Panasian Power posts Rs 99m PAT in1Q, 2018

Panasian Power PLC, a green energy solutions provider, posted a consolidated net profit of Rs. 99 million for the quarter ending June 30, 2018. This represented an incredible growth of 1380% compared to the same period last year.

Revenue grew by 134% to reach Rs. 177.7 million. Operating profit for the quarter increased to Rs. 138.7 million from Rs. 40.3 million during the same period last year.

These results were attributed to contributions from the Padiyapelella, Manelwala and Rathganga mini hydropower plants, both of which have Standardised Power Purchase Agreements (SPPA) with the Ceylon Electricity Board (CEB) to supply all of the energy generated to the national grid.

During the period under review Panasian Power recorded its first solar power income.The company increased margins during the quarter by exercising prudent cost control practices which brought down direct expenses and finance costs.

This resulted in direct expenses of Rs. 19.5 million compared to Rs. 22.9 million during the same period last year and a finance cost of Rs 25.8 million compared to Rs. 33.6 million during the corresponding period last year.Chief Executive Officer, Panasian Power, Dr. Prathap Ramanujam said, “This monumental growth is validation of the steps we took last year to aggressively seek bottom line growth.

“We fully expect these figures to improve further over time as power generation increases at the plants and with greater contribution coming from our solar power investments. With several solar projects in the pipeline, we continue to explore new opportunities both here and abroad,” he said.

General Manager and Executive Director, Panasian Power, Pathmanatha Poddiwala said, “We have already begun construction on another 900 Kw rooftop solar plant in Kelaniya and a 1 MW ground solar plant is expected to begin construction during the second quarter of this financial year.”

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Panasian Power constructing more solar power plants

Panasian Power PLC, which saw a growth spurt in the last quarter ending June 2018, has begun construction on another 900 Kw rooftop solar plant in Kelaniya while a 1 MW ground solar plant is expected to begin construction during the second quarter of the current financial year.

According to Pathmanatha Poddiwala, the company’s General Manager and Executive Director, Panasian has also entered into an agreement to build and operate a 2.9 MW rooftop solar plant in the Kurenegala district which is expected to be commissioned during the third quarter of his financial year.”

The company, in a media release, said it has reported a consolidated net profit of Rs. 99 million for the quarter ending 30th June 2018, up sharply by 1380 per cent compared to the same period last year.

Revenue also grew during this period by 134 per cent to reach Rs 177.7 million. Operating profit for the quarter increased to Rs 138.7 million from Rs 40.3 million during the same period last year.

These strong results were attributed to contributions from the Padiyapelella, Manelwala and Rathganga mini hydropower plants, both of which have Standardised Power Purchase Agreements (SPPA) with the Ceylon Electricity Board (CEB) to supply all of the energy generated to the national grid. The period under review also saw Panasian Power record its first solar power income. The company was also able to increase margins during the quarter by exercising prudent cost control practices which brought down direct expenses and finance costs. This resulted in direct expenses of Rs 19.5 million compared to Rs 22.9 million during the same period last year and a finance cost of Rs 25.8 million compared to Rs 33.6 million during the same period last year.

Commenting on the results, CEO Dr Prathap Ramanujam, said, “We fully expect these figures to improve further over time as power generation increases at the plants and with greater contribution coming from our solar power investments. With several solar projects in the pipeline, as part of our continued energy diversification plans, and as we continue to explore new opportunities both here and abroad, we are that much closer to realizing our ultimate goal of securing a clean energy future.”

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Sri Lanka's EPF delay holding up hotel sale: East West

ECONOMYNEXT - A delay by the Employees Provident Fund, a state-managed pension fund in coming up with a price for a 11 percent stake is delaying the sale of a hotel to a Singapore based firm, East West Properties said.

In March 2018, East West said it had signed a letter of intent with HPL Hotels and Resorts Pte Ltd, Singapore to sell a 72 percent stake in Weligama Hotel Properties Ltd.

In a stock exchange filing Friday, East West said HPL Hotels had said they only want a 100 percent stake.

But fund had not come up with a valuation of their 11.11 percent stake "despite all accounts and other details being available to the EPF though their representative" who is director of the hotel, East West the filing said.

No offer price was mentioned in the filing.

Sri Lanka to charge 7-pct tax from banks on added value

ECONOMYNEXT - Sri Lanka has proposed to charge 7 percent value added style-tax from banks and finance companies, in changes proposed to the Finance Act as a so-called Debt Repayment Levy.

The proposed tax will be calculated "applying the attributable method" referred in the value added tax act 14 of 2002, the bill said.

It is not clear whether customers who take loans can recover the tax, through their value added tax payments.

Banks already pay a non-recoverable value added tax which falls mostly on salaries.

If the 'Debt Repayment Levy' is not recoverable as part of the standard value added tax regime by borrowers, the administration would have added yet another tax to the already complex system and would be going against a promise given to reduce the overall number of taxes and broadbase a few and boost compliance in bid to put the country on a faster growth path.

Including the tax in the existing VAT regime is would be consistent with the policy of base-broadening.

Banks are considered easy targets for tax, but the overall effect is to push up nominal interest costs.

The proposed changes to the law also allows for discretion to make exceptions, which critics say can lead to corruption.

"The Ministry may, having regard to the economic development of the country by Order published in the Gazette, exempt any transaction of a financial institution specified in such Order, from the payment of the Levy payable under this Part, subject to such condition as may be specified in such Order.

