Sri Lanka's Agalawatte Plantations returns to profit

ECONOMYNEXT – Sri Lanka’s Agalawatte Plantations, which is carrying heavy losses with the former management accused of mismanagement, returned to profit in the September 2017 quarter.

The firm made a net profit of Rs42 million in the September 2017, the latest for which accounts are available, compared with a loss of Rs128 million the year before, according to interim results filed with the stock exchange.

Sales rose 52% to Rs523 million over the period. Quarterly earnings per share were Rs1.66. Agalawatte’s share was trading at Rs19.70 Wednesday.

In the nine months to 30 September 2017, Agalawatte made a loss per share of 89 cents while Sales rose 43% to Rs1.5 billion.

The accounts showed Agalawatte’s tea and rubber businesses continued to make losses while profits came mainly from oil palm.

Agalawatte Plantations owns part of AEN Palm Oil Processing (Private) Limited, a joint venture processing and selling palm oil.

Last year, D R Investment (Pvt) Ltd., the new owners of Agalawatte Plantations said re-audited accounts of the firm had revealed over Rs4.5 billion accumulated losses and liabilities and promised legal action against those responsible for mismanagement.

In March 2017, Browns Group sold a 61% stake in Agalawatte Plantations to D. R. Investment (Pvt) Ltd.

Browns’ controversial acquisition of the loss-making Agalawatte from Mackwoods group has been challenged in court.

Sri Lanka Treasuries yields spike across maturities

ECONOMYNEXT - Sri Lanka's Treasuries yields rose across maturities at Wednesday's auction with the 12-month bill yield up 34 basis points to 9.28 percent, the state debt office said.

The 6-month bill yield rose 30 basis points to 8.29 percent while the 3-month bill yield rose 27 basis points to 8.02 percent from the last auction, a statement said.

The debt office accepted Rs28.5 billion worth of bids, the same amount offered, after getting total bids worth Rs51.7 billion

It sold Rs10 billion rupees of 3-month bills, having offered Rs4 billion and getting bids worth Rs13 billion while accepting lower amounts than offered in the other tenors.

Sri Lanka's BAT unit net up 125-pct in Dec, cigarette volumes down

ECONOMYNEXT - Profits of Ceylon Tobacco Company Plc, a unit of British American Tobacco, more than doubled to 4.5 billion rupees in the December 2017 quarter, from a year earlier despite shrinking cigarette sales, interim accounts showed.

The company said cigarette volumes fell 18 percent during 2017 after price hikes. But turnover tax revenues rose to 107.3 billion rupees from 89.77 billion rupees a year earlier up 19.5 percent. Sri Lanka charges excise, and other levies including a 15 percent value added tax.

The company and its customers coughed up a total of 117.3 billion rupees in taxes to the state, which includes income tax in 2017.

CTC reported earnings of 24.01 rupees a share for the quarter. In the 12 months to December, earnings were 77.87 rupees a share on total profits of 14.6 billion rupees, increasing 15 percent from a year earlier, interim accounts showed.

Sales volumes fell 18 percent during the year on lower disposable incomes and taxes on cigarettes, the company said.

Ceylon Tobacco shares closed Wednesday at 1,049.50 rupees.

Revenue with taxes in the quarter increased 60 percent to 35.6 billion rupees.

The total tax collection on cigarettes amounted to 27.5 billion rupees in the quarter, up 86 percent from a year earlier.

Operating expenses tumbled 65 percent in the quarter to 1.2 billion rupees.

Raw materials cost was down to 246 million rupees from 349 million amid lower volumes, salaries and wages were down to 449 million from 549 million, and other operating expenses were down to 1.2 billion rupees from 3.4 billion.

The company said high domestic prices maintained with taxes were promoting cigarette smuggling.

"The smuggled cigarette market is estimated to be over 450 sticks," the company claimed. It did not say how the estimate had been arrived at.

Over 2,500 raids by authorities had detected 50 million cigarettes in 2017, it said.

