Sri Lankan shares end flat in lean trade

Reuters: Sri Lankan shares closed flat on Monday after gaining for two straight sessions on mild profit-booking as investors awaited fresh triggers amid thin trading, brokers said.

Sri Lanka’s central bank left its key policy rates unchanged as expected on Friday and said the decision backed its goals for stabilising inflation and fostering sustainable economic growth.

The Colombo stock index ended 0.02 percent lower at 6,142.65.

The index hit its lowest close since July 12 and fell 0.16 percent during last week, recording its second weekly decline. It is down 3.6 percent so far this year.

Turnover stood at 296.3 million Sri Lankan rupees ($1.86 million), well below this year’s daily average of 840 million rupees.

“The market is at the moment searching for direction. Thought the valuations are attractive for investors to get in, there is no catalyst for the market to be positive,” said Dimantha Mathew, head of research, First Capital Holdings.

“There is not much of selling pressure either.”

Foreign investors bought equities worth a net 67.2 million rupees on Monday, but have been net sellers of 2.5 billion rupees worth of equities so far this year.

Sri Lanka’s central bank governor Indrajit Coomaraswamy on Friday said the economy is unlikely to grow more than 4 percent in 2018, falling short of an earlier estimate of 5 percent.

Shares of biggest listed lender Commercial Bank of Ceylon Plc fell 1.1 percent while Dialog Axiata Plc closed 2.1 percent weaker and Asian Hotel Properties Plc ended 4.4 percent down. 

($1 = 159.7000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Vyas Mohan)

Hilton improves performance despite refurbishment impact

Despite its property being under refurbishment for most of the year, Hotel Developers (Lanka) PLC, owners of the Colombo Hilton Hotel closed 2017 increasing both revenue and profit after tax as well as the hotel’s occupancy, the owning company’s annual report reveals.

Occupancy was up 57% from the previous year’s 47%. The company had no long-term interest bearing borrowings in its books and the average room rate was marginally up to Rs. 21,077 from Rs. 20,408 the previous year. The owning company had total assets of over Rs. 15.4 billion and equity of Rs. over Rs. 14 billion.

Total revenue topped Rs. 3 billion from Rs. 2.5 billion the previous year and a profit after tax of Rs. 258 million was posted, up from Rs. 141 million a year earlier. The hotel was able to boost both its room revenue and food and beverage earnings.

Hotel Developers Chairman Krishantha Cooray noted that Hilton was the first international hotel brand to set up in Sri Lanka 30 years ago and has stayed the course during the ensuing three-decade strife.

"Over the decades, despite growing competition, the stellar Hilton brand of service with the support of loyal Hilton patrons has helped to sustain and expand market share," the chairman said.

Hotel Developers is 100% government owned and its directors are nominees of the Government of Sri Lanka.

"Despite being in refurbishment mode over most of the year under review, the company achieved a revenue increase from Rs. 2.5 billion the previous year to reach Rs. 3 billion in 2017," Cooray said. "Profit after tax increased from Rs. 141 million to Rs. 258 million."

He thanked the Hilton team for this exemplary achievement made possible by their enduring commitment and unstinted loyalty and Hilton Honours members and other local and foreign guests for their continuing patronage.

Cooray said that their projections for industry expansion remain solid with the tourism sector continuing to prove its mettle as one of the mainstays of national economic growth. The industry expected government to take some bold and impactful measures to market destination Sri Lanka internationally and optimize the country’s tourism potential, he said.

The final stage of the refurbishment of the hotel was beginning this year and Cooray expected profitability to be boosted by extensive room refurbishing and new food and beverage offerings.

"We have taken cognizance of escalating competition within the industry and believe Hilton Colombo competes strongly on aspects including its location, high level and consistency of service, quality of accommodation, food and beverage options, brand reputation and the Hilton Honours loyalty program which contributes almost 50% to our occupancy rate," he said.

The Hotel Developers directors are Messrs. KP Cooray (Chairman), Pravir Samarasinghe, DR Samarasinghe, Ms. Sonali Liyanamana, D. Colombage, Shermin Mansoor, Ms. Dheeshana Ameresekere, Ms. Tehani Mathew, JMUP Jayamaha, C. Ramachandra and Athula Senanayake.

