Sri Lanka's Hatton Plantations makes Rs79mn loss in Sept quarter

ECONOMYNEXT - Sri Lanka's Hatton Plantations, which operates the tea business spun off from Watawala Plantations, reported a net loss of 79 million rupees in the September 2018 quarter.

The firm, which debuted on the Colombo Stock Exchange in February 2018, has sales of 756 million rupees in the quarter, according to interim results filed with the stock exchange.

The quarterly loss per share was 33 cents. Hatton Plantations had a loss per share of 10 cents in the six months to September 2018 with a net loss of 24 million rupees.

The stock last traded at 6.80 rupees Monday.

Before the separation of its tea business, Watawala Plantations had made a net profit of 366 million rupees in the September 2017 quarter with its tea business having a net profit of 76 million rupees.

Hatton Plantations is the segregated upcountry tea businesses of Watawala Plantations, with 17 tea estates and 11 processing factories.

Vish Govindasamy, Managing Director of Hatton Plantations, said its half-yearly performance was lower than expected.

“The loss is mainly due to the substantial reduction in crop and the drop in tea market, which resulted in reduced Net Sales Averages (NSA) achieved at the tea auctions in comparison to the previous year,” he said.

Other contributory factors were less number of day light hours as a result of the highest rain fall recorded in the last 10 years, issues relating to minimum residual levels (MRL) due to unavailability of weedicide, and drop in demand from Middle East, Russia and former Soviet Union countries.

The depreciation of the Sri Lanka rupee has had both positive and negative effects for the tea industry, Govindasamy said.

“Despite the challenges, HPL will continue to focus on quality with balanced nutrient intake to harness the best in quality parameters,” he said.

“Good agricultural practices put in place would ensure the retention of the tea plant’s liquoring characteristics together with its flavour and quality.”

Govindasamy said the crop at the beginning of the third quarter of the 2019 financial year has been in line with expectations.

Sri Lanka construction firm MTD Walkers sustains Rs1bn loss in Sept quarter

ECONOMYNEXT - Losses at Sri Lanka's MTD Walkers were flat from a year earlier at 1.1 billion rupees in the September 2018 quarter with falling revenue and rising finance expenses offsetting declining costs, interim accounts showed.

The construction firm reported a loss of 6.55 rupees a share in the quarter. In the six months to end September 2018, losses were 10.27 a share on a loss of 1.7 billion rupees, a 4 percent increase from the previous year, financial statements filed with the Colombo Stock Exchange showed.

MTD Walkers was trading 80 cents lower at 12.20 rupees Wednesday.

In the quarter, revenue fell 20 percent from a year earlier to 3.01 billion rupees, and cost of sales fell 26 percent to 3.02 billion rupees leading to gross loss declining 97 percent to 8.8 million rupees.

Other income rose 89 percent to 35.9 million rupees.

Administrative costs fell 23 percent to 295.9 million rupees and sales expenses declined 65 percent to 9.6 million rupees.

Net interest cost increased 80 percent to 1.1 billion rupees. Borrowings were 27.6 billion rupees at end September 2018, up 12 percent from a year earlier.

Retained losses in the company's balance sheet surged 413 percent from a year earlier to 4.1 billion rupees with shareholder funds attributed to equity holders falling 54 percent to 2.8 billion rupees.

Total assets amounted to 44.7 billion rupees, up 2 percent from a year earlier.

Segment results reported by MTD Walkers for the nine months to end September 2018 (despite P&L covering the quarter and six months) showed losses from construction deepening 4 percent from a year earlier to 1.7 billion rupees.

Losses from infrastructure construction increased 10 percent to 11 million rupees.

Earnings from trading fell a sharp 184 percent to 29.5 million rupees and marine engineering profits declined 56 percent to 10.5 million rupees.

Real estate profits fell 84 percent to 43 million rupees.

Losses from power generation fell 25 percent to 40 million rupees.

Sri Lanka's LMF Sept profits down 89-pct

ECONOMYNEXT - Profits at Lanka Milk Foods Plc fell 89 percent from a year earlier to 21.5 million rupees in the September 2018 quarter amidst falling revenue and higher costs, interim accounts showed.

Earnings per share was 54 cents in the quarter. In the six months to end September 2018, earnings were 1.08 rupees a share on a profit of 43.2 million rupees, down 83 percent from a year earlier, statements filed with the Colombo Stock Exchange showed.

Lanka Milk Foods, controlled by businessmen Harry Jayawardena through Milford Exports and listed Melstacorp Plc, was trading 80 cents lower at 135.20 rupees on Wednesday.

In the quarter, revenue fell 3 percent from a year earlier to 1.5 billion rupees, cost of sales increased 8 percent to 1.3 billion rupees leading to a 45 percent contraction in gross profits to 180.7 million rupees.

Administrative expenses grew 3 percent to 94.6 million rupees and distribution costs rose 13 percent to 94.8 million rupees.

Net finance costs surged 400 percent to 29.5 million rupees.

In the six months to end September 2018, milk powder sale fell 3 percent from a year earlier to 903 million rupees with earnings declining 175 percent to a loss of 51.3 million rupees.

Liquid and other milk products sales grew 5 percent with earnings flat at 203 million rupees.

The agriculture segment of Lanka Milk Foods reported flat revenue growth at 277 million rupees with earnings falling 209 percent to a loss of 41 million rupees.

Lanka Milk Foods is investing 2 billion rupees on dairy farm with 2,000 milch cows to meet growing demand for fresh dairy products.

It already has 2,100 million head of cattle of Ayrshire and Friesian breeds grazing in 1,500 acres of land in Ambewela, 6,000m above sea-level.

The milk yield is around 16,000 litres a day.

Fitch Affirms Sunshine Holdings at ‘A-(lka)’; Outlook Stable

LBO – Sri Lanka-based Sunshine Holdings PLC’s National Long-Term Rating has been affirmed at ‘A-(lka)’ with a stable outlook, Fitch Ratings said in a statement.

“The rating on Sunshine reflects its strong market positions in its diversified portfolio of products, which has elements of relatively defensive end-market demand, and the strong brand names associated with most of its offerings, ” it said.

“These strengths are counterbalanced by the heightening regulatory risk faced by the pharmaceutical import and distribution business and the exposure to commodity price volatility in its palm oil and tea plantation businesses.”

The full statement follows :

Fitch Ratings-Colombo-14 November 2018: Fitch Ratings has affirmed Sri Lanka-based Sunshine Holdings PLC’s National Long-Term Rating at ‘A-(lka)’. The Outlook is Stable.

The rating on Sunshine reflects its strong market positions in its diversified portfolio of products, which has elements of relatively defensive end-market demand, and the strong brand names associated with most of its offerings. These strengths are counterbalanced by the heightening regulatory risk faced by the pharmaceutical import and distribution business and the exposure to commodity price volatility in its palm oil and tea plantation businesses.

The rating also takes into account Fitch’s expectations that Sunshine’s net leverage – defined as lease-adjusted net debt/operating EBITDAR including proportionate consolidation of Estate Management Services (Private) Limited (EMSPL), the holding company for the agriculture and consumer goods segments – is likely to remain below 3.0x over the medium term. The financial profile has improved following a recent equity infusion and net leverage has fallen, , but over the medium term, free cash generation should improve as capex requirements have moderated.

KEY RATING DRIVERS
Equity Injection Reduces Net Leverage: Sunshine’s net leverage improved to around 2.1x by endSeptember 2018, from 2.4x at end-March 2018, supported by LKR775 million in proceeds from an equity issuance to SBI Ven Holdings Pte Limited in July 2018. Fitch expects Sunshine to use the proceeds to pay down debt, which increased after Sunshine used debt to increase its stake in EMSPL. We expect the company’s moderation in capex, resilient profitability in the palm oil business and high-margin diagnostics, wellness and beauty sectors to help maintain Sunshine’s net leverage at below 3.0x over the medium term.

Healthcare Margins to Shrink: Fitch believes the second round of government price caps on 23 essential drugs and two medical devices in September 2018 and the depreciating Sri Lankan rupee will reduce Sunshine’s healthcare-sector profitability. We expect healthcare EBITDA margins to fall to 5.9% in the financial year to March 2019 (FY19) from 6.5% a year earlier, but should recover from FY20 due to improvement in sales volume of drugs and growing contribution from the higher-margin diagnostics, wellness and beauty segments. Nevertheless the more frequent government price controls underscore the regulatory risk for the business. Palm Oil Key Agri Contributor: We expect the palm oil segment to continue to be the key driver of growth in operating cash flows from the agricultural segment in the medium term. Global crude palm oil (CPO) prices decreased to average USD535/tonne in 3Q18 from around USD650/tonne in 2017 due to robust output and a more challenging export market. However Sunshine’s domestic prices started to increase from 2QFY19 due to the depreciating Sri Lankan rupee and a recent increase in import duty. Fitch sees the risk of sustained pressure on global CPO prices, although the impact domestically will be softened by the higher duty and rupee weakness.

Fitch believes the segment’s profitability to be supported by resilient domestic demand for palm oil. Sunshine is well-positioned to benefit from growing local demand as it is the largest palm oil producer in Sri Lanka, accounting for more than 50% of domestic output. Palm oil is the largest contributor to Sunshine’s profit, making up almost 25% of the group’s proportionate EBITDA in FY18.