Sri Lanka’s RIL Property goes for Rs.1.6Bn Rights Issue

LBO - RIL Property Plc said they will be raising 1.6 billion rupees through one for three Rights Issues to settle part of the long-term loan facilities obtained by the company.

Issuing a statement the company said that the it will issue 200 million shares in the proportion of one new ordinary voting share for every three ordinary shares held at 8 rupees per share.

The current stated capital of the company is 5.76 billion rupees.

The Rights Issue is subject to the Colombo Stock Exchange approving in principle the issue and listing of shares and obtaining shareholder approval at a General Meeting.

Sri Lankan stocks fall on political uncertainty after local polls

Reuters: Sri Lankan shares fell for a second straight session on Wednesday as political uncertainty after a defeat of the two ruling coalition parties in a local poll hurt investor sentiment.

The ruling coalition government of President Maithripala Sirisena’s centre-left Sri Lanka Freedom Party and Prime Minister Ranil Wickremesinghe’s centre-right United National Party suffered defeats in a local election over the weekend.

The results also raised concerns over the future of the unity government amid pressure from the opposition parties to dissolve the parliament.

The two ruling parties have set up a committee on Tuesday to examine the future of the unity government.

The Colombo stock index ended 0.16 percent lower at 6,532.26, further slipping from its highest close since Nov. 8 hit on Friday.

The index gained 0.8 percent last week, its third straight weekly rise.

Shares in Bukit Dhara Plc fell 7.6 percent while Hemas Holdings Plc fell 0.3 percent and Hatton National Bank Plc ended 1.6 percent weaker. Biggest listed lender, Commercial bank of Ceylon Plc, lost 1.8 percent.

“The market is negative with the continued political uncertainty,” said Dimantha Mathew, head of research at First Capital Holdings.

“Delay in settlement is creating more uncertainty,” he said, referring to a decision that could end the political instability.

Investors are waiting for some stability and to see the direction in which both the coalition partners are headed.


Turnover stood at 654.7 million rupees ($4.22 million), well below last year’s daily average of 915.3 million rupees.

Foreign investors, however, bought a net 97.2 million rupees worth of shares on Wednesday, extending the year-to-date net foreign inflow to 5.4 billion rupees worth of equities.

Analysts also said the investors were waiting to see the central bank’s key policy rate announcement on Thursday, which is widely expected to remain unchanged.

($1 = 155.3000 Sri Lankan rupees) 

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

Sri Lanka’s Aitken Spence Hotel December profit down 29-pct

ECONOMYNEXT – Sri Lanka’s Aitken Spence Hotel Holdings reported net profit fell 29% to Rs288 million in the December 2017 quarter from a year ago largely owing to losses in associate firms and higher tax expenses.

Group sales rose 4.7% to Rs4.5 billion over the period, according to interim accounts filed with the stock exchange.

Earnings per share were 85 cents for the December quarter, part of the peak tourism season. The share was last traded at Rs29.70 Monday.

December quarter tax costs rose 123% to Rs125 million from a year ago.

In the nine months to 31 December 2017, part of which is the off-season for tourism, EPS was 49 cents on net profit of Rs173 million with sales up 13.7% to Rs11.6 billion.

A segmental analysis showed that sales increased in both its resorts in Sri Lanka and abroad, classified as South Asia and the Middle East with Sri Lankan hotels returning to profit from losses the previous year while profits fell in overseas hotels.

Sri Lanka's Hayleys profits plunge 67-pct in Dec quarter

ECONOMYNEXT - Profits at Sri Lanka's diversified Hayleys Plc fell 67 percent to 178 million rupees in the December 2017 quarter from a year earlier, on soaring borrowing costs, while increasing raw material prices and adverse weather hit manufacturing and agriculture margins interim accounts showed.