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HDFC seeks govt. support to meet capital adequacy

The HDFC Bank in which the state sector is the controlling shareholder has concluded 2017 boosting income 18% to nearly seven billion rupees from the previous year’s Rs. 5.9 billion but seen its after tax profit dip 16% to Rs. 408 million from Rs. 483 million a year earlier, has sought what its chairman, Mr. R.J. de Silva called "government support to bridge the immediate capital gap and to raise further capital through a share issue to meet capital adequacy requirements by 2020."

"By 2020 our target is an asset base of Rs. 100 billion with a profit after tax of Rs. 1.5 billion," he has said in the bank’s 2017 annual report where he said they had concluded another successful year amidst many challenges.

De Silva said that HDFC has a unique shareholding structure, being the only bank in the country that is a public, private partnership where the government owns controlling 51% with the balance held by the private sector.

"Long term funds at subsidized interest rates are crucial to support low income housing finance, which is the largest segment in the housing finance market. HDFC’s historical average loan size of Rs. 300,000 is a clear indicator of its commitment towards this segment of the population," he said.

They had commenced implementing a new growth strategy, supported by new information technology infrastructure, and hoped to achieved planned higher growth targets.

"However these efforts will prove ineffective without urgent intervention by the government, as the majority shareholder, towards meeting the regulatory minimum capital requirements," he said. During 2017 they had not been able to complete the initiative taken to in increases its capital to Rs. 5 billion, the current regulatory minimum capital requirement.

"In addition, under 2017 directives of the Central Bank, the capital base must be increased to Rs. 7.5 billion by 2020, de Silva said. With a capital fund standing at Rs. 4.2 billion, they were also burdened by the lack of low cost matching funds to support the increased demand for low and middle income housing finance.

The National Housing Development Authority with 49.73% of the bank is its biggest shareholder followed by Lanka Orix Leasing Company (LOLC) with 15% and Thruston Investments with 14.15%. The UDA owns 0.46%.

The bank which has declared no dividend in the year under review and the previous year had net assets per share of Rs. 64.90, up from Rs. 59.05 the previous year and a earning per share of Rs. 6.31, down from the previous year’s Rs. 7.47.

The directors of the bank are Messrs. RJ deSilva (chairman), M. Surendran, RA Chulananda, RH Meewakkala, L. Jayasinghe, LS Palansuriya, DP Wimalasena, N. Wijeyanathan and SAN Saranathissa.

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"Astounding" profit growth at Mercantile Investments and Finance

Mercantile Investments and Finance PLC (MI), founded over 50 years ago by Mr. George Ondaatjie, among the strongest finance companies listed on the Colombo Stock Exchange, has posted a profit before tax of Rs. 879 million in the year ended March 31, 2018, up "astoundingly" by 180% from a year earlier in the words of its chairman, Mr. Saro Weerasuriya.

"Similarly, net profit after tax (NPAT) rose commendably to Rs. 514 million, up 154% year-on-year compared to the moderate NPAT of Rs. 202 million posted the last financial year," Weerasuriya said in the company’s recently released annual report.

"In keeping to our promises, we created investor wealth, declaring a first interim dividend of Rs. 7 per share and Rs. 8 per share as the second interim dividend. The impressive profitability boosted the EPS (earnings per share) by 154% to Rs. 171, thereby assuring our investors strong earnings potential and reinforcing the market price of the company’s ordinary share which stood high at Rs. 2,580 based on the last traded price," he said.

MI is a closely-held modestly capitalized and asset-rich finance company with the group heavily into the tourism and hospitality sectors with three listed hotel companies, Grand Hotel, Nuwara Eliya, Tangerine Beach Hotel and Royal Palms Beach Hotel standing adjacent to each other at Kalutara. The group entered the resort hotel sector with Nilaveli Beach Hotels (Pvt) Ltd. which is the single largest shareholder of MI owning 20.94% of the parent’s equity.

More recently, the group invested in a city hotel, Fairview in Wellawatte. In addition to its hotels, the MI group owns a valuable quoted share portfolio and real estate.