Volatile Tea Segment: Fitch expects the tea plantations’ cash flow volatility to continue over the medium term due to lower land and labour productivity, and cost pressures arising from periodic wage increases. The tea plantation business’s operating performance improved significantly in FY18 as a result of persistently high auction prices, with operating margin reaching 11.1% from 3.9% in FY17. However, operating margin was just 2.6% in 1H FY19 due to weaker prices. We expect supply-side pressures, ensuing cost escalations and volatile demand to hinder the segment’s long-term viability.

Tea Retail Offsets Volatility: Fitch believes Sunshine’s branded-tea segment will partly offset the volatility in the tea planation segment’s profitability. The branded-tea segment’s EBITDA margin declined in FY18 to 8.4% from 8.9% FY17 as a result of higher tea prices in the Colombo Tea Auction over 2017. The situation reversed when tea prices declined in 1H FY19, enabling the segment to improve margins, which partly countered the weaker profitability in the tea plantation segment. However, we expect the intense price competition, particularly in the lower-end of the market, to keep the branded-tea segment’s margins in check over the medium term.

Power, Dairy Improve Cash Generation: Fitch expects the capacity expansions in Sunshine’s power and dairy segments to increasingly contribute to cash generation and as such stabilise consolidated cash flows in the long term by reducing the share of contribution from the volatile tea and palm oil businesses. We estimate that the energy segment to annually contribute LKR180 million to EBITDA in the next two years. Contribution to EBITDA from the dairy business, which we estimate to be around LKR80 million-120 million, should start from FY20 when the farm reaches its full capacity.

DERIVATION SUMMARY
Sunshine is rated one notch lower than Richard Pieris & Company PLC (RICH, A(lka)/Stable) because RICH has a stronger business risk profile due to lower exposure to the cyclical plantation segment than Sunshine, as well as substantially higher cash flow from its defensive grocery retail business and larger operating scale.

Singer (Sri Lanka) PLC (A-(lka)/Stable) is a leading consumer durables retailer that has a stronger business-risk profile than Sunshine and a significantly larger operating scale, despite greater operating cash flow volatility. However, this is offset by Singer’s much higher leverage, which results in both companies having the same rating.

DSI Samson Group (Private) Limited (DSG, BBB+(lka)/Stable) is the market leader in the domestic rubber tyre and footwear markets and has a business-risk profile similar to that of Sunshine. However, DSG is rated one notch below Sunshine due its significantly higher leverage.

KEY ASSUMPTIONS
Fitch’s Key Assumptions Within Our Rating Case for the Issuer – Revenue to rise by 20% in FY19 (FY18: 12.7%) reflecting Sunshine’s larger stake in EMSPL; and then to increase by mid-single digits over the next two years

– EBITDAR margins to be maintained in the low-double-digit range over FY18-FY21 (FY18: 12.0%)
– Capex of LKR3.4 billion over FY19-FY22 for expansion across the board
– Dividend pay-out to be 30% of net profits over FY19-FY22

RATING SENSITIVITIES

Developments that May, Individually or Collectively, Lead to Positive Rating Action

– A sustained reduction in Sunshine’s lease-adjusted debt net of cash/EBITDAR (including
proportionate consolidation of EMSPL) to below 1.5x Developments that May, Individually or Collectively, Lead to Negative Rating Action

– An increase in Sunshine’s lease-adjusted debt net of cash/EBITDAR (including proportionate consolidation of EMSPL) to over 3.0x for a sustained period

– Sunshine’s EBITDAR coverage of gross interest + rent (including proportionate consolidation of EMSPL) falling below 2.0x for a sustained period

– Adverse impact on growth and profitability arising from sustained regulatory pressure in the healthcare and agriculture segments

LIQUIDITY
Satisfactory Liquidity: Sunshine had LKR1.1 billion of unrestricted cash and LKR2.6 billion in unutilised credit facilities as at end-March 2018 to meet LKR1.5 billion of debt repayment falling due in the next 12 months, which places the company in a comfortable liquidity position. More than 50% of the debt maturities in the next 12 months are short-term working capital lines and we expect banks to roll over these facilities as they fall due in the normal course of business.

Moody’s downgrades ratings of BOC, HNB, Sampath Bank; changes outlooks to stable

(LBO) – Moody’s Investors Service has downgraded the long-term local currency deposit and foreign currency issuer ratings of Bank of Ceylon (BOC), Hatton National Bank Ltd. (HNB) and Sampath Bank PLC (Sampath) to B2 from B1.

At the same time, Moody’s has downgraded the long-term foreign currency deposit ratings of the same three banks to B3 from B2 and affirmed the short-term local and foreign currency deposit ratings of the banks at NP.

Moody’s has also downgraded the Baseline Credit Assessments (BCAs) and adjusted BCAs of the three banks to b2 from b1.

As a result, Moody’s has downgraded the banks’ long-term local and foreign currency Counterparty Risk Ratings (CRRs) to B1 from Ba3, and their long-term Counterparty Risk Assessments (CRAs) to B1(cr) from Ba3(cr).

In addition, Moody’s has affirmed the banks’ short-term CRR of NP and short-term CRA of NP(cr) and revised the rating outlooks of the banks, where applicable, to stable from negative.

“The rating actions follow the downgrade of Sri Lanka’s sovereign rating to B2 from B1 on 20 November 2018, and the change in the sovereign’s rating outlook to stable from negative on the same date,” Moody’s said.“To reflect the deterioration in the operating environment, Moody’s has also lowered Sri Lanka’s Macro Profile to “Weak” from “Weak+”.”

Sri Lanka rupee hits record low after Moody's downgrade, IMF loan delay

Reuters: ** The Sri Lankan rupee fell to an all-time low of 179.00 per dollar on Wednesday, a day after Moody’s downgraded the country’s credit rating, as a political crisis worsens a rout in the currency.

** Moody’s downgraded Sri Lanka on Tuesday for the first time since it started rating the country in 2010, blaming the political crisis for aggravating already problematic finances.

** The downgrade coincided with a decision by the International Monetary Fund to delay discussions on its loan tranche to Sri Lanka.

** The political uncertainty remained the main concern of investors a day after President Maithripala Sirisena asked an all-party meeting to hold a third vote on a no-confidence motion against Prime Minister Mahinda Rajapaksa after rejecting the first two motions passed by a majority in the parliament, deepening the country’s political crisis.

** The central bank last week unexpectedly raised its key policy rates, in a move aimed at defending a faltering rupee as foreign capital outflows pick up amid an escalating political crisis and rising U.S. interest rates.

** The rupee hit a fresh low of 179.00 per dollar on Wednesday, surpassing its previous low of 177.35 hit on Monday. Sri Lanka’s markets were closed for a holiday on Tuesday.

** The currency ended at 178.70/179.20 per dollar on Wednesday, compared with 177.30/50 at previous close. It has weakened more than 3.3 percent since the political crisis began on Oct. 26 and more than 16.4 percent so far this year.

** Foreigners bought a net 10.2 million rupees worth of stocks on Wednesday. But they have offloaded equities worth 7.7 billion rupees since the political crisis started on Oct. 26.

** The bond market saw outflows of about 22.9 billion rupees between Oct. 25 and Nov. 7, central bank data showed. This year, there have been 17.3 billion rupees of outflows from stocks and 112.8 billion rupees from government securities, bourse and central bank data showed.

** The 5-year bond yields rose about 25 basis points on Wednesday, market sources said.

** The Colombo stock index ended up 0.04 percent at 5,950.19 on Wednesday. It declined 0.39 percent last week and has fallen 6.5 percent so far this year.

** Stock market turnover was 594.1 million Sri Lankan rupees ($3.33 million) on Wednesday, less than this year’s daily average of 836.9 million rupees.

** Stock, bond and foreign exchange markets will be closed on Thursday for a public holiday. 

($1 = 178.5000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair

Colombo Dockyard returns to profit in Sept. quarter

Sri Lanka’s largest shipbuilder, Colombo Dockyard PLC (DOCK), a unit of Japan’s Onomichi Dockyard, returned to profit during the September quarter (3Q18), after two quarters of losses, largely helped by a surge in other income, the interim financial accounts released to the Colombo bourse showed.

The company reported earnings of Rs.2.23 per share or Rs.165.1 million for the quarter under review, against a loss per share of Rs.1.10 or net loss of Rs.78.2 million.

The revenue for the quarter rose little over 27 percent year-on-year (YoY) to Rs.4 billion. But the cost of sales rose at the faster pace of 30 percent YoY to Rs.3.7 billion, resulting in a flat gross profit of Rs.290.2 million.

However, the group performance buoyed by a 294 percent YoY surge in other incomes to Rs.398 million, which appears to be stemming from a foreign exchange gain.
However, for the nine months ended September 30, 2018, DOCK was in red with a net loss of Rs.101.9 million, against a net profit of Rs.25.5 million reported for the same period, last year.

The revenue for the period fell 2.5 percent YoY to Rs.10.1 billion, with contributions from both shipbuilding and ship repairing segments underperforming.

The shipbuilding segment reported revenue of Rs.4.4 billion for the nine months ended September 30, 2018, down from Rs.5.3 billion reported for the same period, last year.

The segment’s gross profit however improved to Rs.126.8 million, from Rs.106.9 million.