Sri Lanka Softlogic Holdings June net up 14-pct

ECONOMYNEXT - Profits at Sri Lanka's listed Softlogic Holdings grew 14 percent from a year earlier to 49.7 million in the June 2018 quarter on improving margins arising from group synergies despite falling earnings across retail, healthcare and financial services, interim accounts showed.

Earnings amounted to 5 cents a share in the quarter, interim accounts filed with the Colombo Stock Exchange showed.

The share last traded at 22.20 rupees.

In the June quarter, Softlogic gross profits grew 6.7 percent from a year earlier to 5.8 billion rupees, on revenue growth of 5.4 percent to 16 billion rupees and cost of sales increasing a slower 4.7 percent to 10.2 billion rupees.

The retail segment of the group which includes listed Odel Plc contributed 51 percent to group revenue, followed by 20 percent from Healthcare which includes listed Asiri Hospitals Holdings, and 19 percent from financial services which includes Softlogic Life Insurance and Softlogic Finance.

"Better bargaining power led by group synergies paved the way for margins improving to 36.3 percent in the quarter, from 35.9 percent a year earlier," Chairman Ashok Pathirage told shareholders.

Other operating income fell 50 percent to 196.4 million rupees, after a one-off commission income in retail the previous year and lower revenue from the subsidiary finance company, the group said.

Administrative expenses rose 3.6 percent to 3.4 billion rupees and distribution costs grew 3 percent to 688 million rupees.

Net finance cost inched up 1.6 percent to 963.4 million rupees.

Group net debt reduced 54.3 billion rupees in the June quarter, down from 57.2 billion rupees the previous quarter.

This reduction was due to the rights issue of 3.9 billion rupees that was utilized settle debt in April 2018.

"Interest cost savings resulting from reduction in debt will be reflected in the books in the upcoming periods," Pathirage said.

Insurance liabilities of subsidiary Softlogic Insurance transferred to policyholders, which is treated as an expense, amounted to 264.3 million rupees, up 11.4 percent from a year ago.

-Segment results-

Softlogic Holdings' retail segment saw revenue increase 3.2 percent from a year earlier to 8.2 billion rupees in the June 2018 quarter, with profits falling 34 percent to 182 million rupees.

"The branded fashion segment continued its steady pace amidst challenging economic conditions," Pathirage said.

A 40,000 square feet shopping mall at Colombo City Centre will open end-August and Odel Mall opens in 2020, he said.

The Healthcare segment of the group reported revenue growth of 6.5 percent in the quarter to 3.2 billion rupees with earnings growing 1.1 percent to 422 million rupees.

The group is investing in a high-tech cancer treatment facility and 180-bed hospital in Kandy.

Financial services reported revenue growth of 22.4 percent from a year earlier to 3.1 billion rupees in the June 2018 quarter, with profits falling 18 percent to 226.7 million rupees.

Softlogic Life Insurance gross written premiums grew 38 percent to 4.6 billion rupees.

Total assets as Softlogic Finance increased 2.4 percent to 21.6 billion rupees and deposits grew 3 percent to 15.7 billion rupees.

Tech which comprises software and hardware solutions posted revenue of 666.5 million rupees with earnings falling 75 percent to 12.7 million rupees.

Automobile revenue was 278 million rupees in the June quarter on improving sales of long coaches on booming tourism but losses deepened 154 percent to 48 million rupees.

The hotels and property segment which includes Movenpick and Centara Ceysands Resorts and Spa saw revenue increasing 15 percent to 496 million rupees with losses falling 24 percent to 173.4 million rupees.

"Movenpick Hotel Colombo’s tie-ups with airlines and international sports teams proved to be beneficial," Pathirage said.

Distilleries Company of Sri Lanka June net up 88-pct

ECONOMYNEXT - Profits at listed Distilleries Company of Sri Lanka grew 88 percent from a year earlier to 1 billion rupees in the June 2018 quarter despite falling revenue as margins improved and borrowing costs fell sharply, interim accounts showed.

Earnings amounted to 23 cents a share in the quarter, interim accounts filed with the stock exchange showed.

The share closed unchanged at 20.50 rupees on Wednesday.

Gross revenue in the quarter fell 10.1 percent to 19.2 billion rupees with net revenue after turnover related taxes like VAT and excise duties declining 4 percent to 6.4 billion rupees.

Cost of sales fell 20 percent to 4.2 billion rupees leading to a 55 percent growth in gross profits of 2.2 billion rupees.

Net finance costs fell 47 percent to 55 million rupees as borrowing fell to 2.9 billion rupees at end June 2018 from 8.3 billion rupees a year earlier.

Distribution costs grew 22.7 percent to 147.4 million rupees and administrative expenses fell 1.3 percent to 219.8 million rupees.

Sri Lanka LOLC June net flat

ECONOMYNEXT - Profits at listed Lanka Orix Leasing Company, or LOLC, grew 1 percent from a year earlier to 2.9 billion rupees in the June 2018 quarter with losses in hotels, manufacturing and plantations offsetting gains in financial services, interim accounts showed.

Earnings amounted to 6.43 rupees a share, accounts filed with the Colombo Stock Exchange showed.

The share closed unchanged at 86 rupee Wednesday.

Net interest income grew 28 percent to 12.5 billion rupees as interest income increased 21 percent to 28.4 billion rupees and interest expenses fell 16 percent to 15.8 billion rupees.

LOLC group's loan book expanded 30 percent from a year earlier to 501 billion rupees at end June 2018.

Deposits grew a faster 37 percent to 324 billion rupees.

Total operating profit grew 10 percent to 18.8 billion rupees including revenue from other businesses of the group.