The report indicated that there was a realized capital gain of Rs. 219 million on its equity portfolio in the year under review, up from the previous year’s Rs. 60 million while dividend income was down to Rs. 70 million from Rs. 177 million a year earlier. This was attributed to the disposal of their equity holding in Commercial Bank in the middle of the previous calendar year.

MI has just 17 shareholders with Mr. George Ondaatjie and his three children and connected companies owning the lion’s share. The share was not traded in the year under review.

Describing its ownership structure, the report said that MI is not a subsidiary of any holding entity and has no investments in subsidiaries of its own. However, it holds 26.12% of Nuwara Eliya Hotels Company PLC as at balance sheet date and this company is treated as an associate in MI’s books.

MI’s stated capital is just Rs. 36 million while its total assets run at over Rs. 40.3 billion against total liabilities of Rs. 31.7 billion of which over Rs. 20 billion comprise customer deposits. A revaluation reserve of over Rs. 1.9 billion, general reserves of Rs. 4.1 billion and retained earnings of Rs. 1.7 billion are part of shareholders’ funds.

Weerasuriya said that the relatively high interest rate regime continued for the third consecutive year, driven by tight government monetary policy and restrictions on credit growth. While recording moderate lending growth, the industry had to be vigilant about its assets quality, particularly in the wake of fluctuating economic conditions and borrower repayment capacity.

MI’s Managing Director Gerard Ondaatjie also used the adjective "astounding" to describe profit growth, both before and after tax, said that in keeping with company policy for retaining earning for future growth, the dividend payment ratio remained lower at 8.8% with a Rs. 15 per share dividend declaration made for the year.

He said that asset quality continued to be "somewhat impacted" on account of a few large lending accounts of the previous year which kept the non-performing lending ratio at 7.58% "though being fully backed by prime collateral." Total impairment charges stood at Rs. 426 million which included additional prudential provisions on these accounts.

He said that MI had mobilized deposits optimally and increased the base to Rs. 20 billion reflecting sound 18% growth.

The directors of the company are Messrs. SHJ Weerasuriya (chairman), GG Ondaatjie (MD), PM Amarasekera (Deputy MD), SH Jayasuriya (Finance Director), Ms. Angeline Ondaatjie (executive), Travice Ondaatjie (executive), Ms. PTK Navaratne, NHV Perera, SMSS Bandara and PC Guhashanka.
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TKS Finance calls for Rs 109 mn rights issue

TKS Finance Limited is proposing a rights issue of 1:7 to raise a total of Rs109 million to increase the stated capital of the company to Rs1 billion.

The current stated capital of the company is Rs 902 million and the rights issue will enable the company to meet the minimum stated capital of Rs1 billion as per the Central Bank (CBSL) Guidelines.

The main shareholder of the Company, Dato Seri Tiong King Sing, is expected to duly subscribed his full entitlement of the rights issue . The company had also decided to allow the staff of the company and some of its depositors to subscribe to the rights issue to enable them to benefit from the future capital gain, being shareholders of the company. Some senior officers of the TKS staff and some depositors have already consented to subscribe shares of the right issue. The company is expected to be listed at the Colombo stock exchange by the 3rd quarter of 2019.

At the same time a Malaysian company, has signed a Letter of Expression of Interest to take up a strategic stake in the company subject to a due diligence to be conducted.

The Malaysian company is a venture capital company and is involved in IT technology and their participation in a strategic stake in the company, will contribute towards the future growth of the company particularly with the introduction of IT Infrastructure into the finance business and enabling the company to be more competitive against its peers

The Board of Directors of the TKS Finance Ltd observed that subscription of the rights issue by the staff of the company is very encouraging and it reflects the confident the staff has kept on the company, in which, they see the potential value in their investment. Certain selected depositors will participate to subscribe for the rights issue to enable them to benefit the future capital gain as and when the company is listed at the CSE.

The completing of the rights issue is expected to be completed by end of August 2018.

www.dailynews.lk

CSE listed DIMO reports a loss as inventories increase by Rs5bn; stock is cheap but investors pass

LBO – Colombo Stock Exchange listed DIMO lost Rs54mn in the quarter ended June 2018.