The ship repairing segment reported a gross profit of Rs.374.5 million, down from Rs.964.9 million on revenue of Rs.4.2 billion, down from Rs.4.3 billion reported last year.

The heavy engineering segment saw a steady increase in revenues and profits during the period under review, compared to the previous year. The segment reported a gross profit of Rs.262.1 million on revenue of Rs.928.5 million.

Japan’s Onomichi Dockyard Company Limited owns 51 percent of DOCK while the state collectively owns about 35 percent of the issued shares of the firm through various state-owned institutions.
www.dailymirror.lk

Union Assurance posts Rs 2.24 bn PAT in 3Q

Union Assurance (UA) reported steady progress in the life insurance business, reporting 9% growth in gross written premium compared with the previous year.

Income generated from investments has increased significantly by 13% to Rs. 3,036 million for the reporting period. Expenses though high compared to corresponding previous year was spent in line with a business plan to strengthen the long-term prospects of the business.

Profit after tax amounted to Rs. 2,242 million compared with 267 million in 2017. With the introduction of the new tax base in terms of Section 67 of the Inland Revenue Act No. 24 of 2017, UA will have taxable income from the year ending 31 December 2018, enabling the company to claim its brought forward tax losses against its taxable income within a period of 6 years.

Accordingly, during the quarter under review a deferred tax asset amounting to Rs. 1,532 million arising from brought forward tax losses as at December 31,2017 has been recognized.

Profit up to the third quarter does not include a surplus from the life business which is actuarial valued at year end.

As at September 30, 2018, UA’s life fund stood at Rs 31 billion with a healthy solvency ratio indicating the financial strength of the business.

www.dailynews.lk

Expolanka records Rs 4.4bn PBT in 2Q

A focus on its fundamental logistics business has enabled Expolanka Holdings PLC to post promising growth for the second quarter of 2018, with a Year on Year (YOY) revenue growth of 15%.

This quarter saw Expolanka record an impressive 617% YoY growth in Profit After Tax as a result of expanding business and improving efficiency during the period.

In a message to shareholders, Executive Director and Group CEO Hanif Yusoof noted that the group’s financial stabilization was a result of continued efforts to improve margin efficiency coupled with growth in revenue. During this quarter the company recorded a revenue of Rs 25 bn, and a gross profit of Rs 4.4 bn. The logistics sector generated Rs 23.9 bn of the revenue.

Expolanka marked this robust growth streak by focusing on growing volume and market share in its key business sectors of logistics and leisure. This growth strategy aligned well with a global upturn in the logistics sector; the Trans-Pacific trade lane in particular saw strong growth during the period contributing to the sector’s overall performance. Expolanka’s core air export product remained strong, and the ocean product was able to sustain the growth momentum it has recorded over the last several quarters.

The operating environment for the business overall remains competitive and challenging, noted Yusoof. “However, bringing in focus and implementing pre-emptive strategies has enabled the group to deliver this good performance. We will endeavour to continue focusing on key business drivers such as volume, procurement, and operational efficiencies with a view to mitigating challenges from the external environment.”

In leisure, consolidation and sustainable earnings was the key growth focus that paid off with a 56% YoY Profit After Tax growth for the quarter. This figure was in line with expectations, noted Mr Yusoof. “We are seeing a tremendous growth in our core corporate travel business, which is driving growth in the leisure sector. This is complemented by the management team’s continued implementation of plans to optimize the performance within these businesses,” he said.

In Investments, export operations continued to remain stable, delivering projected results. IT operations (that primarily provide internal services) maintained its cost structures from the previous year with a focus on creating strategic value to the group. The sector’s overall contribution to the topline was Rs 774 mn.

Yusoof reiterated the group’s commitment to the fundamentals. “This year we have focused on growing key business lines, and that strategy is delivering results,” he added

About Expolanka Holdings:

Expolanka Holdings PLC has been in operation since 1978 and has a workforce of over 2300 employees. Headquartered in Colombo, Sri Lanka, the Group’s network spans 18 countries in Asia, Africa, USA and the Middle East. 

www.dailynews.lk

Vallibel Finance PBT soars to Rs. 1.03 bn

Vallibel Finance PLC returned yet another impressive report card with profits before tax (PBT) for the six months ending September, 2018 reaching a record high of Rs 1.03 billion.

The name-bearer of the Vallibel Group continued its now customary outstanding financial performance with PBT recording a growth of 28.2% over the same period of the preceding year, growing to the current high from a previous Rs. 807 million.

Profits After tax (PAT) incresed by 21.7% over the corresponding period of the previous financial year, reaching Rs. 527 million with other key indicators also showing strong growth, thus affirming the company’s far-sighted vision and prudent financial stewardship which have seen it emerging as finance sector’s standard-bearer. Deposits, the barometer of public confidence amassed to Rs. 23.9 billion, yet another all-time record, growing exponentially by 21% over the previous period under spotlight. “We have been able to record impeccable performance, both qualitative and quantitative during a very challenging and daunting period of time. This is a testament to the ability of our remarkable workforce, our strength, our dedication, our constant need to better ourselves and implementations of our high performing strategies.”, said Jayantha Rangamuwa, Managing Director of Vallibel Finance.

Further, the impact of the new tax structure, as well as the challenging local environment affected the financial industry adversely but Vallibel Finance has proven its mettle with a creditable performance, said Rangamuwa.

“We kept our focus on mid and long-term vision of the company while initiating revolutionary and resourceful strategies that helped us through difficult times.

“The result is continued confidence of the public”, he said.

The loan book stood at Rs. 35.7 billion at the end of the period under review, growing 32.7% from a previous Rs. 26.9 billion, thus affirming the faith Sri Lankans have placed in the company as their catalyst of development. Interest income was again on the rise, reaching Rs. 3.67 billion, a growth of 26.7% against the preceding period with the corresponding figure recorded as Rs. 2.90 billion.

Balance sheet make for outstanding reading with total assets climbing to Rs. 43.2 billion, firmly establishing Vallibel as one of the largest finance companies in terms of total assets. Total assets grew by 31.9% over the corresponding period of the previous year, where the figure stood at Rs.32.8 Billion. Vallibel Finance kept its eye on the Non-performing loans column keeping it at 3.17%, highlighting the company’s efforts during highly volatile conditions in the market.

LMD adjudged Vallibel Finance as the most respected finance company in Sri Lanka while Brand Finance upgraded its brand rating to – “A”, further enhancing the company’s Brand Reputation which is widely established as a household name in finance in the country, achieved within relatively a short period of time.
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Prime Finance consolidates its upward momentum

Successfully accomplishing the challenge of overcoming the volatile economic condition prevailing in the country, Prime Finance PLC completed the second quarter of its financial year with remarkable progress, by adopting the most productively well-informed, optimistic and pragmatic strategic direction.

Compared to the first quarter, the company has shown a commendable profit growth rate of 30% by 30th of September 2018, and half yearly profit before tax of 113 mn. The Company has also shown an income growth of 30%, reaching nearly 300 mn. The company was able to maintain its net interest margin at 11%, which is well above the industry average owing to its strategic diversification of portfolio, mainly into secured property mortgages with a healthy interest spread.

The Non-Performing Loan (NPL) ratio has systematically got reduced below the industry average as a consequence of focused Recovery Strategy and the measures adopted to improve the asset quality assessment by engaging a careful credit-evaluation process within the company’s strong Risk Management Framework.

The efficiency of the company is reflected through the drastic improvement in cost to income ratio.

The company recently increased its capital base by way of a Rights issue to raise Rs 864 million, and consequently reached the core capital of Rs.1.5 bn, which is well above the present threshold of Rs 1 billion stipulated by the Central Bank. With the enhanced capital structure, the company prides itself in winning customer confidence for a sustainable growth in the future. The company plans to further improve its capital base within the next two years thus strengthening its balance sheet up to a 2.5 bn capital base.





Prime Finance offers a range of financial products serving the needs of the SME sector and personal financial aspirations by being a “one stop shop” for all financial needs - be it financing of a land, house/ apartment, a vehicle or fixed deposits by empowering Sri Lankans to reach their multi- dimensional aspirations through the “Prime Group”.

Prime Finance recently marked a praiseworthy milestone - an investment grade credit rating of BBB - stable outlook by Icra Lanka Pvt Ltd. This was in recognition of the remarkable progress achieved during the recent past by implementing a sustainable business model.

The CEO of Prime Finance, Rasika Kaluarachchi said, “The business environment today is subject to rapid changes and therefore is very turbulent. So, being dynamic is about keeping pace in the ever-changing financial landscape and taking responsive action in order to meet emerging challenges successfully and surge ahead of the competition” He added that “Our focus is strong and our strategies are aligned. Thus, we remain ready and committed to deliver ever-greater values to our stakeholders in a continuous and sustainable manner.”

“By launching many strategic, operational and structural improvements, the Company was able to succeed and will now look forward for further consolidation in order to maintain steadfast progress into the future, whilst embracing the exciting economic challenges and opportunities that await us,” he said.

