Sri Lankan shares extend gains to 2-week closing high

Reuters: Sri Lankan shares rose for a fourth straight session on Friday and posted their highest close in two weeks as investors bought banking and diversified stocks, stockbrokers said.

But a lack of supportive news amid concerns over political uncertainty capped the upside, analysts said.

The Colombo stock index ended 0.32 percent higher at 6,138.08, its highest close since June 29. It rose 0.5 percent this week, its first weekly gain in eight weeks.

"Market sustained its momentum. Local investors have got activated and they are buying on valuations," said Hussain Gani, deputy CEO, Softlogic Stockbrokers.

Turnover stood at 626 million rupees ($3.92 million), less than this year's daily average of 900.5 million rupees.

The benchmark stock index hit its lowest close since March 30, 2017 on July 4, and has declined for 19 sessions in 26 through Friday.

A downward revision in economic growth estimate by the central bank has hit sentiment, analysts said.

Economic growth in 2018 is likely to be between 4 percent and 4.5 percent, falling short of an earlier estimate of 5 percent, Central Bank Governor Indrajit Coomaraswamy told reporters last Friday, adding that the earlier estimate was "ambitious".

Foreign investor net sold equities worth 4 million rupees on Friday, extending the year-to-date net foreign sale to 2.4 billion rupees.

Shares in Lion Brewery (Ceylon) Plc rose 8.9 percent, Nanda Investment Plc ended 12.4 percent higher, Cargills (Ceylon) Plc climbed 1.8 percent and conglomerate John Keells Holdings Plc gained 0.4 percent.

Investors are waiting for some positive news both on the economic and political front, said analysts, adding that the government's policy implementation had been sluggish since both main parties in the ruling coalition lost local polls in February.

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

($1 = 159.5000 Sri Lankan rupees) 

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

Sri Lanka's ACL Cables turns to households, calls for extended protectionism

ECONOMYNEXT - Sri Lanka's ACL Cables is calling for extended protectionism to limit competition, amid a construction sector slowdown at home, fixed priced sales contracts, and competition in export markets.

ACL Cables said its export revenue grow 26.6 percent from a year earlier to 2.3 billion rupees in the year to end March 2018, while local sales grew at a slower 8.6 percent to 14 billion rupees.

Due to the slowdown in domestic sales, total revenue grew 11 percent during the year but cost of sales grew nearly twice as fast contracting gross profit by 18.8 percent to 2.6 billion rupees.

Net profit for the year to end March 2018 fell 39 percent from a year earlier to 763 million rupees, amounting to earnings per share of 5.82 rupees. The stock was trading 1.60 rupees lower at 39 rupees on Thursday.

Rising prices of raw materials, for instance copper increasing 43 percent to 7,000 US dollars a tonne, could not be passed on to consumers quickly.

"Another factor which contributed to the reduction of Gross margin was the locking of prices of cables with contractors in major projects and CEB," Managing Director Suren Madanayake told shareholders.

Higher interest costs were also hurting profits.

The company said it was reorganising its distribution network to reach a broader consumer market, or households, given the slowdown in the construction sector and large customers locking in prices.

There are signs market conditions will improve.

"Continued development of the Port city, creating interest among international investors is a good sign and we believe that there is a huge potential for construction Industry which in turn could lead to very high demand for cables in the coming years," Madanayake said.

However, dealing with the present challenge of falling profitability requires an export strategy.

"The export market is huge and competition is at its peak," ACL Cables Managing Director Suren Madanayake said.

"It is very important to penetrate the export market further in order to understand the international competitive environment and to improve our efficiencies.

"As we adapt to the external environment,we can increase our turnover and capacity utilisation."

The firm however continued to lobby for protection, limiting competition, and economic freedoms of a family that is trying to build a house, forcing them unfairly to pay higher-than-world-prices, giving bigger profits to producers.

Cable firms in Sri Lanka had already enjoyed protection for many years at the expense of families trying to put a roof over their heads.

"The FTAs with China and Singapore are threatening the healthy situation we are in," Madanayake said.

"However, we are lobbying the Government to maintain the Cables in the Negative list since the industry has potential for further expansion in to the export market.

"Such expansion needs a Local base protected from unfair trade practices and economies of scale of neighbouring countries," he claimed.

The firm did not specify what the 'unfair trade practice' was.