The loss comes amid a large build in inventories during the 3 month period. During the quarter, inventories increased from Rs9.5bn, to Rs14.8bn.

Payables correspondingly increased from Rs3bn to Rs5bn, and short term debt increased from Rs8.5bn to Rs12.1bn in the quarter.

Analysts say that the company is moving towards a ‘risk on’ position with their balance sheet increasing by approximately 50% year over year from Rs22.8bn to 34.3bn.

Dimo is most noted as being the agent for Mercedes Benz, and Tata Motors in Sri Lanka. The have invested significantly in property plant and equipment in the last several years. Largest among these investments have been their flagship Dimo 800 facility in Colombo 14.

The automobile market has experienced a significant boom in Sri Lanka as the government has been progressively reducing import taxes on vehicles over the last several years. However, agents have failed to reap maximum benefits as grey market importers have taken significant share as the market has expanded.

The stock trades at just Rs380/share which is just a fraction of its net asset value of Rs1318. As the company has not historically been a significant dividend payer, analysts say that minority shareholders have not had adequate incentive to scoop up the cheap shares.

LB Finance (LFIN) reports profits of Rs1.1bn for the quarter, deposit base grows to Rs75bn

LBO – Colombo Stock Exchange listed LB Finance (LFIN) reported earnings of Rs1.137bn for the quarter ended June 2018.

Profits were up a robust 20% year over year, however sequentially from the march quarter, revenue and profits seem to be flat. Analysts say the lack of sequential profit growth may be deliberate, in order slow down and consolidate the company’s position after years a industry leading growth.

The company continued to report an astounding return on equity of 28%, although this is down from even higher levels in previous quarters.

LB Finance, whose ultimate controlling shareholder is arguably Sri Lanka’s richest man, has grown at an astounding rate over the past decade. Currently the company sits on a massive deposit base of over Rs75bn, indicating the trust that the company has established with its customers.

With deposit bases of finance companies now at such a significant level, some analysts are uncomfortable with the lack of reporting that finance companies have to do with regard to n

Asanga closes deal; Anilana Hotels (ALHP) gets capital infusion

LBO – After several delays, Colombo Stock Exchange (CSE) listed Anilana Hotels and Properties (ALHP) has finalised a deal with investor SOMAP for an infusion of capital.

According to a CSE filing just released, ALHP has issued 513,443,555 ordinary shares, now amounting to 51% of the total shares outstanding of the company, to SOMAP international at a price of Rs1.3/share.

The company now becomes a subsidiary of SOMAP, and two of its appointees have immediately joined the board of directors.

A mandatory offer at Rs1.3/share is expected to be made to all other shareholders of ALHP. It is yet to be announced if Asanga Seneviratne and other connected parties will be tendering their shares.

ALHP, previously controlled by Asanga Seneviratne and family, had run into financial difficulty as they had spent billions to construct luxury hotels on Sri Lanka’s east coast. The properties were not connected to the highway infrastructure making transit times prohibitive to tourists. The company had endured painful losses for the last several years.

It is expected that with the capital infusion and new controlling shareholder, the company will be able to de-lever and restructure its way to profitability.

Fintek Acquires Brown's Integrated Business Solutions

Wide range of business documentations on offer

Fintek Managed Solutions (Pvt) Limited acquired the Integrated Business Solutions (IBS) unit of Brown and Company PLC. With this acquisition Fintek consolidates its role as the authorised distributor of Sharp office automation products and solutions in Sri Lanka.

In a previous release detailing its role as the distributor for Sharp products, Fintek announced that its product line-up would include Sharp branded colour and monochrome photocopy machines, multimedia projectors, interactive white boards, cash registers and software solutions.

With the signing of this agreement with Brown and Company PLC, Fintek will add more products to its existing range of branded Sharp products and solutions. These include Giesecke and Devrient Cash Processing machines, Scancoin cash sorting and counting machines, Vivitek multimedia projectors, Pitney Bowes franking machines, and the outsourcing of Doculine copiers and printers.