Prime Finance PLC is powered by the “Prime Group”, the largest conglomerate in the Real Estate/Residencies Industry, having over 20 years of service excellence, which is headed by its’ Group Chairman, B. Premalal who has been recognized as one of the 50 business personnel in Sri Lanka by LMD-2018. The Prime Group was awarded the “Best Property Developer in 2018,” and rated as one of the “25 Great Work Places in Sri Lanka 2018” for the fourth consecutive year and selected as one of “Asia’s 100 Greatest Brands.

www.dailynews.lk

Allianz Insurance Lanka posts impressive PBT of Rs. 1.2 bn in 3Q

Allianz Insurance Lanka Limited continues its remarkable performance post the amalgamation to record a gross written premium of LKR 13.6 billion with a YoY growth of 6% at the end of the third quarter 2018.

The Company’s continuous commitment to growth was further boosted with an impressive profit before tax of LKR 1.2 billion. Despite the heavy competition among all players in the insurance industry, Allianz Insurance Lanka continued to retain as the second largest player in the market even at the end of third quarter with a market share of 19%.

This was despite our focus and concentration on integrating the two companies during the last quarter.

Managing Director of Allianz Insurance Lanka Limited, Surekha Alles, said, “As a norm a sluggish growth could be expected at a time of integration. However, we are happy with the growth that we have achieved amidst many obstacles and we are confident that we will bounce back strongly to end the year with a sustainable growth demonstrating our strength in the market.”

She further stated that, “Since its inception in 2005, Allianz Insurance Lanka Limited has always recorded strong growth and maintained its profitability by focusing on our business sustainability with our customers at the heart of everything we do.”

Allianz Lanka recently announced the successful completion of the amalgamation and has several new plans to restructure the company in order to maximize the benefits offered. The parent company Allianz SE recently released its nine months earnings for the year which demonstrated the financial strengths the Company possesses. The total revenues of Allianz Group increased by 7.9% to 30.5 billion Euros and the operating profit grew 20.6% to 3.0 billion Euros. The Allianz Group is one of the world’s leading insurers and asset managers with more than 88 million retail and corporate customers.

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Softlogic Group consolidated turnover increases Rs 34.1 bn

Softlogic Group consolidated turnover increased 9.8% to Rs. 34.1 billion (Bn.) during the 1HFY19 while quarterly revenue grew 14% to Rs. 18.1 billion.

Top contributors to Group turnover were Retail (52%), Healthcare Services (19.4%) and Financial Services (18.7%). The non-core vertical which includes Automobile and Leisure together contributed 4.8% to Group turnover while the IT sector made up 5.2% of Group topline, said Chairman, Ashok Pathirage.

Gross Profit grew 10% to Rs. 12.3 Bn during the 1HFY19holding GP margins at36% (35.9% in 1HFY18). Quarterly Gross Profit also improved 13.2% to Rs. 6.5Bn resulting in a GP margin of 35.6%.

Synergy and economies of scale protected profit margins, although there is severe pressure due to waning business sentiment and the ad hoc macroeconomic adjustments imposed by policy-makers.

Distribution expenses declined marginally by 2.7% to Rs. 1.5 Bn while administrative expenses increased 11.8% to Rs. 7.1 Bn during 1HFY19. This resulted in the total operational expenses to increase 8.9% to Rs. 8.7 Bn during the 1HFY19 leading the operational cost margins to improve slightly to 25.4% in 1HFY19 from 25.6% in 1HFY18. Resultantly, total operating costs increased 14.3% to Rs. 4.5 Bn during the quarter.

Other operating income declined 67.1% to Rs. 283 Mn during 1HFY19 as the comparative period had registered one-off disposal gain(Rs. 185.5 Mn in 1HFY18)while fee income from new loans at Softlogic Finance nearly halved consequent to a change in their product mix during the period. Similarly, other operating income for the quarter also reduced 81.5% to Rs. 86.6 Mn owing to the one-off disposal gain registered in 2QFY18 (Rs. 184.9 Mn) Softlogic Life Insurance recognized a deferred tax asset of Rs. 2.4Bn during 1HFY19 by utilizing the available brought forward tax losses already provided for in the books up to 31st March 2018.

Profit after taxation for the first half of FY2018/19was at Rs. 2.4 Bn as opposed to Rs. 677.9 Mn in 1HFY18. Quarterly PAT reached Rs. 2.0 Bn (Rs. 248.2 Mn in 2QFY18).

The Retail sector post restructure, which comprises the consumer electronics, QSR, furniture, departmental store, branded fashion outlets and telecommunications companies registered a growth of 5.1% to Rs. 17.7 Bn during the first half of the financial year while the quarterly revenue improved 6.9% to Rs. 9.5 Bn.

This is currently the Group’s most capital-intensive sector which is redefining the country’s retail landscape with several new projects in the pipeline.

A 100% cash margin was imposed on refrigerators, TVs, air-conditioners and phones seriously impacting cash flows due to the recent policy of removing bank accommodation for import bill refinancing requiring cash upfront for establishing import LCs. The imposition of applicable restrictions on selected import items, especially, in the electronics and footwear sector defeats the long-term vision of establishing Sri Lanka as a shopping destination to compete with other regional tourist destinations. Short sightedness of policy makers could result in several adverse side effects reverberating in the retail sector which is inextricably intertwined with the tourist industry as a whole.

ODEL Group and Softlogic Retail continued to be dominant contributors to the sector performance.

Performance of Asiri Health continued steadily with quarterly revenue of the sector witnessing a growth of 16.1% to Rs. 3.4 Bn while cumulative sector revenue improved 11.2% to Rs. 6.6 Bn. Sector’s operating profit rose 4% to Rs. 1.6 Bn during the first half of the financial year with the quarter witnessing a marginal growth of 0.9% to Rs. 802.6 Mn.

Financial Services recorded a growth of 24.5% in turnover to Rs. 6.4 Bn during 1HFY19as quarterly revenue also improved 26.5% to Rs. 3.3Bn. Softlogic Life Insurance recorded a GWP of Rs. 4.9 Bn during 1HFY19, a growth of 34% compared to the previous year, while registering a GWP growth of 30% to Rs. 2.5 Bn during 2QFY19.

Softlogic Finance PLC’s assets were Rs. 21.3 Bn as at 30th September2018 while Customer Deposits was Rs. 15.6Bn.

IT business continued smoothly despite its import-oriented hardware operations being affected corporate investment slow down and ensuing currency depreciation.

Automobile sector revenue was Rs. 462.6 Mn for the first half of financial year. The wait-and-see approach taken by customers following duties and exchange rate depreciation dragged down the performance of this sector. Leisure sector recorded strong revenues with better-than-expected occupancy levels at the two hotels. Sector registered a topline growth of 10.3% to Rs. 1.2 Bn during 1HFY19 while the quarter made a turnover of Rs. 670.4 Mn (up 6.8%).

“Government plays a vital role in driving an economy and ensuring investment growth. Political vacillation and policy inconsistencies have affected consumer spending patterns slowing down the economy,” he added. 

www.dailynews.lk

SLT Group 2018 3Q, YTD profits up by 23%

The National Telecommunication service provider, Sri Lanka Telecom (PLC) released its Company and Group financial results for the 9 months ending September 30, 2018.

The Group comprises of the holding company Sri Lanka Telecom (PLC) and its eight subsidiaries including mobile arm Mobitel (Pvt.) Ltd.

With an impressive Year on Year (YoY) growth of 23.4%, the group reported Net Profit After Tax of Rs.3.99 bn in the last nine months. The continued revenue growth of the group has largely contributed to the improvements of the Net Profits. Backed by all the revenue streams including fixed voice, data, mobile, carrier businesses, television and the corporate business segment the Group record Rs.60.1 bn revenue with an 6.6% YoY growth during the period under review.

Resulting of better revenue growth coupled with cost control initiatives the Group was able to record a strong EBITDA (Earnings Before Interest Tax Depreciation and Amortization) a margin of 31.1% while reporting Rs.18.7 bn EBITDA during the nine months under review with 15.8% YoY growth.

Net Profits of the group was impacted the by foreign exchange losses of Rs.1.1 bn during the period under review.

The Group Chairman Kumarasinghe Sirisena expressed his pleasure on healthy growth rate and strong results of the Group.

“We are living in a fast paced digital era where the consumer’s needs and interest for Digital solutions such as Ultra-fast Fibre connectivity (FTTH), wireless 4G connectivity (LTE), and Cloud technologies are growing. It is our responsibility meet our customer needs. This is why we are transforming our Company to become a Digital Service provider” said Kiththi Perera, CEO of the holding company.

The holding Company, SLT reported an outstanding YoY Net Profit growth of 75% to reach Rs.1.3 bn during the first nine months of 2018.

The company continued to grow its revenue through its extensive investment programs carried out during the recent past to expand infrastructure facilities in order to provide high quality services to the customers through demanding technologies such as FTTH and LTE. As a result, the company revenue increased by 5.6% to reach Rs.35.3 bn during the first nine months of 2018.

Priyantha Fernandez, COO said “We continue to focus on operational excellence in all segments whilst improving customer experience through strong regional structure spread across the country. Therefore we are well poised to serve the diverse requirements of our customers.”

The subsidiary Mobitel continued to grow its revenue and key profitability indicators despite challenging macroeconomic environment and intensifying competition in the market. 

www.dailynews.lk

CARGILLS BANK records Rs 71 mn PAT

Cargills Bank recorded a modest post-tax profit of Rs. 71 million for the 9 months ended September 30, 2018.This reflects a growth of 56% over the corresponding period of last year, after discounting the one-off gain of Rs. 481million from the disposal of its subsidiary.