Personnel costs rose 18 percent to 5.2 billion rupees, other operating expenses grew 15 percent to 3.5 billion rupees and losses on financial assets revaluation deepened 21 percent to 1.7 billion rupees.

Other operating expenses grew 15 percent to 3.5 billion rupees.

Total assets of the LOLC group grew 20 percent to 832.3 billion rupees, with shareholder funds amounting to 73.4 billion rupees, up 17.2 percent from a year earlier.

-Segment results-

At company level, LOLC reported a net income cost of 922 million rupees, up 55 percent from a year earlier, leading to a bottom line loss of 168 million rupees in the June 2018 quarter, compared to a 183 million rupee profit a year earlier.

The loan book surged to 8.2 billion rupees compared to 698 million rupees a year earlier.

Borrowings grew to 53 billion rupees from 43.6 billion rupees a year earlier.

Investment in subsidiary companies grew to 68 billion rupees at end June 2018, up from 63 billion rupees a year earlier.

The LOLC group's financial services segment reported 20 percent growth in profits from a year earlier to 6.8 billion rupees in the June 2018 quarter.

Profits from insurance grew 500 percent to 102 million rupees.

Hotel losses deepened 55 percent to 570 million rupees and manufacturing reported a 239 million rupee loss compared to profits of 10 million rupees a year earlier.

Plantations reported losses of 56 million rupees compared to profits of 91 million rupees a year earlier.

Sri Lanka's Bank of Ceylon June net down 39-pct

ECONOMYNEXT - Profits at Sri Lanka's largest bank, state controlled Bank of Ceylon, fell 39 percent from a year earlier to 2.7 billion rupees in the June 2018 quarter, on falling interest margins as deposits grew faster than its loan book and higher bad loans provisioning, interim accounts showed.

Earnings in the six months to end June fell 28 percent to 7.5 billion rupees on net interest income growing 4 percent to 31 billion rupees.

In the June quarter, the bank reported net interest income growth of 1.7 percent to 15.9 billion rupees, as interest income increased 12 percent to 48.5 billion rupees and interest expenses grew a faster 17.7 percent to 32.7 billion rupees.

Interest margins had also contracted to 3.07 percent in the quarter, compared to 3.34 percent a year earlier.

Bank of Ceylon's loan book grew 8.7 percent from a year earlier to 1.24 trillion rupees at end June 2018, while deposits grew a faster 16 percent to 1.63 trillion rupees.

Bad loans provisioning increased 12.3 percent to 5 billion rupees.

Net fee and commission income grew 46 percent to 2.1 billion rupees.

Losses from trading in financial assets fell 57 percent to 488 million rupees.

Operating expenses grew 27 percent to 9.2 billion rupees which includes staff costs amounting to 5.4 billion rupees, a moderate 1.3 percent from a year earlier.

Total assets of the bank rose 11 percent from six months earlier to 2 trillion rupees at end June 2018, while shareholder funds increased 12.5 percent to 126.5 billion rupees.

Tier 1 capital adequacy under Basel III was 10.09 percent, higher than the 8.875 regulatory minimum, but lower than what it was six months earlier at 10.87 percent.

Total capital adequacy was 13.77 percent, higher than the 12.875 regulatory minimum, but was lower than 14.49 percent the bank had achieved six months earlier.

Sri Lanka’s Commercial Bank June net up 10-pct, tax, personnel costs up

ECONOMYNEXT – Net profits at Sri Lanka’s Commercial Bank grew almost 10 percent to 4.2 billion rupees in the June 2018 quarter from a year ago with a sharp rise in tax, personnel and impairment costs and big gains in other income.

Net interest income rose 31 percent to 12.1 billion rupees with interest income up 17 percent while interests costs grew a slower nine percent, according to interim accounts filed with the stock exchange.

Earnings per share for the quarter were 4.20 rupees. The share closed Wednesday at 123.50 rupees, down 50 cents or 0.40%.

The June accounts showed tax costs went up by half along with a sharp rise in personnel costs but with big gains in other income despite trading losses mainly from swap losses and fee and commission income also up sharply.

Tax costs went up 57 percent to 4.2 billion rupees after the removal of most income tax exemptions enjoyed by the banking industry with the introduction of the new Inland Revenue Act.

Personnel costs rose 17 percent to 3.2 billion rupees after a pay hike.

Impairment charges for bad loans shot up 240 percent to 2.4 billion rupees in the June 2018 quarter from the previous year with a huge increase in individual impairment costs.

Other income shot up 924 percent to 2.8 billion rupees despite a 1.4 billion rupee trading loss while fee and commission income rose 26 percent to 2.5 billion rupees.

In the six months to June 2018, diluted EPS went up to 8.52 rupees from 8.26 rupees a year ago.

Commercial Bank said in a statement deposits exceeded 911 billion rupees, growing by over 10 billion a month while the loan book grew over 12 billion rupees a month to reach 829 billion rupees.

Taxes exceeded 7 billion rupees in the first 6 months of 2018 accounting for 45% of pre-tax profit.

Commercial Bank said it was “compelled to make significant provisions for impairment charges for the six months ending 30th June 2018.”

But it also said “timely re-pricing enabled the bank to restrict growth of interest expenses despite a shift towards high cost funds in the six months reviewed.”

Net interest income accounted for 77.35% of the total operating income of the bank.

Commercial Bank Chairman Dharma Dheerasinghe said the bank’s performance reflected its ability to withstand challenges, such as an industry-wide increase in impairment charges, necessitated by the trend of an escalation in non-performing loans (NPLs).