With such a versatile line-up of products complementing the existing range, Fintek now offers a wide variety of options for businesses seeking secure, high-quality and environmentally friendly document solutions. “We will offer great customer relationships and service as always,” says Fintek CEO Anton Senadhipathy.

Fintek will continue to operate from the same premises occupied by the former IBS of Brown & Co PLC at St Benedict’s Mawatha, Colombo 13. The company is a fully owned subsidiary of Gestetner Ceylon PLC, a leading total document solutions provider in Sri Lanka. It complements Gestetner’s role in Sri Lanka’s office automation space and plans to add other business lines to its portfolio in the future.

BPPL Launches Polyester Yarn Production Facilitiy

Brush maker, BPPL Holdings PLC (BPPL) recently inaugurated one of the country’s first state-of-the-art polyester yarn plants.

“The facility is another milestone for BPPL, spearheaded by wholly owned subsidiary Eco-Spindles (Pvt) Ltd, towards bringing forth the advantages of innovative sustainability where yarn is produced exclusively from recycled Polyethylene Terephthalate, commonly known as PET flakes,” said BPPL Managing Director Dr. Anush Amarasinghe.

“We are extremely proud of our accomplishment in inaugurating Sri Lanka’s first ever yarn production facility. Propelling the country towards greater recognition, the factory’s state-of-the-art spinning and texturing machinery from Europe will make it a game-changer for the industry.

“Additionally, with the global apparel industry moving towards creating more sustainable products and processes, BPPL sees tremendous potential for its recycled polyester yarn offering,” he said.

As a future oriented company, Eco Spindles is recognised as a pioneer manufacturer, synonymous throughout the industry for producing synthetic monofilaments for cleaning tools and for paint brushes and polyester yarn for fabric.

As a driving and innovative force continually setting new standards in the industry, Eco Spindle’s technologically advanced new yarn facility, located in the Horana BOI Zone, has an area of 13,000 sq. meteres area and a capacity to produce approximately 960 tonnes of synthetic yarn per annum for local and globally renowned fabric manufacturers.

This is only one of two plants globally which creates yarn directly from flakes circumventing the polymerisation process where flakes are first converted to chips and then to yarn.

The raw material for the plant’s yarn is sourced through post consumer (waste) PET bottle collections. Eco Spindle’s well established network of over 125 collection points set up across the country ensures that nearly 200-250 tonnes of PET waste is amassed each month.

The PET bottles are then sorted, hot and cold washed prior to being transformed into flakes and finally, into recycled draw textured polyester yarn. This polyester yarn is available in both raw white and dope dyed yarn forms.

Eco Spindle’s quality compliance, including Global Recycled Standard (GRS), Restricted Substances Lists (RSL) and Oekotex Standard 100 ensures the produced yarn meets stringent international standards, a company spokesman said. The plant is managed by an experienced workforce of over 40 staff including consultants and operators with over 15 years of experience from countries such as Germany and India.

Over 1 m tourists visit Sri Lanka in H1’18

Tourist arrivals in the first half of this year increased by 15 per cent compared to the same period in 2017, statistics released by the Sri Lanka Tourism Development Authority stated.

Sri Lanka was able to witness increased arrivals through the first half in all months and some of the key markets that performed significantly were India with the highest influx of 206,337 followed by China with 136,294 and UK arrivals at 124,627. March recorded the highest increase in terms of value with a 24.1 per cent increase compared to the same month in 2017.

However, arrivals continues to be low during the months from April to June with the industry and government trying to introduce promotional campaigns together with airlines and hotels to ensure there would be an increase in numbers throughout the year.www.sundaytimes.lk

Sampath’s pre-tax profit over Rs 10 B in 1H

Sampath Bank’s Group pre-tax profit for the first half of the year exceeded Rs. 10.3 billion, up from Rs. 9.9 billion in the same 2017 period.

Post-tax profit grew by 19.9 per cent to Rs. 6.8 billion for the first half of 2018. Sampath Group also posted a post-tax profit growth of 20.2 per cent.

In a media release, the bank said Net Interest Income (NII), which is the main source of income representing almost 71 per cent of the total operating income of the bank, recorded an increase of Rs. 4.5 billion, 34.3 per cent higher than 2017.