The net interest income of Rs. 1,530 million improved by 46%, reflecting increased income from a larger loan portfolio, interest rate benefits from currency swaps and the impact of the inflow of Rs. 1billion from the disposal referred to.

Net Fee- based Income of Rs. 115milion for the 9 months reflected an increase of 43%. Most of this was attributable to income from growth in the loan portfolio and to higher guarantee commissions. This income would have been substantially higher if not for the delay in the launch of credit cards.

Other income for the nine months grew 23% when the exceptional gain in 2017 is excluded, an important contributor being increased earnings on foreign exchange.

Impairment charges increased 223% from Rs. 73 million in 2017 to Rs. 237 million in 2018. Growth in the loan portfolio, non-performance by some large customers and delayed settlements on other loans contributed to this. The bank’s NPA ratio increased from 3.55% at 31 December 2017 to 5.78% at 30 Sep 2018. This is receiving close attention; management considers the increase temporary. The bank stringently assesses credit quality and strengthens monitoring and recovery to contain NPAs at an acceptable level.

Operating expenses increased by 27% for the 9 months. Higher depreciation costs and personnel expenses accounted for most of this increase. The employee head count at September 30 2018 was 524 against 418 at September 30, 2017.

The Rs. 24.5 billion loan portfolio of the bank at September 2018 was 18% higher than at December 31, 2017. Credit growth was moderated by a shift in focus to secured lending, an exit from large low yielding facilities and a re-deployment of funds in the SME segment. Growth was slower than expected given the prevailing macroeconomic environment.

The bank’s deposit base, at Rs. 18 billion at September 30, 2018, remained flat compared to the base at 31 Dec 2017. Rupee denominated deposits grew by a modest Rs. 2 billion which was cancelled out by outflows in foreign currency deposits.It commenced, during the 3rd quarter, a deposit campaign targeting 6 month, 1 year and 5 year deposits.

This promotion has been well received and we are seeing a steady inflow of deposits.The Bank also unveiled its new ‘Podihitiyo’ Children’s Savings Account on World Children’s Day, offering an attractive interest rates for children’s savings accounts to help create a culture of savings in the community. Targeted promotions to attract deposits will continue. The Bank’s CASA ratio stood at 16% at September 30, 2018.

The Capital Adequacy Ratio of Cargills Bank continued to be well above the minimum regulatory requirement during the period. At 30 Sep 2018, the Tier I Capital Ratio was 32.3% and the Total Capital Adequacy Ratio was 32.7%. The Bank remains focused on the need to productively deploy the capital buffer it presently carries. 

www.dailynews.lk

Panasian Power records 452%-1H PAT growth

Panasian Power PLC (PAP.N), one of Sri Lanka’s leading green energy solutions providers, posted a consolidated net profit of Rs. 54 million for the quarter and Rs. 153 million for the six months ending September 30, 2018.

This represents a 110% and 452% increase respectively over the corresponding period of the previous year. Furthermore, operating profit for the quarter increased to Rs. 74.7 million from Rs. 41.8 million during the same period the previous year. This represents a growth of 79% for the quarter and a total growth of 159% for the half year despite the increase in costs.

Major contributors to this result were the Padiyapelella mini hydropower plant and the Rathganga Mini Hydropower plant which contributed Rs. 93 million and Rs. 50 Million respectively to the Group’s net profit during the period under review. In addition, the Manelwala mini hydropower plant too made significant contributions towards the growth in revenue during the quarter. The period under review also includes the Group’s diversified solar power income which was initiated in the previous quarter.

During this period the Group’s revenue increased by 137% compared to the previous six months once again due to major contributions from the Padiyapelella and the Rathganga mini hydropower plants. By exercising prudent cost control practices, the Group was able to reduce the finance cost by 9% to Rs. 45.5 million during the same period. Commenting on these strong results, Panasian Power Chief Executive Officer Dr. Prathap Ramanujam said, “We are pleased to once again post strong results thereby validating the confidence all our shareholders have in us.

This continued success is only possible thanks to the calculated steps we took last year to diversify our income streams and implement vigilant cost control measures that have helped grow our bottom line. We have since gone from strength to strength and fully expect this trend to continue in the near term as we unveil and complete new hydro and solar projects that take our country closer to a clean, green energy future.”

Speaking about the company’s future, Dr. Prathap said, “We have commissioned an 800 Kw rooftop solar power project during the quarter and a 900 Kw rooftop solar plant in Kelaniya is in the final stage of construction. The latter will be connected to the grid during the third quarter of this financial year. These projects represent our continued commitment to diversification and we believe they will fuel our future growth.” www.dailynews.lk

Sri Lanka downgraded to B2 from B1 by Moody's on political crisis, external tightening

ECONOMYNEXT - Sri Lanka has been downgraded to B2 from B1 by Moody's, a rating agency with a stable outlook at the lower level, on a worsening political crisis and weakening external conditions.

External tightening has been "exacerbated most recently by a political crisis which seems likely to have a lasting impact on policy even if ostensibly resolved quickly, have heightened refinancing risks beyond levels anticipated when the rating agency affirmed the rating at B1 with a negative outlook in July," the rating agency said.

Moody's said despite the current political crisis it expected "any future government will remain broadly focused on implementing important fiscal, monetary and economic reforms that would strengthen the credit profile over the medium term."

"Moody's projections include a slower pace of fiscal consolidation than assumed in July to reflect disruption to fiscal policy implementation in a period of political turmoil," the statement said.

The full statement is reproduced below:

Rating Action: Moody's downgrades Sri Lanka's ratings to B2, changes outlook to stable from negative 20 Nov 2018

Singapore, November 20, 2018 -- Moody's Investors Service ("Moody's") has today downgraded the Government of Sri Lanka's foreign currency issuer and senior unsecured ratings to B2 from B1 and changed the outlook to stable from negative.

The decision to downgrade the rating to B2 is driven by Moody's view that ongoing tightening in external and domestic financing conditions and low reserve adequacy, exacerbated most recently by a political crisis which seems likely to have a lasting impact on policy even if ostensibly resolved quickly, have heightened refinancing risks beyond levels anticipated when the rating agency affirmed the rating at B1 with a negative outlook in July.

Moody's projections include a slower pace of fiscal consolidation than assumed in July to reflect disruption to fiscal policy implementation in a period of political turmoil.

The stable outlook denotes balanced credit risks at the B2 rating level.

Moody's expectation is that, despite the current political crisis, any future government will remain broadly focused on implementing important fiscal, monetary and economic reforms that would strengthen the credit profile over the medium term.

However, Moody's assessment is that the government's debt refinancing will remain highly vulnerable to sudden shifts in investor sentiment in a period of further tightening in financing conditions and political and policy uncertainty, with limited buffers to face such risk.

Concurrently, Moody's lowered the local-currency bond and deposit ceilings to Ba2 from Ba1. The foreign currency bond ceiling was lowered to Ba3 from Ba2 and the foreign currency deposit ceiling was lowered to B3 from B2.

Sri Lanka Treasuries yields down amid BOP pressure

ECONOMYNEXT - Sri Lanka's 12-month Treasury bill yield fell 04 basis points to 11.21 percent at an auction Monday, data from the state debt office showed, amid balance of payments pressure and a liquidity release.

The 3-month yield also fell 06 basis points to 10.01 percent.

The debt office offered 3.0 billion rupees of 3-month bills and accepted 4.5 billion rupees of bills. After offering 9.0 billion rupees of 12-month bills, 11 billion rupees of bills were accepted.

Bids for 3.5 billion rupees of 6-month bills were rejected.

On Friday the central bank released an estimated 90 billion rupees of new liquidity to the interbank market through a reserve ratio cut, which give banks free money to buy bonds, bills and give new credit and push up imports and worsen pressure on the currency, critics say.

In addition to policy errors, Sri Lanka has now been hit by a political crisis.

Sri Lanka's Laugfs Gas losses deepen from price controls, rupee depreciation

ECONOMYNEXT - Sri Lanka's listed Laugfs Gas Plc said it made a loss of 311.9 million rupees in the September 2018 quarter, down 873 percent from a profit of 40.3 million rupees a year earlier, due to price controls on domestic LPG cylinders and forex losses from currency depreciation.

The loss was 81 cents a share for the quarter. In the six months to end September 2018, the loss per share was 1.45 rupees on a loss of 559.3 million rupees, which had deepened 35 percent from a year earlier, interim accounts filed with the Colombo Stock Exchange showed. Laugfs gas was trading unchanged at 17 rupees on Monday.

"It should be noted that as a result of the Rupee depreciating rapidly against the US Dollar, coupled with the company having to operate its business of LPG downstream under the prevailing retail price restrictions whilst LPG prices in the global market are surging, the finances for this quarter have recorded losses," Chairman and Group Chief Executive W.K.H. Wegapitiya told shareholders.

"In order to address this current situation, the company is in a continuous dialogue with the Consumer Affairs Authority in order to ensure that LPG retail prices are revised in line with global market prices by adhering to the existing pricing formula.

"Whilst we are confident that we will receive a positive response in this regard, the company has concurrently sought advice on seeking legal redress in order to ensure its rights," he said.