“The bank has been able to maintain its NPL ratios well below industry averages, but we expect the pressure on impairment charges to continue in the year ahead due to slower business growth,” Dheerasinghe said.

Total assets of the bank grew by Rs 56.341 billion or 4.93% over the six months to reach Rs 1.2 trillion as at 30th June 2018.

Total loans and receivables from customers crossed the Rs 800 billion mark in the review period, increasing by Rs 74.083 billion or 9.82% since 31st December 2017 to Rs 828.791 billion at the end of the first half.

The bank’s deposits increased to Rs 911.180 billion in the period reviewed, growing by 7.18% or Rs 61.053 billion since 31st December 2017.

Sri Lanka's Melstacorp June net down 30.8-pct

ECONOMYNEXT - Profits at Sri Lanka's listed conglomerate Melstacorp Plc fell 30.8 percent from a year earlier to 789.3 million rupees in the June 2018 quarter on rising finance costs from a surge in borrowings and losses in telecommunications and lower profits from financial services.

Melstacorp is the parent company of liquor producer listed Distilleries Company of Sri Lanka and other businesses ranging from insurance, plantations, financial services and telecommunications.

Earnings in the quarter amounted to 68 cents a share, according to interim accounts filed with the Colombo Stock Exchange.

The share closed unchanged at 50 rupees Wednesday.

Revenue grew 102 percent to 20.8 billion rupees, cost of sales increased 75 percent to 13.3 billion rupees leading to a 178 percent increase in gross profits of 7.5 billion rupees.

Net finance cost surged 941 percent to 413 million rupees as borrowings increased to 26.7 billion rupees at end June 2018, from 3.6 billion rupees a year earlier.

Administrative expenses ballooned 367.6 percent to 4.6 billion rupees.

-Segment Results-

The group's beverages segment which includes listed Distilleries saw revenue decline 10 percent from a year earlier to 20.8 billion rupees in the June 2018 quarter, but profits grew 31 percent to 1.7 billion rupees.

Telecommunications which includes voice and broadband service provider Lanka Bell saw revenue growing 8 percent to 763 million rupees but losses deepened 22 percent to 437 million rupees.

Financial services which include businesses in insurance (Continental Insurance) reported a 12 percent decline in revenue to 751 million rupees with earnings falling 29 percent to 88 million rupees.

Tea and rubber plantations revenue grew 45 percent to 1.2 billion rupees leading to a 60 percent growth in profits to 40 million rupees.

A segment classified as other which includes a BPO, hotels, logistics, energy, textiles and media saw revenue surge to 11 billion rupees in the June 2018 quarter, up from 485 million rupees a year earlier, with combined profits of 611 million rupees, an increase of 50 percent from a year earlier.

Sri Lanka's Lanka Walltiles group June quarter profit down 72-pct

ECONOMYNEXT – Profit at Sri Lanka's Lanka Walltiles group fell 72% to 47 million rupees in the June 2018 quarter from a year ago, interim financial results filed with the stock exchange showed.

The group reported earnings of 87 cents per share in the quarter, down from 3.12 rupees a year ago. The stock closed unchanged at 79 rupees Tuesday.

The tile manufacturing group, which includes Lanka Tiles, benefits from high import tariffs on tiles which keep construction costs artificially high but still faces stiff competition from cheap imported tiles.

Lanka Walltiles June 2018 sales rose 5.3% to 3.8 billion rupees, cost of sales fell 12% to 2.95 billion rupees, contracting gross profits 12.7% to 853 million rupees, the accounts showed.

Profits from the group’s tile business fell 38%, earnings from packing materials were sharply lower while its plantations and aluminium products businesses made losses.

Group subsidiaries also include Vallibel Plantation Management Limited, Horana Plantations PLC, Uni-Dil Packaging Ltd, Uni-Dil Packaging Solutions Ltd, Swisstek (Ceylon) PLC, and Swisstek Aluminium Ltd.

Profits at subsidiary Lanka Tiles fell 43% to 84 million rupees in the June 2018 quarter from a year ago, interim accounts showed.

Earnings per share were 1.59 rupees. Lanka Tiles share last traded at 91.60 rupees.

Lanka Tiles sales rose 13% to 1.4 billion rupees in the June quarter from the previous year with local sales up by 13% to 1.3 billion rupees and exports up 12% to 64 million rupees.

Sri Lanka's HNB June net up 32-pct

ECONOMYNEXT - Profits at Sri Lanka's listed Hatton National Bank grew 32 percent from a year earlier to 4.5 billion rupees in the June 2018 quarter on improving interest margins and lower bad loan provisioning, interim results showed.

The bank, popularly known as HNB, reported earnings of 18.12 rupees a share, interim results filed with the Colombo Stock Exchange showed.

The share closed unchanged at 220.70 rupees on Wednesday.

Earnings were 18.49 rupees a share in the six months to end June 2018 on a profit of 9.1 billion rupees.

In the June quarter, net interest income grew 14 percent to 12.8 billion rupees as interest income rose 9 percent to 28.1 billion rupees and interest expenses grew a slower 5 percent to 15.3 billion rupees.

The bank's loan book grew 9 percent from six months earlier to 695.7 billion rupees and deposits grew 6 percent to 741.3 billion rupees.

Interest margins improved to 4.49 percent in the quarter, up from 4.25 percent six months earlier.

Bad loans provisioning fell 27 percent from a year earlier to 1 billion rupees in the June quarter.

Fee and commission income rose 6 percent to 2.4 billion rupees.