Net fee and commission income, which largely comprises credit, trade, card and electronic channel related fees increased to Rs. 4.7 billion during the period under review from Rs. 3.8 billion earlier.

Impairment charges amounting to Rs 2.8 billion, an increase of Rs. 1.4 billion over the 2017 period of Rs.1.4 billion. “The number of customers qualifying for individual impairment increased resulting in an increase in individual impairment of Rs. 1 billion. Meanwhile, the collective impairment charge also increased by Rs. 0.5 billion predominantly due to movement of certain customers to higher arrears segments,” the release said.

Sampath Bank’s total asset base grew by 8.9 per cent (annualized 17.8 per cent) during the period under review to reach Rs. 865.6 billion as at June 30.

The Central Bank introduced Basel III to the Sri Lankan Banking industry with effect from July 1, 2017. The full implementation would take place in three phases over a period of 18 months and is targeted to be completed by January 1, 2019, at which point Sampath Bank would need to maintain its Tier I Capital Adequacy Ratio (CAR) at 10 per cent and Total CAR at 14 per cent.

In order to fall in line with these new regulatory requirements, Sampath Bank raised Rs. 12.5 billion worth of Tier I Capital by way of a Rights Issue in April 2018 and Rs. 7.5 billion worth of Tier II Capital by way of a Basel III Compliant Debenture Issue in March 2018.
www.sundaytimes.lk

Prime Finance raises Rs. 864 m from rights issue

Prime Finance Plc has raised Rs. 864 million capital in cash considerations from a recent rights issue. The allotment was completed in July 2018.

With this, the core capital of the company exceeds Rs. 1.4 billion which is well above the regulatory threshold of Rs. 1 billion stipulated by the Central Bank, the company said in a media release.

Prime Finance Plc CEO Rasika Kaluarachchi, speaking about the progress of the company, said: “With the well-thought-out and clearly defined marketing strategy, our secured lending portfolio has grown steadily to reflect a remarkable growth together with impressive profit growth as well when compared with the previous year. First quarter of this Financial Year ended 30th June 2018 too has shown vibrant results.”

Prime Group said that with over 22 years of service to the public of Sri Lanka, it is well placed to move forward with confidence and face any challenges in the future.
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Sri Lanka’s Kelani Valley Plantations back in profit in June quarter

ECONOMYNEXT - Sri Lankan regional plantation company Kelani Valley Plantations returned to profit in the June 2018 quarter with net earnings of 14.4 million rupees, interim accounts filed with the stock exchange showed.

The firm, part of the Hayleys group, had made a loss of 8.6 million rupees in the same period a year ago.

June 2018 quarter sales rose two percent to 2.5 billion rupees.

Kelani Valley Plantations had earnings per share of 42 cents in the quarter. The share was last traded at 74 rupees.

The accounts showed both sales and profits from the tea business fell while rubber made a loss compared with a profit a year ago.

In the previous, March 2018 quarter Kelani Valley Plantations had made a net profit of 151 million rupees, down a sharp 45% from the previous year.

The firm also reduced its stake in Hayleys Global Beverages (Pvt) Ltd to 27% from 40% after a new share issue in May 2018.

The accounts showed it booked no loss from the unit in the June 2018 quarter compared with losses of 51 million rupees in the same quarter the previous year and 213 million rupees for the whole financial year.

Sri Lanka's Hayleys Fabric back in profit in June quarter

ECONOMYNEXT –Sri Lanka's Hayleys Fabric returned to profit in the June 2018 quarter with net earnings of 16 million rupees compared with a loss of 25 million rupees a year earlier, accounts filed with the stock exchange showed, on improving margins and growing order book out of Europe thanks to GSP Plus.

The fabric maker, a unit of Hayleys PLC, reported earnings per share of eight cents in the quarter compared with a loss of 12 cents a year ago.

Sales grew 17 percent in the quarter to 2.4 billion rupees from a year ago, while cost of sales grew at 15 percent to 2 billion rupees, leading to a gross profit of 229.8 million rupees, up 40 percent from a year ago.