Earnings were 2.37 rupees a share in the quarter. In the nine months to December, earnings were 2.62 rupees a share on a total profit of 196.6 million rupees, down 87 percent from a year earlier, interim accounts filed with the stock exchange showed.

Hayleys closed at 235 rupees on Monday.

"It has been a challenging nine months for the Hayleys Group despite revenue growth in all our diverse business segments," Chairman Mohan Pandithage told shareholders.

Revenue in the quarter grew 66 percent to 49.9 billion rupees, cost of sales increased 65 percent to 38.2 billion rupees, expanding gross profits by 67 percent to 11.4 billion rupees.

Net finance costs doubled to 1.9 billion rupees in the quarter.

The group's borrowings were 34.6 billion rupees end December 2016, nearly twice as much from a year earlier.

Pandithage promised measures to "realign the financial position" and boost profits.

He said the March quarter is usually the strongest for the group.

In the nine months to December, revenue from consumer products grew four-fold to 19.9 billion rupees, profits surged ten-fold to 965.7 million rupees mostly after the group bought electronics retailer Singer Sri Lanka in September 2017.

Revenues from rubber gloves grew 11 percent to 12 billion rupees, but profits fell due to rising raw material costs, the company said.

Logistics revenue grew 44 percent to 25.8 billion rupees and profits grew 69 percent to 1.9 billion rupees.

Activated carbon revenues grew 14.9 percent to 10.8 billion rupees with profits falling 22.6 percent to 700 million rupees.

Agriculture revenue fell 6.6 percent to 10.1 billion rupees and profits declined 38 percent to 735.7 rupees.

Revenue from plantations grew 35 percent to 9.3 billion rupees. The segment reported profit of 465 million rupees, compared to a loss of 281 rupees a year earlier.

Power generation revenues grew 51 percent to 1.2 billion rupees and profits grew 49 percent to 771.6 million rupees.

Revenue from hotels grew 1.3 percent to 4 billion rupees, but profits fell 71 percent to 150 million rupees.

High coconut shell prices, shortfalls prune profits at Sri Lanka's Haycarb

ECONOMYNEXT - Activated carbon maker Haycarb Plc said net profit fell 22.8% to 162 million in the December 2017 quarter from a year ago owing to shortages of its raw material, coconut shells, and resulting high prices, despite raising product pricing.

Sales rose 8.9% to Rs3.8 billion during the period, interim accounts filed with the Colombo Stock Exchange showed.

Quarterly earnings per share were Rs5.44. Haycarb’s stock closed at Rs140 Monday.

In the nine months to 31 December 2017, EPS was Rs13.44 with net profit down 21% to Rs399 million while sales were up 16% o Rs10.9 billion from the year before.

Haycarb PLC Managing Director Rajitha Kariyawasan said that the raw material shortages and resulting high prices continued to impact the bottom line adversely in Q3 of 2017/18.

“The deterioration of charcoal availability in Sri Lanka, India and Thailand driven by unfavourable weather conditions, resulted in significant increases of cost of manufacture in Sri Lanka and Thailand,” a statement said.

“On the other hand, even though the raw material availability continued to recover in Indonesia during the period under review, the price pressure did not ease due to the high level of demand attributable to shortages of charcoal in other locations.”

In this situation the company said it has made significant efforts to revise prices of activated carbon in consecutive occasions through discussions with its valued customers.

“However, the lagging effect and the inability to pass the full impact of the price increase has resulted in lower margins compared to last year.”

Kariyawasan said that in this challenging environment, noteworthy savings were generated through increased efficiencies and cost reductions obtained via manufacturing processes and supply chain through lean projects.

“The company’s initiatives to acquire new customer accounts and market segments backed by a robust product development platform have also shown positive results and added to the bottom line.

“Haycarb will continue to engage in its development initiatives to capture new markets, while using every effort to provide the best value proposition to its existing markets world-wide.”

Haycarb PLC made significant progress in its accreditations in quality by obtaining GMP, HACCP and ISO 22000 certifications from SGS that will enable the group to position its high value added products in the food, cosmetic and pharmaceutical application segments, Kariyawasan said.