In the quarter, revenue grew 11 percent from a year earlier to 6.2 billion rupees, cost of sales increased a faster 18 percent to 5.6 billion rupees which contracted gross profits by 28 percent to 586.9 million rupees.

Other operating income grew 22 percent 139.7 million rupees. Selling and distribution expenses fell 10 percent to 337.7 million rupees and administrative costs declined 10 percent to 223.4 million rupees.

The company reported a forex loss of 55.5 million rupees in the quarter, down 322 percent from a gain of 25 million rupees a year earlier.

Net finance cost grew 15.6 percent to 440 million rupees.

In the six months to end September, Laugfs Gas Plc's energy segment saw losses decline 87 percent from a year earlier to 85.5 million rupees while profits from overseas operations grew 54 percent to 170 million rupees.

Its property segment saw earnings fall 17 percent to 23 .5 million rupees.

Transport and logistics reported a loss of 11.4 million rupees, down 117 percent from a profit of 76 million rupees a year earlier. Trading losses expanded 106 percent to 137.8 million rupees.

The company said it would soon commence operations at an LPG transhipment terminal facility in the Port of Hambantota.

Sri Lanka's Aitken Spence Sept net down 17.2-pct

ECONOMYNEXT- Sri Lanka's diversified Aitken Spence group said its net profits for the September quarter fell 17.2 percent from a year earlier to 483.6 million rupees, with continued losses in the tourism segment.

Earnings per share for the quarter were 1.19 rupees.

For the 6 months to September, earnings per share were 1.71 rupees on net profits which fell 26 percent from a year earlier to 694.3 million rupees.

The firm's share last traded at 46 rupees.

Revenue for the September quarter grew 1 percent from a year earlier to 12.4 billion rupees. Raw materials and consumables costs fell 18.2 percent to 2.4 billion rupees.

Other direct operating expenses grew 18.3 percent to 4.3 billion rupees.

In the 6 months to September, losses from tourism increased to 632.5 million rupees from 38 million rupees a year earlier despite sales growing 8.4 percent to 12.1 billion rupees

Maritime and logistics sector profits grew 24.9 percent to 711.2 million rupees on revenue which grew 10.2 percent to 5.6 billion rupees.

Profits from the strategic investments segment, which mainly consists of power generation, fell 6 percent to 650 million rupees on revenue which fell 25.4 percent to 7.4 billion rupees.

Sri Lanka's Ceylinco Insurance Sept down 38-pct

ECONOMYNEXT - Profits at Sri Lanka's Ceylinco Insurance Plc fell 38 percent from a year earlier to 640.8 million rupees in the September 2018 quarter on slower incomes growth and higher costs, interim accounts showed.

Earnings were 24.26 rupees a share in the quarter. In the nine months to end September, earnings were 180.27 rupees a share on a profit of 4.8 billion rupees, up 49 percent from a year earlier, financial statements filed with the Colombo Stock Exchange showed.

The share closed unchanged at 1,850 rupees on Thursday.

In the quarter, net written premiums after re-insurance costs grew 9 percent to 8.2 billion rupees.

Investment income increased 3 percent to 3.5 billion rupees in the quarter.

Claims and benefits paid rose 27 percent to 4.6 billion rupees. Acquisition costs rose 9 percent to 958 million rupees and transfers to the life insurance fund fell 14 percent to 2.4 billion rupees.

Operating and administrative expenses grew 29 percent to 3.2 billion rupees.

In the nine months to end September 2018, gross written premiums in the general insurance business grew 10 percent from a year earlier to 15.3 billion rupees, while life insurance premiums rose 12.5 percent to 12.5 billion rupees.

Life insurance contracts grew 6.1 percent from nine months earlier to 85.9 billion rupees and general insurance contracts grew 6.4 percent to 12.6 billion rupees.

The insurer's war chest of retained earnings grew 15 percent from nine months earlier to 30.6 billion rupees.

Ceylinco Insurance's total assets rose 9 percent to 157.8 billion rupees.

Sri Lanka state-run Bank of Ceylon Sept net up 26-pct

ECONOMYNEXT - Profits at Sri Lanka's largest bank, state-owned Bank of Ceylon, grew 26 percent from a year earlier to 5.4 billion rupees in the September quarter despite higher costs, bad loan provisioning and transfers to the government, interim accounts showed.

Earnings for the nine months to end September was 12.9 billion rupees, down 12.3 percent from a year earlier as net interest income grew 8.8 percent to 49.4 billion rupees, unaudited accounts filed with the Colombo Stock Exchange showed.

In the September quarter, net interest income grew 18 percent from a year earlier to 18.4 billion rupees, as interest income increased 11.8 percent to 51.2 billion rupees and interest costs grew a slower 8.4 percent to 32.8 billion rupees.

Net fee and commission income grew 38.4 percent to 2.3 billion rupees and other operating income surged 144 percent to 4 billion rupees.

Provisioning for bad loans increased 31.4 percent to 4.5 billion rupees. Gross non-performing loans were 4.5 percent of total loans at end September, up sharply from 2.85 percent nine months earlier.

Personnel costs rose 23 percent to 5.8 billion rupees and other expenses fell 5 percent to 3.6 billion rupees.

Transfers to the government of Sri Lanka which holds 100 percent of Bank of Ceylon had increased in the quarter.

Value added and nation building taxes paid by the bank rose 48 percent to 10.9 billion rupees while income tax increased 108 percent to 3.4 billion rupees.

The bank paid 4.8 billion rupees as dividends to the government of Sri Lanka, up sharply from 1.3 billion rupees a year earlier.

The bank's loan book expanded 11 percent from nine months earlier to 1.3 trillion rupees at end September while deposits grew a slower 6.5 percent to 1.7 trillion rupees.

However, the bank's interest margin fell to 3.18 percent at end September, down from 3.31 percent nine months earlier.

Total assets of the bank grew 7 percent in the nine-month period to 2.1 trillion rupees, and its net book value increasing 9.6 percent to 133 billion rupees.

Tier I capital adequacy was at 9.89 percent end September, above the regulatory minimum of 8.875 percent, but lower than 10.87 percent the bank reported nine months earlier.

Total Capital adequacy was at 13.77 percent, down from 14.49 percent nine months earlier, but above the minimum regulatory limit of 12.875 percent.

Sri Lanka's LOLC Holdings Sept net dented by leisure, manufacturing losses

ECONOMYNEXT - Profits at Sri Lanka's LOLC Holdings fell 29 percent from a year earlier to 1.3 billion rupees in the September 2018 quarter, with losses from leisure and manufacturing segments weighing down gains from financial services, interim accounts showed.

The group reported earnings of 2.77 rupees a share in the quarter. In the six months to end September, earning were 9.20 rupees a share on a profit of 7.5 billion rupees, down 7 percent from a year earlier.

The stock closed 2 rupees higher at 90 rupees on Thursday.

In the quarter, net interest income LOLC Holdings' primary finance and leasing business rose 28 percent from a year earlier to 25.9 billion rupees as interest income grew 21 percent to 58.6 billion rupees and interest expenses declined 16 percent to 32.7 billion rupees.

Revenue from other businesses in the group including hotels, manufacturing and trading, insurance and plantations increased 1 percent to 10.7 billion rupees as cost of sales increased a faster 11 percent to 7.5 billion rupees which contracted gross profits by 18 percent to 3.2 billion rupees.

Other income rose 24 percent to 8 billion rupees.

Personnel costs rose 12 percent to 10 billion rupees.

Bad loans provisioning rose 55 percent to 5.8 billion rupees.

The group' loan book expanded 29 percent from a year earlier to 559.4 billion rupees at end September while the deposit base increased 39 percent to 377.2 billion rupees during the period.

Borrowings of the group rose 14.4 percent to 377.2 billion rupees.

In segment results, earnings from financial services segment rose 14 percent from a year earlier to 5.7 billion rupees in the September quarter.

Insurance fell 26 percent to 87.7 million rupees.

Losses from the leisure and entertainment segment widened 69 percent to 606.2 million rupees.

Manufacturing and trading businesses of the LOLC group reported a loss of 527.4 million rupees in the quarter, down from a profit of 6.3 million rupees a year earlier.

Plantations and power generation reported segment losses of 70.4 million rupees, increasing from a 27.7 million loss a year earlier.

Sri Lanka's Softlogic Sept net soars on one-off tax reversal amidst slump

ECONOMYNEXT - Profits at Sri Lanka diversified Softlogic Holdings surged to 372 million rupees in the September 2018 quarter, up from a loss of 41 million rupees a year earlier, due to a one-off tax reversal off-setting a slump in earnings across retail, healthcare and leisure, interim results showed.

"The scale and diversity of the group helped in weathering the macro-economic shocks of increased interest rates, a fast depreciating currency, adverse tax changes, import margin requirements and price led inflation," Chief Executive Ashok Pathirage told shareholders.

Earnings were 35 cents a share in the quarter. In the six months to end September 2018, earnings were 40 cents a share on a profit of 421.5 million rupees, surging from a profit of 2.4 million rupees a year earlier, financial results filed with the Colombo Stock Exchange showed.

Softlogic Holdings ended Thursday 40 cents higher at 20.40 rupees.

There was a one-off tax reversal for 1.8 billion rupees in the quarter, attributed to subsidiary Softlogic Life Insurance, which saw net profits reach 2 billion rupees in the quarter, up 720 percent from a year earlier.