"Directly marketing our own branded range of innovative fabrics has helped us achieve better margins," Hayleys Fabrics Managing Director Rohan Goonetilleke said.

The reinstatement of GSP Plus has also seen an increase in the company's order book.

"Everyone in Sri Lanka's apparel industry is now producing at full capacity because of GSP Plus, and there is less competition for orders," Goonetilleke said.

Going forward, increasing raw material prices are expected to impact margins.

"Global yarn prices have increased and we may have to ride through that because customers are not willing to immediately absorb the additional cost.

"This will impact margins going forward, but overall, we expect a good year ahead," Goonetilleke said.

Sri Lanka's 01-year Treasuries yield falls to 9.23-pct

ECONOMYNEXT – Sri Lankan Treasury Bill yields edged lower at an auction Wednesday with the 01-year bill yield falling 04 basis points to 9.23 percent from last week, data from the Public Debt Department of the central bank showed.

It raised 19.3 billion rupees from 01-year bills, having offered 15.5 billion rupees worth of bills and getting bids worth almost 61.4 billion rupees.

The 03-month bill yield fell 07 basis points to 8.17 percent while bids for the 06-month bills were rejected.

The debt office raised 24.5 billion rupees from all tenors, the same amount offered, having got bids worth 80 billion rupees.

Sri Lanka’s Expolanka Holdings June net up 21-pct

ECONOMYNEXT – Sri Lanka’s Expolanka Holdings said net profit rose 21% to 247 million rupees in the June 2018 quarter from a year ago helped by strong sales growth and wider margins.

Group sales rose 25% to 19.9 billion rupees in the period, according to interim results filed with the Colombo stock exchange.

Earnings per share were 13 cents. The share closed unchanged at four rupees Thursday.

Expolanka group chief executive Hanif Yusoof said gross profit rose 46% to 3.9 billion rupees.

“The GP margins saw a recovery during the quarter as compared to the margins recorded during the corresponding period last year,” he said.

Logistics, the largest contributor to the group, saw a 29% growth in sales, mainly owing to strong growth in the core air freight operations.

Ocean freight operations continued to perform to expectations reporting sustainable growth, Yusoof said.

Sri Lanka keeps rates unchanged

ECONOMYNEXT - Sri Lanka has kept policy rates unchanged at a monetary policy meeting in August 2018 meeting, saying there is an economic recovery and inflation is expected to be around on the high side to 4-6 percent.

The rupee depreciated 4.2 percent this year against the US dollar, driving prices up, despite better harvests moderating food prices.

The full statement is reproduced below:

The Central Bank of Sri Lanka maintains policy interest rates at current levels

The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 02 August 2018, decided to maintain policy interest rates at their current levels. Accordingly, the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank will remain at 7.25 per cent and 8.50 per cent, respectively.

The Board’s decision is consistent with its aim of stabilising inflation at mid-single digit levels in the medium term, thereby contributing to a high and sustainable growth trajectory of the Sri Lankan economy. In arriving at its decision, the Board carefully considered the current and expected domestic and global economic developments.

Strengthening of global growth amidst increased uncertainty

The latest update to the World Economic Outlook (WEO, July 2018) of the International Monetary Fund (IMF) confirmed the strengthening of the global economy in 2018 and 2019 despite less synchronised expansion across economies. The balance of risks is biased to the downside amidst monetary policy tightening in the United States and other major economies, strengthening of the US dollar, pressures on currencies of many emerging market economies and escalating trade tensions. Some emerging market economies have responded to these risks by tightening their monetary policies and allowing their exchange rates to adjust appropriately. 2

A gradual pickup in domestic economic growth is expected from the second quarter of 2018

As per the developments observed in leading indicators and current projections, Sri Lanka’s real economic growth is expected to record a gradual acceleration from the second quarter of the year. Improved weather conditions are expected to favourably impact agriculture activities and related industries in the second half of 2018 and support the overall growth momentum, which is expected to be led by the expansion in services and industry related activities.

The economy is projected to reach its potential over the medium term benefiting from a competitive flexible exchange rate, a low inflation environment and a stronger policy framework to support exports and investment, amidst continued fiscal consolidation.

