news on the economic front, analysts said.

Turnover was 326.2 million rupees ($2.05 million), a third of this year’s daily average of 975.8 million rupees.

Foreign investors bought net 12.5 million rupees worth of equities on Friday. The market, however, has witnessed a year-to-date net foreign outflow of 554.6 million rupees worth of shares.

A weaker rupee, political uncertainty and the recent fuel price hike weighed on sentiment in the past week with local investors remaining on the sidelines as they gauged the impact of the floods that killed 24 people in the island nation last month, brokers said.

The rupee touched a record low of 158.90 per dollar on Thursday owing to the greenback demand from importers.

Shares in the biggest listed lender, Commercial Bank of Ceylon Plc, fell 0.9 percent while Sri Lanka Telecom Plc ended 2.7 percent weaker. Conglomerate John Keells Holdings Plc ended 0.5 percent weaker and Access Engineering Plc lost 4.0 percent. 

($1 = 159.0000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez)

Sri Lankan shares end lower; blue chips lead

Reuters: Sri Lankan shares ended weaker on Thursday, after breaching the psychological barrier of 6,400, pulled down by blue-chip shares such as John Keells Holdings Plc , brokers said.

Foreign investors, who were net sellers for the fist time in five sessions, sold a net 114.3 million rupees ($719,773.3) worth of equities on Thursday, extending the year-to-date net foreign outflow to 576.1 million rupees worth of shares.

The Colombo stock index closed 0.57 percent weaker at 6,363.62.

Analysts expected a further decline in the index as there weren’t any positive news to boost market sentiment.

“The selling pressure is there after the index broke the psychological barrier of 6,400 on Wednesday,” said Dimantha Mathew, head of research, First Capital Holdings.

“We don’t see real positivity among the investors, and we expect the index to continue sliding till the next support level of 6,320.”

Most of the investors have adopted the wait-and-watch approach, hoping for some positive news especially on the economic front, analysts said.

Turnover was 545.7 million rupees, below this year’s daily average of 982.1 million rupees.

A weaker rupee, political uncertainty and the recent fuel price hike weighed on sentiment in the past week, as local investors mostly remained on the sidelines as they gauged the impact of the floods that killed 24 people in the island nation over the past two weeks, brokers said.

The rupee touched its record low of 158.90 per dollar on Thursday owing to the demand from importers for the greenback.

Shares in conglomerate John Keells Holdings Plc ended 0.8 percent weaker, while Lanka ORIX leasing Plc closed 3.6 percent and Distiller Company of Sri Lanka Plc ended down 1.8 percent.

($1 = 158.8000 Sri Lankan rupees) 

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

Sri Lankan shares hover near 5-month closing low

Reuters: Sri Lankan shares ended slightly weaker on Wednesday, hovering near their lowest close in over five months hit earlier in the week, led by diversified shares such as John Keells Holdings Plc, while foreign buying helped boost the turnover.

Foreign investors bought net 188.4 million Sri Lankan rupees ($1.19 million) worth of equities on Wednesday. The market has witnessed a year-to-date net foreign outflow of 452.7 million rupees worth of shares.

The Colombo stock index closed 0.15 percent weaker at 6,399.91.

“Investors are worried over continued uncertainty. They are waiting for some positive news,” said Reshan Kurukulasuriya, chief operating officer, Richard Pieris Securities (Pvt) Ltd.

Most of the investors have adopted the wait-and-watch approach, hoping for some positive news especially on the economic front, analysts said.

Turnover was 510.1 million rupees, below this year’s daily average of 986.4 million rupees.

A weaker rupee, political uncertainty and the recent fuel price hike weighed on sentiment in the past week, as local investors mostly remained on the sidelines as they gauged the impact of the floods that killed 24 people in the island nation over the past two weeks, brokers said.

The rupee touched its record low of 158.80 per dollar last week owing to the demand from foreign banks and importers for the greenback, but ended steady on late inflows from remittances.

Shares in conglomerate John Keells Holdings Plc ended 0.6 percent weaker, while BRAC Lanka Finance Plc closed 9.7 percent down.

Foreign investors, who mostly sold shares of John Keells last week, bought the market heavyweight after low share prices “made it more attractive”, stockbrokers said.

MSCI Frontier Markets 100 Index, which captures large- and mid-cap representation across 29 frontier markets, removed Keells from its index, triggering the foreign selling.

($1 = 158.6000 Sri Lankan rupees) 

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

Overseas Realty records Rs 1,147mn profit for 1Q -2018

Overseas Realty (Ceylon) PLC recorded a group revenue of Rs 1,402 million for the first quarter ended March 31, 2018, an increase of 142% over the corresponding period of last year. The group gross profit increased by 96% to Rs 849 million.

The group profit before tax grew by 37% to Rs 1,155 million and group profit after tax increased by 38% to Rs 1,147 million, compared to the previous period.