Trading losses fell 17 percent to 1.1 billion rupees and other operating income rose 34 percent to 1.8 billion rupees.

Net losses on trading increased on account of higher depreciation of the rupee against US dollar from a year earlier, the bank said.

Insurance premium income from a subsidiary HNB insurance rose 17 percent to 1.7 billion rupees.

Personnel costs grew 6 percent to 3 billion rupees and other expenses rose 17 percent to 3 billion rupees.

Gross assets of the bank grew 5 percent to 1 trillion rupees, with equity attributable to shareholders grew 113.2 billion rupees.

Tier 1 capital adequacy was 12.48 percent, compared to the regulatory minimum of 8.875 percent.

Total capital adequacy was 15.22 percent, above the regulatory minimum of 12.875 percent.

"As we move in to the second half of 2018, we are fully cognizant of the macro-economic challenges, slow-down in economic growth and market liquidity constraints," HNB's Chief Executive Jonathan Alles said in a statement.

"These primary challenges and the need for additional capital to meet the enhanced regulatory requirements and taxes, continue to hamper growth in the banking sector.

"As such, we remain optimistic of sustained policy consistency which will create an environment for growth," he said.

Sri Lanka’s 01-yr Treasury Bill yield falls to 9-pct

ECONOMYNEXT – Sri Lankan Treasury Bill yields fell across maturities at an auction Wednesday with the 01-year bill yield falling 16 basis points to 9.00 percent from last week, data from the Public Debt Department of the central bank showed.

It raised 11 billion rupees from 01-year bills, the exact amount offered, after getting bids worth almost 56 billion rupees.

The 03-month bill yield fell 06 basis point to 8.10 percent while the 06-month bill yield fell 08 basis points to 8.62 percent.

The debt office raised 20 billion rupees from all tenors, the same amount offered, having got bids worth 84 billion rupees.

Sri Lanka's Union Assurance June quarter profits surge 349-pct

ECONOMYNEXT - Profits at Sri Lanka's listed Union Assurance surged 349 percent from a year earlier to 300.2 million rupees in the June 2018 quarter on rising revenue and lower costs, interim results showed.

The company specializes in long term, or life, insurance, reporting earnings of 5.09 rupees a share in the June quarter, interim results filed with the Colombo Stock Exchange showed.

Earnings for the six months to end June 2018 was 10.25 rupees a share on profits of 604 million rupees, up 245 percent from a year earlier. During the premium, gross premium incomes growing 12 percent from a year earlier to 5.2 billion rupees and investment income growing 16 percent to 2 billion rupees.

Union Assurance was trading 3.60 rupees higher on Wednesday at 280 rupees.

In the June quarter, gross written premium income rose 13 percent from a year earlier to 2.6 billion rupees, with reinsurance costs rising 13 percent to 138 million rupees, leading to net written premiums growing 13 percent to 2.5 billion rupees.

Profit from operations grew 495 percent to 278.8 million rupees as net losses from changes to contract liabilities in the life fund fell 53 percent to 1 billion rupees.

Net claims and insurance benefits paid rose 88 percent to 792.2 million rupees and underwriting and acquisition costs grew 37 percent to 542.3 million rupees.

Operating and administrative costs rose 57 percent to 809 million rupees

The company did not report any income tax expenses having carried forward taxable losses from the previous financial year, the company said.

The Inland Revenue Department has raised an income tax assessment of 832 million rupees for the 2015/16 financial year along with a 50 percent fine, which totals 1.3 billion rupees.

"Directors are of the view that it has followed due process and acted in accordance with the prevailing laws in its tax submission and therefore, the above assessments have no rationale or basis in law," the company said in the notes to the interim results.

Union Assurance's life fund was worth 35.4 billion rupees at end June 2018, down from 39.5 billion rupees six months earlier due to the falling value of financial investments to 29.6 billion rupees from 34.5 billion rupees.

Gross assets increased to 44.5 billion rupees at end June 2018, up from 43 billion rupees six months earlier.

Net Assets fell to 11.4 billion rupees from 11.9 billion rupees.

Sri Lanka Access Engineering June net down 39-pct

ECONOMYNEXT - Profits at Sri Lanka's Access Engineering fell 39 percent from a year earlier to 364.9 million rupees in the June 2018 quarter as falling margins from construction offset improving earnings from condominium sales and rent, interim accounts showed.

Earnings were 36 cents a share in the quarter, interim accounts filed with the Colombo Stock Exchange showed.

The share was trading 30 cents lower on Wednesday at 15.30 rupees.

Revenue grew 10 percent from a year earlier to 5.8 billion rupees, and cost of sales grew a faster 18 percent to 4.8 billion rupees dragging gross profits down by 16 percent to 990 million rupees.

The construction segment reported revenue growth of 5 percent from a year earlier to 3 billion rupees, but profits fell a sharp 82 percent to 86 million rupees.

Real estate saw revenue increase 312 percent to 196 million rupees, with profits increasing 179 percent to 183 million rupees.

This segment which comprises rents from high-rise buildings owned by the group and apartment sales made the highest contribution to group earnings.

Construction material sales grew 89 percent to 894 million rupees and profits increased 106 percent to 72 million rupees.

Automobile sales increased 11 percent to 2 billion rupees but profits fell 68 percent to 41.2 million rupees.

Group administrative expenses rose 18 percent to 432.7 million rupees and net finance cost rose 193 percent to 152 million rupees.

The company said it was disposing three subsidiaries for 1.54 billion rupees with the sales proceeds expected in equal instalments over a 12-month period beginning April 2018.