The firm also made a another standard argument, saying there were cheap imports which may be of low quality, which analysts say is a separate issue and is already addressed by Sri Lanka standards.

Import duties may in fact promote the import of the cheapest and lowest quality goods, by making the better brands too expensive, fair trade advocates say.

Sri Lanka's massive import protection given to steel, tiles, sanitary ware, have pushed up construction costs. Many protected businesses are however cannot export as long term protection has made them inefficient.

ACL Cables however is in exports unlike many other so-called 'geriatric' businesses that have enjoyed fat profits from import duties for decades.

Protection was advocated in Western nations like Germany, for nationalist 'infant industry' so that poor consumers in particular will sacrifice the well-being of their families and children on behalf of big business in the hope that eventually they will get freedom after business 'grew up'.

Sri Lanka's Melstacorp may increase focus on acquisitions: Fitch

ECONOMYNEXT - Fitch Ratings has affirmed Sri Lanka's Distilleries Company's AAA(lka) rating upgrading the outlook to stable, based on the liquor producer's market dominance as a successful reordering of the group allows parent Melstacorp PLC to focus on acquisitions, the ratings agency said.

"We believe the (Melstacorp) group restructuring will allow management to increase its focus on acquisitions in non-alcoholic beverage segments," Fitch Ratings Lanka said in a statement.

Melstacorp, which owns 92% of DIST, has yet to meet the requirement set by the Colombo Stock Exchange to increase the company's public float to 7.5 percent from 3.2 percent. "We think this is more of a formality at this stage," Fitch said.

"The group has historically pursued acquisitions actively and, while it has not indicated any specific targets at present, Distilleries' rating could come under pressure if there are significant debt-funded acquisitions, particularly those that weaken the group's overall business risk and increase cash flow volatility," the ratings agency said.

The affirmation of Distilleries AAA(lka) credit rating reflects the group's strong credit profile which is underpinned by its entrenched market position in Sri Lanka's alcoholic-beverage sector.

High entry barriers, which drive strong operating cash flows and low leverage, offset the weaknesses in Distilleries other, less operationally significant, investments, Fitch said.

Fitch Ratings statement:

Fitch Ratings has removed the Rating Watch Negative (RWN) on Distilleries Company of Sri Lanka PLC's (DIST) National Long-Term Rating, and has affirmed the rating at 'AAA(lka)'. The Outlook is Stable.

The removal of the RWN reflects our view that DIST and parent Melstacorp PLC have effectively concluded the group's restructuring exercise without an increase in credit risk after the private placement of DIST shares to Melstacorp in February 2018. Melstacorp, which owns 92% of DIST, has yet to meet the requirement set by the Colombo Stock Exchange to increase the company's public float to 7.5% from 3.2% but we think this is more of a formality at this stage.

Fitch rates DIST based on the consolidated profile of Melstacorp due to the strong linkages between the two entities, as defined in our Parent and Subsidiary Rating Linkage Criteria. The affirmation of DIST's National Long-Term Rating reflects the group's strong credit profile, underpinned by its entrenched market position in Sri Lanka's alcoholic-beverage sector and the high entry barriers, which drive strong operating cash flows and low leverage, and offset the weaknesses in its other, less operationally significant, investments.

DIST's rating also factors in the group's enhanced operating scale and cash flow diversity following the increase in its effective shareholding and management control of Aitken Spence PLC (ASP) to 51% in March 2018, from 49% previously. Fitch believes DIST's rating has a higher tolerance for leverage (defined as lease adjusted debt net of cash/operating EBITDAR) following the acquisition, and we have increased the leverage threshold above which the rating could be negatively impacted, to 2.0x from 1.5x to reflect this. We proportionately consolidate ASP's financials with that of Melstacorp in arriving at the rating to reflect our view that Melstacorp may provide support to ASP in a hypothetical distressed scenario only to the extent of its proportionate shareholding in light of ASP's large public float.

KEY RATING DRIVERS

Strong Linkages with Parent: There are strong operational and legal linkages between DIST and Melstacorp's subsidiaries, and DIST accounted for an estimated 71% of Melstacorp's consolidated revenue and 77% of its EBITDAR, excluding Melstacorp's insurance subsidiary, in the financial year to March 2018 (FY18). DIST and Melstacorp share the same board of directors, and DIST has previously provided financial support to weaker group entities in the form of corporate guarantees.

