Wednesday, 25 July 2018

Sri Lanka's Union Bank June net up 7-pct, weighed down by new tax rules

ECONOMYNEXT - Sri Lanka's listed Union Bank of Colombo said profits grew 7 percent from a year earlier to 134.3 million rupees in the June 2018 quarter on improving interest margins despite a sharp rise in tax costs.

"Profits were adversely impacted due to the changes in the tax regulations subsequent to the New Inland Revenue Act enforcement," the bank said in a statement filed with the stock exchange.

The bank reported earnings of 12 cents a share. Earnings were 25 cents a share for the six months to end June 2018 with net interest income growing 17 percent from a year earlier to 2.2 billion rupees in the six month period, interim results filed with the Colombo Stock Exchange showed.

Union Bank closed 10 cents lower to 12.30 rupees on Tuesday.

Income tax expenses grew 131 percent to 103.6 million rupees.

"The effective tax rate for the June quarter increased significantly in comparison to the previous quarter. This is mainly due to the withdrawal of tax exemptions on profits made out of Sri Lanka Development Bonds and corporate debt instruments invested prior to the tax changes and withdrawal in the notional tax credits," the bank said in a statement accompanying the interim results.

The bank saw interest income grow 17 percent from a year earlier to 3.4 billion rupees in the June quarter with interest expenses growing a slower 14 percent to 2.3 billion rupees, leading to a 22 percent growth in net interest income to 1.1 billion rupees.

"Both net interest margins and spreads depicted an improvement. This was despite the withdrawal of the notional tax credit which bears a direct impact on the interest income earned on the government securities portfolio carried prior to the change in the tax regulations," the bank said.

The bank's interest margin improved to 3.06 percent at end June 2018, up from 2.87 percent at end December.

Net fee and commission income grew 16 percent from a year earlier to 217.9 million rupees in the June 2018 quarter.

Provisioning for bad loans increased 84.5 percent to 109.4 million rupees.

Personnel expenses grew 11 percent to 522.6 million rupees and depreciation charges fell 1 percent to 103.8 million rupees.

Other expenses grew 17 percent to 459.6 million rupees.

The bank reported a loss of 80.9 million rupees from revaluating financial assets, compared to a 350.4 million gain a year earlier.

The bank's loan book expanded 3 percent from a year earlier to 81.2 billion rupees as at end June 2018.

Public deposits fell a marginal 0.18 percent to 76.6 billion rupees.

The bank reported a Basel III Tier 1 Capital Ratio of 18.93 percent at end June 2018, higher than the 7.875 percent minimum regulatory requirement.

Total capital adequacy was 18.93 percent, above the 11.875 percent Basel III minimum requirement.

Gross non-performing loans increased to 3.18 percent of total loans at end June 2018, compared to 2.69 percent at end December 2017.

Sri Lanka's Ceylon Cold Stores June quarter net falls 65-pct

ECONOMYNEXT - Profits of Sri Lanka's listed Ceylon Cold Stores fell 65 percent to 238.9 million rupees in the June 2018 quarter from a year earlier, with a sugar-tax hurting manufacturing sales and falling margins and soaring finance costs hitting profits at its Keells supermarket chain, interim results showed.

The company, which makes fizzy drinks, juices and ice creams under the popular Elephant House and other brands, and operates the Keells supermarket chain of about 80 outlets, reported earnings of 2.51 rupees a share in the quarter, a Colombo Stock Exchange filing showed.

The stock was trading 1 rupee lower at 925 rupees on Wednesday. Ceylon Cold Stores is a unit of listed John Keells Holdings.

In the June quarter, revenue grew 13 percent from a year earlier to 13.9 billion rupees, with cost of sales growing at faster 19 percent to 12.7 billion rupees, resulting in a 25 percent contraction of gross profits to 1.2 billion rupees.

Selling and distribution costs rose 16 percent to 549 million rupees, and administration expenses increased 17 percent to 426 million rupees.

Other operating expenses rose 30 percent to 227.9 million rupees.

Net finance costs rose 236 percent to 40.2 million rupees, as finance income fell 26 percent to 23.4 million rupees and finance costs soared to 63.6 million rupees in the June 2018 quarter, up from 2 million rupees a year earlier.

Outstanding bank overdrafts amounted to 4.97 billion rupees at end June 2018, up 61 percent from the previous March quarter.

Revenue from manufacturing fizzy drinks and ice creams fell 7.8 percent from a year earlier to 3.1 billion rupees. Net finance costs rose 104 percent from a year earlier 742 thousand rupees.

Profits of the manufacturing segment declined 38 percent to 434.3 million rupees.

The Keells supermarket chain saw revenue grow 21 percent from a year earlier to 10.9 billion rupees in the June 2018 quarter. Net Finance costs increased 412 percent from a year earlier to 39.5 million rupees.

Profits of the retail business declined 60 percent to 95.6 million rupees.

The company has been reducing the sugar content of most of its drinks and cold-confectionery goods to meet regulatory standards over the last two years.

However, falling sales due to a sugar tax has resulted in the company deferring investments on a new bottling plant, with the current facility operating under capacity, the company said.

The sugar tax resulted in an average 33 percent increase in prices of its portfolio in 2017/18.

Ceylon Cold Stores is going ahead with 4.2 billion ice cream manufacturing plant, hoping to achieve better margins from impulse buying by consumers.

The company is also rebranding its supermarkets to Keells and refurbishing all outlets. It's investing in a 225,000 square foot centralized distribution centre.

Sri Lankan shares fall for third straight session in dull trade

Reuters: Sri Lankan shares extended fall for a third straight session on Wednesday as investors sold blue-chip shares, but foreign buying helped limit losses.

The Colombo stock index ended 0.34 percent weaker at 6,162.49. The index, which is down nearly 3 percent in the year so far, had on Friday recorded its highest close since June 29.

Turnover stood at 161.4 million Sri Lankan rupees ($1.01 million), less than a third of this year’s daily average of 873.1 million rupees.

“Today the market came down on blue-chip selling in dull trade,” said Atchuthan Srirangan, assistant manager - research, First Capital Holdings Plc.

“Investors are waiting to see the direction and the good sign is we are seeing net foreign buying for the fifth straight day.”

Foreign investors bought equities worth net 4.3 million rupees ($26,959.25) on Wednesday, but they have been net sellers of stocks worth 2.4 billion rupees so far in the year.

A downward revision in economic growth estimate earlier this month by the central bank has hurt sentiment, analysts have 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 said earlier this month.

Shares in Ceylon Tobacco Company Plc fell 9.5 percent, while conglomerate John Keels Holdings Plc ended 0.9 percent down, biggest listed lender Commercial Bank of Ceylon closed 1.0 percent down, Dialog Axiata Plc lost 0.1 percent and Hemas Holding Plc ended 1.3 percent lower. 

($1 = 159.5000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Vyas Mohan)