The company's banks have also issued guarantees worth 7.9 billion rupees at end June 2018.

Sri Lanka extends ban on PABC bank's primary dealership

ECONOMYNEXT - Sri Lanka's Central Bank said it was extending a ban on the primary dealership of listed Pan Asia Banking Corporation, barring it from accessing primary auctions of government securities.

"The Monetary Board of the Central Bank of Sri Lanka has decided to extend the suspension of business and activities of a Primary Dealer of Pan Asia Banking Corporation PLC (PABC) for a period of six months with effect from 15 August 2018, in order to continue the investigations being conducted by the Central Bank of Sri Lanka," the Central Bank said Wednesday.

The ban was imposed under the Registered Stock and Securities Ordinance and the Local Treasury Bills Ordinance, the banking watchdog said.

"The Central Bank wishes to emphasize that this regulatory action restricts PABC’s access to the primary auctions for government securities. It does not affect any of the other activities or services of PABC," it said.

Sri Lanka banking sector outlook negative: Fitch

ECONOMYNEXT - Fitch Ratings said it was maintaining a negative outlook for Sri Lanka's banking sector on slower growth in credit and profitability, with bad loan provisioning to increase on sluggish economic growth and disposable incomes falling.

"Fitch Ratings maintains a negative banking-sector outlook for Sri Lanka in 2018 as operating conditions should remain challenging, which could put mild pressure on performance during the rest of 2018 and possibly 2019," the ratings agency said in a statement Wednesday.

Nevertheless, performance of banks under Fitch's coverage remained fairly stable through 2017 and the first quarter of 2018. Their credit profiles are likely to remain broadly intact, the ratings agency said.

Sri Lankan banks have raised Tier 1 capital of 66 billion rupees and Tier 2 capital of 45 billion rupees since 2017 ahead of the full implementation of Basel III in 2019.

Further capital-raising is likely in 2018, although much of the shortfall was bridged in 2017.

"Higher credit costs could continue to hamper profitability in 2018. Credit costs rose in 1Q18, although pre-provision operating profitability buffers could still absorb the higher credit costs," Fitch said.

Fitch Ratings statement on the banking sector follows:

-Steady Profiles, Challenging Environment-

The performance of Sri Lankan banks under Fitch Ratings’ coverage remained fairly stable through 2017 and 1Q18, and we expect their credit profiles to remain broadly intact.

However, Fitch Ratings maintains a negative banking-sector outlook for Sri Lanka in 2018 as we expect operating conditions to remain challenging. This is likely to put mild pressure on performance during the rest of 2018 and possibly 2019.

-Capital Raising to Continue-

The implementation of Basel III in 2017 prompted Sri Lankan banks to raise capital, leading to improved capitalisation across most banks.

Fitch believes that large state commercial banks are the most likely to need further capital, as they are vulnerable to dividend demands from the state and their ability to raise capital may be constrained.

Sri Lankan banks have raised Tier 1 capital of LKR66 billion and Tier 2 capital of LKR45 billion since 2017 ahead of the full implementation of Basel III in 2019.

This includes LKR10 billion of equity by the large state-licensed commercial banks. Further capital raising is likely in 2018 although much of the shortfall was bridged in 2017.

-NPL Risks Remain-

Absolute NPLs for the sector rose by 25% in 1Q18 on the back of difficult operating conditions, with relatively slow economic growth and pressure on disposable income. The gross NPL ratio for the sector had risen to 3.0% by 1Q18 from 2.5% at end-2017.

There has also been an increase in rescheduled loans in 2017 and in 1Q18 across Fitch-rated banks, indicating on-going pressure on asset quality. However, we do not expect a significant increase in NPL ratios in 2018.

-Moderate Credit Growth Likely-

Loan growth for the sector picked up to 4.6% in 1Q18, but Fitch expects credit expansion to be kept in check due to the authorities’ focus on managing inflationary pressure and risks from any fiscal slippages.

Sector loan growth had also moderated in 2017 to 16.1% (2016: 17.5%, 2015: 21.1%), due mainly to the deceleration in private-sector credit demand as measures to tighten monetary policy in 2016 and 2017 took effect.

-Moderate Profit Growth-

The net profit growth for Fitch-rated banks in 2017 dropped to 10% from 25% in 2016 amid higher credit costs and taxes, although there was considerable improvement at the pre-impairment level. Higher credit costs could weigh on sector ROA in 2018.

-Stable Funding and Liquidity-

Deposits are likely to remain the main source of funding (83% of total funding at 1Q18) for Sri Lankan banks.

The share of current and savings accounts (CASA) for the sector had decreased to 34% of total deposits from 37% at end-2016 due to the shift to term deposits on account of higher interest rates. The loans/deposit ratio for the sector had eased slightly to 87% by 1Q18.

-SLFRS 9 Impact-

The implementation of SLFRS 9 in 2018 presents an additional challenge for Sri Lankan banks. The shift could add more pressure to capitalisation through a possible significant one-off adjustment, and drive a structural increase in normalised credit costs.

The Basel III capital shortfall could widen through the impact of SLFRS 9, although the impact on regulatory capital ratios is likely to be spread out across several periods.

Sri Lanka's Hemas Holdings June net down 20.2-pct

ECONOMYNEXT - Profits at Sri Lankan conglomerate Hemas Holdings fell 20.2 percent from a year earlier to 554.3 million rupees in the June 2018 quarter on higher finance costs, lower healthcare profits and losses in leisure and tech, interim results showed.