ASP Improves Business Risks: We believe the combined credit profile of Melstacorp and ASP is among the top tier of Sri Lankan corporates for credit quality. We have assessed ASP's standalone credit profile as slightly weaker than that of DIST due to ASP's exposure to segments with more volatile cash flows such as leisure and plantations, and ASP's slightly higher leverage (2.5x in FY18). This is offset by the greater diversification of Melstacorp's earnings and larger operating scale as a result of the combination.

Melstacorp's consolidated earnings continue to be underpinned by the strong alcoholic-beverage sector, which we expect to account for more than 65% of the proportionately consolidated EBITDA of the combined group in the medium term.

Margin to Improve: We expect the group's EBITDAR margin to rise by around 150bp in FY19 (FY18: 24%) as we forecast DIST's standalone EBITDAR margin will recover to around 37%-38% from FY19 due to better sourcing strategies. DIST's EBITDAR margin rose to 41% in 4QFY18, after falling to around 24% in the first three quarters of FY18 (FY15-FY17 average: 39%) due to higher costs as a result of a doubling of import duty on ethanol - a key input - in 2016. We also believe DIST will be able to pass on higher costs as we do not foresee a significant increase in excise duty levied on hard liquor over the medium term.

Leverage to Peak in FY19: We expect Melstacorp's leverage, including its 51%-share of ASP's net debt and EBITDA, to peak at 1.5x in FY19 (FY18 estimate: 1.4x) mainly due to large capex plans at ASP's power and leisure segments. Leverage is also high at the group's telecom subsidiary, Lanka Bell Limited, and plantation subsidiaries. We expect Lanka Bell to continue incurring high capex as it expands its 4G coverage. Volatile tea and rubber prices continue to affect the group's plantation business, although revenue improved in FY18.

Leading Alcoholic-Beverage Maker: DIST accounts for over 60% of Sri Lanka's hard-liquor production and has been able to maintain its market leadership due to its entrenched DCSL brand and access to a country-wide distribution network. The complete advertising ban on alcoholic beverages acts as a high entry barrier and further strengthens DIST's dominance. However, hard-liquor makers' volumes are likely to drop following the government's more favourable taxation policy towards beer makers from November 2017. We expect DIST's volumes to remain flat in FY19 despite the policy given its strong market position and revenue to grow by low-single digits thereafter as it passes on higher input costs.

Importance to State Revenue: We expect the alcoholic-beverage sector's importance to government revenue to reduce the risk the government will hobble the industry. Incremental excise tax increases on hard liquor will likely be slow as prices beyond consumer affordability could lower the government's income. Excise taxes on liquor contributed an estimated 8% to government tax revenue in 2016, with DIST accounting for around half of this amount.

Acquisitive Nature - Event Risk: We believe the group's restructuring will allow management to increase its focus on acquisitions in non-alcoholic beverage segments. Melstacorp disposed of its investment in a fully owned licensed finance company, Melsta Regal Finance Limited, in March 2018 while it increased its stake in its plantation-sector assets in September 2017. The group has historically pursued acquisitions actively and, while it has not indicated any specific targets at present, DIST's rating could come under pressure if there are significant debt-funded acquisitions, particularly those that weaken the group's overall business risk and increase cash flow volatility.

DERIVATION SUMMARY

DIST is Sri Lanka's leading alcoholic-beverage manufacturer, with a strong portfolio of wellknown brands and access to an extensive distribution network. DIST's 'AAA(lka)' rated peers, Sri Lanka Telecom PLC (SLT, AAA(lka)/Stable) and Dialog Axiata PLC (AAA(lka)/Stable) enjoy a larger operating scale, reflecting the size of the local telecom market and the companies' market leadership in fixed line and mobile, respectively. DIST's operating scale is smaller because a significant portion of the country's alcoholic-beverage consumption occurs outside the formal sector, which is not recorded.

DIST is also exposed to more regulatory risk in the form of increases in indirect taxation, but these risks are counterbalanced by its entrenched market position and high entry barriers, which allow the company to pass on cost inflation and maintain margins, supporting substantially stronger free cash flows (FCF) than the telcos. DIST's capex as a proportion of revenue is also considerably lower than the telcos, and most of DIST's investments in other businesses are discretionary. The telcos' high capex intensity is driven by the need to continually upgrade infrastructure and keep abreast of evolving technology, and to service growing network traffic, while competition keeps tariff increases in check, resulting in larger and more sustained negative FCF than DIST.