He also noted the positive contribution to the bottom line from the environmental engineering arm, Puritas (Pvt.) Ltd. in Q3.

This business segment is expected to continue its growth momentum and make a significant impact to the bottom line in the last quarter, he said.

Puritas Sathdiyawara, the key CSR initiative of the Hayleys and Haycarb groups, was named world’s best environmental water project at Energy Globe World Awards 2017.

It provides 160,000 litres of clean drinking water daily to 33,000 people in 19 villages in North Central and Nothern districts affected by the Chronic Kidney Disease (CKD).

Kariyawasan said the company remains confident of achieving medium to long term growth with increasing emphasis on environmental sustainability worldwide through the execution of its strategic plan for growth and diversification.

Sri Lanka's Richard Pieris December profits edge down

ECONOMYNEXT - Sri Lanka's Richard Pieris and Company saw profits fall 4 percent in the December 2017 quarter to 809.8 million rupees as margins fell on plastics and rubber exports, despite strong plantations performance and gains in financial services. .

Earnings in the quarter were 40 cents a share. In the nine months to December earnings were 1.13 rupees a share on total profits of 2.3 billion rupees, flat from a year earlier, interim accounts filed with the stock exchange showed.

Richard Pieris shares closed 10 cents lower on Monday at 13 rupees.

Revenue in the quarter grew 7 percent to 13.6 billion rupees, cost of sales increased 9 percent to 10.2 billion rupees, leading to flat growth in gross profits to 3.4 billion rupees.

Administrative expenses at 1.5 billion rupees and distribution costs at 788.7 million rupees were flat from a year earlier.

The group reported a gain of 30 million rupees from the sale of financial assets in the quarter, compared to a 2 billion rupee loss a year earlier.

It also transferred 34.5 million rupees of financial assets available for sale to the life fund of Arpico Insurance, a subsidiary.

Revenue from retail grew 7 percent to 20 billion rupees in the nine months to December and profits grew 9 percent to 1.4 billion rupees, but the company did not disclose reasons for the gain.

The company operates a chain of over 60 retail stores across the island, including 21 hypermarkets under the Arpico brand and 17 showrooms for its plastics, rubber and furniture products.

Plantations revenues grew 24 percent from a year earlier to 7.8 billion rupees, profits surged 180 percent to 1.2 billion rupees.

The company has 54 estates covering 32,097 hectares in tea, rubber, palm oil, coconut and spices like cinnamon.

Rubber revenues grew 9 percent to 3.6 billion rupees and profits declined 4 percent to 622 million rupees.

In this segment the company exports a range of rubber products, including mattresses and soles for high end footwear brands to over 40 countries including the US, EU and India. In the previous financial year the company began exporting to China, Vietnam and Bangladesh.

Revenues from tyres, which includes rethreading and dealerships of Indian and South Korean brands, grew 6 percent to 3.4 billion rupees, but profits fell 38 percent to 286 million rupees.

Revenue from plastic ware and furniture fell 6 percent to 5.6 billion rupees and profits halved from a year earlier to 410 million rupees.

Revenue from financial services grew 27 percent to 2.4 billion rupees and profits grew 35 percent to 345 million rupees. The segment includes Richard Pieris Finance, Richard Pieris Securities and Arpico Insurance.

Revenue from a segment classified others fell 4 percent to 1.9 billion rupees, profits falling 10 percent to 904 million rupees. The segment includes IT services and the central commercial unit of the group.

Sri Lanka’s Serendib Hotels December profit down 50-pct

ECONOMYNEXT – Sri Lanka’s Serendib Hotels group said net profit fell by half to Rs17 million from a year ago as costs rose amid stiff competition from the informal sector which reduced occupancy levels and room rates.

Sales rose 12% to Rs487 million over the period, according to interim results filed with the stock exchange.