"The decline in earnings is due to reduced interest income post utilisation of cash reserves to acquire stationery company Atlas in January 2018 and increased interest costs relating to higher working capital due to strong growth in pharmaceutical distribution and the loan financing for our new logistics park," Chief Executive Steven Enderby told shareholders.

Earnings were 96 cents a share in the quarter, interim results filed with the Colombo Stock Exchange showed. The share last traded at 98.30 rupees.

Gross profit grew 17.6 percent to 4.7 billion rupees on revenues increasing 21.3 percent to 13.5 billion rupees and cost of sales growing a faster 23.4 percent to 8.8 billion rupees.

"Revenue growth was led by higher contributions in our consumer and healthcare sectors," Enderby said.

"Operating profit growth has been impacted by losses at N-Able, our IT technology solutions business, coupled with a weaker macroeconomic environment with sluggish consumer demand as disposable incomes have been dampened by rising costs from rupee depreciation and increased taxes," he said.

The group reported a net finance cost of 102.1 million rupees in the quarter, compared to a net finance income a year earlier of 100.9 million rupees.

Long-term borrowings were 4.5 billion rupees at end June 2018, up from 1.7 billion rupees a year earlier.

-Segment results-

Hemas' consumer businesses reported revenue growth of 36.2 percent from a year earlier to 5.4 billion rupees. Profits were up 8 percent to 569 million rupees.

"Market conditions domestically remain depressed with most market commentaries indicating low or negative growth in most major FMCG categories," Enderby said.

The group's Bangladesh business reported revenue growth of 6 percent but profitability remains a challenge due to heavy marketing spend, the Chief Executive said.

Stationery subsidiary Atlas reported revenue growth of 8.8 percent with operating profits breaking even, he said.

Healthcare revenue grew 24.7 percent to 6.4 billion rupees but earnings fell 6 percent to 339.5 million rupees.

"The pharmaceutical distribution operation registered strong revenue growth. However, managing the impact of price regulation and devaluations in the wake of depreciation of the rupee was a key operational challenge," Enderby said.

Hemas Hospitals achieved an occupancy rate of 60 percent in the quarter.

"Revenues and profitability were flat compared to a year earlier when occupancy levels were higher due to the dengue epidemic".

Subsidiary Morison reported a 31 percent decline in profits to 83 million rupees due to higher operating costs and exiting from Alcon eye-care distribution, after making revenues of 844.3 million rupees in the quarter.

The tourism and aviation segment of the group saw revenues grow 16 percent to 792.4 million rupees. The segment reported a loss of 140.2 million rupees, down 30 percent from a year earlier on improving occupancies at Serendib Hotels and Anantara Peace Haven.

Logistics and Maritime segment revenue grew 15.4 percent to 718.3 million and profits were up 10 percent to 171 million rupees.

"Construction of the new logistics park facility is now almost finalized with our first customer moving into our new 3PL warehouse in early August," Enderby said.

Other segment revenue fell 48 percent to 557 million rupees and losses deepened to 275 million rupees in the June 2018 quarter, from a loss of 65 million rupees a year earlier.

"Our technology business, N-Able got the year off to a slower start with revenue decline of 68.5 percent due to delays in project completion during the quarter in contrast to its strong start the previous year," Enderby said.

Sri Lanka’s HNB Assurance June profits up 4-pct

ECONOMYNEXT - Profits at Sri Lanka's HNB Assurance Plc rose 4 percent from a year earlier to to 106.3 million rupees in the June 2018 quarter helped by higher premiums and investment income, interim accounts showed.

The firm reported earnings of 2.13 rupees per share. For the six months to June the group reported earnings of 16.10 rupees per share on net profits of 805.1 rupees which grew 357 percent from a year earlier helped by a one-off gain.

The stock closed at at 112 rupees Tuesday.

HNB Assurance has a life insurance business, and owns a general insurance subsidiary.

Net written premiums in the June quarter grew 15 percent to 1.8 billion rupees from 2017, with gross written premiums up 9 percent to 2.1 billion rupees, and reinsurance costs down 19 percent to 250.1 million rupees.

Total benefits, claims and other expenses grew 16 percent to 2.1 billion rupees from a year earlier, of which insurance benefits and claims paid increased 55 percent to 802.6 million rupees.

Income from investment activities grew 18 percent to 453 million rupees from a year earlier.

Group assets grew to 20 billion rupees in June from 18.6 billion rupees in December, while equity increased to 4.1 billion rupees from 3.8 billion rupees.

Six months to June, gross written premiums rose 12 percent to 4.3 billion rupees from 2017, and reinsurance costs fell 3 percent to 531.7 million rupees, resulting in net written premiums of 3.7 billion rupees, up 14 percent.

Net insurance benefits and claims were up 39 percent to 1.4 billion rupees from 2017. However, total benefits, claims and other expenses remained flat at 3.7 billion rupees due to a 381.2 million one-off gain from a regulatory change in the methodology of valuing life insurance policy liabilities.

Year to date interest and dividend income grew 22 percent to 904.7 million rupees from 2017.

For the 6 months, life insurance profits after tax grew to 713.5 million rupees from 100 million rupees a year earlier, while general insurance profits after tax grew to 91.5 million rupees from 76.2 million rupees a year earlier.

Sri Lanka's Alumex to be export competitive with new plant

ECONOMYNEXT- Alumex Plc, which has commissioned Sri Lanka's largest aluminium extrusion plant says it is eyeing exports and plans to compete strongly in a domestic market with import tax protection that forced customers to pay high prices to be phased out in the future.