KEY ASSUMPTIONS

Fitch's key assumptions within our rating case for the issuer include:
- Consolidated revenue to grow by mid-single digits in FY19 before increasing to high-single digits over FY20-FY21
- Consolidated EBITDAR margin to improve 25% in FY19 on the back of improving alcoholbeverage segment margins (FY18: 24%)
- Lower excise tax hikes as the government would be mindful of falling revenue collection if demand were to decline
- Capex to peak at LKR13 billion in FY19, mainly on account of power and leisure segmentrelated capex by ASP
- A group dividend payout of 30% of net profit over FY19-FY21

RATING SENSITIVITIES

Developments that May, Individually or Collectively, Lead to Positive Rating Action - There is no scope for an upgrade since the company is at the highest rating on the Sri Lankan National Rating scale. Developments that May, Individually or Collectively, Lead to Negative Rating Action - Consolidated financial leverage (measured as adjusted net debt/EBITDAR excluding Continental Insurance Lanka Limited and 51% consolidation of ASP) increasing to over 2x on a sustained basis (end-March 2018: 1.4x) - A structural change in the domestic alcoholic-beverage industry that considerably weakens DIST's competitive position

LIQUIDITY

Comfortable Liquidity Position: The group had a comfortable liquidity position at end-March 2018, with LKR19 billion of unutilised but committed credit lines and LKR16 billion of unrestricted cash and cash equivalents available to meet LKR19 billion of debt maturing in the next 12 months. The group has strong access to local banks due to its position as one of Sri Lanka's largest corporates and its solid credit profile.

Sri Lankan glass manufacturer looks overseas as local sales fall

ECONOMYNEXT- Sri Lankan glass bottle manufacturer, Piramal Glass Ceylon Plc, is turning to overseas markets as local sales fall due to increased taxes on alcohol, a company official said.

“The management has tried its best to channel the extra capacity towards the export market to bridge the gap due to the loss of domestic volumes,” Piramal Glass Ceylon (PGC) Chairman Vijay Shah said in the company's annual report.

While local sales of glass bottles fell, export revenue of PGC has increased 77 percent to 2.1 billion rupees in 2017/18, Shah said.

“The export to US has grown by over 150 percent, Australia by 72 percent and a six-fold increase in the Canadian markets,” he said.

The firm is also entering into Malaysia, Africa, Vietnam and Myanmar.

PGC last year completed a 3 billion rupee upgrade of its furnaces, which increased production capacity by 20 percent to 300 metric tonnes per day.

Shah said that the production capacity taken up by the local market has fallen below 70 percent in the last financial year, compared to the normal levels of over 75 percent.

The local market contributed 4.7 billion rupees to PGC’s revenue in 2017/18, which was a 16 percent fall compared to a year earlier.

“This was mainly contributed by the introduction of new taxes and levies on the beverage and liquor segment of the market as it made the final products a lot more expensive,” he said.

Last November, the government introduced a policy of taxing alcoholic beverages based on their alcohol content. Prior to that, beer was taxed at a higher rate than hard liquor.

Sri Lanka’s largest beer producer said that the new policy has seen more consumers switching to beer consumption, which is mainly sold in glass bottle form, but also includes sales of canned and draught beer.

The government also placed extra taxes on beverages based on sugar content.

Sri Lanka's Sunshine gets 3M healthcare agency

ECONOMYNEXT - Sunshine Healthcare Lanka, a unit of publicly traded Sunshine Holdings Plc said it had got the agency for 3M Global, after a re-orgnization of the US company's operations in the island.

Sunshine Healthcare will now be the sole representative of 3M's Healthcare portfolion in Sri Lanka, Managing Director Shyam Sathasivam said in a statement.

Sunshine had earlier distributed some of the products. A sole agent will import and also market products to their customers.

"The relationship we have had with Sunshine over the last 20 years was indeed fruitful for 3M and our newest tie up represents a powerful opportunity for 3M to significantly expand our presence in Sri Lanka," Debarati Sen, Managing Director, 3M India Region said in a statement.

"We are excited to partner with SHL as we focus our combined energies serving a broader range of customers with industry-leading healthcare products."

Sunshine sells pharmaceuticals and medical devices in surgical and diagnostics. It also operates a pharmacy network.