Inflation to remain in mid-single digits in spite of the recent uptick

Year-on-year headline inflation, which remained in low-single digits during the period February-June 2018, accelerated in July 2018 as expected. This was mainly due to the recent transitory price pressures stemming from upward adjustments to domestic petroleum prices and higher volatile food prices, as well as the base effect.

Although inflation is projected to remain at the higher end of the inflation target of 4 – 6 per cent in August as well, the onset of the harvest towards the end of the third quarter of 2018 is expected to lower inflation thereafter. Stable underlying inflation, together with firmly anchored inflation expectations indicate well contained aggregate demand pressures, and supports the projection of mid-single digit inflation in the medium term.

Short term market interest rates are responding to surplus rupee liquidity, while monetary expansion continued its gradual deceleration

Responding to prevailing surplus liquidity conditions in the domestic money market, short term interest rates have begun to adjust downwards. Yields on government securities in both primary and secondary markets have also declined recently. In line with these developments, it is expected that other market interest rates, particularly interest rates on lending would adjust downwards in the period ahead, thereby reducing high real interest rates faced by borrowers at present.

The growth of credit extended to the private sector by commercial banks continued its gradual decline towards the desired levels. Along with the deceleration in private sector credit growth and a reduction in credit extended to the government by the banking sector on a net basis, the overall monetary expansion also decelerated in June 2018. These trends in monetary and credit expansion indicate greater monetary stability, consistent with the envisaged medium term growth path of the economy.

External sector recorded a mix performance

The growth of export earnings outpaced the growth of import expenditure in May 2018, thereby containing the trade gap to some extent. Supporting the current account, earnings from tourism and workers’ remittances continued to increase so far during the year.

The recently introduced measures to address the excessive growth of import of gold and motor vehicles are expected to reduce the pressure on the balance of payments stemming from trade account dynamics. Meanwhile, as observed in other emerging market economies, some outflows of foreign investment from the rupee denominated government securities market were experienced recently.

Despite an outflow from the secondary market, the Colombo Stock Exchange (CSE) attracted net inflows as a result of primary market transactions. Although some pressure on the exchange rate was observed since late April 2018 mainly reflecting the impact of the US dollar’s broad-based strengthening in global markets, the depreciation pressure has eased to some extent from late July 2018.

Reflecting these developments, the exchange rate has depreciated against the US dollar by 4.2 per cent so far during the year. The Central Bank has absorbed US dollars 133.9 million, on a net basis, from the domestic market by end July 2018. The gross official reserve position was estimated at US dollars 8.4 billion at end July 2018 compared to US dollars 8.0 billion recorded at end 2017.

Policy interest rates maintained at current levels

Based on current and expected macroeconomic developments, the Monetary Board of the Central Bank was of the view that the continuation of the current monetary stance is appropriate. Accordingly, the Monetary Board decided to maintain the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels.

Monetary Policy Decision: Policy rates unchanged

Standing Deposit Facility Rate (SDFR) 7.25% 

Standing Lending Facility Rate (SLFR) 8.50%

Sri Lanka’s Cargills to spend more on supermarkets, logistics

ECONOMYNEXT – Sri Lanka’s Cargills (Ceylon) group said it intends to make much of its capital spending next year on further expanding its retail business, focusing on both front-end stores as well as back-end logistics.

Cargills retail sector consists of the group’s Cargills Food City supermarket chain, the island’s largest modern trade retailer, with 353 outlets spread across all districts.

The stores two formats, Cargills Food City supermarkets and Cargills Food City Express minimarkets, are supported by logistics and distribution centres that handle fresh and dry goods.

“A larger share of the group’s capex in the next year will be invested in the retail sector, driving new store growth, store re-modelling and back-end enhancements,” Cargills told shareholders in its latest annual report.

The group aims to remain the lowest cost operator in the food business, it said.

Cargills group expects to break ground on a logistics centre during the year, which is expected to be completed in 2020.

“Logistics is an integral component in the competitive advantage of the retail channel, and the Cargills Group maintains a logistics network encompassing dry, chilled and frozen distribution,” the report said.