In the quarter, revenue grew 14 percent from a year earlier to 18 billion rupees, while cost of sales increased 14.4 percent to 11.7 billion rupees leading to a 13 percent increase in gross profit to 6.5 billion rupees.

Distribution expenses fell 7 percent to 857.5 million rupees and administrative costs rose 21 percent to 3.7 billion rupees.

Net finance costs rose 3.2 percent to 1.2 billion rupees.

Borrowings of the group fell 4 percent from a year earlier to 32.9 billion rupees at end September while total assets grew 15 percent 121.4 billion rupees.

-Segment performance-

Earnings from financial services segment, which includes Softlogic Life Insurance and Softlogic Finance, totalled 2.1 billion in the September quarter, ballooning from 4.3 million rupees a year earlier.

Healthcare earnings fell 10 percent to 459 million rupees. This segment includes listed Asiri Hospital Holdings.

Retail and telecommunications segment earnings declined 47 percent to 122.2 million rupees.

This segment includes consumer electronics, restaurants, listed department store Odel and fashion brand outlets and now, supermarkets.

"We believe (supermarkets are) a natural progression which will complement the group’s other consumer driven businesses affording visibility and presence across all key consumer value chains to operate under one loyalty platform where consumers could earn and burn points across all sectors of the group," Pathirage said.

Leisure and property reported a 328.5 million rupee loss in the quarter, up 329 percent from a year earlier.

Information technology reported a 16.9 million profit in the quarter, compared to a loss of 13.6 million rupees a year earlier.

Automobile dealerships for Ford and Suzuki reported combined losses of 48.6 million rupees, up 20 percent from a year earlier.

"The wait-and-see approach taken by customers following duties and exchange rate depreciation dragged down the performance of this sector. The Ford sales is primarily generated from Corporate and Government tenders which are now affected by the political uncertainty prevailing in the country," Pathirage said.

Losses from other businesses in the group fell 7 percent to 341.7 million rupees.

"Softlogic has pursued expansionary goals in its core verticals with the aim of strategically positioning itself anticipating that Softlogic’s proposition is a fundamental need in today’s sophisticated market and that the economy will be fast-tracked with Tourism, Leisure and Retail swinging into top gear," Pathirage said.

Sri Lanka's Melstacorp Sept quarter net down 17-pct

ECONOMYNEXT - Profits at Sri Lanka's Melstacorp Plc fell 17 percent from a year earlier to 1.48 billion rupees in the September 2018 quarter as sharp increases in valuation losses, distribution and administrative costs off-set strong revenue growth, interim accounts showed.

The diversified holdings company reported earnings of 1.27 rupees a share in the quarter.

In the six months to end September, earnings were 1.95 rupees a share on a profit of 2.27 billion rupees, down 22.39 percent from a year earlier, statements filed with the Colombo Stock Exchange showed.

Melstacorp was trading 90 cents higher at 52 rupees on Thursday.

During the quarter, net revenue grew 114 percent from a year earlier to 23 billion rupees, cost of sales grew 98 percent to 15 billion rupees leading to a sharp 151.6 percent rise in gross profits to 8 billion rupees.

Other operating income fell 65 percent to 173.4 million rupees.

Distribution costs rose a sharp 134 percent to 899.3 million rupees and administrative expenses ballooned 252 percent to 4.2 billion rupees.

Net finance cost was flat at 203 million rupees.

Losses from valuation of financial assets grew 98 percent to nearly 2 billion rupees.

-Segment results-

The beverages segment which includes listed Distilleries Company of Sri Lanka reported a 53 percent growth in profits from a year earlier to 2.5 billion rupees in the September quarter despite revenue falling 12 percent to 21 billion rupees.

Earnings from diversified businesses surged 216 percent to 818.8 million rupees after revenue increased to 13 billion rupees in the quarter from 511 million rupees a year earlier. This segment includes listed diversified holdings company Aitken Spence, automobile servicing, a BPO, media and textiles dying and printing facility.

Losses from telecommunications which includes voice and broadband services provider Lanka Bell fell 2 percent from a year earlier to 407.5 million rupees on revenues growing 10 percent to 835.5 million rupees.

Plantations reported a 96.7 million rupee loss in the quarter, down 134 percent from a profit of 281 million rupees a year earlier.

Financial services, which includes Continental Insurance, profits fell 13 percent to 104.3 million rupees as revenues slipped 13 percent from a year earlier to 801.8 million rupees.

Sri Lanka's largest brewery Lion net up 477-pct in Sept

ECONOMYNEXT- Sri Lanka's Lion Brewery (Ceylon) Plc said profits grew 477 percent from a year earlier to 552.6 million rupees in the September 2018 quarter as more consumers switched from hard liquors to beer.

The firm's interim financials showed 6.91 rupees in earnings per share for the September quarter.

Earnings per share for the first six months of the year were 16.25 rupees on a profit of 1.3 billion rupees, up 212 percent from a year earlier.

Lion's share ended 2.30 rupees higher at 552.80 rupees on Thursday.

"Latterly, there has been a shift from hard to mild alcohols and very encouragingly from illicit to soft liquor," the firm told shareholders.

The growing tourism industry also increased sales, it said.

However, many hard liquor manufacturers are evading taxes to compete, Lion said.

Revenue for the September quarter grew 65 percent from a year earlier to 10.9 billion rupees, cost of sales increased 49 percent to 7.9 billion rupees, leading to gross profits surging 129 percent to 3 billion rupees.

Distribution expenses grew 58 percent to 1 billion rupees.

Finance costs fell 18 percent to 478 million rupees.

Outstanding from group's 2 billion rupee 2014 debentures fell to 78.7 million rupees from 1.1 billion rupees at the start of the year

Debentures worth 797.6 million were redeemed in June.

Long-term borrowings fell 17.3 percent to 4 billion rupees, while short-term borrowings grew 9 percent to 7.5 billion rupees.

Sri Lanka's Distilleries Company Sept quarter net up 30-pct

ECONOMYNEXT - Profits at liqour producer Distilleries Company of Sri Lanka Plc grew 30.2 percent from a year earlier to 1.2 billion rupees in the September 2018 quarter on lower finance costs and selling expenses, interim accounts showed.

Earnings were 26 cents a share in the quarter. In the six months to end September 2018, earnings were 49 cents a share on a profit of 2.26 billion rupees, up 50.8 percent from a year earlier, financial results filed with the Colombo Stock Exchange showed.

The liqour producer, a unit of listed Melstacorp Plc, was trading 10 cents higher at 16.90 rupees on Thursday.

In the quarter, gross revenue fell 11 percent from a year earlier to 19.8 billion rupees. Net revenue, less excise taxes fell 4.8 percent to 6.7 billion rupees.

Cost of sales decreased a faster 17 percent to 4.2 billion rupees leading to gross profits growing 28.2 percent to 2.5 billion rupees.

Other operating income fell 74 percent to 29.6 million rupees.

Distribution expenses grew 20.3 percent to 152 million rupees and administrative costs rose 6.4 percent to 285.9 million rupees.

Net finance income had fallen 80.5 percent to 29 million rupees as short term borrowings fell to 2.2 billion rupees at end September 2018, down from 7.3 billion a year earlier.

Construction, real estate push Sri Lanka's Access Engineering Sept net up 106-pct

ECONOMYNEXT- Profits at Sri Lanka's Access Engineering Plc grew 106.2 percent from a year earlier to 630.6 million rupees in the September 2018 quarter boosted by earnings from construction and real estate, interim accounts showed.

The earnings per share for the quarter were 0.63 rupees. For the six months to end September, earnings per share were 1 rupee on a profit of 995.6 million rupees, up 10.7 percent from a year earlier, according to interim results filed with the Colombo Stock Exchange.

The stock was trading 40 cents higher at 16.20 rupees Thursday.

In the September quarter, revenue grew 13.9 percent from a year earlier to 7.8 billion rupees, while cost of sales increased 8.3 percent to 6.5 billion rupees leading to gross profits growing 51.6 percent to 1.3 billion rupees.

Other income grew 363.3 percent to 133.2 million rupees.

Net finance costs grew 91.1 percent to 177.6 million rupees.

The group asset base grew to 45.8 billion rupees at end-September, up from 44.4 billion rupees at the start of the year.

Long-term borrowings remained flat over the 6-month period at 5.1 billion rupees, while short-term borrowings fell to 3.6 billion rupees from 3.9 billion rupees.

In the segment results for the first six months, construction was the largest, with profits up 40.5 percent from a year earlier to 809.2 million rupees with revenue up 8.4 percent to 7.7 billion rupees.

Profits from the property segment grew 170 percent to 391.3 million rupees with sales up 159.5 percent to 383.5 million rupees.

Construction material trading profits were up 121.6 percent to 240.7 million rupees with revenue up 33.5 percent to 1.5 billion rupees.

Automobile segment profits fell 66.8 percent to 79.7 million rupees despite revenue growing 7.9 percent to 4.1 billion rupees.

Sri Lanka's Hatton National Bank Sept net up 17-pct

ECONOMYNEXT - Profits at Sri Lanka's Hatton National Bank grew 17 percent from a year earlier to 4.8 billion rupees in the September 2018 quarter, on better interest margins and forex gains due to rupee depreciation, interim accounts showed.