Sri Lanka brushmaker to focus on own-brand in Indonesia, Malaysia on hold

ECONOMYNEXT - BPPL Holdings Plc, a Sri Lanka-based brush maker, is focusing on building its own brand in Indonesia and at home, taking a step back from plans to penetrate the Malaysian market.

“We slowed our brand expansion plans and rationalised our strategies by mainly focusing on the Sri Lankan and Indonesian markets whilst parking our expansion into Malaysia for the time-being,” BPPL Managing Director and Chief Executive Anush Amarasinghe said in the firm’s annual report.

He said that BPPL’s own brands Tip Top in Sri Lanka and JAB in Indonesia still account for only 2 percent of group revenue, since brands take some time to establish themselves.
Big investments required to make brands stand out was also a reason to slow down the strategy.

“This was a key reason for slowing our market expansion plans in this category, a decision taken to balance the near-term vs. longer-term returns provided to our shareholders,” Amarasinghe said.

BPPL in the past had said that it sees potential in selling branded goods in Asian markets such as Sri Lanka, Indonesia and Malaysia, since rising disposable income would let consumers buy high quality, reasonably priced branded goods through supermarkets.

BPPL was hoping to compete with cheaper Chinese products with the power of branding.
Currently, BPPL’s branded goods are available in 251 stores in Sri Lanka, and 294 stores in Indonesia.

The switch to Asia is BPPL’s plan to reduce the risks of overexposure to the North American market, from which 81 percent of the company’s revenue comes from, Amarasinghe said.

In the short-term, BPPL has focused on its plastic recycling business. Amarasinghe said that higher sales orders have been coming for synthetic filaments from new customers in North America.

He said that BPPL has invested 180 million rupees on its third filament extrusion plant which will be opened by July/August 2018.

Earlier this year, BPPL opened a polyester yarn spinning plant, and is expecting apparel manufacturers from Sri Lanka and overseas to start placing orders in the two coming months, he said.

The company is also in the process of converting some of its plastic bottle collection points into collection centres which have machinery to compress and bail bottles for cheaper and easy transport to the recycling plants.

Sri Lanka sells Rs80bn in 7 and 15-year bonds near market

ECONOYNEXT - Sri Lanka has sold 35 billion rupees of 7 year bonds and 45 billion rupees of 15 year bonds at yields near the secondary market, data from the debt office shows.

7-year, 2-month bonds maturing on 15.10.2025 were sold at a weighted average yield of 10.53 percent.

In the secondary market, bonds maturing on 01.08.2025 were quoted around 10.55/65 percent before the auction, dealers said.

15-year, 6-month bonds maturing on 15.01.2033 were sold at a weighted average yield of 10.88 percent.

Indicative quotes for similar maturities were around 10.90/11.10 percent, dealer said.

There was an estimated 90 billion rupees of maturing bonds, and only 80 billion rupees were rolled over.

Sri Lanka’s 03-month Treasury yield rises to 8.37-pct

ECONOMYNEXT – The Public Debt Department of Sri Lanka’s central bank sold five billion rupees of 03-month Treasury Bills at an auction Wednesday with the yield edging up rose 02 basis points to 8.37 percent from last week.

Data from the state debt office showed it called for offers for three billion rupees in short-term T-bills and got offers of 8.4 billion rupees.

The yield on the 01-year bills was unchanged at 9.43 percent with the Public Debt Department selling almost 8.9 billion worth of bills. It had offered seven billion rupees of 01 year bills and got bids worth 32 billion rupees.

The debt office rejected bids for 06-month bills.

Sri Lanka's Taj Samudra to upgrade amid competition

ECONOMYNEXT - Sri Lanka's listed TAL Lanka Hotels which owns five-star Taj Samudra Hotel in Colombo says it's in the final phases of refurbishing and plans to further upgrade the property to capture market share as the city's hotel room inventory continues to increase.

Business is under pressure with hotels in Colombo reporting an average occupancy of 65 percent during the year due to low growth in tourist arrivals (up 3.2 percent to 2.1 million in 2017) and new hotels in Colombo especially in the budget and mid-market segment, the company said in its annual report for 2017/18.

"These hotels are a welcome addition to a market previously dominated by five-star hotels and have quickly been absorbed in the market given their popularity with price conscious travellers," said Vish Govindasamy, a director, told shareholders making the Review of the Board of Directors.

However, as a result, existing five-star hotels are restricted from increasing prices, he said.

TAL Lanka revenue fell 2 percent to 2.8 billion rupees in the year to end March 2018, and earnings fell 8.5 percent to 94.8 million rupees in the year to end March 2018.