Revenue of Rs 557 million was recorded from property leasing at the World Trade Center (WTC) Colombo, an increase of 10% in comparison with previous period. The company expects to maintain good occupancy levels during 2018. Revenue from other services was Rs 98 million, an increase of 44% over the previous period. Revenue of Rs 747 million was recorded from apartment sales of Havelock City, compared to Rs 6 million in previous period.

Havelock City Phase 3 comprising two towers, Stratford and Melford with 304 luxury apartments is currently under construction with almost 45% completed and is expected to be handed over by mid-2019. Over 60% of Phase 3 apartments have been pre-sold as at March 31, 2018.

www.dailynews.lk

Sri Lanka's CT Holdings March profits fall 33-pct

ECONOMYNEXT - Profits at Sri Lanka's CT Holdings, the parent company of supermarket chain Cargills, fell 33 percent from a year earlier to 202.7 million rupees in the March 2018 quarter despite real estate gains and lower finance costs, interim accounts showed.

The group reported earnings of 1.09 rupees a share, according to interim financial statements filed with the Colombo Stock Exchange. The stock last traded at 177.10 rupees.

"The challenging macro-economic environment adversely impacted operating margins of both the retail and wholesale distribution, and FMCG sectors," the company told shareholders in a stock exchange filing.

In the year to end March 2018, CT Holdings reported profits of 2.6 billion rupees, up 50 percent from a year ago, with revenue increasing 8 percent to 92 billion rupees.

"Profits were boosted by the profit on disposal of a property owned by the group. Proceeds from the sale were used to retire debt which resulted in lower borrowings costs during the last two quarters of the year," CT Holdings said.

In the March 2018 quarter, gross profit grew 13 percent to 2.6 billion rupees on revenue increasing 12 percent to 22.8 billion rupees and cost of sales also growing by 12 percent to 20.2 billion rupees.

Distribution costs fell 53 percent to 977 million rupees and administrative expenses declined 2 percent to 1.2 billion rupees.

Net finance costs fell 13 percent to 277 million rupees.

The group reported a gain of 850.2 million rupees on revaluation of freehold land.

During the year to end March 2018, profits from the group's retail business which includes supermarket chain Cargills fell 9 percent in the year to 2.8 billion rupees.

The group added 38 new outlets during the year taking the number of supermarkets to 353.

The fast moving goods business which includes dairy, agri, fresh and processed meats and confectionery saw sales increase by 6 percent to 2 billion rupees.

Real estate saw profits grow 226 percent to 1.7 billion helped by a 1 billion rupee gain from the sale of a parcel of property in Colombo for 4 billion rupees during the year.

The restaurants business which includes the KFC franchise saw profits grow 43 percent to 382 million rupees.

The group's movie business reported a 43 million rupees loss compared to a profit of 31 million rupees a year earlier, despite expanding its theatre network with four new screens in Gampaha and Nuwara Eliya.

The group also made a 255 million rupees gain from the disposal of a subsidiary of associate business Cargills Bank.

Sri Lanka's Melstacorp March quarter earnings surge

ECONOMYNEXT - Profits at Sri Lanka's Melstacorp surged to 3.3 billion rupees in the March 2018 quarter from 140 million rupees a year earlier, helped by business growth and a one-off gain, interim accounts showed.

Melstacorp has interests in alcohol, insurance, hotels, farming and telecom.

The firm reported earnings of 2.86 a share in the quarter. The share was trading 80 cents higher at 55.80 rupees on Tuesday.

Melstacorp saw gross profits increase 59.5 percent from a year earlier to 4.8 billion rupees in the March 2018 quarter, with revenue growing 19 percent to 12.5 billion rupees and cost of sales increasing at a slower 2.24 percent to 7.6 billion rupees.

Other operating income grew 176 percent to 1.5 billion rupees.

Dividends from equity investments increased 88 percent to 853.5 million rupees and a one-off capital gain amounted to 825 million rupees.

Net finance cost increased 27 percent to 248.7 million rupees.

Administrative expenses fell 3.35 percent to 1.2 billion rupees while other operating expenses grew three-fold to 1.4 billion rupees.

Income tax expenses rose more than two-fold to 1.46 billion rupees on account of new tax changes.

Melstacorp said it reported 1.6 billion rupees of impairment in its investment in a subsidiary Milford Holdings which controls Lanka Bell, a telecommunications company.

Earnings for the 12 months to end-March 2018 was 6.62 rupees a share, up 5.2 percent from a year earlier on a revenue of 110 billion rupees, up 0.87 percent from a year earlier.

For the 12-months to March 2018, the beverage segment which includes listed Distilleries saw profits fall 21 percent from a year earlier to 8 billion rupees.

The group's financial services businesses saw profits grow 39 percent to 416 million rupees. Businesses classified under diversified reported a 177 percent growth in profits to 1.1 billion rupees.

The plantations segment made a 147 million rupees profit compared to a loss of 343 million rupees the previous year. The telecommunications segment which includes broadband operator Lanka Bell saw losses increase 23 percent to 1.6 billion rupees.