Quarterly earnings per share were 15 cents. Serendib Hotels was last traded at Rs17.10 Tuesday.

The firm made a loss per share of 35 cents in the nine months to 31 December 2017 witth a loss of Rs39 million compared with a Rs24 million profit the year before and sales growth flat at Rs1.2 billion.

Serendib Hotels executive director Malinga Arsakularatne said that during the December 2017 quarter, occupancy across group hotels stood at 74%, down from 79% in the same period last year. Group occupancy for the nine months stood at 69%.

Serendib Hotels group owns and operates four properties, Avani Bentota Resort & Spa, Club Hotel Dolphin Waikkal, Hotel Sigiriya and the Lantern Beach Collection Mirissa. But Avani Kalutara Resort operating results were not reflected in the group financial statements of Serendib Hotels as Jada Resorts & Spa (Pvt) Ltd., its owning company is treated as an investment.

Arsakularatne said the performance at Avani Bentota and Hotel Sigiriya were impacted due to the decline in room rates and occupancy during the year.

This was “mainly due to price competition from the formal sector and a significant shift in guest preferences to informal stay experiences,” he said. Hotel Sigiriya recoded a higher guest mix from online channels.

Club Hotel Dolphin’s guest mix included a larger portion of all-inclusive guests compared to last year, Arsakularatne said.

“The hotel is pleased to note a recovery from its traditional source markets for guests and the strengthening of the Euro and Sterling in the currency markets which led to an increase in average room rates at the hotel.”

Arsakularatne said that in keeping with the strategy to pursue higher yielding opportunities, its investment in the Lantern Boutique Collection enabled the group to increase its overall revenue per available room by 30% to Rs.7,500 from Rs.5,783 in the December 2016.

Costs rose owing to increases in IT-related expenses and amortization due to new system implementations, business development expenses, and costs of Lantern Beach Collection which was not included in the previous year, Arsakularatne said.

“Finance costs too have grown due to the borrowings obtained to fund the acquisition of the Lantern Beach Collection and other new business development initiatives,” he said.

However, he said the group anticipates a recovery with higher occupancies and rates

Sri Lanka's Central Finance net up in Dec quarter, says past profits overstated

ECONOMYNEXT - Profits at Sri Lanka's Central Finance Plc, a non-bank lender grew 18.9 percent to 1.4 billion rupees in the December 2017 quarter from a year earlier, but the firm made extra provisions which reduced last year's profits.

The group reported earnings of 6.54 rupees a share for the quarter in interim accounts filed with the Colombo Stock Exchange.

In the 9 months to December earnings were 18.22 rupees per share on total profits of 3.9 billion rupees, up 11.8 percent.

Central Finance said it had not fully accounted for leases gone bad in the past, which had tended to overstate profits for the past two years. Higher loss given default ratios (LGD) applied had reduced 9-month profits by 852 million rupees this year and 710 million rupees in 2016.

In the 3-months to December, the Central Finance reported corrected profits of 1.19 billion rupees for 2016, after originally reporting 1.22 billion rupees last year. In the 9-months profits were reduced to 3.55 billion rupees from 3.72 billion rupees originally reported.

Interest income grew 14.9 percent to 4.1 billion rupees, interest expenses grew 22 .2 percent to 1.3 billion rupees, and interest expenses rose

At company level interest income grew 14.9 percent to 4.08 billion rupees in the December quarter, interest costs rose at a faster 22.2 percent to 1.39 billion rupees and net interest income grew 11.6 percent to 2.7 billion rupees.

Its Leases and hires purchase book grew 6.5 percent to 60.9 billion rupees in the 9 months from March to December 2017.

Loan loss provisions rose to 136 million rupees from 61 million a year earlier.

Operating expenses rose 9.4 percent to 1.15 billion rupees.

Group gross assets rose to 82.6 billion rupees from 77.8 billion in March. Net assets grew to 31.4 billion rupees from 28.3 billion rupees after extra provisions.