Revenue from rooms fell 7.5 percent to 1.53 billion rupees, while restaurant dining grew 8.9 percent to 1.1 billion rupees and shop rentals grew 8.6 percent to 47.3 million rupees.

Income from renting and hosting banquets and other events fell 37.6 percent to 30.2 million rupees and income from laundry services fell 29 percent to 5 million rupees.

TAL Lanka says it is continueing a facelift to stay competitive.

"Renovation work on the second floor is expected to be finalised this year and the company has also planned to undertake improvement works to upgrade the property in the coming financial year and to increase market share of the hotel," Govindasamy said.

"The economic outlook remains favourable provided the government is committed to the reform agenda of improving competitiveness, governance and public financial management.

"Growth is projected to rebound in 2018 from a low base and continue to be around 4.5 percent in the medium term, driven by private consumption and investment."

Sri Lanka's rupee is expected to depreciate over the next five years, he said.

Management fees from Airport Garden Hotel grew 17 percent to 16.7 million rupees while dividend income from associate company Lanka Island Resorts nearly doubled over a year earlier to 1.2 million rupees.

Sri Lanka's Adam Investment back in profit in March 2018 quarter

ECONOMYNEXT - Sri Lanka's listed Adam Investments which is undergoing restructuring, reported earnings of 5.3 million rupees in the March 2018 quarter on higher revenue growth, against a loss of 3.5 million rupees a year earlier, according to interim results.

The company, which has interests in activated carbon, ICT, FMCG and a vehicle dealership, reported a negligible earnings per share (0.006 rupees) in the quarter despite revenue growing 42 percent from a year earlier to 319.3 million rupees.

Cost of sales grew a slower 25 percent to 226.3 million rupees, leading to gross profit growing 111 percent from a year earlier to 92.99 million rupees, interim results filed with the Colombo Stock Exchange showed.

The share last traded at 20 cents.

"It is fulfilling to witness the restructuring process and to see the transformation of a company which was once struggling," Adam Investments Chairman Ajita Pasqual told shareholders in a statement signed off in March 2018 included in the late publication of the company's 2016/17 annual report.

"The Group has identified that further growth and profitability could be successfully achieved through International Affiliations and Joint Ventures. Such ventures would bring in advanced technical expertise, management practices and capital for the development and marketing of the products and services being offered by the Group," he said.

The company has signed a collaboration agreement with a Thailand-based conglomerate to access markets in Asia and Africa, Pasqual told shareholders, but did not give details.

Adam Investments reported a loss of 2 cents a share for the year to end March 2018, down from a loss of 13 cents a year earlier as revenue fell 19 percent to 803.5 million rupees.

Net finance cost grew 138 percent to 37 million rupees in the March 2018 quarter and selling and distribution expenses surged 291 percent to 26.6 million rupees.

The company reported a 1 million loss in the revaluation of financial assets in the quarter, compared to a loss of 8.7 million rupees a year earlier.

The company has interests in manufacturing and exporting activated carbons (Adam Carbons), Islamic micro-finance (Adam Capital Micro Credit), ICT (Network Communications Pvt. Ltd.), building materials (Adam Metals), importing vehicles and spareparts (Adam Automobiles) and FMCG (Wellwin).

Sri Lanka’s Arpico Finance, Associated Motor Finance to merge by November 2019

ECONOMYNEXT- Sri Lankan finance companies Arpico Finance Company Plc and Associated Motor Finance Co. Plc will complete their planned merger by November 2019, a filing at the Colombo Stock Exchange said.

Valuations of the two companies have not yet been finalised, which has delayed the firm informing the market on the compensation Associated Motor Finance (AMF) shareholders would get in Arpico Finance Company (AFC), which would be the remaining company after the merger.

“Since the valuations of the two companies have not reached a final stage, AMF is not able to inform the shareholders/market as to the consideration that would be offered by AFC to the shareholders of AMF to purchase their shares,” AFC said.

AFC will offer new shares in the company to shareholders of Associated Motor Finance (AMF) through private placements, pending regulatory approvals.

AMF acquired 90 percent of AFC shares through a mandatory offer in 2014 under the Central Bank’s Financial Sector Consolidation Plan of 2014.

The two companies will consolidate their human resources, finances, legal structures, technical processes and business practices over four phases, which began in August 2017.