With the opening of a two billion rupee plant with the most modern technology and an output of 1,200 metric tonnes a month, Alumex is trying to reduce prices and meet global competition.

“We’re trying to match the prices of the United Arab Emirates," Managing Director Pramuk Dediwela said.

"If we can match those prices, we don’t have to worry about imports coming from any part of the world."

He said that aluminium products in the UAE have high standards at low cost.

The Sri Lankan government has announced plans to remove all protectionist tariffs by 2020 to make the economy competitive.

The aluminium sector has 30 percent import tariffs.

“It is a protected industry,” Dediwela said.

He said that with the addition of Alumex’s new plant, local supply capacity is three times the current local demand of 15,000 metric tonnes per annum.

Dediwela said that with the opportunities the port city project and the general construction boom is presenting, all local manufacturers have expanded capacity.

Alumex alone has a 24,000 metric tonne annual capacity, he said.

“With this plant, the country doesn’t need to import any aluminium extrusions," he said.

"When total local capacity is three times the demand, it’s a national crime to import," he said."It will cost us in foreign exchange."

Economists and philosophers have explained that imports are not a crime, and the right to buy a good from any producer regardless of the geographical location at the best price is a freedom all citizens inherently have in a true free country and stealing somebody's freedoms to force them to pay more of their hard-earned money causes harm, especially to the weakest members of a society.

Members of a society should act freely but in ways that does not cause harm to others by taking away their freedoms, which can be economic freedoms, the right to life or property.

Most building material in Sri Lanka have high costs due to protectionist tariffs, giving easy profits to a handful of businessmen as well as promoting inefficiency at the cost of ordinary families who are trying to put a roof over their heads.

Sri Lanka's export industries and hotels are also having high start-up costs due to protection given to building materials, pushing up costs and making it difficult to compete with countries, especially in East Asia, which have free trade.

In addition to lowering the overall competitiveness of an economy, businessmen who build protected industries also use up capital and resources in activities which exploit the people and generally lowers the well-being, reducing resources available for non-exploitative businesses.

Alumex has a 46 percent share in the aluminium extrusions market and related party Swisstek Aluminium Ltd has a 30 percent share, Dediwela said.

Lanka Aluminium Industries Plc, owned by a third party, has a 19 percent market share and the remaining 5 percent is from imports, he said.

Alumex is aiming for a 50 percent market share, he said.

Dediwela said that more importers are already eyeing entry due to the potential in Sri Lanka.

The current local excess capacity will be filled in another 5 years with the expected construction, he said.

In the interim, Alumex is looking at exports to utilize the plant capacity, and will set up two showrooms in India, one in the Maldives, one in Nepal and one in the Seychelles to improve distribution networks, he said.

Currently, exports to these markets are less than 2 percent of revenue and Alumex is targeting 10 percent, he said. Alumex may also enter the UAE, he said.

If demand picks up in these regional markets, Alumex will look at a possibility of building a plant in South Asia, he said.

“We have big expansion plans at the moment but we haven't finalised which country to build it in.”

“The technology we have in Sri Lanka is more advanced than technology available in other countries, whether it’s India, Bangladesh, Pakistan or Nepal. So, we want to share that.”

High labour and energy costs in Sri Lanka are affecting the decision as well, he said.

“Costs are not that high in Bangladesh. Even India.”

India has four or five plants which are as big as the new Alumex plant, he said. However, the Alumex plant has fully automated extrusion, which is currently unavailable elsewhere in South Asia, he said.

Eco-friendly processes and low wastage are also features of the new plant, he said.

Another local plant is also in the cards 5 years from now if capacities become full, Dediwela said.

Sri Lanka 's Lion Brewery June net up 134-pct

ECONOMYNEXT - Profits at Sri Lanka's listed Lion Brewery grew 134 percent from a year earlier to 737.7 million rupees in the June 2018 quarter on growing demand from tourists for its beers and lower excise taxes, the company said.

Earnings were 9.22 rupees a share, interim accounts filed with the Colombo Stock Exchange showed.

"The continuing growth in the tourism sector has contributed to our performance dauring the year," the company said in a statement to shareholders.

"Importantly, we are seeing a greater influence from the tourist sector in the retail shops rather than from the larger hotel chains.

"This seems to confirm the available empirical evidence that more and more tourists are moving into accommodation in boutique hotels, hostels and the informal sector," the company said.

The share last traded at 620 rupees.

Gross profit in the quarter grew 190 percent to 2.7 billion rupees on revenue growth of 74 percent to 9.4 billion rupees and cost of sales increasing a slower 49 percent to 6.7 billion rupees.

Beer export to 19 countries saw volumes increasing 21 percent in the June quarter, but the company said it does not publish separate revenue number for domestic and foreign beer sales.

The government reversing an earlier decision to charge higher excise taxes on beer compared to hard liquor also helped domestic volumes recover as consumers switched back from hard liqour like the popular 'gal' and 'pol' arrack.

'Gal arracku' is referred to arrack distilled from sugar cane because of plantations that sprang up around the Gal Oya irrigation project in Ampara. 'Pol' is coconut.

"We are (also) seeing evidence of a reduction in the consumption of illicit alcohol. Thus, the Excise Duty reforms of November 2017 have resulted in both social and financial returns to all stakeholders," Lion Brewery said.

Net finance costs grew 3 percent to 309.5 million rupees.

Distribution costs rose 63 percent to 832.3 million rupees and administrative expenses increased 23 percent to 293.7 million rupees.