Earnings were 9.68 rupees a share in the quarter. In the nine months to end September, earnings were 28.25 rupees a share on a profit of 13.8 billion rupees, up 23 percent from a year earlier, interim statements filed with the Colombo Stock Exchange showed.

Hatton National Bank ended 20 cents lower at 215 rupees on Wednesday.

"The bank’s initiatives in centralization and digitalization has yielded a continuous improvement in HNB’s Cost-to-Income ratio, which improved to 36.9 percent for the nine months ending September 2018, exceeding that recorded during the corresponding period of 2017 by 360 basis points," a statement from the bank said.

During the quarter, net interest income grew 15 percent to 13.7 billion rupees as interest income grew 10 percent to 29.5 billion rupees and interest expenses grew a slower 6 percent to 15.9 billion rupees.

Net fee and commission income grew 10 percent to 2.5 billion rupees.

The banking group made a trading profit of 189.3 million rupees in the quarter, up from a loss of 1.8 billion rupees a year earlier due to a revaluation of currency swaps due to rupee depreciation and low volumes compared to the previous year, the bank said.

Bad loans provisioning increased 87.6 percent to 1.8 billion rupees.

Non-performing loans were 3.1 percent of total loans at end September, up from 2.28 percent nine months earlier, "reflecting macro and industry conditions which have precipitated delays across the industry in collections," the bank told shareholders.

Personnel expenses rose 20 percent to 3 billion rupees and other expenses increased 17 percent to 3.1 billion rupees.

Premium income from a subsidiary insurance company increased 20 percent to 1.9 billion rupees while benefits, claims and underwriting expenses rose 17 percent to 1.8 billion rupees.

The banking group's loan book expanded 12 percent from nine months earlier to 736.7 billion rupees at end September while deposits grew 10 percent to 776.3 billion rupees.

Over the nine months period, the bank's interest margin has improved to 4.58 percent, up slightly from 4.25 percent.

Basel III Tier I Capital was 13.25 percent at end September, down from 13.68 percent nine months earlier but above the regulatory minimum of 8.875 percent.

Total Capital adequacy was at 15.67 percent, above the regulatory minimum of 12.875 percent but down from 16.72 percent nine months earlier.

Sri Lanka's Ceylon Grain Elevators net up 101.6-pct in Sept

ECONOMYNEXT- Sri Lankan animal feed and poultry producer Ceylon Grain Elevators Plc net profits in the September quarter grew 101.6 percent from a year earlier to 233.3 million rupees with higher feed and chicken sales, interim financials said.

"Group’s revenue and profitability improved due to increased demand for feed and chicken meat during the quarter under review," Director/Chief Executive Cheng Chih Kwong Primus told shareholders.

"Growth in feed sales volume was driven by consistency in feed quality and maintaining strong partnerships with key chicken processors," he said.

"Profitability of the group has been sustained by efficiency in the farms’ operations and the continued success in optimising formulated feed costs."

The firm said its earnings per share were 3.89 rupees.

Earnings per share for the first nine months of the year were 10.83 rupees, with net profits up 53.2 percent from a year earlier to 649.8 million rupees.

Revenue for the September quarter was up 31 percent from a year earlier to 4.9 billion rupees, while cost of sales grew 27 percent to 4.4 billion rupees, and gross profits grew 78 percent to 506.6 million rupees.

Finance income grew 45 percent to 101.8 million rupees and finance costs were 51.3 million rupees.

The firm had 39.6 million rupees in short-term borrowings by September, from no borrowings at the start of the year.

In the first nine months, post-tax profits from feed milling and farming grew 141.7 percent from a year earlier to 479.2 million rupees while revenue grew 9.7 percent to 12.2 billion rupees.

Post-tax profits from poultry production and sales grew 14.8 percent to 530 million rupees with revenue up 10.5 percent to 2 billion rupees.

The firm said the December quarter will be challenging.

"The Group foresees a challenging market situation in the forthcoming quarter as cost of production will increase substantially due to increase in key raw material prices riding on the severe depreciation of LKR against USD," the chief executive said.

"Also the Group anticipates lower demand with the declining consumer purchasing power as a result of price hikes on basic consumer staples and inclement weather," he said.

Hemas Holdings Sep net up 27-pct; consumer segment drives growth

ECONOMYNEXT - Profits at Sri Lanka's Hemas Holdings Plc grew 27.6 percent from a year earlier to 926.6 million rupees in the September 2018 quarter driven by strong growth in its consumer businesses and stationery subsidiary Atlas, interim accounts showed.

Earnings in the quarter amounted to 1.62 rupees a share. In the six months to end September, earnings were 2.58 rupees a share on a profit of 1.48 billion rupees, up 4.3 percent from a year earlier.

"The lower growth in earnings (in the six months to end September) is due to increased net interest expense post utilisation of cash reserves to acquire Atlas in January 2018, higher working capital due to strong revenue growth in pharmaceutical distribution and the loan financing for our new logistics park, " Chief Executive Steven Enderby told shareholders.

"The business environment remains challenging with significant and on-going currency devaluation through September and October, and political uncertainty impacting the domestic economy, the source of our major business activity," he said.

Hemas was trading 3 rupees higher at 90 rupees on Wednesday.

In the September quarter, Hemas Holdings' revenue grew 44.3 percent from a year earlier to 16.5 billion rupees, with cost of sales growing a faster 53.5 percent to 11.1 billion rupees leading to gross profits increasing 28.3 percent to 5.4 billion rupees.

Selling and distribution expenses rose 41.5 percent to 1.4 billion rupees and administration costs increased 21 percent to 2.5 billion rupees.

Net finance cost was 155 million rupees, down from a net finance income of 71 million rupees a year earlier. The group's total borrowings grew 65 percent from a year earlier to 11.4 billion rupees at end September 2018.

-Consumer driven growth-

Hemas Holdings' September earnings were boosted by its consumer segment which includes FMCG and personal care goods and stationery subsidiary Atlas.

Revenue from the consumer segment grew 80 percent from a year earlier to 6.8 billion rupees in the quarter and profits grew 108 percent to 721.7 million rupees.

"The Sri Lankan home and personal care market continues to be challenging, however we experienced growth from brand re-launches in our core personal care categories. Further, we are also seeing the benefits of our profit improvement programme initiated last year improving operating margins," Enderby said.

Hemas' Bangladesh operations continue to experience challenges amidst intense competition, he said.

"Atlas performance has been on track in the (September quarter, with revenues up by 12.4 percent over the same period last year," Enderby said.

Earnings from healthcare fell 21 percent to 322 million rupees despite revenue increasing 30 percent to 7 billion rupees.

Currency depreciation and price controls are compressing margins at the group's pharmaceuticals distribution business and impacting sales of over the counter drugs, Enderby said.

"Hemas Hospitals achieved an overall occupancy of 57%, with revenues and profitability improving significantly during the September quarter compared to the first three months of the financial year and over last year. The key driver of growth is the continued enhancement in surgical capability," Enderby said.

The Leisure sector saw revenue grow 17 percent to 1 billion rupees but reported a 104 million loss, deepening from a loss of 6.4 million rupees a year earlier due to foreign exchange losses and refurbishment costs.

The group's Serendib Hotels reported a 10.2 percent growth in revenue due to an increase in average room rates and average occupancies across the group reaching 69 percent, up from 64 percent a year earlier, Enderby said.

The travel and aviation segment reported a revenue growth of 22.1 percent driven by newly secured agents under inbound travel, the chief executive said.

Revenue from maritime and logistics-related businesses which includes warehousing and a logistics park increased 7 percent to 719.2 million rupees in the quarter, but profits declined 9 percent to 175.3 million rupees due to fuel price increases.

Revenue from other businesses had grown 34 percent with profits falling 17 percent to 115.2 million rupees.

"Our technology business, N-able witnessed a gradual improvement in the second quarter with increased revenues over last year by 31.7 percent.

However, a significant drop in revenue due to delays in project completion during the first quarter continues to have an impact on year to date profitability," Enderby said.

Nestlé’s Sri Lanka unit Sept quarter net profit up 16-pct

ECONOMYNEXT – Net profits at Sri Lanka's Nestlé unit rose 15.6 percent to 941 million rupees in the September 2018 quarter from a year ago despite lower sales as it restrained costs amid sharply higher tax payments.

Sales of the local unit of the Swiss food multinational fell three percent to 9.3 billion rupees in the period, interim accounts filed with the stock exchange showed.

Cost of sales fell 12 percent to 5.59 billion rupees with gross profit up 13 percent to 3.7 billion rupees.

Nestlé Lanka’s basic earnings per share were 17.52 rupees in the September 2018 quarter.

EPS in the period to September 2018 was 48.77 rupees with net profit up 6.7 percent to 2.6 billion rupees.

Tax costs rose sharply in the September 2018 quarter, up 48 percent to 366 million rupees as Nestlé Lanka became subject to a higher effective tax rates under a new tax law from April 2018.

This led to profit being liable to tax at 28 percent.

Before the new law became effective Nestlé Lanka’s qualifying export profits were taxed at a concessionary rate of 12 percent, profit from its ready-to-drink milk business was taxed at the concessionary rate of 10 percent and profit from offshore business earned in foreign currency exempt from income tax.